how cultural differences impact international business essay

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Research: How Cultural Differences Can Impact Global Teams

• Vasyl Taras,
• Dan Caprar,
• Alfredo Jiménez,
• Fabian Froese

And what managers can do to help their international teams succeed.

Diversity can be both a benefit and a challenge to virtual teams, especially those which are global. The authors unpack their recent research on how diversity works in remote teams, concluding that benefits and drawbacks can be explained by how teams manage the two facets of diversity: personal and contextual. They find that contextual diversity is key to aiding creativity, decision-making, and problem-solving, while personal diversity does not. In their study, teams with higher contextual diversity produced higher-quality consulting reports, and their solutions were more creative and innovative. When it comes to the quality of work, teams that were higher on contextual diversity performed better. Therefore, the potential challenges caused by personal diversity should be anticipated and managed, but the benefits of contextual diversity are likely to outweigh such challenges.

A recent survey of employees from 90 countries found that 89 percent of white-collar workers “at least occasionally” complete projects in global virtual teams (GVTs), where team members are dispersed around the planet and rely on online tools for communication. This is not surprising. In a globalized — not to mention socially distanced — world, online collaboration is indispensable for bringing people together.

• VT Vasyl Taras is an associate professor and the Director of the Master’s or Science in International Business program at the University of North Carolina, Greensboro, USA. He is an associate editor of the Journal of International Management and the International Journal of Cross-Cultural Management, and a founder of the X-Culture, an international business competition.
• DB Dan Baack is an expert in international marketing. Dan’s work focuses on how the processing of information or cultural models influences international business. He recently published the 2nd edition of his textbook, International Marketing, with Sage Publications. Beyond academic success, he is an active consultant and expert witness. He has testified at the state and federal level regarding marketing ethics.
• DC Dan Caprar is an Associate Professor at the University of Sydney Business School. His research, teaching, and consulting are focused on culture, identity, and leadership. Before completing his MBA and PhD as a Fulbright Scholar at the University of Iowa (USA), Dan worked in a range of consulting and managerial roles in business, NGOs, and government organizations in Romania, the UK, and the US.
• AJ Alfredo Jiménez is Associate Professor at KEDGE Business School (France). His research interests include internationalization, political risk, corruption, culture, and global virtual teams. He is a senior editor at the European Journal of International Management.
• FF Fabian Froese is Chair Professor of Human Resource Management and Asian Business at the University of Göttingen, Germany, and Editor-in-Chief of Asian Business & Management. He obtained a doctorate in International Management from the University of St. Gallen, Switzerland, and another doctorate in Sociology from Waseda University, Japan. His research interests lie in international human resource management and cross-cultural management.

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Impact of Cultural Differences on International Business

If you are assigned to analyze the international environment, this page is for you! Knowing how cultural differences impact international business is essential both for business persons and students. Write an essay about the impact of cultural differences on business based on this article.

Introduction

• Topic Relevance
• Culture Components
• International Business Management
• International Marketing
• International Business Practices

Culture is the acceptable way of doing things in a given society. Members of the society learn to conform with the cultural norms as they grow up. Cultural patterns in a society dictate the appropriate responses to different social situations. Culture encompasses people’s thoughts, words and actions. There are many different cultures and sub-cultures in the nations of the world. Thus, effect of culture on international business cannot be underestimated. Understanding the effect of culture on business is no longer a source of competitive advantage in International Business. Rather, it has become a core competence, without which a multinational company should conform to survive in business (Sealy and Hooley, 2009).

Knowing How Cultural Differences Impact International Business

Business operations are increasingly becoming global in nature. Trade, transport and communication are drawing world economies closer to each other than before. This is evident in the increased number of multinational companies in operation today. Any company that wishes to take advantage of this shift towards globalization must understand the effect of culture on its operations. A company may be forced to adopt local practices in order to succeed. This can only be done with a proper understanding of the area’s culture.

Human capital has become highly mobile. Technological and transport development has enabled people to work in different countries with ease. Sometimes, this can even be done simultaneously. Consider the case of a CEO of a group with operations across the continent. This executive may be required to be in different countries within the same week to represent his company. This increases the need to understand different cultures and their effect on the business. This knowledge will prevent such individuals from making mistakes that would cost their companies business. What is normal and acceptable in one’s home country could be considered offensive in another (Kershaw, 2009).

Companies are choosing to enter foreign markets via global alliances. The success of these alliances depends on good relations between the parties involved. A company needs to understand the cultural practices of all potential partners in order to choose one with whom to work. This will enable the company to choose suitable partners and therefore benefit from synergy. Knowledge about culture and business also aids in negotiations for deals. Cultural practices could make the difference between who gets the deal and who does not (Singer, 2000).

The domestic workforce is also becoming increasingly diverse. The major contributing factor is immigration. People can travel to other countries and choose to stay for life. It is possible to have dual citizenship thus enjoy the privileges of citizenship in more than one country. In countries such as America, the population is so diverse that it would be impossible to attach one culture to the whole population. Understanding employees’ cultural background can help management in designing motivational reward packages (O’Neill, 1998).

Components of Culture

Culture penetrates almost all aspects of human life. Scholars have attempted to identify the different components of culture. This paper will concentrate on the classification provided by Terpstra. The first aspect of culture is social interactions. This refers to the relationship and interactions between individuals and society, including their families. For example, it is common practice in India for parents to pick out a spouse for their child. However, in other countries, this is not so (Shaw, 2003). A company selling wedding planning services in India would thus focus its advertising on the older generation since they have a major stake in the wedding ceremony. In America, such a company would focus on the youth who are likely to be marrying since they make their own decisions. Extended family is also extremely important in African societies. It is common to find large extended families living together. This is not so in other parts of the world (Porter and Millar, 1985).

Language is the second aspect of culture. This is the spoken part of a society’s culture. Some words or phrases are unacceptable in particular societies. It is a taboo to mention reproductive organs by name in African societies. In contrast, sex sells a lot in the western countries. An American multinational seeking to enter an African market would not use similar advertising campaigns at home and abroad. Such a move would result in bad publicity for the company in Africa thus loss of sales (Kraakman et al. 2004).

The third aspect of culture is religion. This refers to a society’s beliefs in the supernatural that cannot be proven except by faith. The influence of religion on business is evident mostly in the Middle East where most countries are Islamic and governed by Sharia Law. Consider a multinational that specializes in manufacture and sale of bikinis. The Middle East would not be an attractive market since religion dictates that women should cover their bodies completely with Buibuis. However, a company manufacturing this traditional dressing for women is likely to succeed here. Banks in the Middle East would also find it necessary to design products that do not involve interest. Banks would avoid interest since Islam forbids giving and receiving of interest (Graham et al. 1951).

Values system consists of what people believe to be right and wrong. This aspect of culture influences businesses as it can dictate what consumers would or would not buy. Indians consider cows to be sacred animals, thus opening butcheries in Indian towns would be considered very offensive. None of the natives would buy the beef and the company would have to close down. In contrast, butchery would be a great business in Africa where beef is taken with most meals.

