Culture affects the way an individual communicates
Culture affects the way an individual communicates, behaves, thinks, and perceives. Consequently, it affects the way people conduct business. It is important to understand and learn a countries culture before conducting business and the consequences that can be faced when one does not. It is equally important to be aware of your own culture’s values and beliefs (Cultural Savvy, n.d.) Additionally, culture can be a factor that can attract companies to do businesses in nations such as Turkey, Russia, and Switzerland.
According to Christine Moorman, Russia has the 6th largest economy and is the international market with the highest sales growth rate. These characteristics make Russia very attractive for business negotiations. However, conducting business in Russia can be difficult because of their direct business culture (Moorman, 2014). Author Cavusgil states that language is amongst the most important manifestations of culture. It is essential to communicate effectively and successfully between parties. Russia’s official language is Russian, and they consider English to be their second language. Russians rely heavily on body language in business negotiations. Russians can be portrayed as welcoming during business negotiations with their non-verbal cues as they tend to express trust and confidence in a relationship through touch during conversation. For verbal communication, one can expect Russians to be very direct in business negotiations. They are not afraid to correct people or deliver criticism (Moorman, 2014).
Switzerland is located in central Europe. Switzerland is well known for exporting goods such as computers, apparel, and chemical-pharmaceutical products to name a few. Switzerland is also known for its tourism sites because of its geographical locations neighboring France and Italy. ( Emil Egli, 2018) Switzerland is well known when doing business with other foreign countries because they work hard to get the best deals possible. ( Emil Egli, 2018) They developed high pressure tactics to get the strong bargains and are self-confident. Because Switzerland has four official languages, they are a culturally complex country. In the business culture in Switzerland, individuals with seniority, rank, and authority are often very discreet in exercising their power. ( Emil Egli, 2018) For the most part, the Swiss are reliable, efficient and can be trusted to follow through. They are also very good at maintaining confidentiality. ( Emil Egli, 2018) The EU is Switzerland’s main trading partner, whereas Switzerland is the EU’s third trading partner after the US and China. Switzerland plays a big role in the EU for trade in commercial services. (Egli, 2018)
Turkey has the 17th largest economy and is in the way to being in the top 10 by 2023. The top 3 exported goods are autos, food and electronics. “The main language is Turkish which is spoken by 90% of the population”. When conducting business in Turkey there are cultural differences such as that Turkestan usually like to do business with those that they know and trust. Turkestan also prefer to talk while they are close to the other person, if you back away this can mean you are being rude. Knowing the balance of being polite and rude is important when conducting business, you want to make sure that your business partner is comfortable speaking to you and that you both are aware of each others cultural norms to not be disrespectful.
Author Cavusgil defines globalization as a “macro-trend of intense economic interconnectedness among the nations of the world” (Cavusgil p 5). Globalization aids and facilitates organizations to expand abroad. However, globalization comes with risk. The four main types of risks that a company will face while globalizing are: cross-cultural, country, commercial and currency risk (Cavusgil p 11). Consequently, companies planning to globalize into Russia, Turkey, and Switzerland encounter these risks differently within each nation.
Turkey is known for having a unique placement between Asia and Europe and for offering “prosperous long-term opportunities for American firms”. “Turkey has a steady economy, rising middle class, a youth population, and rising entrepreneurial class,” (export.gov) Turkey has an advantage in that it supplies energy to many countries surrounding it and is considered a gateway to opportunity if one wants to do business in the Asia and the Middle East. Turkey has also been occupied in becoming a member of the European Nations which would be a great advantage in the future because it will make trading easier. Currently the ease of doing business in Turkey is 60 out of 190 in which political issues play a big part. Regardless of being the 17th largest economy, there have been many issues the past couple of years some of which have included limited media exposure, limited freedom of speech in the country and issues having to do with the mixed economy. To successfully conduct business in this nation you need someone who is familiar with the culture and values because there is a high cross-cultural risk in this nation. Chapter 3 pg. 57, explains the importance how meaningful the language and culture of a place you would like to conduct business in is. In an article by the Economist, “Turkey’s president wants to purge Western words from its language”, “Turkey’s president, Erdogan started by ordering the word “arena”, which reminded him of ancient Roman depravity, in which he ordered be removed from sports venues around the country.”
