Through a detailed review of the relevant literature, examine the arguments supporting the view that cultural diversity can have a positive impact on global firms.

“Diversity is a competitive advantage. Different people approach similar problems in different ways.” (Colvin 1999).

Kao (1996) states that if creativity springs from divergence then a great source of ideas is in the multicultural world. The interconnected world gives opportunities to link cultures. With regards to coke he says ‘we have a lot of accents now.’

Management.

‘Whether organizations produce in multiple countries or only export to them, whether employees work as expatriates or only travel abroad, whether legal ownership involves joint ventures, wholly owned subsidiaries, or strategic alliances, global firms must manage despite the added complexity of working in countries simultaneously.’ Adler, 2002.

When entering a culturally diverse market place management is the key to success. ‘Competitive success in the global economy will be increasingly dependent on the contribution of a new breed of manager- the global manager’ (Schermerhorn et al 1995). Managers must be culturally sensitive, and have the ability to take a strategic approach to the human dynamics of working across cultures: to build trust, minimise misunderstandings and create synergy in international business relationships (TCO Profile). This is seen as a powerful resource to benefit from the process of change and to tap into levels of creativity and potential produced by such radical departures from past certainties (Bruce, 2002).

With more and more organisations operating across linguistic and cultural borders, cross-cultural management skills can make the difference between personal success and failure (TCO Profile). With this increase so does the frequency of business negotiations between people from different countries and cultures. Perlmutter (1983) estimates that over 50% of an international manager's time is spent negotiating.

Managing diversity enhances organisational flexibility (Cox, et al 1991: identifies steps to how this may be accomplished).

Companies that have successful diversity programs seem to have higher returns. Referring to how a company's stock performance could relate to its diversity level. It is believed that using social criteria to evaluate a company paints "a picture of the corporate culture and a picture of the quality of management." (Kuczynski, 1999).

Hofstede (1980) noted that the reasons why culture is an important aspect for those who wish to do business outside their own market place and country. Firstly, nationality is important as it has historical implications, which have formed the political backbone of nations and countries. The sociological aspect of culture defines who we are, and experiences and educations received mould the psychological being, culture is collective mental programming.

Hofstede (1980), set out four dimensions of national culture:

• Individualism versus collectivisim: this involves the relationship people have with each other, where individualists are loosely integrated and collectivists are tightly. The degree of each depends on the countries wealth, with collectivists being in poorer regions and vice versa.
• Power distance: this is how people deal with unequality. (This unequality may become inequality). The authority centralisation and autocratic leadership measure power distance. Mental programming leaves those dependants on power remaining so. It is seen that those showing large power distance are collectivist- poor countries, but hose of low power distance are not always individualist- wealthy western countries.
• Uncertainty avoidance: this is based on the fact that he future is uncertain and that some take each day as it comes and take risks, not work as hard, and be tolerant of others with differing beliefs and opinions- weak uncertainty avoidance, this opposite can be said of those with strong uncertainty avoidance. These people protect themselves from risk using technology, laws and rules, and the use of religion that makes all uncertainty tolerable.
• Masculinity versus femininity: this is the division of the role of sexes in society. Masculine societies achieve and show off, ‘big is beautiful’, making money etc. but femine societies are geared towards relationships over money, looking after the environment, quality of life etc.

Using Hofstede (1980): leadership and power distance are the dimensions firms should be aware of when entering a country or market as these will determine the strategy or structure they attempt to implement.

For an organisation power distance and uncertainty avoidance are important, as they serve power and avoid uncertainty. The theories of motivation and practices of motivating people are both related to individualism and collectivism. High individualists are highly motivated to fulfil their own obligations incorporating ‘self respect’ and ‘self actualisation’. Masculinity- femininity and uncertainty avoidance are significant in motivation theories, the need to achieve and assert oneself e.g. US, on the other hand Japan is motivated by security and low uncertainty avoidance.

One area of cultural differences researched extensively is the contrast between individualism and collectivism. Compared to individualistic cultures, collectivist cultures emphasis the need of the group. The research indicates that individualism-collectivism is an important dimension of cultural differences in nations. (Triandis, McCusker, & Hui, 1990). The extent of people’s cultural beliefs of individualism or collectivism has been used to predict the effectiveness of many management practices. As Hofstede (1980) stated: “What this can also lead to is a better ability to manage… essential for the common survival of us all.’’

Strategy.

If companies are to be successful in an ever-changing environment they must view diversity as a business strategy that will distinguish them from the competition (Crockett, 1999).