Aesthetics in culture refers to a society’s perception of beauty. The fashion industry has flourished in France due to the natives’ fascination with beauty. However, what is beautiful in one nation may be considered outright ugly in another. This knowledge helps countries to adapt their products to the country’s beliefs. In the western countries, petite women are considered pretty. Thus a pharmaceutical company selling diet regimes would prosper. In Africa, plus sized women are considered beautiful. In some parts, a man’s success is signified by his wife’s size. Thin women are considered malnourished and it could be associated with poverty. An attempt at selling diet regimes in such countries would fail miserably.

Education is the means by which one generation passes on its wisdom to the next. The attitude to education would influence the purchase of goods such as books. Some countries consider children’s education as a priority more than others. Selling children’s books in countries which do not consider child education a priority might prove to be difficult. It is also true that particular countries are predisposed to sciences while others enjoy arts more. Germans are thought to excel at engineering and other science subjects. Thus establishing a university that offers such education is likely to succeed.

Impact of Cultural Differences on International Business Management

Management of international businesses involves bringing together people from diverse backgrounds in order to achieve the goals of one organization. This can prove quite tricky because of the huge impact culture has on business. Managers have to adjust their management practices to suit the country in which they are operating. The management style must be aligned to the society’s culture if it is to succeed. Hofstede identified four different perspectives from which management is viewed by different societies (Scott, 2007).

Power distance is a measure of how people in the society perceive the difference in power between leaders and their subordinates. In countries such as Israel, people expect to be treated as equals. The difference in power between bosses and their subordinates is downplayed (Sheffrin, 2003). An autocratic or dictatorship method of management would be rejected by workers in such countries. This is because they are used to relating on first name basis with everyone. Employees can participate in decision making and are allowed to critique management’s decisions. Malaysian workers on the contrary are used to autocratic and dictatorial leadership styles. They are good at following orders and rarely question top management. Attempting to use consultative leadership styles in such a country would be time consuming and may prove to be ineffective (Machan, 2007).

Masculinity versus femininity indicates whether people prefer the quantity of life or the quality of life. Masculine tendencies such as competition and aggressiveness are highly valued in United States of America. However, in Muslim countries, family and relationships are highly valued. Therefore, products promoting relationships and values would perform better in the Middle East than in America. A company should adapt to the society’s views if the members of the society are to buy its products (Pinnington et al. 2007).

Uncertainty avoidance is a measure of how much risk a society’s members are willing to take on. Members of certain societies are drawn to risk more than others. Americans in particular have been known to enjoy exciting and probably dangerous activities. Bungee jumping and Scuba diving are two such activities. This trend is also observed in the young people who tend to switch their jobs frequently. Societies with weak uncertainty avoidance would prefer less risky investments and people would stay in one job till retirement. This knowledge is vital in Human Resource planning (Joshi, 2009).

Individualism versus integration measures how much people are concerned with their society’s well being. Africans have been known to care about community more than individual well being. On the other hand, people from western countries are more individualistic than Africans. Scholars have shown that as the national wealth increases, so does the integration attitude decrease. A multinational company needs to establish where the country it seeks to operate in lies. This aids in establishing remuneration packages that will motivate employees. Family medical insurance would be motivating for an employee in a society that values integration (Jones et al. 2005).

Effects of Culture on International Marketing

Language consists of both the spoken and unspoken messages sent and received between members of a society. There are high context cultures where verbal communication is more important than non verbal and low context cultures where non- verbal communication and body language are most important. An international marketing manager would design an advert with fewer words in a low context culture than a high context culture. The words in an advert to be run in a high context culture society would be picked out very carefully (Frederic, 2002).

The level of development in the target market is a huge influence on marketing. It dictates which products would be suitable for which markets. Marketing managers must conduct consumer surveys to find out whether their products would be functional in their societies. E.g. washing machines have not performed well in the African market due to the high cost of electricity. Mobile phones on the other hand have taken the market by storm. Nokia has gained large market shares because it produces affordable, durable and user friendly phones.

Social Organizations

This refers to how societies are structured. In countries where there is a cast system or social classes exist, the marketing manager may have to design different promotion methods for each subculture.

Marketers must be careful not to interfere with the religious beliefs of the customers. E.g. advertising with images of pigs was illegal in China in 2007.A marketing manager who decides to run an advertisement with near-nude women in Muslim countries not only create a bad image for the company, but could also attract serious penalties. The use of obscene language may be acceptable in permissive societies but not in conservative ones (Drahos, 2002).

Values and Attitudes

These impact on consumer’s opinions about products. Advertisements can be banned if they conflict with the host nation’s cultural values. E.g. adverts featuring teens using condoms as contraceptives would not be welcome in Africa where teens are not expected to be sexually active. An advert featuring a basketball star wrestling with Kung Fu was banned in China as it was considered an insult to the national heritage. Careful consideration of this aspect of culture in marketing could save the company a lot of money and public humiliation.

The level of education in a nation dictates the medium chosen to carry a company’s advertisements. It would not be advisable to choose mediums that require the consumer to read if the literacy levels of a country are low. This medium would limit the number of potential customers that can be reached. Audio and video methods would be preferred over brochures and flyers in cases of low literacy levels. International Marketing managers must consider this cultural aspect when designing promotional campaigns.

Culture influences all the aspects of the marketing mix. Product policy is influenced by culture since members of certain cultural groups do not use particular products. E.g. Muslims do not eat pork, thus building a pork factory in a Middle Eastern country will be a futile effort. Promotion is also dictated by cultural views. Muslims consider dogs unclean animals that one should not associate with. However, in the Western Hemisphere, dogs are the pet of choice. Thus running an advert that portrays the dog as man’s best friend in America would be welcome but in Libya, it would be frowned upon (Travis, 2007).

Impact of Culture on International Business Practices

Business practices and relationships vary from nation to nation. Americans tend to focus more on the product itself than the business relationship whereas the Chinese and Japanese value relationships more. The dinning and dietary customs of a society will dictate how business dinners and lunches are carried out. Guests are expected to adhere to the host nation’s code of conduct. Failure to do so may lead poor impressions of the guest being formed by the host. It is thus important for business leaders to research thoroughly before attending such events (Murphy, 2002).

Gifts are an expression of hospitality and friendliness. It is a taboo in African culture to go visiting without a gift. In other nations, hosts do not expect their visitors to come bearing gifts, rather, they present the visitors with gifts to take back home. It is important to know whether or not gifts are expected when going for international meetings. The International Manager also needs to be aware of what kind of gifts he is expected to present. Wrong choice of gift creates poor first impressions (Sullivan et al. 2003).

Culture dictates dressing. International Managers need to pick out their dressing according to the setting ad the occasion. Religious and conservative countries do not appreciate exposing dressing. Female executives participating in negotiations with members of such cultures would be advised to dress in a decent manner according to the second party’s standards. This will help to prevent distractions during communication.

Business communication is also influenced by culture. Communication styles in various countries vary. International Business executives and employees need to learn how to cope with each different style. They must also understand what is meant when certain words and symbols are used by other people. Non-verbal communication is extremely important in some nations. Thus, foreign employees and executives are advised to carefully watch their body language (Davies, 2007).

Culture imposes boundaries that must be respected in International Business. Some societies consider it offensive for members of the opposite sex to hug or have close body contact. In dealing with such cultures, it is best to avoid public displays of affection. However, in America, it is considered friendly to greet someone with a warm hug or handshake. Business executives may also refer to each other by their first names. This is generally not acceptable in China where things are more official (Daniels et al. 2007).

