Cross Cultural Communication Issues in International Business

Cross Cultural Communication Issues in International Business

Executive Summary

Aims and Objectives A research is not just the study of facts and figures; it is rather a systematic investigation of facts to answer various questions that has been unanswered. It is a systematic quest to identify unexplored areas and answer unanswered questions with supporting evidences and facts (Goddard & Melville, 2006). Research is also a never-ending process; one research leads to another one. There are many steps to complete a research successfully. These steps are necessary to systematically plan and execute different processes associated with researches. First step in the research process is to identify the research area and problem. In this case, the research area is international business environment, and the research problem is the impact of culture in international business. Next process is setting the research question. This research focuses on the impact of culture in the cross-cultural communication in international business, as it is believed as one of the most important elements that decides the success or failure of international businesses.
Aims
Several research aims are set based on the research problem and question. Main aims of this research are to: * Understand the reasons for international business failures in relation with culture * Critically examine the impact of culture on international business and business communication * Evidentially examine the key features of cross-cultural communication in international business communication with the help of different cases * Identifying and examining the relationship between existing cultural theories and issues in international business communications * Critically analyse various theories of culture and international business performance * Analyse various problems caused by cultural incompatibilities in international business
Objectives
Major objectives of these studies are given bellow. * Gain understanding about the impact of culture on international business * Understand how multinational and international businesses operate in critical cross-cultural environment * Gain knowledge on various theories and their relevance in international cross-cultural environment
Introduction
A wrong communication or greeting can result in a wrong impression when it comes to business communications. Business relations all over the world are being suffered from many incompatibilities including culture and language. As the success of any international ventures depend heavily on the communication between strategic partners, different departments, employees and employers; hence, communication is crucial in international business relations. Therefore, this report is aimed to draw facts on the impact of culture on international business communication, as it is one of the deciding factors of the success of international business relationships.
Companies all over the world are going multinational since globalisation has resulted in a worldwide reform of economies and markets. These reforms have the ability to open their national markets to international businesses and corporations to invest and run business in alien markets. Most of the companies have been exploiting these opportunities, but only few have succeeded in this. Companies have various ways and methods to enter into a foreign market. These methods include mergers, strategic alliances, subsidiaries and such. Regardless of the method the company chose, they come across cultural incompatibilities when they engage in such businesses. For example, if an American company engage in a joint venture with a Chinese company, they share technology, business processes, employees and many other resources. Out of these resources, human resources are the most critical resource, since they depend on various other factors, while other processes in an organisation depend on human resources of a company. People are influenced and affected by many other factors, which are external to an organisation. In short, businesses have many limitations in controlling these factors, but it is possible to minimise the impact. One of these factors is culture. Cultural incompatibilities are very common in international business activities. Therefore, people are the most important factor in international business. Businesses that exploit these factors have much chances of becoming successful in international business. Therefore, it can be said that, it is people who decide the fate of the business in an international environment. People are highly influenced by their cultural, social, and traditional factors. Any incidents and events that result in disturbing that belief would be treated as a threat. Therefore, it should be treated with at most importance. Most of these problems happen in the area of communication. Each culture follows different pattern and system of communication. When a joint venture or international business results in a collision of different culture, it results in frustrations, dissatisfaction, and lack of loyalty among employees. Hence, it is important to understand what culture is and how it works is important.
