intercultural competence and internationalization: benefits for the development of small and medium...

Columbia International Publishing Journal of Globalization and Business Management (2014) Vol. 2 No. 1 pp. 14-39 doi:10.7726/jgbm.2014.1002

Research Article

______________________________________________________________________________________________________________________________ *Corresponding e-mail: [email protected] 1 Institute of Sport Science and Innovations, Lithuanian Sports University, Kaunas, Lithuania 2 Vytautas Magnus University, Kaunas, Lithuania

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Intercultural Competence and Internationalization: Benefits for the Development of Small and Medium

Enterprises Expanding the Business in Foreign Markets

Jolita Vveinhardt1*and Jūratė Dabravalskytė2

Received 24 September 2014; Published online 3 January 2015 © The author(s) 2014. Published with open access at www.uscip.us

Abstract A globalisation created the opportunities of growth and development for enterprises as well as many challenges to face. Enterprises are forced to compete and internationalize their activities if they prefer to stay on the market. The article analyses the earlier studies on the issues of internationalization of enterprises, intercultural competence and its significance in international business; the concepts of culture, intercultural competence and internationalization formulated by different authors are presented, their features are distinguished; various instruments to evaluate and improve intercultural competence and the significance of intercultural competence for internationalization of enterprises are discussed. Keywords: Intercultural competence; Internationalization; Small and medium enterprises; Globalization; Foreign markets; International development

1. Introduction Relevance of the research. People have a natural tendency to constantly look for and purchase something new, unseen, exotic, and brought from distant lands. If there is a demand the supply always occurs, therefore, businesses start selling in other countries, or vice versa, importing to their own country. The power of the society to develop international business can be understood as the ability to adapt to the constantly changing international political and economic situation using the tools of business development (Melnikas, 2006). This allows timely disclosure and efficient use of the new opportunities for economic and technological progress to enhance economic well-being and social comfort. According to B. Melnikas (2006), a thorough cognition and understanding of international business development and its current affairs creates preconditions for adequate understanding of various problems of international business development finding and using the

Jolita Vveinhard and Jūratė Dabravalskytė / Journal of Globalization and Business Management (2014) Vol. 2 No. 1 pp. 14-39

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right solutions to these problems, at the same time ensuring that international business is developed purposefully and effectively. A lot of examples of international corporations that successfully or unsuccessfully built their business in another country can be found in both scientific and other international press. After numerous attempts it was understood that certain knowledge and ability to use it, intercultural competence, is required. In international business environment, intercultural competence at an individual level is a prerequisite for a successful career in a global world, and at the level of the organization, the majority of such employees brings business success in foreign markets. Intercultural communication can be a prerequisite for both successful and unsuccessful international cooperation. Therefore, for companies facing international competition, it is necessary to build and improve additional capacities, taking into consideration business cultural differences and focusing all the attention on the successful development of the activities in the countries with different cultures. These capacities in the intercultural context become a necessary competence, as they enable companies to use their existing competences in the internationalization of business. The problem of the research: what is the role of intercultural competence in enterprise internationalization, and how to integrate these processes, identifying expected benefits for development of small and medium enterprises, i.e. expanding their activities in foreign markets? The level of problem exploration. Intercultural competence is very actively analysed in the context of human resources, since these areas are directly linked. There are also a number of papers discussing intercultural competence in the field of higher education (Fantini, 2006; Sinicrope, et al., 2007; Deardorff, 2008; etc.), and it shows the importance of intercultural competence and its significance for career and professional development. However, by now there is a lack of extensive research and analysis on how intercultural competence influences businesses, especially the sector of small and medium enterprises, their internationalization and development abroad. This topic was analysed by W. Niemeier et al. (2012) and K. Keršienė (2010), but in the first case, a lot of attention is paid to an entrepreneur as a person, intercultural competence of entrepreneurs is analysed. The author of the second paper sees intercultural competence as a tool to increase competitiveness of a company and gives a lot of attention to the management of intercultural competence on the level of the company / organization. Another significant problem analysed in this paper is enterprise internationalization, international business development has been a widely researched topic for several decades already. However, in spite of the changing business standards and conditions, shifting forms and principles of communication, most authors writing about internationalization ground their work on the classical Uppsala model (Johanson, Vahlne, 2009), developed in the seventies. The main reason for this is the versatility and adaptability of the model in most business segments. The authors of this model (Johanson, Vahlne, 2009) consider internationalization of business a gradual process. Meantime, in recent years a number of companies are oriented towards international markets from the very first years of activity, what basically negates the versatility and adaptability of the model for 21st century business organizations. T. Mughan (2010) and Q. Rizvi (2010), who see internationalization as a business model of the company, presented in more detail in this paper, provide a different approach to internationalization.


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Object of the research – the benefits of intercultural competence and internationalization for development of small and medium enterprises. The aim of the research is to identify the benefits offered by intercultural competence and internationalization to development of small and medium enterprises expanding their activities in foreign markets after the examination of different approaches to intercultural competences and internationalization. To achieve the aim, the following research objectives are set: 1. To distinguish intercultural competence as potentially a key element of internationalization. 2. To discuss the cultural aspect as an exceptional context of intercultural communication. 3. To determine the key elements of intercultural competence. 4. To compare the situation of international corporations, small and medium enterprises in respect of intercultural competence. Methods of the research. The methods of primary and secondary data collection and systematization, analysis, synthesis and comparison of scientific literature were used to prepare the article. The methods of scientific literature analysis and abstraction were used for the analysis of published scientific studies of internationalization, intercultural competence and their interactions.

