Why Cross-Cultural Networks are Important to Companies

​​Jeremy Puah Jun Peng

​"My guiding principle is that prosperity can be shared. We can create wealth together. The global economy is not a zero-sum game." - Julia Gillard, Prime Minister of Australia

Over the past decade, the rate of globalisation has increased rapidly as the world becomes ever interconnected. In response, management has evolved and become more global-centric. Companies began to realise to benefits of establishing and utilising cross-cultural networks in this globalised world.
 
Cross-cultural networks can benefit private companies in various ways:
i)   Develop mutual-understanding between cultures
ii)  Potential knowledge spill-overs can drive innovation
iii) Opens doors for future opportunities in an increasingly globalised world
 
As the world becomes increasingly globalised, individuals are more connected. As more companies have an international presence, work teams are becoming more culturally diverse. Therefore, the value of establishing cross-cultural networks is progressively higher.
 
The figure below shows the continental origin of the world population when condensed into 100 people: 

Figure 1: If the World were 100 People (Hely, 2015)


Within each continent lies hundreds of unique cultures, which enhances the complexity of cultural management. A modern manager needs to possess global-centric management skills and promote diversity as a strength, rather than as a weakness. Establishing and sustaining rewarding cross-cultural networks can help managers to develop a global mind-set and excel in leading a diverse team.
 
Since cross-cultural networks increasingly more important due to rapid globalisation, companies should utilise their networks more effectively to achieve their maximum potential.
 
A deeper understanding of cultural differences allows for more effective communication in a multi-cultural workplace

In today’s global world, working with people from different cultures is a common occurrence in a business setting. Colleagues and suppliers may be from another country and clients may speak a different language. Understanding cultural differences can enhance the effectiveness of communication and reduce the probability of misunderstandings. Cross-cultural networks can provide companies with deeper insights about cultural differences, which are essential in overcoming communication barriers.

A company can better meet its client’s needs if the demographics of its staff correlates with the individuals it conducts business with. A Harvard study (Hewlett et al., 2013) showed that a team with a member who shares a client’s ethnicity is 152% more likely to understand that client’s requirements, compared to another team that without this connection.

Through globalisation, companies have easier access to markets all over the world and the profiles of potential customers are becoming increasingly diverse. Companies need to be culturally sensitive, especially when launching a new product or campaign. While it might be acceptable in one country, it might be offensive to certain cultures elsewhere.
 
Case Study: Heineken World Cup 1999

​Heineken launched a promotional campaign during the World Cup, a global soccer tournament, in 1994. They decided to imprint the flags of all 32 qualifying countries under the caps of their beer bottles. (Dagic and Hejblam, 1996)
 
Heineken was unaware that the Arabic verse depicted on Saudi Arabia’s flag is a holy verse from the Quran, and their declaration of the Islamic faith. In Islam, Muslims are prohibited from consuming alcoholic beverages. Muslims around the world were enraged upon realising this, as they felt that Heineken was disrespecting their religion by associating their religion with an alcoholic beverage.
 
This oversight costed Heineken millions as they had to recall all promotional bottles and discontinue production. This could have been prevented if the marketing team had consulted with someone who has basic Islamic knowledge. Furthermore, Heineken’s brand image was damaged by Muslims, who are not even their target consumers. Although globalisation benefits companies via access to larger markets, the consequences of mistakes would be amplified and could cost them dearly.  
 
Although cultural challenges may seem intimidating initially, they are manageable by acknowledging cultural differences openly and resolving them cooperatively, using available cultural knowledge, country information, and personal dialogue to develop cultural competence skills and mind-set for the global market (Pestana, 2007).
 
Companies can utilise their existing resources to construct a cultural behaviour table (as shown below). They should avoid stereotyping and only use the table as a reference. As they expand their cross-cultural networks, they should make the necessary changes. 

Figure 2: Management Practice Differences (Pestana, 2007) 

​Collaborative efforts with partners from different partners can result in knowledge spill-overs, which drives innovation and creates value

With easier access to global markets, companies can reduce costs by outsourcing or relocating divisions abroad. Companies can also collaborate with foreign partners to capture creativity and innovation from the cross-fertilization of ideas across borders. This allows companies to obtain and share knowledge from research. The presence of Foreign Direct Investment can benefit the host country in the form of knowledge spill-overs. Local companies and workers can use the acquired knowledge and skills to improve the technology in the host nation.
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Cross-cultural networks encourage knowledge sharing, which can promote technological advances in industrial practices. The table below shows the impact of knowledge spill-overs between start-ups and their corresponding industry in Europe:

Figure 3: Measuring the Spill-overs of Venture Capital (Schnitzer and Watziner, 2017)

Cross-cultural networks can help open doors for future opportunities in an increasingly globalised world

International collaboration between companies can unlock synergies that are otherwise impossible within the local market. Companies in less developed countries can tap on the abundant capital and technology in more developed countries. On the other hand, developed countries can access cheaper resources and invest in high-growth emerging markets. As the world becomes increasingly globalised, cross-cultural networks can provide exciting opportunities for companies.

In conclusion, developing and sustaining cross-cultural networks is essential in globalised world
 
The potential benefits from establishing and expanding cross-cultural networks are limitless. As globalisation is expected to progress at faster rate, we will observe the emergence of new opportunities, as well as threats. It is extremely essential for managers to develop a global mind-set and utilise diversity as an advantage, not a disadvantage.  
 
In recent years, there is an increase in the anti-globalisation sentiment around the world. The surging popularity of politicians, such as Trump and Le Pen, indicates the diminishing of cultural acceptance. It appears that people are reluctant to identify and understand cultural differences, instead, opting to reject foreign culture completely. This is detrimental to international collaborative efforts, which may hinder the growth of companies due to restrictive access to foreign resources.
 
Cross-cultural networks are essential to companies in this increasingly globalised world. Companies should realise the importance of establish such networks, and allocate sufficient resources in expanding them. They should also learn to utilise them more effectively to achieve the maximum benefits.



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References

Dalgic, Tevfik and Hejblam, Ruud (1996). Educator Insights: International Marketing Blunders Revisited, Journal of International Marketing: Vol. 4, No. 1.
 
Schnitzer, Monika and Watzinger, Martin. (2017). Spillovers from Venture Capital Investments     
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Pestana, Natalies. (2007). Competing in the Global Market: The Influence of Culture