A Comprehensive Report: Culture's Role in International Business

This report comprehensively examines the pivotal role of culture in international business operations. It delves into the benefits and challenges presented by cultural differences in a globalized business environment, highlighting the impact on multinational companies and cross-cultural teams. The report discusses language barriers, the influence of cultural perspectives on innovation and creativity, and the importance of understanding local cultures for market expansion. It also addresses the effects of cultural differences on workplace etiquette, organizational hierarchies, risk management, and human resource development, including training programs and relationship marketing. Furthermore, the report explores the significance of workplace etiquette and the management of culturally diverse virtual teams, particularly within the IT sector, concluding that effective cross-cultural management is essential for the success of international business ventures.

Running head: ROLE OF CULTURE IN INTERNATIONAL BUSINESS
Role of Culture in International Business
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Introduction
Globalization has entirely transformed the operational management of the business across
the world. In the present days, as the organizations are becoming more globalized, people from
different national and professional cultures come together for the accomplishment of
organizational goals and objectives. In the multinational organizations, diversity is one of the key
factors that affect the corporate culture significantly. As the companies are now expanding across
the borders and the accessibility of the global market place has been increasing significantly for
both small and large businesses, the opportunities of work is expanding internationally (Shenkar,
Luo and Chi 2014). The companies are now able to seek talent from all across the world, which
makes the cross cultural and multinational teams common in the workplaces. This is beneficial
for the companies as they can access and utilize diverse base of knowledge and ideas as well as
get insightful business approaches for different types of business problems. However, Forsgren,
and Johanson (2014) highlighted that along with benefits, the cultural differences often create
stumbling obstacles for the global businesses, especially, in terms of gestures, approaches to
work, cooperation and coordination among the teams. This literature review will present a
comprehensive discussion on the role of cultures in the international business and its benefits and
challenges that affect the global business culture and operations.
Discussion
Cultural differences: benefits and challenges for international businesses
International business includes the integration of different cultures. Steers and Nardon
(2014) highlighted that globalization has opened up many new avenues of integration of different
aspects of life, among which the key beneficiary aspects are technology, business operations,

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tourism and cultures. All the giants in different business sectors are now expanding globally and
employing a diverse workforce. For example, the airline companies, information technology
service companies, such as, Cognizant, Deloitte, Genpact, Accenture, etc, Product manufacturing
companies, such as, Microsoft, Facebook, Amazon, etc., auditing firms like
PricewaterhouseCoopers, entertainment businesses, like, Disney and Universal Studio, which has
opened theme parks in almost all the major cities of the world, are multinational companies that
adopted the strategy of employing local workforce along with cross cultural workforce to cater to
the international client base in a more efficient manner (Kernen and Lam 2014).
However, it has also been found that cross cultural work environment also brings many
challenges. As stated by Piekkari, Welch and Welch (2014), language is a major barrier in
cultural integration in the international businesses. For example, while the primary business
language is English, yet in some countries, people prefer to use their mother tongue as the
professional business language, such as, in the East Asian countries, like, China, Japan and
Korea. Hence, while working in a cross –cultural business environment, the language difference
often creates a challenge for the businesses as due to language barrier, many unintentional
miscommunication and misinterpretation of content occurs, resulting in a different outcome than
expected.
Thus, Brannen, Piekkari and Tietze (2017) focused on the role of language in the
development of international business. The authors opined that as language is one of the core
elements of international business activities, it is essential for the businesses to consider the
language differences of different countries as that plays a major role in shaping the professional
communication of the organizations. Understanding and incorporating the local language helps
the companies grow in the local as well as global market as they have to interact with the

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transcontinental intermediaries, foreign institutions and distinct government agencies and
institutions that practice different languages. Professional communication is required for
maintaining business operations, exercising powers and establishing hierarchies across different
nations and cultures and hence, for facilitating the integration, the multinational businesses must
focus on the language barriers in the markets.
Turró, Urbano and Peris-Ortiz (2014) opined that diverse cultural perspectives can inspire
the workforce to drive creativity and innovation and enhance productivity. According to the
authors, people from different cultural backgrounds have different perspectives regarding one
specific matter and those different ideas, perspectives and personalities come together to give
rise to an out-of-the-box idea for innovation and creativity. A diverse workforce often opens new
windows to think about an issue in various different ways to reach to an optimized solution. For
example, L’Oreal, the French cosmetic giant has achieved huge success in the emerging markets
due to its multicultural product development and marketing teams that could capture the precise
needs and tastes and preferences of the consumers in those markets and address those (Reynolds
2017). Hence, according to Korzilius, Bücker and Beerlage (2017), multicultural work
environment provides a platform for open exchange of ideas and culturally diverse perspectives
to business issues, which leads to creativity and innovation and helps in the growth of the
business.
Moreover, as emphasized by Noe et al. (2017), multicultural workforce is highly
beneficial during business expansion in any new market. To gain a competitive edge in a new
market, businesses must have a thorough knowledge about the country culture, tastes and
preferences of the people, local rules and regulations, customs and the local competitive
landscape. Hence, the native language skills, local connections with the governments and