Literature Review
International and multinational businesses are very common in today’s business environment. The ability to quick innovation, production, movement, and realisation has enabled organisations to expand their businesses across the national border of their origin. These organisations are otherwise called Transnational Organisations. The reach and presence of these organisations are very difficult to comprehend, or measured. Globalisation is one of the greatest drivers behind the growth of such businesses across the globe. Another such driver of globalisation is technological advancement in communication technologies and basic infrastructure. Companies like Toyota, McDonald’s, KFC, Honda, and such have multinational operations, which in fact earn them more revenue than they earn from their country of origin. For example, Skoda is a German car manufacturer, who has a disastrous history of sales in their country of origin, but they were very successful in selling their products to markets like India, Pakistan and other neighbouring countries. The reason behind this phenomenon is simple; it is the cultural difference among people in specific markets (Samovar et al., 2011). Thus, the importance of cultural studies is gaining more popularity among the society. Many international setups often fail due to their negligence or lack of understanding on the cultural factor of international markets. There have been many studies in the area of culture in international business since Edward Hall and Geert Hofstede. Hall & Hall (1990) stated that culture communication and communication is culture in their book understanding cultural differences. The theories formulated by Hofstede (2001) and Hall (2000) states that culture is an integral part of any business, both domestic and international. Hall (2000) has distinguished different cultures in the basis of the role of communication. Hall’s theory of high context and low context cultures provide more insights to cultural issues related to communication (Lauring, 2011). Walker et al. (2003) argues that a greater level of understanding of the culture is necessary to operate in international market, as these markets are differentiated in terms of their traditions, cultural varieties, and communication styles. These arguments favour the findings made by Hall (2000) and Hofstede (2001). According to Walker et al. (2003) developing and training mangers and leaders who are capable of dealing with different cultures is a complex challenge.
Reasons Behind Cultural Conflicts in International Business There are many cultural factors that affect international business in many ways. Some of these factors are language, religion, values and beliefs, customs and manners, education, social settings and such.
Culture and People According to Maddox & Short (2001) international business decisions are influenced by intense and complex cultural differences. Any failure in understanding the cultural dimensions and features may lead to failure in international businesses. Companies that do not consider these factors in the first place, learn them the hard way. For example, an American salesman, who was sent to Saudi Arabia for business purposes, began calling his contacts soon after his arrival at the country. After receiving so many disappointing responses, he had consulted with his friend, who gave him an introduction to business etiquettes and cultural differences. It is not common in Saudi Arabia or any other Arab countries to contact any people without meeting them in person, spending time unofficially, or joining them for a coffee and such. In short, the salesman learnt that he had literally insulted his contacts by refusing coffee, embarking onto aggressive selling techniques, the all business talk, and such. This example shows that there are many and huge differences between the culture of two countries, and even people from different backgrounds (Maddox & Short, 2001). This small example shows how complicated is the phenomenon called culture, and it also shows that culture is very crucial in making decisions and communication in international business. Geert Hofstede is one of the pioneers in cultural studies who conducted some of the earlier studies in culture connected with business and organisations. His studies on national culture and employee behaviour have attracted much attention in international level. Hofstede has conducted various studies on 88000 employees from 72 countries in order to find out the cultural differences in their thinking, behaviour, communication styles and such. Based on these studies, he developed a new framework to understand and interpret culture, both in business and social scenarios (Nakata, 2009). According to Hofstede (2001), culture can be defined as the “collective programming of the mind, which distinguishes the members of one human group from others”. This collective program includes language, communication styles, behaviour, and such. Based on his findings, he further developed a theoretical framework, which is better known as Cultural Dimensions. He found that behaviour and attitude of people are highly influenced and controlled by their cultural background. These factors are rooted into their personality, hence, it is impossible to change their cultural behaviour and attitude, but it is always possible to make them aware of the cultural differences and prepare them to act accordingly, argues Nakata (2009). Apart from behavioural factors, personality traits are also highly influenced by culture. Every time a company begins operations in a foreign market, they are expected to meet with such traits among their employees. These traits usually happen with the business culture and communication rather than any other elements of business. In international business literatures, the success of business in foreign markets are always linked with effective communication, which doesn’t happen easily when two or more cultures are met at the work place, says Lauring (2011). Culture is a very complex phenomenon to understand, define, and interpret. According to Ferraro (2005) there are more than hundred definitions of culture. One of the earliest definitions given by Edward Tylor states that “culture is a complex whole, which includes knowledge, belief, moral, art, custom, law, and any other capabilities and habits acquired by man as a member of society” (Ferraro, 2005). He also gives a modern definition of culture defined by Clyde Kluckhohn and W. H. Kelly as “all the historically created designs for living, which acts as a potential guide from the behaviour of men in a society. These designs include living, explicit, implicit, rational, irrational and nonrational elements”. In short culture is a shared phenomenon that determines how people behave, think, act, and live in societies. It is important to notice the factor that culture is not only specific to people, but also the society as a whole. Culture is learnt through practices, from the society. On the other hand, business culture is different from national culture. Business culture often transform from national to international during multinational operations. It should be noted that national culture has very strong influence on business culture. Therefore, American business culture may be different from Indian or Chinese business culture.

