Cultural Impact on International Business Practices
**Control Mechanisms in Strategic Alliances**
Nomination and Appointment of Key Personnel
- Control requires knowledge of events and circumstances.
- Such knowledge is most readily available to the alliance’s parents if they supply key personnel to run or monitor operations or critical functions such as marketing, R&D, or corporate finance.
Meetings of the Board of Directors
- Although a majority equity holder is in an advantageous position in terms of composition and representation on the board, a minority partner can manipulate the frequency of meetings and agenda content.
- A majority parent cannot consistently overrule or refuse to compromise with its partner without risking the long-term survival of the relationship.
The Cultural Environment of International Business
Culture encompasses the arts and other manifestations of human intellectual achievement regarded collectively. It represents the customs, civilization, and achievements of a particular time or people. It is the way of life of a particular society or group. Culture includes the knowledge, beliefs, art, law, morals, customs, and other capabilities of one group, distinguishing it from other groups.
Culture is very important to the practice of international business. It impacts the way strategic moves are presented and influences decisions. Culture is the lens through which motivation occurs. Management, decision-making, and negotiations are all influenced by culture. It influences nearly all business functions, from accounting to finance, production, and service. Culture is a key ingredient in the “liability of foreignness” described earlier in the Multinational Enterprise chapter. It is what makes international business practice difficult or easy, depending on how similar or different cultures are. Culture is both divisive and unifying.
While culture is crucial to our understanding of international business, it does not explain everything that differs from one place to another. Corporate strategy, structure, rivalry, governmental policy, and economics also help to explain success or failure in international business. As Shenkar indicates, culture is not a residual variable; however, it is also not a primary variable. It is one of many.
Culture is correlated with other variables that vary cross-nationally, like language and religion. It is useful to remember that culture often cuts across religious, linguistic, and national borders. Religious, linguistic, and national boundaries also often cut across cultures.
Language
Language is the means by which we communicate verbally. We use it for socialization and for communicating how values and norms are expressed and understood. According to the textbook, there are approximately 20 different language families that cut across national borders. Not only are words different, but syntax and usage also differ significantly between language families.
Religion
Religion contains key values and norms that are reflected in a way of life.
Religion influences international business practices. People try to adopt business practices that will satisfy religious tenets without sacrificing modern business practices.
Culture and Nation
Culture and nation are not synonymous. National and cultural boundaries overlap partially, and there will be cultural differences in almost all nations. To simplify things, however, scholars have created cultural typologies that attempt to describe cultural differences and ascribe them to national boundaries.
Power Distance
Power distance is the extent to which hierarchical differences are accepted in society and articulated in terms of deference to higher and lower social and decision levels in an organization.