Globalisation and the Convergence of Business Cultures

Introduction

Globalisation, generally defined as the economic, political, and cultural convergence of the world, is undoubtedly a major hallmark of the modern world (French, 2010). The world has increasingly become interconnected in terms of economic activities, communication, technology, social aspects, and politics. Indeed, the once diversified and distanced world has converged into a small global village because of globalisation. Globalisation has led to the interdependence of not only politics and economic activities, but also culture (Grewal, 2008). Cultural convergence is now a widely recognised phenomenon (Cojocaru, 2011). Owing to increased contact amongst people from diverse cultural backgrounds, cultural practices have become ever more similar, consequently resulting in the convergence of business cultures and practices. Organisations now experience fewer cultural difficulties when doing business across cultures. As a result, the study of comparative business cultures may be becoming less relevant. While there is truth in this argument, differences between national cultures — and subsequently business practices — remain significant. This paper critically examines whether globalisation has led to a convergence of business cultures and practices.

Cultural Differences and National Business Practices

Different cultural theories, notably Geert Hofstede's Cultural Dimensions Theory, suggest that significant cultural differences exist between countries (Hofstede, 2001). Values, beliefs, norms, traditions, and worldviews vary from one country to another. For example, while some countries value individualism, others emphasise collectivism and group harmony. Some societies view power and status as a source of recognition, while others consider individual accomplishments as the primary marker of recognition. Generally, culture affects the behaviours, attitudes, and perceptions of a particular group of people (Luthans and Doh, 2012). It affects everything from language and communication to business. Indeed, the influence of culture on business is broadly acknowledged (Deresky, 2005; Browaeys and Price, 2008; Steers, Sanchez-Runde and Nardon, 2010). Culture influences management practices, employer-employee relationships, teamwork, task allocation, and virtually every other aspect of business; in turn, business practices tend to differ from country to country. In a high power distance society such as China, for instance, management practices may be more reflective of hierarchy and bureaucracy, while in a low power distance society such as the UK, management practices tend to portray democracy and inclusivity.

Hofstede's cultural model is one of the most seminal and widely cited theories on cultural differences. The theory has substantially influenced scholarly work on national cultures and provided valuable guidelines for international business management. Multinational organisations have been able to operate more effectively in foreign countries by adapting their management practices to local cultures. In fact, without proper acknowledgement of cultural differences between countries, an organisation may not succeed in its international operations (Cojocaru, 2011). Instances of organisations experiencing remarkable difficulties — or even closing down — in foreign countries due to cultural factors are not uncommon. Often, organisations that succeed in the increasingly globalised environment are those that design their management practices in recognition of the underlying national culture (Luthans and Doh, 2012).

Globalisation and Cultural Convergence

A major shortcoming of Hofstede's model, and other cultural models more broadly, is that they have increasingly become less relevant in today's world. The majority of cultural theories ignore the fact that cultures tend to converge over time, as described in cultural convergence theory. Over the years, cultures have become more similar, in large part due to globalisation (Grewal, 2008). For example, democratic ideals have traditionally been associated with Western countries such as the United States and the UK. Today, however, with increased contact between Westerners and the rest of the world, democracy has spread to other parts of the globe. In essence, there has been increased cultural homogeneity across the world, with values, beliefs, and ways of thinking becoming increasingly alike. Practices that were once exclusive to certain countries or regions are now evident elsewhere. Food, music, fashion, language, and other aspects of culture now reflect greater uniformity across the globe than ever before. For instance, aspects of Western dressing and music, along with greater awareness of and loyalty to global brands, are now amply evident in Asian countries, mirroring increased homogeneity in consumer behaviour.

The homogeneity of attire is a particularly good example. Due to globalisation, the three-piece suit has become the global standard for executives as far as clothing is concerned. The attire is used across the globe to depict power and position. Even in meetings of cross-cultural organisations such as the United Nations, virtually everyone wears the same type of dress rather than outfits that reflect their respective local culture.

