In the past two decades more and more countries of the world have considerably reduced tariffs and quotas and liberalized their foreign policies to allow free imports. Businesses have established not only marketing offices but also production units in foreign countries. The employees of multinational corporations belong to different religions, cultures and ethnicities. The way people greet each other, the importance given for time, the value attached to personal relationships and the emphasis on mutual trust are different in different cultures. The market for goods and services in various countries is vastly different depending on the local culture and value systems. These differences have significant influence on the way businesses can be successfully conducted in different parts of the world. It is in this context that it becomes imperative for business managers to understand the culture and value systems of the regions in which they want to establish their operations. They have to customize operational and marketing strategies to match the local requirements and also review them to accommodate changes.
Cultural differences across the world
Though culture has been defined in various ways by historians and anthropologists, it may be generally take to consist of material objects; ideas, values and attitudes; and normative or expected patterns of behavior shared by a society (“Culture and International Business: A Conceptual Approach,”p.20.). Historians tend to broadly classify world culture into eastern and western. Eastern culture in general was considered primitive and western culture was considered superior. However, with the emergence of Japan, Taiwan and China as world manufacturing hubs, much attention is being focused on the culture, values and ethics of these countries. It is now an accepted fact that the world is a rich mixture of hundreds of cultures and each culture has its unique characteristics and its own specific strengths. Multinational corporations are intentionally recruiting people from diverse backgrounds in order to draw upon the best talent from different cultures.
How people perceive the things around them depends very much on their culture. For Eskimos, the word “snow” has at least 10 variations. Likewise Zulus have 39 unique descriptions of color in the place of “green” (“Typical examples of cultural differences”, n.d.). Shaking head sideways may mean “no” in most countries, but it means “yes” in many parts of India. The “thumps up” sign cannot be used universally as it is a rude sexual sign in some Islamic cultures. Laughing does not always indicate happiness; in Japanese culture, it indicates confusion and embarrassment.
As described by Ghemawat and Reiche (n.d.), the Dutch social psychologist, Geert Hofstede, analyzed the responses of 116000 IBM employees across 50 cultures over the period 1967 to 1973 which revealed the cultural difference across four dimensions; power distance, individualism/collectivism, uncertainty avoidance, and masculinity/femininity. Power distance denotes how the society values differences in power and authority. Respect and obedience to higher levels in the hierarchy are predominant in high power distance cultures. Independence and importance of individual rights are given importance in individualistic societies, whereas collective achievement and loyalty to the group are more important in collectivist cultures. How the society deals with risky or ambiguous situations is denoted by uncertainty avoidance. Some groups prefer challenging and uncertain situations and people belonging to such cultures are likely to take up risky business ventures. Achievement, assertiveness, competition, material success and male dominance are characteristic of a masculine culture. Feminine culture is characterized by care for others, personal relationships, quality of life and lack of distinctive gender roles. Though Hofstede’s analysis is quite old and does not take all factors into account, it certainly gives an idea of the cultural differences existing among various countries.
Cultural differences between India and United States of America
Let us now examine the differences in cultures between India and the United States of America and also analyze how these affect the conduct of business in these countries. The Indian culture has evolved gradually over millenniums and many thinkers have contributed to it (Sengupta). Upanishads, Vedas and Bhagavat Gita have been part of the Indian culture from unknown times. Invasion by Moslem rulers and colonization by the British have contributed to many changes in the Indian culture. In fact the Indian culture harbors within itself many different cultures. Many world religions and cultures peacefully co-exist within the Indian culture. Christmas, Eid, Durga Pooja and Onam are all celebrated with equal fervor. The underlying philosophy of Indian culture is ‘to live and let live.’ Scientific thinking does not come in the way of religious rituals. Even the space scientists offer their prayers to the Sun and the planets. The philosophic attitude towards life gives the Indians strength to survive through poverty and calamities. This is in contrast to the highly materialistic American culture. Most Indians have limited wants and limited aspirations, in contrast to the highly competitive spirit of the average American. Individual achievement and innovation are highly valued in the American society. Family and societal values are more important than individual success in India. The family ties are generally stronger in India and marriages are for life. There is a lot of give and take to save relationships. Individual privacy is very much valued in America, but in India, all personal affairs are known to members of the family as well as the neighbors. In the Indian society, the status a person enjoys in society largely depends upon the family in which he is born. The caste system is prevalent in most parts of India even now. The stamp of caste follows a person, however successful he may be. In America, a person is respected and appreciated for what he has achieved in life irrespective of caste, creed or ethnicity.
