Assignment 2: LASA—Applying Cultural Theoretical Approaches
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Running head: APPLYING CULTURAL THEORETICAL APPROACHES
APPLYING CULTURAL THEORETICAL APPROACHES 8
Applying Cultural Theoretical Approaches
Applying Cultural Theoretical Approaches.
This paper will apply the cultural theories from the cultural theoretical approaches literature review to an examination of the globalization trends and the changing relationships between corporations, governments, and civil society, surrounding the concept of CSR in MNCs.
Literature Review
The purpose of this paper is to conduct a review of the literature on cultural theories and global management concepts so far discussed in this course, and relate these theories and concepts to the concepts of corporate social responsibility (CSR). The following concepts and themes emerged from the analysis of the articles reviewed.
Cultural Differences and Global Business
Companies face some new and unfamiliar challenges while engaging in international business. Factors such as political, legal, economic, and cultural environments affect how businesses are conducted globally. It is important to consider both the similarities and differences in these factors between the home and the foreign country. The differences in language, religion, political, and social norms will affect the way companies conduct businesses globally and will also affect the nature of consumer demand (Zacharakis, 1996). Mayrhofer (2004) noted that the socio-cultural difference is an even more important aspect of the factors to be considered. Therefore, businesses expanding to international markets must consider the cultural differences before entering (Zacharakis, 1996). According to Deari, Kimmel, & Lopez (2008), culture has positive as well as negative influence on business operations, so companies must handle the differences in culture in such a way that it benefits both parties involved.
According to Bowie (2008), becoming knowledgeable about different countries’ communication styles, body language, meeting and negotiation tactics, dress, greetings, and social events are all keys to having a good business relationship with individuals in other countries. Deari, Kimmel, & Lopez (2008) noted that trust and respect can easily be won and competitive advantage can rise by learning the host country language; however, disrespect for the foreign culture can destroy the whole cooperation.
Cultural Dimensions
According to Javidan, Dorfman, Sully de Lupe, and House (2006), there is need for managers to be able to compare their own cultures with the cultures of other countries in order to understand the cultures of different countries. Several models have been developed to help in understanding of cultural differences; however, the Hofstede model is the most used of these models (deMooiji and Hofstede, 2010). The Hofstede model provides six dimensions of national culture (The Hofstede Center, n. d). Javidan, Dorfman, Sully de Lupe, and House (2006) re-conceptualized the Hofstede model and the works of Trompenaars, and Kuckohn and Strodtbeck, and developed a few new dimensions to make nine cultural dimensions. These cultural dimensions are the aspects of a country’s culture that distinguishes the country from other countries and as such have implications for management engaging in international business (Javidan, Dorfman, Sully de Lupe, and House, 2006).
Power distance. This according to Javidan, Dorfman, Sully de Lupe, and House (2006), is the degree to which members of a society expect and should expect power to be distributed equally. The Hofstede Center (n. d) sees the fundamental issue in power distance as how a society handles inequalities among people. The high power distance countries such as Thailand, Brazil, and France accept hierarchical order; therefore firms in such countries should expect hierarchical decision making processes (Javidan, Dorfman, Sully de Lupe, and House, 2006; The Hofstede Center, n. d).
Uncertainty avoidance. The degree to which members of a society feel uncomfortable with ambiguity and uncertainties in the future (The Hofstede Center, n. d). It deals with the fact that the future is always uncertain, therefore, the society struggles to either let it happen or control the unpredictability of the future (The Hofstede Center, n. d) by relying on social norms, rules, and procedures (Javidan, Dorfman, Sully de Lupe, and House, 2006, The Hofstede Center, n. d). High uncertainty avoidance countries such as Singapore and Switzerland prefer elaborate processes and formal detailed strategies, unlike the low uncertainty avoidance countries like Russia and Greece where simple processes and broadly stated strategies are preferred.
