2016年最新从沃尔玛在韩国市场的失败论本土文化对企业经营的影响

2016年最新从沃尔玛在韩国市场的失败论本土文化对企业经营的影响 从沃尔玛在韩国市场的失败 论本土文化对企业经营的影响 摘要:经济全球化和区域经济一体化的发展，使世界变成了一个统一的大市场，“国界”在这种全球化趋势面前变得越来越没有实际意义。国内市场与国际市场的统一。真正使社会的生产、消费、交换和流通等一切进入了“无国界”阶段。使生产力要素和各种资源得到了在更大范围内的有效配置。但无国界的生产和经营，并不意味着无文化的界限和差别，全球化进程中的文化冲突与碰撞将首当其冲地在国际经营的企业中现出来。进行国际经营的公司面临着越来越陌生的文化环境，面临着更多的因文化差异所带来的矛盾和冲突，使企业在国际经营过程中面临更大的风险。沃尔玛这一世界零售巨头在韩国市场的失败，也是一个很好的教训。理解文化差异，化解文化冲突，应从解决对文化的认识问入手:尊重文化差异，促进文化认同，打有准备的仗是企业跨国经营不容忽视的战略。 关键词:文化;文化差异;跨国经营;影响;沃尔玛 i An Analysis of the Impact of Local Culture on Foreign Businesses — A Case Study of Wal-Mart’s Failure in South Korean Market Abstract With economic globalization and regional economic integration, the world is getting a huge unified market. The unification of the domestic market and the international market leads production, consumption, exchanges, communication and the like into international times, which makes resources better allocated in a more extensive scale. However, international production and operation never mean that there is no boundary or difference in culture among countries. On the contrary, in the process of globalization, cultural conflicts and shocks are always big matters to a foreign business. The world retail giant, Wal-Mart, who has failed in South Korean market, is a classical example. And to comprehend cultural differences and defuse cultural conflicts should be based on a clear understanding of culture. So it is a significant strategy for foreign businesses to be well-prepared, to respect foreign cultures and to promote recognitions of different cultures. Key words: culture; cultural differences; foreign businesses; impacts; Wal-Mart ii Acknowledgements First and foremost, I would like to express my heartfelt gratitude to my supervisor, Zhang Kaiquan , both for his intellectual guidance and for his warm and constant encouragement during the process of writing this thesis. With patience and prudence, he labored through drafts of this thesis and pointed out defects in my theorizing. Therefore, I owe all the merits in this thesis, if any, to him, though I am fully aware that the thesis might still contain some mistakes, for which I bear the whole responsibility. My cordial and sincere thanks go to all the teachers in the Scholl of International Business, whose interesting and informative courses have benefited me a lot during my college years. The profit that I gained from their profound knowledge, remarkable expertise and intellectual ingenuity will be of everlasting significance to my future life and career. I am also very grateful to my roomates, who have given me a lot of help and courage during my stay in the University and throughout the process of writing this thesis. Last but not the least, big thanks go to my family who have shared with me my worries, frustrations, and hopefully my ultimate happiness in eventually finishing this thesis. iii Contents 中文摘要 …………………………………………………………………………… i Abstract …………………………………………………………………………… ii Acknowledgements ……………………………………………………………….. iii Introduction ...................................................................................................................... 1 I. A Brief Overview of the Definition of Culture .................................................................... 3 A. The Definition of Culture...................................................................................... 3 B. Cultural Effects on Business Functions ................................................................... 4 II. Wal-Mart in South Korea ................................................................................................ 6 A. Wal-Mart: the Company Profile ............................................................................. 7 B. Wal-Mart‘s Business Model in South Korea ............................................................ 8 C. Korean Consumers‘ Response to Wal-Mart‘s EDLP Strategy ................................... 10 D. Limitations of Wal-Mart‘s Business Model in Korea................................................11 III. Understanding Cultural Difference................................................................................ 14 A. Causes of Cultural Conflicts in International Business ............................................ 15 B. Rules for Doing Business Across Cultures ............................................................ 17 Conclusion...................................................................................................................... 20 Notes ............................................................................................................................. 21 Bibliography ................................................................................................................... 22 iv An Analysis of the Impact of Local Culture on Foreign Businesses — A Case Study of Wal-Mart’s Failure in South Korean Market Introduction With economic globalization and regional economic integration, the world is getting a huge unified market. The unification of the domestic market and the international market leads production, consumption, exchanges, communication and the like into international times, which makes resources better allocated in a more extensive scale. However, international production and operation never mean that there is no boundary or difference in culture among countries. On the contary, in the process of globalization, cultural shocks and conflicts are always big matters to a foreign business. According to statistics, about 35%—45% multinational companies throughout the world has failed in their foreign businesses, including 30% caused by financial, technical or some other factors, and the left 70% resulted