A2 Economics and Business Social and cultural differences in doing business Unit 3

1. A2 Economics and BusinessSocial and cultural differences in doing businessUnit 3 By Mrs Hilton for revisionstation

2. 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

3. From the spec

4. 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)...

5. 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

6. Oops! • Coors Brewing slogan “Turn it loose” when converted to Spanish means “Suffer from diarrhoea” — erg no thanks!

7. 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.

8. 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.”

9. 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.

10. 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.

11. Lost in translation Watch out for marketing on an international scale – what can go wrong...

12. 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 ????

13. 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.”

14. Ikea – one of many • Ikea has yet to issue explanations for a workbench called Fartfull

15. Chevy Nova? Sounds OK? • The supposed howlers include the Chevy Nova's flop in Latin America because "no va" means "won't go”

16. Coca cola in China • Coca-Cola's misbegotten attempt to render its name in Chinese characters, which came off as "Bite the Wax Tadpole."

17. 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."

20. Careful how you say it!

21. Talk to your translation department • Could it have been checked BEFORE it was painted onto the side of a fleet of aircraft?

22. 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.

23. 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.

24. Lots of examples • Lost in translation: • https://www.facebook.com/media/set/?set=a.425097661741.212424.235374096741

25. 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.

26. High Context/Low Context • High 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

27. 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.

28. Cultural Differences in SelectedCountries and Regions Doing Business in China • The Chinese place values and principles above money and expediency. • Business meetings typically start with pleasantries such as tea and general conversation about the guest’s trip to the country, local accommodations, and family. • The Chinese host will give the appropriate indication for when a meeting is to begin and when the meeting is over. • 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.

29. Cultural Differences in SelectedCountries and Regions Doing Business in Russia • 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.

30. Cultural Differences in SelectedCountries and Regions • Doing business in India • It is important to be on time for meetings. • Personal questions should not be asked unless the other individual is a friend or close associate. • Titles are important, so people who are doctors or professors should be addressed accordingly. • Public displays of affection are considered to be inappropriate, so one should refrain from backslapping or touching others.

31. Cultural Differences in SelectedCountries and Regions Doing business in France • When shaking hands with a French person, use a quick shake with some pressure in the grip. • It is extremely important to be on time for meetings and social occasions. Being “fashionably late” is frowned on. • During a meal, it is acceptable to engage in pleasant conversation, but personal questions and the subject of money are never brought up. • Visiting businesspeople should try very hard to be cultured and sophisticated.

32. Cultural Differences in SelectedCountries and Regions • Doing business in Arab countries • 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. • 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. • 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.

33. 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.

34. Agent? • Not that kind of agent

35. International Business Agent • There to make sure you don’t call your product “Barf or fartful” in their language

36. Two types of commercial agent • You can use commercial agents to help sell your goods abroad. Commercial agents include export agents and overseas distributors.

37. 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

38. 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)

39. 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

40. 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.

41. Disadvantage of Overseas Distributor • You lose control over the marketing of your goods and after-sales service when using a distributor.

42. 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

43. 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

44. 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.

45. Sample question 1 • [6]

48. 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

49. Sample question 2 • [6]