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).
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
Objectives & Core Themes
The report aims to analyze the influence of political and socio-cultural factors on international business operations, using Wal-Mart’s market entry into Germany as a primary case study to illustrate the challenges of cross-cultural management.
- Impact of political environments on international trade
- Cultural dimensions including language, religion, and core values
- Application of Hofstede’s cultural theories in a business context
- Critical assessment of Wal-Mart's failure in the German market
- The role of ethnocentrism in strategic management decisions
Excerpt from the Book
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).
Chapter Summaries
1 Introduction: This chapter defines the complexity of culture and explains the necessity of understanding local specifics in the context of the growing international trade volume.
2 Findings: This section provides an environmental analysis focusing on political and socio-cultural influences, including a detailed examination of cultural elements and Hofstede’s framework.
2.1 Political Issues: The text discusses how government policies, trade barriers, tax rates, and labor laws create diverse challenges for international companies.
2.2 Cultural Issues: This chapter highlights culture as a key determinant of success or failure in international business, emphasizing the need for cultural intelligence.
2.2.1 Importance of Language: It explores the communicative challenges MNEs face, emphasizing that linguistic nuances and idiomatic differences can cause significant operational misunderstandings.
2.2.2 Importance of Religion: This section details how religious beliefs shape consumer behavior, purchasing patterns, and the working habits of local populations.
2.2.3 Importance of Values: The author examines how deep-seated moral convictions and social beliefs influence professional interactions and interpretations of concepts like intellectual property.
2.3 Hofstede’s theories of culture: This part introduces the four primary work-related dimensions developed by Hofstede to classify cultural differences between nations.
2.3.1 Power Distance: The chapter explains how different societies handle status and hierarchy, contrasting authoritative leadership styles with consensus-based management.
2.3.2 Uncertainty Avoidance: It describes how cultural differences in risk tolerance affect organizational structures and the need for stability versus autonomy.
2.3.3 Individualism – Collectivism: The text contrasts cultures that prioritize individual career interests against those that emphasize group cohesion and community goals.
2.3.4 Masculinity – Feminity: This section explores how societal roles for men and women impact work-life balance and competition in the business environment.
2.3.5 Critics at Hofstede: The author presents counter-arguments regarding the age of Hofstede’s data and the evolving nature of culture over time.
2.3.6 The impact on the 7 P´s: It discusses how cultural dimensions necessitate the modification of the marketing mix to suit specific target markets.
2.4. Ethnocentrism: The chapter defines how viewing one's own culture as superior leads to bias and poor strategic decision-making in foreign markets.
3. Conclusion: This final chapter analyzes the failure of Wal-Mart in Germany, attributing it to a lack of cultural sensitivity, poor labor relations, and an ethnocentric business strategy.
Keywords
International Business, Culture, Globalization, Hofstede, Wal-Mart, Political Factors, Language Barrier, Consumer Behavior, Ethnocentrism, Strategic Management, Marketing Mix, Cross-Cultural Management, Market Entry, Labor Laws, Values
Frequently Asked Questions
What is the core focus of this report?
The report examines how political and cultural environments influence international business decisions, specifically highlighting the impact of foreign market entry on strategy.
What are the primary thematic areas explored?
The core themes include language, religion, cultural values, the application of Hofstede’s dimensions, and the impact of ethnocentrism on business success.
What is the primary objective of this study?
The goal is to demonstrate that success in global expansion depends heavily on adapting to local cultural nuances and political realities rather than applying a universal business model.
Which methodology is utilized?
The author employs an environmental analysis approach, specifically utilizing PEST analysis concepts and Hofstede’s cultural framework to assess international business performance.
What topics are covered in the main section?
The main section covers political hurdles, cultural elements (language, religion, values), a critique of cultural dimensions theory, and the role of ethnocentric bias.
Which keywords characterize this document?
Key terms include International Business, Culture, Globalization, Hofstede, Ethnocentrism, and Strategic Management.
Why did Wal-Mart fail in the German market according to the author?
The author identifies failures such as ignoring local language requirements, misaligning company values with German labor laws, and an overly ethnocentric product portfolio.
How does religion impact consumer shopping behavior?
The text explains that religious faith dictates purchasing processes and consumer risks, influencing how brands should tailor their marketing strategies to local beliefs.
What are the implications of high vs. low uncertainty avoidance?
Societies with high uncertainty avoidance prefer structure and safety, whereas those with low avoidance value autonomy and are more open to new, unconventional ideas.
- Quote paper
- Roberto Niesing (Author), 2008, Culture in relation to Walmart, Munich, GRIN Verlag, https://www.grin.com/document/92855
