Importance Of Cross Cultural Diversity In International Business

ISSUE: Cross-cultural Diversity

Due to globalization, many companies are now operating in more than one country. This crossing of geographical boundaries by the companies gives the birth of multicultural organization where employees from more than one country are working together. It may be true that companies are finding these expansions as attractive and lucrative but operating and managing a global business is normally a lot tougher than managing a local company. The main reason for the expansion of companies is to create global competitiveness by reducing production costs and exploiting market opportunities offered by trade liberalization and economic integration. Effective knowledge and use of cross cultural diversity can provide a source

International business management is inseparable from the sphere of patterned cultural behaviors because culture is represented in terms of the pervasive and shared beliefs, norms, values, and symbols that guide the everyday life of different groups of people. International managers have to decide to choose and adjust their strategies aligned with each country’s culture. The traditional strategies used by management to manage culturally diverse workforce are proving inadequate and may not be able to solve the problem of cross cultural diversity in the era of globalization

Why Culture Matters in International Business?

Effective handling of the cross-cultural interface is a critical source of a firm’s competitive advantage. Managers need to develop not only empathy and tolerance toward cultural differences, but also acquire a sufficient degree of factual knowledge about the beliefs and values of foreign counterparts. Cross-cultural proficiency is paramount in many managerial tasks, including:

• Developing products and services

• Communicating and interacting with foreign business

Successful managers acquire a base of knowledge about the values, attitudes, and lifestyles of the cultures with which they interact. Managers study the political and economic background of target countries—their history, current national affairs, and perceptions about other cultures. Such knowledge facilitates understanding about the partner’s mindset, organization, and objectives

• In the long run, managers who can converse in multiple languages are more likely to negotiate successfully and have positive business interactions than managers who speak only one language.

• Multi-cultural workforce is becoming the norm. To achieve organizational goals and avoid potential risks, the managers should be culturally sensitive and promote creativity and motivation through flexible leadership.

• Avoid cultural bias. Perhaps the leading cause of culture-related problems is the ethnocentric assumptions managers may unconsciously hold. Problems arise when managers assume that foreigners think and behave just like the folks back home. Ethnocentric assumptions lead to poor business strategies in both planning and