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As companies continue to expand across borders and the global marketplace becomes increasingly more accessible for small and large businesses alike there are ever more opportunities to work internationally (SOURCE). International and ethnically diverse teams are becoming more common, meaning businesses can benefit from an increasingly diverse knowledge base and new, insightful approaches to business challenges. Along with the benefits of insight, global organizations also face potential obstacles when it comes to culture and international business (SOURCE).
While there are several ways to define culture, the one used today is that it is a set of common and accepted norms shared by a society (SOURCE). But in an international business context, what is common and accepted for a professional from one country doesn’t always carry over to another colleague or business. Effective communication is essential to the success of any type of business, it is critical when there is a risk of your message getting lost in translation or obstructed by noise. Mastery of language is not what is the key to successful communication, it’s how you frame your message and that the meaning gets across which is important. Understanding the importance of subtle non-verbal communication between cultures can be equally crucial in international business. What might be obvious in your (business) culture could be strange or offensive to a foreign colleague or client. Do your research in advance of professional interactions with individuals from a different culture to ensure successful interactions. Being perceptive to body language helps. Approaching cultural differences with sensitivity, openness, and curiosity can help to put everyone at ease. Formality is a big consideration when dealing with colleagues and business partners from different countries. The concept of punctuality can also differ between cultures in an international business environment. Along with differences in etiquette come differences in attitude, particularly towards things like workplace confrontation, rules, and regulations, and assumed working hours.
Ethics
‘The field of ethics is a branch of philosophy that seeks to address questions about morality, about concepts such as good and bad, right and wrong, justice, and virtue (SOURCE).’ When the topic of business ethics comes up, most people focus on corruption and bribery. While this is a critical result of unethical behavior, the concept of business ethics and global business ethics is much broader. It impacts human resources, social responsibility, and the environment (SOURCE).
The role of ethics in management practices, particularly those practices involving human resources and employment differ between cultures. Local cultures might have a different view on the importance of age, race, gender, sexual preference, handicap, and so on. The Netherlands is an example where most of such information is asked for during the hiring process to ensure appropriate onboarding. In other cultures, such as the United States, it is not even allowed to put your height on your resume to prevent possible discrimination. Even when there are formal rules or laws against discrimination, they may not be enforced. Our modern understanding of business ethics notes that following culturally accepted norms is not always the ethical choice. What may be acceptable at certain points in history, such as racism or sexism, became unacceptable with the further development of society’s mindset (SOURCE).
Corporate social responsibility (CSR) is defined as: ‘The corporate conscience, citizenship, social performance, or sustainable responsible business, and is a form of corporate self-regulation integrated into a business model (SOURCE).’ CSR policy functions as a built-in, self-regulating mechanism whereby businesses monitor and ensure their active compliance with the spirit of the law, ethical standards, and international norms. Corporate social responsibility encompasses not only what companies do with their profits, but also how they make them. It goes beyond philanthropy and compliance and addresses how companies manage their economic, social, and environmental impacts.
Law
Another instrumental part of conducting global business is learning the different laws, tax codes, business regulations, and other standards in different countries can be challenging, it is said that compliance was the biggest challenge when expanding overseas. Foreign banks may also be hesitant to deal with the administrative burden of a foreign-based business (SOURCE). The best way to familiarize oneself with foreign laws and regulations is to bring an expert into the fold. Having this person involved in decisions regarding this foreign business can prevent problems and might even increase their profits (SOURCE).
Outsourcing
The next step after having sought out the knowledge needed regarding tax and other regulatory factors, could be to consider outsourcing. It’s generally true that it’s cheaper to rent a factory and its workers than to maintain them yourself. The availability of cheap overseas labor is one of the biggest advantages of outsourcing. Lower tariffs and duties, and local market access, can be added incentives to move production offshore (SOURCE). Outsourced labor, and especially overseas labor, often includes technically skilled, highly educated, and multilingual workers who are willing to work for less than labor that must be brought up to speed. The advantage of having support workers who can respond to your global customers in many languages is a significant asset (SOURCE). Your company may also enjoy a market advantage locally out of an appreciation for the jobs it provides.
Conducting your manufacturing overseas can also present difficulties. Although bribery is against the Common Law, in some countries it is part of doing business. Refusing to play the game may put your company at a disadvantage but participating in bribery creates substantial legal risk for your firm (SOURCE). Economic security is also generally less certain overseas. Crime, terrorism, corruption, and political instability can all turn out to be detrimental to the success of the enterprise. Countries can sometimes quickly and unexpectedly destabilize, as has happened in Venezuela in the past few years (SOURCE). Outsourcing your production, particularly overseas, usually means that you give up some of the daily control to your contractor.
Personal Reflection
All this knowledge gathered from this course has led me to a path of continuous learning. Since I have taken the course, I have continued to take steps to becoming a full-fledged global business leader. I have taken on more responsibility than ever and I believe that I have made steps in the right direction. An example would be that over the summer I worked for a fiduciary and financial service provider for global entities. This led me to engage in many different types of law, Dutch, Slovakian, and common law are some examples. On top of this, I have been a part of several Initial Public Offerings (IPOs) and have had to mediate between clients and federal institutions. The amount of money involved is something that I cannot disclose due to my non-disclosure agreement. But one thing I learned is after observing people interact with seven-figure amounts, they still manage to complain about the price of a gallon of milk. This might not seem like the most important life lesson, but it says a lot about the Dutch culture and the readiness to haggle even on the smallest amounts to maximize subjective profits.
Lastly what I have learned is that making mistakes is the best way to improve for me. I used to have quite the ego, it has taken me a long time to admit this. Having this ego had me believe that everything I did was correct and that any mishap that occurred was somebody else’s fault. Mistakes happen constantly, and the best thing to do with them is to own them, fix them, learn from them, and then move on.
References:
- Gaspar, Julian E., Arreola-Risa, Antonio, Bierman, Leonard, Hise, Richard T., Kolari, James W.,
- Smith, L. Murphy (2014). Introduction to Global Business: Understanding the International Environment and Global Business Functions (1st edition).
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