Cultural Differences Impact on International Business Operations

This essay examines the critical role of cultural awareness in international business, focusing on the differences between Australia and Saudi Arabia. The study employs Hofstede's Cultural Dimensions to compare these nations across various aspects, including power distance, individualism, masculinity, and uncertainty avoidance. The paper highlights significant cultural disparities and their implications for business operations. It further explores opportunities and potential challenges for businesses, especially for Australian companies expanding into Saudi Arabia. The essay concludes with practical recommendations and strategies to mitigate these challenges, offering insights into navigating cross-cultural business environments and fostering successful international ventures. The analysis underscores the necessity of adapting business practices to align with local cultural norms for effective global operations.

Running head: CULTURAL DIFFERENCES IN TERMS OF INTERNATIONAL BUSINESS
Importance of National Culture with respect to Global Business Environment
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1CULTURAL DIFFERENCES IN TERMS ON INTERNATIONAL BUSINESS
Executive summary
This study is aimed at understanding the importance of cultural awareness at the global level.
The purpose is being explained with the help of Hofstede’s Cultural Dimension. In this paper,
Australia and Saudi Arabia are being compared with each other. Some major differences in
cultures in between Australia and Saudi Arabia are being identified in this study. The paper
presents some suggestions as well in case if an Australian business is moving to Saudi Arabia.

2CULTURAL DIFFERENCES IN TERMS ON INTERNATIONAL BUSINESS
Table of Contents
Section 1: Introduction:...................................................................................................................3
1.1 Introduction:..........................................................................................................................3
1.2 Factors that made national cultures important at the global level:........................................3
Section 2: Main body of the essay:..................................................................................................5
2.1 Comparing the national culture based on Hofstede's Cultural Dimension:...........................5
2.2 Opportunities for business in Saudi Arabia:........................................................................11
2.3 Possible challenges in doing business in Saudi Arabia:......................................................12
2.4 Recommended suggestions to mitigate the challenges:.......................................................13
Section 3: Conclusion:...................................................................................................................14
References:....................................................................................................................................16

3CULTURAL DIFFERENCES IN TERMS ON INTERNATIONAL BUSINESS
Section 1: Introduction:
1.1 Introduction:
International business means either operating on the global platform or utilizing the
prospect of globalization to increase the business efficiency and enhance the competency level
(Gurung and Prater 2017). It is also an interesting point that what all compels an organization to
move to international locations. They do it to widen up their market to increase their customer
base and most importantly, to enhance their market shares and maintain a progressive profitable
venture (Gurung and Prater 2017). They also move to international locations to access the
resources like technological advancement and the cost-effective production in the target foreign
location (Gurung and Prater 2017). Globalization has widened up the scope and integrated the
different cultures on the same platform. The globalization of production is one of its kinds that
companies use to increase its efficiency by accessing the technological advancements and the
cost-effective production of the target country (Islam and Hossain 2016). The globalization of
market helps to take a company-specific factor to the global platform to fetch a home like
success (Crane, Kawashima and Kawasaki 2016). Globalization of market is indeed a challenge
as it involves cultural intervention in notable amounts. This creates problems for the human
resource management as they will have a diverse workforce to take care of. The management
faces the challenge to understand the culture of the target country and finds this difficult to offer
only relevant products or services to customers. The study is aimed at understanding the
importance of national culture in the international business environment.
1.2 Factors that made national cultures important at the global level:

4CULTURAL DIFFERENCES IN TERMS ON INTERNATIONAL BUSINESS
Globalization is perhaps one such factor that has largely contributed to the fact that
national cultures are important at the global level. Foreign markets or most probably a potential
market has now seen as a potential prospect, which is why multinational companies look to enter
the target market (Wood and Wilberger 2015). They do it in numerous ways. Globalization can
be defined in two types of globalization of production and globalization of market. Firms use
globalization of market to target a new market with a new set of a product line. However, they
used to keep their unique elements intact at the global platform as well (Chung 2014). This can
be understood from an example of the Coca-Cola Company that has maintained its supremacy
over the supply chain operation in the countries across the globe (Mohamed and Omwenga
2015). Their success is not limited only to the United States but the success story is the same in
many centers across the globe. The Coca-Cola Company is a leading name in most markets. In
this example, the company has maintained its supply chain uniqueness at the global level. The
approach may be different; however, they have maintained the success and took this to the global
platform (Mohamed and Omwenga 2015).
Globalization of production is another factor that has helped to integrate the different
cultures on just one platform. The needs to have advanced technologies and a cost-effective
production have encouraged many multinational firms to establish business relationship with the
different countries (Christensen and Kowalczyk 2017). For example, China has been considered
by many multinational companies for outsourcing of production works or some have also
considered to import the Chinese made products to offer cost-effective products to customers and
importantly, maintaining a competitive advantage in the market (Balsvik, Jensen and Salvanes
2015). China had offered cheap material and the labor costs. These two factors have a high
influence on the cost of production (Paul and Mas 2016). Walmart is one of such examples that

