Importance of Cultural and Ethical Variations for Transnational Companies

Seminar Paper, 2000

18 Pages, Grade: 1,3 (A)





2.1 International Politics
2.2 Foreign Market Environment
2.2.1 The Economy
2.2.2 The Political and Legal Environment
2.3 Culture and Behaviour of People and the International Dimensions of the Marketing
2.3.1 Product
2.3.2 Distribution
2.3.3 Pricing
2.3.4 Promotion
2.4 Market Segmentation

3.1 Corporate culture
3.2 Standardisation or localisation
3.3 Organisational structure alternatives

4.1 Organisational Structure
4.1.1 Recruitment
4.1.2 Difficulties of a geographic structure
4.2 Cultural Peculiarities
4.2.1 Organisation of a working day
4.2.2 Official Company language
4.2.3 Cultural differences concerning working behaviour
4.3 Marketing strategies
4.3.1 Product
4.3.2 Price
4.3.3 Promotion
4.3.4 Distribution




For a long time the role of culture and ethics was ignored in business. As globalisation and regionalisation have progressed people were confronted very often with cultural differences. To be aware and to understand different cultures has nowadays become inevitable, if transnationals want to be successful in a long term.

The following text deals with the importance of cultural and ethical differences for the management of transnational companies. The text is divided into four different parts. In the first we define culture and ethics. The main subject of the second part is the international marketing environment. Political and economic conditions and their cultural and ethical context are pointed out. The third part shows how the internal environment (Corporate Culture) is influenced by culture and ethics and therefore affects marketing decisions of each country market in different ways. In the last part we give an example of one transnational company called Bear Systems[1] in order to underpin with practical experiences the cultural and ethical aspects shown above.

1 Definitions

Culture, in anthropology, are the patterns of behaviour and thinking that people living in social groups learn, create, and share. Culture distinguishes one human group from others. It also delimits humans from other animals. A people's culture includes their beliefs, rules of behaviour, language, rituals, art, technology, styles of dress, ways of producing and cooking food, religion, and political and economic systems. Culture is the most important concept in anthropology (the study of all aspects of human life, past and present). Anthropologists commonly use the term culture to refer to a society or group in which many or all people live and think in the same ways. Likewise, any group of people who share a common culture—and in particular, common rules of behaviour and a basic form of social organisation—constitutes a society. Thus, the terms culture and society are somewhat interchangeable. However, while many animals live in societies, such as herds of elk or packs of wild dogs, only humans have culture.[2]


1. "the total way of life of a people"
2. "the social legacy the individual acquires from his group"
3. "a way of thinking, feeling, and believing"
4. "an abstraction from behaviour"
5. “a theory on the part of the anthropologist about the way in which a group of people in fact behave”
6. " a storehouse of pooled learning"
7. "a set of standardised orientations to recurrent problems"
8. "learned behaviour"
9. “a mechanism for the normative regulation of behaviour”
10. "a set of techniques for adjusting both to the external environment and to other men"
11. "a precipitate of history"
12. “a behavioural map, sieve, or matrix[3]

Ethics (Greek ethika, from ethos, "character", "custom"), principles or standards of human conduct, sometimes called morals (Latin mores,"customs"), and, by extension, the study of such principles, sometimes called moral philosophy. This article is concerned with ethics chiefly in the latter sense and is confined to that of Western civilisation, although every culture has developed an ethic of its own.

Ethics, as a branch of philosophy, is considered a normative science, because it is concerned with norms of human conduct, as distinguished from the formal sciences, such as mathematics and logic, and the empirical sciences, such as chemistry and physics. The empirical social sciences, however, including psychology, impinge to some extent on the concerns of ethics in that they study social behaviour. For example, the social sciences frequently attempt to determine the relation of particular ethical principles to social behaviour and to investigate the cultural conditions that contribute to the formation of such principles. [4]

2 The International Marketing Environment - The External Environment

2.1 International Politics

Politics in an individual country and political relations to other countries are founded on the general basis of ethics and culture of a society. Companies trying to access a new market or to produce in a host country are dependent on these basics.

A company is defined as an economic organisation. Even if the company is not directly interested in politics it is always affected by the political development. It cannot ignore this non-economic factor, if it wants to be a successful international marketer. There are bilateral relations between countries that include political, cultural, legal and military aspects. They have to be monitored over a long period of time and can change fast or in a long timeframe. A conflict or a crisis between two countries affects the trade tremendously. One company is not able or does not want to access a market because of the circumstances. Each country has a unique relationship to other countries.[5] The freedom of action of a company depends on them. Another important factor for multinational companies are the multilateral relations. Military and trade-alliances are the most used instruments to reach common goals. They have a large influence on the trade and the marketing in other countries. Examples for multilateral alliances are OPEC (Organisation of Petrol Exporting Countries), UNCTAD (United Nations Conference on trade and Development), FAO (Food and Agricultural Organisation), ITU (International Telecommunications Union).

2.2 Foreign Market Environment

Each market in a foreign country is unique and is influenced by specific determinants. These determinants are the same everywhere and influence the marketing of a company in different markets. The marketing environment of economy, law, social forces and political forces affect the application of the parts of the marketing mix - product, price, place and promotion.

This principle can be used in the home country and the host country as well.

Figure 1: Marketing Mix and Environment[6]

2.2.1 The Economy

The most important factor for choosing a foreign country is the size of the market. An important conclusion can be drawn from the information about population and income of countries. The most interesting markets are the countries with the largest population. Besides the age distribution and geographic distribution are important factors. These informations enable a company to evaluate the different needs of a population. Services, goods, logistics and communication may vary in the different circumstances. The size and the quality of the population depend on the cultural and ethical background of a country. As monetary values the Gross Domestic Product (GDP) and the per capita income -reflected in the Gross National Product (GNP)- are important for the decision. The GDP becomes very important in selecting a foreign market for industrial goods. The GNP is a reliable indicator for consumer goods.

