Cultural Diversity essay on Importance of Cultural differences for Global MNCs
Task: Background and Context of cultural diversity essay: Some argue that cultural diversity creates barriers between people due to obvious linguistic, cultural and religious differences. Others point to renowned global professional services firms, such as the “Big Four” Accounting partnerships, which actively promotes diversity - in all its forms - in the workplace and offers a range of services to a variety of clients around the world.
Given that historically, the English language is effectively the “lingua franca” or the language of business in the advanced economies of the developed world, some argue that cultural differences are irrelevant if everybody learns English, speaks the same language and becomes “Westernised”.
A good example of this is the city state of Singapore, which famously evolved from “third world to first” in a generation in the late twentieth century. All Singaporeans learn English as well as a second language based on their cultural heritage. This bi-lingual requirement is one factor, from among many, which has given Singapore an undeniable advantage when conducting business, attracting international businesses and appealing to high-wealth individuals.
However, the rise of emerging / developing economies in Asia and Africa potentially disrupts this assumption that English will remain and continue to remain the “lingua franca” of international business and that cultural differences fade away if everybody adopts liberal Western values, as espoused primarily by the USA.
The rise of China is a good case in point. What role do cultural and linguistic differences play in the trade war between the USA and China Most observers see it as “great power rivalry” based on intense competition for economic, and now technological supremacy, but others see it as “a clash of civilisations”, driven by incompatible cultural - political differences. Ironically, “Communism” is derived from the West not the East, and yet the most powerful “Communist” political parties are in Asia.
In this assessment students must think laterally, but also think “prospectively”. If our “global village” is more interconnected with more and more efficient means of communication and travel, then are cultural differences still real barriers or obstacles which impede meaningful interactions in the business world I am reliably informed that, just like driverless vehicles, automated real-time language translation is less than ten years away and will simply be another “app” we can download on our phone!
• Students should firstly familiarise themselves with the unit content from weeks 1 -5 and consider which parts are relevant to the assignment topic.
• Students will need to supplement their knowledge with wide research of the topic and consider referencing useful and relevant case studies and other academic sources, which support their thesis statement and argument.
• Students must follow correct in-text citation protocols and end of essay referencing conventions.
• Finally, Students will need to conclude with a decisive evaluation of the relative importance of cultural differences for the modern-day firm (MNC) with a considered and logical argument, based on an objective appraisal of the evidence gathered.
Culture is a vital element in any business growth and performance, because it impacts the values, decisions, and communication in global businesses. The discussion presented in the cultural diversity essay has described the meaningful aspect of cultural differences and their determinants and dimensions. Therefore, every organisation must accept and adapt to the cultural values of different regions in order to expand globally. The essay has also enlisted the dimensions in accordance to the Hofstede’s theory, and other aspects. Multinational Corporations are present in almost every sector, operating at a wide level, therefore requires employees from different backgrounds. Hence, it has been analysed that diversity in the organisation promotes acceptance, respect, innovation and teamwork within individuals leading to success.
The essay brings about the discussion on the theme of assignment ‘Managing across borders’ which analyses the importance of cultural differences for MNCs. The term cultural differences refer to the behaviour, beliefs, languages, practices and values specific to the people of a community, race or origin. The discussion will conduct assessment of the cultural differences and the related aspects. In addition, the readers will gain an understanding of the cultural dimensions with the suitable explanations and examples. Thus, in the later part essay will enlist the advantages and disadvantages of the cultural diversity for MNCswith evidenced material.
The Importance of Cultural Differences for the Global Multi-National Corporation (MNC)
Culture is a key component as they set the values in any business or businesses. The interconnectedness of the companies around the globe has greatly contributed towards the globalisation, resulting into differences. These differences consist, social standing, religion, gender, beliefs, values, and practices, or employees who hold higher degree than others at the workplace (Park, 2020).
For an example, ‘language barrier’ and the work values are two common issues that affect businesses across borders. Language barrier creates miscommunication within teams, thereby influencing the overall performance.Thus, understanding cultural differences really matters as they assist organisation gain cultural competence, and ensure effective management and high performance (Usunier, Van Herk and Lee, 2017).
Now, the essay will describe certain key themes in context to the culture in businesses.
1. Determinants of culture
Major determinants of culture in international business consist of religion, education, social structure, political philosophy, economic philosophy, and language.
Religion is defined as the shared beliefs, values and rituals that a society observes, shaping their culture and influencing business across regions. For an example, ‘Singapore’ follows Buddhism, Christianity and others as their religion. Under Christianity ‘Protestantism’ mainly affects businesses, encouraging hard work and wealth-acquisition, shapes culture exerts influence on the international business (Brannen, Piekkari and Tietze, 2017).
Social structure defines the way society is organised, and the associated individuals. As the society may embrace the aspect of individual-based organisation, emphasizing individuals or a group-based, thereby determines culture (Li, 2018). Education is vital determinant of culture, as the society with a formal level of education may provide labour to the organisations. Singapore and U.S. ensured access to the formal education, leading to theprovision of labourfor global MNCs.
Language play a key role, as it helps in communicating effectively with the teams. An example here, ‘Switzerland’ gained prosperity being the multi-lingual state, and also ‘Singapore’ that gained a competitive edge by learning English along with their native language (Li, 2018).
Economic and political philosophy states about the economic and political norms, assisting business to encompass the market. For an example, In Australia there are supermarkets that operate with other countries by enquiring and studying their rational choices, and political philosophies.