from lack of experience of multicultural management and failed in dealing with cultural shocks and conflicts. Since it was first coined by Theodore Levitt in a Harvard Business Review article in 1983, the term globalization has been gradually familiar to the world, especially to the world economy. And an increasing number of domestic markets have been saturated. Meanwhile, in order to keep corporations running well or even better, they need to create and protect their profit by pushing forward their international expansion. However, doing foreign business is not simply to go out, but to try to understand the local culture and to handle with the regional market environment. That is why Wal-Mart, the world‘s retail giant, failed to cater to Korean customers. That is why the unmodified proven successful ―American way‖ just turned out to be nothing short of a fiasco in South Korea. That is why Wal-Mart failed in South Korea after clearly dominating the US retail market and succeeding in many other foreign markets. It should be apparent that in order to be successful in their relationships with 1 people in other culture, international businesspeople must be students of culture. They must not only have factual knowledge of their own business, but also become cultural sensitive to be aware of that there are cultural differences, what they are, and how to overcome or coordinate them. E. T. Hall, a famous anthropologist, recommended spending a lifetime in a country or, instead of this, undergoing an extensive program to study what the culture is and what it does. However, most newcomers to international business do not have the opportunity for area orientation. They can take the significant first step of realizing that there are other cultures. People in different cultures absolutely speak diverse languages. They share different customs. And they may have dissimilar work ethic and different attitudes towards achievements, work, or even time. A product or a kind of service can be sold to customers, because it has the value meeting their needs or fitting to their life in their local culture. In the same way, an employee is willing to work for a company, in most cases, given that there is something worth doing in his culture. On the contrary, if the product or service does not have the value or the company does not share the same significant thing with the employees, they both might lose the market. As China‘s economy is booming, more and more companies are growing stronger so that they begin to make plans for their international expansion. In order to get more chance of success in foreign markets, Chinese enterprises ought to be better prepared, that is, they should understand the local culture of their target markets and manage to overcome or coordinate those cultural differences. 2 I. A Brief Overview of the Definition of Culture Although there are countless definitions of culture, most anthropologists view culture as the sum total of the beliefs, rules, techniques, institutions, and artifacts that 1 characterize human populations.In other words, culture consists of the ―individual worldviews, social rules, and interpersonal dynamics characterizing a group of people 2 set in a particular time and place.‖ Because society is composed of people and their culture, it is impossible to mention one without referring to the other. Anthropologists often use the terms 3interchangeably or combine them into on word---socioculture. This is the term businesspeople more often use, because the variables that they are interested in are both social and cultural. When people work in societies and cultures different from their own, the problems they encounter in dealing with a set of cultures are multiplied by the number of cultural sets which they find in each of those foreign markets. All too often, unfortunately, people familiar with only one cultural pattern may believe they have awareness of cultural differences elsewhere, while in reality, they do not. Unless they have made comparisons with other cultures, they may not even be aware of the important features of their own. A. The Definition of Culture Culture is the essential character of a society that distinguishes it from other 4societal groups. Although there are countless definitions of culture, most anthropologists view culture as the sum total of the beliefs, rules, techniques, institutions, and artifacts that characterize human populations. The underlying elements of every culture are the values, language, myths, customs, rituals, and laws that shape the behavior of people, as well as the material artifacts, or that behavior as 3 5 they are transmitted from one generation to the next. Culture is pervasive. Cultural values and influences are the ocean in which individuals swim, and the most are completely unaware that it is there. What people eat, how they dress, what they think and feel, and what language they speak are all dimensions of culture. It encompasses all the things consumers do without conscious choice because their culture‘s values, customs, and rituals are ingrained in their daily habits. Culture is functional. Human interaction creates values and prescribes acceptable behavior for each culture. By establishing common expectations, culture gives order to society. Sometimes these expectations are enacted into laws. For example, grocery stores and hospitals are open 24 hours whereas banks are open only during bankers‘ hours. Culture is learned. Consumers are not born knowing the values and norms of their society. Instead, they must learn what is acceptable from their family and friends. Children learn the values that will govern their behavior from parents, teachers and