IMPACT OF CULTURE ON BUSINESS PRACTICES
Write an essay to Explain the impact of culture on business practices in an international
organization and evaluate the challenges of doing business in another
culture.
Solution
IMPACT OF CULTURE ON BUSINESS PRACTICES
The current world of business is characterized with acquisition of existing businesses a
development that has been ongoing internationally. Businesses with the same stature are also
known to merge for various reasons such as being able to cut unnecessary costs and offering
goods and services at cheaper prices. Competitiveness is also achieved especially due to the
ability to reach larger populations through mergers and acquisitions. Mergers and acquisitions
can sometimes involve companies in different countries and the question of mixing the cultures
becomes a worry in most of these companies. For a business to succeed, some cultural practices
which are discussed in this project are evaluated and weighed.
Introduction
Existence of businesses in the recent past that have branches all over the world has been
the start for mix in culture. Various businesses have different purposes to meet meaning that they
follow different procedures. Every nation has what they believe are the right norms to follow and
what is believed to be wrong depending on the historical background of such a nation.
Businesses are brought up in environments that could either be friendly or unfriendly in cultural
terms, some of which may end up closing down owing to the challenging culture. Researches
carried out by various scholars have brought an understanding of what culture can be defined as
and the different cultures that exist in a business environment. Results from samples of
companies that have been known to mix cultures through globalization of such companies show
that there are benefits and challenges related to such cultural interactions. This paper will discuss
in depth the cultural impact on business practices in international organization setting.
Cultural variation across international organizations
Entrepreneurial practices have been known to bring changes in business environments
such that new cultures are introduced. The advent of technological changes brings about the
necessity to communicate with different members so as to find out what should be done in the
organization to create a friendly working environment for all. According to Guirdham (2011,
p. 6-8), culture interchange is made possible through communication where people get the
chance to pass information on what they believe in and what they feel is important. For this
reason, it is important to analyze the method of communication that will promote a positive
organizational culture in the business. The importance of identifying varieties of cultures is based
on various factors such as how one defines culture and the type of organization one is in.
IMPACT OF CULTURE ON BUSINESS PRACTICES
Different Definitions of Culture
According to Pieterse, (2015, p. 56), culture can be defined as a theme that involves
ethnic politics, fashions and methods that can change depending on the generations and levels of
people involved. in this case a global perspective of what culture is will be described as an
interaction of different ethnic groups with different tastes and fashions’ preferences which can be
mixed to make up an all inclusive belief. Weber, Tarba, and Reichel, (2011, p. 11) identify that
culture is a channel that facilitates the start of new business ideas as new businesses are started or
bought through different people allowing for cultural interrelation in national and international
levels. The performance of these businesses will be a product of successful cultural interactions
between different individuals and in them accepting that their cultures are not superior but
complementary. According to Furham, (2012, p. 9-22), culture is a combination of business tools
that are joined together to bring the best outcome for that business. The tools involved include,
technological advancement, entrepreneurship, innovation among other relevant tools. It can thus
be noted that culture can be manipulated to either bring success or failure and the decision of
what the result will be lies upon the individuals. Decisions on whether the impact of cultural
variation will be used for competitive advantage will be made by the individuals constituting the
organization.
National Culture Frameworks
A workplace can adopt a framework to guide its approach towards cultural changes such
that those changes will not negatively impact the business. Depending on the nature of business,
the country and extent of cultural value, the structure or framework of national culture can be
derived. Appendix 1 illustrates the characteristics that apply in a cultural framework for health
centers in most nations worldwide.
People-Centered Culture
According to NSW Department of health, (2011), the purpose of an organization should
mainly be focusing on satisfaction of customers. This applies to all business sectors; private,
public, big, small, service providers and goods distributors. Lack of the motive to achieve this
would mean that a business is not culturally responsible, and the impact would be failure of that
business. An organization achieves this role by making sure diverse cultures have been taken
IMPACT OF CULTURE ON BUSINESS PRACTICES
care of in terms of particular specifications of goods and services which in the long run improve
the value of services offered by the organization.