This paper has shown the great impact cultural differences can have on international business. These effects cut across the entire organization. However, cultural differences can be beneficial to businesses. Multinational businesses stand to benefit from the pool of talent created by cultural diversity. A company with operations in France and Germany benefits from the scientific insight of the Germans and the Artistic taste of the French. If the company manages this talent well, then it can benefit greatly from the synergy created. Innovative ideas can also be exchanged. This would result in faster growth for the business (Boldrin et al. 2008).

Studies have shown that work efficiency increases with increase in cultural diversity of workers. This is attributed to the increase in skills and experience available. New processes can also be developed. These could be the key to a business’ success in a given market. The problem solving efficiency also increases. Language skills improve since employees have to learn to cope with others who may not speak English.

The effort involved in creating synergy in a culturally diverse organization may divert resources from the major aim of the business. Training and awareness programmes take up time that should have been spent working. Employee resistance could cause the failure of such initiatives. The diversity in workplaces could also slow down the decision making process since everyone has their own idea of how things should work. This could have been avoided by doing business locally where the people share the same culture (Cooper, 2006).

Business organizations which operate across borders should invest time and other resources to study the culture of their operating environments. This will save such companies money that could have been spent paying fines for committing cultural offences. The organization will also be spared the bad publicity that comes with disregarding peoples’ culture. Knowledge about the society’s culture will also enable such an organization to design customer responsive products. These products will lead to growth in sales revenue and eventually profit. However, disregarding cultural differences can have devastating effects on a multinational company. Sales revenue could be lost due to cultural ignorance. Potential customers are likely to avoid businesses which are not operating in line with their norms and values. One could conclude that the very success of an international business depends on the adaptation to local cultures and sub-cultures (Machan, 2007).

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How cultural differences impact international business in 2017

As companies continue to expand across borders and the global marketplace becomes increasingly more accessible for small and large businesses alike, 2017 brings ever more opportunities to work internationally.

Multinational and cross-cultural teams are likewise becoming ever more common, meaning businesses can benefit from an increasingly diverse knowledge base and new, insightful approaches to business problems. However, along with the benefits of insight and expertise, global organizations also face potential stumbling blocks when it comes to culture and international business .

While there are a number of ways to define culture, put simply it is a set of common and accepted norms shared by a society. But in an international business context, what is common and accepted for a professional from one country, could be very different for a colleague from overseas. Recognizing and understanding how culture affects international business in three core areas: communication, etiquette, and organizational hierarchy can help you to avoid misunderstandings with colleagues and clients from abroad and excel in a globalized business environment.

1. Communication

Effective communication is essential to the success of any business venture, but it is particularly critical when there is a real risk of your message getting “lost in translation.” In many international companies, English is the de facto language of business. But more than just the language you speak, it’s how you convey your message that’s important. For instance, while the Finns may value directness and brevity, professionals from India can be more indirect and nuanced in their communication. Moreover, while fluent English might give you a professional boost globally, understanding the importance of subtle non-verbal communication between cultures can be equally crucial in international business .

What might be commonplace in your culture — be it a firm handshake, making direct eye contact, or kiss on the cheek — could be unusual or even offensive to a foreign colleague or client. Where possible, do your research in advance of professional interactions with individuals from a different culture. Remember to be perceptive to body language, and when in doubt, ask. While navigating cross-cultural communication can be a challenge, approaching cultural differences with sensitivity, openness, and curiosity can help to put everyone at ease .

“There is an atmosphere of understanding and support at Hult. Everyone has this respect and curiosity for all the cultural and personal differences between us. This environment encourages everyone to strive for excellence.” Tatiana Ufimtceva Hult MBA Class of 2014

At Hult, we’re fortunate to have a student body made up of over 130 different nationalities. With the opportunity to study alongside peers from all corners of the globe, building cross-cultural communication skills is at the core of our business programs .

2. Workplace etiquette

Different approaches to professional communication are just one of the innumerable differences in workplace norms from around the world. CT Business Travel has put together a useful infographic for a quick reference of cultural differences in business etiquette globally.

For instance, the formality of address is a big consideration when dealing with colleagues and business partners from different countries . Do they prefer titles and surnames or is being on the first-name basis acceptable? While it can vary across organizations, Asian countries such as South Korea, China, and Singapore tend to use formal “Mr./Ms. Surname,” while Americans and Canadians tend to use first names. When in doubt, erring on the side of formality is generally safest.

The concept of punctuality can also differ between cultures in an international business environment . Different ideas of what constitutes being “on time” can often lead to misunderstandings or negative cultural perceptions. For example, where an American may arrive at a meeting a few minutes early, an Italian or Mexican colleague may arrive several minutes — or more — after the scheduled start-time (and still be considered “on time”).

Along with differences in etiquette, come differences in attitude , particularly towards things like workplace confrontation, rules and regulations, and assumed working hours. While some may consider working long hours a sign of commitment and achievement, others may consider these extra hours a demonstration of a lack of efficiency or the deprioritization of essential family or personal time .

3. Organizational hierarchy

Organizational hierarchy and attitudes towards management roles can also vary widely between cultures . Whether or not those in junior or middle-management positions feel comfortable speaking up in meetings, questioning senior decisions, or expressing a differing opinion can be dictated by cultural norms. Often these attitudes can be a reflection of a country’s societal values or level of social equality. For instance, a country such as Japan , which traditionally values social hierarchy, relative status, and respect for seniority, brings this approach into the workplace. This hierarchy helps to define roles and responsibilities across the organization. This also means that those in senior management positions command respect and expect a certain level of formality and deference from junior team members.

However, Scandinavian countries, such as Norway , which emphasize societal equality, tend to have a comparatively flat organizational hierarchy. In turn, this can mean relatively informal communication and an emphasis on cooperation across the organization. When defining roles in multinational teams with diverse attitudes and expectations of organizational hierarchy, it can be easy to see why these cultural differences can present a challenge .

As part of our mission to become the world’s most relevant business school, Hult is dedicated to preparing our students for the challenges and opportunities of working across borders and cultures . A big part of this preparation is understanding the role culture plays in international business. In many ways, the Hult classroom mirrors today’s business environment, with students of 130 nationalities collaborating and studying together. And not only are our students multicultural, our faculty is too. Many have lived, worked, and taught across Europe, Asia, the Middle East, and beyond.

Outside of the classroom, Hult students have the opportunity to experience life, culture, and commerce in today’s most dynamic business centers through our global campus rotation program. This international learning environment offers a truly global perspective and unique insight into culture and business practices from all over the world.

Discover how  Hult’s global programs are designed to hone your cross-cultural competency

Have you ever encountered cultural differences in your workplace that were surprising? Tell us in the comments below.

Hult offers a range of highly skills-focused and employability-driven business school programs including a range of MBA options and a comprehensive one year Masters in International Business . To find out more, take a look at our blog Hult scholarships: What we offer and how to apply . Download a brochure or get in touch today to find out how Hult can help you to learn about the business world, the future, and yourself.

Katie Reynolds

Related posts, hult international business school breaks guinness world records ™ for class diversity, alumni success story: peter windischhofer and kilian kaminski of refurbed, get a reality check on entrepreneurship at hult, how i became a tiktok “realty star”, look who’s #headingtohult, creating the ideal working environment—remotely.