peers. As members of the society, they learn to shake hands when they greet someone, to drive on the right side of the road, and to eat pizza or rice and drink Coco-Cola. Culture is dynamic. It adapts to changing needs and an evolving environment. The rapid growth of technology in today‘s world has changed entertainment patterns and family communication and has heightened public awareness of political and other news events. Automation has increased the amount of leisure time we have and, in some ways, has changed the traditional work ethic. Cultural norms will continue to evolve because of people‘s needs for social patterns that solve problems. The most defining element of a culture is its value---the enduring beliefs shared by a society that a specific mode of conduct is personally and socially preferable to another mode of conduct. People‘s value systems have a great effect on their 6behavior. B. Cultural Effects on Business Functions 4 In marketing, the wide variation in attitudes and values requires that many firms 7use different marketing mixes in different markets. Customers with similar value systems tend to react alike to price and other marketing-related inducements. Values also correspond to consumption patterns. For example, Americans place a high value on convenience. This value has created profitable markets for products such as breakfast bars, energy bars, and nutrition bars that allow consumers to eat on the go. Values can influence consumers‘ TV viewing habits or the magazines they read. For instance, people who strongly object to violence avoid crime shows, and those who oppose pornography do not buy Hustler. In human resources management, the national culture is also a key determinant 8for the evaluation of managers. In Great Britain, an American general manager complained, people are promoted because of the school they had attended and their family background but not for their performances. School ties are important in France, too. In fact, this phenomenon extends elsewhere---an example is the elite Bishop Cotton Boys School in India. Production managers have found that attitudes toward change can seriously influence the acceptance of new production methods. And personnel problems can 9result from differences in attitudes towards authority, another sociocultural variable. For instance, Latin Americans have traditionally regarded managers as an authoritarian figure responsible for their welfare. When American managers accustomed to a participative leadership style are transferred to Latin America, they must become more authoritarian, or their employees will consider them weak and incompetent. Even treasurers realize the strength of the sociocultural forces when they approach local banks with excellent balance sheets, only to find that the banks attach 10far more importance to who they are than to how strong their companies are. One reason for Disney‘s financial problems in Paris was the insensitive attitude of Disney executives toward European business culture. 5 II. Wal-Mart in South Korea Wal-Mart is the world‘s largest retailer, operating in 15 countries with 6500 stores, and generating $62.7 billion in 2006. Its stock price has skyrocketed over 180,000 percent by 2007 since its IPO in 1972. Wal-Mart has been forced to initiate international expansion in the early 1990s due to changes in the US market condition. Market saturation was becoming a problem in the US market. Over 200 new Wal-Mart stores being opened each year, the rapid growth in the number of stores in the US placed newer stores close to older ones and the newer stores start to cannibalize the older ones. Demographics of the US market was also evolving as the baby boomer segment was increasing and the family sizes were getting smaller, which led to slower growth of US market on demand side. Dynamics of the US retail industry has also changed significantly, posing a threat to Wal-Mart‘s market leader position. Wal-Mart‘s core competitive advantage stems from having a low price/high volume orientation to dominate the discount retail sector. Wal-Mart implemented a superior information technology (IT) system and established a centralized automated distribution system that connected itself with its supplier through Electronic Data Interchange (EDI) system. The EDI system gave Wal-Mart an access to information on the entire value chain and allowed maintaining constant cost-cutting. This enabled Wal-Mart to have superior productivity, significant reduction of operational costs and overall lean business model. This enabled Wal-Mart to offer the lowest retail prices. Wal-Mart disrupted US retail market with its aggressive price offering and had the market dominance for past a few decades. Wal-Mart‘s strategy fitted well in North America where consumers were willing to compromise service and quality for low price. Wal-Mart‘s low price offering was matched with customers‘ definition of value in the area and this created ―value-exchange‖ between Wal-Mart and its customers there. 