Question

Question 8 Explain how cultural factors impact management in international business. Exemplify with on example.

Answer 1

Initiating and managing a foreign subsidiary disregarding the factors such as country's economy , Location , people's capability to buy , etc... a major factor that has to be looked into is SOCIO-CULTURAL IMPACT on management and progress in business .

They are ,

• Religion and Language
• Labour
• Customer preferences

In order to easily understand and discuss the impact of above three factors let's take an example of a RESTAURANT in south India serving traditional chettinad cuisine (non-veg food) , now wanted to open many branches across the world . The main factors that they should consider would be the above three factors .

RELIGION AND LANGUAGE :

Communication would be the main barrier for any international businesses carried on world wide .The language difficulties can be reduced by appointing expatriates on the top managerial positions in the local subsidiary or nationals that have good knowledge of parent company's knowledge and corporate culture . Across the world there are many religions followed and languages spoken by people . The customs and traditions they follow vary among every religion . For example , in India , majority people following Hinduism do not eat meat as per their customs . Thus opening more branches in India would only bring more loss rather than opening a branch in Arab states where people prefer meat more than any other food.

LABOUR :

To start a foreign subsidiary or branch , the major requirement would be LABOUR or EMPLOYEES . In our example in order to get a traditional taste of south India a chef must be trained to its taste in that foreign country or a chef from India has to be sent there which would be a higher cost . But there are certain businesses which provide global services using the cheap labour services available in developing countries to reduce its labour cost  .

CUSTOMER PREFERENCES :

Though there is "GLOBAL CONVERGENCE" among the young generation , there are still visible cultural and social differences among countries . Therefore , it is very significant for any company to modify the product and promotion strategies to match the preferences of that country . Coming here to our example , this restaurant serves only few varieties of meat such as chicken and lamb certain sea food varieties only , whereas the other country may prefer steak , while as per the south Indian customs they never eat steak.

Multinational companies are affected by more than one culture at a time . It can be concluded that successful international businesses develop acceptance and understanding of cultural differences among various country and learn how to take advantage of various opportunities and cope with disadvantages that arise from different national cultures .