Cultural Diversity Essay: Significance Of Cultural Differences For Global MNCs
Question
Task:
Background and Context of Cultural Diversity Essay:
Some argue that cultural diversity creates barriers between people due to obvious linguistic, cultural and religious differences. Others point to renowned global professional services firms, such as the “Big Four” Accounting partnerships, which actively promotes diversity - in all its forms - in the workplace and offers a range of services to a variety of clients around the world.
Given that historically, the English language is effectively the “lingua franca” or the language of business in the advanced economies of the developed world, some argue that cultural differences are irrelevant if everybody learns English, speaks the same language and becomes “Westernised”.
A good example of this is the city state of Singapore, which famously evolved from “third world to first” in a generation in the late twentieth century. All Singaporeans learn English as well as a second language based on their cultural heritage. This bi-lingual requirement is one factor, from among many, which has given Singapore an undeniable advantage when conducting business, attracting international businesses and appealing to high-wealth individuals.
However, the rise of emerging / developing economies in Asia and Africa potentially disrupts this assumption that English will remain and continue to remain the “lingua franca” of international business and that cultural differences fade away if everybody adopts liberal Western values, as espoused primarily by the USA.
The rise of China is a good case in point. What role do cultural and linguistic differences play in the trade war between the USA and China? Most observers see it as “great power rivalry” based on intense competition for economic, and now technological supremacy, but others see it as “a clash of civilisations”, driven by incompatible cultural - political differences. Ironically, “Communism” is derived from the West not the East, and yet the most powerful “Communist” political parties are in Asia.
In this assessment students must think laterally, but also think “prospectively”. If our “global village” is more interconnected with more and more efficient means of communication and travel, then are cultural differences still real barriers or obstacles which impede meaningful interactions in the business world? I am reliably informed that, just like driverless vehicles, automated real-time language translation is less than ten years away and will simply be another “app” we can download on our phone!
Required Activities:
- Students will need to supplement their knowledge with wide research of the topic and consider referencing useful and relevant case studies and other academic sources, which support their thesis statement and argument.
- Students must follow correct in-text citation protocols and end of essay referencing conventions.
- Finally, Students will need to conclude with a decisive evaluation of the relative importance of cultural differences for the modern day firm (MNC) with a considered and logical argument, based on an objective appraisal of the evidence gathered.
Answer
Executive Summary
As seen in the present context of cultural diversity essay, culture acts as crucial factor in the business, as it affects the decisions, values and effectiveness in communication amongst people. In the present scenario of globalisation, international business is getting bigger and expanding at a high level. Due to this, cross-cultural differences and communication have acquired importance in the business across borders. The assignment has discussed well the significance of cultural differences on international business. Moreover, it has listed determinants and dimensions of culture using appropriate theory and examples. Thus, organisations need to become more culturally sensitive, as they require workforce from different backgrounds. Hence, cultural diversity in the workplace fosters respect, innovation, and innovation and creativity within teams.
Introduction
The essay introduces to the theme of the assignment, ‘Managing across borders’ which carries an analysis of significance of cultural differences for MNCs. To understand the cultural differences, it states about the behaviours, beliefs, languages, and practices followed by the members of a particular community, race or national origin. Thus, the discussion mentions the benefits of understanding cultural differences in businesses. In addition, the readers will gain an understanding of the concepts such as determinant, cultural dimensions, cross-cultural literacy and others with the suitable examples. Thus, essay analyses the overall impact of cultural differences in the effective functioning of business for global MNCs.
Significance of Cultural differences for global Multi-national Corporations (MNCs):
More businesses are entering into the global market resulting into cultural differences in the organisational activities. Examples include, social standing, discrimination, values, language, religion, gender, or employees holding higher position than others at the workplace. For an instance, the cultural difference of language is one common barrier influencing cross-cultural communication within teams in business. Therefore, understanding cultural differences is phenomenal to the business as it leads to effective communication (Luo & Shenkar, 2017).
