THE IMPACT OF THE NATIONAL CULTURE ON THE ORGANISATIONAL CULTURE OF DOMESTIC AND INTERNATIONAL BUSINESS

THE IMPACT OF THE NATIONAL CULTURE ON THE ORGANISATIONAL CULTURE OF DOMESTIC AND INTERNATIONAL BUSINESS

Table of Contents

2.1 Introduction 3

2.2 Concepts of organisational culture 4

2.3 Role of the cultural diversity in national business 6

2.4 Role of the cultural diversity in international business 8

2.5 Hofstede’s model 10

2.6 Roosevelt Model 11

2.7 Page Model 12

2.8 Management factors that are affected by the cultural diversity 12

2.9 Management process for cultural diversity in the business 14

2.8 Gap in literature 17

2.10 Summary of the chapter 18

References 19

Chapter 2: Literature Review

2.1 Introduction

The present chapter focuses on various impacts that Swiss companies are facing due to the impact of diverse national cultures on organisational cultures. In the business world, it is found that understanding cultures is an important step towards success, besides their presenting several negative impacts. Globalization has led Swiss firms such as Apxo Holding AG, Franke Holding AG, and Novartis to begin their international trades which opened an area for discovering and exploring the diversified culture work environment in other countries. The better acceptance and understanding of various cultures of organisations led the firms towards greater success through effective communication. The current chapter is going to highlight the broad concepts of organisational cultures besides evaluating the concept of national cultures that would help to clarify the link between national and international cultures with domestic business. In addition to this, the chapter is also going to emphasize the various roles that cultural diversity plays in domestic businesses. Further, the research set out in this chapter sheds lights on the roles of cultural diversity in international businesses. The research also specified the Hofstede’s model to determine the significance of cultural diversity in a business organisation and how can it be implemented effectively through famous phrases and communicational powers.

The secondary research which was sourced from the main databases provided access to the most relevant supply chain management literature, including the key journals, International management: Managing across borders and cultures and International Business Review. Preferable and relevant recent literature was widely available for each category of the SCMH including the International Journal of Logistics Management, Journal of Operations Management and few others. This was particularly aligned with their peer review journals such as Journal of Cross-Cultural Psychology. Older journals and articles but not more than 10 years are applied within the present study to present a historical aspect of the particular topic. The conceptual framework would also be outlined in this chapter which would provide an overview of the Hofstede model in the form of a flowchart.

Furthermore, in the literature gap portion, the difference is shown between the present research and past research which highlighted on the area that previous researchers have failed to show, whereas the present research has attempted to meet those areas.

2.2 Concepts of organisational culture

As noted by Samahaet al. (2014), organisational cultures mainly focus on shared beliefs, values, and assumption that naturally govern the behaviour of people within an organisation. In the present case scenario, the managers of Franke Holding AG and Novartis think that to maintain cultures in the business workplace are too complicated. However, the senior members of organisations of Swiss bother to manage cultures within the business environment. It is important to manage cultures in the business as it bridges the gap between the purpose of each individual and organisation’s purpose. Zenget al. (2013) argued that diverse cultures are the reason for the failure of success in the competitive market of the organisation. It can be said that cultures are the double-edged sword as it sometimes becomes difficult to lead the employees. As imperative from the modus operandi of Franke Holding AG and Novartis, the employees are mainly unaware of the owner of the business. It is difficult to keep track of the organisational work environment all the time as owners are busy in uplifting the business to a higher level.

Understanding different organisational culture can give a broad idea about the concept of cultures of the organisation, their strengths and limitations and implementing which one would benefit an organisation. Handley and Angst (2015) stated that Clan cultures stand as the best organisational cultures that help to build a social and friendly environment at the workplace. The Swiss Companies is found to introduce clan cultures in the organisation that helps employees to share their success stories, experiences, problems among themselves. Maintaining such an environment at the working place creates interest in the minds of the employees to give their proper input. Employees begin to love their organisation as they get motivated to work there. Autio et al. (2013) added that the Clan culture helps an organisation to create a supportive environment. Creating an atmosphere like this has made the employees of Swiss companies help one another that can be the source of success in the business. Uzkurtet al. (2013) argued that Clan culture makes the employees of any organisation lenient. The Companies’ growth has become less comparatively as most of the employees started taking the advantage of the mentioned organisational culture. Instead of focusing on work, they can discuss other subjects at the workplace, which would result in the downslide of company’s success.

