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 and Management

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.

Cultural Theory and Its Determining Factors

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.

Application of Cultural Theories

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.

References

Drucker, P. (1988). The coming of the new organization. Harvard Business Review, January–February 1988.

Fadel, J., & Petti, M. (1997). International HR policy basics. Global Workforce, April 1997, pp. 29–30.

Hofstede, G. (1992). Cultural dimensions in people management. In V. Pucik, N. Tichy, & C. Barnett (Eds.), Globalizing Management.

McCaskill, S. (2005). Communicating across cultures. Diversity Performance Associates, International Business Lecture.

Ralston, D., Elsass, P., Gustafson, D., Cheung, F., & Terpstra, R. (1992). Eastern values: A comparison of managers in the United States, Hong Kong, and the People's Republic of China. Journal of Applied Psychology, Vol. 71, No. 5.

Robert, K., Kossek, E., & Ozeki, C. (1998). Managing the global workforce: Challenges and strategies. Academy of Management Executive, Vol. 12, No. 4.

Roger, C., & Roethlisberger, F. J. (1991). Barriers and gateways to communication. Harvard Business Review, November–December 1991.

Serrat, O. (2008). Culture theory. Knowledge Management Center, Regional and Sustainable Development Department, Asian Development Bank.

Schuler, R., Jackson, S., Jackofsy, E., & Slocum, J. (1996). Managing human resources in Mexico: A cultural understanding. Business Horizons, May/June 1996, pp. 55–61.

Tayeb, M. (1998). Transfer of HRM practices across cultures: An American company in Scotland. The International Journal of Human Resource Management, Vol. 9, No. 2, April 1998.