MISUNDERSTANDINGS can easily occur between people from the same background, but the chances of confusion increase when the parties speak different languages and have different values and expectations.
The DHL Export Barometer released in November last year found different business and cultural practices were considered by more first time exporters to be a major barrier to exporting than any other single factor.
Despite this, cultural trainer and principal of Matthew Flinders, Matthew Reede, says Australian businesses frequently underestimate the importance of culture in their international dealings.
“The definition of culture is ‘learned behaviour’. From a very young age we learn different behaviours and we take that as a norm of society, but those norms are not necessarily portable across national boundaries,” Reede told Manufacturers’ Monthly.
Failing to account for cultural differences can lead to minor mix-ups or deal-breaking errors.
At one extreme, Reede gave the example of an Australian businessman who was in China setting up a joint venture. Progress was slow and the man became frustrated. “He got angry in a meeting, very angry, and showed a great deal of emotion in front of two senior Chinese executives. He put the entire relationship at risk.”
In China it is considered bad manners and poor business acumen to show emotion at work, Reede explained. “The Westerner saw it as just an emotional outburst and didn’t see it effecting the transaction. The Chinese saw it as a major change in the relationship.”
According to Reede, this case highlights a key difference between cultures: Westerners tend to focus on business transactions, while people from other cultures, particularly Asia and Latin America, tend to focus on business relationships.
Transaction based barriers
Of course, transaction details are also important. First time exporters saw regulations, tariffs and licensing requirements as barriers to trade, the DHL Export Barometer revealed.
Austrade’s chief economist, Tim Harcourt told Manufacturers’ Monthly Australian manufacturers should look for local business advice to overcome these barriers.
Harcourt also suggests manufacturers looking to export should talk to banks, EFIC (Export Finance and Insurance Corporation) and financial advisers to find ways to minimise risks from exposure to exchange rate fluctuations and instability in foreign markets.
When setting up, Harcourt said manufacturers entering export markets should expect to incur initial fixed labour costs, and costs for capital, loans, and legal requirements such as business name registrations and insurances.
Some new exporters saw set-up costs as a barrier but Harcourt warned against attempting to cut costs at this stage.
“Do things properly - don’t cut corners - and get help from advisers like Austrade, EFIC and industry associations such as AI Group,” Harcourt said.
Change of focus
Few Australian manufacturers do cut corners on export transactions, but Reede says many neglect to learn about culture.
Even minor incidents which show a lack of cultural awareness can strain relationships.
Managers in Asia, for example, expect business partners to respect their hierarchy and give them time to deliver their message. Reede said Westerners may interrupt to provide what they believe is a good point which could cause offence.
Australians may not make it clear who leads a delegation and Reede says this often leaves Asians unsure of who they should communicate with.
Australians also tend to be individualistic, while Asians generally see themselves as part of a group. This effects group dynamics and decision-making.
For example, since Chinese businesses are generally heirarchical, Westerners may expect decisions to be made quickly by the business unit leader. “The reality, in several Asian markets, is that because it’s collective, everyone will have an opportunity to comment on a business decision and that will take time,” Reede said. Westerners may be frustrated by the delay.
Reede said Asians and Latin Americans in several markets take a long term view of business, while Western thinking is more short term. In some cases, this allows foreign business people to use time pressures to their advantage.
“There’s an expression originally out of Japan, but the Chinese use it as well, which is ‘A Westerner will sign anything if you make him wait long enough’...They have more patience than us and we feel pressured. We feel as though we’ve failed unless we come home from Asia with the results,” Reede said.
Westerners can also use patience and understanding as a competitive advantage. Reede told Manufacturers’ Monthly about two companies, one Swedish and one American, which responded to a tender from a company in Argentina.
The American’s product was superior and the company knew its competitor’s pricing strategy. They visited Argentina and, in one day, presented to the Argentinean company the superior aspects of their technology and matched the Swedes for price.
The Swedes arrived in Argentina, spent a week with the clients and learned about their vision and background. They went out to dinner with the Argentineans and met their families. On the last day of their delegation, the Swedes pitched their product, covering the technology issues and pricing.
The Swedes won the deal.
The South Americans took a long term approach to business, relationships and trust. The Americans missed the cultural differences and, while their product was superior, it didn’t win them the deal.