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Managerial Issues for Cultural Differences

Federico Pastrone - Università Cattolica del Sacro Cuore di Milano - [2005-06]
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  • Abstract
    “If you look at modern companies, you see that almost anything can be copied within three months; the only thing you can't copy is the way it's done, in other words, culture. And it takes years to build up the competencies to deal with international culture.” (Cees Van De Heijden).

    There is now abundant evidence that we are living in an `era of internationalism' for business. By the creation of multi-country trading blocks such as NAFTA, EU and the Asia-Pacific Economic Cooperation group, trade barriers and tariffs are lower now than they have ever been, increasing the extent to which goods and services are able to flow freely across countries.
    Improvements in transportation, logistics and communication systems have ensured that these trends towards globalization continue and provide producers around the world with access to the same markets.
    “Today's executives must understand that they face foreign competitors as well as local and national ones.” (Robbins, 1997).
    Therefore the number and size of multinational companies, that make and distribute their services and products from a variety of countries has also increased markedly.
    The globalization of the business environment is also increasing the competition faced by managers on a daily basis; in fact consumers now have wider choices and are becoming more sophisticated in their selection of products and services. They expect new and improved products, superior service and lower prices.
    “We are living in an Era in which we are moving from the Cold War’s competitive forced technology to an exchange and sharing of technologies between East and West; from simple cultural dependency to multicultural sufficiency; from national to multinational free market economies; and from oligopolistic industries to multiple, optional conglomerate enterprises.” (Parhizgar, 2002).
    The two major forces driving globalization have been market growth and cost reduction initiatives. If an organization wishes to gain market share, expanding operations outside its national borders is one such strategy. But many multinational organizations have also been motivated to expand beyond their national borders in order to gain cost advantages over rivals.
    The clearest examples of this strategy are the many Western multinational companies that are manufacturing products such as electrical goods and textiles in Southeast Asia.
    In this 'globalization era', it would be difficult to find a company that is not affected by global competitive events, considering that most companies secure supplies and resources from foreign countries and/or sell their outputs as finished and /or refined from foreign countries and/or sell their outputs abroad.
    Indeed, there are fewer and fewer organizations and managers who are not influenced by what is happening outside their country and whose behavior has no impact at all on events beyond their own country.
    “Collaborative learning, knowledge sharing and institutional networking with 'others' across borders have become enormously important to policy-makers, managers and ordinary citizens.” (Holden, 2002; Edwards & Kidd, 2003).
    The problems faced by Multinational companies in coping with this process of globalization are accompanied by an increasing necessity to find cultural solutions to organizational problems in a world that has begun to resemble a global village.
    The heightened pace of global integration, brought about by technological and economical forces, suggests that managers will increasingly have to deal with counterparts from cultures quite unlike their own. Such globalization of multinational organizations presents management with the challenge of learning to operate in diverse cultural settings.
    Therefore at the present moment it is becoming obvious to everyone that multicultural behavior as an aspect of business is a competitive advantage: in fact the magnitude of competitive international enterprises makes it imperative that producers and consumers develop multicultural behavioral skills to deal with today’s culturally diverse global market.
    But it is also clear that these skills are very difficult to develop and understand; anthropologists, sociologists, psychologists, and economists have documented the fact that people in different cultures, as well as people within a specific culture, hold divergent value systems on particular issues.
    The cultural orientations of a society reflects the complex interaction of conceptions, apperceptions, beliefs, values, faith, ideology, attitudes, motivations, expectations, adaptation, and behavioral modification displayed by its member. (Adler, 1986)
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