Part I: There’s a stealthy murderous disease that’s killing millions and is often misdiagnosed, even after death
There is a silent killer murdering business ventures abroad. The disease is often found in emerging markets. It is difficult to treat because it is rarely accurately diagnosed, even after the venture is dead. But thankfully preventative measures can inoculate those most vulnerable to the disease, and if identified early enough, an antidote can be prescribed for those caught within its venomous grasp. The killer is culture. Or more accurately, the ignorance of the need to prioritise culture when operating a business in foreign markets or cross-cultural environments.
Picture this, you’re a CEO and you want to expand your business overseas. You have a great product to sell at a good price that your expensive research shows to be a ‘great fit’ in your new target market. You’ve done the right preparation; undertaken classes in cross-cultural understanding, bought the right coloured tie, learned some of the language and made adjustments to your product to suit the local market. You open your first immensely expensive overseas office; employ some enthusiastic sales staff with experience in the region. And then…
One year down the track your sales have been dismal. Potential partners walk away from profitable deals at the last minute and you’re tangled in red-tape. You close the office and cut your losses. Your report to your Directors details the reasons for your failure; the costs of doing business were too high, local decision makers couldn’t make up their minds, there were unrealistic expectations. And maybe you believe it or maybe you really don’t know how it all went so wrong. You’re left scratching your head. The internet is full of stories of failed ventures into new markets, and often the companies that have failed are famous with household names. Culture is the killer.
In her Huffington Post article, Don’t Pull The Plug Too Fast, international business expert Valerie Berset-Price tells a similar story of an American company that opened a new office in Chile. After six-months without achieving any sales the company decided it would withdraw from the country if no sales had been made by the twelve-month mark. When the twelve-month mark arrived and still no sales had been made, the company assumed that the operation was not progressing and closed down the venture. What the company didn’t anticipate was that Chilean businesses, as Berset-Price points out, are generally ‘much slower in their decision-making process (compared to the U.S. businesses) and that one year in Chile, in the context of business, would be the equivalent of three months in the U.S.’.
Unpacking further this concept of decision making time in international business, Berset-Price details how the decision making time-frame is often a cultural difference between businesses of different nations, she writes:
Americans are transaction-oriented; as such, they focus on the product, the price, the warranty to promote and market a product. Internationally, people assume that the price is competitive and that the product holds its own; what they are truly after is the relationship that will save the day once problems occur. As such, they need much more time to decide if partnering with a U.S. company is of interest to them compared to a domestic company. The expectations from the business relation are different, and they require a different time line to yield success
Culture was the killer. It turned out that when the American company left Chile they were right on the cusp of achieving the sales they had hoped for and that their potential clients ‘were shocked and upset to see the company leave – some feeling insulted by the lack of commitment the company was displaying’. The company’s assumption that they had made no progress was wrong. It’s likely the Americans incorrectly blamed failed business processes. Whilst they had the corpse – the cause of death remained misdiagnosed.
Part II: An antidote and a cure
If you can’t pinpoint the reason for your venture failing in a new market, or not being as successful as you might like, the problem is probably cultural.
This is why I started my business League Cultural Diplomacy (LCD); to help businesses and other organisations overcome cultural problems when operating in foreign markets or cross-cultural environments.
the most common reason for failure in foreign markets is an inattention to cultural factors, not because of a lack of opportunity
Academics such as Asherman, Bing and Laroche succinctly lay out a well known fact in their Building Trust Across Cultural Boundaries work:
In many other parts of the world, including China and many Arab or Latin American countries, building relationships is a pre-requisite for professional interactions. Building trust in these countries often involves lengthy discussions on non-professional topics (soccer, family and politics in Mexico, for example) and shared meals in restaurants. In these countries, work-related discussions start only once your counterpart has become comfortable with you as a person. This may take a lot longer than you would consider “normal”; in the case of Arab countries, China, or Mexico, it may take months of repeated interactions to establish trust
Had my business, League Cultural Diplomacy existed when that American company tried their hand in Chile; our corporate cultural diplomacy (CCD) activities would have ensured they had the required relationships in place before they even opened their office. CCD activities would have provided that company better cultural insights so that they would have known about decision making timeframes in Chile – and helped them establish productive relationships with potential buyers with whom they could have more forthright discussions about local business processes. CCD activities would have quickened the decision making process because trust would have been earned at an earlier stage. CCD activities can be implemented at any time but are most effective (and least expensive) when implemented before you open an office abroad or send permanent staff. Sure, it’s still crucial for you to have your business processes right, do your research and undertake the required cultural training – but these alone won’t build relationships or trust or guarantee your success. Corporate cultural diplomacy can help you build the required relationships from the very start and pave the way for your corporate success abroad. Beware the silent killer and take precautions. Good luck!
Endnotes and sources are on the next page.
Followup post: How do we know if we have a cultural problem?