Culture and Business
Read this chapter for an overview of how cultural understanding applies to business negotiations. For example, you will learn how a message is communicated in high- and low-context cultures. In high-context cultures, body language is as important and sometimes more important than actual words spoken. In low-context cultures, people tend to be explicit and direct in their communications. Verbal language and body language can impact our chances of understanding and being understood in a positive or negative way.
Understanding How Culture Impacts Local Business Practices
Learning Objectives
- Identify the ways that culture can impact how we do business.
- Understand the aspects of business most impacted by culture.
Professionals
err when thinking that, in today's shrinking world, cultural
differences are no longer significant. It's a common mistake to assume
that people think alike just because they dress alike; it's also a
mistake to assume that people think alike just because they are similar
in their word choices in a business setting. Even in today's global
world, there are wide cultural differences, and these differences
influence how people do business. Culture impacts many things in
business, including
- The pace of business;
- Business protocol - how to physically and verbally meet and interact;
- Decision making and negotiating;
- Managing employees and projects;
- Propensity for risk taking; and
- Marketing, sales, and distribution.
There
are still many people around the world who think that business is just
about core business principles and making money. They assume that issues
like culture don't really matter. These issues do matter - in many
ways. Even though people are focused on the bottom line, people do
business with people they like, trust, and understand. Culture
determines all of these key issues.
The
opening case shows how a simple issue, such as local flavor
preferences, can impact a billion-dollar company. The influence of
cultural factors on business is extensive. Culture impacts how employees
are best managed based on their values and priorities. It also impacts
the functional areas of marketing, sales, and distribution.
It
can affect a company's analysis and decision on how best to enter a new
market. Do they prefer a partner (tending toward uncertainty avoidance)
so they do not have to worry about local practices or government
relations? Or are they willing to set up a wholly owned unit to recoup
the best financial prospects?
When
you're dealing with people from another culture, you may find that
their business practices, communication, and management styles are
different from those to which you are accustomed. Understanding the
culture of the people with whom you are dealing is important to
successful business interactions and to accomplishing business
objectives. For example, you'll need to understand
- How people communicate;
- How culture impacts how people view time and deadlines;
- How they are likely to ask questions or highlight problems;
- How people respond to management and authority;
- How people perceive verbal and physical communications; and
- How people make decisions.
To
conduct business with people from other cultures, you must put aside
preconceived notions and strive to learn about the culture of your
counterpart. Often the greatest challenge is learning not to apply your
own value system when judging people from other cultures. It is
important to remember that there are no right or wrong ways to deal with
other people - just different ways. Concepts like time and ethics are
viewed differently from place to place, and the smart business
professional will seek to understand the rationale underlying another
culture's concepts.
For
younger and smaller companies, there's no room for errors or delays -
both of which may result from cultural misunderstandings and
miscommunications. These miscues can and often do impact the bottom
line.
Spotlight on Cultures and Entrepreneurship
With
global media reaching the corners of the earth, entrepreneurship has
become increasingly popular as more people seek a way to exponentially
increase their chances for success. Nevertheless, entrepreneurs can face
challenges in starting to do business in nations whose cultures require
introductions or place more value on large, prestigious, brand-name
firms.
Conversely,
entrepreneurs are often well equipped to negotiate global contracts or
ventures. They are more likely to be flexible and creative in their
approach and have less rigid constraints than their counterparts from
more established companies. Each country has different constraints,
including the terms of payment and regulations, and you will need to
keep an open mind about how to achieve your objectives.
In
reality, understanding cultural differences is important whether you're
selling to ethnic markets in your own home country or selling to new
markets in different countries. Culture also impacts you if you're
sourcing from different countries, because culture impacts
communications.
Your
understanding of culture will affect your ability to enter a local
market, develop and maintain business relationships, negotiate
successful deals, conduct sales, conduct marketing and advertising
campaigns, and engage in manufacturing and distribution. Too often,
people send the wrong signals or receive the wrong messages; as a
result, people get tangled in the cultural web. In fact, there are
numerous instances in which deals would have been successfully completed
if finalizing them had been based on business issues alone, but
cultural miscommunications interfered. Just as you would conduct a
technical or market analysis, you should also conduct a cultural
analysis.
It's
critical to understand the history and politics of any country or
region in which you work or with which you intend to deal. It is
important to remember that each person considers his or her "sphere" or
"world" the most important and that this attitude forms the basis of his
or her individual perspective. We often forget that cultures are shaped
by decades and centuries of experience and that ignoring cultural
differences puts us at a disadvantage.
