Cultural Diversity is a source of international competitive advantage

by: Stefanie Hoffmann

Companies all over the world have always tried to create and capitalise on competitive advantages, ensuring profitability and long term survival. Due to the increasing competition in most markets, mainly caused by globalization, liberalisation and better information of the customers, the need to gain advantages in competition is now more essential than ever. This essay, labelled “Cultural diversity is a source of international competitive advantage. Critically evaluate”, shall point out the complexity of this topic. “What business strategy is all about; what distinguishes it from all other kinds of business planning - is, in a word, competitive advantage. Without competitors there would be no need for strategy, for the sole purpose of strategic planning is to enable the company to gain, as effectively as possible, a sustainable edge over its competitors.” Keniche Ohnae (http://www.quotationspage.com/quote/8183.html: accessed on 30.11.2005) Michael Porter, professor at the Harvard Business School, stated that competitive advantages depend on different factors like the availability of resources, the size and sophistication of the market or the type of strategic networks. (Schneider and Barsoux, 1997) He also said that choosing the right strategies make the company unique, build brand reputation or set the right goal. (Porter, 2005) In general, competitive advantage is often associated with specific business operations like mentioned above.

Little people think that also cultural diversity provides a source of competitive advantage. “The office of today consists of people of many different cultures working together. Appreciating and being able to manage cultural differences at home and abroad is becoming more and more part of everyone’s job.” (Schneider and Barsoux, 1997, p. xi) Cultural diversity is a great opportunity to bring new ideas, creative input and innovative thinking in an organisation. Many companies believe that a diverse workforce helps to create a competitive advantage. Because of globalisation many people are confronted with a high diversity of cultures, languages, religions, characters or peculiarities. Therefore, most of our societies and organisations have to be multicultural with the familiar or strange aspects. Concerning cultural diversity many companies make use of the so called diversity management which is the ability and the expertise to steer the diversities as well as the similarities in an effective and successful way.

But it is also obvious that cultural diversity brings along disadvantages. When moving to another country in order to work there it often starts with total confusion. People become members of a foreign culture including new beliefs, ideas and values and they often notice that their expectations do not coincide with reality. Also organisations which decide to set up a subsidiary in another country have to take such things into consideration. This phenomenon is labelled cultural shock and it often lasts for a long time. There are many companies where it is obvious that employees from other countries and cultures suffer from isolation, anxiety, helplessness and performance deficit, for example if a German manager has to go to Africa for a special business project. (Marx, 1999) Therefore, these organisations have to ensure a high qualified training in order to develop or to maintain a competitive advantage. In general, many companies try to avoid cultural clashes between employees by developing an own culture known as the corporate or organisational culture. The strength of the organisation′s culture is one of the most fundamental competitive advantages. Values, rules and expectations of the organisation are used by all company members and are given from one generation to another.

(http://www.quintcareers.com/jobseeker_glossary.html: accessed on 30.11.2005) The company Procter&Gamble for example believes that: “A fully engaged and leveraged diverse work force is a competitive advantage. Our goal is to grow that competitive edge by fostering an inclusive culture.” (http://www.pg.com/company/who_we_are/diversity/global/index.jhtm: accessed on 30.11.2005) The employees of the company represent a rich mix of the world′s population. Corporate culture affects the lives of many people to a greater or lesser degree. In Japan for example it is really strong, whereas in other countries like Spain a so called family culture is more important. (Lewis, 1999)

[...]