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The Importance Of Understanding Culture

Updated: Jun 29, 2021

One of the mistakes that many individuals make when attempting to do business overseas for the first time is to not give enough time to understanding the culture of the country in which they are attempting to do business. In American business schools, much of the training sort of assumes culture and focuses on the aspects of running a business such as sales, marketing, cost control and the bottom line. As important as these things are, it can seem however that the concept that business is also a relational transaction (and not just an economic transaction) gets lost. Even when only operating in your home country, transactions are often accomplished through the relationship that the company owners have with each other, rather than simply on economic terms. For example, Company A might purchase inputs from Company B because the owner of Company A has a relationship and trusts the owner of Company B, even if Company B’s prices are not the lowest or the quality is not the highest. At its core, business runs on trust, and there is an economic value to that trust.


The importance of being able to build rapport with your business partners in your home country is really a self-evident concept. However, it is even more important when you are doing business overseas. One must remember that the people you are doing business with directly often experience life much differently than you do. Depending on what sort of business you are engaged in, these individuals might be the people who effectively represent you in that country and will be connecting you to various suppliers. Also, given the different legal and regulatory regimes in other countries, having someone on your side who has experience navigating these is extremely important and often makes the difference between success and failure of the venture.


In addition to rapport, one needs to be able to understand the social cues of a foreign culture in order to effectively negotiate. While one’s language skills may or may not be up to conducting negotiations in that language, being able to understand subtleties of body language or what a certain figure of speech might mean can not only allow you to understand what is being said, but also what is not being said. In certain cultures, saying “that is very interesting” might really mean “there is absolutely no way that will happen”. Not understanding these unspoken rules can lead to confusion, but also can lead to the sense that one is being deliberately misled, when this might not be the case at all.

Also, understanding a foreign culture is important in order to align your own expectations with what you are likely to encounter doing business there, and also to be able to align your own business practices in a way that will be accepted in that culture. As an American doing business abroad, you are an ambassador. Much of what other countries think of us is based on Hollywood movies and whatever their local media puts out. Whatever negative prejudices that they come to the table with can be dispelled with the right amount of diplomacy and tact on your part. Understanding their culture and aligning your local business practices with that culture (at least as much is as practicable) will be much appreciated and go a long way towards establishing the rapport necessary to have a successful business relationship in that country.


Finally, understanding a foreign culture is important in order to be able to understand the potential pitfalls of doing business in that country. Some cultures are easier for a Westerner to do business in than others. Some of the business practices in certain cultures can be opaque, and while a local can navigate this landscape safely, it will be very challenging for a Westerner to do so.



For all of these reasons, it is imperative to spend a lot of time researching a country before embarking upon a business venture in that country. Read about their history. Read about how their political and economic systems have developed. Read about their sports, their food, and what people like to do in their spare time. And finally, read about their business practices. In addition, read multiple sources, including some English online versions of their newspapers. In short, invest some serious time in becoming a country expert. Not only will you pleasantly surprise your potential foreign business partners with your knowledge of their country, thereby facilitating a good rapport with them, but you will be much better prepared to negotiate and avoid pitfalls because of your newfound cultural literacy. In this way, you will substantially increase the chances of a successful business venture in that country.


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