assumptions in international business

The term ‘economics’ comes from the Ancient Greek oikos, which means ‘house’, and nomos, which stand for ‘custom’ or ‘law’. In other words, economics is really a social science about the ‘rules of the house’. Macroeconomics, microeconomics, business economics, international business. House rules. When talking about house rules in international business, we should immediately consider differences and, of course, assumptions in international business.

Smile or Not to Smile

The mandatory smile for Walmart employees was indicative of its international failure in Germany. The Chinese public did not quite get the do-it-yourself proposition from Home Depot. KLM Royal Dutch Airlines decided that cultural differences would not be part of its merger efforts with Alitalia. To smile or not to smile, is definitely the question. Indeed, these assumptions in international business did not quite work out well.

Bridging House Rules

International expansion, whether it is growing organically or through mergers and acquisitions, requires companies to recognize that each country, every industry, and all companies for that matter, have their own house rules. Understanding the clearly written rules and acknowledging the existence of ‘invisible’ cultural differences helps bridge those differences and enhances chances for success.

Flying Over the Gap

Of course, some companies succeeded with international expansion by flying over the gap. Energy drink Red Bull successfully launched in international markets through local grassroots branding instead of relying on ‘traditional’ mass-marketing campaigns or building partnerships with other local or international brands. However, not all companies have wings.

The Good Assumption

For international expansion to be successful, assuming that different house rules exist is a good assumption. That way companies with international ambitions can build strategies on solid ground. Assuming a gap allows for the possibility to build a bridge.

Trust is important in international business, read more about trust here.

An article on employee motivation can be found here.

An article on international management expectations can be found here.

 

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