Influences of Culture on Business

Categories: CulturePsychology

Government policy, political stability or instability in overseas markets, foreign trade policy, tax policy, labour law, environmental law and trade restrictions should be taken in mind by a firm. Firms need to be able to respond to the current and anticipated future legislation, and adjust their operations and running policies accordingly.

Political risks are among the first crucial risks to consider when going internationally. Political changes, instability, government geopolitical changes, taxes are hard to face and control. These risks may drag down investment return or even force it to close down and face losses.

Economic Factors

Economic factors have a significant impact on how an organization does business and also how profitable they are. Economic growth, interest rates, exchange rates, inflation, taxation, wages rates, disposable income of consumers and businesses.

Pricing

A vital factor for a customer to practice his/her buying process is price . Price plays a vital role in creating customer value and building customer relationship. Pricing, part of the marketing mix is one of the competitive aspects of firms in domestic and international markets.

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It’s even more complexed to deal with pricing method internationally. Among the aspects to consider in order to set the pricing policy the firm should consider competitiveness, political, legal , social and technological factors that apply within that country.

Employees

Giant firms going globally, develop a global oriented strategy regarding the human resources workforce so they can operate as multinational enterprise. If entering a European country , its quiet easier since European countries have similar laws and regulations.

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Entering eg. USA or China or Asia, however, significantly differs from Europe. Local tax, laws, contracts, employee benefits obligations and other issues are on stake. Nowadays due to technology and globalization workforce is connected and remote allowing employees moving virtually anywhere in the world.

However, employment laws vary from a country to country, and local authorities, the firm should carefully examined all those aspects in order to avoid conflicts and penalties. The organizational employee chart, should support those employees. Culture can determine success or failure in case is not wisely considered towards local employees. Employees should feel comfortable and create a positive return of production and engagement. Individualist should be minimized and collectivist should take place. Trust is important. In Japan respect for people in authority is very important in the workplace. It defines responsibility and roles and they expect respect and formality. In Asia negotiations build stronger relationships among employees. In Norway, which emphasize “societal equality” tend to have a comparatively flat organizational hierarchy. This can mean informal communication and an emphasis on more smooth co-operation across the organization.

The difference between masculinity and felinity is very important. Hofstede (2001) mentioned culture differences when it comes to gender. In south American female workers are very respectful as male workers. In Europe female possesses high level in hierarchy and be even be leader. In Muslim countries however, this does not happen. As a result, this will be examined carefully when a firm is going globally and to which country.

Technological Factors

The new technology innovation is one of the most important factors influencing the marketing advertising. Its known how fast the technological landscape changes and how this impacts the way we market functions. Constantly there are new ways of producing and distributing goods /services , to the target markets. Technology often becomes outdated within a short period of time after its released.

Huge firms such as Amazon is an ideal example of technological expansion. The company begun in 1996 by Jeff Bezos as an online bookstore and soon has become a powerhouse in the US e-commerce market. By establishing a base in the leading English speaking ecommerce markets and customer loyalty program , it has spread its e-retail dominance to the universe.

https://blog.bobsledmarketing.com/blog/amazon-international-markets-strategy

Therefore, technology is an important factor to be adapted by the marketing advertising strategy, when expanding globally, in order to lead successful distinction.

Environmental Factors

Environment and its existence is on stake. Due to the increasing scarcity of raw materials, pollution targets, doing business as an ethical and sustainable company, carbon footprint targets set by governments, firms due to apply these rules and respect them. Consumers are demanding that the products they buy are sourced ethically, and if possible from a sustainable source. Consumers are also showing a higher regard for ‘going green’ and supporting organizations that show their efforts in following this trend.

https://bohatala.com/wp-content/uploads/2017/08/macro-environment.jpg

Legal Factors

Governmental laws are affecting how an organization acts, internal policies are also taken into account when developing strategies for the company, both internal and external. If these factors are not continually reviewed, large fines, imprisonment and business closure can become reality. Some critical rules are health & safety, advertising standards, consumer rights and laws, product Labeling, product safety, labor laws, and competitive legislation.

Design of product /service & marketing

Achieving a smooth and dynamic presence in a new market, firms should seek exceptional marketing strategies that may be acceptable and adaptable by their new customers.

Initially, Levitt (1983) argued the opinion that organizations should develop standardized, high-quality world products and market them around the globe by using standardized advertising, pricing, and distribution so this will lead to lower prices. (Article in the Harvard Business Review)

However, Wind (1986) introduced an approach that encourages companies to ‘think globally and act locally’. In the globalized world, markets might have common characteristics, but they often have important differences. Therefore, a company’s marketing strategy will fail if it indicates that the same strategy that works in one country must also work in another. A global product, via its advertising, can be loaded with local values to add local significance.

Glocal marketing that combines “Global” and “Local” marketing, it is a strategy employed by global brands to adapt to local needs and aims to maintain global brand messaging and adapt to the needs of the local culture. By this it allows business to maintain brand consistency all around the world, but to adapt their message to different products, services, or experiences that better suit the local culture. Glocalization is a concept developed by Robertson (1994)

For instance, McDonald’s has restaurants in 119 countries with a goal to preserve the brand message of simple and affordable fast food. But, they also need a menu that suits the local people’s dietary needs, and other various habits. This has led them to use glocal marketing to promote various menus in different countries, such as their no-beef menu in India, that focuses on chicken, vegetarian, and local variations.

