Chapter 8: Role of Culture in International Business (PDF)

CHAPTER 8- Role of Culture in International Business Global expansion is demanding. If you're expanding into a market whose local culture is different from your home market, you may experience cultural differences that present yet another challenge: a cultural challenge. In recent decades, cultural...

CHAPTER 8- Role of Culture in International Business Global expansion is demanding. If you're expanding into a market whose local culture is different from your home market, you may experience cultural differences that present yet another challenge: a cultural challenge. In recent decades, cultural and international business have been inextricably linked. Thanks to globalized goods, people, and money flows, companies growing internationally must deal with cultural differences in new, local markets. There are many ways — and reasons — international businesses need to keep culture in mind when doing business abroad, such as: Marketing and promoting products and services whose prices and use differ from one market to another Relocating senior managers who would need to perform several business activities abroad Engaging local customers in one market to expand into a neighboring market whose access is hard to achieve directly Establishing solid business partnerships with local suppliers, vendors, collaborators, etc. Outperforming the competition by creating a more insightful, favorable, and enduring presence in a market instead of a distant approach where you're less involved with local customers or businesses Whichever reason you wish to do business abroad, culture is a staple. Knowing how to do business in a different culture means that you need to understand which cultural factors affect international business activities. This article shares what cultural barriers you need to overcome and how to do so by centering culture in your global business operations. International business and cross-cultural challenges International business involves a range of cross-cultural challenges, which present barriers across cultural lines. Understanding cross-cultural challenges, or differences, is critical for your success as an international business. Think of these challenges as another barrier to market entry when doing business abroad. There is, however, a primary difference between (usual) business and (and less so) cultural barriers: Where business barriers can be overcome using business learning methods and models (e.g., marketing strategies, business negotiation, etc.), cultural barriers need to be addressed using more innovative techniques (e.g., role plays, immersive workshops, and cross-cultural programs). Such approaches can be informed by how your staff interacts with local customers, suppliers, and partners. So what are some common cross-cultural barriers you are likely to encounter? They come in almost every shape, scope, and depth, including:  Cultural conflicts, primarily arising from cultural differences among your international staff members Parochialism, meaning your staff might (mistakenly) believe at-home rules and ways of doing business apply equally (and literally) abroad Individualism, meaning your staff members who are used to working independently might find working in teams hard to do in your foreign markets Cultural distance, meaning your staff — whose culture is vastly different from your foreign market's — might be unable to adapt to new ways of doing business according to local cultural customs. Culture shock is an extreme case of culture difference where your staff assigned abroad cannot adapt to local culture and habits so much that your final output as a business decline instead of grows. Addressing the cultural barriers in international business To overcome cultural barriers, companies should: For international projects, carefully select employees who are cultural sensitivity, have an expansive worldview and cultural knowledge, and a desire to learn about new cultures and habits Assign employees compatible assignments, meaning you should send your employees to markets where local cultures are close to their home culture to avoid  significant adaptation challenges, particularly on first assignments Provide pre-departure training by educating selected employees about local cultural habits, geography, dress codes, etc. Provide after-arrival orientation to help your assigned employees settle in and adapt to your chosen foreign market by offering assistance in housing, commuting, shopping, etc. Provide financial and non-financial incentives (e.g., promotions upon returning home) for your international assignees to ensure job insecurity, soothe feelings of separation from family and friends, and fill gaps in employee engagement that may have occurred due to remote work. Prepare employees for reentry cultural shocks, helping them to reorient upon returning home. What are cultural differences in business? Cultural differences in business refer to variations in customs, behaviors, and norms that affect how individuals and organizations run business activities in different parts of the world. It should come as no surprise that each conducts business differently according to their respective cultures. When workplaces from around the world come together, these differences can have a significant impact on business practices, communication, and relationships. Below, we list 11 key cultural differences in business. 1. Communication styles Communication is key in any business. However, communication is inevitably affected by cultural norms. Researchers use the terms “high context” and “low context” to describe how culture can influence communication styles.  A. Direct vs. Indirect In a high-context culture, communication is implicit, not direct. Here, a great deal of communication is achieved through body language and indirect allusions. Much of what is being communicated relies on the relationship and mutual understanding between the two people conversing. On the other hand, in a low-context culture, communication is direct, clear, and explicit. People are more likely to tell you exactly what they need, when they need it, and how it needs to be done. B. Verbal vs. Non-verbal Part of working in a low-context culture is being more verbal. People expect each other to express their thoughts, ideas, and feelings in words. However, the norms in high-context cultures dictate that people communicate in other ways, such as body language and facial expression. Keep in mind that while someone in a high-context culture may say one thing, their hunched shoulders or closed posture may say another. On the other hand, someone from a low-context culture not smiling doesn’t mean they are unhappy. In that case, don’t assume you know how they feel or what they are thinking unless they vocalize that feeling. 