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CULTURAL ISSUES A COMPANY FACES WHEN EMERGING IN A NEW MARKET Home

Cultural Issues a Company Faces when Emerging in a New Market 2
CULTURAL ISSUES A COMPANY FACES WHEN EMERGING IN A NEW MARKET
TABLE OF CONTENT
INTRODUCTION…………………………………………….3
1.1 BACKGROUND……………………………………………3
1.2 OBJECTIVES AND AIM………………………………….4
1.3 RESEARCH QUESTIONS…………………………………4
LITERATURE REVIEW……………………………………….5
2.1 CULTURE CATEGORIES……………………………….5
2.2 DECIDING THE MODE OF ENTRY……………………6
2.3 METHODS OF EXPORTS……………………………….7
2.4 ECONOMIC MODEL………………………………………7
2.4.1PESTEL MODEL…………………………………7
2.5 CULTURE AND MARKETING…………………………8
METHODOLOGY AND METHODS…………………………9
3.1 METHODOLOGY………………………………………9
3.2 DATA COLLECTION………………………………….9
3.2.1 PRIMARY DATA………………………………9
3.2.2 SECONDARY DATA………………………….10
3.3 RESEARCH APPROACH…………………………….11
DISCUSSION AND LIMITATIONS………………………….12
4.1 DISCUSSION……………………………………………12
4.2 LIMITATIONS………………………………………….12
WORK SCHEDULE…………………………………………….14
REFERENCES………………………………………………….15
Chapter 1
Introduction
1.1 Background
A company can develop a new product or emerge in a new market by using its own ideas or those of others, however, there are a number of issues such as cultural problems that it can encounter during the entire process. Firms have to take cultural issues into consideration before deciding to enter into a new market. Some of cultural issues include, religion, norms, customs, and language. When a company has adequate knowledge and information it needs, the process of emerging into a new market will be less painful.
The most important thing for a company is to consider the market it’s about to enter, once it begins the process of developing a business model and concept (Govindarajan and Ramamurti 2011). The key to a successful venture is taking time to understand the market, which means carrying market research to evaluate every aspect of the market including cultural issues.
The reason for this study is that firms always look to expand to new opportunities and markets, and for each new market that a firm establishes itself in, there is always a different culture that might sometimes generate different problems for the firm. This paper aims to research the cultural issues that companies face when emerging in the new market and how they solve the issues. This study is hence so important since it will create a guide to those firms planning to enter new markets. The guide will provide the best way possible on how to avoid or/and deal with cultural issues.
1.2 Objectives/Aims
The objective of the research is to increase our understandings on the various cultural issues that most companies face when emerging in new markets.
1.3 Research Questions
· How do firms gain understanding and knowledge concerning the cultural issues of a new market?
· How do firms overcome these issues?
· What is the utmost efficient and effective technique to lessen risk relating to cultural issues in new markets?
Chapter 2
Literature Review
Culture is the knowledge and characteristics of a particular group of individuals, encompassing religion, language, arts, cuisine, social habits and music. According to Hofstede Geert “culture is the collective programming of the mind which distinguishes the members of one human group from another” (Hofstede 1991, p. 90). In general, culture is a way people do their things.
2.1 Culture Categories
One has to understand the diverse cornerstones of culture, to understand the various issues that firms face when entering new markets. Culture can be categorized into various categories for easy understanding. Sense of space and self is the first category. Self-identity and appreciation can be expressed differently in a different culture. For example, it is more okay to boast in some culture, whereas, people have a habit of being humble in other cultures (MacCormack et al 1980). People are structured and formal in some cultures, whereas, others are flexible and informal.
The other category of culture is body languages and spoken language. Body language differs between different cultures. People speak different languages with different dialects in various part of the world. Body language is somehow universal; however, signals and gestures have a different explanation in different cultures.
There are diverse feeding habits and diet in different cultures. For instance, many Americans and Europeans eat a lot of beef which is unacceptable among Hindus. Jews and Muslims are not permitted to eat pork, whereas several Swedes have distinct harm for Christmas. The food varies generally from culture to culture and the way food is served and eaten also differ. Food are eaten directly with bare hands in some cultures, while in other cultures, individuals use wooden sticks and many more.
