How can big international companies deal with cultural differences

How Do Cultural Differences Affect International Business?

Culture is a complex thing.

It affects everything we do from the way we raise our kids to the way we do business.

We are going to give you some insights into cultural differences in international business.

Along the way, we will answer questions such as,

DON’T MISS THE FREE SAMPLE OF OUR CULTURAL AWARENESS COURSE AT THE END!

Cultural Differences

Our cultures very much shape how we go about our business.

Culture informs our expectations, our behaviours, our motivations and our perceptions of others.

When we are working with people from the same, or similar, culture, it’s these shared rules that help give us structure and agreement in how to go about doing things, whether that’s how we communicate, run meetings or negotiate.

However, when we have to work with someone from a different culture, the rules may no longer be the same.

Bringing different expectations, understandings, motivations, etc. to the meeting or negotiation table may therefore cause problems, and it does.

The Challenges of Cultural Difference in International Business

By way of exploring these differences, we are briefly going to look at 3 ways in which culture can cause challenges.

These are:

Let’s explore these in more detail below.

1. Personal Challenges

When working in a multicultural environment or with another culture, the personal challenges can be many.

When we come across cultural differences and are unable to recognise and deal with them, our responses are emotional. This can have a detrimental impact on many factors including a sense of well-being and confidence.

Anxiety and stress are common reactions for people new to working in a foreign culture. When people find themselves confronted with difference, they feel challenged and therefore build mental walls to help them cope. These walls, more often than not, do more harm than good.

For example, decision making may be impaired or people may withdraw from others, creating even more distance between themselves and a solution.

Symptoms may also be physical, with people experiencing headaches, migraines, exhaustion and burnout.

The ‘Culture Shock’ experienced by many expatriates who move abroad is a very good example of how cultural differences affect professionals on a personal level. Not being able to manage cultural differences is a common reason cited for failed international business assignments.

The Business Culture Complexity Index™ ranks the top 50 economies of the world according to the potential complexity or ease of their business cultures.

Which country do you think is the most complex?

2. Cognitive Challenges

Working with people from different cultures can present considerable cognitive challenges.

Cognitive challenges relate to how we think, process information and essentially how we view the world.

When we come up against a foreign culture, this can cause us real problems, especially if we fail to recognise differences and adapt.

Two simple examples of this are the concepts of time and relationships.

Some cultures place a high value on time, others don’t. If you come from a culture in which ‘time is money’ and you find yourself working with a culture in which it isn’t, your cultural norms can result in you making bad decisions.

Time conscious professionals can see lateness in other cultures as unprofessional or even disrespectful. They don’t appreciate that in the culture they are working with punctuality is a much more nuanced concept.

In reverse, those cultures that are a lot more flexible with their approach to time can see the time-conscious professionals as rigid and materialistic, which ties in with the value given to relationships.

In some cultures, it’s relationships before business whereas in others, business first. Usually, those cultures that are time conscious are less relationship orientated.

Now, what happens when you have a professional from a very task-orientated culture visit a client or colleague from a very relationship-focused culture?

Yes, they can see each other’s priorities incorrectly, i.e. the relationship-driven culture sees the task-driven culture as impersonal, unfriendly and disinterested, whereas the task-driven culture is seen as not taking business serious enough, spending too much time on small talk and breaching the line between personal and professional matters.

The result is a sort of cognitive dissonance – both sides are looking at one another through their own Cultural Lens which means they are interpreting behaviours incorrectly and attributing erroneous meaning to them.

This can happen at many levels, whether we are talking about a general approach to business or in the more specific areas such as how we communicate, manage hierarchy and conduct negotiations.

Examples of Cultural Differences in International Business

If you would like to further your reading on cultural differences in international business, then these are all excellent additional resources:

3. Practical Challenges

Doing business with people from different cultures can also affect the more practical aspects of work.

