SOCIO-CULTURAL IMPACT ON THE PERFORMANCE OF MULTINATIONAL COMPANIES

Socio-Cultural impact on the Performance of Multinational Companies,

The main purpose of this article was to understand the importance of socio-cultural factors’ influence on
the performance of multinational companies.
Society and culture have an impact on every aspect of the overseas business of multinational companies.
Analogously, the socio-cultural environment is significant for multinational companies. The key socio-cultural
factors that have a major impact on the operation of the multinational companies are

1) culture;

2) language;

3) religion;

4) level of education,

5) customer preferences, and

6) the attitude of the society towards foreign goods and services.

The influence of culture on multinational companies is real and widespread. Multinational companies are
affected by more than one culture at a time. Through their subsidiaries located in various countries, they are
exposed to different national cultures. Culture in particular country directly, or indirectly, reflect on the achieved
performance of multinational companies. On the basis of the results obtained from various surveys, it can be
concluded that successful multinational companies develop acceptance and understanding of cultural differences
among various country and learn how to take advantage of opportunities, and cope with disadvantages that arise
from different national cultures.


Religion is an important social factor that should take in consideration when some company decides to
operate in a given country. Religion, through its effects on people, affects a multinational company and its
operations. Consequently, it can be concluded that an appropriate understanding and respecting of religion is
extremely important for the efficient functionally of multinational companies.


From the perspective of the multinational companies, it is very notable to have good knowledge of the
local language. The lack of knowledge of a local language is reflected on the performance of foreign subsidiaries
and their managers. Consequently, the languages difficulties can be reduced by appointing expatriates on the top
managerial positions in the local subsidiary or nationals that have good knowledge of parent company’s
language and corporate culture.


Education has notably impact on international business. In a country where the level of education of local
population is higher, it is considered that expectations from multinational companies are proportionally higher.
Buyers with a higher level of education require more quality products and services, a better price-quality ratio (a
better VALUE-for-MONEY RATIO) and know their right as customers. Also, well-educated local workforce
requires better working conditions, more stable work, and greater opportunities for further improvement as the
business environment changes

Even if people like or use same or very similar products in various countries, they may use them for
different reasons, on different occasions and under different circumstances in each country. Therefore, it is very
important for multinational companies to modify their product and promotion strategies that will suit the
preferences of the population of different countries. The multinational company should implement strategies that
will be appropriate for the given socio-cultural environment. This type of strategic approach leads to
successful business outcomes.


In summary, it can be concluded that it is very significant for multinational companies to anticipate the
key socio-cultural factors in each host country separately in order to evaluate the actual performance of foreign
subsidiaries and their managers.

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