Spotlight on Impact of Culture on Business in Latin America
The
business culture of Latin America differs throughout the region. A lot
has to do with the size of the country, the extent to which it has
developed a modern industrial sector, and its openness to outside
influences and the global economy.
Some
of the major industrial and commercial centers embody a business
culture that's highly sophisticated, international in outlook, and on a
par with that in Europe or North America. They often have modern
offices, businesspeople with strong business acumen, and international
experience.
Outside
the cities, business culture is likely to be much different as local
conditions and local customs may begin to impact any interaction.
Farther from the big cities, the infrastructure may become less
reliable, forcing people to become highly innovative in navigating the
challenges facing them and their businesses.
Generally
speaking, several common themes permeate Latin American business
culture. Businesses typically are hierarchical in their structure, with
decisions made from the top down. Developing trust and gaining respect
in the business environment is all about forging and maintaining good
relationships. This often includes quite a bit of socializing.
Another
important factor influencing the business culture is the concept of
time. In Latin America, "El tiempo es como el espacio". In other words,
time is space. More often than not, situations take precedence over
schedules. Many people unfamiliar with Latin American customs,
especially those from highly time-conscious countries like the United
States, Canada, and those in Northern Europe, can find the lack of
punctuality and more fluid view of time frustrating. It's more useful to
see the unhurried approach as an opportunity to develop good relations.
This is a generalization, though, and in the megacities of Latin
America, such as Mexico City, São Paulo, and Buenos Aires, time
definitely equals money.
In
most Latin American countries, old-world manners are still the rule,
and an air of formality is expected in most business interactions and
interpersonal relationships, especially when people are not well
acquainted with one another. People in business are expected to dress
conservatively and professionally and be polite at all times. Latin
Americans are generally very physical and outgoing in their expressions
and body language. They frequently stand closer to one another when
talking than in many other cultures. They often touch, usually an arm,
and even kiss women's cheeks on a first meeting.
In
business and in social interactions, Latin America is overwhelmingly
Catholic, which has had a deep impact on culture, values, architecture,
and art. For many years and in many countries in the region, the
Catholic Church had absolute power over all civil institutions,
education, and law. However, today, the church and state are now
officially separated in most countries, the practice of other religions
is freely allowed, and Evangelical churches are growing rapidly.
Throughout the region, particularly in Brazil, Indians and some black
communities have integrated many of their own traditional rituals and
practices with Christianity, primarily Catholicism, to produce hybrid
forms of the religion.
Throughout
Latin America, the family is still the most important social unit.
Family celebrations are important, and there's a clear hierarchy within
the family structure, with the head of the household generally being the
oldest male - the father or grandfather. In family-owned businesses,
the patriarch, or on occasion matriarch, tends to retain the key
decision-making roles.
Despite
the social and economic problems of the region, Latin Americans love
life and value the small things that provide color, warmth, friendship,
and a sense of community. Whether it's sitting in a café chatting,
passing a few hours in the town square, or dining out at a neighborhood
restaurant, Latin Americans take time to live.
From
Mexico City to Buenos Aires - whether in business or as a part of the
vibrant society - the history and culture of Latin America continues to
have deep and meaningful impact on people throughout Latin
America.
Key Takeaways
-
Professionals often err when they think that in today's shrinking
world, cultural differences no longer pertain. People mistakenly assume
that others think alike just because they dress alike and even sound
similar in their choice of words in a business setting. Even in today's
global world, there are wide cultural differences and these differences
influence how people do business. Culture impacts many elements of
business, including the following:
- the pace of business
- business protocol - how to physically and verbally meet and interact
- decision making and negotiating
- managing employees and projects
- propensity for risk taking
- marketing, sales, and distribution
-
When you're dealing with people from another culture, you may find that
their business practices and communication and management styles are
different from what you are accustomed to. Understanding the culture of
the people you are dealing with is important to successful business
interactions as well as to accomplishing business objectives. For
example, you'll need to understand the following:
- how people communicate
- how culture impacts how people view time and deadlines
- how people are likely to ask questions or highlight problems
- how people respond to management and authority
- how people perceive verbal and physical communications
- how people make decisions
Exercises
(AACSB: Reflective Thinking, Analytical Skills)
- How does culture impact business?
- What are three steps to keep in mind if you are evaluating a business opportunity in a culture or country that is new to you?
- If you are working for a small or entrepreneurial company, what are some of the challenges you may face when trying to do business in a new country? What are some advantages?