Read the full script of Module 9, Episode 2 of the Global Growth Master Class below. Want to get certified on global expansion? Simply click here to access the complete course today.

Now, we will take a closer look at each of the types of culture and how to navigate when they conflict with each other.

In particular, let’s answer the question, What are the most effective ways to navigate differences in cultures? What do I do when cultures conflict?

John Brandon, former VP of International for Apple, was faced with a huge cultural conflict because of a situation that arose within the company’s team in China. Upon review, John and the team at HQ discovered a few discrepancies with the team’s financial results. An investigation was conducted, and it showed that numbers were fabricated to hide mistakes stemming from the local general manager’s poor judgment. The GM gave no admission of guilt, and when questioned his staff supported him, alleging that the figures were accurate. 

This was a perfect example of how, in China’s business culture, priority is given to respecting hierarchy, saving face, and making the boss look good over being forthcoming. This breach clearly conflicted with Apple’s culture, which valued integrity and protecting the company and brand over the boss, crossing the line in both scale and significance. Apple’s efforts to scale in China were almost derailed, and John decided to fire 75 percent of the existing local team, rebuilding with a new staff (and in particular a GM) with values that aligned more with the company than with local norms.

It is important to note that in both cases, each side, the local team and China, and HQ in Silicon Valley acted in accordance with local business culture. We are not here to judge whether the team in China was right to protect the boss, or that the Apple HQ team was right to fire them, but merely to point out the complexities and conflicts that arise because of differences in culture.

When Local Market Culture Conflicts

The local market culture plays a crucial role in shaping the behavior, decision-making, and mindset of people in that market. It is the driving force that compels a business to adapt its model and incur localization costs, such as Marketing, Sales, and Product premiums, to gain traction and achieve company-market fit in a new market. Additionally, local market culture can influence the laws and regulations within a country, impacting the Administrative Premium, as it has a significant impact on the social institutions of a nation.

Global Class Companies aim to comprehend the buying behavior of the local market, including the decision-making criteria, important benefits, relevant use cases for target audiences, and customer habits. By doing so, they can gain insights into the local culture and how it varies from other markets in which the company operates. As an illustration, module seven highlights that the notion of "fresh air" differs significantly between Japan and South Korea.

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Companies that aspire to be part of the Global Class prioritize understanding the local market culture and the values that are important to the locals. They demonstrate respect for the local culture by adopting local practices and communication styles, rather than imposing their own. This approach helps build local connections and trust in the brand. In addition, physically immersing oneself in the market, interacting with everyday people, and experiencing the local way of life provides valuable insights into the nuances of local market culture. This further emphasizes the need for having local knowledge and expertise within the team, as discussed in module eight.

Global Class Companies carefully observe local trends and government actions that influence market behavior, identifying potential opportunities to leverage. For instance, DocuSign recognized the aging workforce and the corporate trend toward digital transformation (such as implementing zero paper policies) as factors that could accelerate adoption in the Japanese market. These shifts reflect changes in both local market culture and business practices.

Global Class Companies go beyond just understanding local market culture and take steps to connect with it on a deeper level. One approach is to build a personality behind the brand and find ways to integrate its products into the cultural zeitgeist. For instance, Heineken in Vietnam took advantage of the country's most popular holiday, Tết, by creating a cultural ritual where people from urban areas would bring beer to their relatives in rural areas. This practice became so embedded that Vietnamese people started to embrace Heineken as their own and even gave the Dutch brand a nickname, "Ken." By creating these types of cultural connections, Global Class Companies can foster a sense of local ownership and loyalty towards their brand.

So in summary, to navigate local culture conflicts:

• Seek to understand local culture

• Show respect for local culture and commitment to presence in the country

• Connect with the local culture and ecosystem

   

When Local Business Culture Conflicts

Local business culture reflects the local market culture and the attitudes and values of the local population. This unique way of conducting business can bring both challenges and opportunities for companies looking to establish a local presence. Business culture influences decision-making, strategy, and interactions between team members and customers. Differences in business practices across countries can range from minor customs to fundamental differences in values. Understanding local business practices is important for developing relationships with key stakeholders, and demonstrating cultural awareness can help attract local talent to join a company's team.

There are numerous examples of differences in business culture around the world. For instance, in certain parts of Europe, it's usual for employees to be aware of each other's salaries, whereas in the United States, salary transparency is less common. In the Philippines, where I’m exactly at right, employees are used to receiving a 13-month salary at the end of the year, almos like a holiday bonus.  In Turkey, there is a business hierarchy, with a small number of influential families holding sway over many local industries, and being accepted by one of them can often result in acceptance by the entire business community. As noted earlier, the ThoughtWorks team discovered that in China, it's customary not to pay the final invoice as a way of investing in the business relationship for future deals.

Business meetings often have their own set of norms and rituals, which can vary widely across different cultures. For instance, in many parts of Asia, it's common to exchange business cards using both hands as a sign of respect and to offer a small gift when traveling to meet someone. 

These practices are often appreciated, and mirroring them can help to strengthen business relationships. For example, our team often brings San Francisco's famous Ghirardelli chocolates, a local treat from our local area, as a gift for international clients to show our commitment to the relationship. can communicate understanding and commitment to the market.

However, this practice from a regulatory perspective can be categorized as bribing a client in other European countries. So as a team, we always check beforehand to ensure it’s a typical practice in the local culture.

ANOTHER difference that can create tension amongst teams is WORK HOURS

The disparities in work hours across different countries must be carefully understood when choosing target markets, establishing a team, AND projecting future outcomes. Local BUSINESS cultures hold distinct sets of values and work ethics. 

