In today’s business world, stakeholders are no longer from the host country as it was in the past. Due to stiff local market competition, companies have started going global by investing in other countries. They end up facing competition both locally and globally. It is even tougher taking the intercultural differences into consideration. Managers have to be more considerate on cultural issues to succeed in the foreign market arena. Francesco and Gold, (1998) define culture as a complex whole that encompasses knowledge, beliefs, art, morals, laws, customs and other capabilities and habits acquired by man as a member of society. Culture is acquired through a social process. According to Czinkota & Ronkainen (1998), culture consists of interdependent elements including language, customs, morals and values among others. Foreign Companies should always consider cultural differences that may be of a problem between the business partners, (Johan & Svedjeholm, 2006). The company’s management should always consider these cultural factors for it to venture into the global market.
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Cross cultural encounters are today more frequent with increased trade, migration, media coverage and travel hence the need to accommodate intercultural and ethnic diversity (Osman-gani & Joo-Senq, 2002). Due to this, communication and technology have greatly improved with time and countries are no longer independent but interdependent (Francesco & Gold, 1998) meaning that companies must operate in the globalization era. The most challenging element in the market place is culture (Czinkota & Ronkainen, 1998). As Harris & Moran (1996) argue that socialization for business people must in their culture, business culture and corporate culture. Involvement of a firm in foreign culture is what shows the firm’s degree of adaptability on foreign cultural elements (Czinkota & Ronkainen, 1998). Cultural diversity still remains to be an important factor in the modern world market liberalization and mergers across the border. According to Adler (2002), globalization is a reality and intercultural communication is more of a norm than an exception.
The foreign direct investment funds that a country gets are directly related to the culture of the host country. According to UNCTAD (1998), foreign direct investment (FDI) entails long term commitment to a business endeavor by foreign firms in a host country (Bhardwaj, 2007). Firms always like investing in countries with favorable economic, institutional and regulatory conditions. Certain host country’s cultural attributes either attracts or repel foreign investors. The host country’s culture influences the entry, strategy, structure, marketing, production as well as finance and management style for the foreign company. As Gulbro and Herbig (1996) point out; there are three things that are necessary for a company to succeed in a foreign market:
Identifying, understanding, accepting, and respecting the other sides’ culture and a preparation to communicate and operate on two separate cultural wavelengths.
Sensitivity to other people’s culture.
The attitudes of people differs as far as time, work, change, family, social mobility and religion are related to culture. A society that is so much focused on work has a culture that surrounds work. For example the U.S society is so much centered on work. Work form their culture. Such a society has little time for leisure activities. On the other hand, a society that values leisure time will have little time for work. Many societies are religions. There are some religious aspects that are of importance as far as culture is concerned. Different religions have different religious practices. These practices are internalized by the religious faithful of the religion. The religious practices that they practice form societal norms hence culture. Also the way people view family and social mobility will automatically form their culture because it will influence the way they behave (Yip, Loewe, & Yoshimo, 1988).
Language: Language is part of culture. It defines the way people communicate among each other. Language can be either verbal or non-verbal. Language is part of a people’s culture because it defines the way they behave while communicating. Different societies have different languages and thus culture.
Physical environment: this is where a person lives. Each place has its own culture. The culture of a place will depend on the culture of the people living in that place. When a person changes the physical environment, he has to adapt to the new environment. This adaptation includes adapting to the culture of the people of that new place. Therefore he has to change his culture (Yip, Loewe, & Yoshimo, 1988).
Media: the media always has some positive and negative impacts on culture. People can adapt to the new behavior they see on TVs or read in books, newspapers or magazines.
Government and politics: these two go hand in hand. The government has laid down policies regarding foreign companies. The government regulates the way foreign companies do business in a country through enacting legislations that regulate their entry, operation, profits and exit. Tight laws concerning tariffs and high interest rates keep off foreign companies.
Ethnocentrism: this is where a person views the world from one’s own culture. Managing ethnocentrism is challenging. Companies that would like to stay in the competition should use the methods like; outside-in advocacy, waste of inward focus or customer experience management. The above methods let the company to approach its manufacturing activities with a customer oriented focus. Through such focus, the company will be able not only to manufacture products but to produce good, quality, upgraded products that suit the consumer. Also, the company will be able to manufacture new products based on the consumers’ tastes and preferences (Ezinearticles, 2010).
Attitudes: this is a person’s evaluation of things, issues or persons. Attitudes are built on the basis of social norms. Social norms are the things associated with normality (attitudes common with everyone) in the society.
Values and culture: values are known to be different across cultures. Values are known to shape an individual’s attitude. Hofstede (1980) argues that one of the characteristic of culture is its underlying values. A value is a concept that is distinct of an individual or a characteristic of a group that influences their modes of selection or a means to an end to an action (Kluckhohn, 1952). Values form cultural ideas (Evans, n.d).
Strategies For A Company To Go Global
Many managers are facing it rough taking their companies global. The challenge they face is the adaptation to the international market culture. This yields to the dilemma on the strategies to use. The strategies that can be used include:
Playing big: this is where a company decides to conduct large scale business in a new global market. It is mainly applied in the major world markets. It is mainly used by countries that account for a big share of the world’s share of the world’s volume Yip, Loewe, & Yoshimo 1988).
Standardizing the main product: a company can standardize the main product that it sells. This will make the product acceptable in many countries thus maximizing its revenue.
Value added activity concentration: the company does sample surveys in few countries and then manufactures the product. The product is manufactured as per the survey results but sold across the world. Therefore, the value added is concentrated in the few countries of the survey (Yip, Loewe, & Yoshimo, 1988).
Other strategies to enter the global market are: adopting of a uniform market position and market mix and integrated competitive moves across the countries.
In view of the above, cultural awareness is key to the companies success in the global market. A foreign company should study and understand the available cultures in the foreign market it is about to venture in. this is necessary because through the understanding of the different cultures, the company can repackage its products to suit the new market. Or it cal also come up with new products that suit the different markets depending on their cultures. When a company does that, it will capture its market make enough revenue and have possibilities of expanding. A failure to establish the cultural aspects of the market can make a company to close down (Yip, Loewe, & Yoshimo, 1988).
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Culture has several elements that are vital focal points for any marketing manager who would like to venture into a new market abroad. This is because culture has a great significance on the success of that company abroad. The marketing manager must study all the aspects of the foreign culture, analyze them and see the possibility of adapting to them hence work out the possible return on investment that they are yet to make. Such a good analysis will enable the management establish the certainty and the riskiness of the new market. This will in turn make them know the entry strategy to the market; a more diverse culture with a complicated culture means numerous cross cultural miscommunication hence high uncertainty rates and more risks; the company will not invest much in the market. Therefore, cross cultural miscommunication could prove costly to the organization unless it leans the cultural aspects involved in it.
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