Globalization has broken down geographic boundaries making business operations within the globalized world easier. However, even with the broken boundaries, there are elements of human livelihood and interaction that remain intact despite the near obsolete geographic boundaries. Of the elements, culture is perhaps the most important as it defines and describes people from a particular section of the world. With globalization, supply chain management in logistics has also become an important element for businesses. Logistics is especially vital given its role in the integration of partners both up and down different channels to ensure delivery of superior value while lowering the cost within the entire channel (Krishnan, Smark& Pepper, 2013). However, given the interaction within logistics, which involves different companies, and naturally different people, from different cultural backgrounds, culture becomes a huge influencer on the type of interaction within the global platform among companies (Krishnan, Smark& Pepper, 2013). Specifically, culture has great influence upon operations of international companies, regardless of the industry within which the company operates. While some cultural factors are more influential, others are less, as this paper will discuss.
Perhaps the most important cultural factor with the greatest effect upon operation of an international logistics firm is the establishment of relationship with people and businesses within the international market. Business is about relationships and the relationships have to be established within a comfortable cultural environment for both parties. Harps (2013) informs that cultural differences have a significant impact in the establishment of the initial relationship. Even more important is the establishment of the initial relationship, which then determines not only the type of business relationship the two parties will have, but most importantly, whether the two parties will be able to have a business relationship at all.
The significance of relationships in the international business market is a well-documented factor. Geert Hofstede’s five dimensions of culture have foundation on the type of relationship acceptable within a particular society. Thus, while the logistics company’s business may be international in nature, it has bases in different countries, which have different cultures and approach to business, especially at the establishment of the business relationship. Hofstede’s dimensions of culture include power distance, uncertainty avoidance, individualism versus collectivism, masculinity verses femininity and time orientation (Krishnan, Smark& Pepper, 2013). A careful scrutiny of the dimensions of culture points to the significance of relationship across all the different dimensions. Power distance, for instance, explains the distribution of power within a society, and the degree of acceptance within the society of this distribution. A society with a high power distance tends to have bureaucracies, high regard for authority and strong leadership. In contrast, a society that has low power distance favors personal responsibility and autonomy (Provenmodels, 2015).
In the initial establishment of relationship, therefore, the company must look into the type of relationship accepted within a particular culture. Otherwise, it may be possible to make a blunder that not only costs a company business, but also the reputation of the company. According to Harps (2013), conducting business in Asia requires trust, patience and contact (face-to-face). Conversely, Americans do not pay more attention to trust, contact and face-to-face contact; they prefer over-the-phone deals with contracts and agreements being the most important elements of the business relationship (Harps, 2013). The type of cultural orientation in establishment of a business relation, consequently, determines the type of business relationship and approach a company take in its international operations. Establishing the right relationship and approach is thus the most important element of culture for any international operation, and specifically for a logistics company wishing to operate internationally.
Working style is yet another cultural factor to consider in international operations. Harps (2013) enthuses that giving job assignments that are compatible with local nationals goes a long way in getting desired results. In comparing working styles, America largely advocates for individualism and personal responsibility within the work environment. Raises, promotions and other benefits are all reliant on an individual’s performance at work. This is however not the case in other countries, especially in Asia. Japan for example believes in workgroups rather than in individual work and performance (Hudson, 2005). Hofstede’s dimensions of culture identify individualism versus collectivism as one of the dimensions. The dimension refers to the actions of individuals as either for self-interest or for the interest of the group. Relating this dimension to the working style of the specific country the company wants to operate helps in choosing the right approach to give employees in distribution of work and responsibility.
Approach to resolving conflicts is an element of culture, which although important, is not as significant as the initial establishment of relationship between the two business parties. Different cultures have different ways of resolving issues, where while some may resort to violence, others are more docile, resorting to decorum, the rule of law or use of intermediaries in resolving conflicts. In the US for example, Southerners are more inclined to use violence in settlement of scores and conflicts in comparison with the Northerners, who are more inclined to allow the rule of law (Cohen et al., 1996). The Southerners’ behavior is a characteristic that has a long history in slavery, poverty and inadequate, corrupt or unreachable law enforcement in the south, eventually birthing the culture of honor (Cohen et al., 1996). Although conflicts are bound to occur and be resolved in the workplace, they are not as important as the establishment of the initial relationship. It is, in fact, possible to avoid conflicts within the workplace and in the relationship between business partners, on the contrary, establishing the initial relationship remains integral in doing business and thus cannot be avoided. Finding the right approach and “politically correct” way of establishing a relationship is far more important.
Although important, contracts may not be as vital as the initial relationship and the type of working style a particular culture chooses. Contracts are largely formal documents that show commitment. However, in some cultures, such as the Chinese, Japanese and largely Asia, relationships are more important than contracts, a contrast with the approach in the US (Harps). Important for the business therefore, is establishing contacts and networks with other companies in the international platform rather than emphasizing on contracts, this while providing security, could cost a company a lucrative business opportunity due to an insistence on a contract.
Good initial relationship and knowing the working styles present in different cultures are some of the most important factors for consideration for a logistic company seeking to operate internationally. While conflict resolution and contracts may be important, the come second to the two factors mentioned above. Globalization has made it a necessity for companies to gain in-depth knowledge of the cultures of the nations they seek to conduct business in; failure to do this may be catastrophic to the prospects of the company in the said country.
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Harps, L., H. (2003).Global logistics: Bridging cultural divide. Inbound Logistics.
Hudson, S. (2005). Cultural affects on the global supply chain. NC State University.
Krishnan, S., Smark, C., & Pepper, M. (2013).The influence of national culture on third party logistics outsourcing: An
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Provenmodels (2015). Five dimensions of culture.