National Culture and Financial Systems - Essay Example

National Culture and Financial Systems Introduction This paper aims at examining the two practical elements of culture and business. The first part is about the impact of culture at the national, firm and personal level. The second part will undertake a comparison of the cultures of the United States of America and Germany. In doing this, the research will involve an examination of secondary sources to ascertain the importance of cultural awareness and its impact on the three levels of individuals and groups. This will include a critique of journals, books, articles and other authoritative theories and studies on the matter. The research will go further and apply important models in cultural analysis to examine the different cultures in the United States and Germany and how it affects the national, firm and personal behaviour of units in the two nations. Based on the findings of this two-part study, the writer will draw conclusions and make inferences on the subjects. This will include an examination of important elements and aspects of culture and its consequences on the national, firm and individual levels and specific implications for the two countries in quest. Culture “Culture is the full range of learned human behaviour patterns” (Taylor, 2009: 85). Culture refers to the patterns that are generally accepted in a given community. These behavioural patterns dictates what is right and what is wrong in the community. Hence, culture defines a framework of what is acceptable and what is not acceptable. Another definition put forward by the Center for Advanced Research on Language Acquisition states that “culture is a shared pattern of behaviours, interactions, cognitive constructs and affective understanding that are learned through a process of socialization” (2012). This means that culture relates to a number of preferences and patterns that are common in a community because the social structures of the community have accepted them and they transmit them to other people. Culture clearly defines the social system of a community and sets a clear framework for what is right and what is wrong. Organizations take inputs from the environment, process them into outputs which they offer to customers. Customers are products of the society. Hence, customers are influenced by the norms, values and culture of the society. Due to this, cultural analysis is an important aspect of business success. Thus, a business must undertake an analysis of culture in order to succeed. It can be demonstrated on the national, firm and individual level. Importance of Culture on the National Level Kwok and Tadesse argue that countries differ in the way their financial activities are organized and this has to do with the culture (2006). This means that the economy and its market structures are influenced severely by the culture and widely held values and believes. Kwok and Tadesse demonstrates this by stating that in a country where uncertainty avoidance is high, the banking system is very prominent. This gives important clues about how things work in a country. Culture influences law and law influences culture (Saguy and Stuart, 2008: Wildavsky and Sweldon, 2006). In other words, there is a strong relationship between the pervasive norms and laws in a country and the culture of the people. This is because laws evolve from morals and values of a society. Polleta (2008) identifies that culture influences strategic actions which leads to political grievance which leads to changes to rules of the nation. This means that when a business grasps the cultural system of a country, they can understand the patterns of relevant rules and regulations much easier. The cultural system in the national level gives an idea of how political and dominant institutions in a given nation operate and what pattern best defines the wider nation. Importance of Culture on the Firm Level The main areas within which culture and firms interact are strategic management, marketing and human resource management. This is because these three things are human relations functions and hence, there is the need to respect the values and norms of people and individuals in these three areas. One of the most prominent areas of cultural sensitivity is in the area of internationalization (Bartel, 2003). As a firm goes international, it would have to vary its systems and methods to survive and grow in foreign markets. “A detailed understanding of the cultural environment is of commercial importance, as many businesses have found to their cost” (Gilligan and Hird, 1986: 46). Fey and Denison (2003) argue that a business' success depends on its adaptability in a foreign cultural system. In their study, Fey and Denison examined 179 US based firms that expanded to Russia at the end of the Cold War. They identified that most of the firms had to change their mode of operations because the Russian culture was extremely different from the American culture. Due to this, most firms have to integrate cultural analysis in their strategic planning. Strategic planning involves the assessment of internal and external factors of an organization in order to position it [alongside all its units] for the best results over