A2 Economics and Business
Social and cultural differences in
doing business
Unit 3
By Mrs Hilton for
revisionstation
Lesson Objectives
• To be able to discuss different promotional
message for different countries
• To be able to identify specific examples where
companies have got it wrong
• To be able to discuss Social / cultural differences
in trading internationally
• To be able to discuss joint ventures as a way of
getting it right
• To be able to discuss the use of agents when
trading internationally
From the spec
Starter
• List as many cultural differences that might
have an impact when doing business as you
can think of (you may want to share ideas in
pairs or small groups)...
Possible answers to starter
• Time differences
• In some countries it may be expected to call people by their
first names
• Give gifts: bigger gifts for senior members, equal gifts for
employees
• Color implication: Black/white not used in business; Red
means luck (red letter day)
• Holidays: these may be at a different time of the year
• Language barriers
• Local knowledge
• Cultural differences (UK vs German sense of humor)
• Body language
Oops!
• Coors Brewing slogan “Turn it loose” when
converted to Spanish means “Suffer from
diarrhoea” — erg no thanks!
• Clairol launched a curling iron called “Mist
Stick” in Germany. Mist in German is slang for
manure. It turns out manure sticks aren’t very
popular in Germany.
• Pepsi in China
translated their
slogan, “Pepsi
Brings You Back
to Life.” The
slogan in
Chinese literally
means, “Pepsi
Brings Your
Ancestors Back
from the Dead.”
• Parker Pen in Mexico wanted its advertisements
to say “It won’t leak in your pocket and
embarrass you.”
• Instead, the company thought that the word
“embarazar” (to impregnate) meant to
embarrass, so the ad read: “It won’t leak in
your pocket and make you pregnant.” I guess
it all depends on what you want out of a pen.
• Pepsi lost market
share in Southeast
Asia when it change
its vending
machines from
deep blue to light
blue. Light blue is a
symbol of death
and mourning in
Southeast Asia.
Lost in translation
Watch out for marketing on
an international scale –
what can go wrong...
MR2 in France is the MR – why?
• A vacation in France for
Americans who have a zippy
Toyota MR2 roadster back
home provides a rare
opportunity to feel smug
around the French. After all,
French drivers are still poking
along in the MR model while
we're driving the undoubtedly
superior next-generation MR2,
right? Not quite.
• Or, rather, it doesn't sound like
"M-R-deux"--which, when
spoken with a breezy French
accent, sounds a lot like ????
GST is not liked in Canada – why?
• Mercedes-Benz shortened
the name of its Grand
Sports Tourer, which
launched in 2005, to the
sleek, succinct GST. The
French, presumably, don't
have a problem with those
initials, but in Canada GST is
the acronym for the widely
loathed goods and services
tax, also known as the
"gouge and screw tax.”
Ikea – one of many
• Ikea has yet to issue
explanations for a
workbench called
Fartfull
Chevy Nova? Sounds OK?
• The supposed howlers
include the Chevy
Nova's flop in Latin
America because "no
va" means "won't go”
Coca cola in China
• Coca-Cola's
misbegotten attempt to
render its name in
Chinese characters,
which came off as "Bite
the Wax Tadpole."
The power of words
• "Language is in many
respects such a silly
little thing, but it has
the power to bring
marketing directors to
their knees. That's
where the terror lies."
Careful how you say it!
• Talk to your translation
department
• Could it have been
checked BEFORE it was
painted onto the side of
a fleet of aircraft?
When it can be a benefit...
• An Australian company
called Golden Circle has
long manufactured a
caramel-flavored
Sarsaparilla drink, the
abbreviated product name
of which is “Sars.” Believe it
or not, when the SARS
outbreak of 2003 hit, sales
of Sars went up: its value as
a novelty item apparently
outweighed the negative
associations.
When it goes wrong
• http://www.inc.com/ss/geoffrey-james/top-9brand-blunders-all-time#9
• Entertaining top 9 brand blunders of all time
• 70-odd years ago, Procter and Gamble changed
its new soap brand from Dreck to Drift when it
realised the former title sounded like German
and Yiddish words for waste and garbage.
