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Businesses Engaging in International Business Activity in Ignoring Culture Do So at Their Peril.

Essay by   •  April 11, 2012  •  Research Paper  •  2,208 Words (9 Pages)  •  1,666 Views

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International business activity is the economy system of exchanging products and services undertaken by individuals and business in various countries and it entails a set of complicated relationships which have implications for business dealings around the world. Culture is most often perceived as the language or religion of a country, but there is more to culture than these two things. Understanding the role of culture boosts our understanding of the procedure at work in the globalization of business. In order for businesses to be able to communicate clearly and efficiently and of course to avoid misunderstandings in their international business activity, it is necessary that they understand the cultural background of decision-making and economic behaviour. This will enable businesses to have a prolific business relationships and survival of their companies and economy when they decide to extend they operation internationally.

In this essay we will look at the relationship between business and culture and examine how culture has a negative influence on international business activity if ignored. The purpose of this essay is to analyse and understand that if any business engaging in international business activity without do not take into account the importance of culture do so at their own risk.

Local businesses are more and more being challenged by external competition inside their own domestic markets. Due to the challenges faced in the domestic market local business activities level can no longer be considered as different or separate from the global environment in which they operate. Globalization has effectively (diminished) the world causing national borders to lose their significance as boundaries for people and economic relations. In order to succeed and most of all to survive in this dynamic and challenging environment, businesses need to look for better alternative outside their local and national borders.

Conducting international business around the globe it involves complex affairs that have impact on the global business interactions. The article called "The Globalisation of the Market" by Levitt (1983) supports this dispute based on the supposition that consumer behaviour is rational. Often businesses do not change the way they do things but they rather standardise and consolidate their processes or operations which leads them to a decrease in productivity and as result of the decrease in profitability it also negatively affect their profits. Herbig (1998:22-45)) say that a company in a standardised international orientation tend ignore national differences and sells the same goods and provide the same services as if the world was only one large market. On the other hand, if businesses were to adopt various orientation, they would be able to approach each country singly according to their needs and wants. Hornby et al (2002:216) states communication is one of the major hurdle to international business, specifically if companies utilise a standardise approach. Being able to understand the role of culture it will enable us to better gain understanding the process at work in an international business setting.

Ignoring and failing to respect distinctiveness of culture and customs of each country can lead an international business activity to blunders, misunderstanding or confusion, lawsuits and it reduces the possibility of business success in the particular country. There are many authors including Herbig, 1998, who have listed many blunders that happened to businesses who showed lack of consideration to cultural factors. It is vital for businesses to acknowledge cultural environments. Cultural, language, religion, legal, geographical and communication difference in markets are all part of the adaptation approach and not of the standardised approach. According to His studies from 1984 and 1991 Hofstede supports the belief in deviation of the markets.

To be effective and competitive, businesses and managers must grasp the understanding of other countries, cultures and ways these countries do business. Knowing the local language was once considered enough to succeed in different countries. But in the current climate if businesses are to meet the dynamic and challenging environment in which they operate they will need to develop a deep understanding of how cultural variables can manipulate international business activities.

Research has shown that if a company fails to settle in country outside of its culture then it is because of the company's inability to understand, adopt and adjust itself to the different ways of thinking and doings and not from a professional or technical ineffectiveness (Jordan 2003, Furnham 1986, Hofstede 1984, Hampden-Turner 1994, Mendenhal 1995, Hiltorp 1995 and Schneider 1997).

In additional to the influences of culture on international business setting religion plays a vital role in the success of a business as well as damage the establishment of the business setting in the host country if ignored. For instance, in countries where the majority of the people are Islam, the Islamic body is the Sharia law which controls the community and some the personal aspects of life. Their law forbids usury which is the collection of interest, and forbids the trade in financial risk because it is seen as a type of gambling. The Islamic law also ban investment in businesses that go against the law such selling pork or alcohol and even media businesses that produce pornography. If international business do not take into consideration all these aspects found in such countries and decides to ignore and to impose their sets of values on the host nation or perhaps the region they will do so at their own risk.

In a country such as Ghana where the north is considered as a predominant Muslim population, organisations who deals with investment or food products or even provides service must carefully take heed in complying with the Sharia Law otherwise the will end up to relocate their business operation which will be a loose to the company or perhaps being fined or banned by the government.

When a company decides to expand its operation internationally it does not only imply the geographical areas of its expansion. It entails shifting into and operating in different economic, socio-cultural, political, legal and financial environments. If a company ignores or fails to identify, recognise, understand and most of all to adapt to these environmental differences to its operations and dealings it will then definitely determined the failure of its international expansion.

Undertaken any type of business activity across different countries, cultural borders and

cultural diversities need to be taken into consideration by businesses. Management styles, culture

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