2. International Business Development Internationalization is a complex and multidimensional process, describing the continually growing geographic extent of the firm, involvement in activities in foreign countries (Vabinskaitė, 2009). However, successful activities under the conditions of uncertainty in foreign markets require a clear position of each business entity, its conception and programme of actions, the ability to evaluate its objectives, possibilities, objective circumstances of the activity independently – strategic thinking must prevail in the field of business (Alimienė, Kuvykaitė 2004). Small and medium enterprises (hereafter SMEs) penetrating into foreign markets seek mostly short-term objectives, i.e. to increase the sales revenue, profitability of the company, realize the overproduction (it is especially characteristic of industrial enterprises that cannot stop production because of technological processes), expand the circle of users (characteristic of service companies), etc. If the executives of the company are able to implement them, the income and profitability indicators of the company may actually increase in a certain period. However, the enterprise, especially SME sector, should focus on the formulation of long-term objectives and their implementation. For instance, more strategic objectives of export (to entrench in a new market, to conquer new market shares, to occupy a new niche in the export market), after their implementation, ensure the company a long-term competitive advantage, allow to consolidate its positions for a long time in the specific markets; therefore, the growth of sales and profitability of the company is achieved naturally – these processes are inseparable from the strategy of internationalization. There are a number of internationalization theories in the literature, but in the context of this research we will briefly review only the main theories. Traditional theories of internationalization can be divided into two main groups, i.e., internationalization based on economic decisions and


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internationalization based on evolutionary behaviour (Vaiginienė, 2009). The first approach attaches the highest significance to specific economic aspects, i.e., internationalization is seen as dependent on economic decisions, e.g. how companies make strategic decisions in the international business: choose markets, the ways to access the markets and locate the business. This approach states that the company, selecting between alternatives, based on rational, economic criteria, such as costs, risks and control, makes decisions of internationalization (Vabinskaitė, 2009). Proponents of this approach also explain internationalization by strategic decisions of the company, which depend on abilities and the components resulting from the managed resources, such as the general human capital, management know-how, production know-how of and availability of financial capital. This attitude was once considered to be an alternative approach, but in recent years it attracts increasingly more attention. The other approach argues that internationalization of the company is a gradual process. On the basis of this approach two traditional models of the processes of internationalization have been formed. Uppsala model of internationalization asserts that internationalization is a long gradual process, when the company is becoming increasingly more aware of foreign markets and, at the same time, increases its resources in order to increase the degree of involvement abroad (Vabinskaitė, 2009). Innovation-based model of internationalization represents internationalization of the activities of the enterprise in stages. Basically, these models are quite similar, as they are based on the same key ideas of process theories, but there is a fundamental difference: innovation-based model of internationalization explains the internationalization of the company as a result of managerial innovations, in which each stage presents an innovation (Alimienė, Kuvykaitė, 2004). The innovation model on operational level is based on the indicator of the part of export in sales, which can affect the level of involvement of the company in international activities. Uppsala model is by far the most popular and oldest internationalization model, which is based on the (behaviouristic) theory of behaviour the firm, on E. Penrose (1959) theory of the growth of the firm and on certain characteristics of the product life cycle theory (Cattani, Tschoegl, 2002). As it has been already mentioned, internationalization of the firm in the Uppsala model is interpreted as a process where the company consistently increases its international involvement. This process shows itself by the change of the knowledge of foreign markets and operations on the foreign markets, and by increasing commitments of resources to foreign markets (Vaiginienė, 2009). It is believed that the decision to increase commitments in the foreign market, as well as the operational model is influenced by the knowledge of the market and already existing commitments to the market. Conversely, the firm acquires knowledge about the market when undertaking the current activity and then it decides to increase the commitments it has. E. Penrose (1959) distinguishes two types of market knowledge: objective knowledge that can be acquired by learning, and knowledge from experience, which is acquired only from personal experience (Fletcher, 2001).


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Fig. 1. Uppsala model (Source: Johanson, J., Vahlne, J. E. (1977), p. 26) Uppsala model describes internationalization of the firm by a causal cycle, in which the aspects of the internationalization structure inevitably influence the aspects of internationalization change. The aspects of internationalization structure are the commitment of the market and knowledge of the market; the aspects of internationalization change are the current activities of the company and the decision to commit (Fig. 1). The model of internationalization process can explain two concepts of internationalization of the firm: the concepts of stages and psychological distance (Johanson, Vahlne, 2009). The stage concept argues that the activities of the company in a specialized market of the state are developed in accordance with the chain of establishment of business, i.e. in the beginning there are no any permanent export transactions, later export is developed through independent agents, later on – through subsidiaries, then the time comes to the production unit in a foreign country. This sequence of stages shows the growing commitment of resources of the firm to the market. This sequence also reflects the changes in the activities of the firm, which are determined by an increasing understanding of the market. No market related experience is acquired on the first stage. On the second stage the firm already has a permanent source of information about market conditions; however, this information is quite superficial. Subsequent activity of the firm is already based on the differentiated and significantly broader market information and experience (Vabinskaitė, 2009). Whereas the Uppsala process model has been developed from empirical research on international competitiveness of Swedish enterprises, there are some opinions that this model can only be applied to Swedish companies. And although subsequent studies in other countries have proven the universality of the model (Johanson, Vahlne, 2009), the view that this model no longer reflects today’s internationalization processes, especially its classical concept, based on the stages of business, is still upheld (Alimienė, 2004; Rizvi, 2010). The first Uppsala model was based on the concept of stages, but later it was revised and updated in 2009, as the changing business standards and globalization induced the authors of the model to pay attention to other factors of the internationalization process. Thus, the concept of psychological (cultural) distance was formed. In this case, it is argued that the firm steps into those markets, which are psychologically different from the home market as little as possible (Vabinskaitė, 2009). The factors that reflect this aspect, such as language, culture, political system, etc., can interfere with firm and market information flows. Therefore, normally firms initially develop their activities in those countries, where they best

Change State

MARKET

KNOWLEDGE

MARKET

COMMITMENT

CURRENT

ACTIVITIES

COMMITMENT

DECISIONS


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understand the opportunities and there is a small risk of unknown market. According to the authors of the model J. Johanson and J. E. Vahlne (2009), in the past internationalization was seen as a consequence of the company growth, influenced only by the capacities and resources of the company itself, as well as on the experience acquired. In conditions of globalisation internationalization is perceived here not as evolution of the company, but as a selected business model, heavily influenced by surrounding organizations. Therefore, internationalization in the new Uppsala model is already seen as a network of organizations, where different organizations are closely related to each other. According to the authors of the model, the company has not only to accumulate the necessary knowledge and skills, but it also has to be able to notice business opportunities (i.e., to establish the appropriate relations for internationalization), and expand them (Johanson, Vahlne, 2009). The revised model is presented in Figure 2.

