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International Business Practices

Individual Project Phase 2

Instructor:

09/03/2014

Culture can be defined as values, ideas, beliefs and knowledge which are shared by a social group (Wren, 2012). It consists of expressions, artistic works and other traditions, which are shared and reinforced by members of a group and passed down from generation to generation. Cultural practices vary from one community to another and it is imperative that organisations consider them while considering a business plan to adopt. Cultural factors such as lifestyles and customs mould the character of a society and often influence decisions made by consumers. Businesses planning to go global should familiarise themselves with how unique political and legal dynamics can affect their operations in different countries, this can only be achieved if a business has cultural sensitivity. This will help the entity to not only recognise and accept the diversity between different groups, but it will also help it to act objectively.

Factors Multinational Companies Need to Understand

My team and I are at an advanced stage of taking our business global. We have singled out three regions that we consider ideal to set up our operations. These specific regions are in the Middle East, in Latin America and in Asia. Further still, we have decided to select only one country from these three regions, the main reason being because we are only just beginning our operations, maybe if the businesses succeed we can expand our scope to other countries. In Latin America we choose to invest our resources in Chile. One consideration that influenced our decision was a report by the World Bank entitled “Doing Business” which highlighted that economist and investors rated Chile as the best Latin American country to do business in. Chile has open laws regarding enterprising and company start-up, which can be done in a single day. The country also has few bottlenecks on imports and exports. As for the Middle East we decided to settle with Saudi Arabia. The country is widely recognised for promoting and encouraging innovation among entrepreneurs. The country is also very similar to Chile on the basis that starting up a business enterprise is relatively straight forward. In Asia we favour practising in Singapore due to a selection of factors such as safety and a conducive business environment.

From a business stand point there are various components of these varying cultures that I need to take into account and understand. The first is language and communication, which I consider as one of the biggest obstacles which we will have to overcome. In order to effectively conduct a business communication is a must. Any small errors can not only curtail negotiations but they can also have disastrous implications. Obviously a quick fix to this would be to learn a new language but since we are setting up ground in three different countries this might prove difficult. The other solution would be to recruit locals to my businesses who would help ease the communication process, as opposed to just using expatriates. Another factor that I need to consider is the religious beliefs of these cultures. For example, religious influences may affect what an individual believes to be ethical and therefore this impacts on the type of work that he/ she is willing to perform (O'Brien, et al, 2006). It may also affect work patterns on the basis that varying religions may view different dates of the year as sacred resting days. It is important to consider this if a business is to succeed.

The Difference in Cultural Components

These different countries each have their own distinctive culture which makes it easy to distinguish between them. For example, while in Chile Roman Catholicism is deeply embodied in their culture and history, Saudi Arabia is predominantly Islam. Singapore on the other hand is quite a diverse, multi-religious nation. Buddhism, Christianity and Islam are just but a few of the religions that it contains. There are also other differences that do exist in the business etiquette observed by these cultures. For example, while in Saudi Arabia Islam religion may bar certain gifts for example portraits of dogs this is not such a big deal in Chile and in some fractions of the Singapore population.

Suitability of the US management Style in these Countries

The American management style can best be portrayed as an individualistic one on the basis that managers are responsible for decisions they make within the scope of their responsibility (Benfari, 2013). Though the verdict to important undertakings can be taken in an open forum, the person accountable for these decisions is the manager; as such managers tend to ignore their subordinates’ opinions, a case similar to the Chilean situation whereby managers rarely seek consensus prior to making a decision. Usually employees heed to their managers instructions without questioning them. A US management style would therefore be suited for the Chilean people because in a way they are already accustomed to it. In Singapore the situation is quite different. Though managers are tasked with the responsibility of making decisions this does not mean that the decisions are never debated albeit in a respectful manner. This usually creates harmonious teams where everybody is at ease. I would therefore not implement an American management style in this case. In the same light I would also not implement the style in Saudi Arabia. Despite having a business environment which is very instructional, leaders tend to include their team in consensus style discussions though the still leader makes the final decision.

Economic System Classification

The Chilean economy can be classified as a market oriented economy. It is characterised by strong financial institutions and large quantity of foreign trade and this has ensured that its economic achieves a very strong sovereign bond rating, the strongest in South America to be precise. Singapore on the other hand is state capitalist mixed economy. The central government owns and regulates firms which make up roughly 60% of the country’s GDP. The company uses a blend of both the free market and economic planning. Finally, Saudi Arabia uses a free market economic system. This has seen the country transform from an agricultural society to an economic power house. After carefully studying and analysing these countries I see it best that we set up our centres in each of them, because they all offer suitable business incentives and are ranked high in this regard by the World Bank.

Conclusion

Cultural values are beliefs, ideas and knowledge which are shared and upheld by a social group and passed down from generation to generation. An organisation that wishes to invest in a foreign country with a different culture would be advised to understand this culture first and adopt cultural sensitivity before proceeding. My business has decided to expand its operations into three countries, which are Chile, Singapore and Saudi Arabia. Though these countries have varying cultures, the similarity they hold is that they all offer a suitable business environment and this is why I would invest in them.