Impact of Cultural Differences in Global Businesses
Every country has its own culture and traditions that shape their way of doing business. The globalized world is culturally sensitive. As more companies are going global, the global marketplace has become more accessible to entrepreneurs and small businessmen. If a company understands the culture of the country in which they want to start their business, it will save them from many embarrassing mistakes and business losses.
What is Culture and How it Impacts Global business?
Culture depicts the customs, social behavior, and ideas of a person or a society. The question is how it impacts global business. In the business world, culture portrays the professional behavior that is accepted from one region to another. One thing that needs to be kept in consideration is that the business practices that are accepted in your region might not be accepted in other regions. So to make your mark in a fierce global market, you need to develop the cultural competencies. It will help you in tremendous growth in global business.
There are two types of cultures. Low context culture and high context culture. In low context cultures, communication is precise and clear. The countries that have low context culture are Canada and the United States. In a high context culture, communication is nuanced and easily understood. Russia has a high context culture. The cultural context is useful when there is a need to give feedback. If you need to give negative feedback, high culture countries become direct and in case of low context, the negative feedback is given indirectly.
People try to do business with those stakeholders that are trustworthy. The business can be started on two bases; task-based and relationship-based.
To start your business in China, it is necessary to build a relationship with the business partner at the dining table. The new relationship will open new opportunities for growth by keeping cultural differences aside. In Chinese culture, it is called guanxi.
When we talk about American culture, people don’t like to drink with potential business partners unless it is necessary to avoid embarrassing situations.
How Global Business Can get Benefit from different Cultures
The cultures of different countries have established their norms of doing business. If you try to understand these cultural norms, you can appropriately do business without any hurdles.
Effective communication is very important for business success. English is considered the language of business, but you cannot interact with all global stakeholders with the English language. You need to communicate with the foreign market in the language which they understand. In India, business professionals communicate in an indirect manner whereas, in Finnish culture, people are direct and precise in their communication. In global business culture, apart from business communication, verbal communication also plays an important part in dealing with international counterparts.
The interpersonal style shows how to talk to others. People follow different interpersonal styles according to their culture. In some cultures, people give personal space when talking to business colleagues. It also includes eye contact and an entrepreneur’s attitude towards their business partners. Social skills have an impact on your business, if your employer doesn’t like your way of communication, they will not hire you. In some cultures, it is considered rude to make direct eye contact or shake hands. It is considered very unethical to ask about personal life in the US. On the contrary, in some cultures, it is considered ethical to inquire about personal life.
People give significance to time according to their culture. American people are fast-paced and they act on the timeline to complete business projects. When you come across the business stakeholders from Russia, Japan, South Korea, and the United States, they prefer to be on time in business meetings. In Germany, it is expected to make an appointment 10 minutes before. In Greece, people come slightly late in meetings. Brazilian people are not so punctual. They are sometimes on time and sometimes they are late. In Malaysia, people tend to wait up to an hour if business partners are late. In Chinese culture, people can be late for a business meeting for 10 minutes. When we talk about Mexico, people usually come late by 30 minutes for a business meeting. In Nigeria and Ghana, people can get late for the meeting for an hour. While conducting a meeting in Morocco, keep in mind, people can be late for an hour and in some cases for a day. Furthermore, Indians are not punctual in maintaining discipline in meetings.
Laws are influenced by culture. If you break any laws in doing business in a foreign land then you may have to face many legal problems. Legal problems will not only affect business but also alienate clients. In some cultures, it is important to have a relationship with legal authorities to get all the paperwork done. Moreover, to fight with nepotism and red tape, networking with legal authorities is important. You also need to tackle the global employees as per labor laws because if you don’t abide by labor laws then you will get stuck in the jurisdiction.
Chain of Command
Many cultures use such a chain of command from which most of the rules come from the top. Many businesses follow a collaborative style or run a family system. While doing business in a foreign land, you cannot impose your approach to the business chain of command. You can ask them how they are making decisions and get information about how you can contact higher authorities. If you contact the wrong person in the chain of command or exclude someone then you will create problems in your career path.
Global businesses require negotiations to finalize their contracts. Culture has a great influence on the way people negotiate. Before going global in business, one needs to understand cultural differences before doing any business transactions. In Spanish culture, businessmen negotiate to get a contract. In Asian cultures, negotiation is the way to build stronger and former relationships. Japanese consider negotiation as a win-win process while the Spanish consider it the win-lose process.
The Israelis and Americans are very direct in negotiation so you can know with your negotiations whether you want to get a contract or not. On the other hand, the Japanese are indirect. For this, you need to read and understand vague signs to know whether your contract will be approved or not. Some of the nations have a very emotional culture like Latin Americans. Asian cultures are famous for suppressing their emotions and keeping things formal. Various cultures handle business contracts differently. Americans want to have a contract with details. This means that everything that is negotiated needs to be mentioned in the contract. On the other hand, the Chinese prefer the contract with general principles mentioned only. Because according to them closing the deal means developing a relationship with the business partner.
Our standard of living and consumer behaviors are shaped by culture. To penetrate in lucrative markets of the world and to stay competitive in the global world, it is necessary to understand cultural diversity. Your business will get into trouble and you will have to face rivalries if you start your global business without knowing the cultural intricacies.
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