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Raising Trade in Egypt: Cross Cultural Differences

BUS707 Managing across global cultures

Identify a media article that you will analyse. It should report on

  • a difficult international business situation
  •  involving cross-cultural management issues
  •  that has arisen in the past twelve months

This task will demonstrate your ability to apply your cultural intelligence skills to a problematic ‘real life’ international business situation

Choosing an appropriate article

  • Choose a newspaper or online article between 350 and 1,000 words and less than twelve months old as the basis of your essay
  • It should be reporting actual international business activities or events and not a commentary or academic critique.
  • Ensure it is less than twelve months old
  • Ensure it relates to cross-cultural management issues.
  • Avoid editorials or columns.
  • You can search for articles in the LibGuide you used for task 1 (see last slides here)
    Keep in mind that you are required to analyse the article with respect to theory, so choose one that will give you scope to do that


Answer

Cross Cultural Differences affecting International Business

How Egypt is still a hope for Investors

Executive Summary

The task is about assessing a situation in International Business industry where the cross-cultural issues led to serious issues in the International Business sector finally leading to loss. In this paper I have considered a political situation in Egypt that have turned the entire position of Egypt in the global scenario and the investors became interested in investing in the country that would result in huge cash flow leading to a rise in the economic situation of Egypt. 

It is about the cross-cultural difference between the elected president of Egypt and his opponents that resulted in attracting the investors of that community to think about Egypt as a right place to invest. It has also been discussed about the challenges that cross-cultural differences pose to any country or organization and how can they be overcome. 

Introduction

The issue to be discussed in this paper would be based on difficult International Business situations. However, the Egypt investors are not much affected neither directly associated with the President’s election occurring in Egypt, they found to be unusually influenced by or supporting the elective decision of Abdul Fattah al-Sisi with a negligible opposition. The investors, however, are looking towards this victory as a positive opportunity to boom the economic conditions of Egypt. 

Till now the Egypt economy was struggling with a double-digit inflation but with governmental reforms it was moving down slowly. Egypt gained a strong position recovering from a difficult situation of currency devaluation and a hard fiscal policy. All the credit went to the result of the elections that have turned out the situation. This report will identify the major cross-cultural management issues and which one has played a critical role in raising the International business trade in Egypt. 

Article Synopsis

Recently, Egypt has got a vital funding from IMF amounting to about $3 billion followed by the Islamic Development Bank that raised the hope in investors of heavy economic recovery in Egypt. This has also lowered down the chances of the civil disturbance that often created instability in the country. It will also play an effective role in overcoming inflation. 

Investors are now ready to give a second chance for investment in Egypt. They have a hope of getting substantial returns from Egypt and the country is going to witness large amount of Foreign Direct Investment despite the fear that the global interest rates may rise. The funding through IMF has left a positive impact over investors through which Egypt was able to introduce major adjustments in its economical imbalance. 

Despite of the crisis that Egypt faced in terms of currency devaluation and strict fiscal policy, Egypt landed up into favorable conditions by a sudden gambit introduced by the Central bank by lifting the currency control. The price rise also came down suddenly from 33% to a whopping 12%, reporting the lowest of all in last two years. 

The risk was highly prone to the misinterpretation of the policy that may lead to inflation depreciating the value of the Egyptian pound. Correspondingly, there would be an increase in the import price. But the risk is found to be limited. 

With controlled inflation, inflation in foreign investment will also work in country’s favor in improving its business climate. This year Egypt has reported the highest foreign currency reserve amounting to $42.5 billion. At the same time, it has also issued the international bonds amounting to $4 billion that got extremely oversubscribed. The devaluation of currency turned on a positive note by raising the economic conditions without causing inflation. 

But the main factor behind raising the investor confidence is not only social but regional unrest as well. The macro environment was getting favorable for the businesses exploring the capacity of the major projects in different sectors like infrastructure. Currently, Egypt has become a complete package of business opportunities with huge geopolitical support, strong macro-environment, and positive attitude of investors. With all these factors landing up in the same arena, the consumer is found to be opportunistic whereas the huge FDI investment is being made in sectors like transportation and real estate sectors. With falling interest rates and stabilizing economy, a huge opportunity has grown up in the banking sector. 