6 However, other major competitors in the US retail sector have adopted strategies similar to Wal-Mart, and learned to have a retail-format with superior technology and lean business operations. The retail price difference between Wal-Mart and other retailers have narrowed consequently and weakened consumers‘ incentives to visit Wal-Mart. All these factors have contributed to slowing Wal-Mart‘s earning growth in the US, and international expansions have become a strategic priority for further growth of the company. A. Wal-Mart: the Company Profile Wal-Mart was founded in 1962, with the opening of the first Wal-Mart discount store in Rogers, Ark. The company incorporated as Wal-Mart Stores, Inc., on Oct. 31, 1969. The company's shares began trading on OTC markets in 1970 and were listed on the New York Stock Exchange two years later. The company grew to 276 stores in 11 states by the end of the decade. In 1983, the company opened its first Sam‘s Club membership warehouse and in 1988 opened the first supercenter -- now the company‘s dominant format -- featuring a complete grocery in addition to general merchandise. Wal-Mart became an international company in 1991 when it opened its first Sam's Club near Mexico City. Wal-Mart serves customers and members more than 200 million times per week at more than 8,969 retail units under 55 different banners in 15 countries. With fiscal year 2010 sales of $405 billion, Wal-Mart employs 2.1 million associates worldwide. A leader in sustainability, corporate philanthropy and employment opportunity, Wal-Mart ranked first among retailers in Fortune Magazine‘s 2010 Most Admired Companies survey. Wal-Mart Stores, Inc. operates retail stores in various formats worldwide. The company‘s Wal-Mart U.S. segment offers meat, produce, deli, bakery, dairy, frozen foods, floral, and dry grocery; health and beauty aids, household chemicals, paper goods, and pet supplies; electronics, toys, cameras and supplies, photo processing 7 services, cellular phones, cellular service plan contracts, and prepaid service; fabrics and crafts, stationery and books, automotive accessories, hardware and paint, horticulture and accessories, sporting goods, outdoor entertaining, and seasonal merchandise; apparel, shoes, and jewelry; pharmacy and optical services; and home furnishings, housewares, and small appliances through discount stores, supercenters, and neighborhood markets, as well as through Wal-Mart.com. Its International segment includes various formats of retail stores and restaurants, including supermarkets, combination discount and grocery stores, supercenters, Sam‘s Clubs, hypermarkets, cash-n-carry stores, department stores, and general merchandise stores. The company‘s Sam‘s Club segment offers merchandise, including hardgoods, softgoods, and selected private-label items under the MEMBER‘S MARK, BAKERS & CHEFS, and SAM‘S CLUB brands through warehouse membership clubs in the United States, as well as through samsclub.com. As of January 31, 2010, it operated 803 discount stores, 2,747 supercenters, 158 neighborhood markets, and 596 Sam‘s Clubs in the United States; 43 units in Argentina, 434 in Brazil, 317 in Canada, 252 in Chile, 170 in Costa Rica, 77 in El Salvador, 164 in Guatemala, 53 in Honduras, 1 in India, 371 in Japan, 1,469 in Mexico, 55 in Nicaragua, 56 in Puerto Rico, and 371 in the United Kingdom, as well as 279 stores in the People‘s Republic of China. The company was founded in 1945 and is based in Bentonville, Arkansas. B. Wal-Mart’s Business Model in South Korea One of the important aspects of Wal-Mart‘s successful business model in the US was its unique approach to market penetration and market positioning. Wal-Mart established itself in the US market by penetrating small sized rural communities and spread out its stores to nearby cities to form retail clusters. The retailing business incurs high levels of fixed costs and the profit margins primarily come from sales volume and efficient management of operating costs. Thus, minimization of the operating costs is important for the profitability of the retail business and this can be 8 achieved when several stores in near proximity can share merchandising, distribution networks, and resources. These retail clusters became fundamental components of its centralized distribution system which enabled Wal-Mart to have low inventory levels and cost control and effectively respond to the market demand and changes. Wal-Mart attempted to penetrate the Korean market by building stores in distant areas where land prices were low, replicating the US strategy of smaller city store build-up. Wal-Mart had only 16 stores in all of Korea with just one in the Seoul metropolitan area and could not achieve the economies of scale. Wal-Mart expected the Korean consumers to drive to its stores for price shopping as the American consumers do. However, this location strategy did not match well with the Korean consumers‘ lifestyle and shopping habits. Korean consumers have substantially different shopping styles and preferences compared to North American consumers. They prefer to purchase smaller units on a more frequent basis and to have accessibility to a store in walking distance. Convenience and store location are major determinants of where a consumer will shop. Wal-Mart failed to attract Korean consumers as their locations were not strategically well positioned to create sufficient customer traffic. Wal-Mart‘s main competitive advantage has been its ability to offer the most competitive price to consumers by having a cost efficient operating system that ensures low costs. Wal-Mart‘s expense structure, measured as a percentage of sales, was among the lowest in the industry. These cost savings were used to promote its ―Every Day Low Price‖ (EDLP) strategy which ensured the lowest price among competitors. The EDLP strategy led to a high volume sales and higher earnings and company growth. The earnings were reinvested into further advancement of the operating system, and resulted in further reduction of the operating cost. This ―Productivity Loop‖ was a key driver in Wal-Mart‘s rapid success in the U.S. Wal-Mart managed to set the competitive retail price with its EDLP strategy in the US and acquired its market dominance in the US retail industry for past few decades. Wal-Mart was price competitive and successful in attracting