According to Zhang (2013), Hierarchy Culture is important at any organisation as it includes certain procedures, rules as well as policies that are required to be followed by the members of the organisation. The rules as implied by the Hierarchy Culture defines the areas that are to be performed by the members of Switzerland’s organisation and even provides them with procedures of how the work will be done. Therefore, it can be said that the present culture in the domestic or international organisations helps to gain competitive advantage. De Mooij (2013) goes against as Hierarchy Culture aims to make a strict atmosphere in the workplace. Employees can get frustrated due to heavy regulations and rules of the companies and can demand a resignation. Loss of employees in the organisation is directly proportional to the degradation of an organisation. Engle and Crowne (2014) opined that setting up Adhocracy Culture can help an organisation to encourage and welcome new innovations and ideas. The new development of ideas can lead the organisation towards its success and creativity is developed within the minds of the employees. Moelleret al. (2013) opposed that Adhocracy Culture results in the organisation to face several losses due to its risk aversion nature. Therefore, company’s gain can never depend on the Adhocracy culture within an organisation. Ab Talib and Abdul Hamid (2014) added that it is better to adapt Market culture within an organisation. It is the pragmatic culture as the goals of the company’s are fully focused. The Swiss companies can make use of the Market culture to meet the goals of the organisation within time; while on the contrary, the mentioned culture does not have any innovation feature. This can hamper the growth of the companies in the Swiss society.

Deresky (2017) stated that the organisational cultures help to improve the productivity of companies. Employees of Swiss companies can better grasp organisational goals; properly understand the managers’ needs, customers, and other employees through the help of proper organisational culture. Therefore, it clear that healthy culture at the workplace can make the organisations of Switzerland more productive and committed. Turróet al. (2014) goes against organisational cultures as it threatens the identity of the individual employee. All employees are not same, so some of them may develop a fear of status loss. Such uncertainties can make the employees resist change. According to Gurung and Prater (2017), organisational cultures have the tendency to increase the marketability. Besides forming a unity among all the members of the workplace, the cultures of organisation motivates the employees to perform to perform their best by making the friendly atmosphere as seen in the case of Clan culture. Dikova and Sahib (2013) argued that misalignment can result due to diverse cultures in the organisation. Culture cannot be the source of meeting vision statement of the company by the employees; in fact, it requires proper support from the corporate cultures.

2.3 Role of the cultural diversity in national business

Cultural diversity can make an organisation to use the advantageous points to make its business prosperous while making attempts to overcome the negative impact of cultural diversity. Stahl and Tung (2015) noted that cultural diversity helps the national business to increase employee’s creativity. Employees coming from different cultural background have different ideas and when working together towards specific goals, the mixing of ideas can increase their creativity benefitting the national business. Budhwar and Debrah (2013) argued that communication issues arise in the workplace due to the diverse culture at one place. Communication problem can then have a direct impact on the productivity of Swiss organisations. Therefore without effective communication between members of the national business, success can wither. According to Brannenet al. (2014), cultural diversity can increase adaptability as an organisation has to set up proper organisational cultures for employees so that they can adopt diverse workforce. The ever-changing demands of the customers, as well as fluctuating market condition, can be adopted using the ideas of employees coming from sundry cultural backgrounds. Organisations of Swiss are required to develop ideas for collaborative working and employees requires thinking in cross-culture way for quickly adopting new situations.

Pouliset al. (2013) go against the diverse cultures of national business as proper training is required for promoting diversity in the workplace and that is too expensive. Besides usual training, the national businesses of Switzerland have to invest on special programs, lectures, seminars and so on that would focus on teaching workforce the ways to accept, ideas and thoughts as well as other’s personality at the workplace. Therefore, training expenses are great that even somewhere affects the financial condition of national organisations. Ang and Van Dyne (2015) stated that diverse culture increases the productivity of the company. Internalizations, as well as Globalization, are the result of cultural diversity within the national businesses of Swiss. Hence, this would uplift the current position of the company in the competitive market. It provides opportunities for competition in the workplace, which would bring higher productivity and success. Ribbink and Grimm (2014) argued that competition is the result of cultural diversity. Instead of working collaboratively, they start competing with others resulting in diversion at national business. People then would prefer working separately that would herby result in failure of completion of the task within time. In addition to this, the progress of business slows down. According to Ferraro and Briody (2017), cultural diversity increases the services range thereby profiting the national business. Diverse cultures include people of different cultural understanding, skills, languages, and such diversion is beneficial in serving customers on a global basis. Wennberg et al. (2013) opposed cultural diversity as employees can lack the skills of public speaking in front of everyone. Employees are sensitive to such diverse cultural background and saying anything one likes can never be acceptable by others. Therefore, it is difficult for people to state their own opinions due to the fear of discriminating.

Figure 1: Role of cultural diversity in national business

(Source: Ribbink and Grimm, 2014)

2.4 Role of the cultural diversity in international business

Set of business activities which extend across two or more countries are referred to as an International business. In the era of globalization, there is an increasing number of businesses emerging in the global market at a rapid rate and therefore it is essential to determine the major factors which are influencing the emergence of international business. According to Deresky (2017), culture or cultural diversity is found to be an influential factor among various elements which plays a crucial role in the managerial operations of the business. Ang and Van Dyne (2015) suggested that to achieve the desired success and build a long-lasting relationship with the customers of a foreign country, the businesses are required to grasp the cultural differences between the local and global culture. For instance, a foreign business setup in Asia does not prioritize the working hours, instead, the foreign business tries to value the cultural rituals and abide by the critical norms of that particular society. In this way, an international business organisation develops a bond of trust that is equally valued by the workforce and therefore collectively works towards the growth of the organisation in the global market.

However, Ribbink and Grimm (2014) argued, it has been also evident that there are many aspects due to which an international business failed to set up its business within a foreign market as it tried to impose the host country’s culture within the international market. Additionally, there have been instances where cultural diversity or cultural differences have put adverse effects on international business and restricted its growth and survival within a particular foreign local or nation. According to Brannen et al. (2014), a business organisation in order to expand in the international market requires co-aligning with the cultural diversity and further emphasizing the social and cultural values within the foreign nation. From the discussion, it can be said that there is a definitely beneficial effect of culture which plays a crucial role in determining the success of an international business. However, Stahl and Tung (2015) argued there is an adverse effect of a cultural diversity that hampers the business process within the global market. The positive and negative roles played by the cultural diversity in the international business are further discussed in the followings.

The positive roles of cultural diversity in the international business

Gurung and Prater (2017) opined that there is certain evidence which suggests that the differences within the national and international culture can prove to be beneficial or in favor of the international business set up in a foreign country. The managers from the host country of the business tend to be more cautious when dealing with the foreign partners which pose a potential challenge. Liñán and Fernandez-Serrano (2014) suggested that the authorities of an international business setup usually spend their maximum of efforts in reducing any misunderstanding and avoiding any kind of conflicts due to the difference in their domestic and international culture. By considering the mentioned factors, the difference within the national culture can effectively lead towards a sustained collaboration and high level of communication. Furthermore, Wennberg et al. (2013) opposed the management process within the business operation can turn out to be highly advantageous if the managers and other higher officials for the international business are hired from a local country.

In addition, the culture of a society can act as a part of business resources which can be effectively extracted for the success of a business enterprise and development of the nation at the same time. As per the findings from Deresky (2017), through the application of greater commitment by the foreign and local officials, the business enterprises could derive it to form a competitive advantage. Shapero and Sokol, for example, stated that the formation of the business vary from society to society because of different culture carries a different level of beliefs for the feasibility and desirability of the business organisation the employees are working in. Similarly, Timmons observed organisation with a greater commitment towards work have a greater level of desire for the business outcomes.

The negative roles of cultural diversity in the international business

According to Hofstede, the national culture creates long lasting and strong influence over an international business organisation. The national culture accounts the values, beliefs, and attitude of managers for the difference in their managerial and business operations. Therefore, the cultural difference between the alliance and host can pose a threat or challenge for developing successful business relationships. Park and Ungson (2009) suggested that these kinds of challenges arise partially from the lack of shared values or norms. This lack of mutual understanding further reduces the effectiveness of interpretation of strategic intent between the two which is a crucial factor in order to establish itself in the global market.

