Global Mindset in Multinational Business

Cultural differences, while difficult to observe and measure, are obviously very important. Failure to appreciate and account for them can lead to embarrassing blunders, strain relationships, and drag down business performance. National culture shapes behavior and this influence reaches beyond administrative attributes such as governmental policies, laws and public institutions. Therefore, the influence of culture and how those cultural differences affect the operation of firms around the globe is an important aspect to take into account.

In his book “Culture’s Consequences: International Differences in Work-Related Values” (1980), Geert Hofstede speaks of culture as a process of “collective programming of the mind”. It is this collective programming that determines what is considered acceptable or attractive behaviour. Furthermore, during his research Hofstede developed a model which proposes some dimensions along which cultural values could be analyzed:

• Individualism vs. Collectivism

• Uncertainty Avoidance

• Power Distance (i.e. strength of social hierarchy)

• Masculinity vs Feminity (i.e. task-orientation versus person-orientation)

• Long-term orientation

• Indulgence vs. Self-restraint

While at the surface level there may be some convergence in cultural habits, artifacts and symbols, at a deeper level cultural differences persist. Hofstede's work established a major research tradition in cross-cultural psychology and has also been drawn upon by researchers and consultants in many fields relating to international business and communication.

Cultural value differences are particularly relevant for large multinational companies that are exposed to multiple national cultures in their daily operations. This suggests that managing across borders introduces substantial complexity because it forces multinationals to tailor their practices and approaches to each and every cultural context they operate in.

Like Edgar H. Schein in his “Organisational Culture and Leadership” said, the analogy of an iceberg illustrates the different layers that culture consists of:

Certain aspects of a culture that are more visible, just like the tip of an iceberg: this manifest culture includes observed elements such as behaviors, language, music and food;A deeper understanding of a culture: this consists of expressed values that reflect how cultural members explain the manifest culture;Finally, the very bottom of the iceberg: this consists of basic and taken-for- granted assumptions which form the foundations of each culture.It is these basic assumptions that provide the ultimate meaning to the expressed values and behaviors.

Differences in national culture are reflected in business decisions such as choices about foreign entry modes, consequently understanding the national culture can help business make better decisions. For example, national culture has also been shown to have an impact on manufacturing and supply chain practices, which can be useful to consider in a variety of contexts: analyzing manufacturing footprints, managing multi-plant operations, assessing competitors and suppliers and different countries, and so on.

Improving the alignment or congruence between management practices and cultural contexts yields tangible business benefits. So, it’s clearly a bad idea to simply ignore cultural differences. Some of the solutions that businesses can consider to mitigate this aspect and reduce the cost of adapting to local cultures include for example externalization (e.g. via joint ventures). Partnering with a local firm can provide access to local cultural understanding, business networks, and so on, that would be costly and time-consuming for a foreign company to develop on its own. Furthermore, research by Andre Laurent indicates that bringing employees from different cultures together in the same company might actually strengthen rather than mitigate national cultural differences among them. Additionally, investing in cross-cultural training can also be a powerful tool to improve workforce capabilities and flexibility in a multinational context.