how culture affects cost of doing business

It is normal for people new to a foreign culture to experience anxiety and stress. Business protocolhow to physically and verbally meet and interact; 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, business protocolhow to physically and verbally meet and interact, 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. Costs are the expenses that must be made in order for a business to function. When we come up against a foreign culture, this can cause us real problems, especially if we fail to recognise differences and adapt. This can have a detrimental impact on many factors including a sense of well-being and confidence. The issues related to the cultures time orientation, whether its at an individual level or collectively as a society, not to mention conflict assumptions and non-verbal communication, all affect the understanding(s) across the table, as well as the chances of being understood. 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. In this article, we will talk about 10 major setbacks that a company can face because of its toxic culture. How and what you eat and drink with your family and friends may be different from what is acceptable while eating and drinking as a business person. Far from it; what it shows is the cultural significance of consensus and consultation, which tends to guide the decision-making process in Africas group-oriented cultures. This is a BETA experience. He has vast experience in the areas of international business, structured trade and strategic management, and also has first-hand experience of Africa (having resided and traveled extensively in the continent), China, SouthEast Asia & the Middle East. 1) Outline why the culture of a country might influence the costs of doing business in that country. Building and maintaining strong company culture is essential for businesses of all sizes. Opinions expressed are those of the author. This framework can help to identify the ways in which potential markets may be distant from existing ones. The important thing is to realize that there are many differences to how people live. Cognitive challenges relate to how we think, process information and essentially how we view the world. Watch the volume of your voice. Look at their faces and see how expressive they are when they speak. It is also important to reciprocate if you can with compliments, favors, hospitality, etc. Hence, the social cultural set up in Africa is quite diverse and varied and not static, and has been impacted upon by both internal and external forces. This is due to, among other things, the fact that the intrinsic African identity is dominantly an ethnicised cultural diversity. In order to overcome barriers resulting from cultural differences, companies must understand these differences prior to business transactions. Your facial expressions and gestures help convey the message. In total for example, the cost of producing one tonne of sugar vis Kenya ranges from 32000 shillings to 34000 shillings while that of producing the same tonne in Egypt ranging from 24000 shillings to 27000 shillings. The values and morals are abstract and invisible (non-material) such as respect, love, marriage, taboos, laws, kindness and worship and is prevalent in the background, visible to a select few outsiders. CAGE is an acronym for four broad components of distance: Cultural, Administrative, Geographic and Economic. You may opt-out by. In much of the Middle East, Africa, and Latin America it is common to have a conversation between members of the same gender and have frequent contact. They may be the leader and everyone else may need to follow their command or wishes. 1. ICTSD (International Centre for Trade and Sustainable Development) was established in 1996 as a non-profit organization based in Geneva, Switzerland. culture A business needs the space and interior decoration to work, which cost a It affects everything we do from the way we raise our kids to the way we do business. The beliefs also promoted good kinship and cordial interpersonal relations and respect for elderly, kindness and habit of sharing, compliance with social norms, taboos and totems, and control of deviant behaviours in the society. For example, in some cultures people who are older are treated with extreme reverence. Most employees arent interested in finding a job that can just pay the billsthey have too many options to settle for that. According to Richard Bell in his Understanding African Philosophy (2002), the African regional cultures were broken up and destroyed (or at least radically altered) primarily by the European and Islamic incursions going back some 500 years. It also impacts the functional areas of marketing, sales, and distribution. Copyright 2023 by Ictsd. The result can be very messy. According to research, people from various cultures consume differently mainly due to re consume differently primarily because of their differences in values and norms (Parker-Pope, 1996). There may be many other reasons. You would not want to hurt someones feelings. Also, it is important not to be self-centered and arrogant. The American culture perceives an indirect tone as unprepared or unorganized. Body Language. 