The cultural aspects of a business significantly affect its strategy, goals, and operations. Decision-making is influenced by cultural beliefs and practices, which vary worldwide. Cultural disparities in various countries play an essential role in decision making within functional areas such as marketing, human resources, and finance.
Each department in a company has its own specific duties and obligations that contribute to the overall achievement of the business. In the worldwide market, it is particularly important for the marketing function. The marketing department is exceptional in terms of innovation and aims to expand consumer imagination and recognition.
To clarify, the American Marketing Association provides a definition of marketing as a function and processes within an organization. It involves creating, communicating, and delivering value to customers and managing customer relationships for the benefit of the organization and stakeholders (Peter, Donnelly, Vandenbosch 3). With the growing global expansion of marketing, both in terms of consumers and organizations, the marketing department plays a crucial role in numerous decision-making processes.
The decisions made by the marketing department are influenced by various internal and external factors, with culture and cultural differences being the most crucial. Cultural differences have multiple effects on marketing decisions, including ethical decision making, the diverse cultural backgrounds of marketing managers, and advertising initiatives. In a multicultural marketing environment, ethical values across global boundaries remain a matter of focus and hold great significance in the global marketplace.
In summary, ethical decision making involves recognizing a problem, creating choices, and selecting the best alternatives that prioritize essential ethical values and fulfill the desired objective (Guy 39). The culture within the marketing department significantly impacts ethical decision making. Specifically, building relationships and fostering trust among consumers play a crucial role in ethical decision making in marketing.
Cultural differences greatly influence decisions regarding relationships and trust ideals. Marketing professionals must always align their decisions, which affect relationship development and trust levels, with the overarching principles of marketing theory. This theory asserts that all transactions are built upon trust and conflicts are prone to arise when buyers and sellers have differing ethical mindsets.
Hence, if there is conflict, trust will not grow, and thus the exchange process will stop, inhibiting the full development of marketing relationships. It is crucial to comprehend this theory, especially as global competition intensifies and consumer acquisition costs steadily increase (Srnka 3). The importance of relationships and trust can be observed in Latin European cultures (Browaeys and Price 42). Furthermore, the marketing department must grapple with ethical decisions that pertain to value compatibility.
Values refer to the fundamental beliefs that individuals hold about what is right and wrong, good and bad, important and unimportant (Doh and Luthans 101). The compatibility of ethical values in the global marketplace is crucial for organizational success. Since cultural values vary, this significantly affects the decision-making process in marketing. Marketing professionals often encounter decisions that go beyond their cultural boundaries and values, such as those related to political and economic environments (Srnka 3).
Marketing personnel must go above and beyond to ensure their decisions align with both organizational and consumer needs and values in the global marketplace. Cultural dimensions greatly influence ethical decision making in marketing, impacting the process through ideals shaped by the wider and closer cultural environments (Srnka 2).
The wider cultural environment, which includes aspects such as economic systems and nationality, plays a role in determining the emotional stages of the decision making process. On the other hand, the closer cultural environment focuses on organizational culture and has an influence on the behavioral aspects of decision making (Srnka 2). These cultural dimensions are crucial for marketing personnel to consider when making decisions in the global marketplace.
In the realm of marketing, ethical decision making plays a crucial role in ensuring success. The composition of the marketing department within a company ultimately impacts its potential for global recognition. In today’s world, where cultural diversity is valued in business, it greatly influences an organization’s decision making. Specifically, marketing managers from different cultures may have vastly different approaches to making decisions.
Both positive and negative impacts on the outcome of the decision making process can arise from cultural differences. According to Herche, et. al. (2003), there are five effective management styles that accurately represent decision making among marketing managers. These styles include: information valuation, quantitative planning, individual decision making, advance planning, and information using. Therefore, it can be argued that these dimensions form a management style, but not the singular management style (Albaum 2).