Fig. 2. Revised Uppsala model (Source: Johanson, J., Vahlne, J. E. (2009), p. 1424) Figure 2 shows that the most obvious difference between the old and the new Uppsala models is that they are based on different approaches to internationalization of enterprises. The old model was based on the concept of stages, whereas the new model is based on the theory of psychological distance. Based on this approach, the company will start internationalization using the markets that are most psychologically close to them (in this way it is easiest to find partners willing to commit), but not necessarily economically most useful or culturally best familiar. This is one disadvantage of this model. Another important thing is that in spite of the updating of the model, the versatility of this concept is still questioned (although this is exactly what the authors of the model seek to prove most). According to J. Vabinskaitė (2009), this model is difficult to apply to internationalization of services, and M. Alimienė and R. Kuvykaitė (2004) note that the model eliminates the born global enterprises, as the latter carry out internationalization in several directions at once and do not rely on the principle of “psychologically closest market”; otherwise, the company should make enormous investment in preparation. This is why the “learning by doing” is perhaps the most common term in the business world, when it comes to training and improvement of professional skills, as well as in international business, especially among SMEs: the latter are often restricted by a lack of financial resources, therefore cannot hire very qualified professionals or invest in the training of existing employees. But then how do these companies to overcome the difficulties, when the company runs international business development in foreign markets? SMEs in Western Europe have for some time already become the object of activity of many governmental organizations promoting business development that is given major investment,

Change

State

KNOWLEDGE

OPPORTUNITIES

NETWORK

POSITION

LEARNING CREATING

TRUST-BUILDING

RELATIONSHIP COMMITMENT

DESICIONS


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especially in the development of export skills and knowledge (OECD, 2006). This is not surprising, because in the age of globalisation a lot of opportunities for international trade have emerged, that determined the increased interest in SME capacity to properly communicate with clients of different countries, languages and cultures at the same time in order to ensure their needs and sustainable growth of the company. Using the latest technology, companies are now able to reduce not only the costs of production or trade, but also faster penetrate into other markets and make contact with potential partners at the same time (Alimienė, Kuvykaitė, 2004). Currently there has been progress in the analysis of intercultural experience of SMEs, although most of the studies carried out on this topic focus on the importance of foreign languages to those starting export, ignoring the intercultural dimension. As a result, researchers mainly focus on large companies, and the knowledge about the SME sector companies still remains limited and is currently divided into two separate schools: one of them focuses on learning foreign languages (Hagen, 1999), the other one on internationality (Manolova, Manev, 2004). The latest and the most important scientific papers, which will allow identifying the main characteristics and defining the intercultural competence of SMEs, will be discussed further. First of all, it should be noted that when evaluating the capacities and competence of SMEs, the owner/executive, i.e., decision-maker becomes the most important figure (Knowles et al., 2006). In other words, intercultural competence of SMEs can be defined, taking into account the capacity of the owner/executive, because in most cases all the processes and activities related to the enterprise internationalization depend only on the executive of the SME. This is the executive of the company who controls all the resources of the company, have them in his/her disposition, and strategic decisions of the company depend on the position and competence of the executive. According to T. Mughan (2010), that is what determines how a specific company comes into the market and how it will behave in the market. At first glance, this may appear as a positive factor, but in fact the organization perceives and evaluates a foreign culture through the prism of the decision maker. A key factor determining the access of the company to the foreign market is the availability of resources and the ability to quickly respond to business opportunities (Ibeh, 2000). Studies have shown that the company is entrenched as an international company with the growth of the number of national markets, but it is happening almost incidentally (Lloyd-Reason, Mughan, 2003). In other words, the company that spent some time to prepare to go to a specific market is later pulled to other markets naturally, it requires small resources for preparation, and these efforts are seen as an opportunity or a necessity for business. If this opportunity offers to increase the profit of the company or to improve the situation on the market, most businesses will start overseas development, even if the country, especially its language and culture, is not familiar. In some cases, the owner/executive and the company may find themselves in a situation where they are forced to respond to business opportunities in several countries at the same time, and it starts to raise many and various communication problems. Such a situation can often emerge in the beginning of international development of a company, when the company is forced to allocate more resources, both financial and human, as well as the time for cognition of the language and culture of the first foreign market, and the company seeks to build up its expertise and gain confidence in the market. At the beginning of the process of internationalization the company starts to move from specific experience (focussing only on the national market and its features) to the general (or multicultural) experience, so it starts to develop the intercultural competence of the company and its specialists.


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When the company starts to discover the significance and importance of cultural differences in business development, it faces a need to develop intercultural understanding, multilateral communication and operation competences (Knowles et al., 2006). However, in this case, learning about cultural differences and intercultural processes is going on sporadically, and is usually strongly restricted by the company resources and general opportunities. This learning is without a doubt linked to problems caused by language difficulties, miscommunication, but is not limited to them. The solution of these problems is very closely related to personal and business experience of the business owner/executive (Lloyd-Reason, Mughan, 2003). Usually the solution of problems related to intercultural competence is formal, i.e., when the focus is on language and communication training and consultation (Harzing et al., 2011). However, the company may also apply an experimental method of competence development, where both the manager and the team learn through experience – learning by doing (Kuznetsov, Kuznetsova, 2014). Both the manager and all the team analyse intercultural situations and problems and are faced with many questions and uncertainties related to differences in approach and communication. But on top of that the executive has to consider opportunities of the company, financial, logistical, legal and commercial aspects related to a specific market. According to Q. Rizvi (2010), a lot of executives, especially in the SMEs sector, are afraid to develop business expansion because of the complexity of problems raised by internationalization; many of them see it as an activity “beyond their comfort zone”. Many foreign countries, such as India, China offer unique business opportunities, but the lack of knowledge paralyses management and everything happens by inertia, there is unwillingness to take risks. Business risk abroad pays off, giving huge growth opportunities for businesses, with the condition that everything is done correctly. Business expansion to foreign markets offers rapid growth, both in terms of revenue and company profit, but only in case the expansion is implemented following the action plan prepared in advance fairly and honestly. According to Q. Rizvi (2010), the key element of right international business development is know-how, however, not the general knowledge about the market or the situation of a certain branch of economics, what basically contradicts J. Johanson and J. E. Vahlne approach – according to them, it is necessary for a company to know the certain market as best it is possible. The difference between these two elements is obvious: general knowledge helps understand why the expansion in one or another foreign market (or global business in general) can grow the company and what added value it may create, and know-how is the part of that general knowledge which reveals to company executives and/or managers how to conduct international development and makes a basis of competitiveness. According to Q. Rizvi (2010), know-how allows evaluate what opportunities and challenges will be brought by international development to a certain company, and how to capitalize the opportunities. Meanwhile, in the Uppsala model the basis for capitalization of companies is development of commercially beneficial relations. At this point it is important to note that the Uppsala model is regarded to be classics of business internationalization, i.e., an extremely wide range of scientists and a considerable circle of practitioners refer to it. However, this model (or its corrections) are criticised for excessive uncertainty, i.e., this model does not distinguish specific activities or steps/phases of the process, which one or another business operator must pass in order enterprise internationalization to be successful (Kalinic, Forza, 2012; Offenberg, Bruun, 2013; Hajela, Akbar, 2013). This is particularly