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. This is no small task, but one that is very rewarding. Various cultural influences can affect how much it costs a company to do business in a given country. And in our role as a stakeholder in the organisation, its important to raise the awareness of cultural issues within our organization beyond the factual cultural information obtained. When youre 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. Cultural diversity here has to be seen and understood from two sides: the diversity within the African cultural landscape; and. Developing trust and gaining respect in the business environment is all about forging and maintaining good relationships. As a visitor in Africa, one is therefore broadly exposed to three distinctive components of the people inhabiting present-day Africa: (1) traditional Africans who are yet little affected by modernization (thereby socialising among the same ethnic people), (2) transitional Africans, and (3) modern Africans (foreign educated, well-travelled and socialising using modern tools). By accepting you will be accessing a service provided by a third-party external to https://www.commisceo-global.com/, 34 New House, 67-68 Hatton Garden, London EC1N 8JY, UK. Its said that the so-called contemporary development called values, norms and morals does not take place in a vacuum, but in what the human does with his/ her immediate habitat. When making business decisions, always include the costs of doing business in your calculations to determine the viability of a project. Mercado et al (2001) identified eight elements of culture which For younger and smaller companies, theres no room for errors or delaysboth of which may result from cultural misunderstandings and miscommunications. It helps make us knowledgeable about the questions to ask, not the answers. They may not be included in decision-making. Try to be practical, respectable, and in good taste. For example, decision making may be impaired or people may withdraw from others, creating even more distance between themselves and a solution. Culture affects our relationships with any of our business associates. In family-owned businesses, the patriarch, or on occasion matriarch, tends to retain the key decision-making roles. The influence of cultural factors on business is extensive. So again be sensitive to this. However, if you look at someone in public too long so your glance becomes a stare - whether on a bus, walking on the street, in a restaurant, etc. ", "Where do we find cultural differences in international business? It also impacts the functional We cover everything from understanding culture to cultural differences in business, including a look at differences in approach to time, communication and teamwork. Why Do Middle Eastern Men Wear a Chequered Headdress? to the meeting or negotiation table may therefore cause problems, and it does. Feel free to ask me any questions you may have about North American culture. Shorts and jeans are probably not acceptable. In research, it has been shown that improving a companys culture can lead to better employee engagement and loyalty which will in turn lead to a higher approval rate among investors and a higher share price. As is the case in the distant memory of colonialization, enslaved Africans were forced to abandon traditional customs, camouflage spiritual rituals, and perish cultural artefacts. The cost of doing business is equal to your total annual costs divided by the number of billable days. The 2018-19 Union Budget highlighted that the country has a $2.5tn economy, which is the seventh largest in the world. . A strong company culture tends to lead to more significant innovation, especially for cultures that encourage experimentation and risk-taking. Again, observe how others dress to give you a better idea of what is the status quo. 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. If you have business cards in dual languages, you should pass them out with the appropriate language on top. Horizons can facilitate employment without the need for you to open a local entity. This will allow you to be more sensitive to other cultures. Feel free to watch the video sample below or, Cultural Differences in Mergers & Acquisitions, Cultural Differences in International Retail, 3 Real-life Examples of Cultural Misunderstandings in Business, Free Self-Study Guide to Cultural Differences, How Lack of Cultural Awareness Can Cost A Business Big, a foreign expat manager actually managed to cause a riot and get himself beaten up, Why Cultural Intelligence is an Essential Skill for the 21st Century, How Intercultural Awareness Training Helps You Succeed at Work, How Cultural Accuracy Checking Can Make or Break Your Global Business Venture. The use of this framework in international business negotiations may allow you to anticipate misunderstandings and become better acquainted with your counterpart. What are the most important factors to consider in evaluating and selecting a country for international business? Africas arable land for food security is reported to be the largest in the world. Usually, those cultures that are time conscious are less relationship orientated. The cost of doing business in a given company is influenced in various ways by a country's culture. WebThe cost of doing business in a given company is influenced in various ways by a country's culture. There are laws/regulations, intellectual property laws, and