Obstacles Faced by International Firms in Dealing with Other Cultures

This report discusses the obstacles faced by international firms when dealing with employees, customers, and business partners from different cultures. It explores communication and language barriers and their impact on business operations. Additionally, it provides an overview of different methods of expansion into another country and their advantages and disadvantages.

Global Business
Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
Obstacles faced by international firms often face when dealing with employees, customers
and business partners from other cultures..............................................................................1
Methods of expansion along with advantages and disadvantages of each for a business
considering expansion into another country...........................................................................3
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Global business environment can be referred to as the environments prevailing within the
periphery of range of sovereign nations, with some factors which are exogenous to home country
environment of the company, impacting over the decision making related to capabilities and
usage of resources (Patel, 2013). In addition to this, it can be seen that global business
environment is composed of internal as well as external environments. The external environment
encompasses facets such as socio cultural, economic, political, regulatory, legal, and
technological, taxation and many more. In order to carry out business operations in an effective
and efficient manner, the corporations that are functioning at international scale need to gain
knowledge of the social environment of the host market they are currently functioning within or
intend to function within in future. In the present time, there are infinite numbers of corporations
which are functioning across different parts of the world. Such corporations need to equip
themselves with knowledge of the language and other cultural aspects of the host country
whereby they are operating. The below mentioned report seeks to discuss about two essay topics.
Obstacles faced by international firms often face when dealing with employees, customers and
business partners from other cultures
The main intention or purpose of each and every company in the present world is the
maximisation of revenues as well as profits. In this regard, a business which only operates within
the confines of domestic market may face immense time in reaching high growth prospects.
Thus, in the present era, each and every company intends to go international. There are a number
of reasons underlying behind that. The primary rationale behind this is that it provides entities
with an opportunity to enhance its overall scale of operations. Another reason is that this gives
the company a chance to interact with a larger base of audience by way of its marketing,
advertising and other related activities (Johnson and Cullen, 2017). One more crucial reason
behind the intent of corporations to go global is that this implies the availability of access to
more technologies, physical resources, human resources and more, all of which are regarded
crucial for the success of an organisation in market place. Thus, this can be easily seen that the
reasons why then companies aim to operate in the confines of international environment is
justified for them in the sense that it leads to an increment in their growth and development
perspective in the long run.
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Now, provided that the firms operate in the confines of international environment, it is also
posed to certain risks or challenges. Such challenges act as constraints for the companies while
functioning in the international landscape. In the presence of these issues or challenges, a firm
faces extensive complexity while carrying out its day to day operations on a regular basis. In this
relation, it has been identified that one of the key challenges that are encountered by the
organisations while operating internationally is the presence of cultural differences. Now, the
international corporations face a few difficulties while carrying out correpondence with
customers, business partners and employees belonging to different cultures. Such challenges are
explored in a detailed manner as follows:-
Communication Barriers
Effective communication is considered to be the most important consideration for each and every
company operating within the confines of an economy. When firms operate in an international
landscape, it is crucial for them to make sure that they communicate in a manner which does not
lead to emergence of misunderstandings or confusions among the people. A very common
observation when companies function internationally is that their way of communication differs
from that of their customers, business partners, associates or employees. This leads to
complexities in the operational environment (French, 2015). The way in which a message is
communicated by these firms to the other individuals needs to complement their way of
communication. In this relation, for an instance, it has been observed that Finns tend to give
importance to brevity as well as directness while professional belonging to India are
acknowledged to be more of nuanced and indirect while communicating. This shows the
differences that may lie within the pattern of communication of host country individuals and the
company. Yet another example to reflect upon this issue is that the use of non verbal cues like
handshakes, eye contacts, kiss on the cheeks may be very common in the company’s workplace
environment but may seem to be offensive to the customers, business partners, associates and
employees of the host market. Thus, it becomes important for the companies to build knowledge
of the communication pattern of individuals prevailing within the country that they are operating
within.
Language Barriers
The international companies have to interact with a large number of business associates,
customers and employees on a daily basis. This is central to the execution of their day to day
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activities in an effective and efficient manner as per the requirements of the company. However,
it is very common that the language used by the company may be different from that used by the
before mentioned parties (Gehrke and Claes, 2014). For an instance: An international firm
operating within Germany while having UK as its domestic market may tend to use English as
the language of communication. Contrary to this, the individuals prevailing within the host
environment may prefer to communicate in German. This gives rise to the emergence of
linguistic barriers between the company and its diverse set of stakeholder groups such as
employees, business partners, customers and so on. Thus, it becomes important for the
international firms to exercise cultural sensitivity and thereby gain knowledge of the language
which is used by the people in host market in order to set interaction with them in an effective
and efficient manner.
Methods of expansion along with advantages and disadvantages of each for a business
considering expansion into another country
The main intent of each and every organisation in today’s world is to enhance their market share
as well as position by undertaking strategic measures and course of action. In this relation,
expansion of market tends to provide opportunity to an organisation to enhance its growth as
well as development prospects. When a business takes the strategic decision to facilitate
expansion of its business operations from one nation to another, it has to take into account
several considerations. With respect to this, it has been identified that the most important
consideration borne by the companies in their mind is that they need to select a sound strategy
for expansion (Grünig and Morschett, 2017). Selection of market entry strategy is very crucial
for a company as this tends to pave way towards the success or failure of an organisation within
the confines of new market place. Thus, it can be said that market entry mode needs to be
selected by an organisation looking upon the advantages as well as disadvantages of the various
alternatives available as strategy to carry out market expansion.
