A business cannot simply rely on its current method of conducting business when it decides to take its business at international level. Every country has a set of different variables which can be new for an offshore company e.g. rules and regulation, taxation, different currency, different holiday periods etc. Most important consideration in this regards is the difference in culture.
In a study on international negotiations between organisation maintains that successful negotiations not only require technical proficiency i.e. communication technique, but also needs to understand the context in which those negotiations are being done in order to secure profitable contracts.
Business expansion into international territories can be either through internal growth or by mergers and acquisitions. There can be a cultural mismatch In the case of internal growth and the decision to set up a base in a new country from scratch because it takes time learn the culture and adopt its traits. A merger or an acquisition of an already established company is more beneficial method of growth internationally as the parent company can gradually learn the norms and beliefs of the target company through the acquired unit which is being operated according to the local cultural preferences.
studied the impact of culture in international organisations in the context of expansion into newer regions with different prevailing cultures and concluded that it is vital for any such organisation with the intention to move into new areas that the cultural differences are understood and mapped in order to bridge the gap between business units performing in multiple cultures. The study further proves that a multinational company with presence in many different cultures will have a smaller cultural gap than an organisation which is operating in a few different cultures; the reason of this abridged gap is the learning factor from working in different cultures. The results of study are not similar to Morisini as it is shown in the study that multinational organisations prefer to have new business establishments than acquisitions or mergers.
There can be many similarities in two cultures along with the obvious differences. The levels of similarities between cultures vary for different countries.According to international business theory, multinational organisations try to expand into countries which have more similarities and fewer differences in two cultures so that cultural mismatch can be avoided.
It is hard to make an outright assumption that expansion into territories with higher cultural differences will adversely affect the performance. There is no conclusive evidence in this regard.In fact some researches have shown positive performance as a result of moving into countries with greater cultural differences.
Knowledge of organisational culture is vital for managers and should be considered in the process of feedback, intrinsic and extrinsic rewards etc. E.g. the relation between level of pay and job satisfaction is strong in the US but weak in Japan, so an international manager will find it hard to motivate staff through increments in Japan.
The importance of cultural understanding in successful international companies is reflected from their marketing strategies which are grounded in the cultures of the target industries. Alternatively, a company with weak understanding of the target company’s local culture can commit disastrous mistakes in developing the marketing strategy through designing advertisements which offend people because of culturally unacceptable content.
Companies which do not completely understand the culture of target region’s culture often devise marketing strategies which do not attract consumer’s attraction and fail right from the start. There are many past examples of culturally incompatible marketing content e.g. using an owl in an advertisement in India where it is thought to be a bad luck symbol and animals wearing prescription and sun glasses in an advertisement designed for Thailand market where animals are thought to be lower forms of life. (WinTranslation, 2014)
Greater cultural distance in international companies can have negative effects which hurt the reputation of company and overall business in the long run. A cultural blunder can result in loss of customers as they shy away; it can create problems for a company through pressure groups and general public outrage, attracting negative feedback in the process. Loss of customers means lesser revenues and eventually lesser profits;people offended by cultural mistakes committed by companies can file lawsuits which can result in fines or settlement pay-outs.
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