Key themes
Now, the essay will address certain themes in respect to the culture within business as mentioned below:
- Determinants of Culture
Factors or aspects that determine the culture in business consists of religion, language social structure, education, political philosophy, and economic philosophy.Religion defines the beliefs, values, and rituals shared amongst the members of a society, and influence the attitude of people towards work in internal business. Japanese are secular-atheist and culture initiates values, undertaking the responsibility for the environment, preparation for business meetings and so on (Fernández & Pinuer, 2016).
Social structure describes the organisation of the society, as individual or group-oriented. These aspects determine the culture within a society in a region.
Education serves to be another major determinant of culture, as the society with formal education may provide the organisation with the quality of potential workforce and status of consumers. This serves as a great competitive edge of the organisation over others in the industry (Jetter & Parmeter, 2018).
Language plays a dominant role in the effective communication between teams of different countries. It affects the marketing strategies, brand names, decision-making, and conduct of business relationships. ‘Canada’ speaks two official languages. Thus, it indicates about the level of cultural diversity influencing businesses (Brannen, Piekkari and Tietze, 2017)
Economic and Political philosophies: In businesses across nations, keeping knowledge about the political norms, aspects, and economic policies will help identify tactics to encompass the market. ‘Walmart’ is one great example that shows the benefit of understanding the culture of Mexico, and attaining success in Mexican market by establishing and selling fresh products.
- Cross-cultural literacy and dimensions of culture
Cross-cultural literacy is being literate or knowledgeable about the cultural differences, and their influence in the business practices. It is important for businesses working internationally to develop the cross-cultural literacy, for business transactions, cordial relations with the people, and improving overall performance (Bouncken, Brem & Kraus, 2016).Cultural dimensions
Cultural dimensions states about the differences in cultures across nations. Hofstede cultural dimension theory is a framework designed for the cross-cultural communication. Six dimensions of culture in a workplace environment are given below (Beugelsdijk, Kostova & Roth, 2017).
(Source: Hofstede Cultural dimensions, 2017)
Power distance Index (PDI)
This dimension states the degree to which people accepts differences in power, as inequality exist in every culture. High power indicates less communication between superiors and employees and low power shows effective communication. PDI is high in African, Asian and Latin countries and low in Germany. Bulgaria is the country with the greatest differences between managers and subordinates (Cross-cultural management, 2017).Individualism v/s collectivism
Individual rights and the freedom values are of vital importance in individualistic cultures. Whereas, collectivism aims to establish harmony between people in the group, and prioritizes group needs and interests. Individualism is predominant in Canada and Denmark while collectivism exists in China, Korea, and Israel (van Kerkhoff & Pilbeam, 2017).Masculinity v/s femininity
Masculine society’s value ambition, heroism, assertiveness and oriented towards the possession of property and money to attain success. Feminine society develops relationship between people, caring for others, and prefers cooperation, modesty and quality of life. Austria and Japan is considered to be masculine society, and Sweden, Thailand as highly feminine (Beugelsdijk, Kostova, & Roth, 2017).Uncertainty avoidance
This dimension deals with how individuals of a society attempts to tolerate uncertainty and ambiguity. High scores appear to be less tolerant of the changes, and follows strict code of behaviour, laws, and regulations. On the contrary, low scoring countries are accustomed towards ambiguity. High scoring countries are Belgium, Russia, and Mexico, and low scoring countries include Unites States, England and Singapore (Gelfand et al., 2017).Long-term orientation v/s Short-term orientation
Long-term oriented society values perseverance and persistence towards work. Whereas short-oriented societies focuses on the values ‘respect for tradition’ and ‘return for favours’.Indulgence v/s restraint
This dimension emphasizes happiness of people in society. The indulgent countries allow relatively free gratification of basic human desires. Restraint countries tend to control gratification of needs, and regulate by strict social norms. Indulgent countries are Nigeria, and Pakistan and Egypt as restraint (Cross-cultural management, 2017). - Values, norms, ethics, and social mobility
The term cultural norms determine the rules or expectations of behaviour based on shared beliefs in a group. Cultural values are the core principles or standards that base the functioning of entire community or group. It further consists of several parts, i.e. customs, rituals, traditions, and beliefs. These values evaluate what is good and what is bad, such as “honesty” is a value, and greeting people as a norm in cultures (McMurrian & Matulich, 2016).Ethics refer to the accepted principles of right or wrong, governing conduct of people in organisation. Social mobility refers to the movement of individuals, families, or other person within or between any social strata or group in the society (Crul et al., 2017).
