National Culture Components
Numerous issues should be taken into consideration when realizing the differences between cultures, as each of them features a unique set of factors that determine its development. Although there are multiple approaches to categorization, most of them include the following phenomena: language, customs, rituals, behavior, religion, food, and art. All of the above-mentioned factors have historically been considered a crucial part of national identity. Espig et al. (2021) pinpoint that countries need to promote values that encourage innovation to facilitate changes in scenarios. In the 21st century, values continue to determine various aspects of everyday life, which in turn, has remarkable implications for business and politics.
Language, especially in Europe, has long been considered one of the critical cultural components that determine culture and nationality. Moreover, people around the world continue to consume most of the information in their native languages, which directly influences their life perspectives. Customs and rituals are believed to be crucial for the establishment of national identity, while religion provides a complex framework for values and various norms of behavior.
Hofstede’s Model of National Culture
Various cultures have different hierarchies of values, which can significantly influence the desirable strategies that should be applied while working with a multicultural team. Professor Geert Hofstede managed to develop one of the most efficient and comprehensive systems that seek to explain the origins of cultural differences. Moreover, the professor’s theory provides scales based on six dimensions, which allows for a vivid comparison between values in different cultures. The dimensions proposed by Geert Hofstede include the power distance index, individualism versus collectivism, masculinity versus femininity, uncertainty avoidance index, long-term operation versus short-term normative operation, and indulgence versus restraint. Although the framework is highly useful, it is crucial to realize that every society constantly changes.
International Business Implications of Economic Systems
Humans have always had different approaches concerning the most efficient production and distribution processes. Thus, the evolution of the traditional economic system took different directions. The market economic system is considered to be the most widespread in the world. It emphasizes the crucial role of minimal government intervention. The centrally planned economic system, on the contrary, relies on government decisions that direct most economic processes. The mixed economic system seeks to balance the two approaches. It is essential for every multinational to clearly distinguish between the systems, as it allows for the development and implementation of the most efficient strategy in each case. For instance, in some countries, government relations should be considered as important as orientation on customers’ tastes and innovation.
Entry Strategies for Multinational Companies
In the 21st century, there is a wide range of strategies that can be successfully applied when a company seeks to enter a new market. The most common options include export, licensing, franchising, partnering, and M&A. Each of the approaches does not provide a universal guideline that ensures success. Each case scenario should be analyzed separately, as products, companies, and markets may vary substantially. For instance, some strategies that rely on government relations, sharing technologies, and acquiring existing distribution channels may not be crucial for a strong brand with remarkable awareness that produces common consumer goods. Thus, structured exporting remains the default option for entering a new market, as companies and consumers can purchase products wholesale and independently develop efficient marketing and distribution channels.
Espig, A., Mazzini, I. T., Zimmermann, C., & de Carvalho, L. C. (2021). National culture and innovation: A multidimensional analysis. Innovation & Management Review.