a long and sustained period of time (Johnson, Scholes and Whittington, 2008). In doing this, a firm will need to integrate all culturally related variables that affect the firm either directly or indirectly. In the area of human resource management and marketing, there are direct elements of culture that are applicable to ensure the success of a firm. “Culture has a strong impact on communication, products and their promotion” (Bode, 2007: 5). This means that a firm will have to get a good understanding of culturally accepted means of communication in order to promote understanding amongst its employees. Also, in marketing and production of products, cultural sensitive is needed to ensure that the values and norms of the society are integrated in the firm's actions. Thus, culture plays a significant role in the survival, growth and success of businesses that operate in different social environments. Importance of Culture on the Interpersonal/Individual Level. Hofstede states that culture is the software of the mind. He states that “every person carries within him or herself, patterns of thinking, feeling and potential actions which was was learned throughout their lifetime” (Hofstede, 1991: 4). In other words, culture defines the way people think and do things. “A problem that is regularly solved disappears from consciousness and becomes a basic assumption and underlying premise” (Tromenaars and Hampden-Turner, 1997: 7). This means that culture involves the generally accepted and normal ways of addressing people that is so widely accepted that individuals hardly think before they use these widely accepted methods. Thus, in order for a firm to have an individual connection with its customers, employees and other stakeholders, they will need to use these generally accepted approaches to address their issues. Otherwise, there will be no meaningful interaction between them. In other situations, there could be conflicts with the way individuals want things and this can affect their relationship with an entity. In order to get a strong bond and connection to people, there is the need for two important things (Doole and Lowe, 2010). The first is cultural empathy. This refers to the ability to place oneself in the position of another person who has a completely different cultural background. This allows people from different background to understand the patterns of thinking and decision making in a different culture (Doole and Lowe, 2010). This helps in interpersonal relationships. Also, there is the need for neutrality in dealing with individuals of different cultures. This allows a business or anyone from a different background to focus on the differences rather than the superiority of one culture over the other. This prevents conflicts and promotes cooperation and partnership across cultures. General Analysis of the USA & Germany Kluckholm and Strodbecks Value Terpstra and Sarathy: language, religion, value and attitudes, education, social organization, technology and material flow, law, politics and aesthetics usa is materalistics, edcuation- very important, edcuation is class driven- a status surrounds it, which families can give their kids the best eductaion money can but, america have the best business university- harvard, their culture stems around business, social organisation- male orientated, centralished gov. Segragrated society.sorry for springing this on you, but it is important i include this. Hofstede Model: USA & Germany Trompenaars Model: USA & Germany Conclusion References Bode, S. (2007) Importance of Culture Berlin: GRIN Verlag Bartell, M. (2003) “Internationalization of Universities: A University Culture-Based Framework” Higher Education Vol 45 (1) pp43 – 70 Center for Advanced Research on Language Acquisition (2012) What is Culture [Online] Available at: http://www.carla.umn.edu/culture/definitions.html Accessed: November 6, 2012. Doole, I and Lowe, R. (2010) International Marketing Strategy: Analysis, Development and Implementation Mason, OH: Cengage Fey, C. F. and Denison, D. R. (2003) “Organizational Culture and Effectiveness: Can American Theory be Applied to Russia?” Organizational Science Journal Vol 14 (6) pp686 – 706 Gilligan, C. and hind, M. (1986) International Marketing: Strategy and Management London: Taylor and Francis. Hofstede, G. (1991) Cultures and Organizations: Software of the Mind London: McGraw Hill. Johnson, G, Scholes, K and Whittington, R. (2008) Exploring Strategy London: Pearson Publishing. Kwok, C. and Tadesse, S. (2006) “National Culture and Financial Systems” Journal of International usiness Studies 37 pp227 – 247 Polletta, F. (2008) “Culture and Movements” Annals of the American Academy of Political and Social Science Vo 619 pp78 – 96 Saguy, A. C. and Stuart, F. (2008) “Culture and Law: Beyond a Paradigm of Cause and Effect” Annals of the American Academy of Political and Social Science Vol 619 pp149 – 164 Taylor, E. B. (2009) Culture New York: Forgotten Books. Trompenaars, F. and Hampden-Turner, C. (1997) Riding on the Waves of Culture: Understanding Cultural Diversity in Business London: Nicholas Bradley Wildavsky, A. B. and Sweldon, B. (2006) Cultural Analysis: Politics, Public Law and Administration New York: Transaction Books. Read More