One area significantly affected by globalisation-fuelled cultural convergence is business. A closer look at business cultures and practices across the globe today reveals greater similarity than ever before (Gupta and Wang, 2003). The manner in which organisations are managed shows that cultural differences have faded over time, giving rise to a more uniform global culture. Today, organisations, sectors, and industries worldwide are guided by — and subject to — internationally recognised standards and practices. An ideal example is the banking industry. The Basel Accords (Basel I, Basel II, and Basel III) provide guidelines for best banking practices. Many countries around the globe, notably in North America and Europe, rely on these guidelines to ensure the stability of their financial systems. The guidelines have remarkably driven financial market efficiency across the globe. The increased uniformity of business practices is not restricted to the financial industry. The modern global manufacturing industry is now heavily influenced by practices that originated in Japan. Management approaches based on models such as total quality management (TQM) and lean principles are now popular worldwide. This uniformity of business practices may not have been achieved without globalisation.

Global interconnectedness in terms of economic activity implies that events occurring in one part of the globe can quickly spread to other parts of the world. The global financial crisis and the Eurozone crisis are clear examples. A great deal of similarity has been observed in how governments, banks, and organisations in the affected countries responded to these crises, further demonstrating how globalisation has harmonised business cultures and practices.

The impact of globalisation on the convergence of business cultures and practices can further be observed in the increased similarity of organisational structures around the world (Bhattacharyya, 2010). Traditionally, hierarchical, autocratic, and centralised organisational structures were the norm in both the West and the rest of the world. Today, however, there has been a greater shift towards flatter and more decentralised organisational structures across the globe. Businesses in various parts of the world increasingly recognise the importance of a democratic and inclusive organisational environment. It is no longer unusual for organisations in historically high power distance societies such as China to involve employees in decision making. Furthermore, human resource practices such as compensation, recruitment, training, and development exhibit greater similarity across nations than ever before (Lucas, Lupton and Mathieson, 2006). More interestingly, the increased influence of multinational corporations (MNCs) such as McDonald's has led to a considerable degree of standardisation of organisational life across the globe. It is, however, important to note that there is no single approach that fits all organisations. As French (2010) points out, organising and managing are influenced not only by culture, but also by contingent factors such as the attributes of the inherent political-economic system.

The standardisation of organisational behaviour, coupled with the homogeneity of consumer behaviour, has meant increased standardisation in products and services (Steers, Sanchez-Runde and Nardon, 2010). Though marketing practices may differ from country to country, MNCs deliver products and services to a global audience. Automobile products offer a clear example: Japanese and European car manufacturers deliver vehicles with similar specifications — in terms of design, functionality, and engine performance — to consumers all over the world. Likewise, electronic devices such as smartphones, tablets, television sets, and music players are sold in nearly identical configurations throughout the globe. The standardisation of consumer products and services demonstrates that the needs and wants of consumers across the globe have become more homogenous, subsequently resulting in greater uniformity of business practices.

Recent research has also confirmed that globalisation has resulted in the convergence of business cultures and practices. For instance, a Hofstede's model-based study of approximately 400 Chinese and Anglo-Saxon managers working in the Chinese construction industry found that there were no significant differences in managerial behaviour such as the model would lead one to expect (cited in French, 2010). Contrary to expectations, the study found that managers from the two theoretically different contexts exhibited quite similar behaviour in terms of collectivism and cooperation. This similarity in managerial behaviour can be attributed to cultural convergence: as a result of globalisation, Chinese managers may have embraced Anglo-Saxon ways of doing business, while Anglo-Saxon managers may have adapted their practices to the Chinese context.

Conclusion

Overall, culture theory suggests that significant cultural differences exist between countries, and that these differences significantly influence organisational behaviour. Over the years, however, globalisation has resulted in increased cultural similarity, meaning that business cultures and practices have become more alike across the globe. In this sense, studying comparative business cultures is arguably becoming less essential. Even so, because culture is embedded deeply in the lives of a group of people, cultural differences cannot be ignored altogether. It remains important for business organisations to adapt their strategies and practices to local cultures. The study of comparative business cultures therefore still has an important place in today's increasingly globalised world. While cultural convergence is increasing, cultural divergence persists. Organisations must acknowledge cultural diversity and adopt practices that reflect it.

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