People have different norms and values in different cultures. In several parts of the world, individuals try to survive due to the absence of food and water, whereas individuals in other regions concentrate on upgrading their standards of livings through material possessions and better employment. Success is frequently measured in wealth in the United States, whereas in other regions such as Pacific Island, success is measured on the bases of how much an individual shares his/her wealth.
Attitude and beliefs of people are other significant factors of culture. This is an aspect of culture that is difficult to measure. People have different attitudes and culture. Religion has the same effect on the attitudes of people, but a person interprets a message might be different from the other interpretation.
2.2 Deciding the Mode of Entry
A firm has to choose the means of entry when it decides to emerge into a new market. This decision is thought to be affected by the following aspects: external factors, internal factors, favourite mode characteristics, and so on. The most interesting factor to our study is the external factors because cultural issues belong to external factors that face a firm (Zhang et al 2007). The socio-culture comprises of language, cultural characteristics, and education level, to name a few. The socio-cultural issues influence a choice of means of entry for a company because it can generate internal indecision in the business and by that, it will influence their choice.
2.3 Method of Exports
The products of a country are either manufactured in either the third country market or domestic market and then indirectly or directly exported to a new market or a new country. Export is the most common means for initial entry of a company and is essential in evaluating the market growth. It is normally the distinctive way for firms to initiate entry to external markets which changes towards foreign-based activities. The major types of export methods include cooperative exports, direct exports, and indirect exports.
Cooperative exports are when a company collaborates with other companies in exporting functions (Michaely 1977, P.50). Direct exports are when the firm itself carry out the exporting processes, and also the company is in direct connection with the intermediary. Indirect export, on the other hand, is when the firm indirectly carry out the exporting processes. As an alternative, a domestic corporation, for example, export house or trading company accomplish those activities.
2.4 Economic Model
There are different economic models established to evaluate how cultural issues affect the decision of a company to emerge in a new market.
2.4.1 PESTEL model
The PESTEL model categorizes six key types of the external environment that have an influence on a company. These factors include economics, social, political, environmental, technological, and legal factors. The PESTEL model is suitable for viewing the future effects of environmental aspects to the company. The socio-cultural factors are the most interesting aspect of the model to this study (Issa et al 2010). The sociocultural factors include income distribution, lifestyle changes, population demographics, attitudes to leisure and work, consumerism, education level, and social mobility.
2.5 Marketing and Culture
Culture varies from one state to another. A company, therefore, has to strategize its marketing approach to fit the values and principles of a particular country. Culture entails individuals’ beliefs, attitudes, and values, what works in a particular state may not work in another. Culture plays a crucial role for a firm when it comes to understanding consumer behaviour, therefore, culture influences customer’s consumption at the end of the day (Deshpande and Webster 1989). It is important for firms to carry thorough marketing research to know how a particular aspect works in an external market, to assist them in selecting the perfect promotional mix that is suitable for the culture of a particular country (Webster 1995, p.10). A company needs to design the market mix: price, product, people, and promotion to fit the culture of a particular country.
Chapter 3
Methodology and Methods
3.1 Methodology
The aim of the research is to find out more about cultural issues when a company enters a new market. The research will mostly refer to the past experiences of a few firms. The study will also use models and theories that explain how firms should deal with cultural issues to analyse the answer from the respondents. The study will look at diverse literature on cultural issues, emerging markets, and globalization.
Countries work in diverse manner, and whatever works in a region does not normally work in another region. The research wants firms to understand the difficulties that different cultures can bring to a company emerging in a new market. This research will do that by using theories and model, and what companies actually do.
3.2 Data Collection
The literature has to achieve the following criteria when selecting the information for the dissertation; it must be in an understandable language, be contemporary, and must relate to the subject. The dissertation will use the following type of data; secondary data and primary data.
3.2.1 Primary data
Primary data is the category of data collected from the original source by a researcher. This type of data can be collected in different manner, for example, through interviews, or through observations. Interviews are useful for gathering reliable and valid data which is essential to the research (Wilcox et al 2012). There are different methods of interviews, interviews can either be, informal and unstructured or they may be formalized and structured or semi-structured method. The interview method that will be used for this study is the semi-structured because the study will not use similar questions for all firms, only for a few, and it will not use pre-coded responses as is done in structured interviews. Further or follow up inquiries may be asked during the interview to explore the answers/questions deeper. The research will not conduct unstructured interviews because the research uses predetermined questions.
