How Cultural Differences in Business Impact International Affairs

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Employees from different cultures work on a project.

A country’s culture directly impacts how it conducts international business. As a borderless business, also known as international business, becomes an everyday part of company growth in today’s world, participants in the global marketplace need to know how to navigate cultural differences in international business.

For those working for international companies, building awareness surrounding the practices of other countries is essential to cultivating healthy relationships. Many professionals pursue a Master of Business Administration (MBA) to learn about global business, international marketplace scale, and cultural differences in business, including sensitivity issues and expectations that can influence the success of their business abroad.

Cultural Differences in International Business

Globalization — The process of creating networks across countries via the exchange of people, information, and goods — is an undeniable driving force in today’s business world. According to the 2021 KOF Index of Globalization, as reported by Statista, the U.S. has a globalization rate of 82.28 out of 100, based on global-minded economic, social, and political factors.

To place that score in perspective, in 2019, the value of goods transported throughout the world was $19 trillion, with exported goods from the United States making up 8.1% of that value, the second-highest export volume according to Statista. These high export numbers testify to the global nature of business today, especially in the U.S.

Companies looking to succeed in such a market must be mindful of cross-cultural collaboration. To strive toward a global business model without considering the customs of other cultures would be problematic. Such an approach would put off existing clients and ignore a huge potential client base. Cultural sensitivity is a key soft skill when navigating international cultural differences in business.

Cultural Sensitivity in Business

Because cultural differences are as varied as they are prevalent in our global marketplace, it takes knowledge as well as sensitivity to address them with finesse. Here are just a few tips regarding cultural sensitivity, ranging from researching cultures of interest to maintaining the proper mindset when conducting business within targeted locations.

Research the Culture

An essential part of bridging cultural differences in business involves researching a given culture’s defining elements prior to pursuing a business relationship. These elements may include a country’s communication style, dress code, etiquette, organizational hierarchy, concept of time, and other factors. In business, building trusting relationships between parties is essential, and cultural misunderstandings stemming from lack of basic research can hinder negotiations and even tarnish a company’s reputation. The following are examples of how companies have responded and adapted, some more successfully than others, to different cultures.

No Research on Cultural Differences

Home Depot: The do-it-yourself (DIY) nature of the company’s brand failed to take off in China, which appropriate research would have predicted. If the company had investigated, it would have known that

DIY is often viewed with disdain in China because it is seen as a sign of poverty.

Subway: When the build-your-own-sandwich shop opened in China, locals were confused about how to “build” a sandwich, didn’t believe the tuna was really fish, and hated touching their food. Most of all, it turned out that Chinese customers didn’t want sandwiches in the first place, as they tend to prefer rice and pasta to bread.

Research on Cultural Differences

McDonald’s: Thanks to research on Chinese consumer habits, the fast-food chain realized that the Chinese as a whole consume more chicken than beef. Thus, the spicy chicken burger was offered in Chinese McDonald’s restaurants to much success.

KFC: When KFC looked to integrate its brand with local tastes, the chain decided to remove coleslaw and replace it with a localized alternative. The brand switched coleslaw for familiar Chinese dishes such as bamboo shoots and shredded carrots.

These are just a few examples of how researching the nuances of another country and its cultural differences in business can help companies connect with their overseas target audience.

Keep an Open Cultural Mindset

Having the proper mindset for international business is crucial. The importance of being sensitive, open, and flexible to the customs of another culture when conducting global business leads to better communication and fewer misunderstandings, which can lead to more success. Companies should adopt the local language, so to speak — sometimes literally. For example, according to Shopify Plus, communicating in a target culture’s language can make or break global e-commerce sales, with 65% of consumers preferring their buying experience to take place in their own language.

There are many cultural differences in business, and they touch on subjects that range from how deals are brokered, to the attitude to present to a potential business partner when negotiating. To succeed in markets with cultures different from their own, companies would do well to cultivate the right mindset within their own company cultures.

Patience

Conducting international business calls for patience, as misunderstandings often occur, and business markets can move at a slower pace than in the United States. Remaining focused on the long-term goal, rather than reacting abruptly in the short term, tends to produce positive outcomes when it comes to global business transactions.

For example, business negotiations in Asia tend to go through several rounds of approval before a business can move forward. This often seems unnecessarily slow to Western partners. However, to do business globally, patience with cultural differences like these is a virtue.

Greetings

When greeting a business associate from another culture, it is important to offer a few words and gestures of greeting in a local manner, which will vary by culture. People might shake hands, hug, kiss, or place palms together in front of their chests, according to the International Trade Administration.

It is important to know which greeting style is appropriate to avoid offending or creating an awkward situation.

Titles

Businesspeople should also know how to address their foreign counterparts in a respectful manner, taking into consideration local customs. The International Trade Administration has outlined many useful examples: Many countries (such as Denmark, France, Germany, and the United Kingdom) use titles instead of first names unless suggested otherwise. Others (South Korea and Japan) use last names. However, in Thailand, only first names are used (last names are only for special occasions).

Meanwhile, in Belgium, “Monsieur” or “Madame” are used for French-speakers, while Flemish-speakers use “Mr.” or “Mrs.” To confuse the two is frowned upon.

Contact the U.S. Commercial Service

Making your way through the challenging obstacle course of international cultural differences can be fraught with unintentional missteps. How can professionals make sure their companies have the cultural insight they need in the country they are doing business with? Experts can help. For example, the U.S. Commercial Service, part of the International Trade Administration in the U.S. Department of Commerce, offers to counsel on cross-cultural business practices, market intelligence, and regulatory issues.

Through higher education that places an emphasis on cultural sensitivity in business — as well as using resources such as the U.S Commercial Service — graduates can move about the world with confidence. The objective is to understand that above all, showing respect to business partners and peers can decide the success of a company, relationship, or business venture. By making an effort to learn about other cultures, professionals can find success by building lasting business relationships.

Cultural Sensitivity for Success

Understanding international cultural differences in business is integral to success abroad. By taking the time to learn about another culture, business professionals can show respect to their counterparts and assist in building lasting and trusting relationships. From the ways in which business practices differ from one country to the next to the cultural expectations for well-mannered behavior, learning how to best interact with others can make all the difference in a business transaction.

Professionals can gain the cultural sensitivity necessary for success by advancing their education through a graduate-level program, such as the Online Master of Business Administration from Ohio University.

With its focused curriculum, choice of specialties, and experienced faculty, the program is designed to prepare you for the challenges and demands of working in the real world. Discover what you can do with an MBA from Ohio University, and prepare yourself for a bright new future in international business.

Recommended Readings

Exploring Types of Corporate Social Responsibility in Business

MSM vs. MBA: Which Degree Is Right for You?

Reasons to Get a Master of Business Administration

Sources:

Business Insider, “The Rise and Fall of Subway, The World’s Largest Fast-Food Chain”

International Trade Administration, Country Commercial Guides

International Trade Administration, Export Solutions

International Trade Administration, Services for U.S. Exporters

Marco Polo, “How KFC Changed China and How China Changed KFC”

Medium.com, “The Reasons Behind Home Depot’s Multimillion-Dollar Failure in China and What It Revealed About Globalism”

Shopify Plus, “Global Ecommerce Explained: Stats and Trends to Watch in 2021

Statista, “Exports of Goods and Services from the United States from 1990 to 2019, as a Percentage of GDP”

Statista, “Share of the Leading Merchandise Exporters Worldwide in 2020, By Exporting Nation”

Statista, “Top 50 Countries in the Globalization Index 2020”

Statista, “Trends In Global Export Value of Trade In Goods From 1950 to 2020”