Moreover, Kanagaretnam et al. (2013) added that it has been also evident that the more a difference is a present between the managerial operation of national and international culture, there is more chance of disrupting collaboration which ultimately leads to ineffective or loss of the alliance partners. The successful development of a relationship and developing effectiveness within the alliance’s social value are majorly challenged along with the difference in organisational culture. Further, according to Ferraro and Briody (2017), the difference in organisational culture reduces the positive outcomes such as the development of learning program along with effectiveness and satisfaction of workplace interactions.

2.5 Hofstede’s model

As stated by Adair et al. (2013), Hofstede’s model is framed for the possibility of cross-cultural communication that was formed a great scholar, Geert Hofstede. The model was designed to examine results of a survey of the employees’ values worldwide by IBM. It is cultural dimension model that describes the culture’s influence on the members of society. It can be said that Hofstede theory quantifies the cultural differences within an organisation; whether domestic or international. Hofstede started the survey through four cultural dimensions and each index showed trends and features of people belonging to the targeted group. Liñán and Fernandez-Serrano (2014) opined that Power Distance Index focuses on the degree on which less powerful employees of the organisations accept that powers are unequally distributed. Higher degree in the index shows that there is the proper establishment of hierarchy in business. On the contrary, lower index denotes that employees question for authority and distributing of power. Kanagaretnam et al. (2013) added that individualism versus Collectivism focuses on a degree in which society’s people are generally interested in groups. Individualism coupled with collectivism results in the creation of groups in society. Hofstede model has examined various issues of the relationship between cultural diversity to the ethical behaviours. This model, therefore, can help the managers of Switzerland’s companies to understand several national cultures along with their implications for business ethics. According to Samaha et al. (2014), masculinity versus Femininity phase highlights the masculine side as heroism, achievement, material as well as assertiveness rewards for their success. Contrary to this, femininity sheds light on preference for modesty, caring and cooperation as same with men. The fourth one is Uncertainty Avoidance Index that emphasizes on degree based on the feeling of being uncomfortable due to ambiguity and uncertainty to members of society. The Hofstede’s Model therefore easily highlights on the awareness of cross-culture in large firms of Switzerland along with associated stakeholders for adopting new ways towards success by effective communication with different cultures within an organisation (Hofstede, 2014).

Figure 2: Initial indexes of Hofstede’s Model

(Source: Hofstede, 2014)

2.6 Roosevelt Model

This model was propounded by Dr R. Roosevelt Thomas Jr., one of the eminent experts in the discipline of diversity management at the workplace. This model implies that the management of a diversity of the change in the workplace staff is extremely important for the concerned leaders and the management groups. Additionally, it also states that the effective management of diversity in the workplace must be objected to achieve better outcomes with reference to the conduct of business. Furthermore, efficiency in the management of diversity drives all the members of the workplace to provide services in an equal manner in order to fulfil the aims of the organisation. Moreover, if diversity management is successful, there are no discriminatory practices at the workplace (Ashikali and Groenveld, 2015).

2.7 Page Model

This model was postulated by Dr Scott Page, a professor at the University of Michigan. This model states that arising from complex issues at the workplace results in the necessity of diversity in the group involved in the resolution of the issues. Additionally, diversity is not restricted to superficial features. Furthermore, a rational application to the management of diversity must take a cue from science, mathematics, and empiricism. Moreover, the diverse groups entrusted with problem-solving tasks would deliver better results than the nondiverse groups. In a nutshell, it is imperative from this model that diversity is more effective than ability (Finckh and Reich, 2016).

2.8 Management factors that are affected by the cultural diversity

The international business and companies are striving for a greater diversity as the management factors are highly influenced by the implementation of cultural diversity. As opined by Dikova and Sahib (2013), establishing a business in the international market and hiring employees from a different category of race or creeds bring about effective changes in their managerial experiences. The management factors are most benefited from the development of a diverse workplace and the organisation can possess a greater advantage over the national companies. The most influencing factor in the management process is as follows

Financial factor: From the viewpoint of Stahl and Tung (2015), if a workplace is successfully diversified the international business organisation is highly probable to generate a profitable income. However, it has been argued by the Budhwar and Debrah (2013), there is a requirement of a greater source of capital or a higher level of investment for implementing a greater and successful diverse workplace. For instance, if a company is hiring local staffs for performing their international business, there is a requirement of additional cost to teach and make them learn their culture and the differences. Or maybe an additional investment of time and resources would be required by the company to bear in order to teach the existing employees from the host country to interact with the officials, managers, and locals of the foreign country. This factor helps in building a better communication within the international workplace.