For the Americans, time is money and they become impatient if they are kept waiting. Indians are not very good at keeping time for appointments. They may also spend a lot of time in treating the guests to Indian specialties. Sometimes the host may even feel upset if the offerings are not accepted. This is consistent with the Indian philosophy, “athithi devo bhava” (guest is god). Indians tend to invest in long-term relationships rather than in one time business deals. The concept of ‘win-win’ relationships is part of the Indian culture. Americans tend to apportion the time depending on the value of the business deal.
Effect of cultural differences on the conduct of business
The study of ethical code of conduct of the top fifty public companies in the US and India shows how the cultural differences influence the framing of ethical business practices. Indian companies tend to apply the code of conduct to senior management only, consistent with the hierarchical structure where more power is vested with the boss. American companies apply the code of conduct to all employees as the authority and responsibility are decentralized. In India, employees at the lower level are not expected to report violation of rules by their colleagues, but in America anonymous reporting is generally provided for in the code of conduct. However, there are many commonalities which provide for good business understanding. AS LeFebvre (2011) points out, confidentiality of data, protection of company assets and observance of rules are valued in the business communities of both countries. When it comes to personal accountability, only top levels of management can be relied upon in India.
An American business man has to be very patient when he deals with his Indian counterpart. He should be prepared for delayed appointments, unscheduled breaks and extended time limits. Most Indian companies may not respond promptly to business enquiries. When they are not interested in any product or proposition, they do not immediately inform so. Persistent efforts may in fact change the decision. Indians take time for negotiations. Many rounds of talks may be required before arriving at an agreement. During meetings Indians may use mobile phones, which should not be taken as disrespectful (Agarwal). While the Americans would like to explicitly state all minute details in the agreement, Indians may leave room for contextual interpretations and expect additional features for improving the customer experience. Mutual trust and understanding is considered more important than written agreements in many cultures.
The body language and gestures used in interpersonal communication play an important part in the success of negotiations. Though Indians are used to shaking hands as a form of greeting, one should be cautious while shaking hands with ladies. Though it may be taken in the right spirit in elite circles, by and large, the average Indian woman prefers to be greeted with folded hands. Touching ladies in any way is treated as bad manners. According to Meyer, Meyer and Murphy (2006), The distance which people tend to keep when facing each other varies from culture to culture. This distance also indicates the degree of formality or intimacy (p.5).
While setting up a business in India, an American company has to make allowances for the differences in work culture. It takes quite a big effort to implement punctuality. People find various excuses like heavy rain, traffic jam, missing the train or bus etc. People also tend to work unhurriedly and take extended lunch and tea breaks. Things like subsidized food, free gifts on festive occasions, insurance, housing schemes etc. are important for the Indian workforce. It is not usual to retrench permanent employees in India. Though, as per employment conditions, an employee can be retrenched after the notice period, this happens only in IT companies following the American culture. Promotions are generally based on seniority; unless it can be proved that the performance has been extremely bad. An average performer also expects to be promoted after the qualifying service has been put in.
Deadlines have to be planned with sufficient cushions. Invariably, there will be requests for extensions. Right from positioning of raw materials to dispatch of finished goods delays have to be anticipated. When the material is delivered in time, the customer is surprised and wants that the dispatch be delayed, because payment is not ready. A lot of importance is given to religious and cultural events. Indians expect paid holidays on such occasions. Marriages and religious functions in the family are occasions for the employees to take leave and celebrate. They may also invite their colleagues and senior officers on such occasions. In short there will be plenty of unplanned disruptions and the people responsible for keeping commitments should be well aware of them.
Indians have the attitude of ‘doing their best and leaving the rest to god’. For the American, however, nothing should be left to chance or god. Each individual wants to ensure that his responsibility is discharged perfectly. As Rahul (2011) purports, Americans consciously try to set right the things around them which they feel are wrong. Indians try to live with them in the hope that things will be fine in the long run. Probably this necessitates the use of more supervision in the Indian context. Constant reviews and checks are generally conducted by Indian business concerns to ensure that projects are progressing as planned. Traditionally rich Indian households have many servants to assist in the various chores. Likewise the Indian managers have quite a number of office staff to assist them.
Diversity in Indian culture
The Indian culture is in itself a combination of many cultures. There are regional variations in the cultural practices throughout India. The clothing styles, food habits and festivals are different in different parts of India. The southern states use much more spices, whereas the northern states use milk and milk products and more of sweets in their diet. People in the cities enjoy all types of food including Arabian, Chinese and European. So India is a huge market for goods and services. American firms viewing India as a prospective market should take note of the consumer preferences. Unlike in America, moderately priced goods will be more popular in India among the middle class. According to Hume (2012), in India, it is possible to appoint drivers for cars at modest wage. So cars for the Indian market should take this also into account. There are many Indians who can speak perfect English, have polished manners and are easy to deal with, just like Americans. However, the vast majority of the population needs careful handling. The southern part of India is populated by more educated people and consumer preferences there are different from those of the northern part.
