Introduction

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            No two nations are alike, cultural and legal systems differentiate nations from each other and grant them their individuality. Multinational corporations (MNCs) who seek to enter new markets face a harrowing task of adapting their strategies, policies, and structure to meet the needs and expectations of the local environment. In some ways, the differences between cultures legal systems, and environmental conventions can prove beneficial in driving growth and innovation among MNCs. The closer integration of societies through globalization has helped to merge legal systems in the European and Caribbean regions to a certain extent. However, differences still exist between European and Caribbean Community (CARICOM) nations despite their close economic and legal integration.

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            The cultural aspects of conducting business in the international environment will be evaluated to provide an overview of the challenges businesses face and their ability to overcome them. Different legal systems throughout the globe and their impact on MNCs will also be analyzed to differentiate how various systems affect MNCs. Variation in global legal systems will be examined against their influence on corporate social responsibility (CSR) strategy and foreign direct investment (FDI). A clear understanding of the implications of multiple legal systems on MNCs ability to effectively implement CSR and FDI will help to clarify the challenges that present themselves in the international business environment. An evaluation will be done to examine the impact of major environmental conventions on MNCs effectively operating their international business.

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Cultural aspects of conducting business in international environments

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Communication

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            There are various cultural aspects of communication that needs to be understood by MNCs before they enter new markets. Language, greetings, body language, and inflection are all communication aspects that vary widely based on cultural influences (Kraidy, 2017; Lim, 2017; Neuliep, 2017). Knowing how to address and engage prospective business clients during a meeting is a necessary skill that requires research and cultural awareness (Kraidy, 2017).

 

            Language. In Ireland, Gaelic is the official language with English being the second recognized language; however, most business transactions are conducted in English rather than Gaelic (Lim, 2017). India is also another complex society where cultural nuances dictate specific language be used in business negotiation based on the province where such business is taking place (Kraidy, 2017). Going into a culturally charged international business negotiations without having a complete understanding of the language can create a severe disadvantage in negotiations (Lim, 2017). The growth of social media has also advanced the evolution of certain cultural lingos and references that could be detrimental to negotiations if taken out of context; therefore, MNCs should avoid complicating their international business by maintaining a clear policy of acceptable language use during negotiations (Kraidy, 2017). Losing face during a negotiation in China because of language issues can result in complete breakdown of the deal, the use of experienced translators can go a long way in preventing language barriers (Lim, 2017).

 

            Greetings. To understand how greetings and interactions can be culturally sensitive topics, I present the comparison of Guyana, Ireland, & Saudi Arabia. Guyana and Ireland share many similarities when it comes to greetings, both cultures highly respect personal greetings with everyone, male and female, being greeted (Dirani, Hamie, & Tlaiss, 2017; Neuliep, 2017). Although Guyana has a large Muslim population, the cultural differences between Guyana and Saudi Arabia vary greatly (Long, 2016). Saudi Arabia maintains significant legal restrictions on male-female interactions that would prevent contact during a greeting, whereas Guyana and Ireland encourage and embraces the equal standing of women in the business environment (Dirani, 2017; Long, 2017). Indeed, the government of Guyana, with support from the local Muslim community, maintains and advances several programs to empower women to create their own businesses, a policy that ABC corporation would not experience in Saudi Arabia (Dirani, 2017; Long, 2017). Avoiding culturally charged issues such as gender role restrictions during greetings and interactions require advance research and awareness by MNCs.

 

            Body language & inflection. Simple actions such as shrugs, furrowed brows, smile, etc. can convey the level of interest and attention that an individual has in a conversation (Neuliep, 2017). The tone and level of voice also relay a significant amount of meaning behind a conversation (Neuliep, 2017). Irish and Indian cultures tend to enjoy telling stories and making conversations with their guests, they especially expect guests to engage and respond in a positive manner (Neuliep, 2017). Misunderstanding can easily arise in a setting where MNCs are seeking to enter new markets and are unaware of cultural nuances regarding body language and inflection (Neuliep, 2017). Speaking with certain tones can be misconstrued as insulting or making a mockery of a fellow employee in certain societies (Kraidy, 2017). Knowing the right way to sit, eat with, present ideas, and speak to multicultural audiences is a necessary tool for multinational corporations which are expected to respect the society and culture, wherever they may be (Kraidy, 2017).

 

Hierarchy

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            MNCs operation in global environments is driven by the organizational structure as dictated by local business customs. Organizational hierarchy in different cultures can dictate the ability and willingness of lower level employees to bring issues and concerns to the attention of upper management (Kossek, Huang, Piszczek, Fleenor, & Ruderman, 2017). The perception of upper management in certain cultures have a great deal to do with the effectiveness and efficiency of business operation by MNCs in various overseas locations (Ferraro & Briody, 2017; Kossek et al., 2017). For example, employees in India respect hierarchical structures and would avoid bringing concerns to upper management unless expressly instructed to do so (Kossek et al., 2017). The Scandinavian nations maintain a more relaxed structure where employees have informal and direct lines of communications with upper management (Ferraro & Briody, 2017). The hierarchical structure of the organization will help determine the level of efficiency and operational effectiveness within the organization (Ferraro & Briody, 2017; Kossek et al., 2017).

 

Agreements

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            The agreements that MNCs draft with their foreign partners can be significantly influenced by cultural expectations. In the U.S. there is a general thought to place everything in writing to accommodate every possible disagreement or issue (Chan, 2017). The Chinese prefer a more generalized approach to agreements and contracts, opting to take each other’s word as a statement of the relationship that exists between them (Chan, 2017). Knowing when to take a stand and when to acquiesce takes skill and tact since the agreement will disappear at the first sign of either party losing face (Chan, 2017). Certain agreements between MNCs and local partners could be driven by political and religious beliefs (Chan, 2017). MNCs need to ensure their agreements are legal and responsible when it comes to protecting stakeholders against unnecessary loss and damage (Folsom, Gordon, Van Alstine, & Ramsey, 2017). In some instances, executives need to know how to use determination to get what they want in an agreement or contract without insulting the other party (Folsom et al., 2017). The tricky aspect of doing business in an international and globalized environment requires MNCs to constantly evaluate and adjust their position and approach to developing situations (Folsom et al., 2017).

 

Challenges posed by differences in foreign legal environments

 

Different legal systems

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            Differences in the Common law, Civil law, Customary law, Mixed law, and Religious law systems that govern the world tends to complicate the legal process for MNCs. Globalization and the interconnection of societies have helped to create semi-uniform legal systems in the European Union (EU) and the Caribbean Community (CARICOM). Nevertheless, most nations maintain their own individualized and unique legal system that MNCs are forced to deal with. The rule of thumb for MNCs is to consult with local legal experts before entering new markets to avoid running afoul of local laws and regulations (Glenn, 2014). Working with local communities to create jobs and sustainable environmental practices can help to reduce legal barriers to entry by enticing local authorities to cooperate (Glenn, 2014). MNCs need to be smart in their legal dealings to ensure they operate within the laws while avoiding costly and time-consuming incidents (Glenn, 2014).

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Foreign direct investment (FDI)

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            A nation’s effectiveness in attracting foreign direct investment is based largely on its legal system. Each system allows for a specific level of protection and legal recourse when issues arise. The common law system is one of the best systems for attracting FDI since the court system is somewhat more independent (Lee, Biglaiser, & Staats, 2014). The common law system is also viewed as a more stable system where property rights and contracts are protected and enforced (Lee et al., 2014). Civil law systems, such as the UK and Canada are viewed as more rigid frameworks where the courts are less independent (Lee et al., 2014). Mixed legal systems often include some variation of civil, common, and or religious laws (Lee et al., 2014). The mixed systems can be complex and complicated for MNCs to traverse, often serving as a deterrent to FDI (Lee et al., 2014). Mixed systems often have a slow legal process where rights of corporations are often questionable, such as in Guyana (Lee et al., 2014). Religious legal systems such as Egypt is more restrictive to investors (Lee et al., 2014). Religious laws tend to come with varying interpretations from one judge to another based on personal belief rather than the letter and spirit of the law (Lee et al., 2014).

 

Ethics

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            The role of ethics is essential for success in MNCs; however, the ethical standards set by MNCs are often tested by local laws and regulations. The ethical standards of a company determine the behavior and actions of the corporation, regardless of the market/industry, they are in (Orts & Smith, 2017). Companies in the tech industry, such as Facebook and Google, constantly face ethical dilemmas in China, where the government has numerous restrictions on content (Pan, 2017). MNCs will often find that their ethical standards are questioned when faced with legally mandated gender discrimination in the United Arab Emirates (UAE) and other Middle East nations (Orts & Smith, 2017). Even some Common law states can prove challenging where MNCs are required to enforce a code of ethics to prevent violating numerous laws and regulations driven and constantly changing through court opinions (Orts & Smith, 2017). Maintaining a basic global standardized ethical framework helps to ensure some level of stability across the board.

 

Corporate social responsibility (CSR)

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            Social responsibility is another aspect of international business that is influenced by various global legal systems. MNCs often avoid legal issues by adopting a strong global CSR policy with minor localization and adaptation to meet unique and stringent laws and regulations (Backer, 2017). In most cases, some form of localization helps MNCs to bond with the local community and create an easier path for conflict resolution with authorities (Backer, 2017). Aspects of localization would be a foreign MNC adapting its emissions standards to meet California’s strict emission standards, a localization strategy that could eventually evolve into a stronger global strategy (Backer, 2017). Stronger regulations and laws in certain nations help MNCs to develop stronger CSR policy that benefits the company (Backer, 2017). Employees who are trained to act ethically in their everyday dealings tend to be more aware of CSR and how the company’s policy affect the local community (Backer, 2017). Empowering local employees can help MNCs to meet legal, regulatory, and community expectations in term of CSR.

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Impact of major environmental conventions on MNCs

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            The recent Paris Agreement and the European Agreement Concerning the International Carriage of Dangerous Goods by Inland Waterways (ADN) are two major environmental conventions that affect MNCs. The Paris Agreement targets emissions standards and levels from various nations to stem the rate of climate change (Blau, 2017). MNCs will experience stronger regulations regarding emissions control among nations participating in the Paris Agreement as they seek to meet the terms of the agreement (Blau, 2017). The ADN mainly impacts MNCs who need to transport dangerous chemicals and products on the inland waterways of European nations (Soares & Garbatov, 2017). The purpose of the ADN is to ensure safety protocols are in place to prevent spills and pollutions (Soares & Garbatov, 2017). There are numerous other international environmental conventions that have a host of requirements on MNCs in virtually every industry. Consulting with local legal experts in each market that they operate will help MNCs to understand better what is required and expected of them as responsible global corporations.

 

Conclusion

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            MNCs face dynamic challenges brought on by as range of cultural and legal expectations stemming from the individuality of each nation around the globe. Meeting cultural and legal expectations take strong leadership and the ability to necessitate change as required for the growth and development of the company. Legal and regulatory demands can be a driver for innovation and development or an Achilles heel, it all depends on the effectiveness of executive leadership within the organization. Respect for cultures and customs can be gained by studying and understanding the reasoning behind them; informed leaders are able to make informed decisions. Localization strategies can be a great help for MNCs who opt to consult with local experts who are well versed in the cultural nuances and legal expectations of each society. Comprehensive research ahead of market entry is a necessity that could help avoid cultural blunders and legal/regulatory issues in the long run.

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References

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Backer, L. C. (2017). A Lex mercatoria for corporate social responsibility codes without the state? a critique of             legalization within the state under the premises of globalization. Indiana Journal of Global Legal             Studies, 24(1), 115-146.

 

Blau, J. (2017). The Paris Agreement: climate change, solidarity, and human rights. Cham, Switzerland: Palgrave             Macmillan.

 

Chan, W. (2017). Litigation: taming the dragon: enforcing contracts in China. LSJ: Law Society of NSW Journal,             (30), 78.

 

Dirani, K. M., Hamie, C. S., & Tlaiss, H. (2017). Leadership in Saudi Arabia: a multifaceted phenomenon.             In Leadership Development in Emerging Market Economies (pp. 245-260). Palgrave Macmillan US.

 

Ferraro, G. P., & Briody, E. K. (2017). The cultural dimension of global business. Taylor & Francis.

 

Folsom, R., Gordon, M., Van Alstine, M., & Ramsey, M. (2017). Principles of international business transactions.             West Academic.

 

Glenn, H. P. (2014). Legal traditions of the world: sustainable diversity in law. Oxford University Press (UK).

 

Kossek, E. E., Huang, J. L., Piszczek, M. M., Fleenor, J. W., & Ruderman, M. (2017). Rating expatriate leader             effectiveness in multisource feedback systems: cultural distance and hierarchical effects. Human Resource             Management, 56(1), 151-172.

 

Kraidy, M. (2017). Hybridity, or the cultural logic of globalization. Temple University Press.

 

Lee, H., Biglaiser, G., & Staats, J. (2014). legal system pathways to foreign direct investment in the developing             world. Foreign Policy Analysis, 10(4), 393-411.

 

Lim, T. S. (2017). 8 Verbal communication across cultures. Intercultural Communication, 9, 179.

 

Long, J. (2016, October). How business can help us meet the global goals. In International Trade Forum (Vol. 2016,             No. 1, pp. 15-17). Organisation for Economic Cooperation and Development (OECD).

 

Neuliep, J. W. (2017). Intercultural communication: a contextual approach. Sage Publications.

 

Orts, E. W., & Smith, N. C. (2017). The moral responsibility of firms. Oxford, United Kingdom: OUP Oxford.

 

Pan, J. (2017). How market dynamics of domestic and foreign social media firms shape strategies of internet             censorship. Problems of Post-Communism, 64(3/4), 167-188. doi:10.1080/10758216.2016.1181525

 

Soares, C. G., & Garbatov, Y. (Eds.). (2017). Progress in the analysis and design of marine structures: proceedings             of the 6th International Conference on Marine Structures (MARSTRUCT 2017), May 8-10, 2017, Lisbon,             Portugal. CRC Press.