price conscious shoppers who were willing to compromise customer service and quality for the low price in the 9 US. Given its previous success in the US market, Wal-Mart intended to employ this EDLP strategy in the Korean market as its core value proposition to the Korean consumers. C. Korean Consumers’ Response to Wal-Mart’s EDLP Strategy Korean consumers considered the freshness of food products very seriously and were willing to make frequent trips to supermarkets or corner stores or traditional wet-markets in order to buy small volumes of fresh produces. The Korean local retailers accommodated this preference for the freshness of food product by transplanting the traditional outdoor market into a convenient format indoors in hypermarkets. The local retail stores placed live-seafood, local delicacies and on-site packaging service that replicate the features of a traditional outdoor market, and their merchandise mix heavily focused on food and beverages. The local retailers have extensively used a localization strategy that fitted well with Korean consumers‘ taste and preference. In contrast, Wal-Mart‘s merchandising mix offered everything from dry goods to electronics and clothing, which was viewed to be more westernized than those of its local competitors. Wal-Mart had uniform merchandising and distribution strategies that limited differentiation in its merchandize mix which was also a constraint to adapting to local taste and preference. Korean consumers viewed Wal-Mart as a store to visit when they need large purchase of non-food products and to see variety of products, including foreign products. They preferred to visit local domestic supermarkets for food purchases and items for daily uses. Korean consumers also like to shop daily instead of weekly or bi-weekly and purchase small package size, given small houses with limited storage and freezing spaces. This Korean consumers‘ shopping behavior and their preference did not match with the Wal-Mart‘s retail format which was set up to serve consumers‘ infrequent large bulk shopping. The local retailers such as E-Mart offered discounted pricing in smaller quantities and 10 in familiar environments similar to conventional department stores rather than warehouses, while offering more fresh produce and feature special in-store events. Wal-Mart‘s EDLP strategy had lack of a strategic fit to the nature of Korean consumers. Korean consumers were quality conscious and tend to be more brand-loyal, less likely to switch to less expensive products. Korean consumers were unwilling to compromise the customer service and the quality for the low price, and expected to see sales people in each aisle of the retail stores and aggressive promotion in the value of service and products offered by the retailers. Korean consumers perceived Wal-Mart stores as a ―cheap marketplace‖ with warehouse-style layout and poor quality products. This retail format was not well received by the Korean consumers who were used to the assistance of the sales ladies who gave out free samples and helped packaging and wrapping the products in the store. The Korean discount stores even had employees at the parking lot that gave out the parking tickets nd guided the parking directions. Wal-Maart‘s EDLP was perceived to be insufficient ―value‖ in the minds of Korean consumers. D. Limitations of Wal-Mart’s Business Model in Korea There are three aspects of the Wal-Mart‘s business model that became major challenges for Wal-Mart, which could have been examined and considered for possible solutions prior to the market-entry. First, timing and choice of market-entry and the location selection were major factors that led Wal-Mart to have disadvantage in the Korean retail discount market. To enter and consolidate a market position in a foreign market, it is strategically important to take over commercially crucial locations that have high traffic. In Korean case, the choice of the store location was particularly important as the Korean consumers‘ shopping mostly took place in the metropolitan areas as they had strong preference for the stores with close proximity. Local rivals had the location advantage as they managed to build stores in the early 11 1990s that had much higher store traffic compared to Wal-Mart, which had stores mostly in distant, less crowded areas. This affected Wal-Mart‘s competitive position significantly. Wal-Mart should have assessed whether it could come up with alternative strategies that could compensate its location disadvantage. Second, mismatched merchandising, assortment and marketing that missed local needs and context were other factors that contributed to Wal-Mart‘s failure in Korea. Tesco, a British origin global retailer, is a successful case that had effective ?localization‘ strategy for downstream activities. Tesco Korea has enjoyed significant success in the Korean discount retail market. Tesco entered the Korean market by forming a joint venture with a major local partner, ―Samsung‖ and leveraging on Samsung‘s knowledge and expertise of the local market condition. Tesco devoted considerable attention to transferring its core capabilities to this new market, yet did not attempt to reiterate the British version of its retail format in Korea. For example, it preferred to hire local managers with only a few operational experts from the U.K. Tesco learned to strike a balance between the Western style hypermarket retail format extra services from its local partner. and the Korean way of retailing that entailed One key factor that contributed to Tesco‘s success was its ability to create ―value‖ that are suitable for the Korean tastes and preference. For example, Tesco offered fresh