(Levels of culture in multinational management: Aswathappa, 2010) Business culture of an organisation provides guidelines to operate everyday business. Business culture encompasses many customs, traditions, methods and communication tactics that need to be used while operating in a foreign market or dealing with foreign business parties and customers. For example, as stated in the above example, Saudi Arabian customers and businessmen consider giving business cards with left hand as lack of respect, while in China, it should be given with both hands with respect, on the other hand, and it can be done in either way in America. These can be briefly called as business etiquettes. Each national culture has its own business culture (Aswathappa, 2010). As companies and world economy evolves from time to time, markets are now free and open for international businesses, which gives them the advantages like resource utilisation, talent acquisition and such. International business transactions are emerging in international markets with the help of globalisation. However, the most important part of any business; people are not ready for such changes yet, or they are restricted to change by their national culture and traditions. Becker (2000) gives few examples on how this is possible, or how this happens. To Americans, change is acceptable and welcomed. They change everything from time to time; consumption patterns, houses, job, and the way things are done and such. On the other hand, people from Europe, Asia, and such are not similar. They tend to stick to their traditional practices and patterns rather than a change. On the contrary, there are countries that have many cultures within the country. Some examples are America and India, which have wide variety of cultures, traditions, and regional differences among people. For example, people from New York are fast and quick in anything they do, while people from Southern states are more relaxed and laid back. This is a cultural phenomenon. These differences are also visible in their communication styles and tactics (Gesteland & Gesteland, 2010). According to Samovar et al. (2011), communication is the process of sharing ideas, values, beliefs, feeling, and even befriending people, and it is contextual. Communication issues can happen in both customer interactions and interpersonal communication. According to Gesteland (2003), there are two iron rules in international business, which is very important when it comes to cultural conflicts. 1) The seller adapts to the buyer, 2) in international business, the visitor is expected to observe and learn local culture and customs, rather than integrating the visitor’s culture to the business. This makes it clear how international businesses to be performed. A simple example stated by Aswatahappa (2010) gives more information on this matter. Smithknline Beechem in India has only hired top rank professionals from Indian top business schools into their marketing division. Eventually, they have successfully developed a competent and result oriented marketing team capable of ideation, conceptualisation, and planning great market entry packages and solutions. On the other hand, the research and development tasks were completely handled and operated by the headquarters. Unfortunately, neither the head office nor the R&D and production teams were able to grab or understand the values and idea behind their plans. This had resulted in a wide knowledge gap between the two departments in the organisation, resulting in failures of many products in the Indian market (Aswathappa, 2010). This case shows that any gap in communication can result in issues in an organisation. In this case, the problem was in understanding the cultural and social values in the local market by the foreign business operator.