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has maintained a healthy relationship with China and imported the Chinese made goods and
products to remain cost-effective (Spicer and Hyatt 2017). Walmart is an American based
company and has a quite different business culture in comparison to the cultures in China. Such
cultural integration could become possible due to the globalization of production. Walmart had
needed to work to understand the work culture of China (Spicer and Hyatt 2017). It just shows
that national culture is critical while doing business with the foreign countries.
Section 2: Main body of the essay:
2.1 Comparing the national culture based on Hofstede's Cultural Dimension:
The importance of understanding a national culture can well be understood with the help
of Hofstede’s Cultural Dimension. Hofstede's has taken a very unconventional move to study the
cultures in different countries. The findings may or may not be realistic to some extent, but it
offers a really good concept to compare the cultures in the two different countries. The cultural
dimension is divided into few segments upon which the differences are measured. The
dimensions are divided into six segments like as follows (Beugelsdijk, Kostova and Roth 2017):
1. Power Distance Index (high versus low)
2. Individualism Versus Collectivism
3. Masculinity Versus Femininity
4. Uncertainty Avoidance Index (high versus low)
5. Pragmatic Versus Normative
6. Indulgence Versus Restraint

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The section provides a comparative study of the cultures in the two different countries Australia
and Saudi Arabia. The comparison has been given to understand the influence of national
cultures on the international business environment.
Power Distance Index (high versus low):
In terms of power distance index, Saudi Arabia is much higher in Australia. The gap is
very wider, which means the cultures are very distinguished in this regard. According to the
cultural dimension, when power distance is low, this will provide a highly accessible
organizational hierarchy (Degens et al. 2017). This means that the organizational hierarchy in
Australia has lesser distance between the managers and the employees. Managers are quite
accessible whereas a very high scoring of Saudi Arabia means a wider distance between the
managers and the employees. Employees will not maintain high formalities to reach to their
managers. However, employees will find this indeed difficult to reach to their managers. In
addition to this, managers also encourage the participation of employees in the decision-making
process. On the other side, only high designated people are invited to take part in the decision
making process.
Importantly, communication is much informal at the Australian workplace whereas, in
Saudi Arabia, high formalities will be required to communicate to the managers or to the top
managers (De Mooij 2015). A high score in power distance is limited only to those few nations
and it is manageable as well. They have their own measures on how to proceed with such
cultures; however, this may be problematic if it gets united with an altogether different culture.
Management will expectedly face the challenge if they enter such market. The problem will

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remain hidden until it produces profitable results. However, an unexpected business crisis might
all change the face (De Mooij 2015).
This can well be understood from an example of joint venture union between an
American based Pfizer and the Chinese based Hisun. The joint venture had happened because
Pfizer had wanted to capitalize the market for generic drugs. Moreover, Hisun is a leading
Chinese company in manufacturing the generic drugs. On the other side, Hisun had wanted a
better production capability driven by the extensive technologies and a capable research &
development process. A mutual purpose was served with the joint venture union (Hughes-
Morgan and Yao 2016). It was interestingly a collaboration of different expertise and had been
thought as one of the historic joint ventures in the history. However, the venture had failed due to
the decreasing exports of generic medicines from the United States (Hughes-Morgan and Yao
2016). Such business failures can be because of various reasons; however, both the companies
had wider cultural differences.
Individualism versus Collectivism:
Australia scores much higher to Saudi Arabia in terms of individualism. This means that
the workplace culture in Australia is much in favor of individual contribution. Employees will
have high values to self-reliance and will not hesitate to display any initiative. On the other hand,
employees in Saudi Arabia will have the high inclination to collective work. They will utilize
their skills to the betterment of their performance; however, they will have the tendency to avoid
taking any initiative. Such tendency may be good at times when employees do not have the
relevant experience behind them. However, this will not be productive for the company if they

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are experienced enough but are restraining them to take any initiative (Ribbink and Grimm
2014).
Innovation is indeed produced when employees have encouragement into them to take
innovative steps (Drucker 2014). There are examples of organizations that have been benefitted
from the innovative decisions of their employees. One of such examples is of First National
Bank (FNB) that had created a revolution by entering into the different social sites like
Facebook, YouTube, Twitter and LinkedIn (Simbanegavi, Greenberg and Gwatidzo 2014).
Employees were encouraged to come up with the better ideas as they will be rewarded with a
certain sum of the amount on the annual basis (Simbanegavi, Greenberg and Gwatidzo 2014).
The efforts had then paid off as employees had produced an ample of creative suggestions like e
Facebook Game Wallet and storytelling on YouTube (Simbanegavi, Greenberg and Gwatidzo
2014). Such efforts had helped the customer to interact with the CEO of the company on Twitter
and be updated with the news on YouTube (Simbanegavi, Greenberg and Gwatidzo 2014).
Moreover, Facebook was also used for the transaction process (Simbanegavi, Greenberg and
Gwatidzo 2014).
Masculinity versus Femininity:
Both Saudi Arabia and Australia score more or less the same in terms of Masculinity.
Both will be considered as a “Masculine” society. Such a society will have high importance to
the shared values (Chua, Roth and Lemoine 2015). They will share each other's success and
importantly, each one of them will strive for the success. They rely on their individual capacity
as a performer. They do hard to attain the best possible qualities to get preferred during the