Semi-structured method of interview is usually used to evaluate data in a qualitative manner, therefore, the semi-structured method fit this research because the data in the study is of a qualitative nature. Additionally, semi-structured methods are suitable when the research is of investigative nature, this will fit this research because it is examining in what manner cultural issues create challenges for companies.
3.2.2 Secondary Data
Secondary data is the information that has already been collected by another individual in other studies. It includes both quantitative and qualitative data. Secondary data comprises the following categories; survey-based data, government database, and documentary data, to name a few (Szabo and Strang 1997). The documentary data that the research will use if from the website of the companies, newspapers, articles and from books relating to the subject. To add on that, documentary data is frequently suitable in the study that also uses primary data collected by different methods, in this situation, questionnaire.
3.3 Research Approach
The study will involve interviews with a few companies that have emerged in new markets to find answers for the objectives. The interview will provide a further understanding of the issue, and offer sufficient evidence to come up with a better deduction that other firms, thinking of moving to new markets can benefit from.
Chapter 4
Discussion and Limitations
This chapter will analyse the findings and the expectations of the research. It will also include limitations of the study.
4.1 Discussion
People tend to think that all human beings are the same when it comes to actions and behaviour, no matter what culture. Directors make a lot of wrong choices because perform in a way that they would have performed in their local culture. A business deal or a relationship can be damaged easily because of misunderstanding that arises due to cultural issues.
Cultures might bring substantial problems for firms when emerging into new market. A market culture may influence a strategy of a company. An important aspect that this study concentrates on is the mode of entry of a company. Cultural issues will influence the mode of entry of a company. Cultural problems will also influence marketing strategy of a company. Additionally, culture will also influence the mode of exports for company products. Many companies hesitate when it comes to emerging into new markets, since it is understood as a risk.
4.2 Limitations
There may be a possible limitation in this study, some of the limitations include the following;
· Limited access to data
When research involves questioning certain organizations or people, a problem may arise of limited access to the respondents.
· Time constraints
Academic researchers must always meet the deadline for submitting the research. Thus, the time available to carry out the research may be constrained by the deadline of the assignment.
· Conflict arising from personal issues and cultural bias
Sometimes the researchers may be biased due to their perspectives or cultural background, and this may affect the legitimacy of the study. The researcher may also have biases towards results and data that only support their arguments or hypothesis.
Work Schedule
Task name Time duration
Data collection 2 days
Data Analysis and interpretation 3 days
Writing of dissertation 1 week
Proof-reading of dissertation 1 hour
References
Deshpande, R. and Webster Jr, F.E., 1989. Organizational culture and marketing: defining the research agenda. Journal of marketing, 53(1), pp.3-15.
Govindarajan, V. and Ramamurti, R., 2011. Reverse innovation, emerging markets, and global strategy. Global Strategy Journal, 1(3‐4), pp.191-205.
Hofstede, G. (1991). Cultures and organizations: Software of the mind. London: McGraw-Hill, 4(1), pp.70-100.
Issa, T., Chang, V. and Issa, T., 2010. Sustainable business strategies and PESTEL framework. GSTF International Journal on Computing, 1(1), pp.73-80.
MacCormack, C., MacCormack, C.P. and Strathern, M. eds., 1980. Nature, culture and gender. Cambridge University Press.
Michaely, M., 1977. Exports and growth: an empirical investigation. Journal of development economics, 4(1), pp.49-53.
Szabo, V. and Strang, V.R., 1997. Secondary analysis of qualitative data. Advances in nursing science, 20(2), pp.66-74.
Webster, C., 1995. Marketing culture and marketing effectiveness in service firms. Journal of Services Marketing, 9(2), pp.6-21.
Wilcox, A.B., Gallagher, K.D., Boden-Albala, B. and Bakken, S.R., 2012. Research data collection methods: from paper to tablet computers. Medical care, pp. S68-S73.
Zhang, Y, Zhang, Z and Liu, Z., 2007. “Choice of entry modes in sequential FDI in an emerging economy”. Management Decision, Vol. 45 No. 4, 2007, pp. 749-772

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