You’ve worked hard to get to this point—to take your business global. You’ve done the market research, built your expansion strategy, and identified the perfect country to enter. Everything looks great on paper.
Then you have your first video call with potential partners in Tokyo, and suddenly you realize nobody’s quite clicking the way they do back home. The conversations feel stilted. Decision-making takes forever. You’re not sure if people are agreeing with you or just being polite.
Welcome to the reality of culture in international business.
Here’s what most expansion guides won’t tell you: having a solid business plan is just the entry fee. The real game-changer? Understanding how people actually work, communicate, and make decisions in your target market.
Culture shapes everything from how direct people are in meetings to who gets included in decision-making. Miss these nuances, and you’ll find yourself wondering why your proven strategies suddenly aren’t working. Get them right, and you’ll build relationships that turn good business plans into great international success stories.
This isn’t about memorizing a list of cultural do’s and don’ts. It’s about recognizing that the way you do business at home might need some adjustments when you’re building teams and partnerships across borders. Because when you’re expanding internationally, cultural fluency isn’t just nice to have—it’s what separates the companies that thrive globally from the ones that struggle to get traction.
How does culture influence international business?
Culture permeates every aspect of international business, shaping how companies operate, communicate, and win in foreign markets. When venturing into new markets, organizations encounter a myriad of cultural factors that can impact aspects of their operations and objectives.
New market entry
When entering a new market, accepting local customs, consumer preferences, and business practices is essential for tailoring products, services, and marketing strategies to resonate with target audiences.
Take advertising in foreign markets, for instance. In some Middle Eastern countries, ads featuring women must adhere to discretionary guidelines. Companies entering these markets must often reposition their marketing materials to respect local cultural norms and avoid offending potential customers, vendors, or partners.
Businesses can avoid costly missteps and enter new markets more effectively by conducting thorough cultural research. This research should go beyond surface-level observations and delve into the underlying values, beliefs, and customs that shape consumer behavior and business practices in certain target markets.
Recognizing these dynamics can help teams handle negotiations smoothly, build trust with partners, and avoid unintentional blunders that might jeopardize pivotal business deals. By developing cultural intelligence and baking flexibility in an organization’s negotiation strategy, it can build stronger, more productive business relationships.
Employee recruiting and retention
Different cultures have unique expectations around work-life balance, management styles, and career paths. Some cultures value employee benefits like parental leave and paid time off, while in other countries, long working hours and dedication to the company are more of the norm.
Businesses can exercise their global fluency in employee recruitment and retention by:
- Developing culturally sensitive job descriptions and recruitment materials that resonate with local candidates
- Adapting interview processes to accommodate cultural differences in communication styles and expectations
- Tailoring unique employee benefits packages that align with local values, such as extended family leave in family-oriented cultures or flexible working hours in countries that prioritize work-life balance
- Implementing diversity and inclusion initiatives that respect and celebrate cultural differences within the organization
- Providing cross-cultural training to help employees from different backgrounds work together effectively
By aligning HR practices with local cultural norms, organizations can foster an inclusive work environment that draws in top talent and promotes employee loyalty. This cultural sensitivity will help teams design effective upskilling programs and performance management systems.
Business reputation and value
How a company approaches cultural diversity is not just a matter of policy; it’s a primary factor that can shape its reputation and value. Organizations that demonstrate cultural intelligence and adaptability often earn greater respect from stakeholders in various markets.
A prime example is Airbnb, which has built a strong reputation in international markets by adapting its platform to meet local cultural expectations and prioritizing genuinely local experiences. This approach has helped Airbnb build trust and satisfy international users across diverse markets.
Adopting local customs, celebrating cultural differences, and respecting diverse perspectives cultivates trust and credibility with international partners, customers, and investors. Beyond boosting brand image, this cultural sensitivity can help capture larger market share, forge stronger partnerships, and improve financial performance abroad.
