Social and Cultural Differences

1. Social and Cultural Differences A2 International Business

2. Social and Cultural Differences • These come from the fact that individual societies and groups within them may have a distinctive way of life. • This will affect their patterns of consumption and the products they favour. But it will also affect the way they do business with one another. • Corporate Culture: the set of important assumptions that are shared by people working in a particular business and influence the ways in which decisions are taken there.

3. Why do they matter? • Social and cultural differences can be very different. • They have to be taken into account in any activity that involves different groups of people. • Businesses have quite often easily underestimated the impact of these changes. • The term culture refers to the shared values, customs and expectations that define groups of people. • Social differences relate to different ways of communicating and expectations.

4. Why do they matter? • If businesses with inflexible business models expand abroad, they will encounter problems. • Unfamiliar national and local cultures may stun their expectations about the markets they propose to operate in.

5. Areas of Difference • The areas of difference between various country markets can be summed up as: • Product design • Communication methods • Business conventions: how organisations operate and how to avoid misunderstandings and from offending people. • Languages and marketing messages: they have to appropriate (lost in translation: always avoid literal translations) • Pricing and Distribution strategies.

6. What to do? • In order to avoid the mistakes of other companies that have failed (only half succeed) action needs to be taken. • 40% of firms trading abroad get their products designed locally. • Unilever has 68 design and innovation centres on over 20 countries. They study local markets and devise products that best meet their needs. • This has allowed them to serve different market segments within certain countries.

7. What to do? • Some businesses have assumed that if incomes are low and then so must be prices. • Levis struggled to sell their Jeans at full price in India and so changed its design/price strategy (came with affordable jeans) • Products have to be appropriate and not just cheap i.e. do the job they are designed for.

8. Appropriate Marketing • Businesses that want to expand into new countries must get to know their target markets. • They must seek out partners and decide whether joint ventures would be more appropriate. • Businesses will need local agents and local employees to better understand their target markets.

9. Appropriate Marketing

10. Adapting to change • Many businesses have made serious money by breaking into new markets but some have found them risky. • Some have pulled out and some companies still pour money into these ventures in the hope that one day it way pay off. • Being well informed about cultural differences can reduce risks. • The best businesses are well informed, adapt and keep up with change and flexible enough to work within differing cultures.