The market entry mode is a strategic distribution and transportation method of products and
services to new selected market for carrying out the measure of expansion. In this process, it is
essential that proper formation and management of contracts is done by the entry while
facilitating entry into the confines of a new nation (Lindsay, Rod and Ashill, 2017). Thus, below
mentioned and discussed are the different modes or methods through which an entity can
consider to expand its business operations in international market place. Thus, a number of
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market entry modes are discussed as follows along with their advantages as well as
disadvantages: -
Exporting:
This type of market entry refers to the simplest way to enter in an international market
and moreover, couple of ventures start their international enlargement using the model of this
entry mode. In this relation, exporting basically deals with the sales of product and services in
foreign countries which are sourced from the home country (Hollender, Zapkau and Schwens,
2017).
Advantages The biggest advantage of exporting is acknowledged to be the ease to enter any market
with low probability of risk.
Disadvantages
 One of the biggest demerits of exporting is that it provides less power of control.
 The entity may not get fruitful outcomes if it is not having basic local information about
the particular location.
 It is sometimes seen that the natural environment negatively impacts upon import and
export activities.
 Yet another constraint is enforced heavy custom duties along with the cost of transporting
to the chosen location.
Licensing and Franchising:
Franchising and licensing are two of the most widely used market entry modes. Hereby,
franchising allows an individual to duplicate the business entity in any other region. Licensing
allows an individual to sell company’s products among the audience (Ekanem and Uwajeh,
2017).
Advantages
 Both the market entry strategies are quick to execute as well as simple.
 They are strategies which can provide ease to enter with low probability of risk and low
cost.
 This is beneficial for those companies who want to exercise access to the markets that
may otherwise be limited owing to the prevalence of governmental policies.
Disadvantages
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 Hereby, the revenues are acknowledged to be substantially lower than that earned in case
of other market entry strategies.
 These strategies lack power of controlling so there can be difficulty that can be faced
owing to the regulatory system.
Partnering and strategic alliances:
A strategic alliance can be referred to as that mode of entry whereby a contractual agreement is
entered between two or over two parties stating that the parties involved would exhibit
cooperation for a certain time period for the achievement of a particular goal (Hollender, Zapkau
and Schwens, 2017). A large number of firms in the modern world make use of this market entry
strategy to gain access to new market and attain success in quick manner.
Advantages In partnering business, there is a merit of equally sharing the profit as well as losses
among the partners. It decreases the amount of investment along with uncertainty for an individual.
Disadvantages
 There would be higher amount of investment required as opposed to exports, licensing or
franchising.
 It may lead to emergence of clashes within two parties.
Acquisition:
This is a market entry mode whereby a firm is acquiring the other firm by buying their
stocks, dealings of stock on its own. This is a strategy whereby the buyer pay the actual amount
of the company's value to the owner.
Advantages
 In acquisition there is flexible legal entry with no restrictions.
 By acquiring good firm can be beneficial for maximisation of profits as well as goodwill.
Disadvantages
 It will require high cost incurred.
 Disputes among peers in organization
 Can be suffering of problems with residence and office.
Greenfield Venture:
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Through this type of entry, a firm can be integrated into the new market by not taking any
favour from other business that have already established and run in the same location (Hollender,
Zapkau and Schwens, 2017). Hereby, a new wholly owned subsidiary is established within the
confines of a foreign market by starting its facilities from scratch.
Advantages By having full-fledged knowledge about the new location with its consumer behaviour
knowledge, a company can earn huge revenues.
Disadvantages
 There is an extensive amount of risk which is involved hereby related to financial,
manpower and other resources.
 This method implies market entry in a slow manner as the setup of wholly owned
subsidiary takes time.
CONCLUSION
On the basis of above discussion, it can be said that international business faces a lot of
difficulties such as communication and language barriers while dealing with customers, business
partners and employees pertaining to other cultures. In addition to this, it has been determined
that there are a number of alternatives available for an organisation to carry out business
expansion by making entry into a new country. The widely used market entry strategies include
strategic alliances, franchising and licensing, Greenfield venture, acquisition etc.
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REFERENCES
Books and Journals
French, R., 2015. Cross-cultural management in work organisations. Kogan Page Publishers.
Gehrke, B. and Claes, M. T. eds., 2014. Global leadership practices: A cross-cultural
management perspective. Macmillan International Higher Education.
Johnson, J. L. and Cullen, J. B., 2017. Trust in cross‐cultural relationships. The Blackwell
Handbook of Cross
‐Cultural Management, pp.335-360.
Patel, T., 2013. Cross-cultural Management: A transactional approach. Routledge.
Grünig, R. and Morschett, D., 2017. Determining the Market Entry Modes. In Developing
International Strategies (pp. 105-123). Springer, Berlin, Heidelberg.
Lindsay, V., Rod, M. and Ashill, N., 2017. Institutional and resource configurations associated
with different SME foreign market entry modes. Industrial Marketing Management, 66,
pp.130-144.
Hollender, L., Zapkau, F.B. and Schwens, C., 2017. SME foreign market entry mode choice and
foreign venture performance: The moderating effect of international experience and
product adaptation. International Business Review, 26(2), pp.250-263.
Ekanem, I. and Uwajeh, N.J., 2017. Transnational entrepreneurs and their global market entry
modes. In Diasporas and Transnational Entrepreneurship in Global Contexts (pp. 130-
151). IGI Global.
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