Marketing managers in the Philippines, Australia, and New Zealand are relatively low on information valuation and quantitative planning compared to their counterparts in Vietnam (Albaum 6). Understanding the influence of culturally diverse decision-making styles can benefit both the marketing function and the entire organization in improving their decision-making processes. Additionally, cultural differences in worldviews and paradigms for processing information affect decision-making processes within the marketing department (Albaum 1).
Data interpretation plays a crucial role in marketing as it shapes decisions about a company’s future. This interpretation can be done through analyzing customer questionnaires or surveys. Failing to address cultural differences in information processing can lead to adverse consequences such as ineffective decisions, loss of customers or profits, and internal conflicts within the management department. It is essential for marketing managers with different cultural backgrounds to have a unified understanding of the corporate culture when making business decisions. Corporate culture refers to the combination of cultural backgrounds of company managers (Albaum 2). Despite the existence of cultural differences, it is important for marketing managers to align decision-making processes within their department, organization, and corporate culture. By ensuring a high level of consistency, the marketing department and organization can be seen to have a collective management style that reflects its individual managers (Albaum 2).
The potential to clearly identify the meaning of “corporate culture” within an organization is influenced by cultural differences in marketing management, which significantly impact decision making. Advertising initiatives are notably affected by these cultural differences in organizations worldwide. Advertising is not only a means to inform the public but also to persuade consumers to purchase products or services (Browaeys and Price 204). The marketing department often holds sole responsibility for these initiatives.
Cultural differences in the perception of advertising messages can greatly affect decision making in marketing departments. Perception, which is an individual’s understanding of reality, has the power to influence judgment. This can become a major issue on a global level when advertising messages are misunderstood. While an organization’s home country may interpret advertising messages in a certain way, other countries may have a different interpretation, leading to disastrous consequences (Doh and Luthans 196).
A well-known instance of advertising misinterpretation involves Mercedes-Benz and their release of the Grand Sports Tourer, commonly referred to as the Mercedes GST, in Canada. The use of the acronym GST by Mercedes was poorly received by Canadian citizens as it seemed to imply a connection to Canadian socialism (Doh and Luthans 196). In the global context, marketers must carefully consider perceptual barriers that could arise when making advertising decisions. Moreover, cultural variances in language significantly influence marketing choices in the international marketplace.
In today’s world, there are more than 6000 languages being used. This poses a challenge for marketing personnel when it comes to making advertising decisions (Anderson 2). The existence of language barriers can have significant consequences for an organization, as it becomes difficult to understand behaviors specific to different nationalities and accurately interpret translated words (Browaeys and Price 197). However, by reducing or eliminating these language barriers, marketing decisions can be enhanced and the organization can have the opportunity to prosper.
Cultural differences in communication styles have a significant influence on global decision making in marketing, particularly in advertising. Understanding how different cultures communicate enables the marketing department to create advertising campaigns that resonate with and are appreciated by potential consumers. When making decisions about advertising and cultural communication, it is crucial to identify the two main types of context cultures.
In high-context cultures, communication is implicit and indirect. People in these cultures have close personal relationships and extensive information networks. An example of a high-context culture is Japan. On the other hand, low-context cultures are characterized by direct, focused, and explicit communication, where people meet mainly to achieve specific goals. The United States is an example of a low-context culture (Doh and Luthans 187-188).
It is crucial for marketing personnel to have an understanding of cultural differences in communication standards in order to make effective advertising decisions. Human Resources (HR) is a department responsible for implementing strategies and policies related to managing individuals within a company. According to an established theory, employees play a vital role in the success of a company. Hence, the recruitment and selection process, which involves hiring employees for specific positions and responsibilities, is essential for achieving organizational goals.
Recruitment and selection are influenced by culture as the person in charge of finding suitable candidates intends to find individuals who will assimilate well into the company’s culture. The recruiter’s cultural background can play a role in this process. For example, if the recruiter is of Japanese origin, they may prioritize an applicant’s experience level and seniority in their current job over their educational background when making hiring decisions.
