Why Is It Important to Understand the Cultural Background of a Foreign Supplier?
Technology has made doing business worldwide much easier and for many companies, the Great Recession made a global outlook a necessity. After all, most of the world’s consumers are outside the United States. According to the World Bank, the value of trade (goods and services) as a percentage of the worldwide gross domestic product (GDP) was up to 70.7% as of 2017. Meanwhile, foreign direct investment, as a percentage of GDP in the U.S. was 1.83% in 2017. While taking on global partners or expanding into emerging markets offers many opportunities, it also brings challenges, not the least of which are the cultural differences that arise when doing business outside the United States.Recognizing the importance of culture in the business world is an important step toward success in the global marketplace.
Carol Campbell is a new fashion designer who has developed a line of accessories sold through local boutiques. Recently, a popular fashion journalist noticed her collection and featured several pieces in an editorial spread. Suddenly, Campbell's products are in demand all over the country, forcing her to step up production of her purses, headbands and scarves. After speaking with several trusted advisors, she decides to outsource production to a factory in China. Although she is able to develop a list of reputable operations, she is told that it is best to fly to China directly to meet with factory owners and to inspect the facilities. Carol gets her visa and books a ticket to China. In the weeks between deciding to make the trip and actually getting on the plane, Carol spends time learning more about Chinese culture and even begins a course in Mandarin. When she arrives for her meetings with factory owners, Carol is nervous but more confident than she might have been otherwise. She greets her hosts in Mandarin and they appreciate her taking time to learn some Mandarin. In addition, she is familiar with certain aspects of Chinese culture and business etiquette, which creates a favorable impression. At the end of her trip, Carol is confident that she is selecting the right factory to manufacture her goods and help her take her business to the next level. Ellen operates a casual restaurant close to a small, private college. Six years ago, an alumnus passed away, leaving his entire, and very large, estate to the school. In his will, the donor requested that the school establish an international studies program that would actively recruit students and faculty from other countries. Now in its third year of operation, the program has an excellent administrative team and is attracting top academic talent from around the world. Yet Ellen’s café has experienced a dip in business. Some visitors to the café have mentioned that Ellen's menu, largely consisting of American-style diner food such as bacon and eggs, cheeseburgers, creamy soup and meatloaf can be difficult to navigate for some of the international students. The difficulties include lactose intolerance, which is common in many countries, and religious prohibitions against eating meat or certain types of meat. Realizing that she needs to make changes, Ellen reaches out to one of the patrons who mentioned the need to update her menu and asks for feedback. The patron suggests that Ellen contact the head of the international program and bring together a focus group of students who can give feedback on dietary preferences. After talking with students in learning about their concerns, Ellen talks to her cooks. After trying out some new recipes and tweaking their offerings, Ellen’s restaurant debuts a new menu that features vegan dishes, customizable burgers (including veggie burgers), build-your-own omelets and an extensive salad bar.
People with different cultural backgrounds often do not share the same basic assumptions and this has an influence on international business negotiations on several levels (Gummesson, E. 2000). For example, the trust between parties, attitudes toward each other during negotiations and tactics and flexibility while negotiating can be affected. When the company is preparing for negotiation, it must think in the other side of culture, such as on the elements of another country’s culture. This is one of the reasons why culture is a main issue that affects international business. From the elements of culture, language is one of the most important issues that can affect international business. Because Andritz already has been doing business in South America, and already faced most of the challenges that international business and the different kind of culture include, they are aware of the difficulties. We can point out that the most important thing that we can recommend Andritz in Växjö to think more about in the future is to improve their language communication with Latin American people. The company’s employees and staff should learn Spanish or Portuguese before going abroad. As we discovered during our investigations, language was one of the main problems for Andritz in almost every country in South America. The company do not have any language education courses and rely heavily on the personnel’s own language skills. This can be a mistake in the long run, especially if Andritz wants to enter a completely new country where they are not aware of the different possibilities and translator availabilities. Because of this, time and money can be wasted and it can become more difficult to gain the country’s trust and respect. When entering a new location, it is a great advantage to speak the local language. The advantage can come from easier negotiations and respect earnings. It is even easier to understand contracts and to interact with business associates during leisure time. This in turn can also lead to gaining respect and the trust of the other part. Because language is a part of a country’s culture, the foreign negotiator can thereby feel that the company invests in the co-operation and thereby even in the cultural issues (Hoecklin,L. 1994.).
In conclusion, preparation by a trained expert related to these issues not only assures that unnecessary blunders will be avoided, it brings to each of us a personal knowledge that deepens our understanding of others, thereby promoting acceptance, understanding, and on the level of international relations, peace and prosperity.
Gummesson, E. 2000. Qualitative Methods in Management research, United Kingdom: Sage Publications, Inc.
Hoecklin,L. 1994. Managing Cultural Differences, United Kingdom: Addison-Wesley
Hofstede, G. 2001. Culture’s Negation-Comparing values, Behaviors, Institutions, and Organization Across Nation, USA: Sage Publication
Johansson, J. 2000. Global Marketing, USA: McGraw Hill
Onkvisit, S. 1993. International Marketing – Analysis and strategy, USA: Macmillan Publishing Company