Challenges Posed by Culture to International Business Paper Example

Introduction

Culture refers to norms and social standards that regulate members of specific community behavior and thinking processes. In every society, there are cultural differences due to the existence of different ethnic groups that practice different cultures and pass them to the next generations of their community group through socialization (Rodrigues & Sbragia, 2013). Different communities and different cultures have different consumer characteristics. With this knowledge, international business can be bolstered. The world has increasingly become a global village due to the improved technology applications for communication and transportation. International trade is key to the development and acquisition of goods services in a globalized economy. However, cultural sensitivity such as ideas, social behavior, and customs differ from one market to another which poses a significant threat to international business and also an opportunity for others. This essay will assess the impact of culture on international trade with the focus of how the Kingdom of Saudi Arabia unique culture affect its interactions with the international community and businesses.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

International Business Concept

Trade and investment activities that take place across national boundaries can be referred to as an international business. Due to globalization businesses can conduct business activities beyond national borders in selling products and also outsourcing resources (Adamczyk, 2017). Technology has increased the ability of large business organizations to extend their market share into foreign markets. International business occurs in different methods such as franchising, exporting, foreign direct investment and licensing (Adamczyk, 2017). Risk assessment in international trade especially when it comes to culture is a significant consideration to ensure competent cultural operations. The modern society is characterized by increased freedoms which have improved the potential for international business through functional integration of trade markets (Adamczyk, 2017). Transnational linkages between Saudi Arabia and other countries have increased international businesses investment in the country as well as the ability of the country to carry out foreign investments. Through international business, the Kingdom of Saudi Arabia has been able to attract investment and also to meet the domestic market needs with foreign produced products.

Culture

Culture refers to the values and beliefs that are held by society and differ from one nation to another. Culture involves the collective behavioral programming of a society that makes it unique compared to other countries (Weber & Hsee, 1998). This occurs due to a unique set of laws, art, beliefs, knowledge, and customs that exist within a community and acquired from one generation to another. Culture, therefore, is not a universal phenomenon but exists in different kinds and geographical locations. International businesses are therefore mainly affected by cultural variations that separate market characteristics which influence both management and the niche of the overall product that can be traded by an international business entity (Rodrigues & Sbragia, 2013).

Saudi Arabia Unique Culture

The Kingdom of Saudi Arabia is mostly a conservative, religious, family oriented and traditional country with significant maintenance of century-old cultural traditions. Most of the Kingdom cultural attitudes and customs are derived from Arab civilization and Islamic heritage that has been passed from one generation to another (Algumzi, 2017). International traders and businesses are required to adhere and respect the Kingdom customs and culture such as business honesty and friendly business culture that the country has overtime developed (Algumzi, 2017). Therefore, the Kingdom of Saudi Arabia regarding international business is the bridge for cultural communication in the Middle East. Every business seeking to trade with Saudi Arabia has to respect the country Islamic cultural beliefs which make the cross-cultural understanding key to international business. The Kingdom of Saudi Arabia has a unique set of laws that every company should adhere to which is profoundly shaped by the Islamic religion values (Algumzi, 2017).

Example of Culture Change in Saudi Arabia Due to International Business

In the Kingdom of Saudi Arabia women in the previous years had minimal roles in society and a vast gender gap existed between women and men primarily due to religious values. However, there is a massive wave of change as women are increasingly becoming empowered to hold management positions, study and even operate machinery (McKernan, 2018). This cultural change can be attributed to cultural change due to the adoption of western cultural values because of the country's substantial trade with western world by assimilating cultural practices exhibited by western associates and products such as films and music.

Culture and Cross-Cultural Risks

Cultures are defined by beliefs, morals, and ethics that influence communication across cultures in the era of globalization and international business (Renn & Rohrmann, 2000). Although most companies do not recognize culture as a risk factor especially in conducting international business, cultural differences pose a significant threat to the management and operation of global brands. How international businesses handle cultural differences and the risk posed by culture plays a significant role in the success or failure of the companies (Renn & Rohrmann, 2000). Cross-cultural exchanges are shared within a globalized economy, and potential misunderstandings could be catastrophic to the parties involved. For a business to maintain a competitive edge in the transnational business environment, it is essential to encourage and sustain cultural competence in decision making and also products and services (Rodrigues & Sbragia, 2013). Understanding the unique expectations of another cultural group can significantly help international businesses to succeed in areas where there is a cross-cultural risk. For instance, Islamic values and principles play a significant threat to any company seeking to sell its products and services in the Kingdom of Saudi Arabia. Therefore, cross-cultural risk real in international business but identifying the risks and managing them can significantly increase the success of global companies in the globalized economy (Renn & Rohrmann, 2000). The Kingdom of Saudi Arabia poses unique cross-cultural risks to international businesses such as values, religion, laws and behavioral codes that every company seeking to set up camp in the market should observe. Businesses that fail to observe the unique set of cultural values and practices in the Kingdom of Saudi Arabia loses the support of the consumers and also can be barred from conducting business in the Kingdom when business products or practices does not align with the unique culture in Saudi Arabia.