Foreign businessmen who may have to settle down in India for long duration have to take note of the varying food habits. A considerable percentage of the population is vegetarian. While many Indians consider drinking as a bad habit to be totally avoided, some consider social drinking as acceptable. Alcoholic beverages are not generally served with meals as a matter of practice. Indians are generally hospitable and eating meals with them is a good way of building relationship. It is also a good idea to take part in their festivals and be appreciative of their culture. To the scientific and questioning mind of the westerner, the rituals may look ridiculous, but it is best not to make any comment about it. According to Zimmermann (2015), the multitude of languages, food varieties, art, architecture and religious rituals form an integral part of the Indian culture, and understanding and appreciating it, is fundamental to business success.
Culture and management style
The local culture influences to a large extent, the management style followed in a country. Traditionally, Indian companies follow the hierarchical system. The power is concentrated with the boss. Even if the boss considers the opinion of the senior managers of the company, the final decision is his. The Indians are accustomed to being ruled by kings and implicit obedience to higher authorities is a part of the culture. Even today, large manufacturing companies employing labor in considerable strength follow the traditional hierarchical structure. Clear work instructions are given at all levels, so that there is no ambiguity. The system depends on a high level of supervision for the success of the operations.
However, with cross-cultural interactions, visible changes have taken place in the management styles in India. Modern businesses are going for flatter structures. With improved education and skill acquisition by the employees, a more collaborative and engaging work environment is preferred. In the BPO and IT sectors the work is managed by teams rather than by individuals, just like in similar American companies.
Some good aspects of Indian management can, however are worthy of emulation. Treating the employees like family is one of them. Firing is not an easy option in such a relationship. Being flexible, the managers are not perturbed by unexpected business setbacks. Cost over-runs, midstream change of plans and delayed execution are all taken as part of the game and do not frustrate the individuals concerned. As Anandkumar (2012) points out, many top Indian companies have ventured into areas far removed from their core competencies and still have been highly successful. This goes to show that the Indian style of management has some worth.
Globalization and its effects
Since the 1990s, India has adopted a policy of liberalization, i.e., gradual removal of restrictions on trade existing in the form of quotas and tariffs. There has also been increased private participation in core businesses. Multinational companies have opened their branches in India. Likewise Indian companies have also set up units in many foreign countries. The result of this cross border migration of business has been a sea change in the corporate culture of Indian business. Many Indian managers have internalized the professionalism and timeliness of American companies. The revolution in internet communication technology has made it possible for American companies to outsource many of their software and customer interaction work to the Indians directly or through Indian partners. Indian software companies are serving many clients all over the world. This has created an affluent middle class and consequently a huge market for new products and services. While the youth may adhere to their core cultural values in the privacy of their homes, they would like to wear fashionable branded clothing and eat a variety of foods from all over the world. There is also a demand for modern gadgets. Since the Chinese companies manage to supply gadgets with excellent features at budgetary prices, the market for American goods is limited to branded clothing and food chains. However, a word of caution for Mc Donald’s and Kentucky Fried Chicken; there are many strict vegetarians and non beef- eaters among the Indian population. So they better do some homework and label their products as to their contents. It is also better to avoid ingredients which may offend the religious sensitivities of some sections of the society.
Dealing with diversity
Typically the workforce in India will comprise of Hindus, Muslims, Christians and Sikhs with their unique religious beliefs and customs. Added to this people from the Southern states –Malayalees, Tamilians and Kannadigas bring with them their regional flavor. It takes a lot of understanding and patience to treat all of them impartially and to respect their regional and religious preferences. But once this is achieved, this diverse work force will prove to be an asset and provide for an innovative environment. Together, they can build most optimal relationships with suppliers, customers, local society and the legal and regulatory mechanisms for the smooth running of business.
In the post liberalization era, India is one of the fastest growing economies of the world. While the GDPs of the western countries are stagnating, India’s GDP is expected to grow by 7.6% this year and zoom to 7.7% in 2016, overtaking China (“India's economic growth to surpass China's in 2015-16: UN report”, n.d.). This presents tremendous opportunities for doing business in India. There are many commonalities between USA and India, both having been colonies of the British Empire. Though there are many spoken languages, it is quite easy to find someone who is fairly conversant in the English language. The business hierarchies are also common in America. Most of the bureaucratic systems in place in India date back to the colonial days and hence familiar to the Americans also. However, the American businessman should be patient enough to put up with the general disregard for keeping time and the hurdles and delays due to bureaucracy. Developing a long term win-win relationship based on mutual respect and trust is utmost essential for making loyal customers and good business partners.
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