Beyond Handshakes: Why Culture Matters in International Business

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Introduction

Imagine being a US citizen, looking to expand your business into The Japanese market. Upon your arrival, you naturally extend your hand for a firm handshake, initiate a small talk, and address your counterparts by their first names- practices appropriate and expected in American business culture. However, you are soon encountered with puzzled expressions and subtle discomfort. In Japan, such behaviours can seem disrespectful, where bowing is the customary greeting and formality is deeply valued. 


This scenario displays a common challenge faced by the Multinational Corporations (MNCs) operating on the global stage: CULTURAL DIFFERENCES. Every culture has its own unique set of communication styles, norms and business etiquettes.


What is considered standard practice in one country may be inappropriate or misunderstood in another. Failing to recognise and adapt to these differences, can result in miscommunication, damaged relationships and even the breakdown of negotiations. 



Understanding Cultural Differences in Global Business


Cultural differences in business refers to the broad range of values, behaviours, communication styles, customs, norms and expectations that exist between people from different cultural backgrounds. Here are some key areas where cultural distinctions typically arise.

  1. Communication styles: Cultures can be either low-context cultures(like the U.S. or Germany, where direct and explicit communication is prioritised) or high-context cultures(like China or Brazil, where non-verbal cues and implicit messages dominate). Ignoring these subtleties can lead to serious misinterpretations.

  1. Power distance and hierarchy: Some cultures such as Japan, China or India, emphasise hierarchy, colleagues with more power should be treated a certain way by colleagues with less power. While countries like the US and the UK, promote participative leadership style with flatter hierarchies. Social psychologist Geert Hofstede defines this cultural difference as Power Distance*.

* Power distance- countries with a high Power Distance score indicate a more hierarchical society, where inequalities between people of different ages and positions are normal. For countries with a low score, power is distributed more equally and it’s the norm to question authority.

  1. Negotiation tactics: Negotiation is another area with cultural complexity. In the U.S., negotiations are considered a problem-solving process, whereas in Japan people prioritise relationship building over speed. A famous concept in Japan is Haragei, or "stomach art,"- a silent communication style based on nonverbal cues, body language, and intuition rather than spoken words. In Europe, deals may be concluded informally over lunch or drinks, reflecting a more relational style. 

  1. Risk propensity: Cultures also differ in how they perceive and handle uncertainty. Brazil, Mexico, and Japan tend to avoid uncertainty and prefer structured systems with planning whereas the U.S. and Australia are generally more risk tolerant.

  1. Workplace etiquettes:  Attitudes towards time and punctuality vary widely. Germans and Americans highly value functionality- being late is considered unprofessional, while countries like Argentina may have a more relaxed approach to schedules.

Understanding where the target market falls on this spectrum can unlock opportunities for collaboration, innovation, and lasting partnerships. 


Strategies to deal with Cultural Differences in International Business


Long term success of a business into a foreign country depends on the ability to overcome cultural barriers, build mutual respect and embrace social and cultural diversity. Here are some actions that can be taken to navigate cultural differences effectively.

  1. Cross-cultural training: Personalised training programme can be designed to provide employees and leadership with regular training, focusing on understanding, different cultures, values, communication styles, and workplace expectation. Such training can improve collaboration and reduce culture shocks.

  1. Cultural research: Before entering a new market,  in-depth research is critical. Teams should deep dive into local customs, business etiquettes, legal framework, consumer behaviour, religious practises, and social taboos. This comprehensive knowledge enables informed interactions and avoids costly missteps.

  1. Different communication approaches: Employees need to be encouraged to tailor communication based on local cultural norms. This may involve understanding non-verbal cues , shifting from direct communication to more indirect forms, using clear and easy words to avoid any language misunderstanding in multilingual environments. 

  1. Build diverse teams: Hiring individuals from various cultural backgrounds will promote creative problem-solving and a naturally inclusive work environment that mirrors the global operations. Future issues will be more culturally aware if an open atmosphere is fostered from the start.

  1. Adaptability: Global businesses must have flexible models and marketing strategies to operate. They should be flexible enough to be modified to align with local customs.


Curious Case of Cultural Contrasts: India


India's vast cultural diversity across regions makes it essential for businesses to engage local expertise, because what works in Mumbai may fail in Kolkata.


India across its regions: 

  • North India, business is relationship driven, with display of wealth and  hierarchical approach.
  • South India values process oriented decision-making, respect, discipline, and professionalism.
  • East India adopts an intellectual approach, with loyalty, stability, collectivism and tradition, but shows less ambition for rapid advancement.
  • West India is known for professionalism, entrepreneurial outlook, commerce driven mindset, specially in Gujarat and Maharashtra. 

Communication styles, workplace etiquettes and religious practices differ regionally, so companies must adapt strategies accordingly. 


Case Study: Changes made by McDonald’s and KFC to capture Indian Market


McDonald’s:

McDonald's successfully managed its food chain in India by adapting to country's cultural and religious diversity. Understanding the dietary restrictions of Hindus and Muslims, it removed beef and pork from its menu and introduced vegetarian McAloo Tikki burger. The brand also launched region-specific and limited-time products, such as Maharaja Mac and IPL combos to cater to local tastes. The brand designed their pricing strategies to make it accessible for the Indian middle class and ultimately established itself as one of India's most trusted and successful fast-food brands.

KFC:

KFC successfully established its presence in India by adapting to align with country's cultural and religious diversity. KFC added various vegetarian options like Veg Zinger, Veg Snacker and paneer-based dishes. Understanding India's love for bold flavours, the brand introduced spicy flavours and masalas. To further respect religion, they eliminated beef and pork and introduced chicken, fish and vegetarian items. KFC positioned itself as a family-friendly brand and became a major Player in India's fast food industry.




Conclusion

Cultural differences are important in international business, affecting how people communicate, negotiate, and manage. Understanding these differences is key for companies working globally, as misunderstandings can create conflicts and reduce collaboration. Some cultures like direct communication, while others prefer indirect methods, changing how messages are understood.

Cultural norms also influence business practices and decision-making. In certain cultures, building personal connections is crucial before business talks, while others focus on quick transactions. Acknowledging these differences helps businesses adapt their strategies and build better partnerships.

Furthermore, cultural differences impact workplace behaviour and employee relations. A diverse workforce offers new ideas but needs careful management to avoid misunderstandings. Promoting cultural awareness creates inclusive environments that enhance innovation and performance worldwide.

References

https://velocityglobal.com/resources/blog/culture-in-international-business/

https://preply.com/en/blog/b2b-cultural-differences-in-business/

https://www.badrukaschoolofmanagement.edu.in/cross-cultural-skills-for-global-leaders/

https://www.globalbusinessculture.com/cultural-awareness/what-you-need-to-know-about-business-culture-in-india/

https://florafountain.com/mcdonalds-marketing-strategy-india/

https://ijrpr.com/uploads/V6ISSUE6/IJRPR49003.pdf


Blog by Gourav Pradhan and Nidhi Attri, M.Com Students.

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