Lots of examples
• Lost in translation:
• https://www.facebook.com/media/set/?set=a
.425097661741.212424.235374096741
Kraft again
•
•
•
•
The name that Kraft Foods Inc. chose
for its global snack spinoff —
Mondelez International — has
sparked plenty comment.
In Russia, though, it may trigger
snickers.
Kraft says it chose the mashup to
connote worldwide deliciousness.
(Monde means "world" in French,
and delez, with a long E in the final
syllable, is a play on "delish.")
But pronounced "mohn-dah-LEEZ,"
the name means something else to
Russian speakers, say those fluent in
its language and slang. We were
tipped off to the double entendre by
a reader who braced us with a “no
offense, but this is bad” before
explaining the name sounds like the
Russian term for an oral sex act.
High Context/Low Context
High Context Communication Needs:
Low Context Communication Needs:
• Establish social trust first
• Get down to business first
• Value personal relations and good will
• Value expertise and performance
• Agreement by general trust
• Agreement by specific, legalistic contract
• Negotiations slow and ritualistic
• Negotiations efficient as possible
94
Other Cultures – Other Worlds
• Culture is the dominant set of behaviors, values,
beliefs, and thinking patterns we learn as we grow
and develop in our social groups.
• Culture determines how we view ourselves and
others, how we behave and how we perceive the
world around us.
• We tend to believe that our way of viewing the world
is the only way, or at least the best.
27
Cultural Differences in Selected
Countries and Regions
Doing Business in China
1. The Chinese place values and principles above money and
expediency.
2. Business meetings typically start with pleasantries such as tea
and general conversation about the guest’s trip to the country,
local accommodations, and family.
3. The Chinese host will give the appropriate indication for when a
meeting is to begin and when the meeting is over.
4. Once the Chinese decide who and what is best, they tend to
stick with these decisions. Although slow in formulating a plan of
action, once they get started, they make fairly good progress.
Cultural Differences in Selected
Countries and Regions
Doing Business in Russia
1.
2.
3.
4.
Build personal relationships with partners. When there are
contract disputes, there is little protection for the aggrieved
party because of the time and effort needed to legally enforce
the agreement.
Use local consultants. Because the rules of business have
changed so much in recent years, it pays to have a local
Russian consultant working with the company.
Ethical behavior in the UK is not always the same as in Russia.
For example, it is traditional in Russia to give gifts to those
with whom one wants to transact business.
Be patient. In order to get something done in Russia, it often
takes months of waiting.
Cultural Differences in Selected
Countries and Regions
• Doing business in India
1. It is important to be on time for meetings.
2. Personal questions should not be asked unless the other
individual is a friend or close associate.
3. Titles are important, so people who are doctors or
professors should be addressed accordingly.
4. Public displays of affection are considered to be
inappropriate, so one should refrain from backslapping or
touching others.
Cultural Differences in Selected
Countries and Regions
Doing business in France
1. When shaking hands with a French person, use a quick
shake with some pressure in the grip.
2. It is extremely important to be on time for meetings
and social occasions. Being “fashionably late” is frowned
on.
3. During a meal, it is acceptable to engage in pleasant
conversation, but personal questions and the subject of
money are never brought up.
4. Visiting businesspeople should try very hard to be
cultured and sophisticated.
Cultural Differences in Selected
Countries and Regions
• Doing business in Arab countries
1. It is important never to display feelings of superiority,
because this makes the other party feel inferior. Let one’s
action speak for itself and not brag or put on a show of
self-importance.
2. One should not take credit for joint efforts. A great deal of
what is accomplished is a result of group work, and to
indicate that one accomplished something alone is a
mistake.
3. Much of what gets done is a result of going through
administrative channels in the country. It often is difficult to
sidestep a lot of this red tape, and efforts to do so can be
regarded as disrespect for legal and governmental
institutions.
From the spec
It is important to emphasise that a business
person needs to know the social/cultural
differences in order to do business in a certain
country.
Some companies prefer to use agents as they
have local knowledge and appropriate language
skills.
Agent?
