In today’s globalized and extensively interconnected world, businesses hail from different cultures and so do the customers. What is acceptable in one country may not be acceptable in another country. Understanding cross-cultural differences has become critical for businesses expanding internationally, and only cross-cultural training can prepare businesses for operating beyond their native countries.

In this article, learn the major cultural risks and find out why cross-cultural training is so important!

What are the main cultural risks that global businesses face?

cultural risk

Cross-cultural miscalculations can put businesses at risk. Without the proper cultural training, the business can:

Fail to adapt to the local market

market failure

Culture has a significant impact on consumer attitudes and behavior. Business models should be updated when a company enters a new market and effort must be made to match local preferences, customs, and habits. Product and service offerings, price, and marketing, for example, need to be altered to fit the local demands. Foreign enterprises have a significant likelihood of failure unless local cultures drive business concepts, and failure in a foreign market can be extremely costly.

Fail to identify differences

failure to identify

Every culture is different. In fact, within a country there can be multiple cultures. Understanding cultural and regional differences is important both internationally and intranationally. Consumer preferences also differ based on these differences. When companies fail to recognize these differences, they risk missing out on fruitful customer interactions, impacting their sales and overall performance negatively.

Fail to understand local business customs

Like customers, business customs differ based on region as well. Establishing a successful overseas business requires in-depth understanding of regional business customs. Without full preparation of economic, political, and cultural practices, operating in a foreign market can be quite competitive for businesses, even for large corporations.

Fail to attract human resources from local markets

Fail to attract human resources

Ignorance of a country’s cultural dynamics can affect human resource management considerably. When businesses remain unacquainted with a region’s specific work culture and employment demands, they may not be able to leverage the pool of talent adequately. The company’s human resource management and recruitment policies thus need to adapt to the cultural profiles of the local employees. This will ensure job satisfaction and maximize workforce performance within a diversified and culturally compatible environment.

Fail to prevent miscommunication

Not bridging cultural divides in a foreign workspace and market can lead to severe episodes of miscommunication. This can be because of language barriers or custom barriers. Either way, miscommunication in a business, especially in an overseas market, can affect the business radically. Appreciating these differences beforehand and devising a cross-cultural strategy

convince an employee

can help global companies overcome these communication challenges and meet their goals more effectively.

Some examples of business failures due to lack of cross-cultural understanding

MNCs aren’t all success stories. They have faced several challenges and backlash as well. Many of these failures revolve around the lack of cross-cultural understanding of the new regions they have expanded to. Here are some of the most prominent examples of how inadequate cross-cultural understanding and lack of proper localization have affected the global image of some of the most well-established MNCs.

Pepsi in China

While expanding to the Chinese market, they used the slogan “Pepsi Brings Back to Life.” This phrase was translated by the Chinese into “Pepsi bringing their ancestors back from the dead.” Although it may seem a funny mistake, this was a significant blunder from a huge MNC like Pepsi. This mishap was a culmination of the language-divide, which could have been prevented if Pepsi had understood the cultural differences.

Honda in Nordic countries

Honda too had to face problems due to cultural differences. They introduced a new car model in the Nordic countries and named the new model “Fitta.” In the Nordic countries, the word had a vulgar connotation in Swedish, Norwegian and Danish languages. If Honda had undertaken cross-cultural research then they would have refrained from using the word to name the car model. Once again, the language barrier presented a problem for a well-known corporation. Later, they renamed the model “Honda Jazz.”

Vicks in Germany

The widely popular MNC Vicks faced certain cultural challenges when they expanded to the German market, even though they were operating quite successfully in the international market. In Germany, they faced pronunciation issues in their brand name because in German, the ‘v’ is pronounced as ‘F.’ This led to a mispronunciation of the brand name, implying something entirely inappropriate for their cough drops. This led to a failure of Vicks in the German market.

Umbro and its blunder

The UK sports manufacturer Umbro also faced a similar situation. However, this was due to their lack of cross-cultural and historical research. They had named their new trainer as Zyklon, resembling the Zyklon B gas that was used by the Nazis to murder millions of Jews during WW2. After receiving several complaints, they withdrew their product from the market.