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How Do Cultural Differences Affect International Business?

Culture is a complex thing.

It affects everything we do from the way we raise our kids to the way we do business.

We are going to give you some insights into cultural differences in international business.

Along the way, we will answer questions such as,

• "How do cultural differences affect business?"
• "Why do business professionals need cultural awareness?" 
• "Where do we find cultural differences in international business?"

DON'T MISS THE FREE SAMPLE OF OUR CULTURAL AWARENESS COURSE AT THE END!

Cultural Differences

Our cultures very much shape how we go about our business.

Culture informs our expectations, our behaviours, our motivations and our perceptions of others.

When we are working with people from the same, or similar, culture, it’s these shared rules that help give us structure and agreement in how to go about doing things, whether that’s how we communicate, run meetings or negotiate.

However, when we have to work with someone from a different culture , the rules may no longer be the same.

Bringing different expectations, understandings, motivations, etc. to the meeting or negotiation table may therefore cause problems, and it does.

The Challenges of Cultural Difference in International Business

By way of exploring these differences, we are briefly going to look at 3 ways in which culture can cause challenges.

• Personal Challenges – the emotional challenges faced by individuals.
• Cognitive Challenges – the mental challenges faced by people.
• Pragmatic challenges - the practical challenges faced by business.

Let’s explore these in more detail below.

1. Personal Challenges

When working in a multicultural environment or with another culture, the personal challenges can be many.

When we come across cultural differences and are unable to recognise and deal with them, our responses are emotional. This can have a detrimental impact on many factors including a sense of well-being and confidence.

Anxiety and stress are common reactions for people new to working in a foreign culture. When people find themselves confronted with difference, they feel challenged and therefore build mental walls to help them cope. These walls, more often than not, do more harm than good.

For example, decision making may be impaired or people may withdraw from others, creating even more distance between themselves and a solution.

Symptoms may also be physical, with people experiencing headaches, migraines, exhaustion and burnout.

The ‘ Culture Shock ’ experienced by many expatriates who move abroad is a very good example of how cultural differences affect professionals on a personal level. Not being able to manage cultural differences is a common reason cited for failed international business assignments.

The Business Culture Complexity Index™ ranks the top 50 economies of the world according to the potential complexity or ease of their business cultures.

Which country do you think is the most complex?

2. Cognitive Challenges

Working with people from different cultures can present considerable cognitive challenges.

Cognitive challenges relate to how we think, process information and essentially how we view the world.

When we come up against a foreign culture, this can cause us real problems, especially if we fail to recognise differences and adapt.

Two simple examples of this are the concepts of time and relationships.

Some cultures place a high value on time, others don’t. If you come from a culture in which ‘time is money’ and you find yourself working with a culture in which it isn’t, your cultural norms can result in you making bad decisions.

Time conscious professionals can see lateness in other cultures as unprofessional or even disrespectful. They don’t appreciate that in the culture they are working with punctuality is a much more nuanced concept.

In reverse, those cultures that are a lot more flexible with their approach to time can see the time-conscious professionals as rigid and materialistic, which ties in with the value given to relationships.

In some cultures, it's relationships before business whereas in others, business first. Usually, those cultures that are time conscious are less relationship orientated.

Now, what happens when you have a professional from a very task-orientated culture visit a client or colleague from a very relationship-focused culture?

Yes, they can see each other’s priorities incorrectly, i.e. the relationship-driven culture sees the task-driven culture as impersonal, unfriendly and disinterested, whereas the task-driven culture is seen as not taking business serious enough, spending too much time on small talk and breaching the line between personal and professional matters.

The result is a sort of cognitive dissonance – both sides are looking at one another through their own Cultural Lens which means they are interpreting behaviours incorrectly and attributing erroneous meaning to them.

This can happen at many levels, whether we are talking about a general approach to business or in the more specific areas such as how we communicate, manage hierarchy and conduct negotiations.

Examples of Cultural Differences in International Business

If you would like to further your reading on cultural differences in international business, then these are all excellent additional resources:

• Cultural Differences in Mergers & Acquisitions
• Cultural Differences in International Retail
• 3 Real-life Examples of Cultural Misunderstandings in Business
• Free Self-Study Guide to Cultural Differences
• Cross Cultural Marketing Blunders
• How Lack of Cultural Awareness Can Cost A Business Big

3. Practical Challenges

Doing business with people from different cultures can also affect the more practical aspects of work.

All of us have specific ideas as to what is the good or bad way to conduct a job interview, give a presentation or handle a customer complaint.

Many of these do not necessarily translate into other cultures, which can cause challenges.

For example, the simple act of eye contact can cause several practical challenges. What happens when you have a culture that sees eye contact as a sign of confidence and engagement interact with one that sees eye contact as rude? If the two parties are unaware of this there can be several consequences such as a lack of trust, poor communication, a failed job interview or a confusing meeting.

Management is another good example of where we see differing cultural expectations cause challenges in the workplace. What happens when you have a manager who is used to a more hands-off leadership style, whereby they leave their team to their job, come into a country where the management style is much more authoritative and directive? They can come across as weak and unqualified. And if it is was the other way around, the manager would be seen as a control freak who doesn’t trust their team to do anything.

The result can be very messy. In Iraq a few years ago a foreign expat manager actually managed to cause a riot and get himself beaten up due to not understanding local ways.

Cultural Differences in Business

So, as we can see culture can affect international business in many ways.

In essence, when you have two or more differing views, opinions, assumptions or presumptions come together, the result can be negative due to a lack of understanding between the two.

This is why cultural awareness is so important.

The more aware you are of your own culture and the effect it has on you, the more aware you will become of how culture affects others and what you can do about it.

Take a Course on Cultural Awareness

If you would like to learn more about cultural differences and how they affect business, then our eLearning course is perfect!

We cover everything from understanding culture to cultural differences in business, including a look at differences in approach to time, communication and teamwork.

Feel free to watch the video sample below or go to the course page to learn more.

Related Posts

Common fails salespeople make when selling to foreign cultures, how can cultural competence positively affect your business, the communication style in the philippines: a guide for business professionals.

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How Cultural Differences Impact International Businesses

Cultural differences tend to be considered only in terms of consumer bases and target audiences, but less so when it comes to international teams operating within a company. However, what may be an acceptable business practice in one country, may be very different from the approach that is used by international businesses.

When it comes to business, cultural differences refer to what behaviour is common and accepted professionally in one location compared to another. Therefore, recognising how culture can affect international business is something that you should consider. This will help avoid misunderstandings and make sure that your business is presenting itself to its new market in the best way they can. Cultural sensitivity is essential, but how exactly do cultural differences affect international business? And how should you handle them to prevent them from negatively affecting yours?

Cultural Differences in Communication

Communication affects every single aspect of your international business. And doing it effectively can be the difference between a successful or a failing endeavour. International businesses need to pay close attention to effective communication to avoid cultural differences affecting their messages in unexpected ways. But cultural differences in communication can affect more than just your marketing strategy. It can also affect the way you communicate with potential vendors or overseas team members (ex., when conducting a meeting).

Managing Differences Right to Deliver Messages Effectively

Speaking the same language as your target audience is the obvious first step. But getting your message across encompasses more than just that. Translation and localisation are not the same , and only the latter truly addresses the cultural nuances involved in communicating across cultural differences. 