Whether we realise it or not, we have all been conditioned by our cultures to approach work and the practicalities of business in specific ways.

All of us have specific ideas as to what is the good or bad way to conduct a job interview, give a presentation or handle a customer complaint.

Many of these do not necessarily translate into other cultures, which can cause challenges.

For example, the simple act of eye contact can cause several practical challenges. What happens when you have a culture that sees eye contact as a sign of confidence and engagement interact with one that sees eye contact as rude? If the two parties are unaware of this there can be several consequences such as a lack of trust, poor communication, a failed job interview or a confusing meeting.

Management is another good example of where we see differing cultural expectations cause challenges in the workplace. What happens when you have a manager who is used to a more hands-off leadership style, whereby they leave their team to their job, come into a country where the management style is much more authoritative and directive? They can come across as weak and unqualified. And if it is was the other way around, the manager would be seen as a control freak who doesn’t trust their team to do anything.

The result can be very messy. In Iraq a few years ago a foreign expat manager actually managed to cause a riot and get himself beaten up due to not understanding local ways.

Cultural Differences in Business

So, as we can see culture can affect international business in many ways.

In essence, when you have two or more differing views, opinions, assumptions or presumptions come together, the result can be negative due to a lack of understanding between the two.

The more aware you are of your own culture and the effect it has on you, the more aware you will become of how culture affects others and what you can do about it.

Take a Course on Cultural Awareness

If you would like to learn more about cultural differences and how they affect business, then our eLearning course is perfect!

We cover everything from understanding culture to cultural differences in business, including a look at differences in approach to time, communication and teamwork.

Feel free to watch the video sample below or go to the course page to learn more.

Working abroad?

In this article, we will focus on cultural differences in communication and in valuing time before briefly touching on some general guidelines. You may also be interested in our articles on international etiquette and international business culture, or in our cross-cultural communication section.

Differences in Communication

If you have traveled a lot before, you know that there are huge differences in communication between people from one country to another. In some cultures, people are loud, direct or even blunt and tend to interrupt others during a conversation. In others, people are typically soft-spoken, use flowery or indirect language and wait patiently for others to finish their sentence.

During a business meeting, these differences are likely to come to the fore. Try to adjust to the way your business partners communicate, e.g. when addressing and greeting your business partners, your boss and your colleagues. Always use last names and titles unless you are invited to do otherwise.

Hierarchies may have a great influence on the communication style in your new surroundings, so it is important to keep an eye on this. The most senior business partner may be the one who is making the decisions at a meeting. Failing to acknowledge their status within the company or to greet them with due respect can leave a bad impression.

Valuing Time

Cultural differences also become apparent in differing concepts of time. Is the scheduled time frame for a meeting set in stone, or does it allow for some flexibility? Will you jeopardize a business deal by arriving late, or is it perfectly acceptable to let family matters, for example, take precedence over business appointments?

A popular example: Everyone would agree that Germans are well-known for their punctuality. In many African and South American countries, however, scheduled appointments are often treated like a general guideline rather than something one has to strictly abide by.

Seeing how some cultures are more time-conscious than others, it is always best to be punctual at first and simultaneously adopt a relaxed attitude towards time management. Even if you are always on time, your business partners may not take the appointed time for a business meeting as seriously as you do. After a while, you will learn to adjust to your business partners’ unique pace at work.

Cultural Differences Aside…

There are always a few generally valid guidelines you should pay attention to in order to make a positive impression in the business world. Being dressed appropriately for the occasion and arriving at a business meeting well-prepared are two very obvious ingredients for your success in international business. Whether you are in France or in China, your business partners will appreciate your efforts to make a good impression, regardless of cultural differences.

When you fly abroad for business purposes, jet lag is a factor that needs to be taken into account as it might inhibit your professional skills significantly. After all, who makes a great impression when they are sleep-deprived and stressed out?