Inclusive Decision Making
Decision making is localized because all the implementations that would result directly
affect the individuals involved. In this case, diverse opinions of different people are listened to
and implementation is made depending on the agreement of all of them. The implication of this
can be positive or negative. For example, this can neutralize the power of the management or
make better utilization of viable ideas for which the organization will be successful in the long-
term. On the same, accountability will be enhanced because records of the progress of the
business will remain known to everyone since biasness will be reduced.
Communication for Cooperation
Communication takes different directions, from management to mid level to the lowest
level. Customers also need an organizational culture that allows them to air their opinions in
deciding prices and other factors related to business involvement. Communication on the
improvement expected by the customers and employees so as to increase satisfaction is also part
of the culture that is passed in the organization. An international organization that does not
promote cooperation and communication between it and universal clients faces challenges that
could lead to its failure. Through cooperation, the business can get new competitive ideas from a
global perspective.
Investment in Human Resources and Customers
An essential cultural structure also relates to recognizing the value of people in an
organization. Since culture is just a way of expressing oneself to the environment, the value of
such people determines how much they contribute to the outcome of every business practice.
Investing in the customers and employees of a business is one way of promoting positive culture
which makes individuals involved to be loyal. Therefore, this investment can be used as a
competitive strategy for most of the businesses.
Responsible Innovation
Technological advancement and other innovations that facilitate better cultural exchange
are encouraged in every business regardless of its nature. The impact of improved technology is
IMPACT OF CULTURE ON BUSINESS PRACTICES
that communication will be enhanced especially in an international business setting. Innovation
is also an organizational culture that would lead to the promotion and appraisal of employees in
different departments of an organization. The challenges encountered in conducting business
practices innovatively especially in another culture is that in most cases the management is not
well aware of what should be done and what should not be done especially in introducing new
practices.
Inclusive Leadership
Among the most significant parts of a business is the leadership role carried out by the
management. A positive leadership culture that allows all members of the organization
regardless of the cultural background would improve the outcome of business practices since the
best possible options will be made known to all participants. Allowing employees to give their
feedback as leaders in their various units means that they are dignified and respected. Seeking
guidance from the top most leaders has also been encouraged in businesses to ensure
inclusiveness in leadership roles. In every national or international organization leaders should
display a high level of cultural discipline especially in promoting organizational vision and
focus.
Safety of Individuals
Safety in every business environment is a culture without which progress would not be
monitored or experienced. Security has always been an international challenge and the fact that
its deficiency can bring about failure globally, leads to the development of systems to ensure it is
enhanced. A safe working environment is one where all employees are treated with kindness and
customers are offered standard goods and services. The national culture standards are responsible
for ensuring that all employees of international organizations do not contradict the safety of all
environmental factors.
Result-Based Improvement
Based on the results derived from the past experiences, it is the culture of a business to
work on the negative implications to avoid their recurrence. Teams are built to create a platform
for discussion of the past procedures and recommendations to solve the grievances presented.
Public scrutiny is allowed so that all evaluations are not biased and possible changes are made in
IMPACT OF CULTURE ON BUSINESS PRACTICES
transparent ways. Methods of ensuring more efficiency in the performance of businesses have to
be devised after every outcome to establish a basis for better results in the consecutive term.
Discussion of International Mergers and Acquisitions (IM&As)
Mergers are created through the joining of two businesses with equal capabilities and
stature where the result of the joint forces is a bigger business under the same management and a
new name. On the other hand, if a big company acquires a portion or the whole of another
smaller organization and takes up the management rights, then that is an acquisition. Mergers
and acquisition happen due to a number of reasons among which could be described as some of
the challenges at international levels. A huge value of cultural exchange exists due to the rise of
IM&A especially since a number of countries will be involved. Success can be forecasted due to
that mix if the right characteristics for culture framework are being followed up whereas failure
of such IM&A will result if the right framework is not followed up.
Reasons Behind the Growth of International Mergers and Acquisitions (IM&As)
Economic Concerns in the Involved Countries
According to Erel, Liao, and Weisbach, (2012, p. 1045-1082), some countries hold on to
the culture of retaining a wealthy standard such that any business that is across their border and
is successful becomes their target. Nations utilize all their available resources to ensure that they
gain maximally in the IMAs. Beyond what they gain, lower costs such as taxation and
contracting expenses are provided since the combined tax liability is easier to handle than in the
original business. Existence of the culture framework to invest in human resources and clients
becomes more realistic as different cultures are combined to give inclusive products with lower
prices and tastes and preferences considered. The value of Mergers and Acquisitions is also more
improved which is an ideal development for most of the national culture frameworks as the
improvement in every particular result guaranteed. Foreign investment is also made possible in
the advent of IMAs since the companies contribute a certain amount of capital in the decision to
merge or acquire the business in a foreign country. In this case, better chances for profitability in
both countries are increased due to the value of economic culture.
