What Are the Cultural Problems Encountered by Multinational Companies?

by Randi Hicks Rowe ; Updated September 26, 2017

Doing business across national boundaries requires more than just exporting a concept that is successful in the United States. Cultural differences can be challenging, leading to misunderstandings between employees and management as well as between the company and its customers and partners. By enhancing cross-cultural training and adapting to local needs, multinational companies can succeed in bridging cultures.

Workplace Values

One problem encountered by multinational companies is differences in workplace values. Geert Hofstede, a researcher and published author on workplace culture, has identified six dimensions of national culture that affect employee values. The first of these is power distance, which deals with how society views inequalities among people. Some societies accept without question the concept of a hierarchy, while others demand justification for unequal power, Hofstede says. This means that executives of multinational companies need to adjust their leadership style based upon the power distance view of the host country's national culture, for example, by adopting a collegial style in countries that reject hierarchies.

Another of Hofstede's dimensions is the degree to which a society believes that individuals are expected to care for themselves and their immediate families vs. those societies in which an extended family or group will care for all its members. A third dimension is competitiveness vs. cooperation. Understanding these dimensions helps determine compensation structures; for example, if collectivism and cooperation are strong cultural attributes, companies will reward employees as a team based on team performance.

Hofstede's other dimensions are the degree to which societies feel uncomfortable with uncertainty, how much priority is given to tradition vs. education and innovation, and whether societies are restrained or indulgent in meeting needs and wants. Companies that require workers to be creative and take risks to invent cutting-edge products might need to find a way to link innovation with the country's traditions to gain worker buy-in.

Communication Styles

Multinational companies also are challenged by different communication styles that affect developing strong relationships with partners or clients. For example, Western communication style is straightforward and direct, but people in India and China are more accustomed to a less aggressive approach. In these cultures, patience is required to build the relationship outside of the board room. Because of the need to build these connections, business deals might take five times longer to complete in China than in the United States, reports Business Insider.

Concept of Time

A third challenge is that cultures tend to view time differently. Monochronic cultures, such as the United States and Germany, value punctuality and keeping to schedules, reports Iowa State University's Center for Excellence in Learning and Teaching. In polychronic cultures, such as the Middle East or Latin America, maintaining relationships and socializing is more important than the schedule.

Tips

  • Differences in concepts of time can pose challenges for multinational companies; one example is in how meetings are run. An American executive trying to stick to a strictly timed agenda might be seen as brusque in Peru.

About the Author

Randi Hicks Rowe is a former journalist, public relations professional and executive in a Fortune 500 company, and currently a formation minister in the Episcopal Church. She has been published in Security Management, American Indian Report and Tech Republic.She has a bachelor's in communications, a master of arts in Christian education and a master of business administration.