In an increasingly globalized world, where people can connect across multiple countries simultaneously, it is beneficial for you to understand different corporate cultures.
Cultural differences often vary between countries and regions, from the number of working hours per day to the various processes that go into decision-making. Overcoming differences and working across borders is essential for more 80,000 multinational companies around the world.
It also presents growth opportunities, allowing, for example, a US-based asset manager to tap into China’s rapid growth potential, and vice versa.
“Intercultural management” therefore refers to people of different nationalities and backgrounds working together, whether internally within a multinational company or alongside other companies.
What is corporate culture?
Corporate culture is fundamentally derived from the larger social culture of a country or region, and people’s behaviors often match the culture they are used to, says Dr. Zhang Gangfeng. (Photo), Associate Professor of International Business and Intercultural Management at the School of Management, Zhejiang University (ZJU).
Corporate culture can also have a direct impact on the global position of a country or region. Zhang attributes Asia’s recent rapid growth to its cultural roots in Confucianism, an ancient Chinese belief system that prioritizes morality and ethics.
“A well-accepted view is that the cultural traditions of diligence, economics and entrepreneurship derived from the teaching of Confucianism laid the foundation for economic development in these countries,” he explains.
Asia currently constitutes 45% global GDP, and its position has been largely driven by rapid economic growth over the past 30 years in countries like Taiwan, Singapore and, of course, China.
Corporate actions are also essential to corporate culture, in the way companies define the framework for doing business, which creates cultural differences between regions.
In Western cultures, Zhang explains that there is often a democratic approach to management, with several people consulted on key decisions. In Asia, management adopts a more paternalistic style, with an authority taking charge.
Cultural differences also vary within regions. While Japan is renowned for having a very structured working day, it is common and acceptable in China for meetings to be arranged and rearranged at the last minute.
“There are still many differences between Asian countries,” says Zhang. “Even people in different parts of the same country can have different cultures and behave differently.”
What does this mean for global businesses?
For companies looking to operate globally, cultural differences make life difficult and not understanding them can lead to disaster.
Take the case of eBay in China. There is more than 180 million eBay users around the world, but the company does not operate in China after exiting the market in 2006.
Taobao, a national e-commerce group owned by Alibaba, was launched in China at the same time as eBay. It currently dominates the market with sales totaling over 530 billion dollars in 2020.
Why did Taobao succeed eBay? One of the many failures of the American company was to neglect to hire people who understood Chinese culture – all of the management staff were from Germany and the United States.
This meant that they had failed to recognize the importance China places on social bonding. While Taobao has implemented a chat feature that allows buyers and sellers to communicate, eBay has provided no way for the parties to connect.
It is one of many prominent multinational companies that have failed in the Chinese market due to a lack of cultural understanding, believes Dr Wang Lili. (Photo), director of the ZJU Global MBA.
“The business world, consciously or unconsciously, has not paid enough attention to intercultural management,” she explains.
Why is intercultural management important?
ZJU aims to enhance cultural awareness of the next generation of business leaders by focusing on cross-cultural management as part of the Global MBA program.
Modules cover topics such as global macroeconomic analysis and policy, international law and intercultural management. During a course in international markets, the school invites professors from all over the world to give lectures on doing business in their region. There is also a range of study abroad opportunities available.
This cross-cultural approach is designed to help ZJU MBAs understand the intricacies of doing business in the world.
“It is extremely important for business leaders to be aware that cultures are different across borders, as business and management may need to be conducted differently,” says Wang.
ZJU MBAs from Asia will also be poised to launch careers in multinational companies operating across the globe, while international students will be uniquely positioned to work with the world’s largest consumer market and second-largest economy.
Wang also predicts that, despite the Covid pandemic, it will only gain in importance in the future. Indeed, China’s global exports in the first quarter of 2021 were 27% higher than the same period in 2019, before the pandemic struck.
“A global perspective is increasingly vital to thrive in this new era,” Wang said. “One of the missions of our school’s programs is to give students a global perspective. ”