Gremmen (2003) gives an example of Procter & Gamble’s (P&G) strategy for Pringles, an American brand of potato chips. While it attempted to penetrate the European market, the company first tried to sell its product by centralized marketing. However sales were not good and P&G decided to localize the brand, develop local flavors and adopt the advertising campaigns, leading P&G to succeed in increasing Pringles sales.

Expanding internationally involves high risks

John field executive director of the Center for enter. and innovation at Duke University said ‘’you have to expect to lose money for a while,” when expanding abroad.

Bearing all the above mentioned, all aspects should by examined and applied in such a carefully manner in order to avoid any possible failure. Indeed, still , even “Giant” firms face such a crisis like Disney World Ltd in Disneyland Paris in France.

Disneyland Paris in France opened in April 1992 , after the Disney company chose very carefully the location not only for its magnificent landscape but also for its easy access by all means of transportation vessels and its location in the geographic position. France government provided all possible incentives to make this huge project reality. The main idea was to create an ideal theme park and resort {entertainment (restaurant), resort facilities , retail exploitation (shops) commercial and residential (hotels).} Furthermore an expanded workplace was created, employing 12.000 employees and with a prospective turnover of 11 million of visitors. However, the first year was destructive as per manager Robert Fitzpatrick. Visitors were 50.000 instead of 500,000 estimated , sales in souvenir and hotel accommodation were low. Employees were resigned due to uncomfortable working conditions and the enormous land and plants were difficult to support.(Adekola & Sergi, 2007).

Disney , was closed to bankruptcy when (year of the mouse- 2005) , the new manager Philippe Bourguignon , along with the Disney management evaluated extremely carefully the major problems and realized that “ a transplant of American culture into one of the intellectual centers of Europe “ (Palmer et al. 2007) was the destructive approach applied. The company imposed a global strategy rather than a local strategy (Rugman & Hodgetts, 2011). Thus the firm changed its approach and made a number of alternations and improvements. First it changed the name form “Euro Disney” to “Disneyland Paris. The second and third step, was to change the management and manager, both Gilles Pelisson and later Andre Lacroix who introduced new shows and generally increased marketing activities. French did not like for example celebrating Halloween and Micky was not the favorite for the French. New theme shows, exhibits were composed based on Jules Verne’s novels , The Hunchback of Notre Dame. Minnie and Mickey’s were transformed into Josephine Baker and Moulin Rouge characters.

Abandoning Disney’s global approach and substituting a local one that match to the local tastes was the key to success. (Rugman & Hodgetts, 2001). Straight after , the management change the pricing policy, removing the high admission and hotel prices, as they were too high, even for the American’s one (Adekola & Sergi, 2007). After lowering the price visitors were increased by 23% in 1995 and for first time made profits.(Monroe & Cox, 2001). In 1996 visitors increased by 33%.

Additionally, management hire local staff with Parisian attitude, in terms of culture and behavior , the glamour French style, avoiding the American one. The “Look Book” was based on French customs and labor policies and the expectations of the European managers and workers.

Moreover, menus and eating habits, were customized to local French flavors and habits. Management up to 2006, did not serve alcohol and according to Holson, 2005 this was an insult. Management decide to offer alcohol since French’s traditions is drink wine with meal. (Aupperle & Karimalis,2006).

The gesture to transplant the American culture into the European culture was devastating . With the ultimate usage of “Glocalization” approach, Disneyland Paris, managed come out from a debacle and be a winner. Over 12 million visitors every year visit the theme park(Kapferer, 2008).

https://www.tandfonline.com/doi/abs/10.1080/09652540903537014?journalCode=rjsm20

Conclusion

National culture has effect on the activities of organizational culture – such that, national cultural norms, values and beliefs are forced on organizations through societal establishment, all above revealed by studies performed by Hofstede (2001), Nelson and Gopalan (2003), Johns (2006) and Nazariana et al. (2017)

Furthermore, multinational companies are affected by more than one culture at a time. Through their subsidiaries located in various countries, they are exposed to different national cultures. Recognizing the importance of culture in the business world is an important step toward success in the global marketplace. An ideal path to success is implementing “glocalazation” at its maximum level.

Culture profoundly influences how people think, communicate, behave, they way the function and negotiate . Realizing, understanding and adapting to local preferences, generates maximal profits and remain competitive in the global arena

Therefore, its proven that different cultures have different attitudes. To successfully turn into “global” vision into “reality”, a company must carefully outline its business identity, assess threats before expansion and then adapt accordingly.

Geert Hofstede

a Dutch social psychologist, IBM employee, and Professor Emeritus of Organizational Anthropology and International Management at Maastricht University in the Netherlands[1], well known for his pioneering research on cross-cultural groups and organizations.

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Influences of Culture on Business. (2021, Oct 15). Retrieved from https://studymoose.com/influences-of-culture-on-business-essay

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