To mellow the effects of jet lag, try to arrive a couple of days early to give your body enough time to adjust. It may help to set your watch to the new time before you leave and to act accordingly. If at all feasible, this could involve slowly adjusting your sleeping and waking hours to the new time zone. This may seem trivial to you, but a well-slept and alert traveler is much better equipped to deal with cultural differences than someone who is underslept and exhausted.

Blog Post

How cultural differences impact international business in 2017

As companies continue to expand across borders and the global marketplace becomes increasingly more accessible for small and large businesses alike, 2017 brings ever more opportunities to work internationally.

Multinational and cross-cultural teams are likewise becoming ever more common, meaning businesses can benefit from an increasingly diverse knowledge base and new, insightful approaches to business problems. However, along with the benefits of insight and expertise, global organizations also face potential stumbling blocks when it comes to culture and international business.

While there are a number of ways to define culture, put simply it is a set of common and accepted norms shared by a society. But in an international business context, what is common and accepted for a professional from one country, could be very different for a colleague from overseas. Recognizing and understanding how culture affects international business in three core areas: communication, etiquette, and organizational hierarchy can help you to avoid misunderstandings with colleagues and clients from abroad and excel in a globalized business environment.

1. Communication

Effective communication is essential to the success of any business venture, but it is particularly critical when there is a real risk of your message getting “lost in translation.” In many international companies, English is the de facto language of business. But more than just the language you speak, it’s how you convey your message that’s important. For instance, while the Finns may value directness and brevity, professionals from India can be more indirect and nuanced in their communication. Moreover, while fluent English might give you a professional boost globally, understanding the importance of subtle non-verbal communication between cultures can be equally crucial in international business.

What might be commonplace in your culture — be it a firm handshake, making direct eye contact, or kiss on the cheek — could be unusual or even offensive to a foreign colleague or client. Where possible, do your research in advance of professional interactions with individuals from a different culture. Remember to be perceptive to body language, and when in doubt, ask. While navigating cross-cultural communication can be a challenge, approaching cultural differences with sensitivity, openness, and curiosity can help to put everyone at ease.

“There is an atmosphere of understanding and support at Hult. Everyone has this respect and curiosity for all the cultural and personal differences between us. This environment encourages everyone to strive for excellence.”

Tatiana Ufimtceva
Hult MBA Class of 2014

At Hult, we’re fortunate to have a student body made up of over 130 different nationalities. With the opportunity to study alongside peers from all corners of the globe, building cross-cultural communication skills is at the core of our business programs.

Watch Hult Professor Jean Vanhoegaerden discussing why culture is important in international business:

2. Workplace etiquette

Different approaches to professional communication are just one of the innumerable differences in workplace norms from around the world. CT Business Travel has put together a useful infographic for a quick reference of cultural differences in business etiquette globally.

For instance, the formality of address is a big consideration when dealing with colleagues and business partners from different countries. Do they prefer titles and surnames or is being on the first-name basis acceptable? While it can vary across organizations, Asian countries such as South Korea, China, and Singapore tend to use formal “Mr./Ms. Surname,” while Americans and Canadians tend to use first names. When in doubt, erring on the side of formality is generally safest.

The concept of punctuality can also differ between cultures in an international business environment. Different ideas of what constitutes being “on time” can often lead to misunderstandings or negative cultural perceptions. For example, where an American may arrive at a meeting a few minutes early, an Italian or Mexican colleague may arrive several minutes — or more — after the scheduled start-time (and still be considered “on time”).

Along with differences in etiquette, come differences in attitude, particularly towards things like workplace confrontation, rules and regulations, and assumed working hours. While some may consider working long hours a sign of commitment and achievement, others may consider these extra hours a demonstration of a lack of efficiency or the deprioritization of essential family or personal time.

