Globalization has made it increasingly essential for companies to expand across borders and the international marketplace has become more accessible for both Multinational Corporations (MNCs) and small businesses (Newell & Roberts, 2016). However, one of the most critical aspects of international business is the cultural factor. Companies that have always considered themselves purely domestic are now as a result of globalization able to assess and understand the effect of events happening in the international business environment. Cross-cultural and multinational teams have become familiar implying that business can benefit from the diverse knowledge, business practices, and new insights of solving business problems. However, along with the benefits of expertise and insight, global organizations face potential obstacles when dealing with the international business culture. Cross-cultural risks are inherent in international business because MNCs step into different environments of culture characterized by unique value systems, unfamiliar language, behaviors and beliefs (Cavusgil, Knight, & Riesenberger, 2016). The business partners and customers display differing norms, lifestyles, and consumption behavior. Therefore, these dimensions affect or influence the international business dimension.
Cross-cultural risks frequently arise in international businesses due to the rich cultural heritage of the employers, employees, business partners, and consumers. Culture depicts the shared, learned, and enduring orientation patterns in a society demonstrated through values, symbols, behaviors, ideas, attitudes, and laws. As much as globalization has created a cultural homogeneity regarding products consumed around the world, there are still rampant cultural issues in international business (Krieken, 2016). One of the cross-cultural risks is when global businesses fail to alter their business model to suit the local market. Culture influences consumer behavior through habits and customs. Cultural homogeneity has created an aspect of shared cultural behaviors but in practice cross-cultural challenges are eminent. Foreign businesses have a high risk of failure unless local cultures drive business models. There are high costs incurred in the failure of foreign businesses and on average, international retailers absorb seven years of loss before a re-sell of operations to local competitors or a shutdown (Hamilton & Webster 2015).
Ineffective cultural diversity management is also a challenge to cross-cultural businesses. Research indicates that diversity presents two sides of the same coin. Diverse teams can either improve or detract/and or limit performance (Cavusgil, Knight, & Riesenberger, 2016). Successful integration of cross-cultural perspectives promotes creativity and innovation. Likewise, an inclusive workplace where the organizational culture accommodates cultural integration attracts, retains and energizes top global talent. Therefore, diverse employees have the potential to comprehend and respond to the unique needs of foreign consumers as well as attract foreign suppliers and businesses. However, if not effectively managed, a cross-cultural workforce may experience persistent conflict, reduced trust, and cohesion than a culturally homogenous team. As a result, companies in the international business environment should effectively manage cultural bias, discrimination, and conflict. Businesses that fail to solve internal diversity wrangles fail to leverage the benefits of diversity in the workplace and may face expensive discrimination lawsuits (Newell & Roberts, 2016).
Communication is also another factor important in the international business environment. Communication is a cross-cultural risk in business is it is not well-managed. As a result, effective communication is important to the success of a business venture. Communication is risky due to the language barriers and messages are at risk of misinterpretation or getting lost in translation. In business, English is the de facto language accepted globally. However, the most important aspect of communication is not the language spoken, but how the messages are conveyed (Hoo, 2016). While the fluency of English may give a person a professional boost worldwide, having in-depth knowledge of the significance of body language and other non-verbal communication subtle between cultures is vital in the international business environment. For instance, a handshake, direct eye contact or a pat on the back might be a common aspect of one culture but could be offensive or unusual to foreign clients and colleagues. Therefore, international businesses should approach cultural diversity with openness, sensitivity, and curiosity to promote effective communication in a diverse workplace (Evans & Suklun, 2017).
Culture has a great influence on the international business environment. However, one of the major concerns of the new globalization culture is that it has led to the homogenization of the world culture and the unilateral imperialism of the American culture. Americanization of the global culture is a contentious issue because US MNC such as McDonald's has penetrated in almost every country around the globe (Tomlinson, 2013). American companies have influenced the cultural identity with regards to food. Food is an integral representation of culture and restaurants can influence the habits and preferences in food, leading to neglect of local or traditional cuisines. However, the one-size-fits-all international business model is flawed because the international business operation requires a glocal approach. According to studies, glocalization is the infusion of localization and globalization. Whereas globalization stands for the standardized global processes, products, and services, localization refers to the process of offering tailor-made products altered to meet the targeted local market (Cavusgil, Knight, & Riesenberger, 2016).
To understand the cultural influence on international business, this study will analyze the Kingdom of Saudi Arabia. Saudi Arabia is the third populous country in the Middle East that is conservatively very religious. Majority of Saudis are Muslim, and Islam is the dominant religion in the country. Arabic is the official language, and English is used for business, but not all businesses use the language (Mohamed, 2015). However, English is well understood in urban areas. Islam has a great influence on the government, politics, and laws. Therefore, while transacting business in Saudi Arabia or when MNCs set up in the country, they are expected to honor religion and local business practices. All businesses foreign or domestic must adhere to the Islamic law and traditions especially during prayer times when business activity stops. During the month of Ramadan, the dress code, diet, and gender segregation must be met in public environment. When it comes to business relationships, Saudis prefer face to face meetings and frequent visits by foreign business managers because it shows the level of commitment to business in the Kingdom. Likewise, the Saudis prefer team consistency and thus sending different teams for business negotiations is not advisable. The Saudis value relationships and advice that people should develop their own wasta over time without rushing (Khakhar & Rammal, 2013). In 2008, the Saudis banned the sale of cats and dogs in the capital Riyadh in attempts to keep sexes apart. Conservative Saudis imposed the ban because they viewed the sale as a corrupting influence of Western culture like the presence of fast foods, pop music, and jean wears that have become common in the country (Mohamed, 2015).
In conclusion, culture is an essential aspect of the international business environment. Globalization has promoted the access to global markets but cross-cultural risks such as communication, diversity, and failure to develop effective business models that integrate local practices among other factors. Cultural risks undermine the success of international businesses. However, a well-managed business can leverage on the benefits from diversity such as performance and new business insights. Therefore, international companies should have a deep understanding of culture for their success in foreign markets.
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