The Role of Cultural Differences in Forming a Business Strategy

INTRODUCTION I have selected an article from the Journal of Intercultural management which is written by Sylwester Marek Kania in 2010. Article is published in the journal with the title "The Role of Cultural Differences in Forming a Business Strategy." In this report I would be elaborating the theoretical concepts discussed in the article. Let us first have a look at the central idea of the article i.e. culture and its role in international business management. Culture plays an important role in the formulation of strategies of international business. And since culture of different places is different and thus it becomes essential for an organization which is present cross border to understand the culture and organize its business accordingly. It is sure that the companies which want to see growth in upcoming future are focusing highly on the cross cultural development of the business. Economic development of the company depends on its ability to handle the cross cultural situations. There are many countries that are emerging economies for example PwC has estimated that the annual GDP growth of India is 8.9 %, Vietnam's 8.8 % and China's 5.9 % until 2050. The companies, who will be able to deal with the typical cultural conditions of these countries, will be able to succeed in cross border business. There are many factors which are involved in the cross cultural understanding such as cultural themes, communication, group dynamics, globalization etc (Pirrotti 2012). In the report further I would be explain how the author have explained these factors in his article. ANALYSIS OF THE ARTICLE In the introduction part of the report authors state that when a business wants to expand its business in foreign countries then it requires following the same business processes as it is done in the domestic markets and their financial results. Author has explained many factors that can affect the business in a foreign country including commercial practices, differences in legal systems, the different managerial approaches, different government structures and different currencies. Author says that due to different cultures different commercial practices are seen and it is important to understand the fundamental differences to succeed in the business (Barney 1991). In the next part of the article authors has explained the different culture and their importance for the international management. He says that globalization has brought many countries together the business purposes and it has also presented people from different cultural background together. Author explains culture and says that it is acquired and learned in the environment. According to Nogalski and Jarocki (1998) culture is formed from generation to generation and contains some set of rules, categories, conceptions, concepts accepted by the society as well as determination of the obligatory behavior. Culture affects the marketing environment of the business. He explained it with examples of colors as green color has different meanings for Muslims and South eastern Asia. Similarly, White is also considered as a color of purity in west but for Asians it is the color of death. Author has given some fundamental dimensions of culture which differentiate people of different regions. These dimensions include attitude of people towards the rules and regulations as well as principles; individualism versus collectivism; perception of people about the world; ascribed status versus achieved status; Attitude towards time and environment of the country. According to the author it is necessary to understand the fundamental dimensions discussed above in order to establish your business in a foreign country (Ajami, R, A et al. 2006). In the next part of the article author discusses about the formulation of business strategy in international business management. Author starts this section with the description of what the strategy is and says that it is made of four fundamental factors i.e. goals to achieve, strategic supremacy, domain of activity and fundamental programs. Domain of the activity is the most crucial dimension which clears the market of the organization. Market contains people i.e. target audience and target audience has different cultural beliefs and here role of culture comes into the picture. Understanding the socio - cultural environment of the market becomes essential for the business. The cultural differences of the market can be understood with the help of awareness of the products and services of the company. Sometimes brand name or color of the logo becomes a negative factor and go against the culture of the market. Understanding the language and gender issues is also important; for example in some parts of the world woman is given higher positions in the corporate world and in other parts they are undesirable such as Republic of Korea, Japan etc (Ball, D, A et al. 2009). Further author have implemented above mentioned concepts on a real life company named Young Digital Planet (YDP). YDP is a company in the education industry which provides computer developed study material. YDP established its business all over the world including Great Britain, Germany, France, Spain, Poland and Holland etc. Company faced many challenges in developing its business in these countries due to the cultural differences. Author has provided the description of cultural differences that YDP faced in five nations which are Malaysia, Korea, Nigeria, Saudi Arabia and British. Author says that YDP faced negotiation problems in Asian countries as in Asia management is more structured. Asian managers are punctual and believe in long term contracts if they have faith in their partners. It is also seen that Asian people generally avoid saying "no".