2. Cross-cultural literacy and dimensions of culture
Cross-cultural literacy can be defined as being literate about the fundamental differences in culture across nations. It helps attaining competitive advantage over other firms over a period of time, and improve performance (Saravia-Shore and Arvizu, 2017).
Dimensions of culture
Cultural dimensions are the aspect that defines differences in national cultures. Geert Hofstede proposed framework for cross-cultural communication (Usunier,Van Herk and Lee, 2017).Six dimensions are depicted through the diagram below:
(Source: Hofstede Cultural Dimensions, 2017)
Power distance Index (PDI)
The dimensions demonstrate the degree to which the individuals accept or expect that there has been an unequal distribution of power. High power people believe that power is equally distributed among all. China and Saudi Arabia are the countries with high PDI.
Individualism v/s collectivism
This dimension focuses on the relative importance of an individual over group, where individuals take care of themselves and their families. Under Collectivism each member is obliged to take care of their fellow members. Examples, USA follows high individualism and Guatemala at lowest (Ferraro and Briody, 2017).
Masculinity v/s femininity
Themasculinity side prefers heroism, achievement, material rewards and assertiveness to attain success. Here society at large is more oriented towards competition. Feminine sideprefers for cooperation, modesty, care for weak, and quality of life. Here, society is consensus oriented. Examples, Japan is masculine, and countries Norway, Sweden are highly feminine.
It is the degree to which individuals feel uncomfortable with the uncertainty and ambiguity. Thereafter, countries form rigid codes of behaviour. Low uncertainty avoidance allows countries to maintain relaxed attitude, less need to restrain the uncertainty. Chile, Peru, and Argentina are considered highly uncertainty avoiding countries(Ahammad et al., 2016).
Long-term orientation v/s Short-term orientation
Every society maintains the relationship with the past while handling the challenges in present or future. Low scores maintain time-honoured traditions, and norms with the change, and high score countries adopts changes, in modern education for future. China and Japan follow long-term, and Morocco adopted short-term orientation.
Indulgence v/s restraint
It defines the extent to which people can control their drives, relatively weak control is indulgence is, and strong control is and restraint. Under indulgence aspect, society allows free gratification of the needs, and behaviour of individuals to live life. Whereas, restraint suppresses the gratification of needs and further regulates it by strict norms.
Thus, these are the dimensions shaping the individual’s belief towards culture and emerging diversity, MNCs focus on effective recruitment of individuals (Lozano and Escrich, 2017). 3. Values, norms, ethics, and social mobility Cultural norms are the shared rules that specify the behaviour of individuals within society. Values refers to the standards, that evaluates what is good and what is bad, e.g. ‘honesty’ is a value and greeting people as norms within cultures.
Ethics refers to the set of moral principles that determines behaviour, right or wrong, social norms, cultural practices. Social mobility is the movement of individuals, families, or other person within or between any social strata in the society.
4. The advantages anddisadvantages of cultural diversity for the MNC and level of importance.
Cultural diversity is defined as the quality of diverse or different cultures for the sustainable development of communities and countries. Some of the positive and negative points of cultural diversity have been mentioned below.
Advantages consist of work practices, creativity, technology and management proficiency, process & product innovation, targeting marketing, quality, increased productivity and high performance within organisations and others (Lozano and Escrich, 2017).
Some of the disadvantages include: Cultural diversity creates lack of cohesion, mistrust among team members: individuals lack trusting members or employees from different culture or country which is one major negative point of cultural diversity. Lack of trust often leads to miscommunication. Language barriers, cultural differences, gender inequality, discrimination amongst the pay in men and women, generation gaps and others affect MNCs (Elia, Petruzzelli and Piscitello, 2019).
Thus, MNCs must be active in different countries therefore it needs to be sensitive towards the established different norms of behaviour in different countries, determines importance for achieving success (Brannen, Piekkari and Tietze, 2017).
To conclude the above discussion, it has been analysed that cultural differences exert great influence for the global MNCs. Each society has different norms, values, and culture that shape the behaviour of individuals. The essay has discussed well the determinants and dimensions of culture, and cross-cultural literacy between nations. In addition, the essay has also described the significance of cultural diversity within businesses trading across nations. Hence, it can be stated that an organisation must analyse the cultural differences and ensure diversity for high productivity and improved performance in the long run.
Ahammad, M.F., Tarba, S.Y., Liu, Y. and Glaister, K.W. (2016) Knowledge transfer and cross-border acquisition performance: The impact of cultural distance and employee retention. International business review, 25(1), pp. 66-75.
Brannen, M.Y., Piekkari, R. and Tietze, S. (2017) The multifaceted role of language in international business: Unpacking the forms, functions and features of a critical challenge to MNC theory and performance. In Language in international business(pp.139-162). United Kingdom: Palgrave Macmillan.
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Elia, S., Petruzzelli, A.M. and Piscitello, L. (2019) The impact of cultural diversity on innovation performance of MNC subsidiaries in strategic alliances. Cultural diversity essay Journal of Business Research, 98, pp. 204-213.
Ferraro, G.P. and Briody, E.K. (2017) The cultural dimension of global business. United Kingdom: Taylor & Francis.
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Park, J.S.Y. (2020) Translating culture in the global workplace: Language, communication, and diversity management. Applied Linguistics, 41(1), pp.109-128.
Saravia-Shore, M. and Arvizu, S.F. (2017). Cross-cultural literacy: An anthropological approach to dealing with diversity. In Cross-cultural Literacy (pp. xv-xxxviii). United Kingdom: Routledge.
Usunier, J.C., Van Herk, H. and Lee, J.A. (2017) International and cross-cultural business research. United States: Sage.