• Not that kind of agent
International Business Agent
• There to make sure you don’t call your product
“Barf or fartful” in their language
Two types of commercial agent
• You can use commercial
agents to help sell your
goods abroad.
Commercial agents
include export agents
and overseas
distributors.
Watch the video and explain what an import / export agent
does
http://www.youtube.com/watch?v=Si9JDZSppRQ
What sort of strategy is working an export agent?
http://www.youtube.com/watch?v=YlbRDYDtqI8
1. EXPORT AGENT
Export agents
• Export agents act on your behalf by introducing you to
overseas customers. They charge a commission usually between 2.5% and 15% - and they’re widely
used in the EU.
• An export agent can also help:
– give you information and contacts for overseas markets
– identify and make the most of opportunities overseas
– cut the cost of setting up your own offices overseas and
recruiting and training your own employees to work there
– keep more control over your product, eg the final price
and brand image (when compared with using a distributor)
Disadvantage of Export agents
• You’ll still be responsible for things like
shipping, customs paperwork and tax. Your
export agent may be able to help, or you can
use a freight forwarder for this.
• More about this later
Overseas distributors
• Overseas distributors buy your goods from you and
then sell them on in an overseas market.
• An overseas distributor can:
take care of shipping and customs
buy your goods in bulk
warehouse your goods
market your product for you
introduce your product to new markets

Distributors may expect heavy discounts and a long
period of exclusivity, so you need to research and
choose one with proven experience in your target
market.
Disadvantage of Overseas Distributor
• You lose control over
the marketing of your
goods and after-sales
service when using a
distributor.
Joint Ventures
• Is where two or more companies share the cost,
responsibility and profits of a business venture
• The complexities arising from social and cultural
differences persuade many businesses that it is
better to work via local agents or in joint ventures
with local companies, in order to gain inside
information on how to operate in a country
• Some countries block foreign business so joint
ventures is only option
Advantages of joint ventures
• Just as it would be easier to visit a new country
with a local showing you the sights, a business
may seek a partner in another country with local
knowledge – many benefits:
• Use local knowledge to avoid making costly
mistakes
• Access to supply chain through partner
• Understanding of cultural differences
• To gain access to a new market
• To comply with local laws and regulations
Disadvantages of Joint Ventures
•
•
•
•
Having to share profits
Unreliable partners
Clash of cultures between companies or countries
Having to establish a working relationship from a
distance
• There is an imbalance in levels of expertise, investment
or assets brought into the venture by the different
partners.
• Different cultures and management styles result in
poor integration and co-operation.
Sample question 1
• [6]
Answer question 1
Knowledge 2, Application 2, Analysis 2
Knowledge: up to 2 marks for identifying reasons such as
shared costs, local knowledge, government regulations, spread
risk.
Application: up to 2 marks for developing the above in the
context of the project e.g. Italian firm and Spanish language,
Chilean government anxious to keep some national control, very
costly - $3.2 billion
Analysis: up to 2 marks for developing the reasons, e.g.
preventing costly mistakes due to communication problems, easier
access to materials and supply chain because of local knowledge of
the partner
General – if only one reason, cap at 3 marks
Sample question 2
• [6]
Answer Question 2
Sample question 3
• [9]
How marks are awarded for Q3 [9]
Level
Mark awarded
1
1-2
Knowledge
2
3-4
Application
3
5-6
Analysis
4
7-9
Evaluation
Answer question 3
e.g. identifying what a joint venture is and/or explaining the characteristics of
a joint venture, such as sharing the risks and profits of a new project
e.g. potential markets mentioned in the text and connecting Mothercare to
joint venture partners, like DLF
e.g. to get round government restrictions on foreign firms having sole access
(such as in India and China), gain local knowledge to avoid making costly
mistakes, make use of existing supply networks to help reduce unit costs,
greater sales and profitability as a result of increased access to new markets
etc.
e.g. a candidate balances his/her answer by pointing out that joint ventures
can have drawbacks such as sharing profits, unreliable partners, clash of
cultures etc. A candidate might also say the benefit might depend on the
nature of the joint venture.
Revision Video