Impact of Cultural Norms on Global Businesses

Lesson Transcript
Instructor: Allison Tanner

Allison has a Masters of Arts in Political Science. She has worked in the customer service and food industry since 2013.

Doing business globally requires knowledge of how to handle the cultural norms of the regions or employees from the regions where the company does business. Explore how cultural norms can impact the business strategy of a global business. Updated: 03/22/2022

Cultural Norms

Cultural norms are the shared values, beliefs, and customs that influence the behaviors and practices of people. Because these norms differ from region-to-region, they can impact how a business operates in the international or global market.

John, a business entrepreneur, is not new to cultural challenges, but he has succeeded in overcoming them with the help of his pal, Cultural Norman (C.N.).

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  • 0:03 Cultural Norms
  • 0:32 Business Strategy
  • 3:13 Business Performance
  • 5:05 Lesson Summary
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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.

Business Performance

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.

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