Articles // August 10,2022

How Do Cultural Differences Affect The Global Economy

By Meenakshi Girish , Editor - Swetha Sitaraman

Companies are exponentially expanding their horizons across the global marketplace. This is making the market more accessible for both small and large businesses, thereby bringing life to new international opportunities. Not just foreign relations, but the businesses themselves can benefit from a diverse knowledge base, global expertise, and brand-new insightful approaches.

Culture can be defined in many ways – a set of common norms widely accepted and shared by society – is one of them. When we consider this definition in the context of international business, an overseas client does not need to accept the norms of your own culture. Read on for the major areas affected by cultural differences and how they affect and shape the global economy.

Benefits of international connections

Your business can benefit greatly by respecting cultural differences and forming strong international connections with other countries. These benefits include:

  • Expanded expertise and skills
  • Scope to thrive in the international business marketplace
  • Insights to overcome business issues
  • Ways to cope with potential barriers
  • A steady source of ROI
  • Enhanced resources and sales pipeline
  • Strong personal contacts, connections, and network of clients

Communication – It speaks volumes!

As a business leader, you must know that effective communication is a key factor for any venture. It will not work if things get lost in translation and you fail to convey the right message. For example, Indians might value a more nuanced communication whereas Americans prefer directness. If you are speaking to an American client, you cannot waste time by indulging in a lot of small talk. Knowing how to communicate with whom is a major challenge and will require tactfulness.

More than this, non-verbal communication and body language cues play an even bigger role, as they are crucial in international business. It could be that your country understands the value of making direct eye contact while speaking, a firm handshake as a greeting, or a hug or bow. This might seem offensive to others who are not aware of these customs.

“I was in a sales negotiation with someone who was from the USA – my first time with a foreign client. At the start of the meeting, the client smiled at me and reached out his hand and gave me a well gripped handshake. I was not used to that. Once we got past that awkward introduction, I asked him how things were back at home and how his family was. He began to get impatient when the small talk exceeded a couple of minutes. I switched gears and called him Mr Smith (name changed) which again annoyed him as he wanted to go by first names. On the whole, I messed up the entire meeting as I kept annoying him. I should have done my research about their culture beforehand,” said a sales representative from a reputed IT company in Chennai.

Etiquette – Understand physical and psychological cues

Pay attention to various workplace behaviors of different international partners. The formality of address is different in different places – while some prefer to be addressed by their titles (such as Doctor, Professor, etc.), others prefer to be called by their surnames. It would be embarrassing, and even a bit offensive – if you addressed them by their first names. The same would occur if you were to address them formally but they wished to maintain a casual rapport in the workspace.

“It pays off to take time and confirm with the people you work with how they would like to be addressed. It also sets the tone for the meeting – whether it is casual and conversational or formal and strictly business. Do your research to know what habits are acceptable for the international colleague you are handling,” said the sales team lead of a business firm in Coimbatore.

A plethora of norms apply to punctuality as well. While some business environments define being ‘on time’ as arriving a few minutes early, others arrive only a few minutes after the scheduled time. These misunderstandings could lead to many negative perceptions if your colleagues or international partners are not familiar with your culture. It is always better to play it safe and arrive a few minutes early – better be extra early to a meeting than to be extra late.

Working hours – Welcoming new perspectives

Be it questioning a colleague in the workplace or following specific rules and regulations, various international companies have varying ideas of assumed working hours and days. Some countries consider Sundays to be off days and Mondays to be the start of the week. For other countries, the off-day could occur any time in the middle of the week and the start of the week could be on Saturday. The same goes for the number of working hours.

Your team might consider working long hours to be a sign of commitment and dedication toward the company’s growth. But in some countries working extra hours denotes a lack of efficiency or an inability to understand priorities. Some people view the need to work past the allocated time as lethargy. It also demonstrates a lack of prioritisation for one’s family and personal life, which is considered important.

Organizational hierarchy

Cultural norms prevailing in each country dictates the attitude that professionals have towards management and hierarchy. Some countries do not permit their junior staff to share their perspectives during meetings. Others consider it important to consider everyone’s point of view before arriving at a constructive decision.

“I was handling a client from China who got offended when a junior staff on my team spoke during our meeting. There is a very strict hierarchy followed in China. Even as children they are taught to respect their elders and take care of their grandparents. This attitude is brought into the board room as well and only senior staff can speak and dictate the terms. My client got offended by our action although it is quite common in our country. They considered it an act of superiority,” said the accountant at a banking and auditing firm in Chennai.

There are some countries like Norway that have absolute societal equality and this attitude is reflected in the office space as well. Their system of organisational hierarchy is flat, if not entirely non-existent. Some other countries tend to value respect and demand respect to be shown towards elders and senior staff. A high degree of formality and respect is shown, which is considered to bring more cooperation and coordination between teams. Organisational hierarchy plays a big role in the global economy.

Building personal connections outside the office

It is of paramount importance to build trust with your clients and colleagues as a leader. There is a need to build a personal connection with your business partners to gain their trust and build lasting connections. This could be through something as simple as eating dinner together or taking your business partners out for a drink or a cup of coffee. This opens paths to building networks and setting aside your cultural differences.

As a business that understands cultural differences and wishes to expand its international pipeline, you need to learn cultural sensitivity and engage in trust-building activities. This could involve maintaining a few moments of silence before a meal, kissing your clients on both cheeks while meeting, greeting the client at the airport when they arrive, or simply avoiding non-vegetarian dishes when your guests are strict vegetarians. Paying attention to such minute details shows that you care and builds trust outside the board room.

Negotiation – Learn to negotiate fairly

Even the process of negotiation and closing deals varies greatly depending upon the culture. It affects how people communicate, behave, and manipulate. While some countries like to sign a formal contract to seal the deal, other businesses consider the deal to be a long-term relationship. Pay attention to the communication occurring during negotiations. Americans are very direct and either approve or reject a transaction. On the other hand, Japanese clients are very indirect and imply their preferences in vague signs.

Be sure to communicate your expectations and circumstances in the contract or any other formal agreement possible. It doesn’t matter whether you want every detail of the agreement to be registered or if brushing over the general principles will do. Ensure that you can turn back to your contract and seek redressal for any misunderstandings in the transaction. Communicate your understanding in clear terms and how it will affect outcomes for both businesses in the future.

What have we learnt?

As a leader who understands and is empathetic to cultural differences, you must do your research about your client before any meeting. Even if you are hiring someone from a different country, understand their preferences and show that you respect them. You don’t want them to face a massive ‘culture shock’ when they enter your team. This is the power of cultural differences – you can nurture relationships, build trust, and create lasting connections.

It is vital to know what role culture plays in the global economy and by predicting how it will affect customer behaviour, you can approach them in different ways that will appeal to them. The ultimate goal is to bridge barriers between foreign markets and local businesses. You can be competitive and stay updated about cultural diversity – be it in terms of priorities, employee preferences, or future scope and expectations.

To know more about handling cultural differences and entering the global marketplace by building trust, click here.

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In my career leading and building high-performing teams, I enjoy inspiring & coaching employees to unlock their potential for maximum performance. The team's success is my deepest delight. Global Coaching Lab provides the platform to put this into practice every day and fulfill my passion of making others great.




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