Assertiveness. This is the degree of aggressiveness and confrontational that individuals are and should be in their relationship with others (Javidan, Dorfman, Sully de Lupe, and House 2006). The Hofstede Center (n. d) calls this masculinity versus femininity dimension, where masculinity refers to societal preference for achievement, heroism, assertiveness and material rewards for success; and femininity refers to societal preference for cooperation, modesty, caring for the weak and quality of life. In highly assertive countries such as United States and Australia, firms should expect high competition in business as people tend to have a can-do attitude; whereas in low assertive countries like Sweden and New Zealand, firms should expect the preference for loyalty and solidarity as well as harmony in relationships (Javidan, Dorfman, Sully de Lupe, and House, 2006).
Individualism / collectivism. This dimension captures how people’s image in a society is being defined either in terms of “I” or “we” (The Hofstede Center, n. d). The individualism aspect of this dimension refers to the definition in terms of “I” where there is high preference for loosely-knit social framework that expects individuals to take care of only themselves and their immediate family. However, the masculinity aspect refers to the definition in terms of “we” characterizing a tightly-knit social framework where individuals can expect themselves to be taken care of by their relatives and members of in-group society in exchange for loyalty (The Hofstede Center (n. d). This dimension was captured as two separate dimensions: institutional collectivism and in-group collectivism by Javidan, Dorfman, Sully de Lupe, and House (2006). In their work, institutional collectivism captures “the degree to which organizational and societal institutional practices encourages and rewards (and should encourage and reward) collective distribution of resources and collective action” (p. 69). Sweden and Singapore are examples of collectivistic countries that emphasize group performance and rewards, while Individualistic countries like Greece and Brazil emphasize individual achievement and rewards.
Gender egalitarianism. The degree to which the society tend to minimize gender inequality. European countries are known for their gender egalitarian practices while countries like Egypt and South Korea are known to be male dominated (Javidan, Dorfman, Sully de Lupe, and House, 2006). Countries operating in the gender egalitarian countries should expect and encourage tolerance for diversity in both ideas and individuals.
Humane orientation. This is one of the new dimensions of national culture developed by Javidan, Dorfman, Sully de Lupe, and House (2006). It is the degree to which the society tends to encourage and reward individuals for fairness, altruisticity, generosity, care, and kindness to others. Egypt and Malaysia have high humane orientation while France and Germany have low humane orientation.
Future orientation. This captures the extent to which individuals engage in future oriented activities or behaviors such as delaying gratification, planning, and future investments (Javidan, Dorfman, Sully de Lupe, and House, 2006). The Hofstede Center identified this as long term versus short term normative dimension. Long term orientation characterizes societies that have a pragmatic approach to the future. They encourage thrift and efforts in modern education as a way to prepare for the future. Whereas short term characterizes societies that prefer to maintain time-honored traditions and norms while viewing societal change with suspicion (The Hofstede Center, n. d).
Performance orientation. High performance orientation is evident in countries like the U. S. and Singapore where the society encourages and rewards individuals for performance improvement and excellence. Firms operating in such countries should expect to emphasize training and development. On the other hand, low performance orientation is evident I Russia and Greece where family and background counts more (Javidan, Dorfman, Sully de Lupe, and House, 2006).
Indulgence / restraint. This is Hofstede’s latest dimension of national cultures. Indulgence stands for a society that allows relatively free gratification of basic and natural human drives related to enjoying life and having fun. Restraint refers to a society that suppresses and regulates gratification of needs through strict social norms (The Hofstede center, n. d).
Cultural Adaptability
Almost all firms engaging in international business are impacted by globalization. One of such impacts is the rising need to cope with the diverse stakeholders such as cross-cultural employees, suppliers, competitors, and creditors. Culture affects almost every aspect of human behavior, therefore, it is important that every execute operating in a cross cultural business environment have a good working knowledge of culture and its influences.