3. Organizational hierarchy

Organizational hierarchy and attitudes towards management roles can also vary widely between cultures. Whether or not those in junior or middle-management positions feel comfortable speaking up in meetings, questioning senior decisions, or expressing a differing opinion can be dictated by cultural norms. Often these attitudes can be a reflection of a country’s societal values or level of social equality. For instance, a country such as Japan, which traditionally values social hierarchy, relative status, and respect for seniority, brings this approach into the workplace. This hierarchy helps to define roles and responsibilities across the organization. This also means that those in senior management positions command respect and expect a certain level of formality and deference from junior team members.

However, Scandinavian countries, such as Norway, which emphasize societal equality, tend to have a comparatively flat organizational hierarchy. In turn, this can mean relatively informal communication and an emphasis on cooperation across the organization. When defining roles in multinational teams with diverse attitudes and expectations of organizational hierarchy, it can be easy to see why these cultural differences can present a challenge.

As part of our mission to become the world’s most relevant business school, Hult is dedicated to preparing our students for the challenges and opportunities of working across borders and cultures. A big part of this preparation is understanding the role culture plays in international business. In many ways, the Hult classroom mirrors today’s business environment, with students of 130 nationalities collaborating and studying together. And not only are our students multicultural, our faculty is too. Many have lived, worked, and taught across Europe, Asia, the Middle East, and beyond.

Outside of the classroom, Hult students have the opportunity to experience life, culture, and commerce in today’s most dynamic business centers through our global campus rotation program. This international learning environment offers a truly global perspective and unique insight into culture and business practices from all over the world.

Have you ever encountered cultural differences in your workplace that were surprising? Tell us in the comments below.

Hult offers a range of highly skills-focused and employability-driven business school programs including a range of MBA options and a comprehensive one year Masters in International Business. To find out more, take a look at our blog Hult scholarships: What we offer and how to apply. Download a brochure or get in touch today to find out how Hult can help you to learn about the business world, the future, and yourself.

Cultural Differences in a Global Company

The world seems to be getting smaller. Nearly instant communication flies effortlessly over time zones. Still, important cultural differences remain and make words more complicated. Precise communication is one of the most critical factors in dealing with people at work. Successful international and intercultural companies deeply understand. Most of them have started programs to build the cross-cultural skills of their employees across the world.

Read our practical advice to stay out of office gossip with our blos post Steer Clear of the Water Cooler: How to Avoid the Rumor Mill.

How Big is Intercultural Training?

Multi-cultural companies are expanding all over the world. They open principal offices in several countries that operate within different cultures. Managers in the head offices must manage far-flung teams from many different cultures, speaking different languages, with different worldviews, and lifestyles. In spite of globalization and the internet, a lot of cultural divides still exist. Some companies ignore them or try to homogenize them at their peril. If a company brings its outposts onto a country, it has to become comfortable in its surroundings and come to belong to the culture around it. Since the 1980s, corporate diversity programs emphasized tolerance. In the new intercultural workplace, companies have to make cultural diversity into a strength.

It goes beyond tolerance. Companies have to shake the old patriarchal attitudes about the high state of their civilization. They have to learn to immerse themselves in the living styles of other peoples. Making appropriate gestures and try to speak in the same idiom give an advantage to a good relationship. Many companies appear to be sensitized to the need to adapt to different cultures but take the shortcut of learning cultural tips and formulas of etiquette for particular countries. This is not immersive enough for right intercultural business. They need to establish a baseline understanding of intercultural communication which can then be applied to a variety of cultures. Intercultural communication has become a significant academic discipline. Hundreds of educational institutions are offering graduate studies in the field.

Cultural Differences Can Sink Alliances

According to SHRM (Society for Human Resources management), many mergers fail because of culture. Many fail just because the corporate cultures are incompatible. But international culture makes alliances or even business cooperation more complicated. Over 30 percent of intercultural mergers fail because of “cultural incompatibility.” For instance, when the German corporation, Daimler merged with the American corporation, Chrysler in the late 1990s, it was called a “merger of equals.” A few years later the merger became a fiasco. Factors like differences in the level of formality, attitudes about pay and expenses, and operating style between American and German culture sunk it.