produce /fruits that have been partially processed and repackaged into a form that is ready to cook or eat. Tesco also had a deli section that sold popular Korean traditional food items, while its meat section had sales staff that cut and custom-packaged meat product according to each consumer‘s preference. Wal-Mart, on the other hand, entered the Korean market without any local partner, and implemented its original merchandise mix from the US model, yet its ?global standardization‘ strategy did not elicit sufficient responsiveness from the Korean consumers. This shows that the entry mode can have a significant impact on how an international retailer develops its strategy and on how the retailer positions itself in a foreign market. Third, effective channel mix organization was an important part of the competitive advantage that was missing in Wal-Mart‘s business model for the Korean 12 market. In other words, Wal-Mart needed to build a strong alliance with local suppliers, as this facilitated effective merchandising and tighter integration along the value chain. Consequently, Wal-Mart could not obtain the ability to control all logistic phases, from sourcing to delivery, which dampened Wal-Mart‘s price competitiveness, which was its core competitive advantage in the US market. 13 III. Understanding Cultural Difference Underlying core values can vary across cultures. Most Americans are more concerned about their health than weight. But for many Brazilian women, being thin is more important than being healthy. In fact, one survey found that 75 percent of Brazilian women over the age of 20 who wanted to lose weight had taken prescription diet drugs for obesity even though less than one-third of the women were obese and the drugs presented the risk of side effects such as heart and lung damage. In contrast, most Chinese women do not place such a high value on thinness and show less concern about being overweight than those Brazilians. As more companies expand their operations globally, the need to understand the cultures of foreign countries becomes more important. A firm has little chance of selling products in a culture it does not understand. Like people, products have cultural values and rules that influence their perception and use. Culture, therefore, must be understood before the behavior of individuals within the culture context can be understood. Colors, for example, may have different meanings in global markets than they do at home. In China, white is the color of mourning and brides wear red. In the US, black is the color of mourning and brides wear white. American designers at Universal Studios had to learn about Japanese culture when planning a new theme park that catered to their culture differences. After extensive surveys and product testing, the result was a Universal Studios theme park with an orderly clockwise layout, Japanese-style American food, and a Jurassic Park water slide designed to prevent rides from getting wet. Language is another important aspect of culture that global marketers must deal with. When translating product names, slogans, and promotional messages into foreign languages, they must be careful not to convey the wrong message. General Motors discovered too late that Nova ( a car name ) literally means ―doesn‘t go‖ in Spanish; Coors ( a bear brand ) encouraged its English-speaking customers to ― Turn it loose,‖ but the phrase in Spanish means ― Suffer from diarrhea‖. 14 A. Causes of Cultural Conflicts in International Business First, they are caused by differences in value orientations. Geert Hofstede, a Dutch social psychologist found that cultural otherness among different countries and nations could be based on four value dimensions: individualism versus collectivism, large versus small power distance, strong versus weak uncertainty avoidance, and masculinity versus femininity. With a large number of surveys, he further proved that, indeed, there are differences among different cultural values, which are rooted into people‘s minds and hardly to be changed. Diversification and otherness of cultural value lead to cultural interchange and shock, even cultural interopposition and interrejection, in multi-regional, multi-national, and multi-governmental business operations. And the more different cultural backgrounds of managers in the same company are, the more possible and stronger cultural conflicts will be. Second, they are caused by otherness of managerial concepts. Chinese culture and the Western culture, which are totally different, are two main kinds of cultures in the world‘s culture system. Advocating individualism and individual-orientation are the main characteristics of the Western culture, while collectivity-orientation and conservativeness are the main characteristics of Chinese culture. A corporation is not only an economic group, but also a sociocultural group, which is an important part of socioculture. It presents a national cultural characteristics. Because of national cultural otherness and corporations‘ succession to their national history and culture, managerial concepts and methods varies a lot. In this sense, on one hand, conflicts during foreign operation will happen due to differences of the main cultural environments between multinational enterprises and the host country. On the other hand, employees and managers with different cultural backgrounds will conflict with each other in managerial methods and operational concepts. Generally speaking, western enterprises prefer rational management style, with emphasis on 15 standardization and individual contribution. In this style, innovation, adventures, clearness of thoughts, and direct expression are encouraged. Chinese