Examples of cultural differences in international business
Imagine entering a business meeting in Tokyo, only to realize that a firm handshake and direct eye contact—which is perfectly normal in the U.S.—baffles Japanese counterparts.
Or picture being puzzled when a group of German colleagues seems frustrated by “inefficient” small talk, which is considered polite in many other cultures. These scenarios highlight how cultural differences can create unexpected challenges in international business. Here are several examples.
Communication styles
Communication styles can range from direct to indirect, depending on the culture. For example, Americans tend to be more direct and explicit, while Japanese culture often values indirect and implicit communication.
Similarly, people prefer clear, detailed information in low-context cultures like Germany or the Netherlands. Conversely, high-context cultures like China or Brazil rely more on non-verbal cues and shared cultural understanding.
Negotiation tactics
Negotiation approaches can differ greatly across cultures. In some countries, like the U.S., negotiations are often a problem-solving process to reach a mutually beneficial agreement. Negotiators from countries like Russia or Spain view negotiations more competitively.
Additionally, the pace of negotiations can vary, with some cultures preferring quick decisions while others value lengthy relationship-building periods before closing a deal.
Leadership styles
Cultural norms can heavily influence leadership styles. In hierarchical cultures like Japan or India, there’s often a transparent chain of command and respect for authority.
Other parts of the world, such as Scandinavian countries, typically have flatter organizational structures with more participative leadership styles. Some cultures value charismatic, visionary leaders, while others prefer consensus-building approaches.
Workplace etiquette
Workplace etiquette can vary significantly across cultures. For example, Germans value punctuality, and being late is considered disrespectful. In contrast, countries like Brazil or Spain tend to take a more relaxed attitude towards punctuality. Dress codes, greetings, and the use of personal space in the workplace can also differ greatly between cultures.
Work ethic
Attitudes towards work and work-life balance can vary widely. For instance, Japanese culture is known for its strong work ethic and long working hours, while many European countries highly value work-life balance and leisure time.
In some cultures, like the U.S., taking work home or working on weekends is common, while others, like France, have strict regulations for work hours and overtime.
Conflict resolution
Approaches to conflict resolution can be deeply rooted in cultural values. In some cultures, like those in the Middle East, conflicts may be addressed indirectly through intermediaries to save face.
A more direct approach to addressing conflicts is often preferred in countries like the Netherlands or Germany. Some cultures view conflict as a natural part of business relationships, while others see it as something to be avoided at all costs.
Local values and customs
Respecting local values and customs is crucial in international business. This can include religious practices, holiday observances, dietary restrictions, and social norms. For example, in Muslim countries, teams should be aware of prayer times and fasting during Ramadan.
8 tips for turning cultural challenges into a competitive advantage
You don’t need to become a cultural anthropologist to expand successfully—but you do need some practical strategies for working across different business cultures.
These approaches help you spot potential friction points before they become problems and build the kind of international relationships that move your business forward. Because the goal isn’t to master every cultural nuance overnight. It’s to show up with enough awareness and adaptability that people want to work with you.
Provide cultural awareness training
Implement cultural awareness training that goes beyond surface-level stereotypes. This training should explore various cultural nuances, including communication styles, business etiquette, and societal norms.
Why? Research from the Society for Human Resource Management (SHRM) found that 65% of organizations with diversity training programs reported increased employee engagement and productivity.
In turn, companies can equip their employees to interact more effectively with international partners, co-workers, and clients by cultivating a mutual understanding and respect for cultural norms and traditions.
Develop cross-cultural communication skills
Frictionless communication is the cornerstone of successful international business. Invest in developing cross-cultural communication skills, including language proficiency and non-verbal communication awareness.
According to the Harvard Business Review, cultural differences can significantly impact the performance of global teams. However, when managed effectively, team diversity can positively affect task performance.
Encourage employees to listen actively and adapt their communication styles to different cultural contexts. It’s not just about speaking the language but understanding the cultural subtext behind the words.