Employees in countries like Japan and in some industries in the US (like Tech) experience seemingly endless hours of work each week, while SOME countries observe a culture where everyone leaves work at 5 pm. Such a discrepancy in business cultures can create severe clashes between headquarters and local teams. 

For many Americans, work is the centerpiece of their identity, pride, and priority, which may not align with other local business cultures, making it challenging to create a global team that fits the company culture. Conversely, in Scandinavia, striking a balance between work and family is a fundamental aspect of the local culture.

In the next module, we introduced the Global Class Management Model (GCM Model), which highlights the importance of aligning the local business culture with the company culture to ensure strong cables of trust and support throughout the international company structure. Understand, however, that differences in work culture between HQ and local teams may not surface right away, making it difficult to fix problems if differences they go unnoticed. In various business cultures, bosses and management play different roles. 

Executives at Slack had to learn through experience that in Indian business culture, it can be intimidating for employees when an executive visits, putting the team on edge. They discovered that being present in local markets helps to build trust and that it's important to establish a relationship and rapport before visiting a local office in a culture where accessibility is valued.

Let’s explore an example of how BUSINESS culture affects how employees act and how international companies must adapt and learn to do things differently

Executives at Apple observed SIGNIFICANT differences in how feedback was GIVEN and RECEIVED in China compared to the United States while expanding Apple’s retail presence in China. 

Former Head of Organization Design for Apple’s Retail Division Jennifer Cornelius discovered that the cultural practice of "SAVING FACE" and respecting HIERARCHY influenced the feedback process, leading employees to withhold their TRUE opinions. China's business culture places a strong emphasis on plan EXECUTION and following AUTHORITY without any ambiguity. The American concepts of employee EMPOWERMENT, ENGAGEMENT, and OPEN FEEDBACK are NOT necessarily applicable or easily understood in some other business cultures.

To measure local engagement, the Apple team asked Chinese employees to complete anonymous surveys. The results showed HIGH engagement and satisfaction, which conflicted with the fact that employee TURNOVER was extremely high. The local BUSINESS culture around feedback was the reason for this. 

Employees were hesitant to share NEGATIVE feedback, EVEN ANONYMOUSLY, due to concerns about protecting the boss. To address this, Jennifer and her team began asking different TYPES of questions, such as about happiness, to navigate this aspect of local business culture and IMPROVE employee retention. She learned that companies must strike a BALANCE between allowing for DIFFERENCES in LOCAL culture and aligning employees with COMPANY values to succeed in global markets.

So in summary, to navigate local culture conflicts:

• Be ready and willing to adapt programs, processes, and norms to align with the local business culture

• Don’t favor the local business culture of the country where the company is headquartered. Recognize differences and find a balance to allow local teams to operate in ways that are aligned with local business culture whenever possible

When Company Culture Conflicts

Enacting a successful company culture requires navigating the challenge of maintaining core values and principles while adapting to new local markets and business cultures. While authenticity, trustworthiness, and transparency are essential, companies must also adjust certain aspects of their culture to align with local norms. It is crucial to strike a balance between adaptation and consistency to ensure continuity in decision-making and behavior. The company culture serves as a reference point for achieving this balance.

Let me share a few examples of core values. 

For Rakuten, it’s “Speed, Speed, Speed.” For Plaid, it’s “Learn and Grow, Together.” At Chegg, it includes “Dream Big, Debate, Decide and Do.” At Zoom, it’s “Community, Customers, Company, Teammates, Selves.” While the companies’ core values (principles) differ, they each serve as the North Star for their respective companies worldwide. Core values guide the efforts of all aspects of the organization, both internal and external facing.

Company culture serves as a unifying force that directs and aligns team efforts. It encompasses the nonnegotiables and fundamental elements that form the DNA of the company, going beyond policies and procedures. Together with core values, it can inform goal-setting and provide a framework for evaluating success. Additionally, the company culture can foster a sense of identity within the team, leading to increased trust and cohesion.

Company culture and core values serve as a beacon for numerous reasons. They not only instruct employees on how to interact with others but also emphasize what is significant and assess employee performance. They also establish a bond between team members and the company, creating a sense of identity, trust, and purpose. Additionally, shared values between customers and the company can be established through them, fostering a connection.

By utilizing company culture and core values as a primary framework for decision-making, it is possible to gain clarity during difficult and stressful situations. This is why it is included in step two of the LPA (Localization Premium Analysis). The use of company culture and core values can also help to identify areas where taking risks and learning from failures is acceptable, and where compromises should not be made.

In a distributed workforce, company culture, and core values play a crucial role in providing a cohesive identity that unites people from different geographical locations. They act as a binding force that fosters social bonds within the team, especially when face-to-face interactions are limited. As a result, even with people working in decentralized locations, the organization can maintain a sense of unity and teamwork.

So in summary, to navigate company culture conflicts:

• Strike a balance between adapting to fit local culture and consistency of company culture to ensure continuity in decision-making and behavior

• Connect company culture to the local and local business cultures

Having a thorough understanding of all three types of culture enables you to navigate local markets and anticipate potential issues, implementing measures and precautions to mitigate cultural tendencies that clash with company values. 

With cultural differences, you can see why it’s beneficial to have someone on the team with knowledge of how local business is conducted so that an HQ team that lacks this local market experience doesn’t have to learn these lessons the hard way, wasting time and money and burning opportunities in the process.

NOTE: Don't miss out on the next episode! If you want to continue learning about global expansion strategies and dive deeper into the course material, simply click here to access Module 9, Episode 3 of the Global Growth Master Class.