A2 Economics and BusinessSocial 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 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

Can you pronounce brands – team game

• http://www.businessinsider.com/hard-to-pronounce-brands-2012-5?op=1

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-9-brand-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

iSnack 2.0• Setting up a competition can be a good

way to reach out to customers and let them engage meaningfully with your business.

• Kraft thought it was onto a winner in 2009 when it decided to ask the public to choose the name of its new Vegemite variant. Nearly 50,000 suggestions flooded in. What could possibly go wrong?

• Well, the decision to pick out iSnack 2.0 is what went wrong. The name provoked widespread derision, to the point that a website called Names That Are Better Than iSnack 2.0 was launched.

• Kraft admitted it was “surprised” by the backlash which, in itself, is fairly surprising, given that the use of the term "2.0" beyond 2004 is almost unforgiveable and probably wouldn’t have registered with hard core Vegemite fans even back then.

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 ContextHigh Context Communication Needs:• Establish social trust first

• Value personal relations and good will

• Agreement by general trust

• Negotiations slow and ritualistic

Low Context Communication Needs:• Get down to business first

• Value expertise and performance

• Agreement by specific, legalistic contract

• Negotiations efficient as possible

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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.

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Cultural Differences

• Some main indicators of cultural differences are:

– Behavioral patterns: appearance vs. reality

– Non-verbal behavior: Gestures, signs, mimics

– Distance behavior: personal space vs. closeness

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Behavioral Pattern• If we don’t know anything about other cultures,

we tend to use stereotypes as our knowledge base – Is this a right approach?

• What are stereotypes?– Negative labeling of a certain group or culture

based on the actions and/or appearances of a few individuals.

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Non-Verbal Behavior • Understood as the process of communication through

sending and receiving wordless messages.

• Language is not the only source of communication; there are other means, including:– Gestures and touch– Body language or posture, facial expression and eye contact– Object communication such as clothing, hairstyles or even

architecture and symbols

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Non-Verbal Behavior • Nonverbal communication plays an important role

on an emotional level.• It constitutes a main part of intercultural

communications.• Problems and conflicts can occur when expressing

gestures or facial expressions in other cultures – messages can often be misinterpreted.

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Cultural Differences in SelectedCountries and Regions

Doing Business in China1. 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 SelectedCountries and Regions

Doing Business in Russia1. 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.

2. 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.

3. 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.

4. Be patient. In order to get something done in Russia, it often takes months of waiting.

Cultural Differences in SelectedCountries and Regions

• Doing business in India1. 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 SelectedCountries and Regions

Doing business in France1. 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 SelectedCountries and Regions

• Doing business in Arab countries1.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/culturaldifferences 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.

1. EXPORT AGENT

Watch the video and explain what an import / export agent doeshttp://www.youtube.com/watch?v=Si9JDZSppRQ

What sort of strategy is working an export agent?http://www.youtube.com/watch?v=YlbRDYDtqI8

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

2. OVERSEAS DISTRIBUTORS

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.

Contracts

• You need to: have a contract with your agent or distributor use a solicitor who specialises in this type of work

to write the contract If you want your agent to credit check customers

you need to put this in your contract

Find a commercial agent

• To find an export agent or overseas distributor businesses can contact:

• UK Trade and Investment for local international trade advice including how to find an agent

Sample question

• Evaluate the difficulties multinational retailers might experience when entering a foreign market such as India. [10 marks]

• Assess the potential difficulties a UK business might face when entering a foreign market, such as India. [10 marks]

Answer

• Look at the two MMAs (on the next slide) the one on the left is for the 2nd question and the one on the right is from the first question

• Create a series of bullet points from these two answers to give you some structured points to use (if it comes up again).