Cultural Risks in Global Business

Overview

• Felicity Menzies: CEO of Culture Plus Consulting, expert on cultural intelligence and diversity.
• Publication Date: September 28, 2015
• Core Idea: Globalization has surpassed many organizations' capacity to manage cultural shifts, leading to various risks in business operations.

Key Cultural Risks in Global Business

1. Failure to Adapt Global Business Models to Local Markets

• Consumer attitudes influenced by culture, requiring modifications in business models.
• Glocalization: Integrates global and local approaches.
• High risk of failure if local cultures are not considered.

2. Overlooking Regional and Subculture Differences

• Intranational cultural barriers exist within countries.
• Multinationals often make decisions at a country level, ignoring regional nuances.
• Example: Gender and generational differences in consumer behavior within the U.S.

3. Lack of Understanding of Local Business Practices

• Success requires understanding local customs, economic, political, and regulatory influences.

4. Management Practices Not Adapted Across Cultures

• Management theories often carry culture-specific assumptions that may not translate well across borders.
• Need for cultural adaptation in management practices.

5. Missed Opportunities Due to Cultural Barriers

• Companies may fail to enter or sustain presence in developing markets.
• Importance of recognizing potential in emerging markets.

6. Ignorance of Local Legal and Ethical Issues

• Complexity of legal and ethical issues in foreign markets.
• Examples: Trademark case of Hermès in China, and the cultural practice of "guanxi."

7. Inadequate Human Resource Adaptation

• Need to adapt HR policies to local cultural profiles to attract and retain talent.
• Differences in motivation, conflict resolution, and feedback.

8. Inefficient Diversity Management

• Diverse teams can enhance or detract from performance.
• Importance of managing cultural conflicts and biases.

9. Stakeholder Conflict

• Diversity increases complexity in communication, leading to potential conflicts.

10. Expatriate Assignment Failures

• High failure rates due to cultural adaptation challenges.
• Solutions include virtual assignments and short-term travel.

Decreasing Business Risk with Cultural Intelligence

Cultural Intelligence (CQ)

• Ability to function effectively in diverse cultural settings.
• Competencies:
  • CQ Drive: Willingness to engage with diverse backgrounds.
  • CQ Knowledge: Understanding of cultural differences.
  • CQ Strategy: Mental flexibility and openness.
  • CQ Action: Adaptability in communication.

Benefits

• Agility: Ability to adapt processes and products to diverse markets.
• Improved Performance: Innovation, workforce engagement, and effective partnerships.

About the Author

• Felicity Menzies: Experienced in cultural intelligence, diversity, and inclusion strategies.
• Services include training, consulting, assessments, coaching, mentoring, and keynote speaking.
• Author of forthcoming book on cultural intelligence.