Cross-Cultural Communication Different countries and cultures have different styles in greeting, addressing, communication, and business processes. According to Wynne (2004), a wrong greeting can set a wrong turn in international business relations. Common sense and little understanding is not enough when it comes to dealing with people and businesses from alien cultures and countries. For example, Americans restricts their greeting to Hi or Hello, while this process is complex in other cultures like China, India, and Arabian countries. In India, people say Namaste with joining their palms together, which also means hearty welcome, or good day. Communication is also said to be the process of building relationships and respect. Greeting is the beginning of any communication in both personal and business processes. The western tradition of greeting, hand shake is followed by most of the business people across the world. Hand shake is accepted in many countries, but firmness of handshake and occasions may vary from culture to culture (Wynne, 2004). According to Adler (2002) communication includes the behaviour that other human being perceives and interprets, and it includes transmitting both verbal messages and non-verbal messages. Sender may send messages consciously and unconsciously. Unconscious messages may include body language and styles. Culture is an artificially created element that exists in the society and people’s personality and behaviour is formed by these cultural patterns. Therefore, it is easy for people from the same culture to interact with each other since they share the similar image of beliefs, values, and social symbols. People in each society and cultures interpret and send messages and signal in different ways.

| encoding in symbols | | decoding of the symbols | | Sender | | Medium | | Receiver | | the message | | the message | |
Process of communication: (Hinner & Rulke, 2002) In this diagram, a basic formula of communication process is illustrated. In this process, the encoding and decoding message is specific to cultures. These issues are clearly explained by Hall (2000) in his contextual theory. Decoding of the message can only accurately done by people in similar cultures due to the implicit and explicit meanings contained in the messages. Communication in international business can happen in both business and consumer levels. Griffith (2002) stated that communication is very important in developing strong relations within the organisation and among business partners. It would be impossible to learn about partners and business processes without effective inter-organisational communications. He also argues that, the underlying cultural frameworks create hurdles when people from different cultures engage in business. Griffith (2002) has listed several communication competencies for the purpose of developing intercultural communication frameworks for managers. These include cognitive competencies, affective competencies, and behavioural competence. Cognitive competence is the ability of a person to ascertain the meaning of verbal and nonverbal language. This can also be referred to as the ability or cultural and psychological values embedded into an individual’s personality that decodes the message accurately. For example, when Sony Ericsson announced that they would use external contracts for manufacturing headsets for their mobile phone handsets, all their supply chain partners located in China and other Asian countries believed that they would be withdrawing from current partnership with them, while the truth was far further. This issue shows the lack of cognitive competence in partner relationships. Any misunderstanding in communication would lead to undesirable outcomes, especially when two different cultures are involved in it. On the other hand, affective competence is an individual’s emotional tendencies in communication. These tendencies are developed from his/her past experiences. For example, Daimler is Mitsubishi’s part owner. So, when Hyundai announced they would be partnering with Mitsubishi and Daimler, Hyundai seen it as an alliance as Daimler is part of Mitsubishi, but Daimler denied it. This was resulted by the misunderstanding happened due to affective competence. The third one, behavioural competence are related to the ability of an individual to respond to communicational encounters with flexibility and resourcefulness. For example, Bridgestone’s Firestone tires were claimed to be the cause many deaths in the US, but Yoichiro Kaizaki of Bridgestone remained silent on the issue. He viewed this issue as a US problem, as firestone tires were manufactured and sold in US only. However, Bridgestone’s silence was taken differently by their business partners like Ford Motors and such. This problem was caused by behavioural and cultural attitude difference, and the partners were not able to understand the inner meaning of his silence (Griffith, 2002). According to Griffith (2002), when people from different cultures communicate, it is necessary for them to have communication interaction, which helps in developing protocols that helps each person engaged in the communication to understand each other as required. As mentioned, understanding culture is a very complicated business, but using cultural and communication guidelines of do’s and don’ts may not be sufficient to become successful in many countries. Rather it needs in-depth understanding of various communication patterns and styles. These issues are very much visible in societies that feature ethnocentrism (Sriussadaporn, 2006). It is also stated that culture is a complex pattern of ideas, symbols, beliefs, emotions and such, which tends to be expected, reinforced, and rewarded by people and individuals within the group itself. Usunier et