How Cultural Differences in Business Impact International Affairs
Clarke Ricks School of Business,
Liberty University
BUSI 690: Policy and Strategy in Global Competition
Dr. Hicks
June 8, 2022
How Cultural Differences in Business Impact International Affairs
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.
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.