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important for small companies or start-ups (born global companies), which have very limited resources; therefore all procedures must be clear and concrete, easy to apply and quickly comprehended. When carrying out the analysis of scientific literature, it was difficult to find such models of business internationalization. One of the best known is the system of development of internationalization created and patented by an American international business consultant Q. Rizvi. This model is distinguished by the fact that it is sufficiently elaborated (stages of the process, specific steps, etc. are distinguished) and concrete questions to which company executives and/or managers have to find answers are raised. iSMАRTЕ (Informed and Structured Market Acquisition Route to Transcontinental Expansion) framework presented by Q. Rizvi (2010) (Figure 3) basically visualises the know-how. This model allows distinguishing and applying simplified, concrete business knowledge, practicably applied in the specific market, thus ensuring that the strategic decision of the company to expand on international level is objective and reasoned. As the iSMАRTЕ framework was created on the basis of mostly practical knowledge, this system also allows to acquire practical experience (using the model as a tool of practical learning) and to achieve tangible results quite quickly (using the model for actual expansion). The iSMARTE was constructed as experiential learning, the application of which would provide real, tangible results. Due to the model the company goes through four key categories of business development that help overcome the lack of specific knowledge of international development. It is argued that following this methodology the company can achieve success in a foreign market in 12–20 months. The first stage (three steps) is conceptualisation of international development. This is, without a doubt, the most important stage, as it shows why and how international development is useful to the organization, what opportunities it creates. It helps to define the basic international business development solutions and accumulate necessary initial knowledge and information for further preparations for foreign expansion of the company. In addition, it is also very important due to the fact that it is the information collected at this stage helps to shape the correct attitude and opinion of organizational decision-makers to the development of business abroad. And this, in turn, determines performance results. In other words, if a company starts to carry out international expansion following a conservative and quite critical approach to the results of such activity, it is natural that the results will be of this kind. And vice versa, if international plans are implemented with enthusiasm, this can lead to significant results. The second stage (two steps) is selecting new markets. Until this stage, companies typically already have a strong understanding of the opportunities international business development provides them, so they are ready to assess their capabilities (strengths and weaknesses) in the development of activities in the foreign markets. In other words, the company must evaluate the work/tasks which must be carried out, as well as identify its particularities (what makes us so different/unique/interesting) in order to successfully export its products/services into new markets. In carrying out these activities, companies can refer to the diamond model created by Q. Rizvi, which is presented in Figure 4. According to this author, competitive uniqueness of the organization is determined by five elements (aims, users, production, segments of activity and positioning in the market). At this stage, market analysis helps to assess preliminarily specific countries, potential users, and helps to select the markets that are the most acceptable to the company. This stage lasts the longest of all, as the company not only has to carry out a pretty broad


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selection according to specific chosen criteria, but also objectively evaluates itself and its opportunities, set priorities.

Fig. 3. iSMARTE™ framework (Source: Rizvi, Q. (2010))

Fig. 4. Elements of company’s core competence (Source: Rizvi, Q. (2010))

CORE

COMPETENCE

PRODUCT

SEGMENT FOCUS

POSITIONING

GOALS

TARGET

CUSTOMERS

CORE ACTIVITIES

& MARKETS


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The third stage (two steps) is preparation of the strategy. According to Q. Rizvi (2010), the company that is moving into this stage has already passed major difficulties and made all the most important decisions on international expansion. Among other things, according to the author of the model, managers, and especially decision makers, are ready to face the future challenges and have analysed their strengths and weaknesses. As a result, business development team of the organization is properly prepared and has the necessary skills to undertake expansion – they know exactly the advantages and benefits provided by such a business. So the next task is to develop a comprehensive strategy and action plan for international expansion. The author of the model reveals that it is in this stage the company has to request the help of the external partners who would carry out objective, clear and concrete analysis/audit of selected markets and introduce the business standards/experience of the countries. In the light of this information, the managers of the company have to develop a five-year strategy of international business, the aim of which is to get a foothold in the specific market. Another equally important aim of this strategy, international expansion, must make a significant contribution to the performance of the company, starting the international business it must be substantiated financially, specific, clear and easily measurable tasks must be set. The last stage in the iSMARTE framework is commercialization or beginning of real activities in the foreign market. Then, the company is already ready, as it has the correct approach engrained and the concept of process management, it has created a clear vision of activities and concrete action plan. However, the company must elaborate how sales will be carried out and define the standards of processes. The main responsibility and work of decision-makers at this stage is to manage all the difficulties encountered in the activities properly, thus trying to avoid any unforeseen costs, and terminate or stop activities in the particular foreign market in case of emergency. In principle, after successfully installing this model of international development, at the last stage the company is already able to reach the first really tangible results.

Fig. 5. Revised iSMARTE™ framework (extract of Fig. 3) (Source: made by authors according to Rizvi, Q. (2010))

The authors offer to incorporate the fifth stage – intercultural competence in this iSMARTE framework. Having the right competencies and knowing which one of them is needed more for the


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specialists would be easier to construct the whole plan for internationalization. The first step of this stage is to evaluate intercultural competence of those employees, who are going to work with or work in foreign countries. There are many instruments to measure intercultural competence and companies should choose them by their personal needs. After an evaluation company will know the strengths and weaknesses of their employees in area of intercultural competence and those knowledges help to create a strong and clear plan how to educate intercultural competence of company’s specialists. This plan should be a long-term and integrated into general strategy of that company. As one can see, the iSMARTE framework developed by Q. Rizvi based on practice and analysis of real business solutions, simplifies and facilitates the expansion of business in foreign markets, helps to prepare quickly and properly. In addition, this model of expansion is one of the most optimal, particularly as regards the development of internationalization of small and medium enterprises. On the other hand, in this model, as well as in other discussed options, insufficient attention is given to solution of possible conflicts/difficulties that arise as a result of cultural differences or unreadiness of employees of the company to work with people of different cultures.