2. Hierarchical structure Some more traditional countries (for example, Japan, China, or Brazil) prefer that newer, younger employees treat older, more seasoned colleagues with deference. This is called a hierarchical structure, meaning that colleagues with more power should be treated a certain way by colleagues with less power. Other countries, like the United States, place a high value on individualism and equality. These kinds of workplaces don’t mind when less experienced employees speak their minds and share ideas. In fact, if you don’t speak, higher-ups may perceive you to be less of a team player. 3. Negotiation styles There is a famous Japanese style of negotiation that values the power of silence (haragei). In some cultures, negotiation takes place quietly, with very little talking. In others, negotiation is loud and seemingly combative. For others still, negotiation does not even take place in a boardroom, but over lunch or at a nightclub. Approaches vary, from competitive and adversarial to cooperative and consensus-driven. If you’re not attuned to how cultural differences in business affect negotiations, you could lose an important deal or offend key partners abroad. Some more traditional countries (for example, Japan, China, or Brazil) prefer that newer, younger employees treat older, more seasoned colleagues with deference. This is called a hierarchical structure, meaning that colleagues with more power should be treated a certain way by colleagues with less power. Other countries, like the United States, place a high value on individualism and equality. These kinds of workplaces don’t mind when less experienced employees speak their minds and share ideas. In fact, if you don’t speak, higher-ups may perceive you to be less of a team player. 4. Hierarchical structure Some more traditional countries (for example, Japan, China, or Brazil) prefer that newer, younger employees treat older, more seasoned colleagues with deference. This is called a hierarchical structure, meaning that colleagues with more power should be treated a certain way by colleagues with less power. Other countries, like the United States, place a high value on individualism and equality. These kinds of workplaces don’t mind when less experienced employees speak their minds and share ideas. In fact, if you don’t speak, higher-ups may perceive you to be less of a team player. 5. Negotiation styles There is a famous Japanese style of negotiation that values the power of silence (haragei). In some cultures, negotiation takes place quietly, with very little talking. In others, negotiation is loud and seemingly combative. For others still, negotiation does not even take place in a boardroom, but over lunch or at a nightclub. Approaches vary, from competitive and adversarial to cooperative and consensus-driven. If you’re not attuned to how cultural differences in business affect negotiations, you could lose an important deal or offend key partners abroad. 6.Scheduling and time management One study described how a Dutch woman in Argentina waited for clients to show up to an appointment, then gave up hope that they would arrive and left. Later, she found out that they showed up two hours late and expected her to be there. Yet “arriving too late” to a meeting is one of Germany’s most commonly reported business nightmares. Differences in norms around time and scheduling can cause major misunderstandings between intercultural business partners. 7.. Business etiquette Traditionally, business etiquette in Asia dictated that you should accept a business card with two hands. As we work increasingly in a world of online business profiles and remote connections, business etiquette also evolves. Lack of awareness about the proper business etiquette in another culture can offend your business partners without you even knowing it. 8.. According to the OECD Better Life Index, only 3.3% of Canadians report working very long hours, compared to 14.1% of Israelis. It’s evident that work-life balance can shift dramatically according to the culture around work. In some cultures, it’s perfectly acceptable to call or email a colleague past business hours. In others, it would be impolite to extend a meeting even fifteen minutes past the end of the work day. 9. Attitudes towards risk In business, there will always be some level of economic risk. However, certain cultures are more risk-averse than others. According to Hofsteded’s Cultural Framework, Brazil, Japan, France, and Mexico are among the highest risk-averse countries. On the other hand, the United States, Australia, and the United Kingdom seldom avoid uncertainty. 10. Dress code What’s appropriate in one culture may not be in another. In some cultures, it’s acceptable to wear sandals and jeans to work, whereas certain cultures may require a suit, tie, or heels. Whether you dress too formally or too casually, showing up in the wrong clothes can make a poor first impression. In the United States, gifts are appreciated but certainly not expected in a business context. In other cultures, however, such as China or Sweden, not bringing a gift to a business exchange is considered extremely rude. In other cultures still, gift-giving may be seen as a form of bribery, which is punishable by jail. If you’re thinking about exchanging gifts, tread lightly.11. Decision-making In certain cultures, it’s appropriate to defer to an authority, whereas other cultures equally weigh everyone’s opinion. Be aware of the cultural context you’re working in before jumping in or holding back. Depending on the context, your behavior may come across as presumptuous or, on the other hand, evasive. 12. Face and saving face The concept of “face” in China and many other cultures refers to the idea that one must not be humiliated in front of others. Even if you don’t mean to do so, talking about someone’s mistake on a project in public might cause a person to “lose” face. There are a variety of ways to ensure that your colleagues can save face, and each varies by culture.