International Business Environment

Introduction

This essay is researched using secondary sources of data to assess how cultural differences affect international business deals. The question is researched and supported using academic references. The main objective of this essay is to investigate whether; the cultural differences are degrading or improving business performances at the international level. For students who are seeking insights into this specific topic, thorough research and analysis are very important. For example, seeking business dissertation help can provide the most valuable guidance in navigating all the complexities of cultural influences on international business dynamics.

1. Cultural differences affect international business deals

Here the focus is given on the reference article "Re-conceptualizing cultural distance: The role of cultural experience reserve in cross-border acquisitions" by Popli et al. 2016. Before continuing the review to answer the specific question, it is to be identified that cultural difference is the most important fact of business deals. Business scholars through the lens of cultural differentiation have analyzed Cross-border business transactions. Cultural experience is an important firm-level capability and works on a firm's strategic direction. Organizational hierarchy, etiquette, and communication are three pillars on which international business is standing. Understanding as well as recognizing the effects on a business is expected to prevent misunderstanding of foreign clients.

Concepts of cultural differences and business challenges

Low-context along with high context cultures is often throwing challenges on people. In a low context culture such as the United Kingdom, communication is identified to be explicit. However, in a low context country like Russia, communication is implicit. In cultures like China, the business partners are supposed to be sharing more time at the dining table and they try to build up trust as early as possible to avoid any unfavorable situation. Business executives need to learn that cultural sensitivity is essential as they engage in international deals.

Effects on business negotiations

People who belong to a more feminine culture are focused on relationships and they are quite collectivist in their thinking. Negotiations made across masculine countries have shown distributive bargaining. Assessing the level of formality is important in any business and understanding that the levels will differ might improve business deals. In some cultures like in Asian culture, they try to suppress their emotions while keeping the formal talk.

1. Popli, M., Akbar, M., Kumar, V. and Gaur, A., 2016. Reconceptualizing cultural distance: The role of cultural experience reserve in cross-border acquisitions. Journal of World Business, 51(3), pp.404-412.
2. Beugelsdijk, S., Kostova, T. and Roth, K., 2017. An overview of Hofstede-inspired country-level culture research in international business since 2006. Journal of International Business Studies, 48(1), pp.30-47.

Cultural difference factors

Cultural differences that affect the business are identified as:

Communication and Interaction

Any business venture is expected to succeed with the help of communication effectiveness. Business deals have the risk of "being lost in transactions". A fluent English-based communication might provide a professional boost globally. Making direct eye contact with clients or handshaking might sound quite familiar in one culture. However, in solemn countries, these are offensive, and understanding these gestures is important before proceeding with a deal. A verbal language barrier is something that might lead to a time miscommunication of concepts.

Etiquette in workplace

Work etiquettes are identified to be different in different organizations. The formality of addressing each other has become important business etiquette globally. While in some cultures it is okay to address with first names in the organization, this offends some people in other cultures. There is punctuality issues observed that leave an impact on the business deals being conducted. Workplace confrontation and assumed working hours are different across cultures that leave an impact on cross-border deals.

Hierarchy of organization

People’s way of thinking and behavior largely influences the cultures and organization hierarchies. Management roles are widely judged, as if organizational hierarchy might differently analyze questioning the decision of seniors, and speaking up in meetings. The diverse attitude of hierarchy leads towards the cultural challenge of an organization. Senior management in some countries expects the showing of utter respect from junior staff in some countries and cooperation is done formally. All these rules might be a barrier to business deals.

Literature evidence of a cultural difference in international business

Cultural differences leave an impact on taking strategic directions in firms. As per the article, experience gained in previous merger and acquisition deals should be integrated with the future ones. Firms are globalizing in terms of language competencies and designing wider cultural aspects of communication. This article in the review also talks about organizational theories that have been manifesting organizational knowledge through cultural experiences. A major challenge in the field of developing dynamic frameworks of culture is associated with reducing conflicts of interest. The article conceptualizes “cultural experience reserve of a firm as an idiosyncratic, firm-specific capability that could help to reduce uncertainty in deal negotiations and resolving deadlocks". The impact of cultural differences is identified to be contingent depending on the firm's positioning. In this industry context, the likelihood of cross-border mergers and acquisition deal abandonment is working as a contingent factor in highlighting the relationship between cultural distances.

1. Beugelsdijk, S. and Welzel, C., 2018. Dimensions and dynamics of national culture: Synthesizing Hofstede with Inglehart. Journal of Cross-Cultural Psychology, 49(10), pp.1469-1505.

Impact of cultural distance on firm’s business

Mergers and acquisitions involve three main stages and these are pre-announcement, announcement through a resolution, and post announcement. In the second phase, business negotiations are involved that creates complexities due to uncertainties triggered by different constraints. It is also described by the author that international deals are always a complex due rise of unconscious cultural blindness and difference in ethnicity. Culture affects individual perception and behavior and different processes at the firm level. These are expected to be solved by improvising on decision-making and conflict resolution. Cultural differences lead to the inability to accept the underlying beliefs of other parties. Differences can also create a blurry exchange of information and become a reason for deal breaking across borders. Hence, there is a significant negative effect observed while dealing internationally. The impact of cultural difference is not the same for all organizations and therefore, cultural and friction perspectives are optimized.

However, there are some positive impacts seen such as a collaboration of cultures in an appropriate setting. Sharing of experiences between managers and cross-border team members is impressive, as the host country, will get a chance to show off its capabilities. Firms often deploy a person for negotiation that has prior experience in dealing with that country. Cultural reserve highly integrates with the process of managing absolute values and developing appropriate communication channels. As per the article, cultural frictions might be stopped with the successful use of organizational and contextual factors. Moreover, industry affiliation is an important factor in terms of managing cross-border deals. "Industry variations might also affect the relationship between cultural differences and firm-level outcomes".