Even Small Differences Are Important

Many cultural quirks cause temporary inconvenience when employees are transferred overseas.

French workers are protected by a “Right to Disconnect Law” which means that if an email comes in after hours, no one may be responsible for answering it. Collective fitness is the rule in Japan. Every day the radio broadcasts a 15-minute exercise regimen, and most workers exercise together. In Iceland, all new parents get a three-month parental leave at 80 percent of salary. Also, they get another three months of shared leave. In the United Arab Emirates, prayer time takes preference over any phone call, meeting, event, or engagement.

Three Intercultural Companies with Strong Training Programs

The significant cultural differences are the ones that cause a real cultural breakdown in international companies. IBM discovered that Dutch and Indian employees make decisions in different ways. IBM employees were trained in these different decision-making styles. After all, employees improved their general functioning and benefit from diversity.

Coca-Cola brings in outside intercultural trainers to work with staff and their spouses being relocated to do a short-term assignment abroad. A family being transferred to Turkey will receive training from a Turkish representative and a professional intercultural trainer.

Accenture delivers cross-cultural training when they relocate. One employee being transferred to India learned that Indian people are much more intimate when it comes to small talk than Americans. In India, people will want to get to know you as professionals, but they also want to know about your personal life, topics that may seem out-of-bounds for Americans.

Read our practical advice to stay out of office gossip with our blos post Steer Clear of the Water Cooler: How to Avoid the Rumor Mill.

Why Cultural Differences in Business Matter

Are you looking to enter the global marketplace? Do you have an understanding of cultural differences in business and how they can affect your efforts? In the wake of the COVID-19 pandemic, our world and the way we do business have undergone some significant changes. Now, more than ever, organizations need to harness the power of global markets, but it is also vital for them to understand the essential role that culture plays.

Cultural differences can affect consumer behavior, ultimately placing a brand’s opportunities at global success in the hands of their efforts to bridge cultural barriers between local and foreign markets.

Cross-Cultural Challenges

As you learn more about cultural differences in business, you will encounter several more concepts, such as low-context and high-context cultures. In low-context cultures like the United Kingdom, the United States, and Canada, communication is explicit and clear. In contrast, in a high-context culture like Russia, communication is nuanced and implicit, and there is more shared content. However, the opposite happens when negative feedback is to be given. Russia becomes direct, while low-context cultures tend to be indirect when negative feedback is called for.

Another factor that affects trust-building is the comfort of silence. In some countries, a few seconds of silence make the conversation uncomfortable. This happens in countries where the comfort of silence is low, such as in France, Italy, and the United States. In Asian countries like Korea, Indonesia, and Japan, however, the comfort of silence is high, which often results in Asians not speaking often during business meetings with people from Western countries. Asians are not likely to feel uncomfortable if the conversation stops for as long as 30 seconds.

Business executives should learn that cultural sensitivity is essential when engaging in cross-cultural business. Never look at cultural differences as weaknesses. Instead, respect cultural differences to gain success.

Understanding Cultural Differences in Business

Accepting cultural differences provides you with a wide range of business expertise and gives you novel business insights to overcome business-related problems. It’s your way to cope with potential barriers regarding international business and culture.

A global company needs to understand that there is a difference in the definition of culture per se and culture in relation to international business. Culture is typically defined as a group of ordinary and accepted standards shared by a specific society. When you put it in a global business context, what one society considers professional may be different for another foreign society.

You must understand that cultural differences affect global business in three primary areas – organizational hierarchy, etiquette, and communication. Understanding them and recognizing their effects on your business will prevent you from creating misunderstandings with foreign clients and colleagues.

Communication

Effective communication is vital to business success, whether you are a start-up or a big corporation. Although it is common to hear that English is the language of business, it’s never wise to assume that your global business partners will all understand English.

