International companies have a special interest in cultural differences in local markets
And cultural differences in local markets occur when a company intends to move beyond its domestic market
Their international expansion offers access to massive customer bases, and therefore, a rapid growth → thus cultural differences in local markets arise.
That’s why, for such move, it is of vital importance to take into account:
- cultural variations and cultural barriers to communication
- local customs
- legal environment
- negotiation and consumption habits
- and a multitude of other challenges
Marketing and communicating across cultures poses several questions due to cultural differences in local markets
A company’s management will need to answer them when moving to new markets, and so:
- Will the company’s product or service work right for certain geography, local demand, and cultural variations?
- Will the language barrier and cultural preferences require translating marketing stuff and re-adjusting products to be attractive in a local market, and how to overcome difficulties of cross-cultural communication?
- How to fit into the local regulatory environment, understand existing risks, or, movement of product and finance?
Any mistake along these lines may upset sales, cause legal problems, or leave customers unhappy.
Let us focus on the need to take into consideration local negotiation cultures
As it is practically impossible for any company to get into a local market without negotiating terms with possible:
Success requires a lot of patience, understanding cultural differences and ways of conducting business, as culture strongly influences how people perceive, communicate, and act.
Wrongly enacting or misinterpreting communication across cultures affects transactions → while cultural differences between business executives can hamper or disrupt transactions ✓
↳ One such case was Enron’s huge, $3 billion investment in liquefied natural gas power plant project in India:
- Begun in 1992, the Dabhol power plant in Maharashtra state was to generate a fifth of India’s electricity.
- However, endless disputes between Enron’s subsidiary, Dabhol Power Company and the Maharashtra state government over terms of the deal went so wrong that the deal collapsed.
- As the Indian side mistrusted the speed of negotiating process imposed by Americans.
Cultural differences in local markets may define many aspects of negotiations
So, for North Americans, a goal in negotiations is quickly concluding a contract → while only a minority of Indian executives would have a similar view,
⤷ valuing more establishing a trustful business relationship, as characteristic for high-context cultures.
While Japanese businessmen claim that they approach negotiations as a win-win process → among Spanish executives few would agree to that.
There are other subtle examples of cultural variations that influence the atmosphere of negotiations,
⤷ such as physical distance between persons.
Especially in case of different gender
So, an Iranian businessman would never publicly shake hands with a female counterpart.
Attitude towards time and punctuality
- Germans renowned for punctuality
- Latin Americans forever late
- Japanese proceed with transactions only too slowly
- while Americans ever in haste to strike a deal
Role of leadership and consensus within negotiating teams
Americans demonstrate authoritarian tendencies and small negotiating teams → while the Chinese pursue consensus in their bigger teams, that are slower to act.
Using a mobile in public
It is considered rude in Japan → but common among Italians or Indians.
Finally, Americans are quick to address negotiating partners by the first name to demonstrate friendliness → while for Japanese this is seen as an act of disrespect.
Glossary applied to cultural differences in local markets
A verbal or non-verbal communicational activity involving people from differing cultural backgrounds.
The increasingly widespread communication across cultures is an essential characteristic of globalization and the internalization of businesses.
⤷ As a global flow of information, capital, and people necessitates:
- Interaction between representatives of different nations
- Cultural and religious traditions
- Societal and educational systems, and habitats
⤷ This type of communication requires an understanding of how people from different cultures:
- perceive the world around them
As opposed to the low-context culture → in which case businessmen and people in general, predominantly Westerners:
- tend to base decisions on facts and evidence rather than interpersonal trust,
- preferring all transactional specifics noted in contracts and other detailed documents.
⤷ Trust is considered the most important part of social interaction and business dealings, as characteristic for areas in:
- the Middle East,
- South and East Asia,
- and Africa.
Organizations in high-context cultures are collectivist and focus on interpersonal relationships → while individuals are focused on getting to know well their business counterparts,
⤷ to get an intuitive feeling on the issues in question → while also more concerned about group success rather than individual achievement.
Cultural barriers to communication
Obstacles to successful communication between representatives of different cultures that imply differently:
⤷ Between the communicating parties, accompanied also by various:
- confessional devotions
- business traditions
- political opinions
Among the easiest barriers to observe and cope with is the language barrier
As commonly representatives of different cultures would also speak different languages that may:
- on one hand, require the need of an interpreter as a mediator between communicating parties during verbal interaction,
- but may also imply different interpretations of words and concepts that may look very similar (as e.g. the so-called translator’s friend),
⤷ causing the risks of misinterpretation and misunderstanding.
It refers to the diversity in predominant:
- traditions (such as habitat, food, folklore, music, or clothing)
- languages (including mimics and body language)
- social practices and taboos
- attitudes (such as esthetical or consumer preferences),
⤷ that different cultures exhibit around the world.
Examples of cultural differences in local markets are numerous
But maybe well illustrated by the multitude of different linguistic practices, e.g.↴
- In India alone, there are 122 major languages and around 1600 other languages → while in much smaller Papua New Guinea more than 750 languages are spoken.
- Or in the forms of greeting that range:
- from a simple handshake, and occasional kiss, in the Western cultural tradition
- to hongi – traditional Maori greeting in New Zealand, done by simultaneously pressing noses and foreheads.
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