Businesses are going global but why are they failing?
Clarke Ricks School of Business,
Liberty University
BUSI 690: Policy and Strategy in Global Competition
Dr. Hicks
June 30, 2022
Businesses are going global but why are they failing?
Technology and globalization 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.
Cultural risks for global businesses
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 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. 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
organizational 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.
