Impact of Culture on International Business

Define Culture from an International Perspective

Culture is the collective programming of the human mind, which is used to differentiate members of one category of people from the other group from another category (Hoftede, 1997).

Is National Culture Important for Companies going International?

Why?

National culture is crucial for companies going international; this is because international companies can have employees from different national cultures, and the national culture of such employees might shape the way they expect the company should be run and the relations between leaders and their followers (Shapiro, 1996). The differences in opinions of employees from different nationalities might cause problems for the international company’s management.

The issue of differences in national cultures affecting the effectiveness of lead foreign employees, as well as management of foreign stakeholders, might also create management challenges to companies employing people from different national cultures (Shapiro, 1996). Therefore, for a company that wants to go international, understanding the difference in the national culture of its employees helps a company to generate a unifying culture that will streamline employees’ behavior and streamline management problems related to cultural differences. However, the choice of an international company to adopt a unifying culture depends on the company’s business strategies.

How can Culture Impact a Company?

The impacts of culture on a company depend on whether the culture is strong or weak. In the case of a strong culture, it motivates employees of a company to put more of their time at work, which increases the company’s productivity. Employees also enjoy their work and are more committed to a company’s long-term goals; this is because of the favorable working environment set by strong company culture (Geertz, 2006). A strong culture that considers employees as important to the company makes employees respond positively to the objectives and goals of the company, and this gives the company a better chance to achieve its goals.

What are the Main Challenges of Global Financial Management?

Cooperation is a major challenge facing global financial management. The global financial market involves a network of entities from government agencies, third-party monitors, as well as private corporations (Shapiro, 1996). Cooperation from all these agencies is essential for the success of global financial management. However, it is difficult to achieve this because each agency works towards a different end result.

Price management risk is another challenge facing managers who work in future markets. In a future market, parties agree to exchange goods at a certain price, and the goods are delivered in the future (Shapiro, 1996). Sometimes the prices of goods can increase, favoring the buyer and against the seller. This means that the one who predicts the right benefits and the one who predicts wrongly loses.

Disaster risk management is a challenge faced by global financial managers of industries in disaster-prone regions (Shapiro, 1996). Managers of such industries always keep aside funds to cover for losses incurred during disasters.

What is Foreign Exchange Risk Management? Is it Important for Companies going International? Why?

Exchange rate risk management refers to the strategies put in place by an international company to shield the company from the effects caused by unexpected changes in the exchange rate (Allen, 2003). Foreign exchange risk management is crucial for companies going international because it helps a company that is going internationally to determine the nature of present risk exposure, strategies that can be employed to minimize risk, and instruments available to the company for use to minimize the risks (Allen, 2003). The strategies and instruments used by the company to minimize risks are determined by the level of exchange rate risk of a company.

Reference List

Allen, S. (2003). Financial risk management: a practitioner’s guide to managing market and credit risk. New Jersey: John Wiley and Sons.

Geertz, C. (2006). Interpretation of culture. New York: Basic books.

Hoftede, G. (1997). Cultures and organizations: software of the mind. New York: Mcgraw-Hill.

Shapiro, A. (1996). Multinational financial management, 5th Edition. New Jersey: John Wiley and Sons.