al. (2010) argues that the communication across different cultures in a business has become more liberal with the arrival of Internet. But, this is only visible in the online sphere, and not in general and international business environment. The concept of low context and high context cultures are well applicable in intercultural communication. According to Usunier et al. (2010), high context communication is more sophisticated than low context cultures. High context culture’s communication process is more complex both in terms of transmitting and processing. As stated by Sriussandaporn (2006), receiver is expected to understand the inner lying meaning of a message, and high context cultures, this process is more complicated because they are associated with body language, occasional differences, way of communication and such. The examples stated by Griffith (2002) in the previous paragraph clearly show these differences in communication. These characteristics of each culture and individual can be referred to as communication behaviour (Zhao & Parks, 1995). According to them, communication behaviour can be referred to as the way one speaks, reads, writes, and interpret messages. Zhao & Parks (1995) gives more information related to intercultural communication, its dangers, and its cost in an organisation. Many of the US and Japanese companies operate in the US often complaint about effective intercultural communication. Most of the Japanese managers and leaders believe that US employees lack loyalty and commitment towards work, due to their average performance and cold responses to team bonuses and recognition. This is a major issue which is connected to the culture. In US culture, individualism is high (Hofstede, 2001), which means they would rather prefer bonuses and recognition at individual level than collective or group level. The problem with this issue is that, Japanese is a high context and group oriented, while America is low context and individual oriented (Hall, 2000; & Hofstede, 2001). These differences are also visible in their communication styles. Japanese communication style is highly contextual; they would have a different communication style in different occasions, and their messages do not include explicit meanings, since the receiver is expected to understand the inner meaning contained in the message. This is one reason that makes American managers believe that Japanese do not communicate properly, or keep on denying top ranking officials (Zhao & Parks, 1995). Most of the organisations and business that operate in the international environment looks for drawing synergy and new constructs. However, organisations those operate on the side line of intercultural communication often fail to reach this area; as a result, they are left with no synergy in international operations or joint ventures. This is only possible through effective communication between individuals or employees in different companies and cultures (Varner, 2000). Varner (2000) argues that, the need for “transactional culture” is important in intercultural communication. For example, when two finance managers from two different countries discuss about the finance options of a joint venture, they would be more successful if they understand the other person’s culture and communication styles. Human being’s normal nature is to bring their cultural background to their interaction, but it is also possible for them to step outside this background and create a new context, and is called as transactional culture. This is a clear example on how to overcome intercultural communication issues in international business, as stated by Varner (2000). Varner (2000) argues that there are two types of intercultural communication; personal and business. Business communication is different from personal communication, since personal communication includes personal bondage, understanding, passion, affection and such during the interaction, while business interactions are mostly based on knowledge generation, communication of business strategies, business objectives, practices and such. In short, business communication often has set rules and protocols that need to be followed, while personal communication do not have such frameworks or restrictions. Each communication and interaction in intercultural environment generates knowledge, which is necessary for understanding different cultures. These personal styles are entirely different from business environment, since business communication styles are more sophisticated (Varner, 2000). Therefore, communication between two different cultures in international business environment is complicated; argues Varner (2000). According to Yoshida (2002), there is a perception gap in intercultural and international business communication. This perception gap happens when the parties involved in an interaction or communication do not clearly understand each other. Members of each culture expect others, despite their cultural background, to understand and act according to their cultural values. For example, few US senators visited Tokyo few years ago, for a mission. One of the senators spoke to a friend after a meeting with the high level officials of the Japanese government that, “Japanese officials received us with most respect and courtesy, and also seemed to listen to us carefully. But after the meeting, we felt that we did not understand the point Japanese wanted to make”. On the other hand, a Japanese newspaper quoted one of the Japanese officials this way: “we extended our utmost courtesy to the US officials. We tried to be good listeners instead of pushing our beliefs and points, and we believe they appreciated that”. This is a classic example given by Yoshida (2002), which shows the lack of understanding between different