Cultural issues and Performance of Irish Firms Abroad
Introduction
Globalization or going international is one of the aspects in human culture that has taken roots and is influential in almost every other aspect of life. Success and failure in businesses are among the most observable outcomes that are attributable to globalization hence the need to adopt globalization is in current time the most challenging task both to the individuals and organizations. The world in general has undergone a revolution in many aspects that have been experienced due to the advent of globalization.
A good number of firms have expanded the scope of their activities from their country of origin to setting up of operations abroad. However, proper understanding of the dynamics of countries where new operations are being established is vital for a business to succeed in meeting its overseas objectives. Among the components of this dynamism is culture. A profound understanding of global and international cultural issues has significant implications for international success and competitiveness. This essay critically examines this statement in relation to contemporary thinking and practice in the context of Irish firms setting up operations abroad.
The first part of this essay looks at cultural issues which are of significance to the success and competitiveness of firms on a global and international scale. The second part of the essay focuses on how these cultural issues have been significant to the success and competitiveness of firms in the context of a number of Irish firms such as AIB, Apex, Audit Diagnostics and Avego and using them as case studies to further examine this statement critically.
Cultural issues significant for international success
There are many cultural issues that are significant for the internal success of a business entity. One such cultural issue is the international orientation of cultures. As Dearl, Kimmel and Lopez (2008) observe, international competition among multinational companies has become more aggressive than ever before. In order for Irish firms to gain competitive advantage, they need to develop aspects that are in consideration of cultural issues that differ between different countries where they operate and Ireland which is their origin.
An important cultural aspect to be considered for firms is the creation of a sustainable balance between cultures that will give them an attractive cultural image across the globe. Development of an international orientation is what firms in countries should undertake in order to have a multinational face contrary to being just localized firms conducting overseas business (Dearl, Kimmel & Lopez, 2008). This will in turn enable firms to survive the cultural shock that is an inherent threat to the survival of businesses. Consideration of cultural issues existing in different countries is a vital in order for Irish firms to uphold a global image necessary for succeeding and remaining competitive in their respective industries.
Every society around the world has cultural elements that affect the internal success or failure of any business entity. According to Dearl, Kimmel & Lopez (2008), manifestation of such elements is through education, values and attitudes, social institutions, material elements, religion, verbal and non-verbal language, aesthetics, and manners and customs. These elements are contributed by individuals within the cultural framework and merge into collective cultural elements that are influential towards the success or failure of businesses. (Kimmel & Lopez, 2008). In adapting to such elements, companies which are international vary the elements according to how they affect the market. The effects of such elements on a firm’s success in international market and the competitive nature of international markets that Irish firms are bound to face as they expand their operations abroad. (Kimmel & Lopez, 2008)
Values and attitudes are important for firms as they seek to succeed and remain competitive internationally. Every part of a country has a unified set of values that are upheld by the people and this can be very influential on the success of a business. Companies whose key business operations in a foreign country are inconsistent with the general population of that country are not likely to succeed in realizing further growth and adapting to local conditions. In fact, this can be a source of conflicts between the business segment and the society from where the business is operating which can cause the business to fail. Sub cultural differences leads to variations in the general culture which includes where, when, what and how individuals purchase services and goods (Lamb, Hair & McDaniel, 2011). His in turn has a bearing on sales and therefore the general performance and growth of the business at the end of the day. Compared to companies which have incorporated the unique aspects of the values and attitudes of foreign companies, companies which have disregard for these values and attitudes are less likely to compete on a level playing field. For such companies that are not easily assimilated into the new culture, they are often seen as intruders into the new culture and everything is done to ensure that they do not survive.
Another determining aspect of culture towards the success or failure of business is the social and cultural institutions within the environment. These vary from country to country given that each country has a set of unique cultural institutions that differentiate it from another. Social institutions have a big role to play when it comes to ensuring that a country’s cultural ideals are strictly adhered to at the international, national and local levels. One of the Institutions that can be identified as a cultural institution is the government and its affiliated agencies. Firms whose activities are carried out contrary to national values and specific ethnic groups are faced with vehement opposition from not only specific foreign countries’ governments but also from certain groups of people. These groups of people may negatively react to a given company’s products and services whose uses are contrary to their cultures, values and attitudes. Depending on adherence to the specific cultural needs of social institutions, the success and competition offered by Irish firms will be strengthened. This is due to the advantage they will have compared to other foreign firms competing within the same market segment and industry.
