Cultural factors that influence international business
Cultural difference
A business needs to understand local cultural influences in order to sell its products effectively.
For this task you are expected to explore cultural factors in a country that may impact an international business.
Task: Analyse how the following Cultural factors in a COUNTRY may affect ONE of your businesses
- Language
- Ethnic make-up of populations
- Social structures
- Religion
- Values
- Attitudes to business
- Attitudes to work
- Openness to change
Language issues
What problems can different languages cause?
Why is it important for international businesses to communicate in the relevant languages?
English is often referred to as ‘the language of business’. Why?
Mandarin is the most widely spoken language in the world. Do you think that the language of business will become Mandarin?
Language as an issue (P7)
- Communication problems with staff and customers which may lead to issues with misunderstanding in the workplace
- Packaging of products and services
- Slow communication (can be problematic for a business like Tesco as they have very high stock turnover.)[unique_solution]
Discuss the impact of language on an international business (M4)
- Potentially bureaucratic – (lots of paper work )
- Cost – training people, hiring people to translate verbal and written communication
- Customer service processes may need to be extended (e.g. after-sales care in foreign languages)
Language issues
What problems can different languages cause?
Why is it important for international businesses to communicate in the relevant languages?
English is often referred to as ‘the language of business’. Why?
Mandarin is the most widely spoken language in the world. Do you think that the language of business will become Mandarin?
Language as an issue (P7)
- Communication problems with staff and customers which may lead to issues with misunderstanding in the workplace
- Packaging of products and services
- Slow communication (can be problematic for a business like Tesco as they have very high stock turnover.)
Discuss the impact of language on an international business (M4)
- Potentially bureaucratic – (lots of paper work )
- Cost – training people, hiring people to translate verbal and written communication
- Customer service processes may need to be extended (e.g. after-sales care in foreign languages)
Ethnic make-up of populations
The ethnic makeup of a country will determine how a product is marketed, promoted and sold.
87.2% of UK is White British
19 % of UAE is Emirati
Ethnic make-up of population issues (P7)
- Issues developing a product without knowing the market
- Issues with advertising (difficult to create a specific marketing campaign)
Impact of ethnic make-up of population can impact an international business (M4)
- Cost associated with promotion/market research etc
- Products not suitable for intended target audience
- Global businesses must access different ethnicities if they are to be successful in the future.
- This can be clearly seen in the diversity of nations that are seeing significant economic growth. China, Vietnam, India, Brazil, Nigeria, Indonesia etc. The list shows the different ethnicities that businesses must understand if they are to succeed.
- This means that businesses must be global in nature. Making cultural diversity a key element of decision making will give the business a greater chance of succeeding in a fast changing global market.
Social structures
Class systems that exists in most countries i.e. the elite class (6%) to working class (more than 40%)
social structure issues(P7)
- Develop specific targeted Marketing for products and services.
- A variety of quality is required for each
- Pricing of products
Impact of social structure on an international business (M4)
- Cost of marketing to different social groups
- Partnership issues – difficult for Tesco to know who to go into market with. Lower class to help the community or the elite where more money can be made
- Social structures are the shared institutions within society where people interact and live together;
- Social structures look at how society is organised based on relationships e.g. between family, in education and in the workplace;
- The values and standards shared by people and groups within society will impact on the way that people interact with each other;
- Social structures might include politics, law, religion and the family unit within a society. These impact on how we are expected to behave
Religion and Value
Some countries Religion is embedded into their law. Failure to follow these laws may lead to fines and imprisonment for businesses and individuals. Bribes are accepted by many locals to facilitate international business, this is illegal in most countries i.e. UK and businesses/individuals that take part in this type of activates will be fined or imprisoned
Religion and Value as an issue (P7)
Followers of religion and values are limited to the type of product that a company sells. i.e. Alcohol products in Muslim countries.
Some countries accept bribes from local official for international business to setup
Impact of Religion and Value on an international business (M4)
Limited market for some products – reduction in the amount of profit Tesco makes.
Not following Corporate Social responsibility can may cost Tesco its reputation.
Issues with marketing and branding
Religion has a significant impact on businesses looking to do business abroad;
In many countries individuals and groups look to religion to establish what is acceptable in the business world. For example, certain foods cannot be eaten or methods of finance differ;
Offending different religious groups can ruin the reputation of a business, whilst ensuring products are suitable can lead to increased trade;
The sharing of a religious cultures can enhance trade, particularly as networks can be established that allow for the selling of goods and services
Attitude to business
- In Japan, business is conducted using high levels of respect, long-term relationship building, lengthy discussions, patience and women are often paid less than men.
- In Norway, business must be carried out on time, every member is allowed to express their viewpoint, any interruptions are regarded as rudeness and men & women are treated as equals during negotiations.
- In Mexico, attending meetings late is usual, going off-topic is usual, interrupting and speaking loud shows engagement, being emotional is a good thing and men & women are treated relatively equally.
Attitude to business issues (P7)
Some countries have high level of respect when doing business (i.e. UK, Japan)
Some countries offer less wages and responsibilities to Women than men.
Some countries meetings and deadlines for deals are not completed on time
Impact of Attitude to business on an international business (M4)
Legal issues with pay may arise if Tesco decided to follow inequality rules abroad.
Increase risk of non-payment of goods and services (relaxed countries)
Issues with poor time management.
Attitude to work
- In UK, a full-time worker is entitled to 28 paid holidays per annum, whereas in France, a full-time worker is entitled to 38 paid holidays per annum.
- In Spain, it is common to have a siesta (rest) during the middle of the day and work later into the evening.
- In France, it is common to have a long meal at lunchtime.
- Attitude to work issues (P7)
- Less or more working hours
- Public, Religious and cultural holidays varies in most countries
- Holidays entitlement varies for most countries
- Impact of Attitude to work on an international business. (M4)
- Difficulty managing workforce from a central location i.e. Tesco headquarters
- Difficulty budgeting
- High/low wage = high/low profit margin
- High/low working hours = High/low profit
- Attitudes to business and work vary across the globe;
- The UK has some of the longest work hours in the EU, whilst countries such as France and those based in Scandinavia work less
- ‘Work to live, or live to work’ is a quote that reflects this;
- A relaxed attitude to business and work in some countries is likely to require an informal approach to business;
- This might include discussing work outside normal working environments such as the office
- Instead, contracts and other business might be discussed over a drink in the bar or whilst playing golf
Openness to change
Businesses must be more open to change in order to be successful.
Openness to change issues (P7)
some countries are reluctant to adapt and change areas of their business i.e. technology, internet connection for communication
Impact of Openness to change on an international business (M4)
Cost of not using technology in other countries
Marketing and promotion issues
The extent to which countries are open to change will have a big impact on exports;
Some societies remain very closed and are not prepared to tolerate major change;
This can affect the sales of goods and services that deviate from the norm in these societies;
A business that exports will have to take this into account. Understanding local markets is therefore important