The importance of cultural awareness in international business

July 2, 2021

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Businesses are going global but why are they failing?

Technology and globalisation have made global expansion far more accessible for businesses around the world over the past decade.

However, just because a business has the resources to go global, whether or not they can stay global is the question we should all be asking ourselves.

In order for the latter to happen, businesses must learn to traverse the complex waters of cultural differences. Unfortunately, many companies often choose to dive headfirst into these waters without first developing the skills needed to keep them afloat. This short-sightedness can have costly results.

Our article looks are the importance of cultural awareness and it's impact on international business.


Cultural risks for global businesses

Today, whether we work in Düsseldorf or Dubai, Brasília or Beijing, New York or New Delhi, we are all part of a global network (real or virtual, physical or electronic) where success requires navigating through wildly different cultural realities. Unless we know how to decode other cultures and avoid easy-to-fall-into cultural traps, we are easy prey to misunderstanding, needless conflict, and ultimate failure.”

― Erin Meyer, The Culture Map: Breaking Through the Invisible Boundaries of Global Business

In a constantly evolving world, the act of going global must be accompanied by the ability to conduct business in a manner that is efficient, but also sensitive and respectful to the unique differences that are weaved into the fabric of intercultural communication.

Here are five common practices that businesses often overlook.

Adapting global business models to the local market

Lacking in understanding of the local culture and its influence on consumer demand and decision-making can result in failure and significant costs to your business. Therefore, keeping the people you serve at the top of your mind is one of the most important considerations when entering a new market.

While various brands and products are universally prevalent, certain changes must still be made for variables such as product offerings, marketing strategy, and brand messaging to reflect the local culture and value system.

These decisions often coalesce into a market adaptation strategy that can strongly influence a foreign business’ performance and competitive position in their new market.

An adaptation strategy might involve something as simple as tweaking the tagline of a brand to developing a new range of menu items that is more befitting to the local palate.

A term that has been gaining momentum as international business expansion grows is glocalisation. A combination of the words ‘globalisation’ and ‘localisation’, glocalisation is a concept which involves adapting globally marketed processes, products and services to fit in with local needs.

Glocalisation

Glocalisation simply involves recognising the unique differences between various markets and modifying your business model to create better products, services and customer experiences for each one.

The bottom line is that businesses exist to provide solutions to their customers. By paying attention to your customers’ needs, wants and problems, you can better adapt your products and services to be more meaningful and valuable to them.

Studying local business and managerial practices

The influence of local culture is extensive. It impacts everything from how employees are managed to the pace at which business is conducted, how negotiations are handled, and how risk management is enforced.

Thus, an in-depth understanding of local business practices is crucial to international business success. Unfortunately, many businesses enter new markets without familiarising themselves with the business customs of their host country and quickly find themselves struggling to win over their new stakeholders and employees.

For example, culture has a strong influence over how employees respond towards management roles. In countries such as Japan where social hierarchies are valued and respect towards seniority is held in high regard, older employees or those in senior management roles typically expect a certain level of formality in communication and deference from their junior colleagues.

In response to this, junior employees in Japan often look to their superiors for approval when making decisions and expect them to delegate responsibilities.

All Japanese employees abide by a mantra called Ho-Ren-So, a mnemonic acronym that is an abbreviation of the worlds Hōkoku (report), Renraku (contact) and "Sōdan (consult).

This simply means that when a problem occurs, it must be immediately reported and all decisions made must pass through the appropriate chain of command prior to its approval by a superior.

It is rare, if not non-existent for a Japanese employee to take matters into their own hands and make a decision prior to getting management’s approval.

On the flipside, Western countries such as the United States have a comparatively flat organisational structure. Managers are on hand to guide and provide structure but for the most part, workers are encouraged to make decisions independently.

In many cases, employees are also expected to define their own career pathway within the organisation. Communication also tends to be more informal and employees across all levels are regarded as equals.

A big part of embarking on cross-border business ventures is recognizing that organisational theory is steeped in culture-specific practices. Yet, the cultural assumptions that precede international business practices continue to be a recurring issue.

It is when these practices are transferred across cultural settings without consideration of local customs, can it lead to potential failure.

Implementing diversity management

Workplace diversity is a powerful tool for enhancing creativity and inclusion. When it is successfully integrated into a company’s business model, it can be a major draw for high-quality global talent. A diverse workforce also fosters an environment that promotes fresh perspectives and approaches to problem-solving.

However, if it is poorly managed, all of this can go awry.

Diverse teams are made up of individuals with various backgrounds, values, opinions, and business customs. Unless these factors are thoughtfully managed, the likelihood of interpersonal conflicts between team members can arise. Adversely affecting trust, communication, and productivity.

While workplaces are becoming less homogenous day by day, there still exists various tensions such as bias, discrimination and clashing sociopolitical belief systems. All of these can hinder team development and cooperation when culturally diverse employees are grouped together to achieve a common goal.

Companies that do not effectively manage and resolve these conflicts will lose out on the ability to leverage on the positive aspects of a diverse workforce.

Adapting HR procedures to local market needs

Globalisation is essential to business expansion and for companies that enter foreign markets and hire local employees, their human resource policies and practices must be adapted so that they are beneficial to their foreign employees and subsidiaries.