Addressing these cultural differences in communication will affect the way your brand delivers its messages to potential customers. It will also affect the way your team conducts business within the company. For example, it is common in countries like the US or Germany for people to speak loudly and be more assertive when sharing ideas amongst colleagues. But in countries like Japan, people typically speak more softly and have a more passive tone when making suggestions to colleagues. Another thing to consider is the basic customs, mannerisms, and gestures that are typical of that culture. Behaviour that might be common in one culture could be unusual or potentially offensive to a client or colleague overseas. 

International businesses need to understand the cultural differences in communication. This will allow them to truly grasp how to overcome language barriers and use the right tone and body language. This can be a challenge, but having the right mindset of sensitivity, openness, and curiosity can help businesses succeed.

#OptimationalTip: Some tips for addressing cultural differences are: Being patient and encouraging an open-mind work environment . In addition, you should research and learn about other cultures in order to make informed and empathetic choices.

Remember to Consider Cultural Differences in International Business

Our culture permeates everything we do and say, whether we want to or not. Even when accounting for cultural differences in communication, it impacts things that could seem unrelated, but truly are not.

For example, Scandinavian countries such as Sweden emphasize social equality and therefore tend to have a relatively flat organisational hierarchy. Their informal approach to communication and cooperation affects their attitude towards business. Not in terms of the seriousness of the organisation, but concerning how they conduct themselves through everyday life. Meanwhile, countries such as Japan stem from a long-valued tradition that places high importance on respect for seniority. In turn, this is reflected in their businesses, which are usually developed around a very clear organisational structure. Junior members of their team are expected to have a level of formality that could seem out of place for someone raised in a different culture, and in the same way, senior management commands a lot of respect.

These kinds of attitudes can play a big role when dealing with team members overseas. And even more so with third-party vendors, where the overall structure of your company does not facilitate the bridging of cultural differences. For international businesses to succeed, companies need to understand the culture they are delving into. This way, they can take cultural differences into account and make sure the right message is getting across.

#OptimationalTip: For international business, it is crucial to be aware of differences in titles, chain of command structures, negotiation styles, and general rules of etiquette. Equally important is to analyse the importance of prudence (or risk-taking) behaviour, control of emotionality, and how group dynamics play out.

How to Adapt Communication for Cultural Differences

There is much to consider when deciding to take your company global , but getting the small details right can make all the difference in whether a company succeeds on an international scale. Properly addressing the cultural differences in communication can be what makes or breaks an international deal. So doing businesses research and being open to new cultural experiences and expectations is a must.

If you are looking to grow your company on an international scale, you are not alone. Our team can help you boost your international communication—be it with new markets, new vendors, or simply new team members. Contact us to tell us about your business goals and discover how we can help you grow.

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How cultural differences impact international business in 2017

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  IJM © I A E M E International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 6, Issue 1, January (2015), pp. 348-351 © IAEME
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concludes with a suggestion for the understanding of the effect of cross cultural communication barriers on international business.

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What is Culture? How Cultural Differences Impact International Business

• Cynthia Dearin
• August 5, 2021

Interested in expanding your business internationally and learning more about culture? Pick up a copy of my latest book, Business Beyond Borders: Take Your Company Global .

As I mentioned in my post Bridging the Cultural Divide , culture has visible and invisible layers, just like an iceberg. The visible aspects of culture include the way people dress, their behavior (verbal and non-verbal language), food, buildings, customs and traditions.

The less visible aspects of culture include values, beliefs, norms, perceptions, and philosophies, and these intangible aspects of culture are the most important because they influence our perceptions and the way we think and act. Moreover, because we have a natural tendency to revert to our cultural roots, how we behave and make decisions, are all affected by cultural values, even if we are not aware of it. For instance, it was my Australian cultural background that made me conclude that leaving a sick friend to sleep was a kind thing to do, while my friend’s Egyptian cultural background led him to see the same behaviour as uncaring. At the time, neither of us was aware of how significantly culture fed into this episode.

The huge impact that culture has on how we think and act means that it’s very important to understand other cultures if we want to do business in culturally diverse settings. In this blog, I want to touch on some of the key topics and themes that you should be aware of as you start working overseas. I’ll also make some suggestions about things that you can do to prepare for cross-cultural interactions.

Challenge Stereotypes

Challenging the stereotypes that you have about other cultures is a good place to start. Stereotypes are oversimplified ideas about certain groups of people which can affect our own attitudes and expectations as we communicate with people from that group. Stereotypes can be positive or negative and by stereotyping, we infer that a person has a whole range of characteristics and abilities that we assume all members of that group have. 

For example, common stereotypes about Americans include that they are generous, hardworking and optimistic, but also that they are loud, arrogant and obsessed with guns. Or, when doing business in Europe we might expect our Italian counterparts to be late for a meeting whereas a Swiss would always be punctual and well organised. However it would be inappropriate to assume that no Italian would ever be on time and no Swiss would ever be late. Using stereotypes is a way in which we simplify our social world, as they reduce the amount of thinking we have to do when we meet a new person or encounter a new culture. A stereotype gives the illusion of a predictable pattern we can learn, providing a kind of boilerplate for how to react to any given cross cultural situation. The problem is that while they can help us get a very general idea about a culture, stereotypes are general, not accurate and individual people often don’t conform to stereotypes. That’s why cross-cultural stereotypes need to be treated carefully – they can have a negative impact on our thinking and our capacity to perceive things with discernment. 

When you are doing business internationally, get ready to challenge the initial stereotypes that you have about the people in your new target market.

Different lens

Our starting point to unpacking and understanding different cultures is that a lot of what we call culture is perspective. Each of us has different perspectives on the world that are shaped by the circumstances we grew up in; our education and the norms that our family and society taught us. Geert Hofstede, a famous Dutch sociologist calls culture “the software of the mind”. It’s how we’re programmed.

Tip:   Understand that people see the world through different lenses…. and factor that in to how you act or react to circumstances, rather than basing what you think, say and do on your own cultural stereotypes.

Pay attention to hierarchy and status

In what are known as “high power distance” societies, which include countries like China and Japan, status and hierarchy matter. Respect for and deference to superiors is very important, in all areas of life. For example, Richard Lewis, author of When Cultures Collide: Leading Across Cultures says of Malaysia (which has a power distance score of 100/100):

“Status is inherited, not earned, and is confirmed by demonstrating leadership and a caring attitude. Malays feel comfortable in a hierarchical structure in which they have a definite role”.

In these kinds of cultures, people at the top of the hierarchy enjoy privileges which are not available to those lower down the hierarchy. For example, when I lived in the UAE, I had to visit my bank from time to time. When I did, it was normal for me to be escorted to the front of the queue, ahead of all the Arab and Filipino customers who’d been patiently waiting their turn. That was because I was female, white and a diplomat. Coming from a very egalitarian culture where you wait your turn in the queue no matter who you are, this made me uncomfortable. I also didn’t like it when I was talking to the back teller and an Emirati man in traditional dress elbowed me out of the way and began loudly voicing his request. To everyone else in the bank, this kind of thing appeared unremarkable, because as an Emirati man, he held a higher rank than I did, but I really minded it. That’s probably because in “low power distance” cultures like Holland, Australia and New Zealand, much less emphasis is placed on hierarchy and there is a general expectation that society will work democratically.

