Why is an understanding of national cultures important in strategic management?

Answer 1

An understanding of different national cultures is important in all aspects of strategic management. Since international trade is becoming increasingly important, knowledge of national cultures is important to environmental scanning. One must scan not only key forces in one's industry, but also different societal forces in other parts of the world where the company might do business. An understanding of national cultures is also important to the formulation of strategy. Many cultures are very ethnocentric and do not like foreigners controlling key parts of their country. In Saudi Arabia, for example, non-Saudis cannot own land - they can only rent it. Most countries have rules regarding ownership of companies in industries which are deemed important to that country's welfare (for example, the U.S. defense industry). A company must have an understanding of these differences if it is to formulate various entry strategies into different countries or regions. An understanding of different cultures is especially important in strategy implementation. Because of cultural differences, managerial style and human resource practices must be tailored to fit the particular situations in other countries. Hofstede found in his research that national culture is so influential that it tends to overwhelm even a strong corporate culture. In measuring the differences among five national dimensions from country to country, he was able to explain what a certain management practice might be successful in one nation, but fail in another. Knowledge of these kinds of differences is crucial for any multinational corporation. An understanding of national cultures is also important to evaluation and control