Global strategies for operating within global industries require that the building and management of such complex sets of resources have to be structured internationally and globally (Segal-Horn, 2002).

It is also a matter of making sure that there is a level playing field, making certain that there are rules and regulations for international trade that benefits all (Baroness Symons, 2002). The implications of global synergies with respect to competitive advantage have become increasingly clear; they produce a positive impact on corporate profitability (e.g., Hamel and Prahalad (1985); Ghoshal (1987); Kim, Hwang and Burgers (1989)). This is typically actualised through enhanced innovative capability or some form of cost reduction. For example, Honda' s engine technology once developed for producing motorcycles was virtually costlessly available for the production of engines in the different capacities in which Honda exploited it across the globe.

When MNCs enter foreign markets, especially their global contenders' home markets, they may have strategic motivations that go beyond the narrow calculus of choosing the most efficient entry mode; that is, they may have global strategic motivations (Hout, Porter and Rudden 1982; Hamel and Prahalad 1985; Kim and Mauborgne 1988). Hence, global strategic motivation can be defined as motivation to fulfill strategic aims set at the corporate level for the purpose of overall corporate efficiency maximization (Hwang, P.et al 1992).

A number of corporations have reaped the benefits of high profits from having Japanese strategies formulated by expatriates whose skills straddle the cultural and linguistic boundaries. A Japanese client may feel unimportant if they have a meeting and the visitor who cannot speak Japanese. However the recognition that business is fast becoming global has made it easier for US firms to send employees abroad (Lam, 1998).

Europeans see differences in language and culture as a business advantage for example ‘Wella’, the German shampoo, cultivated its European origins when entering an already saturated market place. Two Japanese-speaking executives, who recognised that the final decision lay with the wholesaler and not the customer, enticed them, for want of a better word, by using concerts, to incentive tours of German castles. It was also the cultural insights of Luder Paysen, the Japanese-speaking CEO of BMW Japan which allowed the German auto trader to set up his own distribution network at the time when the US negotiators were insisting that the Japanese mark be closed to foreign entry. Using his knowledge of the culture he found out what the customers actually wanted, in one instance 80% of the Japanese BMW drivers wanted the steering wheel put on the wrong side of the car so their neighbours could see they could afford a foreign car! Europeans take the learning of foreign languages very seriously they hold the European Union Training Program, a one-year intense course of Japanese (Lam, 1998).

As markets globalise, increasing numbers of mergers and acquisitions are crossing linguistic and cultural borders. Within the EU alone, the ease of financing brought by the single currency has prompted a noticeable rise in the number of cross-border mergers (TCO Profile).

The increased number of mergers and acquisitions that have taken place over the past decade imply that there is something to be benefited from cultural diversity, which shall now be reviewed.

Deregulation has a positive impact on globalisation as it reduces time, costs, and complexity involved in trading across national boundaries. The creation of the European Union in 1992 and NAFTA (North American Free Trade Association) in America in 1989 allows for the free movement of goods and services and finances between members of the EU and Canada, respectively (Segal-Horn, 2002).

Worked examples:

Appendix 1 maps out the extent and level to which five different organisations achieved their global status. In all cases they did not intend to globalise as quickly as they did. Aerospace, software and pharmaceuticals initiated exporting activities due to the nature of the market. But in all cases the process began due to the opportunities being offered. In all cases they were quick to learn about other cultures and change their working practices as a result. For Piles Construction they were trying to build their culture and enact this to gain success and a reputation overseas. For Aerospace the most important element was nurturing cultural values internally, in terms of working practices and cultures, so to gain valuable knowledge and experience.

Technology and Communication.

‘… new technology will lead to healthier lives, greater social freedom, increased knowledge and more productive livelihoods…’ (UNDP 2001).

The global economy is historically new, for the simple reason that only in the last two decades have we produced the technological infrastructure required for it to function: telecommunications, information systems, micro-electronic-based manufacturing and processing, information-based air transportation, container cargo transport, high speed trains, and international business services located around the world (Castells, 1998).

Much of the public opinion has been fuelled by the availability of ICT and the rapid transparency of ideas and events around the world that is itself one of the benefits of globalisation (Segal-Horn, 2002).

Technological change and development operates across boarders and has no geographic boundaries. It is probably one of the strongest drivers of globalisation. Entire industries have been created e.g. mobile phones. Technological development may also transform traditional industries such as financial services e.g. selling insurance policies or bank loans over the Internet (Segal-Horn, 2002; Hermel, 1999).

The emerging global information society is characterized by positive features: there will be, better education, more information and diversity of culture. New digital technologies create more choice for people in education, shopping, entertainment, news media and travel. (Castells, 1998). Another recent development which has helped millions is the globalisation of knowledge through information technology. One result is the Ugandan doctor who can better care for the health of his patients because he now has free access, via the Internet, to the latest medical journals. The rate of technological change in specific industries is also observed to influence the decision to pursue a global standardization strategy (Samiee et al 1992).

The flexibility of this global economy allows the overall system to link up everything that is valuable according to dominant values and interests, (Castells, 1998), the global information economy is based less on the location of natural resources and cheap and abundant labour, and more on the capacity to create new knowledge and to apply it to a wide range of human activities.

Furthermore, the highest tier of science and technology, the one that shapes and commands overall technological development, is concentrated in a few dozen research centres and ‘milieus’ of innovation around the globe; overwhelmingly in the United States, Western Europe and Japan. When they reach a certain level of scientific development, Russian, Indian and Chinese engineers, usually of very high quality, can only pursue their research by linking up with these centers. Thus highly skilled labour is also increasingly globalise, with talent being hired around the globe when firms and governments really need the skills, and are ready to pay for it. (Castells, 1998).

The global economy has several features:

• National economies are merely ‘units’, all closely bound together;
• The global economy combines instantaneous electronic transactions with the accelerated distribution of physical goods and through ‘just-in-time’ systems;
• The global transformation is closely linked to the growing significance of knowledge and information in the world economy. Information becomes the critical raw material of which all-social processes and social organisations are made. What is critical in all economic activities is ‘the capacity to retrieve, store, process and generate information and knowledge.

The use of ICT powerfully promotes globalisation. The Internet permits almost instant communication and co-ordination regardless of location and it allows orders to be negotiated and even to receive electronically delivered products and services in an almost frictionless manner. An information society in which this potential was realised could, perhaps, be one in which wealth was distributed around the world with greater equity - since such enterprises may tend to buy physical goods and services locally. It would certainly exhibit a great deal of genuine economic competition as numerous such enterprises and networks joined in a vigorous open market. For example: A German citizen living in Singapore may buy a book by a French author published in Canada from a website in Seattle more easily than from a shop in the next street.

Cultural diversity enshrines a wealth of experience and knowledge about different ways of living, value systems and approaches to issues. The valorisation of diversity is concerned with the exploiting the potential of ICTs in overcoming communication difficulties, "not just because of linguistic barriers, but also because of differences in setting priorities, methods of resolving conflicts and so on".

Cultural diversity leads to increased access to the media, to travel and to information, the speed the cheapness, quality and range of communication arising from advanced ICT and advanced forms of mass transportation (Segal-Horn, 2002; Makhija et al, 1997).

Employment.

Invest.UK announced 869 investment projects from 35 countries creating over 70,000 new jobs. As in previous years, easily the largest source of new investment was the US, which accounted for 421 projects and over half the jobs. Projects covered the whole spectrum, from automotive to telecoms and chemicals to software, and included a wide range of business activity from research & development to manufacturing to customer contact centres - the very diversity emphasising our broad appeal as a country in which to do business.

For US companies seeking to expand their operations in Europe, the business benefits of doing so from the UK remain clear:

• A skilled, hard working, flexible workforce
• Low corporate and personal taxes
• Ease of doing business
• World class research and innovation centres and universities
• Excellent access to other European and global markets
• A leading telecoms and e-business market

These corporations directly employ "only" about 70 million workers, but these workers produced one-third of the world's total private output; and the global value of their sales in 1992 was US$ 5,500 billion, which is 25 per cent more than the total value of world trade in that year (Castells, 1998).

Wages are no the only reason why firms decide to invest, productivity is a major factor. Since the creations of NAFTA in 1989 Mexican wages have increased by 30%, substantial jobs have been created on the American/ Mexican Border. Silicon Valley in the West Coast USA is located close to a cluster of large universities that provide a continuous source of the knowledge workers needed by this innovation-focused business. Most global firms seek to benefit from such specific national differences (Segal-Horn, 2002).

In India and more recently in Pakistan, information technology based exports are booming. One of the reasons for this is that technology and software industries have highly skilled workers and the high number of graduates required. But these graduates cost a tenth less than their equivalent form an American university. This is a form of exploitation but it will only be temporary as wage levels will increase they have done in other developing economies. In the 1950s and 1960s Japan was a cheap labour economy (Segal-Horn, 2002).

Poverty.

‘…stimulating economic growth, making markets work better for the poor and building up their assets- is the key to reducing poverty.’ (World Bank 2000).

