Many Startups Stumble on International Cultures

By Ernst Gemassmer

Most of us have travelled abroad and experienced the challenges and frustrations of getting what we want without being laughed at or insulting our hosts. Similar issues prevail when doing business in other countries, cultures and languages. Even if you think your business is all local, multi-ethnic sensitivities are more relevant than you may think, including the US.

Although the Internet gives you pervasive reach, it hasn’t reduced the world to one locale for your business. The international opportunity is large, as I related in an earlier article, but there are some major challenges as well. Here are a few examples from my personal experience:

1. You need to translate/localize your products. I was once asked by a top executive of a major software company why we were not selling more products in Finland. I informed him that we needed to translate the software into Finnish at a cost of $50,000.

   He did not seem to understand that Finland was not part of Scandinavia and that English is not too well understood by most people there (with the exception of the Swedish-speaking minority in Finland). He could not be persuaded to commit the funds required for localization. Thus, we did not translate the product and sales remained at an insignificant level.

   Translation not only increases sales, but in many countries it is required by law.

2. Local laws prevail. Some years ago Brazil had a major balance of payments deficit. Therefore Brazil made it difficult to import products from abroad. Corporations were encouraged to export from Brazil to generate foreign currency and they were allowed to keep a portion of the foreign currency. Companies became creative by selling and trading foreign exchange licenses.

   Our own subsidiary, of a major technology company, started to repair and service competitive products in order to maintain our own technical staff and service capabilities. Thus, when the government creates restrictions, think out of the box.

   Managing foreign exchange reserves is every bit as challenging as managing a family budget. Brazil is now a powerful country, but similar examples still prevail in many developing nations.

3. Respect local customs and practices. A successful sales person wanted to become more familiar with the international market and requested a transfer to the Latin American sales group, based in the US. I counseled the department manager against hiring since she would be subject to personal challenges in selling to our partners in Latin countries. Eventually I relented and she joined the group.

   Unfortunately my prediction turned out to be true, she felt harassed by one or more of our business partners and left the group shortly thereafter. Even though we had agreed to provide her an equal opportunity to pursue her goals, we could not protect her from the different perspective on comments and advances in Latin America. Thus, hiring decisions should be made carefully, after fully understanding local practices.

   Although most Latin American countries have significantly improved working environments for women, few companies would yet dare send a women employee to work in Saudi Arabia.

4. HR rules are local. I had organized European operations into regions and the country manager for Italy reported to the central European manager based in Germany. This organizational structure worked well until the two senior managers got into a shouting match and the Italian manager indicated that he was resigning.

   His manager accepted his resignation and documented the case in the personnel files. Shortly after leaving the company we were notified that the Italian ex-employee was suing us for creating an unacceptable working environment, which led to his resignation. We retained legal council in Milan and were advised that we would loose if the case went to trial. After some painful negotiations we settled the case out of court for a twelve-months severance payment.

   When hiring staff internationally, always be well informed about local laws and prevailing practices. Not following this advice can be very costly. Although labor laws are increasingly unified in the European Common Market, major differences are still encountered in many countries. Proceed with caution.

5. Watch your product naming. Product naming is always a major effort and mistakes can result in costly failures. You may recall the Chevy Nova, a compact car from GM. Pundits in Latino countries quickly picked up on the name, ‘no va’ means ‘does not go’ in Spanish.

   Thorough name searches as well as professional advice in this area is highly advised. Cultural and religious implications must be very carefully considered.

Thus, I would recommend that you proceed with extreme caution and sensitivity. Great care must be taken in dealing with different religions, customs, dress codes, foods and alcohol issues. This can be frustrating, but the business world is getting smaller, and cultural issues can make or break your business. Have you properly factored international into your product or service?

Today’s article is presented by one of the founders of our Startup Professionals team, Ernst H. Gemassmer. He resides in Silicon Valley, California, and has long helped entrepreneurs there, as well as providing turn-around assistance as interim CEO and business coach for several companies. You can contact him directly at ernst@startupprofessionals.com.