Business Strategy
When John first started his international ventures, he struggled to develop successful business strategies, or plans for operating internationally. C.N. helped him to understand that he needed to consider that some cultural norms influence business strategies, such as:
- Relationship expectations
- Preferences for products and services
- Perception of external businesses and local ethics
At one point, John had planned to expand into Brazil. However, when he sent his vice president to visit with the local partner, they wouldn't speak to him. C.N. helped John to see in Brazil, personal relationships are an essential part of the business deal. By sending his partner, he was disrespectful and showed a lack of concern for the relationship he had built with the partner. In some cultures, business relationships should be blended with friendship and, in others, personal conversations about family are not usually appropriate. Thus, relationship expectations, or ideals on how personal the business relationships should be, needed to be considered in his strategy for business development.
C.N. also showed John that products and services were culturally dependent. For instance, when John wanted to open a burger shop in India, his inquiries were completely ignored. This was because in India, cows are considered holy and their meat is not consumed. In some countries, the business strategy should avoid pork, such as in areas with large Jewish or Muslim populations, because pig is not consumed by most people in these cultures. Business strategies should consider how cultural norms can influence the products and services they offer.
In some cases, method of entry is determined by local laws, but often it is due to the perception of external businesses and local ethics. Some cultures consider a direct investment an invasion on their land, and the company will need to consider a joint venture or partnership in order to enter. However, in countries where there is a high corruption or high probability that a product will be illegally duplicated because cultural norms don't discourage piracy or plagiarism, a direct investment is the best option. Joint ventures, or shared ownership of the business, are expected when entering some international markets. Depending on local norms, a company may consider franchising, or selling rights to a brand in exchange for royalties or foreign direct investment, where the company directly invests into an international market while maintaining full control of the business.
John also needed to evaluate business performance and how his companies can complete tasks in different cultures.
Some important things to consider include:
- Leadership hierarchy
- Time
- Gender barriers
When John first started operating in Taiwan, he would bring in managers from the U.S. to oversee the business. He quickly found out that these managers didn't know how to work with the local workforce. Team members never corrected managers if they made a mistake, and they didn't seem eager to do anything outside of their given tasks. C.N. explained that this was because some Asian cultures such as that in Taiwan have a high level of respect for leaders, and they are taught that challenging superiors is inappropriate. Further, because of the hierarchies, team members generally don't work outside of their given tasks.
John also found that in Taiwan, projects were completed slowly and decisions were not made quickly. As frustrations would arise, C.N. taught him that western countries view time as linear. This means seeing time as something that can be 'spent,' and deadlines are extremely important. However, cultures like Taiwan see time as cyclical. This means that it continues to cycle around and because time will continue, it is better to take as much time as necessary to complete a project well, or make an informed decision, than to work quickly.
Gender is also an important factor in international business. While many Western countries are becoming used to having women as leaders, some cultures have not, and women leading men can be a challenge. It can also be culturally unacceptable for married women and men to be alone in the same office together. While this should not change how a U.S. company operates, sensitivity to local culture can help alleviate tensions.
Lesson Summary
Cultural norms are the shared values, beliefs, and practices of a region. When operating in the global market or internationally expanding a business, it is important to understand how these norms influence the strategy and performance of a business. The business strategy is the plan of how the company will conduct its business. This can be influenced by factors such as:
- Relationship expectations, or how personal the relationships should be.
- Preference for products and services, which refer to what type of products and services are purchased.
- Perception of external businesses and local ethics: Do locals trust external businesses and are locals trustworthy for businesses? Depending on the culture, some methods of entry include a joint venture where the business has shared ownership; a franchise where they sell rights to the brand and collect a royalty; or through a foreign direct investment, which is entire ownership over the international branch.
In addition to the strategy, culture can influence business performance, or how the company operates in the international environment. Some important areas of cultural difference include:
- Leadership hierarchy: Some cultures strictly adhere to top-down leadership and only do the work their boss tells them they have to do.
- Time, which can be seen as linear, where time has a beginning and an end, or cyclical, where it is always moving around. This influences how long projects take and when decisions are made.
- Gender barriers, which refers to different cultures having different perceptions of gender, which can influence how well employees and management teams work together.
Overall, culture influences how businesses operate in the global market, but having an understanding of the cultural differences and remaining flexible will help businesses perform effectively and create successful strategies.