Adaptability within the managerial process: A diverse workplace is offered by an effective management process within the organisation. According to the Brannen et al. (2014), the more a diverse workplace is the more is the chance of solving a complex problem. Moreover, it has been argued by Poulis et al. (2013), that cultural diversity influences the behaviour of the management process in a positive manner. Each and every employee are provided with an equal opportunity for delivering their performance as the competition become more effective when they are challenged within a diversified group of company. According to Samaha et al. (2014), the benefits associated with the performance appraisal are subsequently increased thereby accelerating the business process within the workplace. Employees are exposed to the variety of knowledge and skills which they inherit from the culture of the host country. The management, therefore, is much more efficient in managing the whole workforce as one and does not need to implement a different set of rules and regulations for the diversified groups of the business organisation.

Developing effective communication: This is very usual that the employees from a different background or different culture will face some difficulty in communicating with the authorities of a company. This further leads to confusion in interpreting messages and miscommunication within the workplace that ultimately lead to inefficient business process due to such mixed signals. Additionally, Ferraro and Briody (2017) argued that miscommunication enforces and exacerbates stress and tension within the management which contributes towards the vulnerability of the international business organisation. Therefore, the management would be responsible for introducing special programs and training that would enhance and align the thinking of the workforce with the business objective and organisational goals of the international company. However, Dikova and Sahib (2013) suggested, this is also possible that the management develops an effective diverse workplace by introducing a clarified atmosphere and assessing every employee for their cultural value which would possibly reduce the scope of miscommunication and smoothen the business process.

In-house resource: When a business organisation expands internationally there is a requirement of a large amount of human resource along with a strong capital. Dikova and Sahib (2013) stated that the resources which are gained from the foreign national are not readily available in the host country due to which the management process gets affected by the introduction of new resources within the culture that is not available in the host country. For instance, the availability of highly skilled labors for a specific production unit needs not extra training and development when performing in their national country. However, as suggested by Poulis et al. (2013), training and development program must be arranged by the management of an organisation to skill them or train them according to their business requirement. In this case, it shows, when a nation is readily available to the skilled employee, the management does not need to include any training and development program for implementing skills within them.

2.9 Management process for cultural diversity in the business

Ribbink and Grimm (2014) opined that managing a diversified cultural workplace often contributes towards a sustainable and competitive advantage over its local competitors. An international business needs to incorporate the diversity management into their managerial process so as to assess the most sensible and beneficial way of managing a diversified culture. According to the Ferraro and Briody (2017), working and managing with diversity involves settling the cultural difference or simply avoid them. However, avoiding or ignoring them would not allow the business organisation to grow or expand in the global market. From the findings of Samaha et al. (2014), it has been evident that there is a need for understanding the concepts and frameworks which will help in analyzing and managing the cultural diversity.

Cross-cultural communication: While conducting an international business, cross-cultural communication is an essential process within the management of the organisation to promote cultural diversity in a positive manner. According to the Ang and Van (2015), the cross-cultural communication is a significant strategy within an international business setup for influencing the growth of business globally. As per the management process of this cross-communication involves the development of a mutual understanding of people from different cultural background to perceive and communicate with the world around them. Further, Ribbink and Grimm (2014) stated that different countries have different beliefs, customs and communication strategies due to which management process for international business face a higher level of challenge. The differences in languages along with the high and low context culture factors and the difference in attitudes are the major factors that are considered within the cross-cultural communication.

To manage diversified cultural teams: There are certain essential factors which effectively help in managing a diversified cultural team. The most prominent features are team building, communication, time management and schedules. The culturally diversified teams are provided with accurate information and they are prompted further for effectively increasing the team performance. Additionally, Ferraro and Briody (2017) found a major difference in the behaviour or approach of the employee working in a culturally diversified team towards their job. For instance, the workforce of US is comparatively individualistic with respect to the workforce of Europe or Asia. The people are more inclined towards performing the job alone whereas the other nation promotes cooperation and unity amongst team within their culture. Therefore, it might be an issue while team building from the different cultural background. An effective cross-cultural communication is essential in team building a minimizing any existing difference in the behaviour of the workforce.