How can cross-cultural training benefit global businesses?

As we can see, not having a coherent understanding of cross-cultural elements and relevant training can cost even large multinational businesses their reputation and acceptance worldwide. On the other hand, having adequate cross-cultural training can alter a company’s performance not only on a regional scale but also globally. So what are the benefits of undertaking across-cultural training? Here’s a brief sketch!

Strengthens team work

teamwork

In any organisation, managing relationships between co-workers, bosses, and subordinates can be difficult, but most teams are at least united by a shared culture, which includes similar traditions, language, history, and media. As a result, whenever someone first enters a new and culturally different working environment, it might be challenging to collaborate with their new co-workers. The potential of inadvertent disrespect, misunderstanding, and loss of trust increase greatly.

Intercultural training mitigates these drawbacks by instructing learners on how to engage properly with their new teams and host community. This lessens culture shock for international assignees, allowing them to communicate with each other more effectively and thereby increasing their chances of success.

For instance, intercultural training assists managers posted overseas to have a better grasp of the norms prevalent in their host cultures, enabling them to leverage the best local talent. This further aids in developing a far richer work experience, ensuring their team’s long-term success.

Helps in delivering true value

It is critical to be able to listen to your customers. You won’t be able to generate meaningful value or adjust to criticism if you can’t accurately evaluate what motivates them or how they interact with your service.

By teaching your staff how overseas markets think and operate, through a comprehensive cultural awareness training, you help them design and advertise products and services that are tailored to the target culture.

They can also respond to their customers more swiftly and efficiently, resulting in enhanced customer service, increased client loyalty, and more sales. Companies that use an approach based on cross-cultural knowledge have a significant advantage over competitors that lack cultural awareness. As a result, the company’s competitiveness considerably improves.

Assists in building business relationships

Trust and understanding are the most important building blocks of a healthy, long-lasting business partnership. Even if both the cross-cultural corporations seeking business relationships are fluent in the same language, certain cultural disparities never cease to exist. While living and working in multinationals in different countries, I noticed how there were significant differences in style, structure, and context, though we were both speaking English.

Poor cultural awareness, thus, can lead to lack of clarity in communication, with considerably bigger consequences. As such, negotiations will fail, contracts will be lost, and access to international markets will be hampered.

However, this miscommunication can be reduced by intercultural training, minimizing the second-guessing of cultural standards. It pays off to employ more time and resources in strengthening a productive and mutually respectful relationship between both the business parties.

This point can be illuminated by the example of a particular event involving a Chinese and an American company. The American company was under business negotiations with a Chinese company and was hosting the company’s Chinese delegation at a local restaurant.

At the restaurant, the Chinese delegation was greeted by a junior member of the US team, who asked the head of the Chinese delegation to “sit where you like.” This particular incident offended the Chinese delegation and they left without signing any contract the next day. In this specific case, the cultural differences between the Chinese and the Americans were evident.

In Chinese business culture, hierarchy is critical, and consequently, they are used to being treated accordingly. The head of the Chinese delegation expected to be greeted by the most senior member of the US team and was expected to be offered a position at the head of the table next to the US team leader.

On the other hand, the American business culture has no such strict hierarchical regulations and so they weren’t acquainted with the expected Chinese norms. This cultural misunderstanding was a result of the lack of cross-cultural training and cost both the companies considerable time and resources.

Wrapping Up

Regardless of the size of your business, if you are planning to broaden your consumer base globally, it is important that you first get acquainted with the culture of the specific region. But just being acquainted with the regional cultural norms will not be enough and training your employees will be needed as well to prevent miscommunication and marketing failures.

Whenever you are planning to expand your business operations, launch a product or offer a service in another country or a culturally different region, be sure to provide your overseas team with the right skills through cross-cultural training.

Get in touch so we discuss how we can help you with your company’s cross-cultural training needs.

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