Cultural Differences in International Business

Starting a business outside the geographical boundaries of a country requires assessing a number of factors. Drawing up a business plan, assessing demand and supply, applying for loans and grants, getting permits and licenses and deciding on the location of the business are important issues that preoccupy the entrepreneur. Very often, an entrepreneur focuses only on the technical aspects and ignores the cultural aspects of a business. A good business plan is useless, unless people believe in the success of the plan and are willing to do business with the entrepreneur. This is when cultural differences gain prominence. An entrepreneur who is unaware of the cultural differences in international business will find it exceedingly difficult to communicate with potential suppliers and buyers and foster relations, who are necessary for any business.

Relationship between Cultural Differences and International Business

Role of the Government and Bureaucracy. This is an important factor that is often overlooked by American entrepreneurs, who expect minimal government intervention in the affairs of the private sector. Generally, in developing countries, the government plays an important role, and as a consequence, the private enterprise has to deal with red tape and bureaucracy. In fact, even in case of a few industrialized countries, the government and the private enterprise maintain close ties. For instance, it is a common practice in France, for retired government officials to occupy positions of responsibility in a private company. In case of South American countries, administrative complexity and bureaucracy are common problems that are encountered by an entrepreneur.

Business Meetings. The duration of the business meetings is generally long in Asian and South American countries. Whereas, in the U.S. meetings are short and to the point. Most business decisions in Asian and South American countries are taken after a lot of deliberation. Despite this, strict schedule is rarely drawn and disbursed. In Japan, business ethics demand punctuality; while being well-prepared and getting the facts right is important in Germany. One should avoid setting up meetings well in advance, in case of South American countries, since there are frequent changes in schedule. Again, French business firms rely on long-term plans; while South American firms prefer short-term plans.

Communication. In some countries, written communication is important; while others give preference to verbal communication. In Argentina and Brazil, verbal communication is very important. In France and Germany, written communication is desired. French lay great emphasis on grammatically correct communication; while Germans expect the business communication to be precise. Humor is often used in office communication in both Australia and the U.S. unlike Germany, Japan, and China. In the U.S. excessive modesty is neither appreciated nor desired; but in case of Asian countries, modesty is essential. Diplomacy is the key to good communication in Britain.

Seniority, Meritocracy, and Decision-Making. Seniority is given a great deal of importance in the Asian countries; while meritocracy is important in countries like U.S. Australia, and Germany. In France, a combination of seniority and meritocracy determines the promotions and importance of the individual in the organization. One should not assume that the senior-most person has the authority of making business decisions. This is especially true, in case of South American countries, where the decision-making rules are not strictly defined. Even in an industrialized country like Britain, many times, authority and responsibility may be unclear, since the job descriptions are not precise.

Gifts and Personal Favors. Gifts and favors are common, in case of Asian and South American countries; unlike the U.S. where there are strict rules regarding exchanging favors within an organization. While Americans feel that gifts and favors affect impartial decision-making capacity, in Asian countries, exchanging favors is a way of life.

Appreciating the cultural differences and making a conscious effort to adapt to the ways of a country is necessary for any flourishing business. Even seemingly unimportant practices in some countries, might assume a great deal of significance in others. For instance, in some countries, taking too much interest in the personal affairs of the subordinates may be considered rude; whereas, in a few Asian countries, it is expected, and the employees might disapprove if the employer maintains a strictly formal relationship. Of course, one cannot hope to master the minutia of cultural differences, but can hope that a sincere apology will go a long way in smoothing the bumps along the path to cultural orientation.


Category: Personal Finance

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