3. Intercultural Competence In international business environment, successful cooperation is a huge challenge: firstly, because of general and specific knowledge in a particular field of business (discussed in the first part), and secondly, as P. P. Odrakiewicz and J. Zator-Peljan (2012) maintain, understanding of cultural aspects and intercultural similarities and differences as well as acquisition of intercultural competence should be perceived as a must, a huge advantage in the international market. Therefore, in this part of the article important aspects of internationalization: culture, intercultural competence, its elements and development of intercultural competence will be discussed. Intercultural communication and culture. In order to develop the business on an international level it is impossible to do it without communication which goes beyond the boundaries of the state borders. It is usual to call this communication intercultural. Intercultural communication, according to J. Allwood (2004), can be understood as information sharing at different levels of understanding and control among the people with different cultural backgrounds. Different cultural background includes both national cultural differences and differences related to the participation in different activities in the area concerned. As it is seen from the definition, intercultural communication is a complex process that involves not only conveying the desirable information, but also cultural experience acquired during socialization. Speaking about any international process, whether it is business, communication, management or competence, we cannot manage without the concept of culture. The concept of culture is essentially the basis for understanding of intercultural competencies (Niemeler et al., 2012). According to B. Peterson (2004), culture is a relatively constant set of internal values and beliefs, usually supported by a group of people in a particular country or region, and the values and beliefs notably influence external human behaviour and environment in the region or the country. O. K. Zakič (2010) argues that culture consists of explicit and implicit patterns of behaviour, acquired and transferred by symbols, representing specific achievements of groups of people, fixed in artefacts. To put it simply, each individual perceives the world according to his/her own values and norms existing in his/her


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culture, therefore, the person’s image of the world depends on what culture he was born and raised in, so later it is difficult to take a different understanding of the world (Pruskus, 2010). That is why researchers of culture aim at grouping cultures according to certain properties – ways of thinking and action – so that it would be easier for people communicating with representatives of different cultures to understand them and there would be less confusion. There are quite a lot of models of culture distribution (e.g., G. Hofstede’s iceberg model of cultural dimensions, E. T. Hall’s model of behavioural components of culture), but recently scientists and researchers in intercultural communication competence (Spitzberg, Cupach, 1984; Peterson, 2004; Spitzberg, 1998; Spitzberg, Cupach, 2002; Diskienė, Marčinskas, 2007; et al.) try to combine them into one, as the models of concepts of culture complement each other and allow to go into a particular culture.

Fig. 6. The system of cultural value orientations Source: prepared by the authors on the basis of D. Diskienė (1998), p. 21-23.

For executives, managers and professionals in other fields in order to work successfully in intercultural environment, values are particularly important in an attempt to understand

COMMUNICATION

wide (narrow) context

restrained/expressive

formal/unformal

ENVIRONMENT Under control

Forced

Harmonious

TIME

Monochronic

Polichronic

Strict or free treatment

ACTIVITY

Orientation to bussiness or

relationship

GOVERNMENT

Hierarchic

Equality

SPACE

Private

Public

INDIVIDUALISM

Individual

Collective

Universal

COMPETITEVENESS

Competition

Co-operation

MINDSET

Inductive

Deductive

STRUCTURE

Order

Flexibity

CULTURAL

ORIENTATION


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similarities and weaknesses of behaviour of the representatives of other cultures. Value orientation is summarised and systemised principles related to main people’s problems, which have a large influence on a person’s behaviour. Cultural value orientation is the most powerful element of culture, as in every society there is a distinctive complex of values (Diskienė, Marčinskas, 2007). It is appropriate to follow cultural value orientations when analysing the influence of culture on management. This allows understanding the attitude of people of different cultures to life, work, and relationships. The generalized model is presented in Figure 5. Summarizing cultural differences, D. Diskienė (1998) distinguished culture orientations – the elements of culture and values, helping to orient oneself in different cultures. Every culture or country has its own time perception, sociality of society (i.e., what is more important – an individual or society). Orientations shown in Figure 5 are common to all cultures, only the values of those orientations differ, e.g., communication can be in a broad or narrow context, i.e., in the countries where there is a wide context, verbal communication expresses very little, so it is necessary to pay attention not only to the verbal language, but also to its context. In intercultural communication it is necessary to know the cultural values, because as V. Pruskus (2013) states, intercultural communication is a certain cultural exchange, which means the exchange of values as well. Intercultural competence. In order for international business processes run smoothly and efficiently, certain competencies are necessary. J. Spolsky (2007) argues that in order to ensure a successful process and expected result of business projects, it is necessary to hire professionals in that field. Every member of the team must be competent in his/her field and in respective situations they face. R. Mead (2009) argues that culture is very significant in some cases, and sometimes not, other factors are determining. The executive must be able to recognize when the culture is important, weigh its influence over the other factors and respond to them appropriately. That is why intercultural competence is required, so that both the executive and the employee would be able to recognize and distinguish cultural nuances and make appropriate managerial decisions. C. Sinicrope et al. (2007) argues that intercultural competence in its broadest sense is generally defined as the set of abilities necessary for effective and proper communication with other people who are linguistically and culturally different. Efficiency and appropriateness are distinguished as the main condition for intercultural competence by the majority of scholars (Hammer et al., 2003; Koester, Lustig, 2005; Fantini, 2006; etc.). J. Koester and M. W. Lustig (2005) generally define intercultural competence as a social opinion: how well (appropriately and effectively) an individual communicates with the others, i.e. actions that would meet the expectations and requirements for a certain situation. In Table 1 the elements of intercultural competence distinguished by various scientists in academic literature are presented.


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Table 1 Elements of intercultural competence Author Elements of intercultural competence Ruben (1976)

1. Expression of respect – ability to express respect for another person; 2. Posture – reaction to another person without judgement (the less bias is, the higher the level

of competence is); 3. Orientation to knowledge – the ability to recognize whether the knowledge is individual in

nature; 4. Empathy – the ability to empathize with another person; 5. Task role behaviour; 6. Interaction management – to be able to achieve one’s objectives in discussion, without

prejudice to other interests; 7. Tolerance for ambiguity – the ability to respond to ambiguous situations with little visible

discomfort and adapt to them quickly. Kim (1993)

1. Communication competence – the ability to choose the right means in the cultural environment.

2. Social communication – all information disseminated in a certain environment, both via individuals and the media.

3. Environment – some cultures are assimilating more easily with other cultures, a culture can be warm, open and receiving guests, but it can also be the opposite.