Within Australian companies for example, flat structures are common and there is an understanding that everyone is inherently equal. Where they exist, hierarchies are often established merely for convenience. Superiors are usually accessible and managers rely on individual employees and teams for their expertise. Both managers and employees share information frequently and expect to be consulted. Communication between different levels of an organisation is informal, direct and participative. People call each other by their first names. This is quite different to how things work in a Japanese or Emirati company where titles are important and communication is formal. In high power distance cultures, the person of higher status usually gets to speak first, set the agenda and have the final say. Conversely, in low-power distance countries anyone can speak up if they have a valid point to make and decisions are often made collectively.

One of the most important differences between high- and low-power distance cultures is whether or not a subordinate is allowed to directly confront their boss about an issue. This includes asking questions. In low-power distance countries, employees are expected to ask questions and to tell their superiors when something does not seem to be correct. In a high-power distance culture, employees do not ask questions, and they do not point out obvious errors that a superior has made. You can imagine the kinds of challenges that can crop up when people from low and high power distance societies begin working together without an awareness of these differences.

As you do business in a high-power distance culture, you may also find that you’re not necessarily talking with the final decision-maker and you may need to allow greater time for your contact to get the necessary approvals within the organization to move forward than you would at home. This is often frustrating for businesspeople from low power distance cultures, as they struggle to understand why business moves at what appears to be a glacial pace.

Conversely, if you are from a high-power distance culture, your counterpart may be in a position to make decisions quickly and independently, and your deal may move forward faster than you were expecting.

Rules vs relationships

Cultures can also be categorised as either relationship- based and rule-based. While rule- based cultures and relationship-based cultures both have rules,  the differences between them have significant implications for how business is done.

In a relationship-based culture, relationships are a key driver of behaviour and authority figures – parents, bosses, elder siblings or even departed ancestors do the regulating. Bad behavior is deterred by shame, loss of face, punishment, or ostracism. Because the authority figures are close at hand and form an integral part of the social environment, everyone knows what appropriate behaviour looks like and there is no need to spell it out explicitly.

Behavior in rule-based cultures on the other hand, is based on respect for rules. People respect and obey the rules for their own sake, not because someone in a position of authority made a rule.

The dichotomy between rules and relationship-based culture is particularly apparent if you are a Westerner doing business in the Gulf States. There, it is common to hear people talking about using wasta, which translates as “influence” or “connections”, to resolve a conflict or get things done. Using wasta usually means bypassing official channels or bending the rules to get a faster or more favourable result. In fact, if you don’t have wasta, getting anything done quickly in these countries can be a struggle, and it is the normal and preferred way of doing business in the Middle East. To rule-obsessed Westerners though, it reeks of nepotism, cutting corners and doing back-room deals, all of which are frowned on in Western culture. Australians, Americans and Brits feel irritated by the idea of someone getting a great outcome specifically because they did not play by the rules or do things “the official way”.

Or, consider how contracts work in a country like China. Whereas something as simple as hiring a car in Europe requires you to sign a five-page contract, dealing with every possible contingency, it is possible to begin a major commercial deal in China on handshake (although as a rule-obsessed Western lawyer, I personally don’t recommend it). Where there is a written contract in China, it may be more of a memorandum of understanding than a binding legal document. Because the terms are vague, there is room for adjustment as the situation evolves. As for compliance, the parties are more likely to rely on a relationship of trust than a legal system.

This kind of fluidity makes rules-based people uneasy, but for a Chinese person it makes sense. In a Confucian culture, doing business is primarily about developing personal relationships – not just doing a transaction. These can be based on family or clan connections, or on relationships of mutual obligation, guanxi, which also translates as “connection”. Business plans develop along with the relationship rather than through formal documents, and while businesspeople draw up contracts to please their Western counterparts, stories abound about the Chinese side wanting to alter the terms the day after the document is signed. While this is shocking for the Westerner who says to himself  “I can’t believe they want to start moving the deckchairs already” , the Chinese thinking is  “Why enslave oneself to a piece of paper, when the world constantly changes?”

The group or the individual?

Individualism versus collectivism is the degree of interdependence among the members of a society. In individualistic societies the ties between individuals are loose: everyone is expected to look after himself or herself and his or her immediate family. In collective societies people are integrated into strong, cohesive in-groups from birth onward. Through a person’s lifetime, the group protects them in exchange for unquestioning loyalty. Here’s an example of how these differences can play out in an international business context.

Imagine that Paul is an American who visiting his company’s Japanese partner in Tokyo for the first time. He has been talking with his counterpart, Taro, at least once a week for the last six months. Paul thinks that Taro has done a great job supporting the company’s Japanese clients, and he wants to make sure Taro gets the recognition he deserves.

At the beginning of the visit, Paul meets with the partner’s key staff including Taro. He wants to show his appreciation and build some goodwill, so he praises Taro’s dedication and skills in front of his peers. The mood in the room suddenly shifts and Taro seems visibly embarrassed. Everyone else looks uncomfortable too. What just happened?

As an American, Paul comes from a business culture where individual achievement is highly prized. What he doesn’t realise is that the majority of business cultures around the world place a higher value on group membership and dynamics and that Japan is one of the most collectivist societies in the world. By singling out a group member, Paul made Taro lose face in front of his team and the team shared his embarrassment. This is true even though Paul was recognising Taro for positive reasons. The Japanese expression for this is: “The nail that sticks up gets hammered down.”

Much of the world’s population lives and works in cultures that are more collectivist than individualistic. As a Westerner working internationally, how can you adjust to work effectively with collectivist mindsets?

For starters, the next time you find yourself in conversation with a key contact from Asia, the Middle East, Latin America, or Africa, be conscious of how much time you spend talking about individuals versus the group. While it makes sense to inquire after your contact’s health, it is also smart to ask how their team is doing. If you are meeting with someone from a culture that co-mingles work and private life, inquire about the health and well-being of their family as well. As you move forward in conversation, keep in mind the impact of potential decisions on other group members both in your organization and your counterpart’s.

Communication styles

In Anglo-Saxon cultures – the United States, United Kingdom, Canada, Australia and New Zealand, we trained, usually subconsciously to communicate as literally and explicitly as possible. Good communication is all about getting your message across clearly and succinctly and accountability for accurate transmission rests with the speaker. We are often told “if someone didn’t understand what you meant to say, it’s because you didn’t communicate clearly”.

As a result, people from these societies tend to speak directly without mincing words. We prize the “nothing to read between the lines” approach for its clarity, but not everyone sees it that way. People from the Middle East for example, find Ango-Saxon communication grating, specifically because it is so direct. I once had a Moroccan friend who felt this way, even after many years of living in Canada. He told me on more than one occasion “You Anglo-Saxons are so blunt”, and he didn’t mean it as a compliment. At the time, I found it hard to see his point, because to me, the way I communicated felt to the point, but not necessarily blunt and definitely not rude.

This difference of perspective stems from the fact that Morocco is a “high context” communication culture, where interpersonal relationships are extremely important and the harmony and well-being of the group is preferred over individual achievement, whereas Australia is a “low-context”. In low context cultures, communication is more explicit and direct because individuals are not expected to have knowledge of each other’s histories or background, and communication is not necessarily shaped by long-standing relationships between speakers. In high context Middle Eastern and Asian cultures, messages are often conveyed implicitly, requiring the listener to read between the lines. Good communication is subtle, layered and often relies on lots of sub-text. Responsibility for transmission of a message is shared between the sender and the receiver.