When you venture into the international business arena, one way of bridging cultural differences is through language. Understand the language your target market speaks and know how you use it to convey your message. In India, for example, business professionals typically communicate in nuanced and indirect ways. This is opposite to the Finns, who tend to be direct and brief in their communication.

Aside from verbal communication, it is essential to learn that non-verbal communication is also critical when dealing with international businesses.

Interactions

Workplace Etiquette

When you are working for a multinational company, you are likely to encounter many differences, which prompt you to learn international business etiquette.

Pay special attention to the formality of address when dealing with foreign business partners and colleagues. In some cultures, it is acceptable to address a person you’ve recently met by their first name, while in other countries, they would instead that you address them by their surname or their title. Canadians and Americans often use first names, even when dealing with new acquaintances. But in many Asian countries, such as Singapore, China, and South Korea, you should always address a person formally by adding Mr. or Ms. before their surname. If you are in doubt, use the formal way of address.

Punctuality is relative. When you deal with business partners, clients, or colleagues from the United States, South Korea, Japan, and Russia, you are expected to be on time. In Germany, you are even expected to be at least 10 minutes early for your appointment. In Greece, they expect foreigners to arrive on time, but just like in Russia, you may expect your counterpart to arrive slightly late. Brazil is ambivalent. They could either be late by a few or several minutes unless you indicate that they should follow the English time, meaning they should arrive at the agreed time.

In Malaysia, expect to wait up to an hour if your counterpart stated that they would be about five minutes late. They are not required to explain either. In China, it is acceptable to be at least 10 minutes late, while in Mexico, it is pretty normal for people to be late by 30 minutes for a business meeting. When doing business in Nigeria or Ghana, the appointed hour for the meeting may be one hour late or within the day. In Morocco, personal meetings could be delayed by an hour and, in some cases, a day. When scheduling meetings in India, understand that being punctual is not one of their ways.

Organizational Hierarchy

Cultural norms dictate how attitudes towards management and organizational hierarchy are perceived. In some cultures, junior staff and middle management may or may not be allowed to speak up during meetings. In some countries, it is challenging to question decisions by senior officers or express opinions that are different from the rest.

Attitudes are dependent on social equality or the societal values of a country. In some countries such as Japan and South Korea, where respect for elders and people in positions of authority is deeply ingrained in the members of society, the concept is applied to the workplace as well. It helps define responsibilities and roles in the company, and those holding positions in senior management expect deference from junior staff and a higher level of formality and respect.

However, the situation is different in Scandinavian countries. In Norway, for example, societal equality is emphasized, so the organizational hierarchy tends to be flat. The workplace environment calls for cooperation across all departments, and informal communication is prevalent.

Differences in Negotiation Styles

Negotiation is a principal component of international business. Culture influences the way people behave, communicate, and think. These characteristics are reflected in the way they negotiate. Companies must understand cultural differences during business transactions and find ways to hurdle the barriers these differences present.

Spanish speakers view negotiation as the means to have a contract, while in some Asian countries, negotiations help build firmer business relationships. The Japanese regard negotiation as a win-win process while the Spanish look at it as a win-lose process.

The way one communicates during negotiations should be carefully considered. Israelis and Americas are very direct, so you immediately know if the transaction is approved or not. The Japanese, however, tend to be indirect. You have to read and carefully interpret vague signs to see if they rejected or accepted your proposal.

Even the way different cultures handle contracts varies. Americans like to have every detail included in the contract because they want to anticipate possible eventualities and circumstances. The deal equates to an agreement. Therefore everything that was discussed and accepted during the negotiation should be specified in the contract. The Chinese, on the other hand, prefer a contract to have the general principles only because, for them, sealing a deal means forming a relationship with the business partner.

Remain Competitive and Successful in the Global Marketplace

Cultural differences are sensitive issues, and those who take the time to address these differences will have a better chance of remaining competitive and thriving in the international business environment.

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