Managing Across Cultures in International Business

Introduction: Global Business and Cross-Cultural Challenges

The internationalization of the economy has influenced companies to operate their businesses globally. Global operations have confronted managers with several challenges: market, product, and production plans must be coordinated on a worldwide basis, and organizational structures must balance centralized home-office control with adequate local autonomy. As companies have expanded their operations internationally, the number of employees working abroad has grown substantially, and management is faced with new global challenges.

Three broad international business management challenges were identified by management scholars as follows (Robert, Kossek & Ozeki, 1998):

a) Deployment: Getting the right skills to where they are required in an organization, regardless of geographical location.

b) Knowledge and creativity distribution: Spreading knowledge and practices throughout the organization regardless of where they originated.

c) Talent identification and development on a global basis: Identifying who possesses the ability to function effectively in a global organization and developing such abilities.

When confronted with these challenges, organizations have had to reorganize their policies and procedures for handling global assignments. This requires a thorough study of cultural differences, cross-cultural values and principles, and technical and language aspects — all of which may necessitate comprehensive training programs.

Cross-Cultural Management and Cultural Theory

Inter-country differences affect both managerial and operational business processes. Pluralism, diversity, and collectivism create differences in values and attitudes, which in turn shape the behaviors and reactions of people from country to country. Economic factors and labor cost factors help determine whether business strategy should emphasize efficiency, commitment building, or some other approach. Industrial relations — specifically the relationships between workers, unions, and employers — also shape how global business processes are adopted.

In its broadest sense, culture can be defined as the collective body of a society's ideas, beliefs, values, and knowledge. It depicts the ways in which humans interact with and relate to their environments. Cultural theory is related to branches of social science, political science, sociology, and communication, and it defines the core concepts of culture. Cultural studies often concentrate on the ways subjects relate to ideology, nationality, ethnicity, social class, and gender (Serrat, 2008). Cultural theory encompasses business dimensions including marketing, production, and financial aspects. In the global business context, culture leaves its traces on policies, new processes, and management strategies.

Wide-ranging cultural differences from country to country require corresponding differences in management practices among a company's foreign subsidiaries. Cultural theory aims to examine the subject matter of different countries in terms of cultural practices and power relationships. These theories help illuminate the complex structure of cultural values and analyze the political and social impacts on them. Cultural theories are also subject to political criticism and ethical standards. They tend to promote knowledge sharing within societies, equipping people from different nations to be well aware of the norms, values, behavioral patterns, and psychological patterns of those societies.

Cultural Variations Around the World

For the purpose of comparing different cultures, it is important to analyze operative identities across cultural dimensions in different nations and to identify the aspects that are common to all cultures.

A study conducted on the behavioral patterns of managers from Hong Kong, the People's Republic of China, and the United States concluded that U.S. managers were most concerned with getting the job done, whereas Chinese managers were most concerned with maintaining a harmonious environment, and Hong Kong managers fell between these two extremes (Ralston, Elsass, Gustafson, Cheung & Terpstra, 1992).

A study conducted by Geert Hofstede identified further cross-cultural differences. The study found that nations have different sets of power needs, and that societies' power distance — the extent to which less powerful members of institutions accept and expect that power will be distributed unequally — varies considerably (Hofstede, 1992). These inequalities are exhibited to a greater degree in countries such as Mexico compared to Sweden. The masculinity versus femininity dimension captures the extent to which a society values assertiveness (masculinity) versus caring (femininity). Japan and Australia rank high in masculinity, while Denmark and Chile rank low.

Management studies have found that Mexican workers prefer a formal working environment in which managers and subordinates maintain a certain level of distance. By contrast, the cultural environment of organizations in the United States tends to be more informal and friendly (Schuler, 1996). The same studies have shown that individualism is not valued as highly in Mexico as it is in the United States. Consequently, workers there do not place as much importance on self-determination and instead expect to receive a wider range of services and benefits for themselves and their families.

Conclusion

Modern business enterprises operate in various parts of the world. In the global competitive business environment, it has become extremely important for managers to be skilled specialists who exhibit high levels of managerial and leadership capabilities. They must guide their staff toward preferred goals in ways that motivate effective and timely performance. Ensuring that teams are well motivated is fundamentally a matter of applying the right leadership skills and appropriate management style. At the same time, a thorough understanding of the motivation process greatly enhances the chances of success. An organization's value system is embedded in its corporate strategies and reflects the company's growth prospects and future survival. If the value system is weak, the organization's foundation is shattered, and the pillars of goals, objectives, and strategies will no longer be able to sustain the company over the long term. Cultures are not easily changed, so if a company is faced with divergent cultures for any reason, it must prepare itself to manage across cultures by creating a new culture that supports its new organizational policies and strategies.

The exposure to cross-cultural dynamics brings diversity to the organizational system. Diversity should be regarded as a strength of the organization rather than a threat (MacCaskill, 2010). Pluralistic learning, knowledge sharing, information sharing, capacity building, and skill development all result from the proper application of diversity through a thorough study of cultural value systems and an encouragement of cross-cultural communication. Building a strong cross-cultural communication system is primary to the success of any business operating in a global environment. The role of the manager in such an organization is to develop a mutual communication system that fosters understanding among the workforce and builds strong relationships. In doing so, leaders must recognize the different motivational factors across cultures and the varied needs they reflect.

In the international business environment, expatriate management is vital to the overall management process. It requires managing the selection process, preparing employees for international assignments, providing training, determining appropriate compensation, and managing repatriation. Expatriates bring a wealth of knowledge, skills, and experience to an organization, but if this is not well managed, it will not produce the desired outcomes. There are many documented cases in which international assignments have failed — due to poor candidate selection, an inability to adjust to the international culture, unfavorable economic conditions, or legal barriers. Therefore, for any international assignment, it is essential that the organization train the employee thoroughly, collect all possible information about the country of operation, and give full consideration to labor laws and employee issues.

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