For example, Arabs tend to talk around the point and expect the listener to be intuitive enough to discover the hidden message being communicated. They are more likely to use abstract ideas than concrete facts, particularly when bad news has to be delivered. If a Lebanese or Saudi needs to refuse a request, he or she will rarely say “no”, as being so direct makes them feel extremely uncomfortable. Instead, he or she will drop hints and use indirect language to let you know that what you are asking cannot be done. 

Saying “no” between the lines is also common throughout Asia, especially when speaking to a boss or a client. If you work with a supplier or team member from China, Japan, the Philippines or Korea, you’ll find that people have a variety of ways to say “no”. A question like “Can you complete this project by next week” may elicit a non-committal answer like “I’ll try my best” or “we’ll need to think about it”, or even a silence.

To a Westerner, this can feel like poor communication at best and evasiveness at worst. I’ve heard Western businesspeople ask “why can’t they just say what they mean?” when it comes to negotiating deals in the Middle East. People from high context cultures are also fond of talking about non-business topics in a business context. For example, the Finance Manager at our company is Indian and we meet every few weeks to review the finances. Even though our meeting is specifically finance-focussed and time limited, he always makes a point of talking about other things that are happening in his life – the rate of Covid infections in India, what is happening with his family or property investments, the charitable project he set up – one time he even took our team on a virtual tour of a local temple. These themes often take up 30% of the meeting. As an Australian who is used to sticking with the meeting agenda, this can feel like a diversion, but I have come to appreciate the fact that this is how my colleague is building a relationship with my team, from thousands of kilometers away. And it works.

These same patterns exist in other Asian cultures and as you can imagine, differences in communication styles can lead to serious misunderstanding when Westerners get talking to people from high context societies. Being aware of the differences in the way in which high and low context cultures communicate will go quite a way towards helping you read a particular social or business context and to keeping you out of trouble, even before the commercial conversation begins.

If you come from a low context culture, one of the ways you can improve communication with clients, suppliers and partners from high context cultures is to practice ‘listen between the lines’ rather than taking everything at face value. Try to hear what is being implied rather than focussing on the words themselves, and ask clarifying questions to tease out meaning.

On the other hand, if you come from a high context culture, try to be as clear and transparent with your interlocutors as possible. State your objectives and opinions simply and clearly and show your cards upfront. At the end of a meeting or call, recap all the key points and agreed action steps and repeat these in your follow up email. If you are ever unsure about what has been agreed or what you are expected to do, don’t read between the lines, let people know that you are unsure and clarify their expectations.

A word on email

The use of email is an area which can cause real problems in international business, because people have different expectations about how it is used. I want to highlight two issues: function and tone.

Westerners love email because it is fast, direct and it creates a written record of what happened, which we can use to hold others accountable – it compliments our rules-based thinking. We feel comfortable dashing off short, snappy messages to colleagues as a way of managing work and driving projects forward.

To people in relationship-based, high-context cultures, using email this way feels very perfunctory. In Middle Eastern cultures, for instance, people generally prefer to meet face-to-face (or on video or phone where an in-person meeting is not possible) to discuss work, because it is personal and helps to build a relationship – a key goal for them. Follow-up email is used sparingly, if at all. When I worked in Iraq, colleagues in various government ministries often didn’t reply to my emails, although they were amiable and easy enough to work with in person.

Tone is another are where problems crop up. Without context, emails, like text messages can be easily misinterpreted and problems can occur, even between cultures that are quite similar. I once heard an anecdote about two female colleagues, one British and the other Australian who had come to dislike each other, at least partly thanks to their email communications.

The British woman would always begin her emails with a description of the weather in the UK and enquiries about her colleague’s health, and the Australian would invariably reply in with one sentence answers, completely bypassing all of the peripheral detail. What probably felt to her like efficiency and clarity came across as rudeness and coldness to her slightly more high context colleague on the other side of the world.

I recommend to my clients that they manage potential email problems by making email a secondary means of communication in their international business. My strong preference is that people communicate as much as they can via video (or phone at worst) and rely on email only to follow up and record outcomes, agreements and action points.

Approaches to time

Time is another area where cultures tend to differ markedly in their approach. The American sociologist Edward T. Hall – who developed the theory of high and low context culture – also concluded that two different orientations to time exist across the world: monochronic and polychronic. Monochronic approaches to time are linear, sequential and involve focussing on one thing at a time, whereas polychronic orientations to time involve simultaneous occurrences of many things and the involvement of many people. In a polychronic setting, the time it takes to complete an interaction is elastic and more important than any schedule. The Trompenaars’ model of national culture differences, also divides approaches to time, sequential and synchronous, which map roughly to Hall’s categories.

Western cultures tend to be monochronic / sequential whereas Middle Eastern and Latin American cultures are firmly polychronic / synchronous and Asian cultures are split between the two camps.

In monochronic or sequential cultures like Germany, Britain, Switzerland and the United States, people prefer to “stick to the plan”, to meet on time and for events to happen in the “correct” order. They place a high value on planning, punctuality, planning and staying on schedule because they believe that “time is money,” and don’t appreciate it when their timetable is thrown off.

By contrast, in polychronic or synchronous time cultures, meetings can start later and plans can be interrupted. People see the past, present, and future as interwoven periods. They often work on several projects at once, and view plans and commitments as flexible. I cannot tell you how many times I waited for meetings to start when I worked in Iraq, often with colleagues from the United States. While I was accustomed to laid back Middle Eastern scheduling and prepared to cool my heels for a while, my American colleagues- who hadn’t worked in the region before – found the delays maddening and this sometimes created a tense atmosphere in meetings … not a good way to begin.

As I mentioned above, there are a variety of approaches to time in Asia. Singaporeans value time and don’t like to waste it. The Japanese are more concerned not with how long something takes to happen, but with how time is divided up in the interests of properness, courtesy and tradition.

The Chinese, like most Asians, “walk around the pool” in order to make well- considered decisions, but they also have a keen sense of the value of time. This is apparent in their attitude toward taking up other people’s time, for which they frequently apologize. For example, at the end of a meeting in China, it is customary to thank the participants for contributing their valuable time.

Punctuality is also important in China —more so than in many other Asian countries. Indeed, when meetings are scheduled between two people, it is not unusual for a Chinese to arrive 15 to 30 minutes early “in order to finish the business before the time appointed for its discussion,” so as not to steal any of the other person’s time! It is also considered polite to announce, 10 or 15 minutes after a meeting has begun, that one will soon have to be going, so as to highlight a desire not to take too much of the other person’s time. The Chinese person will not go until the transaction has been completed, but the point has been made.

There is something of a double standard at work here: the Chinese penchant for humility demands that the other person’s time be seen as precious, but the Chinese also expect a liberal amount of time to be set aside for repeated consideration of the details of a transaction and to the careful nurturing of personal relationships surrounding the deal. Chinese people frequently complain that Americans doing business in China often have to catch their plane home “in the middle of the discussion.” Whereas the Americans believe that the facts have been adequately discussed, the Chinese feel that they have not yet attained that degree of closeness that is (for them) the bedrock of the deal and of other transactions in the future.