According to Michael Morris from Colombia University School of Business, he suggests that people have a tendency to favor those who are similar to them. Corporate culture plays a crucial role in the human resource management department as it provides a framework for implementing change and involving employees in the process. It is particularly significant because when a company has a relaxed corporate culture, its employees are likely to adopt a similar attitude.
Culture can influence recruitment and selection decisions in various ways. For example, if a recruiter is seeking someone to work Saturday overnight shifts and they interview a capable candidate who is a Catholic and must attend church on Sunday mornings, the recruiter will need to consider cultural factors. This candidate may be suited for the job overall, but not for that specific shift. It does not necessarily mean that the candidate will not be hired by the firm; it simply means they are not suitable for that particular shift due to religious commitments.
Training and development are essential for the effective implementation of a company’s HR function. However, cultural influences can affect training and development processes. It is important to note that some managers may be biased towards their own culture when it comes to integrating training and development. This bias can impact HR decisions regarding the appropriate types of training and development to be utilized.
The diversity of trainees in terms of culture can have both pros and cons in the context of training. Some trainees prefer to collaborate, while others prefer to work independently. This preference affects how leaders plan and arrange upcoming training seminars to accommodate collectivist cultures like that of Japanese trainees who tend to work together. Another aspect influenced by culture is the system of rewards and punishments. When offering praise for desired behavior, managers must take into account the cultural background of the trainee. For instance, Japanese trainees may not respond positively to public praise because they are humble by nature. In such situations, managers need to find alternative ways to motivate desired behavior.
The way a company conducts evaluations and awards promotions is influenced by culture. In Japan, seniority is valued more than competencies, meaning that even if an employee makes significant contributions to a successful project, they are unlikely to be promoted. Instead, the employee who has been with the company for the longest period of time is more likely to receive promotion. Conversely, in Spain, personal relationships are considered more important than competencies. An individual’s chances of being promoted increase if they achieve success through their networking contacts. This cultural perspective reflects the idea that sometimes connections hold greater importance than knowledge and skills.
The culture in Latin America, especially in Chilean companies, reflects a tendency to give more respect to individuals based on their age and gender rather than other factors. Additionally, the culture greatly influences the working environment and practices of employees, particularly in terms of Human Resources. For instance, in Latin America, where religious beliefs hold strong significance, employees feel more motivated and dedicated when they have a religious statue present in their workplace.
Latin America’s work ethics, for the most part, align closely with Hofstede’s definition of collectivism. Collectivism refers to the degree to which the interests of a group take precedence over individual interests. In a collective society, individuals are encouraged to conform and prioritize actions that benefit the group. This collective mindset can impact decision-making processes, as ideas that do not conform to the group’s values may not be pursued, potentially resulting in decreased profits or inadequate training.
The finance department of a company handles all monetary aspects, from ensuring funds for daily operations to managing investments for future growth. It also involves selecting projects, analyzing capital expenditure, obtaining financing on favorable terms, distributing dividends, and managing inventory and accounts receivable and payable. Cultural differences play a significant role in shaping a business’s financial decisions. They impact individual thinking and behavior within a company and influence the overall decision-making process.
Cultural differences can cause systematic deviations from rational decision making, which in turn lead to cultural differences in risk taking, negotiations for direct investment, mergers and acquisitions, as well as returns of bonds and stocks at local markets, according to Hens. Many researchers have tried to understand culture by exploring its dimensions. However, Hofstede’s cultural dimensions seem to be the most suitable for studying financial decision making.
Power distance, uncertainty avoidance, and individualism dimensions play a significant role in shaping the financial decision making of businesses due to cultural influences. Power distance, as a cultural dimension, refers to the acceptance of inequalities in a society and represents the level of formal hierarchy of authority (Hofstede, 2004). In societies with high power distance, such as Japan and Middle Eastern countries, organizations typically prioritize strict obedience and concentrate power in a hierarchical structure, resulting in unquestioning obedience to superiors.