Challenges Posed by Culture to International Business

Cultural Distance between Countries

The most considerable challenge experienced by international businesses is establishing and aligning to the cultural distance between the business origin country and Saudi Arabia. For instance, international companies based in the United States of America should be able to understand the cultural gap between the two countries to be able to conduct business in Saudi Arabia. When the cultural gap between countries exists bilateral trade is mostly affected because of divergent market needs between the countries (Rodrigues & Sbragia, 2013).

Global Teams Management

In a cross-cultural business environment managing a global team is a challenging task that causes international businesses to fail. People management practices should be able to meet the diversity of human resources and their individual needs to be able to create a functional global team for international businesses (Rodrigues & Sbragia, 2013). The complexity of hiring employees from different cultures is a threat experienced by every global business due to unique needs of the human resources in different countries a factor caused by cultural variation (Rodrigues & Sbragia, 2013). The solutions to the challenges identified in international business due to cultural variation will be addressed in the following section. Therefore, managing global teams using a single cultural orientation is posed to fail because of the unique needs and characteristics of employees in different regions.

Aligning Products to Cultural Specific Needs

International businesses are faced by the challenge of being able to align their products to foreign cultures due to the cost of market research as well as changing consumer needs. For successful international business, companies should be able to create market specific products to be able to retain relevancy and sustainability in a globalized market economy (Rodrigues & Sbragia, 2013).

International Business Management of Cross-Cultural Risk in Saudi Arabia

In a cross-cultural business environment due to globalization, organizations should set measures to overcome the cross-cultural risk that exist in different markets. Managing cross-cultural risks in the Kingdom of Saudi Arabia requires businesses to have intercultural competence especially at managerial level to ensure that an organization adopts the local culture to be able to retain relevance in the Kingdom (Singh, 2010). Having a global mindset, low ethnocentrism and high cultural flexibility by international businesses can increase their success in the Kingdom of Saudi Arabia market. This involves accepting the differences that exist, adapting them in business practices, and continuously integrating areas of the local culture to the products and management practices (Singh, 2010).

Conclusion

International business is a product of globalization and improved technology which has streamlined communication and transportation elements of the international trade. Culture has a significant impact on the success of any international business, and there is a need for foreign corporations to adopt intercultural competence in their management practices to succeed in markets such as Saudi Arabia. However, there is a significant change in the global markets due to cultural influence from foreign products and companies. For instance, women empowerment in the Kingdom of Saudi Arabia is being facilitated by international business.

References

Adamczyk, M. (2017). The importance of cultural differences in international business. The Central European Review of Economics and Management, 1(2), 151-170. Retrieved from http://www.cerem-review.eu/wp-content/uploads/2017/06/cerem_1_2_art_08.pdf

Algumzi, A. (2017). The impact of Islamic culture on business ethics: Saudi Arabia and the practice of Wasta (Doctoral dissertation, Lancaster University). Retrieved from http://eprints.lancs.ac.uk/124023/1/The_Impact_of_Islamic_Culture_on_Business_Ethics._Clean_copy.pdf

McKernan, B. (2018, February 07). Social change is coming to Saudi Arabia, but ordinary citizens worry it comes at a high cost. Retrieved January 27, 2019, from https://www.independent.co.uk/news/world/middle-east/saudi-arabia-women-driving-ban-lifted-social-change-jeddah-a8195826.html

Renn, O., & Rohrmann, B. (2000). Cross-cultural risk perception: State and challenges. In Cross-Cultural Risk Perception (pp. 211-233). Springer, Boston, MA. Retrieved from https://www.researchgate.net/publication/289823973_Cross-Cultural_Risk_Perception_State_and_Challenges

Rodrigues, I., & Sbragia, R. (2013). The cultural challenges of managing global project teams: a study of Brazilian multinationals. Journal of technology management & innovation, 8, 4-4. Retrieved from https://scielo.conicyt...