Invest in local relationships
Take the time to nurture connections with local partners, clients, and stakeholders. Show genuine interest in their culture by participating in local customs and traditions.
For instance, a Yale study emphasizes the importance of relationships in global trade, highlighting how building strong local connections can significantly impact business success. These efforts will help professionals learn more about foreign markets and demonstrate their commitment to the market, fostering trust and loyalty.
Assemble diverse, cross-cultural teams
Data from McKinsey reveals that companies that rank in the top quartile for both gender and ethnic diversity among their executive teams are 9% more likely to outperform their peers.
So, it’s important to harness the power of diversity and assemble teams representing a variety of cultural backgrounds. Fostering an inclusive environment where professionals feel comfortable sharing their unique viewpoints leads to more innovative and culturally sensitive solutions.
Conduct thorough cultural due diligence
Before venturing into a new market, teams need to arm themselves with knowledge. Invest in cultural due diligence that goes beyond basic market research. Dive deep into cultural norms, business practices, legal and regulatory requirements, and socio-economic factors that could impact operations.
To conduct effective cultural due diligence, consider the following tips:
- Engage local cultural experts or consultants who can provide in-depth insights into the target market’s business etiquette, communication styles, and social norms.
- Analyze industry-specific publications and reports to understand how cultural factors influence business practices in the target market.
- Attend or participate in local business events, trade shows, and networking opportunities to observe and learn about the business culture directly.
- Conduct focus groups or surveys with local consumers to gain firsthand knowledge of their preferences, values, and expectations.
- Use a cultural framework, such as the Denison Model, to systematically assess and compare cultures.
This immersion can help companies gain a comprehensive understanding of the cultural landscape, enabling them to make informed decisions and develop culturally appropriate strategies for entering and operating in new markets.
Adapt HR policies to local markets
One-size-fits-all HR policies don’t work in a global context. In fact, McKinsey research indicates that diverse and inclusive organizations are 35% more likely to outperform their competitors.
In turn, it’s imperative to tailor HR strategies to align with local cultural expectations and global compliance requirements. This might involve adjusting recruitment practices, modifying performance evaluation methods, or adapting benefits packages to meet local norms. By demonstrating cultural sensitivity in a company’s HR policies, it will be better positioned to attract and retain top talent in each market.
Seek local expertise
Don’t underestimate the value of locally sourced knowledge. Engage local experts, consultants, and advisors who deeply understand a target market’s cultural and business landscape.
These individuals can provide crucial insights into local customs, business practices, and potential pitfalls that might be absent to outsiders. Their guidance can be instrumental in helping navigate complex cultural nuances and avoid costly missteps.
Remain adaptable
Diverse companies are 70% more likely to capture new markets. As such, adaptability in the workplace is essential to thrive in an ever-changing international business landscape. Your team must be prepared to adjust its strategies, processes, and communications to accommodate cultural sensitivities and preferences.
Such flexibility might mean adapting marketing messages, modifying internal systems, or adopting remote work strategies to effectively manage global teams. By embodying a willingness to adapt, organizations can garner respect in local cultures and be well-equipped to win long-term in international markets.
Ready to expand without the cultural guesswork?
When you’re expanding globally, you can spend months researching cultural nuances, or you can partner with people who already know how business works in 185+ countries.
That happens to be Pebl’s cup of tea. We’ve helped hundreds of companies navigate not just the legal complexities of global hiring, but the cultural realities too. Our Employer of Record (EOR) service means you can establish a presence in new markets without setting up entities, worrying about compliance, or trying to decode local business customs on your own.
We hire and pay your global teams so you can focus on what you do best—growing your business. Think of it as having local expertise without the learning curve. Your team gets onboarded correctly, paid on time, and managed in ways that make sense for their market.
When you’re ready to turn those expansion plans into reality, we’re here to handle the details so you can focus on the bigger picture. Contact us to see how we can help you go global the right way.
This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. The content in this guide is provided “as is,” and no representations are made that the content is error-free.
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Topic:
Global Growth