Each economy is the product of the culture and in its way unique. Economies can be classified in various ways. The most common way is to classify the grad of development of a country into First, Second, Third and Fourth World. For a company there are many other ways to rate markets. Classifying systems depends on the company and its product. There is no ideal way to proceed. Some factors are essential for a classification. One of them is the infrastructure of a country. The infrastructure of a market includes the analysis of communications, energy and transportation. The company gets information about general conditions of logistic networks, technologic circulation, retail structure and population density. These informations are very important for the evaluation of ways of communication and distribution between company and residential companies or consumers.

2.2.2 The Political and Legal Environment

Besides the international political environment the domestic political influences on a company in a foreign market are important. The political stability of a host country has to be assured for a long term Foreign Direct Investment of a company. Rapid changes and governmental instability are the largest disadvantages for a country. The goals of a foreign company can only be reached, if the political system of a host country is safe in a long term. A company is always compared with the domestic political system. In terms that the companies’ home country has a non-reliable one, it can get a negative image.

The laws of countries are different because of the different cultural influences. These legislative regulations have an impact on the international marketing strategies.

2.3 Culture and Behaviour of People and the International Dimensions of the Marketing

There are lots of differences in the behaviour of people in different countries. Even within one market they are not homogeneous. The behaviour of people is founded on the basis of culture and learned behaviour patterns. These large differences influence international marketing. Culture shapes the behaviour of people and therefore strategies of international marketing have to be specific for each market. The cultural differences are the result of large varieties in language, race, religion, values and ethnicity.

A multinational company (MNC) either has to adapt these individual factors or has to standardise their marketing strategies. A standardisation of the marketing strategies results in low costs. Each country has a different cultural behaviour and attitude which is one reason to handle each market segment individually.

Gutenberg defined the market-orientated management that makes all actions of a company dependent on the market development and the demand. So the four marketing ingredients are dependent on the culture of a nation.

Abbildung in dieser Leseprobe nicht enthalten

Table 1:

Some Barriers to Standardised International Marketing

Vern Terpstra: International Dimensions of Marketing (3rd Edition), 1993

2.3.1 Product

The product, product groups or services of a company, define its business. Choosing the right business is the most difficult decision that influences the future of a whole company. It also influences the business profile of a company in each country individually. Most companies decide to sell a domestic product also in other countries. Existing factors, like raw materials, machines and human resources, can be used and the economies of scale can result in a large competitive advantage. Marketing advantages in similar market segments can be useful, too. Some circumstances make a adaptation of product unavoidable. The mandatory adaptations are founded in different technical standards (Voltage, measurements) and regulations. Other reasons for adaptations are income (retail price of product - features of product), educational and technical sophistication. Other important factors are the tastes and habits of a market segment. They have to be kept in mind by choosing a brand name and the design of the product or service. These factors are directly dependent on the culture of each nation.

2.3.2 Distribution

The way of the product to the customer can be decisive for the success of a product. Has the company already a present distribution in the target market it can be an advantage to this distribution channel as well. Opening a new market is a very difficult procedure. Partnerships (Joint venture, Mergers, Acquisitions) with other companies that are familiar in the host country is a strategy to save resources and money. Licensing is another possibility preventing lots of problems with legal, marketing and financial regulations and circumstances. As shown there are lots of different market entry methods that can be chosen. Most importantly the company has to ask the question, if the distribution channel is acceptable by the population and the cultural environment.

2.3.3 Pricing

The price of a product is directly dependent on the costs of production of the product. To hold these costs as low as possible, partnerships, domestic production or the standardisation of the product are helpful. The question each company has to ask itself is “Does the market want to invest in this product? And which price is reasonable?” Income and cultural attitudes judge over the product in a direct relation to its price.

2.3.4 Promotion

Especially the promotion of a company or a product is a very sensitive subject. What is successful in one country is not necessarily successful in the other country. The same rules that characterises the other part of marketing. Colours, names, styles and language vary even inside markets. They are influenced from cultural forces, too.

2.4 Market Segmentation

Standardisation of products and its marketing is only one way to organise the management of a company. Commonly homogeneous market segments are summed up to different clusters that are inhomogeneous in relation to each other. These segments are chosen by common characteristic features, like religion, race, age etc. Punnets(1989)Cluster analysis (excluded Africa and Eastern Europe, based on racial background, industrial development and religion. Eight clusters Anglo, Germanic, Latin European, Nordic, Latin American, Near Eastern, Far Eastern, Arab.) represents this method. A similar possibility to judge about a market segment is Hofstedes(1980) Value Survey Model.


[1] Company’s name changed

[2] Definition of “culture”: Encarta 98 Encyclopedia

[3] Definition: UNESCO

[4] Definition of “ethics”: Encarta 98 Encyclopedia

[5] Vern Terpstra: International Dimensions of Marketing (3rd Edition), 1993

[6] Vern Terpstra: International Dimensions of Marketing (3rd Edition), 1993

Excerpt out of 18 pages


Importance of Cultural and Ethical Variations for Transnational Companies
University of Kassel  (Economics)
1,3 (A)
Catalog Number
ISBN (eBook)
ISBN (Book)
File size
437 KB
single spaced
Importance, Cultural, Ethical, Variations, Transnational, Companies
Quote paper
Dipl.-Ökonom Dan S. Cryns (Author), 2000, Importance of Cultural and Ethical Variations for Transnational Companies, Munich, GRIN Verlag,


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