Another aspect that has a big implication on foreign expansion by Irish firms is language which is applied either verbally or non-verbally. Ideally, language is one of the most basic components of human interaction which in turn bears a reflection on how a business can either be successful or not. Despite opportunities for business being evident, diversity of culture evident even within one country becomes a challenge itself that requires flexibility and adaptation to unique situations that require different responses. In quoting the Maps of world, Dearl, Kimmel and Lopez (2008), state that the culture of Brazil is comprised of cultures whose origins are American, Asian and European. Language is one of the ways through which responding to diverse cultures can be made possible. Using both verbal and non-verbal language techniques during business negotiations can be a significant factor in the success of such negotiations whose outcomes could be business deals that can propel the growth of Irish firms. With this observation it is vital to learn as many languages as possible in order to have Irish firms succeed on a global scene. Many multinational companies overcome this challenge in many ways. One such a way is employing as many people from the host country as possible in order to seal the communicative gap that can exist due to language barrier. Another way through which this problem is dealt with is having as many people working in behalf of the business in question learn the new language. This not only facilitates communication but also creates a sense of mutual connectivity among the people as people feel nice when their language is learnt and used by foreigners.
The importance of verbal Language lies in its application as a way of communication wherever there are business deals which are supposed to be made. A number of studies carried out show a relationship between securing new deals for business in markets abroad and a company’s ability to carry out business in the customer’s language (Dearl, Kimmel & Lopez, 2008). It is important that firms planning to negotiate for new business deals should be equipped in advance. The process of negotiation brings with it a clash of culture and the firm seeking to strike important deals will ensure that it brings into play understanding of the other party. Different partners from cultural backgrounds which differ need to have prior knowledge about each other’s values and assumptions (Dearl, Kimmel & Lopez, 2008).
In addition to the above, religion also plays an important role in determining the success and failure of a business. People have a tendency of sharing the same religion within certain groups that are demographically organized hence a great determinant on whether the business will succeed or not. For instance, a business that deals in selling pork and its products within an area that is full of Muslim believers might not sail through since they are not among the consumers of pork products given their business restrictions. In addition to this, the banking products that are offered in market need to be line with the teaching of the Koran. For instance there should be no interest charged and so the business must be keen on how to conduct such a business in order to ensure that losses are not unduly incurred.
Cultural issues performance of Irish firms abroad
Looking at the cultural issues that are at play, it is evident that the success and competitive nature of Irish firms is strongly influenced by these issues especially when these firms set up their operations abroad. This is expected of any firm that operates in another country other than its own. The cultural aspects of a country like Ireland are different in varying degrees from other countries where they intend to set up their operations. According to Tayeb (as cited in Dearl, Kimmel & Lopez, 2008), the relevance of the culture of other people increases when a firm expands its products and activities beyond its boundaries whereby foreigners’ tastes and value systems are different. With reference to this, a look at some case studies relating to Irish firms which have faced cultural issues beyond the country’s borders will help in understand this paper’s propositions. The countries evaluated include China and Poland.
One of the firms in Ireland which could come as a good case study in relation to this topic and which falls in the banking industry is the Allied Irish Banks. One of the most important accomplishments of this company was its penetration of the polish market for financial services. (Irish Times, 2004). As the year 2000 was ending, AIB was at position 12 in relation to size compared to other foreign investors with polish business interests (Irish Times, 2004). Due to the cultural differences between Poland and Ireland, there were challenges which were faced by AIB during its initial expansion efforts in Poland. Some of these challengers were language differences and social institutions that were at place at the time of AIB’s entry to the Polish financial market. (Irish Times, 2004). As indicated earlier such cultural aspects can be a great challenge to a firm such as the Allied Irish Banks which is an international business.
In the management of financial institutions in foreign markets, language is one of the most important factors to be considered. This is because there is a lot of interaction with the locals and without using a language that is commonly used by them; serious challenges are bound to be faced. In the words of the then CEO of the bank in 2000, Buckley, The Irish Times (2004) reports that the problem which is major in Poland is language and the application of a language that is different implies arriving at consensus, decisions, communication and thinking in ways which are different and concepts which are also different. It is evident that such a scenario can negatively affect kicking off of new operations by firms in foreign countries such as Poland. During translations of names of products, messages of promotion and slogans, care must be taken to avoid conveying messages which are wrong and come with incorrect implications (Lamb, Hair & McDaniel, 2011). The success of AIB can therefore be attributed to their efforts in overcoming this challenge. The staff of AIB proved an important instrument for AIB to overcome language as a cultural issue and other perspectives of culture arising from this.
Attempting to solve the cultural issue of language differences is what AIB attempted to do to ensure their success in Polish markets. The Irish Times (2004), reports that the staff of AIB were individuals who were well educated with ambition and willingness to learn. This is a significant mark towards the success of any firm. Therefore, the way staff ultimately handles clients and cultural gaps challenges despite the cultural differences that clients will encounter in such a foreign financial institution will be an issue that staff has a great contribution towards solving. Considering that language differences bring out other aspects of that are different from local Polish culture such as thinking ways, concepts, consensus reaching and communication of decision among others, coming up with solutions to this through the use of language becomes the best option. This is seen from AIB’s experience in Poland.