The market stakeholders have become ready to take risks of a greater level that are also streamlined till this moment. The key challenge to the policy makers now moves around executing the policies for a sustainable economic growth and investment. Sovereign bonds are found to be much profitable than the local T-bills as its yield range between 6-8%. It has been noticed that in comparison to the Middle east markets, Egypt is the more preferred one as it valuations are not limited. 

Analysis

The process of sharing meaningful information in time through both formal and informal means is defined as communication. To be effective, the factors like being relevant and reliable are required for its transpiration in a time bound manner. It has been the most common criteria for evaluating the learning experience and evaluations of external members about the teaching experience (Faranda & Clarke, 2004). The effective communication is inclusive of the process of passing on information that can be easily understood (Heffernan et al., 2009).

One of the major barriers to effective communication is either miscommunication or cross cultural misunderstanding even if the sender of the information is aware of the receiver’s language. To prevent these forms of barriers, the expatriates now need to communicate in the customer’s language irrespective of the location from where they belong to. However, it is well known that English is considered as the first language in the International Business activities. But till this information is supported by different incidents and events, the expatriates must be involved in learning different languages and number of nationalities and the degree of interaction with their local countries. 

If the culture is understood, the messages hidden in the communication can be appreciated without even understanding its full meaning. If the business is related to the global assignments, it must communicate in the language of the customers (Chitakornkijsil, 2010). Even if employees don’t move to a different country but they need to communicate internationally through travel or electronic mode (Mcenery and Desharnais, 1990). In today’s date, all businesses are striving to expand internationally and must be aware of the host country’s language. 

For minimizing the communication issues, the company may think of hiring the host country’s personnel which have a fair knowledge of the home country culture or a mixed batch of host and home country personnel may be created. The company can also think of training certain experts in different regions or provide training to the persons always been placed in international division with intercultural communication. 

It has been agreed by the communication experts that managers must abide by the culture of the country in which they are working and must be language and culture sensitive. To gain an effective global structure, cross cultural training and robust communication relations are important to the wellness of the team. 

The cross-cultural training is useful in training employees for global assignments. Even if the basic knowledge remains similar in every program but any kind of training needs to be customized according to the specific type of the cultural assignment. On the other hand, the personalities, the origin, and the learning experiences of the managers may also affect the cross cultural training. It is a general notion that the training imparted to expatriates is generally unorganized and is limited to the pre-departure orientation programs (Baliga and Baker, 1985). 

It is only a small portion of the companies, nearly 32%, that provide some kind of International training. But other than US, it was observed that the companies based in Europe and Japanese multinationals do provide International training with the ratio being 69% European and 57% Japanese. The success of the participants attended the International training entirely depends upon the preparation, assistance, and the training they receive (Fontaine, 1997; Anon, 2000; Black etal., 1991). 

The training prevents the participants from getting failed in the overseas (Guzley & Ha& Ivancevich, 1971). The meaning of any training program can be made out from its content. For choosing the right content, the trainer has to prepare for the training by assessing the type of market the business is getting in, the requirements of the people settled overseas, and the type of representative the organization is sending so as to make it as useful as possible for the expatriate. Hence, cross-cultural training would be the best for all kind of international projects. 

Exhibiting the in-depth study of the cross-cultural training, it has been noticed that in many areas the competencies and skills that the representative possess might be of no use if the adjustments are not made. The factors which are vital for success in overseas include acculturation and adaptation, meaningful conversations, and understanding other cultures (DeFranco, 1999; Osland & Bird, 2000). Other important adaptation would be of different managerial styles that would make the intercultural interactions effective and put a barrier on interpersonal blunders (Zakaria, 2000). 

This type of training would help the volunteers in improving their cross cultural skills such as facilitating cross-cultural adjustments that may lead to a high amount of involvement (Shim and Paprock, 2002). This will boost the expatriate to learn more and pass on all his knowledge and awareness to the other employees of the host company. This is definitely going to improve the overall performance of the expatriate together with the host company employees. 

As per the Theory of Contingency, the cross-cultural training must fit in-between the training styles and learning styles that will definitely impact the efficiency of that training in terms of satisfaction level, commitment, and engagement of the volunteers involved in their respective workplaces (Kolb, et al, 1995; Vance & Paik, 2002).

