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Cultural Differences in International Business

Cultural Differences in International Business

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Depending on your role and industry, you might find yourself conducting business or attending events in different states, countries, or continents. If and when you do, it’s in your (and your company’s) best interests to prepare for, understand, and accommodate the cultural differences between you and your business partners.

An international business is one that operates facilities and creates products in its own home country, but sells those products or services in other countries.1 The term may also be used to describe a company that imports or exports products, outsources business functions, creates franchises, or enters into a business venture with an organization in another country.2

Any company that conducts business across borders knows how important it is to be aware and respectful of the cultural differences that are sure to arise. Doing so will help ensure things go smoothly and that everyone is treated with respect and care. By preparing ahead of time, you can avoid unpleasant interactions, awkward meetings, or unintentionally offending someone.

Overview of Cultural Differences

Culture is a broad term with many facets, but it’s commonly thought of as the customary beliefs, social forms, and material traits of a racial, religious, or social group.3 Your culture can be influenced by family, religion, political beliefs, education, work, hobbies, where you live, and the media you consume.

Since business is such a large part of our lives, it’s normal that much of our culture bleeds into our work as well. From the mundane, like always bringing your own lunch, to the more impactful, like whether or not you approve of a new supplier’s work conditions, your culture affects a lot of your working self. The blend of cultures within you can determine what companies you’re willing to do business with, how you approach a conflict with a coworker, and what role you play in your professional life.

Cultural Dimensions Theory

According to Dutch management researcher Geert Hofstede, there are six dimensions to understanding the differences in culture across countries.4

1. Power-Distance Index: how much or how little do lesser members of a society accept their inequality, or their distribution of power. A society with high power distance will create and enforce strict hierarchies with a top-down effect, whereas low power distance groups will solicit and incorporate feedback from all levels, bridging the gap between authority figures and those “below” them.4

2. Collectivism vs. Individualism: how individuals are viewed when part of a group. Individualist societies focus on achievement, personal rights, and the “I”. Collectivist societies emphasize relationships, loyalty, and “we”.4

3. Uncertainty Avoidance Index: a culture’s tolerance for and reaction to change. Strict rules and regulations in high uncertainty avoidance indexes help to eliminate ambiguity and risk-taking. Low uncertainty avoidance cultures accept and feel comfortable in low structure and changeable environments.4

4. Femininity vs. Masculinity: how a society views gender roles and which traits are “important” for each gender. Masculinity favors strength, assertiveness, and competition; a feminine society values nurturing, cooperation, and quality of life.4

5. Short-Term vs. Long-Term Orientation: i.e., short-term success vs. long-term success. Does your society prioritize answering materials, social, and emotional needs now, or later?4

6. Restraint vs. Indulgence: the extent and tendency of a society to fulfill its desires. High indulgence encourages you to splurge, live in the moment, and gratify yourself frequently. Conversely, high restraint means to save and focus on practical needs.4

Examples of Cultural Differences

1. Communication

Perhaps the most obvious difference in cultures is between those who speak different languages. Irish playwright George Bernard Shaw is commonly credited with saying that “ England and America are two countries separated by the same language.” Language barriers can be difficult to overcome, but working with interpreters or translators can greatly alleviate the issue. Sometimes, even those who are speaking the same language can have troubles with differences in dialect or understanding slang, tone, and meaning, so be sure to speak slowly and clearly at all times.

Read the room to see how people are reacting to you. More often than not, people don’t like to hear someone belabor the point; in Northeast Asia and the Netherlands specifically, professionals would prefer that you get to the point and communicate only the essentials.5 Italians, on the other hand, like to build relationships and have friendly communication for much of their time together.6

Communication includes verbal and non-verbal styles, and non-verbal can be much harder to determine. For example, people with European backgrounds tend to initiate and hold a lot of eye contact, which other people can find intimidating and even menacing.7 Some people like to hug, while others prefer to shake hands. Other examples of non-verbal communication include facial expressions, speaking closely, slouching, sitting vs. standing, and bowing.

2. Business Etiquette

Just like how families have dinner in different ways, so do business leaders with meetings. In the United States, people will usually begin a meeting by introducing themselves, shaking hands, and exchanging pleasantries. But in China, you will likely be expected to bring and offer a gift to your business partners, and the most senior member should be given the head of the table.6,8 For Belgians, they will usually start by greeting each other with three air kisses—one on the right, one on the left, then back to the right.6

Be considerate of the time and date of your meetings as well. Different parts of the world have different work weeks. The Jewish sabbath falls on Friday–Saturday; Muslims pray up to five times a day; and Christians celebrate Christmas every December 25. These are just a few of thousands of examples, so make sure to ask your business partners if there are any days and times to avoid.

As general guidance, research the customary business etiquette before you meet with your counterparts so you can be as prepared as possible. There likely will still be nuances that you don’t understand, but you can hopefully avoid any major mishaps. You can always air on the safe side by learning a few phrases in their language—an “I’m sorry” or “Excuse me” in someone’s native tongue can go a long way.

3. Negotiation

When you start to get into the nitty-gritty of your business, you will have to negotiate with people of different cultures. Negotiation can be a delicate dance of competing priorities, considerations, agendas, egos, and stakeholders, which can be made even more difficult by cultural differences. However, you must be able to navigate disagreements across borders and across cultural divides to accomplish your goals.

The dominant cultural norm in the United States is to be direct and resolve issues quickly. Others might find this aggressive and want to talk it out.9 People in the UK tend to avoid confrontation and deflect with humor, while Australians like a more casual, conversational tone to make it through.10

Negotiation is an art, and that requires adaptation and improvement over time. Listen closely to how your business partners speak among themselves, then try to incorporate elements of that into your communication with them.

Examples of Cultural Differences in International Business

Depending on how you approach it, differences in cultural norms can either be a disadvantage or a benefit. When McDonald’s looked to expand into India, they knew to eliminate pork and beef from their menu for Hindus and instead focused on expanding their vegetarian options.13 While Google’s focus on positive feedback has thrown some foreign workers for a loop, it ultimately has given them a strong company culture and friendly relationships between managers and subordinates.14

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Other companies have not always fared so well. In 1997, Nike featured a flame-shaped logo on the back of one of its Nike Air shoes that resembled the Arabic word for “Allah.” Many were offended by the casual use of this reference, especially on footwear. Nike had a similar situation in 2019 after a design on the bottom of another shoe resembled the same word, making it appear that wearers were stepping on it.

Take Your Business International

Expanding your business internationally can be difficult but extremely rewarding. Aside from the cultural pitfalls that can occur, there are legal considerations as well. Different (and sometimes conflicting) laws, policies, business customs, and currencies can create roadblocks that even the most traveled business people can’t overcome—and they can be costly.

Pursuing higher education in international business law will teach you all the ins and outs of dealing with other countries, both in and out of the boardroom. Paired with the Online Master of Studies in Law core courses, the MSL in International Business Law specialization from the University of Pittsburgh prepares you for understanding and managing U.S. and international business transactions. It will further equip you to manage cross-border disputes via skills gained in litigation, mediation and arbitration.

Schedule some time with an admissions outreach advisor to learn more.