The collapse of the Soviet bloc and the rise of the Internet have accelerated things that were already happening: the fall of transport and communication costs, the spread of privatisation and the erosion of barriers to trade and investment. The Asian economic expansion was built on open markets, beginning with those textile markets. In East Asia today, fewer than 15% of people live in poverty, compared with nearly half in 1960. But one of the best ways to reduce poverty in Africa and elsewhere is to increase trade. Analysts have calculated that a 50% cut in all tariffs worldwide would bring a net benefit to developing countries of US$ 140 billion, or three times all current aid flows. The World Trade Organisation is potentially the most effective weapon against poverty, provided the benefits of free trade are shared fairly. Many serious NGOs agree. Oxfam recently reaffirmed that ‘international trade can be a force for poverty reduction’ (Speech; Jack Straw 2001; Baroness Symons, 2002).

Sir John Bond, Chairman of HSBC Holdings plc, was awarded the Foreign Policy Association Medal at the FPA's financial services dinner. In his acceptance speech, he explores the paradox that, while more people than ever before are migrating to developed countries in search of work, much of that work is beginning to move from developed to developing countries. China will be a major beneficiary of these trends.

Brands.

In an article by Rainer Hengst (Sept 2000), he lays out a plan on how to reach your targeted market from an advertising perspective, and the importance of being aware of simple things as to how people like to be addressed, what can be contained within the pictures etc. he states that getting this right will make the difference.

Cultural homogenisation is where the world shares culturally recognised symbols, and is seen as providing an international context and market place in which global brands such as Coke and Levi are universally aspired. Meaning that similar goods and services can be sold to similar groups of people all over the world (Segal-Horn, 2002).

Consumers often use size and global presence as a measure for quality i.e. consumers prefer to buy things that they recognise, secondly as costs have risen companies have tried to spread these costs, especially fixed costs, over a larger and larger market place. Thirdly, there are reputation and branding advantages arising from the positive reputation of international brands that companies benefit from. It also reduces their risk in launching new products using the same brands (Segal-Horn, 2002).

Through cultural diversity firm products can adapt to their given location rather than standardise their products for example: The Pilsbury food company sell jam filled Toasties in Europe and lamb filled Toasties in the Middle East. McDonalds sells tea in the UK, wine in France, teriyaki burgers in Tokyo, the list goes on (Segal-Horn, 2002).

One of the most far-reaching benefits available to global firms is that they can locate different parts of their business activity where ever they find most efficient. I.e. they disaggregate their value chain of business activities. This means that global firms can benefit from lower risks and higher skilled or low cost workers, or both, they benefit from the best research access, biggest government subsidies etc. they can customise their value chain accordingly.

In a study of the banking industry by Orlando (2000) it was found that cultural diversity does add value and contributes to the firms competitive advantage.

Consequences of Cultural diversity.

British Trade International was established three years ago as the UK government's trade and investment organisation. It operates through two arms, Trade Partners UK, which assists UK companies selling in overseas markets, and InvestUK, which helps foreign companies locate in the UK. Trade Partners UK has already helped many thousands of companies based in the UK to export their goods and services around the world (Baroness Symons, 2002).

Firms available to help: American companies that intend to expand into the Japanese marketplace face the possibility of tremendous profits. Entering the Japanese market offers huge business opportunities to American companies Several firms offer training for Americans who want to do business in Japan. Three consulting firms attending the conference were Japanese-American Cross-Cultural Consulting and Education of Carmel, Calif.; NeoConcepts of Fremont, Calif.; and Clarke Consulting Group of Chicago.

The insurance industry has changed since deregulation in Europe has allowed similar products to be sold in different European markets and since technological development has made additional cross border sales and distribution channels available (Segal-Horn, 2002).

There is an increased focus to maintain and increase competitiveness in the global market place. Corporations acknowledge cultural diversity is necessary to compete in the multi-national business environment. IBM, Exxon, Coca Cola, and Dow Chemical, for example, gain more than half their revenues from overseas markets (Cox, 1993). For the first time corporate America see diversity as having significant influence on performance and profitability. ‘Creativity thrives on diversity’ (Morgan 1989).

