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Why Understanding Cultural Differences is Vital for Businesses

By University Alliance
Why Understanding Cultural Differences is Vital for Businesses

Technology has made doing business worldwide much easier, and for many companies the recession of recent years has made a global outlook a necessity. After all, most of the world’s consumers are outside the United States.

According to the International Monetary Fund, the value of trade (goods and services) as a percentage of the worldwide gross domestic product (GDP) increased by 50% from 1980 to 2007, up to more than 62%. Meanwhile, foreign direct investment jumped from 6.5% of global GDP to almost 32%.

While taking on global partners or expanding into emerging markets offers many opportunities, it also brings challenges, not the least of which are the cultural differences that arise when doing business outside the United States. Recognizing the importance of culture in the business world is an important step toward success in the global marketplace.

The Significance of Culture

Understanding a country’s culture is a sign of respect. It also helps to foster effective communication, a vital factor in business success. Developing an appreciation for another culture does not have to be difficult. Here are some considerations to keep in mind:

  • Cultural Stories: Each culture has underlying themes. Values and attributes such as frugality, trust and endurance may be viewed differently in other countries. In some cases, these themes may translate into varying expectations for business partnerships and negotiations.
  • Communication: In many cultures, communication, including non-verbal, may be subtle and nuanced, rather than the direct approach often associated with the United States. Learn how people in your new market use words and phrases, hand gestures, body language and other cues to communicate. Find out which non-verbal gestures used in the United States are acceptable and which are not in order to avoid offending or embarrassing a new business partner. Other strategies can also be incorporated in order to ease communication, including using visual references as much as possible, and allowing for pauses or silence during presentations.
  • Decision Making: How do people make decisions? Individually or as part of a large group? In some countries, it may take months to issue a group decision on a contract. Elsewhere, unilateral decision-making may be the accepted norm.
  • Time Perception: How do your potential overseas partners perceive time and deadlines? While punctuality may be expected in one culture, in other countries a meeting time might be considered more of a suggestion than a hard-and-fast schedule. Similarly, some cultures may place greater emphasis on long-term planning and overall company health, viewing success not through the lens of quarterly fiscal reports but rather from a perspective of five-year blueprints.

Savvy businesses of all sizes are realizing the necessity of breaking into the global marketplace. If your company plans to expand into international markets or use global partners, it’s vital that the key participants understand and appreciate the culture of the people with whom they’ll be doing business.

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Category: Intercultural Management