- The advantages and disadvantages of cultural diversity for the MNCs and its level of importance
In workplace, Cultural diversity (also known as multiculturalism) is defined as the group of individuals from different cultures or society working together. There are multiple viewpoints of the people engaging in cultural diversity, both positive and negative:Advantages
Diverse cultural perspectives inspires creativity, innovation, strengthens market potential, problem-solving, effective communication and strong customer relationships (Bouncken, Brem & Kraus, 2016).Disadvantages
Some of the major disadvantages of cultural diversity include language barriers, gender inequality, cultural differences, imbalance of power, and conflicts between different cultures (Brannen, Piekkari and Tietze, 2017). Additionally, cultural diversity creates lack of cohesion, i.e. mistrust among team members. This further leads to miscommunication between people in organisation.Thus, MNCs must attain cultural sensitivity and understanding of cultural differences while working with organisations across the nation. This will assist in developing long-term sustainability, and gain high performance and success.
Conclusion
The conclusion section states that cultural differences play a vital role in the successful conduct of international trade. They exert great influence on the working of global MNCs, and their operations. The essay has discussed determinants, and dimensions of culture using appropriate theory, and cross-cultural literacy between nations. Additionally, significance of cultural diversity is demonstrated, which leads onto the assessment of pros and cons of cultural diversity at workplace. Hence, it can be concluded that an organisation must attain understanding of the cultural differences to ensure increased productivity, income and performance in long-term.
References
Beugelsdijk, S., Kostova, T. & Roth, K. (2017). An overview of Hofstede-inspired country-level culture research in international business since 2006. Journal of International Business Studies, 48(1), 30-47.
Bouncken, R., Brem, A. & Kraus, S. (2016). Multi-cultural teams as sources for creativity and innovation: The role of cultural diversity on team performance. International Journal of Innovation Management, 20(01), 1650012.
Brannen, M.Y., Piekkari, R. and Tietze, S. (2017) The multifaceted role of language in international business: Unpacking the forms, functions and features of a critical challenge to MNC theory and performance. In Language in international business (pp.139-162). United Kingdom: Palgrave Macmillan.
Cross cultural management. (2017) Hofstede Cultural dimension. Available at: https://www.business-to-you.com/hofstedes-cultural-dimensions/ [Accessed 24/04/20].
Crul, M., Schneider, J., Keskiner, E. & Lelie, F. (2017). The multiplier effect: How the accumulation of cultural and social capital explains steep upward social mobility of children of low-educated immigrants. Ethnic and Racial Studies, 40(2), 321-338.
Fernández, L. M. V. & Pinuer, F. J. V. (2016). Influence of customer value orientation, brand value, and business ethics level on organizational performance. Cultural diversity essay Revista Brasileira de Gestão de Negócios-RBGN, 18(59), 5-23.
Gelfand, M. J., Aycan, Z., Erez, M. & Leung, K. (2017). Cross-cultural industrial organizational psychology and organizational behavior: A hundred-year journey. Journal of Applied Psychology, 102(3), 514.
Jetter, M. & Parmeter, C. F. (2018). Sorting through global corruption determinants: Institutions and education matter–Not culture. World Development, 109, 279-294.
Luo, Y. & Shenkar, O. (2017). The multinational corporation as a multilingual community: Language and organization in a global context. In Language in International Business (pp. 59-92). United Kingdom: Palgrave Macmillan.
McMurrian, R. C. & Matulich, E. (2016). Building customer value and profitability with business ethics. Journal of Business & Economics Research (JBER), 14(3), 83-90.
van Kerkhoff, L. & Pilbeam, V. (2017). Understanding socio-cultural dimensions of environmental decision-making: A knowledge governance approach. Environmental Science & Policy, 73, 29-37.