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understanding of the local culture are extremely important as these can boost the development of
the international business exponentially. For this reason, the multinational companies often
recruit local people in their branches to gain competitive advantage in the local market.
On the contrary, cultural differences have a significant influence on the attitudes of
people, which sometimes affects the professional business communication. Some cultures have
flexible organizational hierarchy, while some cultures maintain very strict and rigid hierarchy in
the business. As per the Power Distance Index (PDI) among the 6 cultural dimensions by
Hofstede, the country with a higher PDI score accepts strict bureaucracy and a rigid preference
for authority, while a country that has a lower score encourages flat organizational structures and
more autonomy to achieve the organizational goals (Mazanec et al. 2015). Hence, while
Australia scores 38, China scores 80 in this index and hence, if an Australian business wants to
expand in China, it must have to understand the role of power and authority in the organizational
culture and must implement those measures and gestures in their work culture to compete in the
Chinese market (Ladhari, Souiden and Choi 2015).
In this context, Engemann and Henderson (2014) mentioned that business expansion
involves risks and while expanding a business globally, more risk elements are involved, such as,
local competition, exchange rate volatility, natural disasters or political and civil unrest, which
could affect the business operations significantly. Cultural differences in business have a role to
play in the manner that the businesses handle the uncertainties. This can again be followed from
the Uncertainty Avoidance Index (UAI) among the cultural dimensions by Hofstede. The UAI
for Singapore is 8 while that for South Korea is 85 (Dissanayake et al. 2015). This indicates that
the Singaporeans are willing to take more risks, think out-of-the-box and embrace the change
irrespective of the outcome in comparison to the South Koreans, who are more strict about

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maintaining rigid rules and responsibilities and hence, less entrepreneurial than the
Singaporeans. Hence, in terms of taking entrepreneurial initiatives in the multinational
companies, cultural differences are a major challenge.
Role of culture in international business
Development of the human resource is a crucial business operation in local as well as
international businesses. As stated by Stone and Deadrick (2015), shifts in the global economy,
domestic and global diversity, technological advancement and globalization of businesses have a
significant influence on the development of human resources in an organization. The nature of
needs and development patterns are changing and the human resources of the organization must
adapt to these changes to enhance the productivity and achieve the organizational goals. Thus,
the companies must understand the cultural diversity of the employees and arrange training
programs in a manner which would not harm their cultural sensitiveness.
Samaha, Beck and Palmatier (2014) emphasized on the role of international relationship
marketing as that is highly important for the growth of international business. The authors
conducted a study on the importance of relationship marketing across diverse and heterogeneous
cultures based on the cultural dimensions designed by Hofstede and found that the individualism
dimension has 71% more impact on the relationship marketing than the other cultural
dimensions. However, power distance and uncertainty avoidance have moderate impact on the
relationship marketing. The authors also found that relationship marketing is more effective for
businesses in the BRIC countries than in the United States as the emerging economies put more
effort in all aspects for business development and when a multinational company expands its

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business in those nations, it is important to establish relationships as per the heterogeneous
cultural aspects in these countries.
Workplace etiquette is a significant element not only for the domestic businesses, but also
for the international businesses. Workplace etiquette often shapes the organizational
environment, which affects the performance of the employees. In an organization with culturally
diverse workforce, it is important to be receptive and sensitive towards the cultural differences of
the employees. Mukherjee and Ramos-Salazar (2014) highlighted that cultural imperialism often
has led to failure of the organizations as they failed to retain their diverse and talented workforce.
For example, while in the United States and Canada, people prefer to use their first names even
in professional communication, people in South Korea, Singapore and Japan prefer to use a
formal address like, Mr./MS. along with the surname. Thus, while integrating a business among
these countries, the authorities should consider these differences as that would reflect their
respect towards the employees.
Punctuality is another aspect of workplace etiquette. Different cultures have different
ideas of punctuality, such as, the Americans arrive at a meeting few minutes early, while the
Italians may arrive several minutes late and would still consider that being on time (Reynolds
2017). Thus, workplace etiquette also includes the attitudes of the employees regarding problem
confrontation, accepting rules and regulations, and maintaining work-life balance, which affects
the performance and productivity of the employees in a diverse workplace. Thus, according to
Martin (2014), success of a global organization depends heavily on efficient cross cultural
etiquettes and international workforce diversity management and hence, the managers in such
businesses should focus on different aspects of cultural diversities to handle the workplace
etiquette issues efficiently.

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In the international business in the IT sector, global virtual project is a common feature
and the companies have to manage culturally diverse virtual teams. Gurung and Prater (2017)
stated that as the IT firms are expanding globally, the numbers of virtual IT project teams are
increasing rapidly. For success of the virtual projects, the managers of these projects must have
an idea and understanding of the cultural differences of these teams and make the project
delivery framework accordingly. These differences include language, etiquette, attitude, risk
aversion nature, punctuality and motivational factors. Since, these teams are located in different
regions, and the connection is established virtually, it is important to integrate the cultural
differences for the success of the projects.
Conclusion
From the above literature review on the role of culture on the international business, it
can be inferred that globalization has played a major role in global expansion of businesses of
different kinds and that has created opportunities for integration of different cultures. The
businesses are not only opening offices in different countries or establishing virtual projects, but
they are also going for joint partnerships with another organization from different countries. It is
seen that, in all these cases, cultural differences play a significant role in the success of the
businesses. On one hand, cultural diversity leads to innovation, creativity, competitive edge in
the local market, higher productivity of the employees by establishing cultural sensitiveness, and
integration of best skills and talents from diverse places, and on the other hand, language barrier,
difference in workplace attitude and etiquette, cultural prejudices, different understanding of the
cultural diversities and insensitiveness, and misinterpretation of professional communication are
some very common challenges faced by the international businesses. However, it can be

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concluded that, culture plays a very significant role in shaping the performance and success of
the international, cross-cultural businesses.

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References
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