How does culture affect business? Culture is the complex set of values, behaviors, lifestyles, arts, beliefs, and institutions of a population that are passed on from generation to generation. Culture impacts all aspects of business: management, production, marketing, and more. Most international businesses fail because they suffer from a lack of cross-cultural awareness. Cross-cultural awareness is an understanding, appreciation, and sensitivity to foreign cultures. Ethnocentrism, a belief that one’s own culture is superior to all other cultures, makes succeeding in international business difficult.

Why do aesthetics matter when it comes to international business? Aesthetics refers to what is considered beautiful or in good taste. Aesthetics affect a culture’s etiquette, customs, and protocols. Few things are more embarrassing than violating a sense of good taste. For example, a company advertised eyeglasses in Thailand by featuring a variety of cute animals wearing glasses. The ad was a poor choice in Thailand because animals are considered a low form of life there, so no self-respecting Thai would wear anything worn by animals. Likewise, former president George H. W. Bush, former Chrysler chairman Lee Iacocca, and other U.S. business magnates violated Japanese etiquette in the 1990s when they went to Japan and made direct demands on the country’s leaders. The Japanese considered this assertiveness rude and a sign of ignorance or desperation. Japanese businessmen don’t “lower themselves” by making direct demands. Some analysts believe this violation of cultural aesthetics doomed the trade agreements the countries were trying negotiate and confirmed to the Japanese that U.S. citizens are barbarians.23

What other cultural prejudices must be examined for success in other countries? Attitudes toward time vary considerably across the world. Time is paramount to those in the United States. People are expected to be prompt. Some cultures view this as pushy and impersonal. In addition, the U.S. time horizon differs markedly from, for example, the Japanese perspective. A long-term view to a U.S. citizen might be four to seven years in the future, whereas to a Japanese citizen, the long term is likely to be decades in the future. Attitudes toward work also vary. For example, the Germans argue that people in the United States live to work, whereas Germans work to live. Germans and other Europeans expect four to six weeks of vacation per year. Compare this to the two weeks on average a person in the United States gets, and it is clear which country values vacation time more.

Religion plays a profound role in shaping a culture. International businesses are well advised to educate themselves on varying religious value systems, customs, and practices if they don’t wish to offend customers in marketing campaigns. For example, a soft drink was introduced into Arab countries with an attractive label that had stars on it—six-pointed stars. The Arabs interpreted the product as being pro-Israeli and refused to buy it.

Why is knowing the native language not enough? Language, both spoken and unspoken, is extremely important. Consider a few more examples of international business blunders as a result of a lack of cross-cultural awareness. A U.S. oil rig supervisor in Indonesia shouted at an employee to take a boat to shore. Because berating a person in public is abhorred in Indonesia, a mob of outraged workers chased the supervisor with axes.

Unspoken language, or body language, also differs significantly around the world. A U.S. telephone company aired an ad in Saudi Arabia that portrayed an executive talking on the phone with his feet propped up on the desk. The problem? The soles of his shoes were showing—something an Arab would never do. Although the world is getting smaller and a global culture is emerging, significant cultural differences still abound.

What are the political challenges to conducting international business? International businesses look for nations that have stable governments because political upheaval can severely disrupt commerce and jeopardize the success of their firms. The political differences among nations can also pose a challenge for companies doing business internationally. China, although politically stable, has a questionable record on human rights issues and privacy. When Google wanted to enter China, the government demanded it abide by the nation’s Internet censorship laws. Google complied and became the number-two search engine in the country.

Should you bow or shake hands when you visit a Japanese client in Japan?

Then Google experienced a cyberattack originating from China that targeted the Gmail accounts of dozens of human rights activists in China. That action, along with an increase in the government blocking of sites such as Facebook, Twitter, and Google Docs, led Google to reverse its decision. It decided to stop censoring results, forcing a standoff with the Chinese government. The “Great Firewall of China” is a nickname for the Chinese government project to filter and block Internet content. This is an example of how the pressure from an international business giant can be at odds with political forces in a foreign country.

Government intervention in the process of determining which goods are undesirable and whether goods should be regulated, taxed, or banned also varies from country to country. Many products that pollute the environment are deemed undesirable and have been regulated in one form or another by most governments around the world. The differences in these regulatory standards can impose big differences in costs of production for global businesses. There are also growing pressures on governments to address global climate change issues that will affect international business.

What are the legal challenges to conducting international business? Laws, regulatory standards, and access to unbiased judicial systems differ considerably around the world. No universal laws, regulatory standards, or global courts exist to settle disputes in the global economy. The different laws governing contracts, product safety and liability standards, and property rights are of particular importance when conducting global business. Property rights violations, including violations of patents and copyrights in the software, music, and publishing businesses, have cost businesses billions of dollars a year. Without adequate protection of intellectual property, technological developments would be too expensive and risky for companies to continue to fund.

Different laws also govern the use of bribery throughout the world. The United States passed the Foreign Corrupt Practice Act in the 1970s to prevent U.S. companies from making illegal payments to foreign government officials to secure contracts or other favors. The act was designed to restore public confidence in the business community in the United States. But Congress became concerned that U.S. businesses were being put at a disadvantage by the law. Many foreign companies routinely paid bribes and were even able to deduct the cost of bribes from their taxes as legitimate business expenses. The United States therefore pushed for the creation of the Organisation of Economic Co-operation and Development, which currently consists of 30 member nations committed to combating bribery. In many places in the world, however, bribes are common and may even be necessary for doing business.25

What are some ethical challenges faced by international business? Bribery is just one of the many ethical dilemmas global businesses face in different countries. For example, should a firm conform to its home country’s environmental, workplace, and product safety standards—even though it’s not legally required to do so—while operating in another country? Should a company do business with a repressive totalitarian regime such as North Korea? When conducting international business, companies must determine whether they are willing to defy ethical codes to enhance their profits.