cultures. American delegation expected Japanese to understand and interact aggressively according to American culture, while Japanese believe it is proper to be silent and listen to others rather than speaking out, as it is considered proper and respectful in Japanese culture. Both the parties failed to understand each culture, and it resulted in creating a gap in understanding. This difference can also be seen as a difference between Western and Eastern Culture. Japanese culture can be considered as similar to the Confucius methodology followed by Chinese. One of the major differences between Japanese and American culture is that Americans depend heavily on words, while Japanese can communicate with each other using simple indications or hints. The influence of such practices is very much visible in Japanese communication, and the real meaning of the message is often buried between the lines. Adler (1991) also agrees to this point. She believes that no two national groups and cultures see or perceive things the same way. Their beliefs, values, understanding and perception on similar issues and things would differ from each other. He in fact, believes that differences in perception are the key cause behind cross-cultural communication issues. These perceptions are selective, learned, culturally determined, constant, and are dependent to all these elements in a culture. For example, when kids in America and Mexico have viewed pictures of bullfight and baseball game through tachistoscope. Mexican kids only remembered watching bull fight, while American kids only remembered watching base ball game, which means perception are selective and learned from the culture, and the culture decides what to take in and what to be left out, explains Adler (1991). As a result of this phenomenon, people only see what they like to see, or hear what they like to hear, and they compare them with what they have learned and experienced in the past. That is the reason why a British Boss got angry on an American candidate when he responded to a question as, "Yeah, that would be great" during an interview. Responding to superiors with yeah signifies lack of respect in British business context while it is common in American business context. Both the boss and the interviewee failed to understand this (Adler, 1991).
Intercultural Negotiation in International Business East and west have different communication and cultural styles, which are entirely different from each other. Hofstede (2001) have differentiated cultures and cultural characteristics based on the society’s basic features, which are dependent to culture. According to Hooker (2008), cultures in the west heavily rely on low context communication. Some examples are Australia, Canada, New Zealand, United States, as well as much of Europe, while rest of the world depend on high-context communication patterns. High context cultures are very strong in Asian countries like Japan, India China, and such. However, the situation is changing due to the influence of western cultures on other countries, and low context communication is becoming more common among high context cultures. Hooker (2008) argues that high context cultures heavily depend on the reading between the lines. People in high context cultures do not speak more; instead they make use of signals, expressions, gestures, and such to communicate the message correctly. This happens due to their heavy dependence on the culture, traditions, and the unwritten laws of the society. On the other hand, low context cultures and communication is different. For example, any European country have detailed information on the streets, roads, city and such, which includes direction boards, road symbols and such, while such signs are kept to the minimum in low context cultures, people are expected to understand and know such things and information (Hooker, 2008). This is also visible in international negotiation. Issues could arise when people from different cultures engage in a negotiation. According to Kumar (1999), negotiations happen in international business on a day-to-day basis. Therefore, it is important for business managers and businesses to understand the importance of cultural factors in negotiations.
Kumayama's (1991) studies on international and intercultural negotiations between Japanese and Americans reveals interesting facts. Kumayama (1991) argues that cultural differences are very much visible in every element of negotiations, right from dress code, business card exchanges, to communication and gift exchange. International negotiations between similar cultures or similar contexts may only need to look into the communication process, while when two different cultures and contexts are involved in a negotiation, there are many elements that need to be considered, states Kumayama (1991). One should look into the methods of entry, card exchanging etiquettes, communication etiquettes and such, in order to leave a better impression. Negotiations are very important in international business, and it is important for the negotiator to understand the cultural differences in order to negotiate with their business partners properly. Sheppard (1997) argued that understanding and preparing to reduce cultural shock is the first step in making an effective international negotiation. Sheppard (1997) also argued that, there are no specific styles or methods to become effective in international business negotiations, but it differ from state to state, country to country, and culture to culture. International negotiations are not only visible in international businesses, but can also be seen among nations, governments, authorities and such, which also make use of the same tactics and methods that are used in international business negotiations, argues Sheppard (1997).