CULTURAL ENVIRONMENT FOR INTERNATIONAL BUSINESS
Table of Contents
Cultural and cross cultural risks on international business
Culture effect on international business
In today’s world of cultural values, international business is greatly harmed in case of violation of values of the host country. In recent years, Saudi Arabia has enhanced its financial and regulatory companies to adopt new business strategies for achieving business goal. While managing their business goals, it is important to expand and diversify the business in order to earn high profits. This international trade builds economic growth, technological process, efficiency and most importantly consumer culture. However, it has been seen while creating international business, cross cultural competencies occur which greatly affects the cultural values of any business objective. In this assignment, cultural risks will be discussed which greatly affected a top company of Saudi Arabia named SABIC.
International companies have continued to expand across borders which helped the company to become increasingly more accessible to work internationally. It was reported that, employees of SABIC, a leading business typhoon has struck on a non-Saudi problem due to cultural issues (Hall, 2013). The cultural risk that has been faced by the company is the failing to adapt the international business models in global context. The employees of an organization have faced many risks related to identifying the difference between regional and sub cultural norms. However, they protested a strike as they are incapable of understanding the local business practices of the company violating their law. According to the company’s Code of Ethics, it entrusts a compliance program which integrates a culture of compliance to daily business life. However, the code guides employee’s behaviour while working with colleagues, customers, government official and suppliers (sabic.com, 2019). The Code of Ethics allows the peoples of nation to prohibit such cultural values that are not purely Islamic. Whereas, the code of ethics of UK doesn’t allow such compliance and while doing any international business, they are at a risk of failing the business regulations of Saudi Arabia.
Based on the views of Samaha et al. (2014), new opportunities are also not identified due to these cultural barriers. There is example of SABIC Company who has overlooked to catch up with the foreign markets. Other companies have withdrawn oneself from the markets due to damaging relationship. The most important risk of cultural and cross cultural competencies arises when both the parties fail to understand local legal and ethical issues of an organization. As per the views of Mazaheri (2013), the companies that have failed to recognize the cultural diversity of a new market are in a more risk of missing vital consumer segments. International business faces a high potential risk on not coping with diversity management and Saudi Arabia is that place where diversity issues are largely seen. Cultural risks however create a risk on stakeholder conflict due to which they couldn’t share their own ideas in expanding the market globally. Thus, cultural risks possess a genuine hazard if the organization does not manage correctly. Potential misunderstandings can be a greatest risk while managing cultural management. Thus, every company will have a different culture because of the difference in mission and vision of the organization.
Cross cultural and multinational teams are becoming increasingly concentrated nowadays. It was reported that, culture greatly affects the prevailing cultural values of an organization and this is the same case for SABIC (Reynolds, 2017). The cultural values of Arabia are most importantly defined by Islamic heritage. Due to these reason, the Saudi society have greatly accepted the norms and traditions while adapting to the modernized cultural values. A case example of such negotiation was the destruction of Arabia culture due to the international business of SABIC group. As per the views of Mazaheri (2013), conflicts arise when there is a cross cultural competency that greatly affects while trading with international business. The employees of the company had many issues with the primary local people of Saudi. Problems rose as the employees were not following their tradition and disarming the cultural values of the organization. This rose to the discrimination of gender equality where different societies were adapted with different norms. It also had a large impact on individual identity, where the communication of person differed due to their own personality traits.
However, these cross cultural risks also affected social class in which a person was borne and groomed into. Racial discrimination was hampered largely among the cultural value of the country. According to Samaha et al. (2014), the cultural value of f Saudi Arabia had a major aspect with racial identity which was a vast drawback of the SABIC Company. It was however reported that due to cross cultural competencies, the socialist workers of the company stopped the production of Chemicals Geleen plant. This was however accounted for Riyadh-based petrochemicals behemoth. A monarchical system will however affect the cultural norms of the country due to the cross cultural risk of the company. Solving such monarchical system will help to solve certain kinds of commitment problems. Business environment reforms damaged the values of country in discriminating and violating the cultural laws of the Saudi. The factors should be understood that strongly affects cross cultural communication have to be removed by the company pondering on the values of the company. These will however help to create a more productive workforce in the organization. It will be helpful not only for a single organization but for a multi organization and thus eliminating the cultural differences among society by following the cultural values of the country.
Based on the above study, it can be concluded that cultural values often place a strong organization in a country like Saudi Arabia where ethical and cultural norms stands at strategic positions. It was seen in the above assignment how a company like SABIC created chaos and nuisances among the cultural norms of the country. There are however various ways by which these cross cultural risks can be mitigated mostly by effective communication. In accordance with these, communication and traditional values of the country’s culture was the most important drawback which led to affecting the values of the company.
Hall., C. (2013). Saudi Arabia’s Sabic facing un-Saudi problems Financial Times [online] Retrieved on 29 January 2019. Retrieved from https://www.ft.com/content/e2c59917-f8e8-3856-ae65-213f3a6f0dce
Mazaheri, N. (2013). The Saudi monarchy and economic familism in an era of business environment reforms. Business and Politics, 15(3), 295-321. Retrieved on 27 January 2019. Retrieved from https://www.cambridge.org/core/journals/business-and-politics/article/saudi-monarchy-and-economic-familism-in-an-era-of-business-environment-reforms/8039D0DC6EA01B08DB39BA8D72B013D8
Reynolds., K. (2017). How cultural differences impact international business in 2017 HULT BLOGS [online] Retrieved on 29 January, 2019. Retrieved from: https://www.hult.edu/blog/cultural-differences-impact-international-business/
Sabic.com (2019). About Sabic Sustainability Report Homepage [online] Retrieved on 28 January, 2019. Retrieved from: https://www.sabic.com/assets/en/Images/SABIC_Sustainability%20Report_2016_English_tcm1010-6149.pdf
Samaha, S. A., Beck, J. T., & Palmatier, R. W. (2014). The role of culture in international relationship marketing. Journal of Marketing, 78(5), 78-98. Retrieved on 31 January 2019. Retrieved from https://research-repository.griffith.edu.au/bitstream/handle/10072/337608/SamahaPUB2497.pdf?sequence=1&isAllowed=y
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