Cultural and communication barriers hold back international growth of companies

More and more companies around the world now expect to grow through international expansion but their plans are being hindered by the challenge of overcoming cultural and communication barriers, according to new research from the Economist Intelligence Unit.

Companies increasingly recognise the financial benefits of having a workforce trained to manage cultural and communication gaps that arise in doing business across borders. But a vast number of organisations may not be doing enough to address the challenge, says a new EIU report, Competing across borders: how cultural and communication barriers affect business, sponsored by EF Education First. In a global survey of 572 senior executives for this study, 40 percent of respondents say there is not enough emphasis placed in their firms on recruiting or selecting people who are suited to cross-cultural environments, and 47 percent believe their firms do not do enough to hone employees’ communication skills.

The surveyed firms’ growth plans are ambitious: nine out of ten respondents say the number of overseas customers for their company will increase over the next three years, and 77 percent believe their company will be operating in more countries than it does currently. Yet two in three respondents also say that working effectively with customers and colleagues in a cross-border business environment poses difficulties.

"The economic downturn, combined with advances in technology and trade dynamics, is making companies think ever more seriously about placing bets outside their home markets," says Abhik Sen, editor of the report. "But our research indicates that many of them are also dangerously underestimating the role that communication skills play in determining success on the global stage."

Words make a difference to bottom line

The report also showed that in international business, words can make a big difference to a company’s numbers. Almost two in three executives surveyed think that "better cross-border collaboration has been a critical factor in the improvement of their organisation’s performance in the past three years."  An overwhelming majority of respondents believe that if cross-border communication were to improve at their company, profit, revenue and market share would all improve as well.

–          Communication problems can be costly. Around one-half of the executives surveyed for the report admit that ineffective communication or inadequate collaboration had obstructed major international transactions, inevitably resulting in financial loss.

Misunderstandings rooted in cultural differences are major obstacle

Misunderstanding rooted in cultural differences poses the greatest obstacle to effective cross-border collaboration according to the survey.  Respondents regard "differences in cultural traditions" (51%) and "different workplace norms" (49%) as the greatest threats to the smooth functioning of cross-border relationships.

Job-seekers hone your language skills!

Companies with international plans increasingly expect employees to be at least bilingual. Almost one-half of executives surveyed say that at least one in five employees at their company should speak a foreign language to do their job, and one in four believes that a majority of their company’s workforce requires some foreign language skills.