4. Predisposition – the mental, emotional and motivational readiness to deal with a new culture. 5. Intercultural transformation – how quickly an individual is able to adapt to conditions of life in

another culture. Byram (1997)

1. Attitude – the ability to relativize oneself and evaluate others, includes openness, curiosity, as well as disbelief in other cultures, but the belief in one’s own culture.

2. Knowledge about oneself and others – knowledge of rules on the individual and social level both in one’s own and in a foreign culture.

3. Skills of interpreting and relating – the ability to interpret, explain and link the events and documents between one’s own and other cultures.

4. Skills of interactions and discovery – fast mastering of new knowledge and cultural practices and the ability to link them with the existing knowledge, attitudes and skills in intercultural communication.

5. Critical cultural awareness – the ability to use one’s own cultural perspectives, practices and products, and evaluate them in other cultures.

Koester, Lustig (2005)

1. Context – includes physical, social and interpersonal environment. The values assigned to certain behaviour may be very different, as different perceptions of norms of behaviour exist in different contexts.

2. Appropriateness and effectiveness – appropriateness here is understood as behaviour that is considered to be appropriate for the expectations in a given culture, and effectiveness is the behaviour that leads to achievement of set, desired objectives.

3. Knowledge – based on cognitive information, necessary about the people, the context and norms of appropriateness which operate in a particular culture.

4. Motivation – includes a set of emotional associations that people perceive when communicating interculturally. The desire and willingness to experience ambiguity is a part of the motivation necessary to develop intercultural competence.

5. Actions – the actions are difficult to implement, even if the necessary information is available, the motives are relevant feelings and intentions, but a lack of behavioural skills can put a spoke in somebody’s wheel.

Rudd, Lawson

1. Appropriateness – the ability to interact with another in a socially responsible manner, without hurting, without breaking rules.


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(2007) 2. Efficiency – achievement of goals set. 3. Reduction of misunderstanding and ambiguity – when representatives of different cultures

meet, there are always some uncertainties, which decrease the quality of communication. Prior knowledge of other cultures, ways of communication allows decreasing it.

4. Adaptation – a person tries to accept and understand customs and worldview of another culture.

5. Body language and security – facial expressions, positivity are very important. Body language has to show amiability and positivity, as well as it should be the body language the representative of a different culture expects.

6. Sensitivity and empathy – the ability to be responsive to the interviewer and to feel oneself “in his/her shoes”.

7. Wide approach and openness – openness to new ideas, approaches, the ability to develop new categories, to understand the perspectives seen by others.

8. Knowledge – knowledge about another person’s culture, negotiation techniques, values, speaking style, strategies of politeness.

Risager (2007)

1. Linguistic competence 2. Linguistic competence and resources: semantics and pragmatics 3. Linguistic competence: poetry 4. Linguistic competence: linguistic identity 5. Translation and interpretation 6. Discourses 7. Use of ethnographic methods 8. Intercultural cooperation 9. Knowledge of language, critical language perception 10. Knowledge of culture, society and critical understanding of the culture

Source: prepared by the authors. Lithuanian author V. Pruskus (2010, 2013) divides intercultural competence into 3 components: linguistic, communicative and cultural competence. The unity of the three competences can ensure a successful intercultural dialogue. Linguistic competence means the ability to choose appropriate linguistic tools to communicate and to repeat the obtained experience in similar situations. However, it is always necessary to be able to evaluate other circumstances as well, for example, the British are quite sensitive to the correctness of language, while this is not the most important thing for the Americans, a person’s efforts to speak and make himself understood are much more important. Perfect mastery of language in linguistic competence should ensure a successful cooperation, however, the choice of inappropriate means of communication, the criteria of efficiency and appropriateness would be affected. Communicative competence is very much related to cultural competence, since the choice of communication means usually depends on the knowledge of the culture and its value attitudes. It should also be noted that V. Pruskus (2013) distinguishes 3 levels of each dimension: general perception of otherness of an alien culture as a fact and recognition of the otherness; an effort to compare the otherness with one’s own culture, highlighting similarities and differences; an effort to understand another culture and its values, looking for ways to win acceptance, communicating with representatives of another culture. One of the newer and wider models presented in Figure 6 is the Rainbow Model developed in 2007 by B. Kupka, A. Everett and S. Wildermuth.


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Fig. 7. The Rainbow model Source: Kupka, Everett, Wildermuth (2007), p. 25.

One of its authors B. Kupka (2011) argues that the 10-dimension model is much wider than conventional models of 5 elements, and it is also not directed solely to one linguistic (Kim, 1993 model) or cultural side. The Rainbow model presents intercultural competence as some sort of subjective, episodic context-dependent process management, based on (un)met expectations. This model is selected also due to the practical value of the organizations. According to the elements of the Rainbow model an employee’s intercultural competence can be evaluated, as well as his/her strengths and weaknesses, what should be improved. During the development of the model, it was tested by several successful tests-researches with students. It is estimated that all the elements are interrelated, since the researches have indicated high reliability scores. Table 2 presents the elements of intercultural competence according to the Rainbow model.


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Table 2 The structure of the elements of intercultural competence

Elements of intercultural competence

Description

Foreign language competence

Modern concepts of communication depict the process of communication as the interactive/transactional, purposeful, interdependent exchange of verbal/ non-verbal symbols. The main element of intercultural competence is the skill to en-/decode linguistic and non-verbal symbols appropriately: only the effective and contextually appropriate interplay of knowledge (grammar, vocabulary), skills (pronunciation, fluency), and motivation to use the foreign language facilitates an impression of competence.

Cultural distance Also known as cultural novelty, culture barrier. The perception is based on ethnocentrism / ethnorelativism theory. Awareness of intercultural differences and distance facilitates management of the challenges associated with finding oneself in a culturally new environment. The person who knows in advance certain differences between his culture and another culture, faced with them, will perceive them as differences, rather than as a culture shock or barrier.

Self-awareness It is with whom the individual identifies himself, his identity; the standards of his and other cultures are distinguished. Understanding these differences allows the individual to behave in accordance with the relevant standards in a certain culture.