managers favor interpersonal relationship and psychological and emotional managerial style. They are used to regard leaders‘ attempts and superior documents as implementation bases and directions. In terms of strategic management, western corporations are biased towards long-term strategy with focuses on constantly improving products, developing new products and training employees. They pay more attention to investing and storing human resources. However, Chinese supervisors are more concerned about short-term strategy. When companies are running well, they would like to consider how to improve investment of permanent assets and how to upgrade their allocation level, instead of training employees and storing human resources. In this sense, they are concerned more material capital investment than human resource investment. According to practice of multinational mergers and acquisitions, all kinds of conflicts caused by corporate cultural differences, which are always an important factor leading to failure in multinational companies‘ foreign operations, does impact not only an enterprise‘s operational methods, but also whether its strategies can be successful. The third reason would be ethnocentrism, with which people think their own ethnic group is superior to all others and so is their home culture, and they will comprehend and evaluate other cultures according to their own cultural value and standard. In the contemporary civilized society, most people would not claim their own culture is superior to all the others‘. However, they will subconsciously judge objects different from their own culture with a subjective criterion, when observing another culture. If supervisors insist on treat the personnel of a different culture with self-oriented superiority complex, they will never try to observe and understand a foreign culture initiatively and objectively. Therefore, most of them will become unaware of cultural differences and miss the chance of fusing those cultures. Moreover, the companies will lose trust of their employees in distinct cultural background so that they will even get in trouble because of being hated and resisted by the host country. 16 Last but not the least, misunderstanding in communication is a direct cause of cultural conflicts. In a multi-cultural environment, people would have diverse opinions of the same issue, due to differences in behavioral patterns, customs and thinking ways. However, effective communication is the base of such activities as information exchange, thoughts interchange, decision making, negotiation, stimulation, leadership and the like during the internal management. Perfect communication must be interactive recycle process, in which target listeners could comprehend both the message and the internal meaning, that is , across-cultural communication have to be based on acceptable, appreciatable and understandable methods and skills for the both sides. However, language barriers among employees and managers from different nations make it hard to reach effective bilateral communication about the operating concept, the managerial system and the behavioral pattern, and finally lead to cultural conflicts in corporate internal management. Furthermore, language barriers could also cause customers‘ misunderstanding of their products when enterprises are doing business in foreign cultures. For instance, when Coca-Cola entered Chinese market for the first time, it was translated into “蝌蝌啃啃”, which made Chinese totally confused of what the product was. But now, it is translated into “可口可乐”,which is more suitable for Chinese culture and custom so that it is well-known today. That is why the saying goes, ―Language is the mirror of culture.‖ Language is not only an important tool of multi-cultural communication, but also an significant factor of running well a multi-national company. B. Rules for Doing Business Across Cultures Knowing customer is just as important anywhere in the world as it is at home. Each culture has its logic, and within that logic are real, sensible reasons for the way foreigners do things. If the businessperson can figure out the basic pattern of the culture, he or she will be more effective interacting with foreign clients and 17 colleagues. And the following six rules would be helpful: 1. Be prepared. Whether traveling abroad or selling from home, no one should approach a foreign market without doing his or her homework. A mentor is most desirable, complemented by lots of reading on social and business etiquette, history and folklore, current affaires (including relations between the two countries), the culture‘s values, geography, sources of pride (artists, musicians, sports etc.), political 11structure, and practical matters such as currency and hours of business. Mimi Murphy, an exporter who trades primarily in Indonesia, says, ―Whenever I travel, the first thing I do in any town is read the newspaper. Then when I meet my customer, I can talk about the sports or the news of the day. He knows that I am interested in the 12thing he is interested in, and he will want to do business with me.‖ The Internet can be helpful as a source of information. 2. Slow down. Americans are clock watchers. In many countries, they are seen to be in rush---in other words, unfriendly, arrogant, and untrustworthy. In other countries, the Japanese and Germans are considered to be somewhat time-obsessed. As current ―mobile culture‖ teenagers become businesspeople, however, we may more and more tend to self-organize ―on the fly.