Cross cultural issues in business

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at 2016.05.07
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“Let my house not be walled on four sides, let all the windows be open, let all the cultures blow in, but let no culture blow me off my feet.” (Mahatma Gandhi).

The changes in the world economy have been attributed to the phenomena of globalization, a term which means differently to different people. “The world has shrunk” and “globalization has created a boundary-less world” are some of the common phrases in business circles in the present times. While the world seems to be shrinking with common products available around the world, the intangibles of culture do not change so easily. More is the globalization, higher is the growing importance of ethnic identity.

cross culture issue business

Culture can be defined as the patterned way of thinking, feeling and reacting that exists within a particular organization, group, subgroup of society or nation or a group of nations. It includes the shared values and beliefs of a group.

Culture – A critical variable

Culture impacts the style of communication, style of negotiations, points of motivation and leadership style. Basically, culture has an impact on the performance of the individual in one way or the other.

Cross cultural management deals with managing the similarities and differences in global teams, wherein individuals work with more than one culture. It is not just about knowing what to do in a particular country but also knowing how to assess the impact of culture on performance.

Cultural knowledge helps managers in many ways, some of which are listed below:

  • It helps understand work culture in global work environment.
  • Cultural knowledge helps in adopting appropriate business protocol in tune with the local standards.
  • It helps to understand the diversity of customers and markets and, thereby, helps in adaptation and standardization policies adopted by the organizations.
  • Understanding cultural differences can help enhance one’s performance in international negotiations.
  • It can help in understanding the rationale behind various management techniques in different countries.

Cultural understanding, thus, plays an important role in international business. Cross-cultural understanding is, therefore, essential for effective management.

Dimensions of culture

To understand culture better, the culture has been classified in several dimensions. The common dimensions of culture are (Hofstede, 2001):

  • Relationship with people
  • Time
  • Space
  • Language (Verbal and non-verbal)
  • Equality
  • Priorities in society
  • Risk taking
  • Emotions
  • Rules and regulations
  • Fatalism and control over nature

These dimensions are viewed and valued differently by different cultures. For example, while in some cultures, relationship with people is given more importance, in others, accomplishing a task may be considered of prime importance. Similarly, in some cultures, time is given more importance and ignored in others.

Effect of cultural values on management practices

Managers and employees from different cultures bring the codes of norms and behavior of their own culture, which further shape the organizational and managerial practices in the organization. Therefore, managerial practices differ across cultures in different parts of the world. For example, in individualistic cultures, such as that of the USA, the promotion of an employee may be based on their personal achievements and records whereas in collectivistic cultures, such as that of Mexico, recommendations by family members, who already work for the company, serve as an important criterion for attaining promotion.

Managers must, therefore, use some principles that may guide their choice of managerial practices and behavior. The principle of fit between cultures and management practices can further be divided into the following sub-principles:

The first sub-principle: Identify the cultural characteristics of the host country.

The second sub-principle: Understand yourself and the cultural values you represent

The third sub-principle: Understand the cultural meaning of various managerial practices: Managerial practices differ across cultures and help understand their ideology. For example: top-down communication represents high power distance and two way communication represents low power distance

Finally, after understanding the culture of the country they are doing business with and own culture, management practices may be matched to the cultural variations.

Different cultural values will lead to different styles of doing business across the world. Following are some of the factors that need to be considered while in international business:

Work Values

Work values are the benefits that people desire from their work and represent a relationship between need and satisfaction. Cultural differences in work values give an understanding of the performance and motivation factors, which further help the managers devise an effective reward system.


Negotiations are integral part of doing business. For successful negotiations across cultures, understanding others’ culture becomes an important criterion. Knowing the language and business etiquettes of the host country always gives an edge. Sensitivity to other cultures also minimizes the chances of cross cultural conflicts.

Negotiation styles vary across cultures. For example, ego focussed emotions such as anger and frustration are more likely to be prevalent in individualistic cultures and the negotiators are, thus, more sensitive to information that has a direct bearing on their ability to realize their hopes. Other- focussed emotions such as shame and fear are more prevalent in the collectivist cultures and the negotiators in such societies are, thus, more sensitive to information that may prevent them from violating their obligations. In Scandinavian countries, people are reserved and tactful while still being direct about disagreements whereas in Mediterranean European countries like Italy and Spain, negotiations occur in a more open and expressive way.

A well known framework for understanding global negotiations contains 12 variables:

  1. Basic concept of negotiation – distributive or integrative
  2. Selection of negotiators – technical ability or social skills
  3. Role of individual aspiration – organisation or self
  4. Concern with protocol – formal or informal
  5. Significance of type of issue – substantive or relationship-based
  6. Complexity of language – verbal or non verbal
  7. Nature of persuasive argument – logic or emotion
  8. Value of time – strict or relaxed
  9. Bases of trust – law or friendship
  10. Risk taking propensity – cautious or adventurous
  11. Integral decision making systems – authoritative or consensus
  12. Form of satisfactory agreement – explicit or implicit

Motivation across cultures

Although the process of motivation is universal, the culture, however, has an influence on the motivating factors and individual goals. The level of intensity with which a person tries to achieve the goal and the persistence i.e. the measure of how long the people can maintain their effort will vary as per the values across different cultures.


Leadership styles are also influenced by culture. The way leaders garner support may differ from culture to culture. For example, a US manager may gather support by showing respect for subordinate’s ideas whereas a Japanese manager may get support by spending more time with the subordinates.

Challenges in cross cultural teams


The language of communication, both, verbal and non verbal varies across nations. The spoken language makes it easy for the managers to communicate and cultivate trust. The non verbal language forms an important aspect of communication, failing which, wrong signals are communicated during business negotiations. Cultural communications are deeper and more complex than spoken or written messages. The essence of effective cross-cultural communication has more to do with releasing the right responses than with sending the “right” messages.” For example, team members from Asian and African countries may not be sensitive to gender discrimination in language but team members from northern Europe and Canada are more conscious of their use of language. Nonverbal communication may also differ. While Americans may nod their heads to indicate that they are listening whereas a Japanese team member may not show any facial expression when listening to someone.

Communication barriers can also occur between team members from different nations based on their individual values and beliefs. Some communication barriers that may arise include stereotyping, self reference criterion, ethnocentrism, prejudices or parochialism.

Inability to cultivate trust

Cultivating trust among team members in a global team is the most challenging task by the global team leaders. People trust one another more when they share similarities, communicate frequently and operate in a common cultural context.

Performance Management in Global Team

Performance management is also an important challenge that an international manager/leader faces. Some of the major reasons for the difficulty in performance management are:

  • A complex reward and recognition strategy as it is difficult to determine the right combination of team and individual rewards. It becomes difficult for the manager to determine whether the rewards should be based on individual performance, team performance or combination of both
  • Cultural differences occur as to what constitutes good team behavior and a fair appraisal system.


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