Knowledge Communication knowledge in a certain context. Skills Skills related to practical implementation of knowledge and motivation. Motivation Motivation, the desire to communicate and to know another culture. Appropriateness Appropriateness means that the values, rules, norms, and expectations of

relationships are not significantly violated in another culture. Effectiveness Effectiveness is the achievement of the set objectives using certain appropriate

instruments in the respective context. Contextual interactions

Factors of contextual interactions affecting intercultural communication: frequency (how often one interacts with foreigners), importance (relationships that range between trivial to important), the nature of the relationships (the nature of the interaction, e.g. face to face, formality – formal/informal relationships, etc.). Here, it is also important to understand that what is acceptable and considered to be a competence in one culture, may be quite the opposite in another culture.

Intercultural affinity

Affinity is seen as emotional disposition towards one’s home culture as well as a foreign culture. These emotions can become an obstruction to intercultural communication; therefore, social categorization of another culture can facilitate the minimization of negative emotions (anger, uncertainty, contact avoidance). Intercultural affinity shows positive and negative emotions towards a certain culture.

Source: made by the authors on the basis of Kupka, Everett, Wildermuth (2007), p. 22-24. The Rainbow model includes numerous dimensions, necessary for intercultural communication. This model facilitates research of intercultural competence, finding out which elements are quite well developed, and discovering the elements which require further training and development. Development of intercultural competence. Knowledge of different cultures, successful communication with the representatives of other cultures can be learned, but those skills must be constantly trained, as culture is not static, it is constantly changing; therefore, it is necessary to


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improve in order to achieve the set objectives. Intercultural competence is associated with the ability to notice, understand and tolerate cultural diversity; it is not a direct result of learning. There are a lot of models of development of intercultural competence. Some scientists, for example, M. J. Bennet offer to start from personality development. M. J. Bennett (2001) identified development of intercultural competence in personal growth stages as intercultural sensitivity. This developmental model sets evenly increasing sophistication through realizing cultural differences, moving from ethnocentrism through recognition of differences and acceptance to what M. J. Bennet refers to as “ethnorelativism” (see Table 3). Table 3 The model of development of intercultural sensitivity

The ethnocentric stages The ethnorelative stages

1. Denial – an individual denies any differences and the fact that there are other views of reality. Isolation – little opportunities to face differences and experience them. Separation – the differences are deliberately separated, boundaries between insiders and the “different” are set. Separation requires recognition of differences and, therefore, it is more advanced than isolation.

2. Defence – cultural differences can be understood as a threat to one’s own identity, as they offer alternative approaches to reality, so the differences are understood and fought with. Denigration – different worldviews are seen negatively (stereotypes, racism). Superiority – highlighting the positive traits of own culture, the other culture is seen as inferior. Reversal – less common in practice, it means the evaluation of another culture as superior, denigrating one’s own culture.

3. Minimization – the differences are recognized, but efforts are made to minimize their significance. Physical/transcendent universalism – attempts to prove that similarities outweigh cultural differences.

4. Acceptance – verbal and non-verbal behaviour in the different cultures is different and that all must be respected. Respect for behavioural difference Respect for value difference

5. Adaptation – someone learns to behave in a new way, and such behaviour complements the model that has already been formed by new styles of communication. Empathy – an effort to understand the other, looking from a different “point of view”. Pluralism – empathy is extended by the fact that an individual may rely on individual systems of views or extend cultural framework.

6. Integration – efforts to integrate various systems of attitudes into one. Contextual evaluation – the ability to evaluate various situations and world-views, taking into account one or more cultures. Constructive marginality – the state of absolute self-reflection, when a person no longer belongs to any culture, just being an integrated alien.

Source: prepared by the authors on the basis of Bennet (2001), p. 205-226 T. Brake (1997) (in Diskienė, Marčinskas, 2007) offers a different model of development of intercultural competence that distinguishes four levels of competence development:


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I level. Broad views. The aim is to raise the ability of intercultural learning (to learn how to accept cultural differences, to explore orientations of someone’s own culture and try to refuse the habits that can give conflicting results when communicating with representatives of other cultures, receive information about other cultures, not to evaluate in accordance with the existing stereotypes; II Level. Self-awareness and awareness of the others. The aim is to understand the main differences and similarities between their own and other cultures (to identify main orientations of one’s own culture and other cultures, how quickly they are able to adapt, an individual’s personal and national culture orientations); III level. Cultural knowledge. The aim is to gain as much knowledge about other cultures as possible (reliable sources of information, accumulation of knowledge for practical application); IV Level. Intercultural skills. The aim is to form behaviour, which would allow increasing the successfulness of intercultural communication (transformation of knowledge of cultures to practical skills, to determine the skills that help reduce the threat of intercultural conflict and increase the effectiveness of activity). D. Deardorff (2008) has created a learning system very similar to T. Brake’s (1997) model, but existing in several dimensions, as culture is constantly changing and dynamic, it is impossible to develop intercultural competence once and be competent for several more decades. Development of intercultural competence is a process, and it must take place constantly and in several contexts at once, rewarding each of them (see Figure 8).

Fig. 8. The intercultural competence learning spiral (Source: Deardorff, D. K. (2006)).


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Development of intercultural competence is divided into 4 key dimensions: attitudes, intercultural knowledge and skills, the ability to reflect cultural realia, the ability to communicate constructively. The more dimensions are achieved the faster they are to achieve in a later cycle than in the previous one. It should be noted that all these 4 dimensions are related: every example of cultural interactions newly influences attitudes, skills, knowledge and ability to reflect. D. Deardorff (2008) argues that it is this spiral of intercultural competence helps to understand that development of intercultural competence should be included into lifelong learning programs. All the presented models are similar in the fact that firstly they are focused on the personality (the broad views, attitudes, personality growth). M. J. Bennet’s (2001) model refers only to the personality growth, the fact that a person has to improve and expand his worldview. T. Brake (1997) (in Diskienė, Marčinskas, 2007) proposes to add broad views to the current approach and thus receive external information about other cultures and improve oneself and become more professional. And D. Deardorff (2008) tries to combine both of these models, but adds the condition that this is a never-ending process, that takes place in several dimensions at once. According to R. Mead and T. G. Andrews (2009), development of intercultural competence is closely related to development of both personal and professional characteristics; therefore, all these models should be combined with each other in order to develop the intercultural communication competence. To sum up the models of development of competence of intercultural communication, it can be stated that all of them are suitable for development of intercultural competence. Since D. Deardoff’s (2008) model is the newest, it most of all reflects the dynamic modern world, stating that all knowledge is quickly losing its original significance. This model is the best to reflect the lifestyle of the modern executive/manager – constantly be in whirlpool of news. However, the executive/manager who starts communication may need to follow the stages of cultural sensitivity named by M. J. Bennet (2001). It is important that a person should have the desire and motivation to grow and to develop his intercultural competence.