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interview process. The workforce will be able to get the best talent. Additionally, they do the
selection and prefer the best skills to the relevant position.
Employees who have been working in Australia will face not much challenge in this
regard in the Kingdom of Saudi Arabia. Good performers will find the same treatment as it
happens in Australia (Chua, Roth and Lemoine 2015).
Uncertainty Avoidance Index (high versus low):
Australia scores a much fairer number in terms of uncertainty avoidance. The country is
halfway between the numbers are much more balanced than Saudi Arabia. There are extreme
gaps between Saudi Arabia and Australia in respect to the level of avoidance that they have for
an uncertain future. Australia looks much more relaxed in terms of future uncertainty. They
believe that they will be able to mitigate the future challenges. They trust in their skilled
workforce and the other resources. On the other hand, the Kingdom of Saudi Arabia looks much
worried about the unexpected future (Gentina, Shrum and Lowrey 2016). This is because of the
reason they try to develop huge attempts to be ready for an unexpected future.
The nature of work will be affected by such thinking as they will be expected to support
the cultural thoughts with their extreme hard works. An added burden of work pressure may
reduce the time for leisure purpose (Gentina, Shrum and Lowrey 2016). Employees working in
Australia may find this difficult to integrate their capability with the work pressure in Saudi as
they are much more inclined to leisure time. They believe to perform well by working smartly.
They try to get sufficient time for their work as well as for their lives. In other words, work-life
balance is much more important to the Australians. On the other hand, employees working in

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Saudi Arabia may also have desires for a balanced relation between the work and life; however,
they might not be able to get that.
Pragmatic versus Normative:
Australia scores lower than the Saudi Arabia in terms of Long-Term Orientation. It
means that they correlate things with the present while not bothering much about the future.
They have high respect for the traditions. They focus less on the future and believe in achieving
the quick results (Sabiote-Ortiz, Frías-Jamilena and Castañeda-García 2016). Australian
employees will rely on day-to-day performance. Employees in Saudi will have the same style but
to a lesser extent than Australia. Such business culture will have its tendency to respect the time-
bound culture. They will consider changes based on the temporal changes in cultures. The
workplace culture will be to attain quick results by not relying significantly on the future
outcome. Moreover, it means giving values to the organizational culture that may be influenced
by the change in customer's demands (Sabiote-Ortiz, Frías-Jamilena and Castañeda-García
2016).
This can well be understood as an example of Corporate Social Responsibility (CSR),
which has become an integral part of multinational companies across the globe. They are doing it
to present an improved picture of their culture in regards to caring the surrounding community
(de Jong and van der Meer 2017).
Indulgence versus Restraint:
Both Australia and Saudi Arabia are indulgent in culture; however, Australia scores more
in this regard. An indulgent society will have the willingness to realize what they feel good. They
have positive attitudes and are quite optimistic about their future. They are positive at the time

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when they are in the workplace. They are positive as well when they are into their personal lives.
They have high values to having fun and enjoying the life. Moreover, they are much in favor of
work-life balance approach (Malik and Yazar 2016). However, Saudi Arabia despite being an
indulgent society lags quite behind to Australia in terms of optimism and self-oriented
workforce.
2.2 Opportunities for business in Saudi Arabia:
Cultural differences between the Kingdom of Saudi Arabia and Australia as discussed in
the earlier segment has helped to realize a very few difference in the workplace cultures of both
the countries. A business that operates in Australia and has planned to expand its network by
entering Saudi Arabia will need to understand the identified differences in the workplace
cultures. This will not only help the human resource management to have its good control of the
diverse workforce, but this will also help during the selection process. The human resource
management will be able to design the job accordingly, which will also educate the recruiters on
what kinds of applicants they might get (McFarlin and Sweeney 2014). Moreover, recruiters will
be able to manage their proceeding accordingly.
Cultural awareness will largely help the human resource management and the employees.
Cultural differences might attract an unexpected conflict that may also delay the project and
produce a negative consequence (Hemmert, Bstieler and Okamuro 2014). Cultural awareness is
also important to understand the common people in the target country. This is another very
important point of consideration as it helps to design the products accordingly. The national
culture that comprises of cultures both at the workplace and of the common people is utterly
required in regards to have a good performing unit and to produce the relevant products