International Trade And Business

International Trade And Business

Cultural problems faced by multinational companies:

International Trade And Business

Contents:

1.  I. Introduction

1. II.  Cultural problems faced

2. Taste and preferences

3. Standards and government interventions

4. Language differences

5. Individualism and collectivism

6. Feminism and masculinity

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1. III. Solving these cultural differences

2. Joint ventures

3. Proper market research

1. IV.Conclusion

1. V. References

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Cultural difference problem that multinational companies face:

Introduction:

Cultural differences have posed a major problem to the multinational companies; in each country that the multinational company invest in it faces new and different challenges depending of the culture of the host country. One of the major problems that they face includes tastes and preferences, language differences, government policies and other believes and values posed by the market. This paper discusses some of the cultural problems a multinational company is likely to face in other countries and also gives some solutions to these problems that can be used by the multinational company to undertake a successful venture.

Cultural Problems faced:

Taste and preferences:

Consumers demand is also determined by taste and preferences, in difference countries the demand structure of consumers is very different and this is one problem that the multinational companies face, an example is where consumers may prefer a cheap good and in some countries the consumers are more concerned about the quality and not the price. In developed countries multinational companies are likely to face consumers who have a large disposable income and therefore consumers are more concerned about the quality and not the price, in other developing countries consumers are more concerned about the price and quantity.

Standards and government interventions:

Different countries have their own standards set by governments and even the consumers, example a multinational company aimed at producing food stuffs may be required to provide its production formula to the authorities in order for them to determine whether such products are fit, an example is the venture of coca cola company into India where the company was

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supposed to provide information about the formula used to make the drinks, the company declined and its rival Pepsi provided its formula and entered the market, however the authorities later announced that Pepsi contained harmful substances that were used in making pesticides. From this example therefore it shows the extent of the problem faced by a multinational company due to the cultural differences.

The government may also have a different culture and policy whereby the firm may be required to hire workers from the host country and not import its own workers from abroad, this posses a problem due to the existence of differing labour laws and movements, the available labour may also not be as efficient and may not be as productive and therefore the problem of inefficiency may arise due to these policies by the government.

Language differences:

A multinational company may face language barriers whereby there may be a language used in the host country may differ from their native language, this may pose a problem whereby the company may incur expenses hiring interpreters in the host country. Other differences may be the use of colour in their products where some products may be rejected in the bases of colours that may signify certain feelings about a product. All these should be taken into consideration before initiating any investment.

Individualism and collectivism:

Individualism refers to the existence of very weak ties between the individual and other members in the society, collectivism refers to a situation where there are strong ties between the individual and the other members of the society, multinational companies face these cultural difference because in cases where the society is characterised by collectivism people who are born in the same family are strongly integrated which protect them for the exchange for continuing loyalty, for this reason the group of consumers tend to have the same consumption behaviour and product loyalty and for this reason it will be difficult to change preferences of such a consumer group.

Feminism and masculinity:

Feminism refers to the equal distribution of roles to all members of the society while masculinity is of the view that men have greater value over the women, therefore the roles played by men is

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of greater importance than that played by the women. For this reason therefore the multinational company may face problems whereby in countries where men are more valued than men it would be impossible to appoint women leaders to lead the company, as a result this may result into cultural conflicts among the workers and this is a problem that may be faced by the company which is not easy to solve.

Solving these cultural differences:

Joint ventures:

The multinational companies can opt to get into a joint venture with a local firm in the host country, this helps the company to learn fast about the different requirements of the new market because of the information provided by the local firm, learning is made easier and fast and this reduces costs that may incurred for the learning process.

Many multinationals have in the past initiated this strategy whereby they search for a partner in the host country and they undertake business together and after some time when the company has fully learnt the market regarding culture its able to purchase the stake of the other company or even able to split and undertake business on its own.

Proper market research:

A multinational company can solve the above problems through market research, before any business undertaking the company should first undertake a research aimed at understanding the culture of the host country market, the research should not only research on possible returns of the investment but also the emotional part of the market.

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Market research is an important tool that is used by each and every company in understanding

its market. It is an important step in every business venture because it gives an overview of the

expected market condition and the cultural differences that are to be experienced in the market.

Conclusion:

From the above discussion it is clear that Cultural differences that are experienced in host countries pose a major problems to multinational companies, some of these challenges includes tastes and preferences, language differences, government policies and other consumer believes and values however this problem can be solved through joint ventures with local firms in the host country which provides the multinational to easily and learn fast regarding the market cultural differences, other possible solutions is through market research aimed at understand the culture of the new market.

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References:

Campbell P. (1998) Cultural Predispositions in Business Correspondence, McGraw Hill, New York

Hofstede G. (1980). Culture Consequences: International Differences, Sage Publications, New York

Louis Turner (1994) Multinational Companies and the Third World, McGraw Hill, New York

Merritt C. and Helmreich L. (1996) The influence of national culture, Journal of Cross Cultural Psychology, 27 (1), page 5 to 20

Sebastian D. (2007) Use of Information in Multinational Companies, McGraw Hill, New York

Souza M. and Dejean H. (1998) Cultures and Products relationship in a globalize environment,

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McGraw Hill, New York

Yves L. D. (1996) Strategic Management in Multinational Companies, Pergamon Press, New York