4. The Relationship between Intercultural Competence and Internationalization

In scientific literature a lot is spoken about internationalization, and recently aspects of intercultural competence have also been started to analyze, but it has not yet been actualized and does not receive due attention of specialists how these two at first glance very different concepts are related to each other, what significance they have for one another and what their connections are. Scientists analysing internationalization (Alimienė, Kuvykaitė, 2004; Manolova, Manev, 2004, Knowles et al., 2006; etc.) mention the importance of knowledge of cultures and cultural knowledge only very briefly and episodically in their works, but they do not raise it as an equally important element alongside different business strategies and topics. Meanwhile, researchers in intercultural competence (Sinicrope et al., 2007; Deardorff, 2008; Keršienė, 2010; etc.) largely focus on the development of intercultural competence of students, as they will have to work in an international environment after graduation. In other words, there is more focus on internationalization of academic community. There is almost no mention about currently working executives and managers and those who have completed their studies, evaluation of their intercultural competence does not receive any active attention of researchers.


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D. K. Deardorff (2004) analyses the topics of internationalization and intercultural competence as mutually inseparable areas. According to her, universities also need to internationalize, they must participate in joint activities with other universities, be attractive to foreign students, teachers, be able to offer the students exchange programmes and thus develop an interculturally competent future employee. However, it is possible to apply it not only to universities; general operating principles of the university are very similar to those of the company. E. Gerulaitienė (2012) argues that the need for internationalization in higher education depends on the economic and labour market needs, which currently also becomes internationalized. When evaluating internationalization in the sphere of education, intercultural competence is becoming an indicator of internationalization (Deardorff, 2004). However, there is no unanimous definition yet – according to D. K. Deardorff (2004), the organization itself should choose the one that is best to match the internationalization strategies of the organization. M. F. Marcel (2011) states that the best way to reveal the significance of intercultural competence to the business is to analyze practical activities of enterprises, the internationalization process of which was unsuccessful, but after changing the attitude and making intercultural competence a cornerstone of the internationalization the performance results of the enterprise are rapidly improving. In the article “Intercultural competence will save the day” M. F. Marcel (2011) analyses the case of the international company MFM, when after setting up the second subsidiary of the company in Poland, disagreements between the Indians (i.e., the first subsidiary of the company in the country), and the Polish (the second subsidiary) resulted in the huge loss, declining quality, and the company has become practically unable to achieve the set development goals. M. F. Marcel (2011) notes that executives of the company get into the same situation for the second time: MFM has already had a similar experience, as when it had opened a branch in India it experienced a similar problem between American and Indian teams. But then the situation was addressed without including intercultural competence in the processes. In order to correct the situation in Poland and create practice how to manage these cases in the future, it was decided to carry out the in-depth interviews at the level of the entire company from an ordinary employee up to the executive to find out everyone’s needs and understanding of a different culture. The company sought to combine theoretical knowledge about intercultural competence with practical knowledge, adapt them to their business model and thus strive for better performance of the staff and the company. MFM executives, in cooperation with leaders of Polish and Indian teams, created a structure that would provide initial knowledge about culture, point out how to cooperate and what is referred to as effective and appropriate communication by representatives of one or another culture. The case discussed by M. F. Marcel (2011) is not the only such case. Multiple cases when international corporations face various cultural difficulties in developing the business in foreign countries are presented in scientific publications, but the cases of unsuccessful cooperation between the United States and Japan are mainly analysed. D. K. Deardoff (2004) and M. F. Marcel (2011) offer organizations to adapt theoretical knowledge to practical. M. F. Marcel (2011) provides a 5-step programme on how to include, maintain and develop the intercultural competence: to recognize the need of the organization in intercultural competence; to segment audiences and set the desired outcomes of behaviour; to set priorities for intercultural competence based on the


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business case of the organization; to define the requirements and the content of programmes of development of intercultural competence; to develop a plan including less significant priorities, in order to ensure that they will not be forgotten. This programme has proven successful in practice in the case of the organization described above, thus, according to M. F. Marcel (2011), the company that wants to change the current situation can learn from “best practices”. The lack of such knowledge and the need for it are highlighted by the fact that quite a lot of consulting firms which emphasise the importance of intercultural competence and offer various trainings related to the development of intercultural competence can be found in the Internet. Such websites as www.intercultural.nl, www.intercultural.org, https://idiinventory.com/, http://www.lcwmail.com, etc. write about the importance of intercultural competence and are oriented to various business organizations, but all their consultations on these issues are paid.

5. Conclusions (1). In the scientific literature, intercultural competence is not distinguished as an essential element of internationalization that can ensure the success of the entire process. Although some aspects of intercultural competence are often discussed (e.g., language, psychological distance, etc.), but the issues of management of intercultural competence which could determine the development of activities of companies (especially small ones) in foreign markets are not distinguished yet. (2). International business expansion is based on intercultural communication. Cultural context in intercultural communication is a very important aspect aiming at successful communication, as every person has “his own vision of the world”, developed during socialization. Therefore, comprehensive knowledge about other cultures helps an individual to achieve the set objectives more quickly, as he knows how to change behaviour to meet the standards of another culture. (3). Scientists identify foreign language skills, knowledge of one’s own and other cultures, their values, and the ability to communicate without prejudice to values of other cultures as key elements of the intercultural competence. It is also stated that the traits of an individual’s character can lead to a higher intercultural competence, although in principle it is not innate, but learned (taught) in many cases. Therefore, an individual’s disposition and motivation to know a different culture are very important. (4). The focus in scientific literature is given to the analysis of successes and failures of large international corporations, which raise the importance of intercultural competence. Despite the fact that the experience of large corporations does not fully reflect the situation of SME sector, it proves that the available almost unlimited resources do not ensure the success of the company in a particular market – just because of inability to adapt to the standards of a certain culture. Thus, intercultural competence is inseparable from the success of outcomes of internationalization, therefore, it is necessary to adapt theory to business processes and make the intercultural competence a strategic tool for the foreign development of the company business.


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