Culture, Institutions and International Strategy

Topics: Geert Hofstede, Cross-cultural communication, Culture Pages: 4 (1186 words) Published: July 13, 2008
Culture, Institutions and International Strategy.
For those firms who want to expand their business internationally, it is inevitable for them to face the cultural challenge. This article stresses the impact of culture on international operation as well. According to institutional-based view, informal and formal institutions have their own way to reduce risk. For informal ones, they rely on relational contact which is informal relationship based and personalized exchange. What is more, Human capital and Relationship capital are important factors to perform successfully in international market which is related to informal institution thought. Also, the article help me to understand the relationship between institution, firms and strategic choices which institutions provide guidelines to firm and effect the way they formulate and implement strategy. For example, Microsoft tries to change their strategy according to Chinese government since the intellectual property protection law is weak which caused it to lost more than billion dollars in Chinese market. Today, Bill Gates openly concedes that tolerating piracy turned out to be Microsoft's best long-term strategy and reduce their price to suit, both, local consumers and law (Kirkpatrick, 2007). Clearly, Microsoft’s strategy was affected by an institution (government) since the law of property rights protection is weak and aim to protect the socialist public properties not private properties (Li, 2004). International strategy, culture and institutions

Beside the strategic objective that driven firms (lecture 6), firms should consider other characteristics, which is cultural factor, to enter a new market. Firms prefer to enter markets with similar cultures because they understand better consumers' needs and take fewer risks. Moreover, they can better manage their new employees if the new market’s culture is similar to their own since they want to gain superior knowledge on that culture and overcome liability of...

References: Kirkpatrick D., 2007. ‘How Microsoft conquered China’, Fortune Global 500, CNN Money News, July 17th, 2007. Available at: (Assessed: 30th August, 2007)
Li S., 2004. ‘Why Is Properties Right Protection Lacking in China?’, An Institutional Explanation, California Management Review, 1-7.
Tao Q., 2006. ‘Race to Great Wall: Competing in the Chinese Automobile Industry’, Global Strategy, Thomson South-Western, 165-170.
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