treaties/agreements. Which country do you think is the most complex? Still, you cannot produce something out of nothing, and certain costs must be incurred. Latin Americans are generally very physical and outgoing in their expressions and body language. Knee-length or longer skirt/dress and a modest blouse are a good choice. Global business ethics are influenced by culture in various ways. The opening case shows how a simple issue, such as local flavor preferences, can impact a billion-dollar company. You can influence how employees interact with their work and your organization by embracing a culture of engagement. The belief in witch-craft still influences the traditional healing and medication practices in the treatment of various ailments and diseases in the society. WebA company's culture will affect other aspects of worker performance, including attitudes towards work, loyalty to the organization, and a sense of creativity and dependability among individual employees. What's Behind The Growth Spurt In Fertilizer Stocks? In some cultures, women may be judged differently if they have more to drink. While in Singapore, PMETs focus on producing quick and tangible results in their work; the experience in Africa, on the other hand, differs. If they are looking for a new job, their age might be a deterrent to getting hired. How can cultural differences affect business? Not making eye-contact might make the other person think that you are shy, insecure, or even insincere! And with the globalization of business through the ease of communication and travel, understanding culture is increasingly important in todays world. It is not that you tolerate discrimination but that you understand the reasons behind different viewpoints and that you dont push your viewpoint on others so they feel alienated and uncomfortable. Again, watch the natives and try to imitate what they do. Every business has its own culture, and its either created deliberately or haphazardly. From Mexico City to Buenos Aireswhether in business or as a part of the vibrant societythe history and culture of Latin America continues to have deep and meaningful impact on people throughout Latin America.CultureQuest Doing Business: Latin America (New York: Atma Global, 2011). Individuals vs. A company's culture will affect other aspects of worker performance, including attitudes towards work, loyalty to the organization, and a sense of creativity and dependability among individual employees. More often than not, situations take precedence over schedules. 1950 W. Corporate Way PMB 25615, Anaheim, CA 92801, USA.+44 0330 027 0207 or +1 (818) 532-6908, 34 New House, 67-68 Hatton Garden, London EC1N 8JY, UK.1950 W. Corporate Way PMB 25615, Anaheim, CA 92801, USA.+44 0330 027 0207+1 (818) 532-6908. If you are thinking of doing business in Saudi Arabia, consider hiring local staff to get business operations started. 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. Lets look at five ways company culture affects business performance. Who knows, it may even lead to more tangible goals for the company like higher sales or increased profits. Even if you are just purchasing vegetables! The Business Culture Complexity Index ranks the top 50 economies of the world according to the potential complexity or ease of their business cultures. Without it, your teams can become unorganized and might begin to argue among each other. What is the significance of culture, exactly? Learn to listen. Professionals often err when they think that in todays shrinking world, cultural differences no longer pertain. When employees are more enthusiastic about their work, they tend to go above and beyond whats expected of them, which translates to better service for your customers. Learning the language and translating or localizing the approach is an important step that can be noted. High employee turnover is costly, time-consuming and a sign of poor company culture, so rememberyour company culture guides who you should hire. Religion influence attitudes towards work, investments, consumption, laws and responsibility for ones behaviour. High employee turnover is costly, time-consuming and a sign 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 cultures concepts. However, if a country has a particular sports defeat or if the historical discussion becomes political, be sensitive to the conversation. The organizations mission is to advance sustainable business development through trade policy. the situation or problem, etc.) The average cost of an eye exam without insurance can range from $100-$200, depending on where you go and who you see. In order to overcome barriers resulting from cultural differences, companies must understand these differences prior to business transactions. Its also evident in the decisions your employees make. They assume that issues like culture dont really matter. In some cultures, it's relationships before business whereas in others, business first. So understanding the importance of culture, one can see that it definitely has implications for business. Top management in a global company can use a variety of The 10 Most Active Stocks Of 2023 - What Are The Biggest Movers This Year? They frequently stand closer to one another when talking than in many other cultures. By focusing on national wealth, consumer income, and peoples propensity