Industry is higher for manufactured goods than non-manufactured goods, and is highest for the more sophisticated manufactured products such as chemicals, machinery and transport equipment, electrical equipment and electronics. This is because sophisticated manufacturing is more likely to benefit from economies of scale in production and is easier to "differentiate" to the final consumer. More complex manufactured products that rely on many components and/or processes may also benefit more readily from splitting up production across countries. In Mexico it rose from 63% of total manufacturing trade in 1988-91 to over 73% in 1996-2000. In the US, it rose from 64% to 69% in the same period. In several countries, like Austria, France and the UK, manufacturing intra-industry trade has been in the 70-75% range for over a decade. In Korea and Japan, it is lower, at around half of total manufacturing trade, and in a few countries, like Australia and Iceland, manufacturing intra-industry trade accounts for about a third of total manufacturing trade, (Turner & Richardson, 2002).

These facts remind us that we live and work in a truly global economy where business and investment are ever more mobile. With its huge population, diverse economy and reforming industrial base, Russia is potentially one of the biggest markets in the world. UK exports last year reached £900 million. In just the first seven months of this year, UK exports to Russia have risen by 27% (Baroness Symons, 2002).

Over 400 British companies are already established in Russia, many of which are keen to maintain their presence for the longer term. Scottish and Newcastle have a successful partnership with Baltika, Russia's largest brewer. Other leading investors in Russia include BP, Shell, Cadbury and Unilever, (Baroness Symons, 2002).

Conclusion.

 ‘Deep cultural undercurrents structure life in subtle but highly consistent ways. Like the invisible jet streams in the skies that determine the course of a storm, these hidden currents shape our lives’ (Hall, 1976).

As early as 1939 cultural diversity was considered: It is as President Roosevelt foresaw when he said, ‘Beyond question, within a few scant years air fleets will cross the ocean as easily as today they cross the closed European seas. Economic functioning of the world becomes therefore necessarily a unit; no interruption of it can fail, in the future, to disrupt economic life everywhere.’ (Source unknown)

Multiculturalism is becoming the norm in global companies. It brings some difficulties but the results demonstrate that cultural diversity does in fact add value and contributes to the firm’s competitive advantage (Raatikkainen, 2002).

Industries and firms go global in the quest for competitive advantage. The drivers given here are by no means exhaustive as triggers for change, but they represent the most powerful factors (Segal-Horn, 2002).

Organisations must value diversity and allow for the celebration of cultural differences. The competitive and moral advantages must be appreciated and not just tolerated (Carnevale & Stone, 1994). To be successful managers must unlearn old practices, create new structures and redesign human resource systems (Jamieson & O’Mara 1991; Rhinesmith, S. 1995).

On reading the material for this review it has shown that international and cultural and organisational dimensions are fundamental variables for the company performance and that there is still a lot of work to be done given the rapid changes taking place in the world in general (Hermel, 1999).

Domestic cultures are strong enough to resist being submerged in global identities. Indian culture is still Indian culture even though people drink Coca-Cola and wear Nike shoes. And most would say that Britain has been enriched, not threatened, by the other cultures in our own society.

It is hard to see how we can curb global brands without artificially restricting people’s choice. It was tried in the Soviet bloc for 75 years. There is nothing inevitable about globalisation. It is created and shaped by the choices and decisions of us all. But it is easy to see why it can seem so overwhelming. If a global culture exists, it is because people see that it has benefits and have made a conscious decision to choose it.

We possess both a wealth of culture and history, of which we are all proud. Our cultural heritage has, over the years, shaped our societies and influenced our standards. Our cultures have also played their part in both the UK and Russia developing, as recognised powerful trading nations. As we all know, St Petersburg was founded by Peter the Great who wanted the city to become Russia's "window on the west". His vision of a modern Russia integrated with the rest of Europe is alive today (Baroness Symons, 2002).

There are many very positive things about globalisation. We are all enriched, and our cultures are enriched, by contact with other cultures. Positive features of globalisation depend on there being a diversity of cultures.

"Instead of allowing diversity of race and culture to become a limiting factor in human exchange and development, we must refocus our understanding, discern in such diversity the potential for mutual enrichment, and realise that it is the interchange between the great traditions of human spirituality that offers the best prospect for the persistence of the human spirit itself. For too long such diversity has been treated as threat rather than gift. And too often that threat has been expressed in racial contempt and conflict, in exclusion, discrimination and tolerance". In this declaration entitled ‘Tolerance and Diversity: A Vision for the 21st Century’, Mary Robinson and Nelson Mandela emphasised the importance of the unique opportunity and challenge which multiculturalism offers civil society (Burke, E. 2001).

144 nations came together at Doha - promoting peace through trade. Providing international and economic stability. In my opinion that the following statement is the strongest of all and indisputable:

“We knew that in the shadow of the 11 September attacks, we had to demonstrate that trade could unite the World” (Baroness Symons, 15th April 2002).