CULTURAL DIFFERENCES AND MULTINATIONAL BUSINESS

ByPankaj Ghemawat and Sebastian Reiche[10]

The analogy of an iceberg is useful to conceptualize culture as consisting of different layers. Certain aspects of a culture are more visible, just like the tip of an iceberg. This manifest culture includes observed elements such as behaviors, language, music and food. A deeper understanding of a culture only develops by looking at the submerged tip of the iceberg. This deeper layer consists of expressed values that reflect how cultural members explain the manifest culture. Finally, the very bottom of the iceberg consists of basic and taken-for-granted assumptions which form the foundations of each culture. It is these basic assumptions that provide the ultimate meaning to the expressed values and behaviors. For example, in many Asian cultures it is considered rude not to carefully study a business card that is presented to you because business cards reflect a person’s professional identity, title and social status. Failing to study the business card is therefore a sign of disrespect towards that person. In other words, the ritual of exchanging business cards (a behavior) can be explained by the deeper-seated meaning that is associated with business cards in this particular context (expressed values). The expressed values, in turn, can only be fully understood by taking into account the underlying importance of respect towards seniority and status in that culture (basic assumptions).

Cultural differences remain persistent and present an array of challenges for multinational companies. Firms that manage adaptation effectively are able to achieve congruence in the various cultures where they operate while extending their main sources of advantage across borders, and in some cases even making cultural diversity itself a source of advantage. While this note has emphasized cultural differences, which are often underappreciated, it’s equally important to take note of cultural similarities. High and low power distance cultures, for example, both reflect responses to common challenges around how human beings should properly interact with each other in the face of inevitable differences in the power they hold in particular contexts. In managing adaptation, as well as more broadly, there’s also a great deal to be gained by focusing on what unites us rather than what divides us.