1. Popli, M., Akbar, M., Kumar, V. and Gaur, A., 2016. Reconceptualizing cultural distance: The role of cultural experience reserve in cross-border acquisitions. Journal of World Business, 51(3), pp.404-412.
2. Ferraro, G.P., 2021. The cultural dimension of international business. Prentice Hall.

There is transferability observed within the acquiring firm as reformation values have become important. A hypothesis can be developed at this stage, which implies that cultural distance is reduced for firms that come with moderate growth optimization strategies. This author had chosen samples from Anglo culture, Eastern Europe, Latin Europe, and Asia for understanding how international deals are sealed and cultural competencies are kept intact. Based on statistics, there was deal abandonment status identified at the standard deviation of 0.254. Cultural distances were included in an S.D of 1.6 whereas cultural experiences reserve was at the point of 3.01 in the research.

2. Empirical analysis of the cultural impact on the business of a chosen company

In this section, a company called Buderus is chosen to determine "how culture influences the marketing strategy and products in foreign markets". This company is one of the leading German heating technology companies that have over 100 years of experience in the field. A complete system of heating is offered by this organization and they have opted for expansion of sales in America. Buderus offers quite high-tech products in the US subsidiary of New Hampshire. The hanging condensing boiler is identified to be quite a product efficient. While the market share of this Buderus in the USA is 6.5%, approximately 230000 boilers are existing inside the market. Although these products are seen to be showing low emission of pollutants as they have a low-profit margin caused by high-tech technology, these were not very successful in the American market.

Culture influencing marketing strategy in international markets

Here, come the cultural differences in the USA and Germany as a success factor of the product. In America, emission guidelines are less strict than in Germany and the product does not have to be as technically innovative as Germany. It is identified that "American consumers seem not so interested in high tech boilers and, therefore, do not prefer green boilers". Hence, selling such boilers with high configuration does not make any sense to these German companies. In Germany, a focus is given on conserving energy due to their high fuel prices. However, US culture is different, as they need not think about energy conservation due to the availability of fuel at comparatively low prices. However, with efficient technology, these heating boilers come at low prices. Hence, a gradual increase in sales was observed.

1. buderus.com, 2021. Available at: [Accessed on 01/06/2021]

Culture influenced the marketing strategies in this organization as Buderus had visited fairs for product sales in the USA as well as heating firms to understand the local marketing strategy. Difference underlies in terms of rules and regulation between the countries. Normally, Buderus gives a five-year warranty on their heating boiler, whereas in the USA, no guarantee is rejected and spare parts are guaranteed to be available for the next 20 years in advance. Hence, differentiation in marketing rules influenced by US culture decides the fate of the product. Moreover, in the USA, liability charges are more for any product and detailed instructions of installation are required to be given with pictures. Failing to these charges can be applied to the company Buderus for negligence. Marketing campaigns are also different for both countries. In the core country of Buderus, there is not much use of television commercials. There is a trend of using soccer games and ski world cups for marking communication with Germans and selling their product. Popular magazines are also undertaken for sales growth identification. In contrast, Americans focus on TV commercials for a successful advertising campaign. They do not give maximum focus on technicality and it was quite clear that cultural differences of trade were not going to give a competitive advantage to the product of Buderus. The prospect of buying energy-efficient products was quite low in the US. This came out as one of the largest issues while Buderus was trying to expand its sales. Hence, it is clear as the daylight that American's different cultural aspects leave an impression on their marketing style. These need to be acquired by the foreign country to proceed with business and generate a good amount of profit.

Moreover, designing a marketing strategy has become important for marketers. Buderus need to focus on middle income American and use their emotion of saving at least 50 to 60% on energy bills for making a good deal of heating products. Otherwise, the generalized standards of having a lower focus on corporate indulgence will be hampered.

1. econstor.eu, 2021. Available at: [Accessed on 01/06/2021]
2. Eicher, S. ed., 2016. Corruption in international business: The challenge of cultural and legal diversity. CRC Press.

Conclusion

This research has shown the probable impact of cultural differentiation on business deals at the international level. Here a focus is made on the specific observations presented in an article based on cross-border acquisitions made and the roles of cultural differentiation. The empirical analysis is also made on a chosen company of Germany to see how their business is impacted through cultural differentiation as well. Most negative impacts are analyzed as some deals were abandoned due to cultural differences. However, some positive aspects like cultural collaboration are also seen.

1. econstor.eu, 2021. Available at: [Accessed on 01/06/2021]

Bibliography

Books

Eicher, S. ed., 2016. Corruption in international business: The challenge of cultural and legal diversity. CRC Press.

Ferraro, G.P., 2021. The cultural dimension of international business. Prentice Hall.

Journals

Beugelsdijk, S. and Welzel, C., 2018. Dimensions and dynamics of national culture: Synthesizing Hofstede with Inglehart. Journal of Cross-Cultural Psychology, 49(10), pp.1469-1505.

Beugelsdijk, S., Kostova, T. and Roth, K., 2017. An overview of Hofstede-inspired country-level culture research in international business since 2006. Journal of International Business Studies, 48(1), pp.30-47.

Popli, M., Akbar, M., Kumar, V. and Gaur, A., 2016. Reconceptualizing cultural distance: The role of cultural experience reserve in cross-border acquisitions. Journal of World Business, 51(3), pp.404-412.

Websites

buderus.com, 2021. Available at: [Accessed on 01/06/2021] econstor.eu, 2021. Available at: [Accessed on 01/06/2021]

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