Switzerland is known for their high quality and value of their goods and services. The Swiss do not like to discuss personal information such as their occupation, age, marital status, and religion. When conducting business with Swiss, business culture is very strict when it comes down to business decision making. Only the highest individuals in authority make the final decision. (Elise Krentzel, expatica, n.d.)
The Swiss Franc is the currency used in Switzerland. The Franc currency was introduced in 1798. (Europe Commision, europa, n.d.) It has a reputation for being strict currency. Regularly used as a global reserve currency, the Swiss Franc is the sixth most traded currency in the world. In January 2015, The Swiss National Bank decided to pre-empt ECB QE by cutting interest rates by 0.5% to -0.75%, while at the same time removing the 1.20 euro cap for the exchange rate. (EC, Europa, n.d.)
When conducting business in Russia it is important to be aware of their cultural differences and negotiation patterns. Conducting business in Russia can be lengthy. Foreigners are required to obtain a visa to visit Russia that is obtained through the Russian embassy or consulate in the country of the foreigner’s residence. The usual meeting scheduling has to be done six weeks prior to the meeting date (Kwintessential, n.d.).Even though the ease of doing business in Russia is a 35 from a scale of 1-190, they have a difficult business environment and hold political and economic uncertainties (GlobalEdge, n.d.). Because of their recent economic downturn, Russia has developed more conservative state policies at the expense of economic reforms. In return, this has undermined the business climate and long-term growth prospects and the Russian government has begun to support local business to hurt foreign investors (McNamee, 2017). Additionally, countries like the United States of the America, that have sanctions against Russia can face some difficulties when conducting business. One of the challenges that these sanctions present business with is the limitation to the business they are able to do with companies and restrictions on selecting specific companies that are under sanctions.
After the deep recession that Russia experienced because of falling oil prices and closure of capital markets, Russia’s economy has been showing signs of stabilization and growth. Russia’s FDI inward flow increased from 4.2% in 2015 to 13.9% in 2016 (Santander Trade, n.d.). Russia investment demands include mining, food production, refined petroleum and chemicals, and manufacture of basic metals. According to Sectoral Analyses, it is forecasted that food production will be among the best performing sectors in the next few years. It is predicted that this large size of the market will draw large FDI inflows.
Additionally, mining, refined petroleum, and chemicals are Russia’s massive comparative advantages because of its abundant natural resources and growing external demand. Russia owns the world’s largest gas reserves. It supplies 30% of oil and 24% of natural gas to Europe. Mining and quarrying take lead with 21.4% of the main invested sectors in 2017. Furthermore, Russia’s has a competitive advantage with its well-educated, skilled, trained, and intermediate cost workforce.
In recent news, Russia was involved in the US trade war with China. The US imposed tariffs on foreign steel and aluminum and the EU, India, China, and Russia challenged the US tariffs of 25% on steal and 10% on aluminum by imposing its own tariffs on US goods (Stevenson, 2018). This retaliation would provide $87.6 million in compensation for the $537.6 millions of “economic damage caused by the U.S. barriers” (Tanas, 2018). This trade war can impact foreign investment flows as the uncertainty of it will play out. In contrast, it will support the domestic companies that will produce the replacing US goods.
Recently in Turkey In August 2018, a Fortune article, ” Turkish President Calls for Boycott of U.S. Electronics,” stated that “Turkey’s President Erdo?an said his country will boycott U.S. electronics Tuesday, as tensions between the nations rise”. As a result of a confrontation between President Trump and President Erdogan, President Trump, used the plummeting Turkey economy by increasing steel and aluminum tariffs which in return made the value of the Lira fall. As a result, many investors decided to pull their money from banks leaving the nation with the Lira, 40 percent of its value against the U.S dollar.
In July of this year, Switzerland filed a case toward WTO case against President Donald Trump’s tariffs on foreign steel and aluminum. Switzerland exports about $80m of steel and aluminum products to the US in 2017, according to a government statement and President Trump announced tariff of foreign made steel by 25 per cent and 10 per cent for aluminum. (Emily Shugerman, 11 July 2018)