Need for responsible corporate governance
IMPACT OF CULTURE ON BUSINESS PRACTICES
The desire of every business person is to have an inclusive leadership to increase the
chances of its success. Leadership at an international level can facilitate better decision making
and implementation of the best possible plans to counter cultural challenges that would otherwise
result from negative leadership. IMAs have leaders representing different cultures and some
incorporate those cultures under the same leader to have the same purpose. A country may
choose to acquire a business for the purpose of bringing to the same agreement, different
cultures. The outcome of this practice can be improved leadership qualities for both the country
and the business involved. Exchange of leadership ideas at an international level enhances the
beliefs of different cultures as well as making the most efficient use of experiences and expertise
in all businesses. Accountability is also an achievement aimed at when trying to acquire new
subsidiaries and mergers, and in the end it can be attained.
Challenges Encountered by International Mergers and Acquisitions
Resistance of HRM Practices by Different Cultures
Identifying the importance of culture comes a long way to the involvement of
International HRM practices. Recognizing the needs of different members of an organization is
part in decision of the HRM practices to apply in the organization. However, most of the mergers
and acquisitions end up using the old methods of HRM practices to a level that the specifications
of the new premise do not matter. In such a case, the challenge faced is that human resources
resist the new management based on what they deem as its failure. In meeting business strategies
and promoting friendly environmental factors, the new business that is formed through
acquisition or merger should come to a conclusion of cultural preferences to improve human
resources practices of all involved employees regardless of their origin. Global leadership
requires that all cultures be considered and represented which may lead to less experienced
leaders being considered. In a research carried out by Gill, (2012, p. 435), it was found that
national Mergers and Acquisitions are more bound to succeed than international ones due to the
cultural difference expected in a country against that of different countries. The main challenge
was found to be leadership difference in quality for various cultures as compared to a uniform
value in one specific country.
Lack of a Specific Relevance in Achieving Goals
IMPACT OF CULTURE ON BUSINESS PRACTICES
Involvement of different currencies in a business brings in the aspect of each national
currency wanting to achieve their individual goals. Every nation has its specific individual
interests which they tend to place a high value on, some of which could be contrary to the group
interests. For example, Japanese people are known to promote a culture of group performance
which can be said led to the success of Renault-Nissan. Evidently, a high desire to achieve group
interests leads to better chances of succeeding as there will be no waste of time trying to achieve
individual goals. Promoting an inclusive group culture helps in associating the individual
components of success and people can gain from the mixing of the two cultures involved.
Through developing a group achievement culture leadership specifications are met with
consideration of important factors and more attention is paid on relevant skills rather than on
biasness. Combining culture and leadership can therefore be identified as measures to contain the
negative impact cultural practices on International Mergers and Acquisitions, Gill, (2012, p 437).
Explanation of the Different Integration Mechanisms/Approaches
Integrating the cultures of various businesses and nations requires a mechanism to ensure
that all the possible effects are considered. Figure 2 in the appendix displays a list of the specific
approaches that facilitate easier understanding of what culture can be consistent of and how to
solve the negative effects resultant. The emphasis placed on the Mergers and Acquisitions is
specifically important owing to the fact that they are majorly involved in the international level.
The importance of leadership role is also highlighted as leaders can be determinants of what
culture to follow and to what extent it should impact on business practices. The purpose to be
met by the business is outlined in the culture framework whereby profit making and customer
satisfaction are combined as part of the business cultural practices.
In the preservation approach as explained by Ellis, et al, (2011, p. 84-85), firms that
merge are allowed to retain their strategic interdependence though some processes have to be
integrated in a uniform manner. The amount or value of changes in the resultant business is not
high because a combination of all the characteristics is added to the new firm. Resources to
improve the firm being acquired are decided upon by the acquiring firm which preserves most of
the management rights. The preservation approach affects business culture by introducing new
management with new capabilities and opinions to an already existing business which may not
necessarily be ideal for all businesses in different countries.