Moreover, according to the Poulis et al. (2013), culture also differs in terms of time perceptions. The viewpoint about time management might be different from one culture to another culture. Some culture believes in balancing work and family whereas some individuals dedicate towards their professional career and compromise over their social life. According to Samaha et al. (2014), the difference also needs to be managed through effective implementation of perception that is socially acceptable and beneficiary for individuals. Therefore the cultural diversity helps in building the time management and scheduling in accordance with the culture and society that can be utilized to maximize the performance of the business operations.

Implement business planning with cultural diversity: For implementing a long lasting and successful diversity management within the management process of an international business organisation there are namely five steps that can be followed, as opined by Ferraro and Briody (2017). The first business process involves the top management team entirely and transparent throughout the whole management. The chief executive officer and board of directors are expected to participate while implementing the management process and personally influence the workforce. They might be made available to the workshops or training program that would drive or motivate every other employee within the business process to take serious participation in promoting cultural diversity. Furthermore, Dikova and Sahib (2013) argued an organisational structure must support the effort diversity. To implement such, a chief diversity officer is been appointed within the organisational structure that has provided to be most effective while implementing the cultural diversity management.

Management resources and support for cultural diversity: In order to implement cultural diversity within the management process an international business organisation would require a number of resources that will enhance and improve the process of management in the organisation. Primarily, as suggested by Wennberg et al. (2014), capital or investments are mostly required by the international business organisations. Next, the employee of the organisation might be less skilled and incompetent as compared to the host country or vice versa. Therefore, effective recruitment of personnel from the nation or the host country is also an essential human resource. According to Samaha et al. (2014), the whole concepts of business planning and implementing the cultural diversity are depended on the initiative of the international business organisation that can be fulfilled by the organisational head of the international business and the management.

Manage training facilitation guide for cultural diversity: Liñán and Fernandez-Serrano (2014) stated that the implementation of the management process for promoting cultural diversity within the international business organisation is not at all successful until and unless a real-time training facilitation is practiced within the organisation. Wennberg et al. (2014) added that the requirement of developing and teaching the employee and personnel about the diversified culture is essential and thereby the necessity of training facilitation guide also arises within the training and development program. The workforce from the host country is required to assess and gain knowledge about the cultural difference and cultural behaviors. Similarly, Adair et al. (2013) suggested that the workforce from the foreign nationals needs to acquire knowledge on the work process along with the organisational goal and its business strategy for expanding the organisation in the global market. The difference in culture, according to Samaha et al. (2014), transforms the organisational culture into the effective diversified cultural workforce that collectively works towards expanding the business most efficiently.

2.8 Gap in literature

From the present research study, there are few literature gaps that have been identified while performing the chapter of the literature review. First of all, the details presented in the research papers are assumed to be standard and applicable to every international business organisations. Secondly, the limits of the study are restricted to the knowledge and research of the authors from journals and books which are secondary sources of data. Again a limiting factor for this research study is the method in which the researchers have been conducted. The time appointed for completing the study posed as a limitation since the subject field offers a lot of depth while gaining information and knowledge. If this limiting factor of time is minimized the research would have taken place more critically. Also in some instances, it has been observed that there are few countries which share common culture or communication process which have not been considered in the present research study.

National Culture

Organisational Culture

Increases creativity

Increases Productivity

Increases service range

Communication issues

Increase in training cost

Competition Increases

Hofstede’s model

2.9 Conceptual Framework

Figure 3: Conceptual Framework

(Source: Self-developed)

2.10 Summary of the chapter

In this literature chapter of the research process, the researcher has demonstrated all the relevant concepts and model along with elaborate information on the cultural diversity of an international business organisation and its management process. The chapter emphasized on the Hofstede model which explained the cultural dimension theory and described influential factor of the culture within an organisation. A combination of beliefs, shared values and other factors within a diversified cultural workforce of an organisation are explained elaborately to meet the research objectives. Further, the role of cultural diversity in national and international business is assessed along with the management factors and process that are influenced by the presence of cultural diversity in the business.

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