The centralization of decision-making in organizations leads employees to rely on top management for decision-making (Hofstede, 2004). The financial department plays a crucial role in controlling costs and ensuring profitability. In Canada, employees have the right to approach their manager and question decisions related to purchases, production costs, or budgets. However, in South Korea, doing the same might result in termination. In countries with a high power distance, subordinates should anticipate a distinct hierarchy between themselves and their superiors.
The role of employees is to follow the management’s decisions and not offer their own opinions; they are solely responsible for completing assigned tasks. In cultures with low power distance, such as Canada and the United States, managers have less control over their subordinates, who are expected to gather information and make decisions on their own. This autonomy is evident when employees handle payment transactions with clients or suppliers, as they have access to decentralized knowledge. This encourages open communication between employees and their superiors.
The employee has the discretion to determine if a client wishes to postpone payment or modify the payment schedule. Various cultural or individual preferences can influence the utilization of accounting information when making investment decisions. As an illustration, Canadian managers may instruct their employees to classify damaged returned items as inventory instead of deducting them from sales. This approach reduces their accountability for sales figures. Including damaged returned items in the inventory account raises the inventory balance, even though the goods cannot be resold.
An exaggerated inventory balance can affect ratios and decisions made by investors who depend on the valuation of the inventory account. Given the information provided, it is reasonable to assume that individuals in higher power distance cultures are more inclined to follow accounting practices and investment decisions guided by superiors. On the other hand, employees in lower power distance cultures are more likely to base their accounting practices and investment decisions on norms, standards, as well as accounting and financial documents, rather than relying on directives from their superiors.
Uncertainty avoidance refers to the level at which individuals perceive ambiguity as a threat and have established beliefs and institutions to avoid it (Luthans, 2009). Cultures with higher uncertainty avoidance, such as Japanese, German, and Spanish cultures, are less willing to tolerate failure, ambiguity, or risk, and they only accept ambition when it benefits the group’s objectives (Hofstede, 2004). In contrast, low uncertainty avoidance cultures like Danish and British cultures are more adept at handling conflict, innovation, deviation, competition, and risk.
Thus, in societies with a lower uncertainty orientation, the management of companies is willing to invest in more risky projects that are linked to the unknown, and also to enter or expand into markets with more competitors. This can be exemplified by U.S. companies like Microsoft or Wal-Mart, which chose to invest in the Chinese market through acquisition or joint venture. In doing so, these companies have taken significant financial risks by operating in foreign countries with significantly different cultures.
Low uncertainty avoidance societies have a higher level of organization in their activities, with more written rules and less risk taking by managers. In Japanese culture, it is important to give ample space and time for the Japanese side to thoroughly investigate, evaluate risks, and clarify any concerns before moving forward with discussions. All risks, regardless of size, must be identified, assessed, and managed throughout the duration of the business transaction or partnership.
This approach has proven to be highly effective in promoting superior product quality and reliability. Toyota and Honda serve as examples of its success. Hofstede’s individualism/collectivism dimension assesses the prominence of either the individual or the group within a society (Browaeys, 2008). According to Hofstede, individualism greatly influences risk aversion and risk perception. Individualistic cultures are typically characterized by a high level of freedom and independence, where individual goals surpass group goals. In such cultures, individual initiative is encouraged and rewarded.
According to Browaeys (2008), characteristics of collectivist cultures are often seen as limiting personal freedom and autonomy in decision making, with a focus on group goals over individual goals. It is believed that this may hinder innovation, but could be more conducive to adaptive efforts. An example of this is evident in a Canadian individualistic culture, where employees are encouraged to generate ideas and strategies independently. The individual who successfully implements their strategies to achieve the firm’s objectives will be acknowledged and potentially receive rewards or promotions.
