How Do Cultural Differences Affect International Business?

Why Cultural Differences Matter When Doing Business

Culture is a complex thing. It affects everything we do, from the way we raise our kids to the way we do business. That’s why cross cultural training for international business matters.

Below, we are going to give you some insights into cultural differences in international business. Along the way, we will answer questions such as:

• “How do cultural differences affect business?”
• “Why do business professionals need cultural awareness?”
• “Where do we find cultural differences in international business?”

Culture very much shapes how we go about our business. Culture informs our expectations, our behaviours, our motivations, and our perceptions of others.

When we are working with people from the same or similar culture, it’s these shared rules that help give us structure and agreement in how to go about doing things, whether that’s how we communicate, run meetings, or negotiate.

However, when we have to work with someone from a different culture, the rules may no longer be the same.

Bringing different expectations, understandings, motivations, etc., to the meeting or negotiation table may therefore cause problems, and it does.

The Key Challenges of Cultural Differences in International Business

By way of exploring these differences, we are briefly going to look at 3 ways in which culture can cause challenges.

These are:

1. Personal Challenges – the emotional challenges faced by individuals.
2. Cognitive Challenges – the mental challenges faced by people.
3. Pragmatic challenges – the practical challenges faced by business.

1. Personal Impact: Managing Stress, Confidence, and Culture Shock

When working in a multicultural environment or with another culture, the personal challenges can be many.

When we come across cultural differences and are unable to recognise and deal with them, our responses are emotional. This can have a detrimental impact on many factors including a sense of well-being and confidence.

Anxiety and stress are common reactions for people new to working in a foreign culture. When people find themselves confronted with differences, they feel challenged and therefore build mental walls to help them cope. These walls, more often than not, do more harm than good.

For example, decision-making may be impaired, or people may withdraw from others, creating even more distance between themselves and a solution.

Symptoms may also be physical, with people experiencing headaches, migraines, exhaustion and burnout.

The ‘Culture Shock’ experienced by many expatriates who move abroad is a very good example of how cultural differences affect professionals on a personal level. Not being able to manage cultural differences is a common reason cited for failed international business assignments.

2. Cognitive Differences: How Culture Shapes Thinking and Decision Making

Working with people from different cultures can present considerable cognitive challenges.  Cognitive challenges relate to how we think, process information and essentially how we view the world.

When we come up against a foreign culture, this can cause us real problems, especially if we fail to recognise differences and adapt.

Two simple examples of this are the concepts of time and relationships.

Some cultures place a high value on time; others don’t. If you come from a culture in which ‘time is money’ and you find yourself working with a culture in which it isn’t, your cultural norms can result in you making bad decisions.

Time-conscious professionals can see lateness in other cultures as unprofessional or even disrespectful. They don’t appreciate that in the culture they are working with, punctuality is a much more nuanced concept.

In reverse, those cultures that are a lot more flexible with their approach to time can see the time-conscious professionals as rigid and materialistic, which ties in with the value given to relationships.

In some cultures, it’s relationships before business, whereas in others, business comes first. Usually, those cultures that are time conscious are less relationship-oriented.

Now, what happens when you have a professional from a very task-oriented culture visit a client or colleague from a very relationship-focused culture?

Yes, they can see each other’s priorities incorrectly, i.e. the relationship-driven culture sees the task-driven culture as impersonal, unfriendly and disinterested, whereas the task-driven culture is seen as not taking business serious enough, spending too much time on small talk and breaching the line between personal and professional matters.

The result is a sort of cognitive dissonance – both sides are looking at one another through their own Cultural Lens, which means they are interpreting behaviours incorrectly and attributing erroneous meaning to them.

This can happen at many levels, whether we are talking about a general approach to business or in the more specific areas such as how we communicate, manage hierarchy and conduct negotiations.

3. Practical Challenges: Navigating Real-World Business Situations Across Cultures

Doing business with people from different cultures can also affect the more practical aspects of work.

Whether we realise it or not, we have all been conditioned by our cultures to approach work and the practicalities of business in specific ways. All of us have specific ideas as to what is a good or bad way to conduct a job interview, give a presentation, or handle a customer complaint.

Many of these do not necessarily translate into other cultures, which can cause challenges.

For example, the simple act of eye contact can cause several practical challenges. What happens when you have a culture that sees eye contact as a sign of confidence and engagement, and interact with one that sees eye contact as rude? If the two parties are unaware of this, there can be several consequences, such as a lack of trust, poor communication, a failed job interview, or a confusing meeting.

Management is another good example of where we see differing cultural expectations cause challenges in the workplace.

What happens when you have a manager who is used to a more hands-off leadership style, whereby they leave their team to their job, come into a country where the management style is much more authoritative and directive? They can come across as weak and unqualified. And if it is was the other way around, the manager would be seen as a control freak who doesn’t trust their team to do anything.

The result can be very messy. In Iraq a few years back, a foreign expat manager actually managed to cause a riot and get himself beaten up due to a lack of cultural sensitivity.

Why Cultural Awareness Is Essential for Success in Global Business

So, as we can see, culture can affect international business in many ways.

In essence, when you have two or more differing views, opinions, assumptions, or presumptions come together, the result can be negative due to a lack of understanding between the two.

This is why cultural awareness is so important.

The more aware you are of your own culture and the effect it has on you, the more aware you will become of how culture affects others and what you can do about it.