Discuss about the Cultural Aspect Of Global Business.
This case study is delving with the issues relating to the cultural aspect of global business. Sustainable business practices take into consideration the issues relating to CSR, foreign investment, as well as the advantages of regional integration in respect of the countries within as well as organizations conducting business in that area. The organizations that are trying to start their operations in a foreign nation need to consider the cultural changeability of various areas of the world as well as developing a cultural understanding.
Importance of cultural understanding regarding market entry and development
When an organization is entering a new market, certain issues in regard to cultural differences might be encountered by the company. Cultural differences that need to be considered by the company entering the new market comprises of factors such as languages, religions, social standards as well as demographics. The significance of cultural understanding regarding the aspect of market entry and development are mentioned as under,
- The cultural aspect, which might be considered being national or organizational culture, will be providing the company a better understanding for conducting business. It should be noted here that the majority of the daily as well as regular business operations are considered being culturally driven.
- While entering a new market, an organization should not simply be relying upon its present process of conducting business. The reason for doing so is that the every country is having a set of varied variables that can be regarded as new for an offshore company such as rules and regulations, taxation, different currency, different periods of holiday and so on. The most significant consideration regarding this is the cultural difference (Crowney, 2016).
- Expansion of business into international territories can take place either via internal growth or mergers and acquisitions. There can occur the aspect of cultural mismatching when an organization will be making decisions in setting up base in a new country since it will be taking time for learning the cultural aspects as well as adopting the country’s traits.
- When organizations are trying to make an entry into a new market that is having varied cultural aspects, it is required for the organizations entering the new market to have an understanding as well as mapping of the cultural differences for bridging the gap amongst the business units that are performing in multiple cultural aspects.
- While entering the new market, the knowledge relating to organizational culture is considered essential in respect of managers and should be taken into consideration in the feedback process, intrinsic as well as extrinsic rewards and so on.
- Organizations that are not having any complete understanding of the cultural aspect of the region that is being targeted for setting up base will often be devising strategies related to marketing that will not be attracting the customer’s interest and will be facing failure from the very beginning itself.
For working effectively in Indonesia there is the need to try reaching an agreement. The country is having an agreement based discussion cultural aspect. One of the constitutional standards is associated with the aspect of making decisions depending upon consultation as well as consensus. This attitude is very much common regarding the business culture in Indonesia. Decisions are made depending upon discussions that are considered being long lasting as well as consultation amongst the business partners. A business solution that might be a considered being a contractual association or any business deal is required meeting the consent of everybody that is having an involvement, since the Indonesian cultural aspect is depending upon a collective principle in which every individual is required providing their consent for having a working solution (Kraidy, 2017).
Analysis of the Indonesian culture by using the Hofstede Framework
Through the use of the Hofstede Framework, the Indonesian culture needs to be analyzed that will take into consideration the dimensions of Power Distance Index, Individualism, Masculinity, Uncertainty Avoidance Index as well as Long-Term Orientation.
Powder Distance Index
This dimension is explaining the degree to which the less powerful organizational members as well as institutional members within a country are accepting the fact that there occurs unequal distribution of power.
Indonesia will be having a high score regarding this dimension stating that the country is following certain traits such as having dependence on hierarchy, unequal rights amongst the power holders as well as non-power holders, directive leaders, and controls relating to the management. There occurs centralization of the power and managers are counting upon the team member’s obedience. Staffs are having the expectation of being told what needs to be done and when it should be done. There is the expectation of control and managers are given due respect regarding their position. There occurs indirect communication and negative feedback is not disclosed (Forsgren, 2014). High Power Distance is also stating that the co-workers in Indonesia will be having the expectation of having a clear direction from the manager or senior.
The primary issue that this dimension will be addressing is considered being the level of interdependence that is maintained by the society within its members. In the Individualist societies, it is supposed that people should only be looking after themselves as well as their direct family. In Collectivist societies, individuals are belonging to the ‘in groups’ that are taking care of them in return of loyalty (Moran, 2014).
Indonesia is considered being a Collectivist society, explaining the fact that there is increased affinity for a strong social structure where individuals are having the expectation of conforming to society’s ideals as well as the in-groups to which they are a part of.
A high score i.e. Masculine on this dimension will be indicating that the society gets driven by competition, achievement as well as success, where success gets defined by the one wins or outshines others in their respective field. This is a value system that begins in school and will be continuing all through the organizational phase.
A low score i.e. Feminine on this dimension will be stating that the prevailing societal values are to care for others as well as quality of life. From a Feminine society’s perspective, quality of life is considered being the sign of being successful and it is not commendable to stand out from the crowd. The primary concern in this respect is what crates motivation from individuals, whether it is the desire for being the best i.e. Masculine or to like what an individual does i.e. Feminine (Storey, 2016).
Indonesia is considered having low Masculine regarding this dimension. Within the country, statuses as well as visible symbols relating to success are considered having significance but it is not material profit that will be bringing motivation every time. Most of the time it is the position that is being held by an individual that is considered having more significance to them due to an Indonesian notion known as “gengsi” that means ‘outward appearances’. It is considered being necessary that there is strong maintenance of “gengsi” so that a different outward appearance gets projected that is having the aim to impress as well as create the impression of status (Brouthers, 2013).
Within the Feminine countries, the managers are striving for an agreement, individuals are valuing equality, solidarity as well as quality within their professional lives. There occurs resolving of conflicting situations through the aspect of compromising as well as negotiating. Incentives like free time as well as flexibility are supported. An efficient manager is considered being a supportive one, and there occurs the achievement of decision making via involvement. On the other hand, the lower Masculine countries are displaying the characteristics of Masculine societies but in a lesser quantity.
