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Cultural Diversity Is a Source of International Competitive Advantage. Critically Evaluate!

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Cultural Diversity Is a Source of International Competitive Advantage. Critically Evaluate!


SEMESTER: 2005/2006, YEAR 3



Today’s businesses are more and more expanding into other countries and thus becoming global. Operating outside the “country of origin” means adapting to national and local aspects. Therefore, it is evident that companies, factories and offices consist of very different people with various attitudes and backgrounds. Doubtlessly it has become normal that people of different countries and needlessly to say of many different cultures are working together. It is evident that appreciating and knowing how to manage these different aspects is becoming more and more a part of international businesses all over the world.

There are various big cities that are inhabited by many people of different countries and cultures. Each culture possesses its own unique lifestyle which is “import” by the people. Singapore for example hosts four cultural and linguistic groups: Chinese, Eurasian, Indian and Malay. Switzerland has four ethnic communities: French, German, Italian and Romansh. (Adler, 2002, p. 137).

The world is constantly becoming smaller through globalisation. Communicating with people from other cultures has become essential. Cultures are mixing together. People dress differently, they have different languages and traditions, their food differs, otherwise would there be Pizza, Sushi, Doners, Burgers and Chicken Tikka in our country? This essay will attempt to examine the effects of cultural diversity on businesses.

People do not realize how much different cultures influence their lives, partly because they have become so used to them and partly because they simply lack the ability to determine them. But people are confronted with them on a daily basis. Multiculturalism, as it is called, has emerged as a dominant factor of people’s lives. It is necessary to assess the potential impact of culture because it indeed has a great impact on the effectiveness of organisations and managers as well as on work and businesses.

Therefore, same situations can and will be interpreted differently across the world, depending on the culture. Being aware of this and understanding them can help businesses seek ways to use cultural differences in their favour: as a source of competitive advantage.

“A competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices”. (

Culture is one of the most important factors influencing the success of businesses. Realizing its importance is imperative. However, culture is intangible and therefore hard to pin down.

Trompenaars and Hampden-Turner (1997, p. 26, 196, 242) argue that culture can be described as a way in which people solve problems and that national differences in value orientations are a major source of cultural diversity. Cultural awareness would be understanding states of mind, not just that of others but of oneself’s too.

Schneider and Barsoux (2003, p. 7-11) claim that according to a survey, cultural differences are the biggest source of difficulty in integration. People tend to use their own culture as a “reference point”. This is also called “Ethnocentrism” and means “our way is the best”. One’s own culture is the centre, everybody else is judged on this basis (Adler, 2002, p. 155). Lacking to recognize culture can have ruinous effects. An American company set up a company on a Pacific island and hired local labour, not knowing that placing a younger foreman in front of elder workers was inacceptable in that culture.

Hofstede’s findings are helpful. His dimensions provide guidelines for identifying cultural situations. The situation above would be allocated in the power distance dimension. If the situation would have been examined through the “culture glasses” the problem could have been avoided.

Marx (2001, p. 101-102) portrays that it is most important for culturally diverse teams to spend time on communication and evening out stereotypes, which on one hand can be helpful but on the other hand harmful too. Openness needs to be practised. To turn cultural diversity into an advantage the whole group must respect eachother’s view and clarify problems.

So is cultural diversity positive or negative? Does it help or prevent companies from being successful?

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