‖ 3. Establish trust. Often American-style crisp business relationships will get them nowhere. Product quality, pricing, and clear contracts compete with the personal relationship and trust that are developed carefully and sincerely over time. The marketer must be established as favorable, worthy of the business, and dependable in the long run. 4. Understand the importance of language. Obviously, translation must be done by a professional who speaks both languages fluently, who has a vocabulary sensitive to nuance and connotation, and who has talent with the idioms and imagery of each culture. An interpreter is often critical and may be helpful even when one of the parties speaks the other‘s language. 5. Respect the culture. Managers are important. The traveling representative is a guest in the country and must respect the host‘s rules. As a Saudi Arabian official states in one of the Going International films, ―Americans in foreign countries have a 18 tendency to treat the natives as foreigners, and they forget that actually it is they who 13 are foreigners themselves!‖ 6. Understand components of culture. Any region is a sort of cultural iceberg with two components: surface culture (fads, styles, food, etc.) and deep culture 14(attitudes, beliefs, values). Less than 15 percent of a region‘s culture is visible, and 15strangers to the culture must look below the surface. Consider the British habit of automatically lining up on the sidewalk when waiting for a bus. This surface cultural trait seems to reflect a deep cultural desire to lead neat and controlled lives. Knowledge about other cultures and how they affect the way people do business way show businesspeople working in a culture different from their own that their solutions are not always the appropriate ones for a given task. Understanding this is the first step in learning to use cultural differences to gain a strategic advantage. Mishandling or ignoring cultural differences can cause numerous problems, such as lost sales, the departure of competent employees, and low morale that contributes to low productivity. When these differences are blended successfully, however, they can result in innovative business practices superior to those that either culture could produce by itself. 19 Conclusion Many companies‘ ambitions to position themselves (profitably) in foreign markets or to establish themselves as ―global players‖ have been thwarted by their inability to fully understand and to adapt to the specific conditions of doing business in other countries, exposing their profound lack of intercultural competence and management skills. The difficulties of foreign businesses are well-known to corporate leaders, the affected staff, management theorists and management consultancies. The formidable challenge of cultural integration is further complicated significantly if it must be taken up in an totally different cultural environment, with all issues frequently being compounded by a lack of language and culture bridging skills. Failure to accomplish this task satisfactorily, however, inevitably results in mutual distrust, demotivation and the exodus of high potentials as well as of ―old hand‖ staff – with the negative impact on the companies' competitiveness, profits and shareholder value. According to not only theories, but also many practices, cultures and cultural differences are actually existing, and even global giants, like Wal-Mart, cannot avoid them. In this sense, corporations have to pay attention to those factors, especially when making strategies of expansion in foreign markets. No matter whether it is in other countries or in other regions of the home country, cultural factors should be put in the preparation list. As Chinese economy and technology are booming, many Chinese home brands are growing fast and going out for their international expansion. How to understand a different culture, how to integrate diverse cultures, and how to defuse cultural conflicts are all significant issues for those companies. In conclusion, local cultures have great impact on businesses of new-comers. In order to gain the foreign market, enterprises have to learn to realize cultural differences, to understand and to respect the culture in the target market, and to integrate different cultures. 20 Notes 1 I. Brady and B. Isaac, A Reader in Cultural Change (Cambridge, MA: Schenkman Publishing, 1975), x. 2 Hy Mariampolski, Ethnography for Marketers: A Guide to Customer Immersion (Thousand Oaks, CA: Sage Publications), 123. 3 Vern Terpstra and Kenneth David, The Cultureal Environment of International Business (Cincinnati: South-Weatern, 1985), 7. 4 Carl McDeniel, Charles W. Lamb, and Joseph F. Hair, Jr, Introduction to thMarketing. 9 ed (Thomson South-Western, 2008), 156 5 Ibid.. 6 Ibid., 157. 7 Ball, McCulloch, et al. Mc Nett, International Business: the Chanllenge of thGlobal Copetition. 11 ed (New York: The McGraw-Hill/Irwin, 2008), 161 8 Ibid., 163 9 Ibid.. 10 Ibid.. 11 Kamel Mellahi, J. George Frynas, and Paul Finlay, Global Strategic Management (New York: Oxford University Press Inc., 2005), 292. 12 Carl McDeniel, 159. 13 Ibid.. 14 Ibid., 160. 15 Kamel Mellahi, 294. 21 Bibliography Ball, McCulloch, and Nett Mc. International Business: the Chanllenge of Global thCopetition. 11 ed. New York: The McGraw-Hill/Irwin, 2008. Feenstra Robert C. and Taylor Alan M.. International Economics. New York: Worth Publisher, 2008. McDeniel Carl, Lamb Charles W., and Hair Joseph F., Jr. Introduction to thMarketing. 9 ed. Thomson South-Western, 2008 Mellahi Kamel, Frynas J. George, and Finlay Paul. Global Strategic Management. New York: Oxford University Press Inc., 2005. Plunkett Warren R., Raymond F. Attner, and Gemmy S. Allen. Management: thMeeting and Exceeding Customer Expectations. 9 ed. 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