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1. Cultural differences
One of the most important factors of the environment are cultural differences. Each culture was formed and developed its own way. Every culture includes a complex set of values. Each value generates a set of beliefs, expectations and customs, the collection of which is called a system of values. In other words, every culture has its own system of values. Differences between cultures are manifested in the style of everyday life, do not coincide in settings on the power, value of work, the role of women in society, willingness to take risks and even the color preferences. (Hodgetts, 1997, p 95)
The value system has a direct impact on communication, ways of doing things, the possibility distribution of goods or services offered by each firm. However, no one knows what are the most important values in most cultures. It is not so easy to identify the values that are the foundation of most convictions, expectations and customs. But the study of habits is much easier. Therefore, before starting work in another country, managers should explore possible customs of the country, as well as the national language of the country, specific features of doing business and competition, and changes in behavior in interpersonal contacts, and also changes in the style and methods of business practices and leadership. (Hodgetts, 1991, p 96)
2. Language differences
Language – is the main component of culture, as well as the most important mean of communication. When doing business overseas, as a rule, one of the most pressing problems is the problem of communication. Of course, when doing business in another country, representatives of the firms use interpreters, but still it is hard to work with the interpreters. First, all translators are familiar with language, but do not know the special terminology. Similarly, there is a possibility that you will not sure you know what was said. Also translation may change the meaning of something, that can be translated incorrectly and, therefore, misunderstood. (Chen, 1997, p.78)
In different countries there may be a difference language of signs, when the same gestures have absolutely different meanings.
The ideal situation it would be training people of language of the target country, since then they will be able to better understand all the subtleties and liaise between the two countries.
3. Differences in time
This factor also has great influence on the activities of the company. First of all, it is possible when the companies are separated by several time zones. This creates a big problem in communication. The consequence is that the connection must be maintained by mail or through the use of electronic communication. Although at first glance it seems little inconvenience, yet temporary differences are some problem for communication between business partners or between the company and its subsidiaries firms.
4. Political conditions
Before starting work in another country, any company should take into account the type of political system in this country and its stability, because the domestic market of each country is influenced by the political situation. Social tensions could disrupt production or restrict sales. Political opposition to the government and regime change means an increase in uncertainty for the exporter or the foreign investor and may be doomed to failure. In addition, political stability affects the state of society in general. The consequence of an unstable political system is unemployment, poverty and other factors that may cause failure of the company. (Hodgetts, 1991, p 95)
Political factors should be assessed prior to capital investments or making any commitment to marketing. As new information and review the circumstances need to be adjusted forecasts.
The company, which has the intention to establish a subsidiary company or branch abroad, must first obtain the answers to the following questions:
– Impact of the typical external factors on political
situation in the target country;
– What are the power structures of the country (government,
– Political parties, other important groups);
– Evaluate the internal factors, including inter-regional and ethnic conflicts, economic factors affecting the stability of the political situation in the country. (Hodgetts, 1991, p 103)
5. Differences in the methods of doing business
These differences largely depend on the culture. If the managers of the company are not widely known cultural features of the target country, methods of doing business adopted it, then their work will be ineffective.
All differences should be studied as much as possible to avoid problems when the interaction with foreign partners.
6. Economic stability
Firms that operate at international level, should always analyze economic conditions and trends and to monitor the economies of those countries in which they are or intend to do business. Analysis of the economic environment improves the efficiency of decision-making and planning.
The most important factors influencing the conduct of affairs in the arc of the country, are wages, transportation costs, exchange rate, inflation and bank interest rates, taxation and the general level of economic development. There are also other factors related to international economic environment, although that are not a purely economic by nature: population, levels of literacy and professional training, quality and quantity of natural resources, the level of technology.
Some economic conditions, generally regarded as negative, for a particular company may be positive. To a large extent this depends on the company, what it produces and is it ready to invest in the economy of this country.
7. Nationalism
The problem of nationalism is to some extent due to the political aspect. Before you begin to do business in any country, try to answer the following questions: whether a country is strongly nationalistic, whether it is a religion that encourages and requires a strong nationalist spirit? (Hodgetts, 1991)
That is, you should decide whether the country’s nationalism do not lead to the failure of the organization. This option is possible because of the fact that highly nationalistic country may not wish to purchase goods created in a different country.
So, business goes far beyond national boundaries, involving in it’s scope an increasing number of people with different cultural outlook. In the result, cultural differences begin to play an increasing role in organizations and have stronger influence on the marginal efficiency of business. And that is why appear the cross-cultural problems in international business – the contradictions at work in the new social and cultural conditions, due to differences in thought patterns between groups of people. Formation of human thinking is influenced by knowledge, belief, art, morality, laws, customs and any other capabilities and habits acquired by the society in its development process.
So, cross-cultural management requires certain knowledge from managers, due to the globalization and internationalization of business.