Cultural Differences in Business and the Impact of Culture on International Business
In This Article
- 1 Cultural Differences in Business and the Impact of Culture on International Business
- 2 Get in Touch
Look at the following points. I’m sure you will recognize a couple:
- Why is the European Union struggling so much with itself and the world?
- Why is it almost predictable that the Italian government will always be chaotic?
- Why will the Belgians and the French go on strike again in October of this and every following year?
- Why do negotiations between North-Korea and the rest of the world always take an unexpected turn?
Which one do you recognize?
The purpose of this article might come across as a bit strange. Why? Because if you’re reading this I would really hope that you are convinced that there are cultural differences in international business. In other words: Culture Matters. Let’s start with the impact of culture on international business.
Cultural Clashes in Business
First watch this 3:30 minute video that will give you a simple and clear example on how things can go wrong and how you can avoid that:
Impact of Cultural differences in Business
The impact of culture in business is huge and often is as hugely underestimated. Many people in organizations (and hence organizations) think that we’re just doing business with other people. Period. Fundamentally we’re all the same. Human beings. And that’s it.
If you’re on that side of the fence let me ask you a couple of questions:
- What do Indians mean when they shake their hands?
- Why can Latinos give such indirect answers?
- Why is everything structured in Germany?
- Why do the Dutch reply to an order always with “Why?”
I could go on and on. The fact of the matter is that cultural difference makes the world a wonderfully diverse place with, on the other hand, lots of trouble going on.
Here’s a list of points mentioned by the website Investopedia, listing the most important reasons why international mergers fail:
- Limited or no involvement from the owners
- Theoretical valuation vs. the practical proposition of future benefits
- Lack of clarity and execution of the integration process
- Cultural integration issues
- The actual cost of a difficult integration & high cost of recovery
- Negotiations errors
For me, ALL of the above points are directly or indirectly related to cultural differences. In other words, they are all a sign of the impact of culture on international business.
How Does Culture Influence International Business
Then what are those cultural differences in business?
Below is a map of the world where you can see different so-called culture clusters; cultures that are more-or-less comparable (not (!) identical!).
As you can see, there are 7 culture cluster with the pink cluster covering the biggest land-mass. Together with the olive-green color these two have about 80% of the world population.
Does that mean that all the pink colored countries are the same? No.
Take South-America for example. Although all countries from Mexico to Chile follow more or less the same trend in the four primary cultural dimensions, there are regional differences. Mexico and Venezuela are a lot “tougher” in their culture (third dimension) compared to Guatemala and Chile.
What Will the Future Look Like?
The cultural differences in business play an important role and that role will only increase in the future. Why is that?
Take a look at your iPhone; on almost all Apple products it says that it’s design in Cupertino California and manufactured in… China. But many other parts of your smartphone will come from different parts of the world. And then there are the logistics of shipping all these goods around the world.
Cultural differences in international business are here to stay and will play a greater and greater role in the coming future. The impact of culture on international business is so clearly visible if you’re able to scratch beyond the surface and look a tiny bit deeper.
If you want to find out if you’re underestimating the cultural differences in business, read this article: The 9 signs you’re not getting it; it’s Culture Stupid…
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I have a Master's Degree in Organisational Psychology and have lived in the USA, the Netherlands and, currently, in Belgium.