On the other hand, employees in Japanese collectivistic culture are expected to cooperate to come up with a solution. They do not expect to be rewarded or promoted as their main goal is to achieve the firm’s objectives. Hofstede found that wealthy countries such as Canada, Australia, Sweden and Denmark have higher individualism scores and poorer countries such as Pakistan, Indonesia and Mexico have higher collectivism scores (Luthans, 2009). As explained above, individualistic societies have a higher tolerance towards risk in regards to business investments.
Companies from France or Italy are unafraid to invest in new products or expand into new territories, whereas firms in Panama or Guatemala take a different approach. These companies exercise caution when it comes to risky investments, prioritizing the avoidance of potential financial losses from unfamiliar products and business operations. Instead, they prefer to make investment decisions that align with their core group or established groups they trust, rather than solely relying on accounting and financial documentation. This method can be likened to making an investment.
Investing in stocks carries more risk but also offers a higher return, whereas investing in GICs is extremely safe but offers minimal returns. To sum up, culture plays a crucial role in decision making within a global organizational context. The three primary functional areas of business are marketing, human resources, and finance. These areas navigate various cultural differences to ensure successful decision making. Integrating these areas into a business requires significant time and effort to effectively align all the cultural components.
Hofstede’s dimensions and cultural differences across countries have demonstrated that culture plays a vital role in business decision-making involving ethics, values, communication, strategy direction, personnel management, and finding the appropriate corporate fit.
Anderson, Stephen R.. “How Many Languages Are There in The World. ” Linguistic Society of America. www. lsadc. org/info/pdf_files/howmany. pdf (accessed July 3, 2010). Browaeys, Marie-Jo’Elle. Cross-Cultural Management. by Marie-Joelle Browaeys, Roger Price. Upper Saddle River: Financial Times/Prentice Hall, 2008. “Cross Cultural Advertising. ” Translation Services | Interpreters | Intercultural Communication | Cross Cultural Training. http://www. kwintessential. co. uk/cultural-services/articles/cross-cultural-adv ertising. tml (accessed July 3, 2010). Doh, Jonathan, and Fred Luthans. International Management: Culture, Strategy, and Behavior. 7 ed. New York: McGraw-Hill/Irwin, 2008. Guy, Mary Ellen. “Ethical decision making in everyday … – Google Books. ” Google Books. http://books. google. ca/books? id=eRo0vcsbslQC&pg=PA39&lpg=PA39&d q=ethical+decision+making+definition&source=bl&ots=sqjTixD02I&sig=XRE rknbSuI0ihfOqkwS674TQ_-8&hl=en&ei=JlkvTK24BNHenAeftKG0Aw&sa=X&oi =book_result&ct=result&resnum=2&ved=0CB4Q6AEwATgK#v=onepage (accessed July 3, 2010).
The following sources discuss the role of culture in ethical decision making by marketers:
– Srnka, Katharina J. “Culture’s Role in Marketers’ Ethical Decision Making: An Integrated Theoretical Framework.” University of Vienna. www.amsreview.org/articles/srnka01-2004.pdf (accessed July 2, 2010).
– “The Industrial and Financial Culture.” http://www.psi.org.uk/publications/archivepdfs/Innovation%20and%20Indust/IISB2.pdf
– “Cultural Effects on Accounting Practice and Investment Decisions.” http://asbbs.org/files/2008/PDF/S/Slaubaugh.pdf
– “Does Finance Have a Cultural Dimension?” http://www.ccr-finrisk.uzh.ch/media/pdf/wp/WP377_A1.pdf
– “Uncertainty Avoidance in Japan.” http://www.cels.bham.ac.uk/resources/essays/Rolnick_AL_06_07.pdf
Additionally, these books provide insights into the relationship between culture and international management:
– Luthans, F., Doh, J. P. (2009). International Management: Culture, Strategy, and Behavior. New York: McGraw-Hill Irwin Companies, Inc.
– Hofstede, G., and Hofstede, G. J. (2004). Cultures and Organizations: Software of the Mind. McGraw-Hill Publishing.
– Browaeys, M. J., Price, R. (2008). Understanding Cross-cultural Management. Pearson Education Ltd.