Cultural adaptability according to Javidan, Dorfman, Sully de Lupe, and House (2006) means “the ability of the manager to understand other cultures and behave in a way that helps achieve goals and build strong and positive relations with local citizens” (p. 19). In the work of Javidan, Dorfman, Sully de Lupe, and House (2006), ten culture clusters were identified by GLOBE and these includes: Latin America, Anglo, Latin Europe, Nordic Europe, Germanic Europe, Confucian Asia, Sub-Saharan Africa, Middle East, Southern Asia, and Eastern Europe. These culture clusters differ in terms of the culture dimensions stated above.
Leadership. Large corporations engaged in global business need executives that have global mindsets cross cultural leadership abilities. As a result of the differences in culture clusters and culture dimensions, acceptable management practices found in country are not guaranteed to work in another country. Javidan, Dorfman, Sully de Lupe, and House (2006), propose a two-step process that enables global leaders to build a positive pathway towards cultural understanding and adaptability irrespective of the host country. First, the leaders need to share information on similarities and differences between his own as well as the host country’s culture, while using similarities as a fertile ground to build mutual understanding. Second, the leader will think of a way to bridge the gap between the two cultures rather than automatically applying their approach.
Global branding and advertising. Culture has great consequences for global marketing and advertising; therefore, it is important to adapt branding and advertising strategies to the culture of the consumer. Studies have been conducted as to whether to standardize advertising for purposes of efficiency, or to adapt to local habits and motives of consumers for effectiveness. Study by Dow (2005) demonstrated that adaptation strategy is more effective; therefore, understanding culture is viewed as increasingly important (de Mooij and Hofstede, 2010).
To develop effective advertising, consumer must be central. The self and personality of consumers are defined by cultural values, this in turn explain the variations in branding strategy and communications. The effect of the various dimensions of culture on verbal and non-verbal communication styles are reflected in advertising styles as described in the work of Gudykunst and Ting-Toomey (1988). Power distance, individualism/collectivism and uncertainty avoidance are the three dimensions that explain variance of communication styles (de Mooij and Hofstede, 2010).
Culture and Application CSR in Current Global Business
It is imperative that the global business should benefit the stakeholders of the companies including the employees, the customers, the external environment and other publics. Some issues of corporate social responsibility arising out of global business include: ethics, value, and leadership, labor practices. Ethical practice in global businesses involves viewing such businesses as it impacts the organization, the employees and other stakeholders, as well as the communities involved. Diversity in nationality, culture, and values can affect the ability of MNCs to achieve their objectives in global business. However, it is expected that such businesses create value for the stakeholders from some kind of synergy. The leadership of the companies needs to ensure that differences are not submerged or conformity forced upon diverse members. Rather, the differences are recognized, understood, and utilized to deal with cultural issues, to encourage employees to continuously evolve, and for effectiveness and achievement of company’s goal.
Political, Legal, Social, Cultural, Economics, Technology, and Environmental
Trends and Current Global Economy
The current global economy shows a highly interconnected economy such that changes in one economy affect different economies in different ways. Therefore businesses operating globally have to keep up with the trends in both internal and external environment of their business to be able to track and analyze these changes and the effect on their businesses. As with globalization, the political, legal, social, cultural, economic, technology, and environmental forces are continually in a state of change.
Political changes refer to the changes in government influence of global business. According to Yucel (2010), the trend in the political dimension of globalization denotes the assumption of United States as the superpower and the single authority in the new world order and security after the collapse of the Soviet Union. The economic changes refer to the fluctuations that are linked to general ups and downs in economic activities such as interest rates, wage rates, and inflation rates. Businesses benefit during booms, but lose out during slumps. Yucel (2010) stated that the trends in economic dimension of globalization denote the economic sovereignty and domination of international capital globally. The decline in the barriers of flow of goods, services, and capital which has occurred since the end of World War II is one of the macro factors underlying the trend toward globalization.
Trends in cultural dimension of global economy involve the globalism of the consumer behaviors, which includes: consumption of similar food, clothes, entertainment, and similar products being used in everyday life (Yucel, 2010). Another trend in cultural aspect is micro-nationalism. This according to Yucel (2010) is the destruction of unitary structures of independent states as a result of too much freedom of citizens.
