International Business: Proceed

With Caution
 Introduction

• If you were asked to describe your own

culture, what would you say?

Describing one’s culture is, in fact, not an easy

task. It is a bit like asking a fish in water
 What is culture?
· Culture as a social organization: the way in which
human activity is coordinated, organized, the way in
which people are expected to behave
· Culture as an abstract concept: Focusing on people’s
characteristic ideas, values, patterns of perceptions, ways
of thinking
· Culture as shared aspects of a society: i.e., aspects that
all its members, or a subgroup of its members, share, are
familiar with, and pass on to the next generation (e.g.,
shared and learned patterns of behavior and perception)
 Why is learning about culture important?

• Business executives who hope to profit from their travel have to

learn about the history, culture and customs of the countries to be
visited.
• Business manners and methods, religious customs, dietary practices,
humor and acceptable dress vary widely from country to country.
• Understanding and heeding to cultural variables such as these is
critical to success in international business travel and in
international business.
• Lack of familiarity with the business practices, social customs and
etiquette of a country can weaken a company's position in the
market, prevent it from accomplishing its objectives and ultimately
lead to failure.
Importance of culture in international business

• Buying behavior: This has to do with the perceptions people of a culture

hold regarding imported products, the value of brand equity in a society, the
existence and strength of brand loyalty, and the impact of social norms on
buying behavior.
• Consumption characteristics: Issues in consumption include the product
versus service consumption in the culture, social class and reference group
influences, and urban versus rural sector consumption patterns. An example
of this would be food consumption in Brazil. In the urban areas, Brazilians
are beginning to eat on the run, favoring snacks and quick meals. In the rural
areas, however, the traditional large, sit-down meal is still predominant.
• Disposal: Resale, recycling, and remanufacturing considerations constitute
the disposal level. In addition, some cultures are strongly influenced by
social responsibility and environmental implications of product disposal.
 Cross-Cultural Literacy:

• One of the biggest dangers confronting a company that goes

abroad for the first time is the danger of being ill informed.
International businesses that are ill-informed about the practices of
another culture are likely to fail.

• To combat the dangers companies should:

-Employ local citizens to help them do business in a particular
culture.
-They must also ensure that home-country executives are smart
enough to understand how differences in culture affect the practice
of international business.
 Culture and competitive Advantage:

• The value systems and norms of a country

influence the costs of doing business in that
country.
• The costs of doing business in a country
influence the ability of firms to establish a
competitive advantage in the global
marketplace.
 Success of Wal-Mart Internationally
• Wal-Mart
• As a global company, Wal-Mart is expanding its branches all
over the world. With extraordinary adaptability to different
consumer purchase behaviors in foreign countries, it has
achieved great success, with $165 billion sales in 1999.
• In China, people are used to getting everything in one stop
and buying larger quantities. To match their buying pattern,
Wal-Mart's supercenters in China provide a broad array of
merchandise, from fermented bean curd to Gerber baby
products to German Bosch tools made in China.
How does a Foreign Culture impact your business?

• Operating in a foreign culture impacts your

business in two key areas:
• · Demand side impact
• · Management impact
 Demand Side Impact
• On the demand side, you are now dealing with
customers who have different behavioral
patterns than those that you are accustomed
to. Customers vary on many dimensions;
purchase behavior, communication aspects
and product preferences are some of them.
 Management Side Impact
• On the management side, management of your business operations becomes
quite different from what it is at home.

Some examples:
• - In Japan, a manager's smile accompanied by the words, "I don't think so," carries
the same meaning as an American manager's "Absolutely not!“
• In Egypt, a training exercise that required the managers to stand on a blanket and
turn the blanket around without stepping off had to be cancelled. The reason? One
of the managers was a woman, and the men were forbidden to touch her. Because
each culture is so specific, it is best to research the individual culture as part of
your market research effort. When companies choose to ignore cultural
differences, they are operating on the assumption that business is business, and
that managers, engineers or bankers are the same throughout the world.
What is required to conduct business successfully in
a foreign Culture?

• A sensitive, experienced understanding of interaction in

different cultures is often a fundamental prerequisite in
marketing products or services abroad.

• There are two aspects that managers need to address:

• · To gain a more than superficial understanding of
people and their behavior.
• · Make sure that their message is getting across to the
foreign nationals.