Nowadays business expansion more often than not involves going international or "going global". This is true both for the small sole trader who may be selling a highly unique and individual product right up to the Blue Chip company. Going global offers access to thousands (even millions) of more customers and therefore revenue. In addition, there are other reasons for an international structure including outsourcing systems and processes, manufacturing and distribution. However, a lot of companies are now jumping onto the global stage but without considering the many challenges they will meet.
One of the challenges that is often ignored is that of intercultural communication. Many a well-organised company has been stung by the cultural problems they have faced on the path to international success. Prior to embarking on this path any company should appreciate that "looking before you leap" is crucial and that culture is one of the many considerations to be examined. So how and where does culture impact going global?
Companies can go global in many ways or for many reasons. On the whole there are common strategies used by companies of all sizes to connect to the global market. These are:
a) Expansion - this is where a company literally expands into another country or countries. This is done by setting up an office, a factory or sales office in another country and continuing to run the business but as a local entity.
b) M&As - mergers and acquisitions are the domain of the big players but are becoming increasingly common as firms expand their interests internationally. In such instances a firm buys another to either overtake it or blend with it.
c) Joint Ventures - JVs are when two (or more) companies set up a new entity. For example Siemens and NEC step up a JV called Mobisphere.
d) Alliances - this is where companies agree to work together closely but still retaining their separate identities. One company may be a supplier to the other or be a sole distributor for the other. Either way they are doing the same thing but not as a united entity.
e) Direct Distribution - a company may decide to sell internationally but from its national base. Products or services may be sold through marketing/advertising campaigns, websites, EBay or many other routes to market.
f) Licensing/Franchising - a company decides to expand abroad but sells the rights to the product or service to someone else. This may be in the form of a license agreement to be a sole distributor of products, or in the form of a franchise such as McDonalds or Pizza Hut.
It may not seem obvious but intercultural communication impacts each and every option stated above; and this manifests in many different ways. Let's look at some brief examples:
a) Expansion - Setting up in a foreign country is not easy. Intercultural communication will come into play when meeting with people, negotiating terms and conditions, managing staff, ensuring the new structure can synchronise with the central office. This is not to mention the potential language difficulties. A company would need to ensure the people it has dealing with the foreign location had good intercultural skills and the competency to work in a foreign environment.
b) M&As, JVs, Alliances and Licensing - All very similar in nature. Many can be successful but many are not. Statistics show that the failure rate of most mergers and acquisitions lies somewhere between 40-80%. If one were to define 'failure' as failure to increase shareholder value then statistics show these to be at the higher end of the scale at 83% (Cnnfn.com 1999). Piero Morosini, author of Managing Cultural Differences: Effective Strategy and Execution Across Cultures in Global Corporate Alliances, emphasizes that, "misunderstood national cultural differences have been cited as the most important factors behind the high failure rate of global JVs [joint ventures] and alliances." Problems such ventures face range from different ways of operating, how to build trust, communication styles, interacting with superiors, motivating employees, etc.
c) Direct Distribution - When selling directly to other countries or cultures there are umpteen things to look out for. Product wise one has to be aware of areas such as sizes, names, logos, colours, etc. Communications wise how will the language barrier be overcome? How does one market or advertise to a foreign audience in a way that attracts them?
Intercultural communication impacts a business every step of the way on the road to going global. This is true at both a macro and micro-level. What is initially important is to have an appreciation that things are not always done the same outside of your country or culture. From there it is then possible to examine what areas will need attention in order to make your venture succeed. This can be anything from bringing in intercultural trainers to sit with and guide the CEOs and top-level management of two companies engaged in a JV right down to helping a company look at its website to ensure the language, images, pictures and content used are suitable for the target culture.
Intercultural communication is in fact a powerful tool that can be used to maximise one's potential on the international stage. It does so by being pro-active and minimising obstacles as well as opening horizons and allowing different cultural viewpoints to work together successfully.
© Kwintessential Ltd
