As globalization takes a leading role in business development and entrepreneurship, cultural influences have become increasingly important. Investing in a new region presents companies with challenges in handling cultural changes.
It has been proven that cultural awareness affects a company’s capacity to penetrate a local market, build and manage business relations, execute successful transactions, and make sales. It also determines how FDIs, undertake marketing programs and engage in production and distribution. The East Asian region comprises different cultural values and identities that significantly affect business operations.
Before an FDI commences, it would be necessary to undertake serious cultural research on East Asian culture. Social interactions come into play here as they determine how well aspiring investors can connect with the locals to gain actionable insight to facilitate business establishments.
Language and communication are crucial before an FDI begins, and investors will need to demonstrate respect for East Asian cultural values by fostering good communication. Cultural distance, which implies how one country’s culture varies from another, determines the level of FDI. Governments are more likely to invest in regions with a less cultural distance.
After establishing a company in East Asia, companies will be faced with compliance issues in relation to the region’s cultural values. Urbanization is one of the key factors that will determine FDI operations in the area. It is worth noting that the East Asian region is characterized by rapid industrialization, urbanization, and rich entrepreneurial culture.
These values will make it easy for an FDI to operate within the region. Culture determines the relationships between business entities, and therefore n, FDI has to comply with the locals’ expectations of inter-corporation communication and interactions.
The people’s culture determines their consumption habits, from the products used to the mode of delivery. For instance, the concepts of “face” and “collectivism” dictate business interactions. An FDI will be expected to give face by maintaining dignity, a positive reputation, and pride.
Collectivism requires that businesses promote teamwork through consensual decision-making processes and information-sharing. The East Asian business culture has a slow decision-making tradition, and therefore, FDIs have to maintain the collectivist approach for successful operations in the region.
Culture affects various departments in a business, dictating how each functional element operates. A people’s culture influences strategic decision-making, management structures, and human resource management methods.
Similarly, relevant aspects such as communication, engagement, organizational structure, societal views of workplace designs, and reward systems are influenced by individual states’ cultures. With regard to human resource departments, national labor laws and industry standards concerning education and training play a crucial role in shaping FDI operations.
Lastly, organizational structures in terms of layout are shaped by people’s cultural values. This implies that businesses have to carefully consider the seating arrangements and general workplace physical structure to match the people’s expectations.
Cross-cultural differences in organizations can be analyzed in line with five major dimensions; identity, uncertainty, gender, power, and time. These dimensions, which were proposed by Hofstede, define business operations in regard to individual versus group values and paradigms of thinking.
In terms of importance, these dimensions vary in the extent to which they affect business operations. In my opinion, identity is the most important dimension, followed by power, uncertainty takes the third position, followed by time, and gender is the least essential in shaping the direction of MNE operations.