This dimension is associated with the manner in which a society is dealing with the fact that the future is always unknown and the degree to which the members of a cultural aspect will be feeling threatened by the circumstances that are considered being ambiguous or not known. Indonesia is having a low preference towards the avoidance of uncertainty, meaning that there is a strong preference within the country regarding the Javanese separation culture relating to the internal self from the external self. One more aspect of this dimension can be associated with Conflict resolution. Direct Communication can be considered as a conflict resolution method that is mostly considered as an intimidating circumstance and one that the Indonesian is not comfortable in (Ambos, 2014). A successful conflict resolution process is associated with the aspect of taking the more familiar path of using a third party mediator that is having numerous beneficial aspects.
Long Term Orientation
This dimension is describing the ways by which every society is required maintaining certain connections with its individual past while dealing with the challenging aspects associated with the present as well as future. Also, societies are prioritizing these two existential objectives in a different manner. In this regard, it can be stated that countries having a pragmatic cultural approach are encouraging prudence as well as efforts in modern education as a means for preparing for the future. Indonesia is considered having a pragmatic culture and individuals that are in societies having a pragmatic orientation, they are believing that the truth is depending strongly or circumstances, context as well as time (Reiche, 2016). They are showing the capability for the aspect of adapting the traditional aspects in an easy manner for changed circumstances, a strong inclination in respect of saving as well as investing and determination to achieve the outcomes.
Impact of CSR issues on the international business activities of an organization
In regard to the Corporate Social Responsibility, there are certain issues that are impacting the international business activities of an organization that take into consideration the economic responsibilities, legal responsibilities, ethical responsibilities as well as the philanthropic responsibilities.
In respect of the international business activities, it can be stated that the primary responsibility of an organization is associated with its economic responsibilities. This is stating that an organization is required having the primary concern of making profit when setting up business abroad. This is associated with the fact that without making adequate money, staffs will be losing their jobs and the organization will not be able to think about taking care of its social accountabilities in the foreign country. Therefore, prior to an organization having the thought of becoming a better corporate citizen, it primarily requires ensuring that it can become profitable in regard to its international business activities (Armstrong, 2015).
The legal responsibilities of an organization are the needs that are placed on it in accord with the law when setting up business in a foreign country. To ensure that the organization is having profitability, it is required ensuring that it will be obeying every law that is prevailing within the foreign country, which is having the most significant accountability, in accord to the corporate social responsibility theory. The legal responsibilities will be ranging from the securities regulations to the labour laws, environmental laws as well as criminal laws in relation to the international business activities (Ferraro, 2017).
After meeting the primary requirements regarding economic as well as legal accountabilities in respect of an organization, there is the need for the organization to concern itself with the ethical responsibilities regarding the international business activities. The ethical responsibilities will be including the process of being environmentally friendly, making the payment of fair wages or refusing to do business with countries that are considered being oppressive (Pudelko, 2014).
When an organization will be meeting each of its other responsibilities relating to the international business activities, it will also start to meet the philanthropic responsibilities. These responsibilities are considered moving beyond what is simply necessary or what the organization believes to be correct. They are having the involvement of making an endeavour of benefitting the society within the foreign country (Wild, 2014).
Incorporation of risk into market entry strategies using an Adaptation Strategy
When an organization will be entering a new market, it is required coping up with the cultural as well as demographic differences in the way it will be handling marketing. The adaptation strategy will be implying the process of changing the different aspects relating to products as well as services to a substantial extent for meeting the requirement of the customers in the global markets by considering their differences. Moreover, while the product adaptation strategy will get involved, there will occur the addressing of the differences relating to particular markets at the stage of product development, accommodating the differences regarding the wants of the customers as well as needs in an efficient way (Stahl, 2015).
There are certain disadvantages associated with the adaptation strategy in respect of an organization that are mentioned as under,
- Increased levels of financial costs can be particularly mentioned as a major drawback relating to the adaptation strategy.
- Low implementation speed regarding adaptation strategy is considered being another drawback.
- Adaptation strategy in general, does the elimination of the scopes to benefit from the economies of scale.
- To learn the conditions regarding the local culture for the integration of this information relating to the components of marketing mix will be considered to be an expensive scheme (Cavusgil, 2014).
Description regarding the Association of Southeast Asian Nations (ASEAN)
In 1967, there occurred the formation of the Association of Southeast Asian Nations (ASEAN) by Malaysia, Indonesia, Singapore, Thailand and the Philippines towards the promotion of political as well as economic association as well as regional constancy. The ASEAN Community comprises of the three pillars such as the Political-Security Community, Economic Community as well as Socio-Cultural Community.
Benefits and drawbacks of regional integration
Gains in Trade (Benefits)
Trade gains are considered being one of the key advantages in respect of regional integration. This will assist in leading towards the monetary advantages in respect of countries that are having the involvement via more advantages in respect of the countries of origin as well as via cheaper products in respect of the importing nations (Deresky, 2017).
Cultural Centralization (Drawbacks)
Regional Integration is having a non-economic disadvantage stating that in particular, strong integration will be leading to the loss of distinctive minority cultural aspects within a region.
To conclude, it can be stated that a discussion has been made regarding the significance of cultural understanding in respect of market entry and development. Then, with the use of the Hofstede Framework, the Indonesian cultural aspect is being analyzed. The CSR issues have been described and explaining in what ways these issues will be impacting the global business activities regarding an organization. Also, a brief description has been provided regarding the Association of Southeast Asian Nations as well as discussing the advantages as well as disadvantages relating to regional integration.
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