Importance of Culture in Business Decisions and Its Implications for All

Increasing Importance of Culture in Corporate Decision Making

The Indian Information Technology (IT) bellwether and the market leader in software services, Infosys, announced that it was appointing Salil Parekh as the CEO or the Chief Executive Officer following the resignation of Vishal Sikka, a few months ago.

When the announcement was made, the company emphasized that Parekh was a good “cultural fit” when compared to the other contenders and that by relocating to Bangalore and otherwise managing the turbulent times, he can ensure that Infosys turns the corner over its recent flaps with the founders over corporate governance issues.

While the other aspects of this discussion are the not the focus of this article, the key imperative that was behind this decision was the move to make someone who was familiar with the Indian Milieu and was comfortable in a cultural sense meant that culture has indeed become important in business decision making.

The fact that many other corporates in recent months have begun to emphasize how their decisions are being influenced by the need to place culture and local familiarity over other considerations is yet another indication that all firms, global or local, have begun to take culture seriously in their decision-making process.

Global Trends Point to Localization and the Glocal Approach

Indeed, this is also the trend globally wherein the election of Donald Trump as the President and the British people voting to leave the EU or the European Union all point to the global headwinds turning inward rather than radiating outward.

While this might seem as a counter to the liberal and the globalization trend, one must also remember that most global firms now operate in a Glocal manner wherein they reach out to global clients and at the same time, work with a local mindset or what is known as Glocal approach.

Indeed, this Glocal approach has become so important that global firms are increasingly hiring local hands to run their operations worldwide so as to ensure that such people have the expertise and the experience to deal with the cultural issues that might arise due to their operations in different countries.

Thus, one can sense a new strand or new chapter in the history and evolution of globalization wherein it proceeds and moves ahead with a distinctly local flavor so that the end result is something like a new page being turned and written by local considerations while retaining the basic structure of the page and the layout.

Do Not Retreat from Globalization

Having said that, one must also be cautious about the growing importance of culture in business decision making. While it is ok and all right to be aware of local cultures and take into account the local sensibilities, one must not proceed too far since then one risks “losing the global plot” wherein instead of globalization, we have localization with neither meeting the other.

In other words, it is important to take into account cultural fits and cultural factors and at the same time, not lose the essence of globalization which is a liberal rule based international order that has served the people of the world in a truly transformative manner so far.

After all, it was only because of globalization that Billions of Chinese, Indians, and Africans, have been lifted from poverty and have begun to aspire to global standards of living that were hitherto unknown to them.

Moreover, it was only because of globalization that the Asian Middle Class prospered and began to be taken seriously as a consumer class by Western and for that matter, even domestic firms and hence, in our quest to become true nationalists, we must not lose sight of the overall purpose and direction of globalization.

Culture is the Glue that Holds Nations and Firms Together

On the other hand, there is nothing wrong with culture determining strategy as well since after all, businesses and especially those in the services sector count human resources as their assets and hence, their preferences should take precedence over most considerations.

Indeed, the election of Trump as the President signifies that the American people have bought into his Make America Great Again and the America First slogans and hence, in a democracy, the people are the final arbiters.

Moreover, even China and India have nationalistic leaders who value and cherish cultural symbols over other aspects and hence, there is always a gain for business to flow with the tide and sail with the wind to reap the benefits from such trends.

Apart from this, the fact that the culture that one grows in and one takes as one’s identity is a powerful motivator for performance means that as long as there is no intolerance and there is harmony within organizations, giving precedence to culture makes for eminent business sense.

Thus, it can be argued that as long as one does not retreat from the basic premise of globalization which is that international trade and free markets work for the good of the people, incorporating local flavors and cultural considerations would only enhance the taste of the globalization process.

Conclusion

Lastly, after considering both the sides of the global versus local debate, one must also note that there are historical precedents to this aspect wherein trade between nations before the industrial revolution proceeded by absorbing different cultures and not necessarily by turning inwards entirely or shutting the door on trade.

To conclude, it would be useful to remember that Gandhi’s words that, “One Must Keep the Doors Open to Winds from Around the World, and Must Not be swept off One’s Feet by them”.

Authorship/Referencing - About the Author(s)

The article is Written and Reviewed by Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.