Culture risk is a term that consists of society’s behaviour either its attitude of people, knowledge, value and beliefs and understanding about risk a group of people shares when they have a common purpose. Culture risk applies to both private and public bodies as well as governments and non-profit organizations. If a risk is taken right in a rational manner by the group of people then it will be reward full for the individual as well as for the group. This is called effective culture risk. There is always a room for development in culture risk.
Culture is the identification of a society’s living style and standards. This term refers to the misunderstandings and difference of cultural biases between different people from different areas. This makes an organization atmosphere uncomfortable and disturbed. This difference may affect the quality and speed of working. Ignoring this difference may affect the progress of work and can damage the reputation of your organization.
An organization may affect its growth consistency and efficiency of work due to these conflicts. Organizations may suffer a heavy loss in terms of incoming of targeted tasks on there specific time. Every organization must take serious steps to avoid this problem.
Culture & Cross-Cultural Risk
Cross-culture is a term referring comparison between two or more than two cultures of different areas or communities. Culture differences can be managed by following three basic steps. The first step is to accept the differences between communities; those differences include all features of culture, the second step is to adopt those differences to prolong cross-culture risks and then finally the third step is to adopt the practices that are new for the culture that strengthens culture risk. Different background’s people can interact effectively via cross cultures in international business as well as local business.
Cross culture is very important in businesses as it increases understandings between different groups and it can be utilized as a marketing factor because it helps to outside the domestic market’s customers and clients can be approached through cross-culture. A culture risk conducted effectively encourages many activities such as open and meaningful conversation, practices and knowledge sharing, persistent improvement in process and ethical behaviour in business with a strong commitment.
Culture & Cross-Cultural Risk In International Business
Culture and cross-culture have the very important role in international business. Employees across different culture and regions can interact with each other smoothly that leads the success in international trade. International trade is the main source of international business. Employees are given proper pieces of training in fast-growing companies to interact with the people or businesses of different culture and region. Experience of cross-culture can be positive via these training. Employees are transferred to different countries so that respective company can take the experience of cross-culture. Language plays a very important role in cross-culture so that employees can communicate to each other for mutual culture risks (Zwilling, 2016).
In international business, the cultural relationship is important so that both companies can communicate with each other and open dialogue between countries is encouraged. The body language between countries is extended through cross-culture as well as body contact; how should one country approach another country to start trade in international meetings and interpretation of pat on the back. Each country has to respect each other culture in order to grow international culture and disrespect of culture should be avoided from both sides. Taking care of cultural differences lead countries toward high shares in the market, positive and high investment returns international business opportunities and good repute globally (Trapp, 2014).
International business can be accommodated and benefitted by learning nature and features of other cultures in cross-culture international business. Cross-culture international business is high in risk and avoiding culture respect of other communities may cause damage in international business. Adoption of new culture techniques eliminates the rate of those risks and save the international business from damage. Termination of formal contracts in the form of joint ventures and partnerships in international business is normally caused by ignorance of cultural difference. It also causes production loss as well as the failure of an expatriate. Cultural ignorance consists of the biases that create tensions and misunderstandings between communities in international business (Khalifah, 2013).
Culture has a significant impact on international business. Companies can moderate their local markets by adopting models of global business by following global cultural norms. Culture has great influence on behaviour and attitude of the customer, which ultimately affect the production. International business can operate effectively with the identification of regional differences as well as subculture differences. Culture teaches practice and understanding of local business to international investors and they can make an effective business strategy. Legal and ethical issues can be learned through the adoption of culture globally. Culture has an impact on the conflicts between stakeholders, as stakeholder’s attitude and behaviour is affected by culture, that ultimately affects international business (Clark, 2014).
Human Resource Management & Cultural Risk
Human resource management is a key to international business and businesses that are failed to adopt cultural norms across countries are ultimately failed to manage human resource because culture is all about behaviour and attitude. Global talent cannot be attracted if cultural values are avoided in international business. Human value can reach stake due to miscommunication in culture. Corporate response is good to cultural international businesses. it is important to take care of time zone while making phone calls for businesses purpose in other countries, it is part of ethics and culture. If a company is going to take the risk in international business then employees of the company should believe those risks (López-Duarte, Vidal-Suárez, & Reis, 2016).