Because approaches to time can be such a source of friction across cultures, it is worth spending time contemplating your own approach to time and that of your counterpart as you do business overseas.

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Home — Essay Samples — Economics — International Business — How Cultural Differences Impact International Business

How Cultural Differences Impact International Business

• Categories: Cultural Diversity International Business

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Published: Mar 28, 2019

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• to access new or existing customers
• develop new products
• find new suppliers and partners
• do more business in other countries across Europe.
• a workforce with strong skills
• a flexible labor market
• regulations designed to protect employees
• identifying market opportunities in the UK and Europe
• providing access and introductions to the right people
• setting up in the UK
• market research
• selecting the best location
• ongoing government support after establishing yourself in UK
• applying for visas and entry to the UK
• finding staff
• support for entrepreneurs

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Cultural Differences in International Business

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

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.

• Retrieved on August 2, 2023, from https://www.bdc.ca/en/articles-tools/entrepreneur-toolkit/templates-business-guides/glossary/international-business
• Retrieved on August 2, 2023, from https://uk.indeed.com/career-advice/career-development/international-business-examples
• Retrieved on August 2, 2023, from https://www.merriam-webster.com/dictionary/culture
• Retrieved on August 2, 2023, from https://www.simplypsychology.org/hofstedes-cultural-dimensions-theory.html#:~:text=Hofstede's%20Cultural%20Dimensions%20Theory%2C%20developed,vs.%20long%2Dterm%20orientation
• Retrieved on August 2, 2023, from https://hbr.org/2016/05/what-leadership-looks-like-in-different-cultures
• Retrieved on August 2, 2023, from https://www.businessnewsdaily.com/5176-unusual-international-business-customs.html
• Retrieved on August 2, 2023, from https://www.indeed.com/hire/c/info/cultural-differences
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• Retrieved on August 2, 2023, from https://thinkculturalhealth.hhs.gov/assets/pdfs/resource-library/communication-styles.pdf
• Retrieved on August 2, 2023, from https://www.businessinsider.com/how-to-negotiate-around-the-world-2015-8#like-italians-spaniards-will-pull-out-every-stop-if-need-be-to-achieve-greater-expressiveness-7

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Culture and international business: recent advances and their implications for future research

• Perspective
• Published: 02 June 2005
• Volume 36 , pages 357–378, ( 2005 )

Cite this article

• Kwok Leung 1 ,
• Rabi S Bhagat 2 ,
• Nancy R Buchan 3 ,
• Miriam Erez 4 &
• Cristina B Gibson 5  

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The paper provides a state-of-the-art review of several innovative advances in culture and international business (IB) to stimulate new avenues for future research. We first review the issues surrounding cultural convergence and divergence, and the processes underlying cultural changes. We then examine novel constructs for characterizing cultures, and how to enhance the precision of cultural models by pinpointing when cultural effects are important. Finally, we examine the usefulness of experimental methods, which are rarely used by IB researchers. Implications of these path-breaking approaches for future research on culture and IB are discussed.

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Accepted by Arie Y Lewin, Editor-in-Chief, 25 February 2005. This paper has been with the author for one revision.

† Authors' note: This paper is based on a symposium organized by Kwok Leung with the co-authors as participants in the First Annual Conference on Emerging Research Frontiers in International Business at Duke University in March 2003. The co-authors have contributed equally to the development of this paper.

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Leung, K., Bhagat, R., Buchan, N. et al. Culture and international business: recent advances and their implications for future research. J Int Bus Stud 36 , 357–378 (2005). https://doi.org/10.1057/palgrave.jibs.8400150

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Accepted : 25 February 2005

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Issue Date : 01 July 2005

DOI : https://doi.org/10.1057/palgrave.jibs.8400150

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Cultural Differences in International Business Essay

Introduction, how companies can avoid ethnocentrism.

This paper is going to discuss how it is important for international companies to relate and adapt to the cultures of the countries that they seek to set up a business. The paper will also discuss ethnocentrism and ways to avoid it. This paper will also discuss how international companies can avoid conflict by understanding the politics and legal systems of a host country. Elements of other cultures are also important things to know and this paper will discuss why it is important for companies to know them.

The world can be said to have very many different cultures but every culture is unique in terms of elements. However, there are elements that when constituted together can be used to define culture. One of the major elements of culture is language. Different languages are a fundamental aspect of culture. Religion and beliefs of people in a certain culture play a vital role in defining a culture. Norms are part of every civilized society. These are very important in a culture and they may include taboos and rituals. Every culture also has a social stratification or collectives. They can also be termed as social constructions which are symbolic. They may be in terms of classes, communities, institutions, and organizations. Statuses and roles are other elements of culture. This involves the roles of different people in a society. It may be based on gender or age. Finally, cultural integration which is a source of harmony in culture is also an important element of defining culture.

Ethnocentricity can be described as the feeling that your culture is the best. It involves biases that foreign culture is inferior to yours. This is a feeling that is prevalent when opening a business in a foreign land. The best way to combat ethnocentrism is through exposure. Companies should always try to expose the employees to different cultures so that they can learn to appreciate them. Companies should do enough research on the hosts and their culture so as to have a smooth running in their business which is free of ethnocentrism. Cross-cultural education is important for employees who are going to work overseas. Businesses that are international need to embrace multiculturalism and avoid being closed-minded.

In order to run a successful business, companies should understand and nurture the skills required to handle the differences in culture which may try to be dominant in such relationships. “Lack of understanding of the important attitudes which are expressed when dealing with different cultures is a recipe for the loss of a lot of money which goes into negotiations, poor sales, and ineffective customer relations” (Moran and Stripp, 2001).

“The company’s willingness to understand, respect and adapt to the other cultures (cultural adaptation) is an important factor for outstanding success in the multi-cultural marketing environment. The Management understanding of both the home firm’s and the partner’s efforts to adapt to each other’s culture are considered essential to the development of successful cross-cultural relationships” (Rudie, 1985).

There are elements of other cultures that companies need to know in order to operate successfully and profitably. These may include religion. A company has to take a religious orientation of the place it is setting base in. For example, a firm that sells alcohol would need to research well before venturing into an Islamic country.

The physical environment has a significant effect on peoples’ culture. For example, people who have lived in arid areas have become nomads and animal keepers like camels.

International companies must know that the politics and the legal systems of a host nation can have a great impact on their businesses. There are countries that do not moot for job creation. Politics also determine if the host nation will adopt capitalism, socialism, free-market and currency controls. The stability of the host nation is also a political impact that international companies have to contend with. The companies also have to abide by the rules set in the host nation. These may occur mostly in businesses that are regulated or professions. Licenses may be required for starting up the business and the time it takes to process them varies in different countries. There can also be restrictions on foreign ownership of land or buildings.” Furthermore, except for the understanding about the stability of the existing government in the country that the firm is setting up a business the state can seize the property that is foreign-owned within its borders. This is termed expropriation where the state quickly compensates the former holders of the property. However, some governments may confiscate property, meaning former owners do not receive proper compensation” (Deresky, 2003).

In my view, it is important for companies to have cultural awareness for them to have successful operations in foreign countries. This will help them adapt to the culture of the people they want to operate with. They will know the political, religious and social existence of their host and thus operate without conflict and also make profits. When you understand someone’s culture you will respect and embrace it.

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