Culture in relation to Walmart

Table of Contents

1 Introduction

2 Findings
2.1 Political Issues
2.2 Cultural Issues
2.2.1 Importance of Language
2.2.2 Importance of Religion
2.2.3 Importance of Values
2.3 Hofstede’s theories of culture
2.3.1 Power Distance
2.3.2 Uncertainty Avoidance
2.3.3 Individualism – Collectivism
2.3.4 Masculinity – Feminity
2.3.5 Critics at Hofstede
2.3.6 The impact on the 7 P´s
2.4. Ethnocentrism

3. Conclusion

References

1 Introduction

An exact definition of culture is very difficult. Therefore the characterisation of society is very broad. Several authors have tried to define this phenomenon. For instance Foster (1962) defines it very abstract: ‘Culture is the way of life of the group of people’. A More detailed description comes from Ball and McCulloch (1999). In their point of view on culture ‘the sum total of the beliefs, rules, techniques, institutions, and artefacts that characterize human populations’. Dresser and Carns (1969) have a more practical view on this topic, culture: it enables a communication through a common language, allows a calculation of possible response on the action which had taken place, to define what is wrong or right. These different explanations disclose how complex an understanding of a foreign country could be. All the more the volume of international trade illustrates that a high awareness of local specifics is indispensable. Every year goods and services with a value of 11783 billion dollars were traded around the world. Especially Europe, Asia and North America have been responsible for over 90% of the exchanges. Hence, in nearly 60 years the international trade has grown approximately around 200 times (World Trade Organisation, 2007). Furthermore, the relation between trades to GDP ratio increased around 12.7% in all OECD countries between 1992 and 2005. Today an average trade to GDP ratio from 45% for all OECD states shows how essential international commerce is (OECD, 2007). But why is international trade so attractive for companies? They diversify themselves and get more independent from a single market. The next reason is that they get the opportunity to sell more goods and be more profitable, and they benefit from economy of scale and reduces costs. Getting into a new market has the advantage of gaining technological expertise from the local worker. Moreover a production in the target market enables the company to adopt faster new demands and avoid trade barriers against their goods. Thus, it is no wonder that the 500 largest MNEs got annual sales of 14.9 trillion dollars (Rugman, Collinson, 2006).

2 Findings

An environmental analysis is important to see major influences and drivers of change. This information could influence the strategic decision making. The technique of a PEST analysis involves four areas: Political, Economic, Social-cultural and Technological (Anon, 2001). The focuses of the examination are political and social-cultural issues which could have an impact on international business. Firstly a presentation of political reasons will take place. Afterwards a description of three main cultural elements and their relation to the behaviour in the business environment will be pointed out (Anon, 2001).

2.1 Political Issues

Politics have a major influence on business, not least because of that reason every interest group try to modify policy in a favourable way. Trade barriers, custom duties, quotas and quality standards are only some examples of hurdles in international trade. However, politics could influence in a positive way, too. Free trade areas like the EU or NAFTA or a currency union have a major impact on companies business. These are mostly international issues.

Also local decisions could influence the business. An increasing in the tax rates reduce the disposable income of the consumer and consumption is reduced for that reason. Labour and union laws are further major issues. In the USA people has a period of notice of 14 days. Therefore, a hire and fire mentality has risen up. In countries like Germany or France a cancellation of a working contract is much more complex. Depending on the employment with a company such a period could be more then six months and must have special reasons. Another influence for a business could be subsidies. They are a special incentive in areas with a weak economy or to support young and high-tech orientated companies. The whole range of possibilities could have a major impact on companies. Thus, governments should use these instruments very carefully (Rugman A., Collinson, 2006a).

2.2 Cultural Issues

Business is becoming more and more internationalised and culture is the key of success or failure of an endeavour. In every strategic, structural or process decision culture could be a helpful friend or a real refutation to possible changes (Markus, M., 2003). Therefore an understanding of the foreign culture is significant. Hofstede (1996) assume that Japanese and American Managers are 90% the same, but they differ in every important area. Hence, the next points try to describe the impact of various figures on international business.

2.2.1 Importance of Language

Even if many people view globalisation only as a technological development, the real driving force of increasing international trade is the ability to communicate with each other. The ability to speak with each other is only one side of the coin. On the other side it can cause problems and misunderstandings, because managers can not recognize idiomatic interpretations. The dilemma of speech could be seen when local firms try to expand and operate globally or English speaking Multi National Enterprises (MNE`s) when they operate in a new environment (Hunt, Rogers, Bashaw, 2000). The language barrier concerns the internal aspect of companies like the flow of information or the external view: for instance, contract negotiations. Authors like Marschan-Piekkari, Welch and Welch (1999) pointed out that employees tend to share information and cooperate with colleagues of a close culture and language, but exclude units in very different foreign states. Hence, the language united similar culture groups and divided different factions. Learning the sector specific terminology is not a problem but the right expression in a small talk situation or understanding nuance in a meeting could be very difficult (Mirajaliisa, 2007). Such a problem could be seen after the merger of Pharmacia and Upjohn in 1995 (Rugman, Collinson, 2006b). However, the communication with external partners is essential for a growing business. Therefore, interpreters are a key for an adequate communication. The problem with such a middleman is that he could miss essential hints from the other side and he can not translate sentences word for word. Thus, misunderstandings could take place and lead in the wrong way. An example for such a situation is the existence of 900 Mandarin Chinese dialects (Herbig, Marin, 1998).

2.2.2 Importance of Religion

Religion is another main influence of cultural differences between nations. Hirschman (1983) says that faith had a major influence on novelty seeking, research activities and consumption processes for instance entertainment or the choice of transportation. Therefore, the belief controls the shopping behaviour of a person. Essoo and Dibb (2004) show that the normal conditions like the product characteristics and image or the store location are a minor part of the purchasing process. A Hindu accepts that he is born in a special caste and will behave in accordance with it. This fatalism could lead to the acceptance of a bad price quality ratio. Otherwise a Moslem thinks that the product of his action is god’s will and therefore he might take greater risks and try a new brand or store. Consequently, marketing must usefully apply the religion in the further development of advertising activities and strategies. Also, they should customise the products to the special characteristics and behaviours of a religion. Otherwise, they cause great damage like the video spot of LeBron James and his basketball game against a Chinese dragon (Sucher, 2006).

Alternatively, the religion could influence a decision of a company where it will produce their goods or create a research centre. Herbig and Dunphy (1998) argue how religion influences the working habits. Firstly, they claim that religious values contradict technological change, like Mahatma Ghandi in India. Secondly, the Islamic culture integrates faith and politics in one entity. This makes it very difficult to alter the everyday routine and explore new science. The opposite of that is the Christian and Jewish religion. These faiths are directed through the motive to dominate the nature and environment. The main interpretation is everybody could be successful through hard work, because god sees this and will support the outcome. Thus, western cultures try to exploit all natural resources, and are therefore so innovative and the leading business societies in the world.

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