Taking risks in international business requires a strong belief in your visions so that company could define its decision to employees in order to take employees into confidence. International business deals with cross culture as well as dealing with cross borders. People have different thinking; they communicate differently and behave differently cross-culture. Transactions made by people are affected by culture and it is easy to negotiate with people cross-culture by giving respect and value to their culture (Chibba, 2015).
Managing Cultural Diversity
Global culture diversity is too large that can impossible to even exceptionally skilled and experienced negotiator to understand how to encounter all the cultures around the globe. A negotiator needs to set negotiating goals while making contracts with people cross-culture. There are different negotiating goals for the different culture. A lot of practice and hard work is needed for this purpose. Negotiation attitude should be win-win rather win-loss so that other parties do not feel offended or disrespected. Personal style can be formal or informal according to the situation. It varies culture to culture.
Cultural values have been affected by international business in Saudi Arabia. When Greece had clashed with Saudi Arabia on arms sale. Greece had controversial arms deal with Saudi Arabia. The government planned to sell surplus missiles and bombs for worth $78.7m to Saudi Arabia. The government was accused by the opposition. The opposition of the government is under the headship of Syriza party and Syriza is the leftist political party. According to the opposition, the government did not follow the international agreement’s proper procedure. Government’s morality was asked by the opposition to this agreement. The government was forced to scrap the deal. Parliament of Greece has shown reservation that Prime Minister’s leftwing government can be destabilized due to this arms sale conflict. (Hope, 2017).
If all the above discussion is summarized than, it is evident that managing cross-cultural risk is essential for performing business internationally. The difference in culture can cause huge risk for any organization and it will have the impact on its revenue generation. That is why before entering into another country a complete cultural analysis should be performed so that the company can provide its products or services according to the traditions and cultures of local people. Many organizations today adopt localization strategy so that they can meet the demands and preferences of local people and through this, they tackle the cross-cultural risk. This problem may be solved by making strict rules in every organization related to the people ethics and behaviour. They should be respected hardly to follow that specific rules. The organization should keep meeting his employees have a very different culture so that if they have any problem that can be resolved. Organizations should make their employees comfortable with no discussions on the cultures and rituals of the persons. An organization cannot be able to give new opportunities to persons other than employees if they have a cultural biasing issue in their office. New employees cannot adjust themselves in such atmosphere, which leads to target failure.
You may also study:
- Chibba, M. (2015). Contemporary perspectives on international business and culture. International Journal of Business and Globalisation, Inderscience Enterprises Ltd, vol. 14(4), 208-419.
- Clark, D. (2014, June 19). How To Succeed In A Cross-Cultural Workplace. Retrieved from https://www.forbes.com/sites/dorieclark/2014/06/19/how-to-succeed-in-a-cross-cultural-workplace/#557a4b24c972
- Hope, K. (2017, November 27). Greeks clash over Saudi Arabia arms sale. Retrieved from https://www.ft.com/content/e600fb7c-d28a-11e7-a303-9060cb1e5f44
- Khalifah, M. A. (2013). International Business & Cultural Risk. Glasgow Caledonian University.
- Li, H. (2012, June 2). Business in Saudi Arabia: Culture Differences to Watch for. Retrieved from https://www.ibtimes.com/business-saudi-arabia-culture-differences-watch-406450
- López-Duarte, C., Vidal-Suárez, M. M., & Reis, N. R. (2016). Understanding the relevance of national culture in international business research: a quantitative analysis. Scientometrics, Springer; Akadémiai Kiadó, vol. 108(3), 1553-1590.
- Trapp, R. (2014, June 30). Why Successful Leaders Acknowledge Cultural Differences. Retrieved from https://www.forbes.com/sites/rogertrapp/2014/06/30/why-successful-leaders-acknowledge-cultural-differences/#2a7a299e661f
- wellings, c. (2013, August 28). Doing business in Saudi Arabia – cultural considerations for HR. Retrieved from https://www.hrzone.com/perform/business/doing-business-in-saudi-arabia-cultural-considerations-for-hr
- Zwilling, M. (2016, April 7). 6 Key Risk Factors When Scaling A Business To Global. Retrieved from https://www.forbes.com/sites/martinzwilling/2016/04/07/6-key-risk-factors-when-scaling-a-business-to-global/#1a20c32a89c3