Some of the cultural restrictions that AIB faced in Poland relate to those which were in place as a historical and political feature that characterized Poland and the region where it lay. The banking culture of Poland placed several restrictions on the operation of AIB leading to a clash. One of the issues which were of concern was the application of management practices which had a western origin in country that was previously a communist (Irish Times, 2004).
In addition to this Poland had a system of banking which was bureaucratic contrary to the expectations of AIB (Irish Times, 2004). Systems that are seen as unduly bureaucratic by the people within the cultural frame that the business is operating in turn out to be a great impediment towards the growth and development of the business. Although the banking business can have the need to remain bureaucratic given the nature of risks inherent the business, there are ways through which this should be taken care of in order to ensure that it does not compromise the business opportunities that are available. In overcoming these underlying cultural issues, AIB had to take a number of initiatives to bridge this gap of cultural differences that was clearly evident at that moment of time. (Irish Times, 2004). Investment of AIB in Poland’s sector of banking is done on the basis of partnering of different managements which are Polish and Irish. This creates a multicultural platform that in turn translates into the success of the business.
In addition to AIB, there are several other companies based in Ireland which have attempted to penetrate Eastern markets in countries such as China. China has turned out to be a market for pharmaceutical products whose growth is regarded as the fastest (Starkey 2011). Due to the cultural gap that such companies have experienced in foreign countries; they have faced immense challenges and setbacks arising from culture. According to O’Donovan who is the managing director of Audit Diagnostics, it is important to close the gap in barriers which are legal, cultural and language through a person who is local (Merrigan, 2009). This is a firm whose initial entry in1999 subsequently led to a decade during which it experienced its market’s growth. The platform for communication in China in relation to market for pharmaceuticals is insufficient (Starkey 2011 p. 536). In this scenario, the role of the company’s initial efforts to bridge cultural gaps evidently was immense. This can justify why the Irish company was successful.
Another company that relates well to the scenario being examined is Apex. According to Bohan who jointly owns Apex with Hughes, putting up a business in China takes a lot of time and involves a lot of bureaucracy (Merrigan, 2009). In this respect, another cultural issue that is vital in China relates to the contacts that one should have in order for a business to kick off in an efficient and timely manner (Merrigan, 2009). According to Bohan, in order to realize progress in China there is a great need to depend on people known to someone and who these people know (Merrigan, 2009). Such a cultural aspect of maintaining networks in China is an important ingredient for ensuring vital initial steps towards the setting, up, establishment and success of Irish business enterprises and firms. Offices owned by Apex in Shanghai had in 2009 a staff of five people employed by the company and people who are Chinese and with experience in Irish companies dealing in funds were transferred to China (Merrigan, 2009). Finally, Avego is another firm based in China whose success in setting up was highly reliant on overcoming cultural issues through various measures. In order to secure license for business, Avego received advice from Dezan Shira which is a firm that deals in matters accounting and legal and whose Chinese staff involved in the negotiation process spoke good English (Merrigan, 2009).It is therefore clear that in these instances, bridging cultural gap in the process of establishing firms by these firms in China was made more possible by Chinese people who understood better the cultural environment in their country necessary for starting and maintaining a business.
In conclusion, it evident from the case studies of the Irish companies evaluated that firms need to understand global cultural issues in order to succeed and remain competitive on an international scale. Irish Firms such as AIB, Apex, Audit Diagnostics and Avego offer different services and their penetration of foreign markets was facilitated by trying to be aware of cultural issues that would have been a set back to their success. By doing so, such companies attain a competitive advantage over those firms which do not have a clear understanding of the cultural environment of the countries where they intend to set up their operations. This also ensures their success.
References
Dearl, H., Kimmel, V., & Lopez, P., Effecs of cultural differences in international business and price negotiations, Masters Thesis.Vaxjo University.
Irish Times, 2004, Allied Irish Banks in Poland: International expansion at AIB. Retrieved from http://www.business2000.ie
Lamb, C., Hair, J., & McDaniel, C., 2011. MKTG 2010-2011 Edition. Mason, OH: South Western Cengage Learning.
Merrigan, M., 2009, ‘Breaking into China: Ambitious Irish companies know that China should be on their radar map for expansion’, Business Plus, December, pp. 26-30.
Starkey, Y., 2011. China’s regulated pharmaceutical market. In: Edward, L., Fox, A., & Stonier, P., eds. Principles and practice of pharmaceutical medicine. Third ed. West Sussex: Blackwell Publishing, pp. 535-551.
