Tuesday, February 07, 2006

Release the power of cultural diversity in international business

Finn Drouet Majlergaard, founder and managing partner of Gugin International Business Development, is a speaker in the Interdisciplinary Stream about Cross-Cultural Competence at the Summit for the Future, May 3-5, 2006 in Amsterdam.

How come that companies, who have been doing business internationally for decades suddenly fail? And how come that companies who wouldn't have had a chance 25 years ago suddenly become a global success?

This paper deals with the links between cultural awareness, corporate strategy and performance. It is based on my 15 years of experience in international business management, academic research in this field and experiences from our company Gugin, who helps corporations in Europe, US and Asia improving their international businesses.

But lets look at why it has become so important to take different cultures into consideration.

Globalisation

Cultural awareness has become important due to increased globalisation. The global political structures have changed. We do have a United Nations that almost all countries respect and honour and the post war division of the world has changed after the collapse of the Soviet Union. New countries have been born and we have a more diverged political picture. We create political/economical relations in new ways e.g. the ASEM (Asia-Europe Meeting) process, which is a direct result of these changes. By 1992 East Asia accounted for 24 percent of global production. By comparison, the EU accounted for 35 percent and North America for 28% of global production. According to World Bank figures from 1991 - 1993 growth of real Gross Domestic Product (GDP) in East Asia averaged 8.7 percent. On the basis of growth rates recorded during 1978 - 1991, many economists including those from the World Bank projected that East Asia's GDP would overtake that of North America and EU in 2010.

Economically we are emerging as well. Europe is turning towards larger entities with common currency, one Central Bank and merges and close collaborations between stock exchanges. ASEAN is another good example however different. But since its foundation in 1967 a lot has changed. Evolving relations between the EEC/EU and ASEAN have lead to a lot of initiatives, such as joint ventures in the exploration of AEAN resources, the possibility of EEC participation in ASEAN manufacturing activities and the mobilisation of capital for financing ASEAN projects.

Technologically the Internet has made it possible for companies to market themselves virtually everywhere and enabled the companies to establish inexpensive global infrastructures. And when you need to go abroad it is less expensive than ever before, so we travel much more than 20 years ago.

So from both a political, economical and technological point of view we are encouraged to discover cultures we have only little knowledge about. For the adventurer it is good news but for international corporations it might as well be bad news.

We have been working with two types of companies: Those who want to expand their international business in either Asia or Europe and those who have tried and faced a lot of challenges they didn't predict or could even imagine. We like the first group very much, because we can help them become successful before they make any serious mistakes, however it is more interesting to look closer at the last group - those who tried and didn't have their expectations met.

You can read the article:
click here

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