In the past 20 years, the cross-cultural challenges in the International Business Management have grown by a high percentage as the companies have started pushing their boundaries across different territories. It is evident that the culture forms the values, attitudes, and behaviors of the people that are transferred from one generation to the next as a part of the norm. The main factors that influence a culture are power distribution whether it is according to hierarchy or egalitarian approach, social connection between family members whether they are individualistic or work collectively, their attitude towards environment whether they are believe in spoiling the environment or exhibit a friendly nature with the surroundings, the pattern in which they work, that is, whether they are multitasking or take up single work at a time, and their attitude towards uncertainty and social control whether they follow rules or their friendship is based on relationships and like to deal with uncertainties.

But since the teams involved in International business generally form a cross-cultural team, their trust over each other might be inadequate. For instance, a Chinese team member may worry why Indians are speaking in Hindi or may raise an argument of not maintaining the decorum of the workplace in absence of Manager by speaking in their native language. On the other hand, people from developed countries may have an inferior outlook towards people from developing countries. 

There may also be a certain kind of biasness on the basis of previous perceptions that Japanese are good decision makers and Indians don’t value on-time delivery. The gestures exhibited by the members of certain communities may be false such as Japanese nodding their head as a sign of politeness but perceived as agreement. 

Also sometimes the differences in the communication styles are being influenced by the culture of certain country that may lead to misunderstandings in communication leading to a wrong decision. Some countries convey the messages in a direct manner. Nevertheless, it is considered that an ‘indirect’ style is more informal containing implicit and contextual messages. 

The messages can also either be elaborate, exact, or succinct. In the elaborate style the speaker might be repetitive, precise with least suggestions, or have moderate repetitions with minimum words with cues given by gestures. 

The style can also either be contextual or personal with the titles attained though hierarchical relationships or focusing on individual achievements with no regards to hierarchy. The styles can also be categorized into being affective or instrumental. In affective manner, the communication is more relationship oriented and the audience needs to comprehend the non-verbal cues given at the time of speech whereas in instrumental conversation the speaker is more focused on the objectives and makes use of direct speech with least amount of cues involved. 

The gestures which have been found prominent amongst the people working in the arena of International Business dealing with cross-cultural teams are hand gestures, embracing, hugging, firm handshakes etc. They also maintain physical distance where 18” is considered as intimate, 18” to 4’ as personal, 4’ – 8’ as socially acceptable, and 8’ as public. Putting on artifacts in the speech comes under non-verbal cues such as tie pin, jewelry etc. Similarly adding on the paralinguistic like speech rate, pitch, & loudness and making use of deodorants, powder, and fragrance etc all come under non-verbal communication. Time appropriateness is also one of the factors that form a part of the gesture which also makes an impact over the business trends of different countries. 

Keeping in view the importance of different types and styles of communication, it can be suggested that there have been instances in the past of businesses or joint ventures because of lack of understanding or letting down the importance of cross cultural challenges and handling them in a suitable manner. Therefore, the companies dealing internationally or present globally are conducting different training programs on cultural understanding and acculturation especially for the representatives who are often traveling abroad or hired from another country such that they can adjust themselves and deal with people in an effective manner. 

All that the Managers need to do is to become more sensitive towards the cross-cultural challenges generating from the cultural scenario of a particular country.

Conclusion

With reference to the Media article discussed in the context of International Business, it can be suggested that since the President elected in the Egypt was unopposed or win by a minor degree of opposition, his communication skills seem to be effective and influential such that the investors turned out a positive outlook towards the economic growth of the country despite of getting the lower ranking for credit investments. 

The potential barriers for effective communication mentioned above are majorly declared to be the cross-culture presence of the team members for a particular project, hence it can be suggested that the president elected for Egypt is found to be familiar with the global culture of different countries and is successful in managing to attract the investors to invest in the moving down economy with a high scope of giving the higher returns for the money they have put into the business of Egypt. 

Recommendations

It can be recommended that in order to tackle the cross-cultural differences affecting International business the esteemed officials of Egypt such as the external affairs department and department of International business must possess high awareness of the foreign culture, respect for that culture, ways to establish good relations with the other foreign countries, ignorance of the cultural differences already present, minimizing the existing differences, and managing the potential gaps present in the system of International Business. 

The differences that have been recognized in the system must be handled with a positive outlook and used in building up the synergies amongst the team members belonging to different cultures. Once these gaps are handled in an effective manner it would be easy for the country to expand into different global regions. 

Appendices

 Cross-Cultural Training ModelCross-cultural Training Model






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