The legal trends include the continually changing and updating of laws in a variety of areas such as consumer protection legislation, environmental legislation, health and safety and employment laws. For technological dimension, post millennium world has witnessed significant changes in technology particularly modern communication technologies. Large amounts of information can be quickly and easily distributed within and outside corporations due to creation of databases and electronic communications. Therefore global businesses need be aware of these changes and the latest relevant technological trends for their business in order to successful compete in eth global economy. Yucel (2010) noted that the dramatic developments in recent years in in communication, information processing, and transportation technologies is one of the main factors underlying the trend towards globalization.
Globalization affects the environment both positively and negatively. Environmental problems can be exacerbated by globalization. Globalization can also provide means of addressing these problems. According to Esty & Ivanova (2003), environmental choices can shape the path of globalization as well and national regulatory choices may act as barriers to liberalized trade or trigger a convergence toward higher international standards. Trends in environmental dimension of globalization include the recent trade and environment disputes at the World Trade Organization (WTO) over beef hormones, regulation of asbestos, genetically modified foods, shrimp fishing that kills endangered sea turtles etc. (Esty & Ivanova, 2003).
Role of International and Domestic Governmental and Non-Governmental
Organizations in Social Responsibility of Global Corporations
Corporate social responsibility (CSR) is a concept that emerged as a result of global business activities. Due to these global activities, firms now have to take greater responsibility for their impacts on the society in which it operates. Corporate social responsibility is the commitment of businesses to contribute to sustainable economic development – working with employees, their families, the local community and society at large to improve the quality of life, in ways that are both good for business and good for development (The World Bank’s working definition of corporate social responsibility). Through CSR, there is a new way of collaboration between corporations, governments, and civil society locally and internationally in strengthening corporate social responsibility.
It is generally believed that corporate social responsibility is business driven. The drivers that generate a business case for CSR include: pursuit of new business opportunities through social and environmental innovation, reputational risk management, campaign pressures form nongovernmental organizations (NGOs) or trade unions, media exposure to the practices of individual companies or sectors, regulation and litigation (Ward, 2004). In addition to the business sector, attention is also being focused on other stakeholders such as the government as drivers of CSR. Governments joined other stakeholders in playing relevant role to ensure corporate social responsibility of global firms over the last decade. These governmental initiatives converged with the efforts of various international organizations such as the UN Global Compact and the European Commission (Albereda, Lozano, Tencati, Midttun, & Perrini, 2008). According to GlobeScan poll of experts, the leading role in achieving sustainability will be played as follows: 35 percent (businesses), 30 percent (NGOs), and percent (government).
Role of Governmental Organizations
The public sector roles in strengthening CSR can be conveniently divide into four broad categories: Mandating, facilitating, partnering, and endorsing (Fox, Ward, & Howard, 2002). Mandating role refers to the laws, regulations, penalties, and associated public sector institutions that relate to the control of some of aspect of business investment or operations. Facilitating role involves setting clear overall policy frameworks and positions to guide business investment in CSR by mandating transparency or disclosure on various issues, tax incentives, investment in awareness raising and research, and facilitating process of stakeholder dialogue. Partnering role involves combining the resources of the public sector with those of the businesses and other stakeholders to leverage complimentary skills and resources to tackle issues within the CSR agenda. This can be done as either participants, con-venors, or as catalysts. The Endorsing role of the public sector involves showing public political support for particular kinds of CSR practice in market place or for individual companies; endorsing specific award schemes or non-governmental metrics, indicators, guidelines, and standards; and leading by example , such as through public procurement practices.
In United States, one governmental organization that ensures the corporate social responsibility of businesses is the Environmental Protection Agency (EPA). It is the largest regulatory organization that acts as watchdog for the environment by implementing regulations aimed at pollution control and ensuring that businesses operate according to legal requirements. The role of EPA has changed progressively from pollution control to pollution prevention.