to consume, CPA emphasizes potential sales, ignoring the costs and risks of doing business in a new market. Conclusion: Consumers' attitudes and behaviors are influenced by culture. Older people may not be valued for their former contributions or for their wisdom. A cross-border deal crosses not only national boundaries, but also cultural barriers. Companies whose bottom lines are compromised when their employees take In the countries with colonial pasts, European etiquette is socially acceptable. Understanding culture also ensures that the business is presenting itself to its new market in the best way it can. However, when we have to work with someone from a different culture, the rules may no longer be the same. This trend has also been increasing in popularity in recent years, according to researchers. A person's culture influences how he or she behaves, communicates, and thinks. A glaring example of the riches of Africa is the Democratic Republic of Congo, the country of Patrice Lumumba. They can come across as weak and unqualified. There might be a pat on the back, an arm around the shoulder, or touch on the upper arm. Better Employee Retention. Its therefore important to understand the cultural diversity of Africa. The important lesson to learn from this is that we should not interpret what we see through our own cultural view and standards. No one can dispute that culture affects how we think and how we act as individuals. employ a distributive bargaining approach - one that emphasizes competition rather than cooperation. Culture has a significant impact on how people think, communicate, and act, as well as the types of transactions they engage in and how they negotiate them. Americans are used to introducing themselves first, asking a few questions, and generating a conversation. We believe culture plays an important role in shaping our beliefs and values, which is why both cultural psychologists and social anthropologists believe culture has a profound effect on personality development. Calculating the Cost of Doing Business The cost of doing business is determined by a variety of factors, including the cost of services and goods, regulatory compliance, and tax and borrowing interest rates. 807 certified writers online How companies should market their brands to attract a global audience or how to manage stakeholder relationships with external stakeholders, for example. When we are working with people from the same, or similar, culture, its these shared rules that help give us structure and agreement in how to go about doing things, whether thats how we communicate, run meetings or negotiate. If you just dont understand something, ask politely (i.e. You should remember that in some cultures, that a persons title is just important as the persons name. Culture has a significant impact on how people think, communicate, and act. It may be hard to use humor in your conversation as others may not laugh at the same things as you. how long has jeff bezos been the ceo of amazon? Along the way, we will answer questions such as. Even though in most cultures, people have an understanding to not judge someone by their physical appearance, it would be wise for you to be knowledgeable about local standards. What are the cultural factors affecting international business? They may be placed on a Board of Directors or have a position in the company even though they may have formally retired. A norm is a set of cultural values, or commonly held beliefs, that affirms what is not acceptable. It is a religion or a religious faith that is a belief. Lets explore these in more detail below. However, be aware that dress pants for women may not be the acceptable dress everywhere. 3 0 obj A toxic work culture can impact a company in many ways which may affect the business directly or indirectly. Why is culture important in global business? Understanding the culture of the people you are dealing with is important to successful business interactions as well as to accomplishing business objectives. Therefore, recognizing how culture can affect international business is something that should be understood in order to avoid misunderstandings and miscommunication between colleagues and clients. Culture affects our relationships with any of our business associates. To build or maintain a positive culture, start by having one-on-one meetings with your team members to check in on how theyre doing. To promote this in your employees, let them know that failure is okay, and theres always a certain amount of uncertainty when youre innovating. Soft handshakes are common across Africa. Understanding cultural differences is critical to the success of companies engaging in international business. These meetings will give them a chance to ask questions and share their concerns/ideas with you. How cultures can impact the cost of doing business? Otherwise, you may wonder why people are just looking at you when you enter a room. 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? How do cultural difference affect companies doing business internationally? People in business are expected to dress conservatively and professionally and be polite at all times. Costs are lower, but it does not mean prices are cheaper. Their negotiating style reflects these characteristics. 4. Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms.