Language Differences between Home and Host Country - Essay Example

How Language Differences between Home and Host Country can Influence MNC’s Entry Mode Introduction Multinational Corporations (MNCs) engage in international business in order to exploit their firm specific advantages and location advantages of foreign countries. Depending on the ownership, location and internalizing advantages, MNCs have to choose an appropriate entry mode from the various options available. Differences in languages between host country and home country increase the liability of foreignness and the costs and uncertainties of international transactions (Davis, 2000). Therefore, MNCs need to deal with multiple languages and the associated administrative and transaction costs with language differences. However, these language barriers can have different effects on different entry modes. The extent of MNCs exposure to language barrier will therefore depend on their entry mode. Moreover, there are various literature examining the effect of formal institutions and informal institutions (mainly language) on entry mode choice. Although the effect of language on entry mode choice is relatively understudied, there exist studies that examine the impact of language on some of the entry modes separately. The rising level of globalization has become of immense importance currently. More and more firms commence to look to foreign lands to increase their businesses as the globe becomes more and more interwoven. To manage such operations across foreign boundaries has become of the biggest issues for international firms today (Egger, 2012). The international economy has formulated a business framework which needs firms to look past the traditional reasoning of the home market, and commence instead observing at businesses from a foreign global view. The technique a firm venture from their market to new foreign markets geographically is of immense importance for how best the firm attains its goals with their various businesses. Factors Considered By International Corporations before Entering a New Market Small and average sized companies, which have taken their choice to internationalize, need to grow into foreign markets face the setback of deciding on the best structural framework. There are numerous factors, which encourage firms to commence their operations in foreign markets (Feely, 2003). The most common include the hope for economies of scale, the experience curve effects outcome from an expanded level of outputs, and the reality of the existence of markets which are beneficial in the international markets which is not present at home. It can be believed that the developing in dissemination of information, progress in travel conditions, decrease in tariff issues and others have made international markets to be more available and have given more meaningful chances for other firms in the home country to move to international heights (Goldberg, 2005). The aspect of going international refers to different environments, which enhance and enable the value added actions. It can be said that production and service industries and firms enter foreign markets for several motives. Some enter in an international country because markets at home are expanding much hastily. Since a high number of firms from around the globe enter the foreign market, companies require being more specific in order to sustain their level of being competitive in the foreign market (Grinblatt, 2001). The scenario today for home firms is not easy. There is an increased level of rivalry between home and foreign firms. This is one of the motives as to why companies must specialize and carry out business activities abroad if they need to grow and survive. A firm must keep in mind that developing economies are unique and vary from industrialized developed economies. This aspect becomes very crucial when it comes to entering the foreign country’s market since developing economies often don’t have a good working infrastructure and the population is far much poverty stricken and often use a huge portion of their income on food related activities (Harzing, 2008). The political and social factors also play a vital role when it comes to entering the foreign market. The subject of this issue can be elected since such issues are of immense interest to carry out investigation on. After some researches, a discovery was made that continents such as South America, for instance, are currently attracting a huge number of foreign investors (Harzing, 2011). How Language Affects the Conduction of Business Activities It can be stated that language differences can be well understood for their effect on habits, and social actions. Currently, it can be realized that this has a direct effect on firms planning, hierarchical links and how firms do negotiate with others in the international setting. The way another country uses its negotiation guide stands to be different from other countries and hence hard to copy (Hejazi, 2011). For instance, the real negotiations between a host and a foreign country may take a number of times, and sometimes making the duration to be extremely long since both need trust and loyalty in tackling the common issues accordingly. Because of certain new investments from foreign economies, the host country needs to become cautious and wary when making deals with foreign business firms. Bargaining is a segment of this negotiation process and results in the creation of trust and strong links. It can be seen that sometimes employment and linkages go hand in hand (Hinds, 2013). Below is an in-depth coverage of the factors in language that may affect business activities. First Impression And Duration Of Business Negotiations An inquiry from persons concerning different attributes when carrying out business was done from people in the continent of South America. The persons responded based on their own analysis that a firm has a firm belief that a mere handshake can be vital issues when approaching business, especially when the two parties meet. When carrying out negotiations on a face-to-face basis, the negotiation process may be done in a similar manner as in Europe (Carter, 2002). The only variation in South America is that such a process can take a longer duration of time. Judging by the respondents, this initial meeting may seem to be more vital in international countries and certain errors may be more complicated to adjust. The first impression is what will always remain with a person (Hutchinson, 2002). This cannot be the scenario for other nations, they may have a more wait and see behavior, but this may be a vital aspect when a host country negotiates with its foreign counterpart when the language difference aspect presents itself strongly during the negotiation process. Language In Relation To Client Value And Creating Clientele Relationship Language plays a critical role in the creation of client value and creating clientele relationship. The aspect of using language can also be one of the four critical elements involved in the promotion and vigorous advertisement strategies and a signifier, which influences consumer choices. Many firms currently rival with one another with varying level of intensities of promotion and advertising in both the home and foreign markets (Ku, 2010). Using a common language which most people in the host country relate to is the sole element in the promotion and advertisement of products and services, which gives a personal touch and affiliation in all other elements, symbolize success and acceptability of a specific brand. Promotion strategies are one of the most difficult decision fields, which foreign marketers encounter. The stiff competition from home-based firms at the client level is much more complicated to curb in foreign markets than in the home market. Foreign promotion and advertisement has generally been more sophisticated and crucial than home promotion where a firm knows its culture and language to perfection. Language aspect is hence crucial since it influences the company’s capability to remain in the foreign market. Thus advertisement and promotion of products can be sophisticated owing to the complexity of the markets with their varied setting such as multiple languages existing in that host country (Lopez, 2010). Therefore, one can be astonished when language plays a critical role, which can affect the foreign business. Language In Relation To Price Negotiations When it comes to matters regarding pricing, language can influence the negotiation by, for instance, not understanding which price can be accepted. If the country has a huge bargaining power, it can be a complex aspect. For instance, in Asia, price dumping can be taken and accepted, while in the USA this is impossible. In the USA, it would not be a good idea to fix the price too high at the start, since persons are not so acclimatized to bargaining as is the case for South America. Thus a company strives to know the local supplier requirements so that the uncertainty with buying becomes less and the price is the optimal price that will be accepted. To be able to implement this, the firm must comprehend the language and cultural background of the international country (Luo, 2006). Price negotiations can be more varied in South America than compared to where the MNC comes from, say Europe. It can be noted that in South America there happens to be lengthy discussions and the price bargaining is more complicated than in Europe (Melitzez, 2008). In South America, the stakes are kind oflower when compared to Europe. Because of South America’s high bargaining power, the price can be varied at the end from what it was at the start. This is something which European firms may not have knowledge about. How Language Differences between Home and Host Country can Influence MNC’s Entry Mode The foreign business, which a company opts to start, can experience some complications, which have disastrous and long-term effects on the achieving of success for the company. A poor decision of a new country minimizes on meaningful chances and raises the uncertainties for greater financial losses (Adsit, 1997). This in turn may result to loss of power and leadership over the international market. When carrying out foreign business it is of best interest to cater in the political, social and economic setting of that country. However, the language aspect is an even more vital factor. If the issues relating to such settings can ultimately be attained, the language difference factor can nonetheless have a profound effect on the firm’s future prospects if not infused in promotion strategies of its products in that foreign market (Arbelaez, 2000). It can be noted that firms, which want to be ahead of their rivals, require being knowledgeable of the home-country issues. By this it implies that firms cannot do away with the language and institutional differences. Moreover, it can be pointed out that a firm seeking foreign markets must take into consideration the issue of language differences before making a move to enter the foreign market. Such differences can be of language and also related to demand and religion to some extent (Brooks, 2008). It may be pretty easy to penetrate into a new foreign market if the firm may develop relationships in the new country. By attaining this, many setbacks can be minimized and entering will be much easier. Firms seem to have more achievement if they are entering to a foreign country, which has same language as their home country. Even if a firm seems to avail a once in a lifetime meaningful chances for the firm, it must take into consideration the uncertainties and complications which making entry into a foreign country and language implies (Ellis, 2000). If the firm sells goods, which require certain adjustments, the company can be forced to grasp more about the country’s language. This grasping can result in certain advantages, but these advantages may be out weighted by