IMPACT OF CULTURE ON BUSINESS PRACTICES
Absorption approach results in the reduction of operational autonomy with a high
interdependence. In this case, the target firm gets changed in very many ways as it is deemed
absorbed by the acquiring firm. Planning in advance on what should be done to avoid negative
implications is necessary as it involves consolidation of the activities of both firms. For example,
if the cultural practices of the target firm are to be altered, then losses could be incurred in the
process of alteration. The primary function of this approach is usually to reduce costs and
minimize disruption in the process to change the management of the business.
The application of symbiotic approach includes traits for both preservation and
absorption whereby the operational autonomy and interdependence are key factors. In relation to
management, some of the operational managers of target firms are consulted showing the
importance of the role they play. Using this approach allows safeguarding of most of the
important cultures held on to by the business even in its acquisition. Cooperation and
communication is enhanced because consultation of the responsible managers is taken seriously
for the purpose of continuation of the business. Boundaries of what should be retained are set
showing the availability of transition period between the old and new form of the companies.
The transformation approach symbolizes a significant change in the fundamental setting
of the organizational culture of both companies. The existing firms are discontinued and a new
form of company with very new structures and operations is brought about. Innovation and
inventions are specifically important based on the fact competitive advantage is necessary.
Planning is also an essential stage in this approach since significant decisions are to be
implemented in the end. All levels of management are represented to ensure that inclusive
leadership and decision making is offered. For example, appointing managers from both
companies in the upper level of management would facilitate better decision making considering
their past experiences.
In the holding approach, the acquiring company simply controls the operations of the
company it acquires without necessarily causing cultural changes in the acquired firm.
Separation of tasks is identified as one of the main features describing this approach. The
operations of the acquired firms are not changed but are financed by the acquiring company.
Crucial activities carried out by the acquired company are supported by the acquiring company,
with the management of those companies not being influenced by any structural changes. The
IMPACT OF CULTURE ON BUSINESS PRACTICES
chances of affecting the culture of firms in this integration approach are usually low owing to the
fact that management is retained.
Justification of the Integration Mechanism chosen by National Partners on the Basis of
their Value Orientation
Partners can decide on the approach to take or use depending on various factors including
the value of the business and its geographical location. A firm that offers globally important
items should consider a preservation approach to ensure that strategic competitive advantage is
retained and control is enhanced. An absorption approach is necessary for a company that has
high operational costs especially if the cultural value of that company will not be negatively
influenced. For a company with lower value, and a smaller structure, it would be easier and more
efficient to apply a holding company operation as it will facilitate the growth of such a company
without negatively affecting its culture. A transformational approach would be ideal with a
business that needs a transition and advanced planning for the decisions that should promote
better implementation, (Ellis, et al, 2011, p. 88-89). A symbiotic approach is ideal for many
business integrations due to the flexibility of decisions made and the inclusiveness involved in
leadership roles.
Recommendations and Conclusion
Providing a positive culture to existent businesses will require evaluation of the national
culture frameworks including finding the main purpose of the business. The necessity of
economic considerations should not be highlighted as the main purpose of business practicing as
it can lead to negative influences some of which could cause failure. It would be important to
promote a culture of group achievement to facilitate easier and quicker achievement of the
targets set by international companies. Mergers and Acquisitions should evaluate their value so
as to establish the most effective approach to help in their management. Natural culture
frameworks are used to determine the level at which a company can be successful at an
international level, based on the application in solving cultural imbalance for a company.
Businesses aim at improving their value so as to be termed as culturally successful as they can
find their targets interconnected with culture at both national and international levels.
Appendices
IMPACT OF CULTURE ON BUSINESS PRACTICES
1. Appendix 1. Cultural framework characteristics
2. Appendix 2. Integration Mechanisms for IM&A
Figure 1: Cultural Framework Characteristics
IMPACT OF CULTURE ON BUSINESS PRACTICES
Figure 2: Integration Mechanism for IM&A
IMPACT OF CULTURE ON BUSINESS PRACTICES
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