Role of Non-Governmental Organizations (NGOs)
Non-governmental organizations (NGOs) according to Hall-Jones are organizations that pursue the agenda of public interest rather than commercial interests. NGO refers to a wide range of groups and organizations from watchdog activist groups and aid agencies to development and policy organizations (Sagepub.com). NGOs are complex mixture comprising of alliances and rivalries, business and charities, conservatives and radicals (Sagepub.com). NGOs receive their funding from different sources, and while NGOs are mostly nonprofit organizations, there are some that operate for profit. They originate from different parts of the world, and can access different levels of resources (Hall-Jones, 2006). NGOs have grown in both numbers and in financial power due to their access to a variety of funding sources. There are four important roles for which NGOs are known for: social development, sustainable community development, sustainable development, and sustainable consumption (Sagepub.com).
The role of NGOs in promoting sustainable development is a shift from its primary focus on governments to addressing large corporations. This goes beyond domestic corporations and extends to international corporations. With this role, NGOs have focused on the social and environmental impacts of business activities. In addition to pressures from activists, corporations also face pressures from NGOs, as such; many of these large organizations are embracing stakeholder approach where they look at the impact of their business activities on the various stakeholders to include: customers, employees, communities, and other interest groups (Sagepub.com). There are two major outcomes of this role. The first one is that many corporations are now paying more attention to the social and environmental affairs, are taking responsibility for their actions, and now report on the impact of their activities. The second outcome is that the management structures of many firms are designed in such a way that sustainable development concerns are integrated (Hall-Jones, 2006).
Apart from the NGOs, there are a number of global institutions that were created to help manage, regulate, and promote the establishment of multinational treaties that will govern the global business system. These institutions include the General Agreement on Tariffs and Trade (GATT) which was succeeded by the World Trade Organization (WTO), the international Monetary Fund (IMF), the World Bank, and the United Nations (UN). These organizations were created to help create international business ethical rules and regulations (Yucel, 2010).
The Value of MNCs in Improving the Condition of the
Places they Operate
The main goal of any business in an open market is to create wealth for the shareholders, employees, customers and society at large. However, as part of the requirements for doing business globally, many companies have been adding environmental and social indicators to their economic and financial results in a report called social reports or sustainability report. According to International Chamber of Commerce (2010), sustained profits and principles are mutually supportive and an increasing number of companies view corporate responsibility as integral to their systems of governance. A growing number of firms approach CSR as a comprehensive set of values and principles which are integrated into business operations through management practices and decision making process.
Only when companies are profitable can they contribute to effectively to the improvements of social conditions by creating jobs and economic growth. However, it cannot be assumed that companies that adopt responsible business practices are automatically economically successful or vice versa; but corporate responsibility can contribute to the success of a business and is a part of good management (International Chamber of Commerce, 2010). Peaceful conditions, legal certainty, and good human relations within the company are the key drivers of business success because they create the stability and the confidence that encourage investment, improve productivity and foster customer loyalty.
In order to commit to responsible business practices, there is need for a consensus and conviction within the company. Thus, the voluntary business principle is advantageous as it bridges cultural diversity within enterprises and offers the flexibility to tailor solutions to particular conditions. It helps to minimize competitive distortions, transaction costs associated with regulatory compliance, and inspire many companies to go beyond the regulatory baseline, and often helps to eliminate the need for more legislation (International Chamber of Commerce, 2010).
Improving the condition of the places that MNCs work may place the MNC in a more favorable legal and political environment, improve their public image, give them a strategic advantage over competitors in the long run, and help them to make their management systems more effective. Hence, such responsible business practices may improve the long term profitability and the ability of the MNCs to obtain greater share of world markets.
Recommendations of Business Strategies for MNCs Entering New Countries
With globalization, managers of MNCs must realize that markets,, suppliers, investors, customers, locations, partners, and competitors can be anywhere in the world, therefore, they should be able to take advantage of these opportunities anywhere they are, and be willing to deal with any potential downfall. However, to successfully take advantage of these opportunities, managers of these MNCs need to understand the similarities and differences across national boundaries, only then can they successfully operate and sustain its growth in the global market.
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