the expense that this knowledge is inclusive of. It can be sated that the firm’s market entry choices are one of the most vital matters prior to entering a foreign market (Kogut, 1988). Questions regarding to the type of foreign country to enter need immediate solutions before making further choices. The kind of entry mode a firm opts for can also be a critical factor. Recent research has shown that if there happens to be an immense language difference between the new market and firm’s home market, ventures, which can be done jointly, can then be preferred. This is because that if the firm comes and fuses with a domestic firm, the expense and efforts to understand the new market and language will be minimized. The level of experience and expertise that a company has also influences the decisions regarding to the entry perspective. Furthermore, language difference can influence the behavior of private managers and their staff as they make interactions with one another in the workplace. This affects even the manner in which workers observe a manager and his or her views. The anticipated traits can likely be related with language and cultural values of the foreign country. Certain languages are basic and others are sophisticated in terms of the number of formal tasks which managers and workers can be expected to carry out. In the scenario of big firms, they may tend to recruit similar kinds of persons globally, thus minimizing national variations (Hyde, 2000). Additionally, a firm with a stringent organizational framework would have a commanding effect on worker’s values, which would enhance the reduction of national effects. Markets all over the globe have commenced to become more cohesive because of technological progress and increased travelling to foreign countries. Firms which avail high quality, reduced price and standardized goods can win out over domestic firms which avail adaptive goods and charging them at high exorbitant prices (Mayrhofer, 2004). Most MNC firms commenced their foreign operations in countries having similar psychological and lingual traits to their country. The language distance phenomenon justifies this fact. If the firm commences carrying out its operations in a country similar to its home, previous experiences may be applied to the new foreign market. If the company attains success in one international country, it can also realize profits by doing a similar stunt in another foreign country. This trend has a motive underlying it (Osland, 2001). Moving farther away from home raises transactional and operational expenses and the opportunity that the market expertise can be meaningful will lower. If the firm slowly enters more foreign countries in an increasing circle far from its own market, the company creates new resources in the manner of learning and grasping certain issues such as language. There is also the aspect of international competition and how language differences play a big role in influencing this. It can be identified that there are three fields in which countries must stand out to benefit and maintain strong foreign trade and investing stands. The first one is that the economy must strive to maintain economic competition in the market. Second, it must affect regulations of trade so that the other countries open their borders for their products and services that they offer, being capable to purchase from as well as sell to that specific foreign country. The third field is that its business must create a worldwide platform which permits them to do their operations as multinational companies, not just as domestic companies doing business abroad (Rodgers, 1998). Moreover, it is evident that the best manner firms can attain competitive advantage is through innovation which comes been with infusing language to promote and control the level of prevailing competition in the foreign market. Language has specific levels. Companies cannot avoid observing that the business framework is changing in various ways, as well as the lingual setting that is one of the most complex fields for most foreign markets. In order to comprehend and have an impact on clients’ needs and other requirements, foreign firms must grasp the different languages and culture. Language can be defined in various ways making a reflection of the uniqueness of language groups that can be analyzed (Slater, 1968). The company must comprehend various language symbols and signals. Such symbols and signals are inclusive of language, religion and art whose symbolism and implications formulate a unique blueprint for a specific foreign country’s market. Conclusion In summary, the aspect of performing and acquiring success in foreign countries, and the capability of the firm to carry out its business in accordance with the language of a client, is paramount to any entry of a multinational company in the foreign markets. There are some dimensions of a foreign language that can portray them in a negotiation scenario (Hejazi, 2011). Foreign partners strive to speak languages new to them, but also have a leaning of reasoning in varying ways and have varied agenda. For instance, some persons may prefer to handle their business meetings in a more formal approach, and would be offended to be referred to by their second name. Some may believe that the usage of an informal way may symbolize that the foreign partners can be trustworthy. Two persons from different language settings can not easily understand each other when negotiating without a previous understanding of one another’s presumptions and ethics. Language benefits can hence emanate from varying ways of observing persons in this world (Goldberg, 2005). To have a competitive edge over them, one must first grasp their ways and culture. Doing so is critical to the overall and long-term success of any MNC desiring to make an entry into foreign markets to expand their growing business prospects. References Arbelaez, H. (2000). 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