Cultural values within a society affect how individuals feel about their jobs and often define their workplace expectations. Human resource teams must be mindful of these cultural differences in order to successfully recruit, retain, support, and communicate with foreign employees. Especially those with a workforce that is dispersed across several locations with varying cultural profiles.

Taxation and employment laws can also affect international expansion. HR departments must be prepared to manage different compensation and benefit requirements, tax rates as well as labour regulations that can sometimes be in conflict with a company’s existing corporate policies.

Failure to do exposes a company to compliance risks that can result in legal penalties, reputation damage and material loss.

Identifying regional and subcultural differences

Not everyone within a country or society engage in the same behavioral patterns or share the values that belong to the dominant culture.

Subcultural differences such as socioeconomic status, language, belief systems and social institutions can vary greatly within a single region. These in turn, influence peoples’ perceptions, their consumption patterns and the values they place on numerous product attributes.

Each subcultural group within a market has its own distinct set of values and beliefs that businesses must understand. However, these differences are nuanced and can very easily lead to stereotypical assumptions about a particular subculture due to premature or limited knowledge.

Businesses should take the time to educate themselves thoroughly on the various attributes that form the cultural make-up on within a national context as cultural barriers can and do exist on an intra-national level. Companies that are unable identify the diversity that exists within their host country run the risk of alienating potential customers.


What happens when global businesses lack cultural awareness?

Adapting a product or service to a new market requires an in-depth and comprehensive study of various cultural components.

Our infographic below highlights some of the most memorable cultural blunders from international companies.

INTERNATIONAL BUSINESS FAILS (2)


How to overcome cultural barriers in international business

Create space for other cultural requirements

Be accommodating to the various cultural requirements of your employees and co-workers in your host country. Take note of factors such religious or cultural holidays, prayer times, dietary needs and work them into your workplace policies so that everyone feels included.

Cultural awareness in the workplace is about establishing common ground so that everyone is able to understand and respect one another's differences.

Ensure clear and polite communication

In scenarios where language differences come into play such as addressing employees who speak a foreign or multiple languages other than your own, use concise and simple communication to reduce any miscommunication. Also be sure to apply to to any internal and external communication material you draft.

Using visual accompaniments and avoiding slang words and complex jargon can help ensure that communication remains as clear as possible. 

Employ diversity training

Making sure that people with different cultural backgrounds feel included and safe is an important step in overcoming cultural barriers in the workplace. 

Diversity training can be a useful tool in helping employees become more aware of any unconscious biases and other barriers may get in the way fully embracing diversity and inclusion. Creating an environment that fosters teamwork, creates new opportunities and motivates positive interdepartmental attitudes - all of which are essential towards creating and maintaining a healthy work environment. 

Global diversity programs should be able to adapt its program  content, language and approach to account for variations in cultural, political, legal and social contexts of  employees. 

Do your homework

Prior to entering your host country, be sure to take the time to do your research about its customs, practices, history and political landscape. Even learning a few key phrases and using them in conversation can go a long way to make them feel comfortable.

While there are plenty of resources available online. don't underestimate your partners and clients as helpful sources of information. In most cases, your interest in their culture will be warmly welcome and they will be more than happy to help you along the way

In fact, them seeing your effort in educating yourself about their culture will be appreciated and increase the likelihood of a continued business relationship.

Be aware of how others may perceive your culture

When entering into foreign ground, we often get caught up in figuring out how to best make sense of of all that is new to us and forget to consider how and why people response to us in the way that we do.

Try to take a step back and think about how your own belief systems, norms and values come across to your foreign employees and partners. This can put a lot of things into perspective and can help you identify what to adjust and how to best adapt to the situation at hand. 

Focus on local integration

Instead of getting caught up in inciting "positive change" and revolutionising business processes and practices in a new market, focus on understanding the foundations that make up local business practices and consumer behaviors first.

Start out by adopting a more localised approach as you gain more insight into how and why things work the way they do, then can you incrementally implement changes down the line. 

Assimilate to the cultural voice of your host country

As important as it is to establish your brand's voice and message, make sure that you do so in a language that won't end up alienating your new audience.

Working with local branding and language experts who are familiar with the local dialects and communication styles can help you find the balance between showcasing your own unique voice and localising your marketing efforts to your targeted customer segments. 

As you communicate your brand, make sure you speak to your target audience in their own language accurately and effectively. Work with language experts, preferably native speakers, who are familiar with local dialects and slang in order to properly localise your brand’s marketing efforts to the target audience.


How a global employment partner can help businesses find success in international expansion

As more and more businesses continue to participate in a growing globalised economy, cultural sensitivity is needed more than ever.

Companies that will see positive growth are the ones who are able to practice business across cultures by considering and respecting the unique differences that make up the many societies and groups that inhabit our world.

For businesses with international expansion plans on their mind, a global mobility partner like Airswift can help you navigate the complexities and nuances that come with doing business in a foreign location.

As experts in the countries we operate in, we are able to support you across a wide range of solutions ranging from hiring and training local employees, to immigration and relocation. Many of our clients have also enlisted our Employer of Record services to quickly and compliantly enter new markets without setting having to set up a physical entity.

Contact us to learn more about our services and how we can support you in your growth.

 

This post was written by: Leanna Seah, Content Marketing Coordinator