4 Times Cultural Differences In Business Affected The Sales

how does culture affect business

“History is a great teacher and those who fail to learn from it are doomed to repeat it.”

Starting from cross-cultural spending behaviors to religious beliefs all come to play while starting or expanding a business. Foreign companies which fail to understand the local market sentiments fail to take off, be it as popular as Starbucks or a lesser known brand ‘Home Depot’.

Here are the examples of cultural differences around the world that can affect business practices.

1.Home Depot In China

Home Depot is an American home improvement company selling tools and construction products. It entered the Chinese market in 2006 by acquiring 12 stores from ‘Home Way’. However, it faced losses and by 2012 it closed down all its stores. On the other hand, IKEA, a Swedish company is rocking it in China with sales climbing the record new every year.

Cultural Reasons:

  • Chinese aversion to the DIY culture: Unlike the West, especially when it comes to home decor, Chinese people would rather hire a skilled worker than do it themselves. In the Western countries, hiring labor can cost you arms and legs. So, people ‘do-it-for-themselves.’ However, labor is particularly cheap in China and Chinese people would rather prefer a finished product, say a furniture than mere pieces of lumber.
  • Lack Of Chinese Home Decor Role Models: In 2015, it was found that almost 70% of the millennials aged 19–36 owned a home in China, which wasn’t the case 15 years earlier. Now, these young people don’t have role models in China and they look up to the West for home decor inspiration. They needed someone to set them up. That’s what IKEA provided – educating the people about Western Home Decor Experience and setting things for them. It’s more like ‘Do-It-For-Me’ model than ‘Do-It-Yourself’.

2. Netflix in India

“…Cricket is a religion and Sachin is GOD.”

I am talking about a cricket crazy country which gets to watch matches for free.

A diverse country with 22 official languages is not interested in what an American company has to offer, that too at the same price it sells its programs/TV series to its audience in the USA.

I had done a SWOT analysis for a case study competition in the past regarding the failure of Netflix in India. You may find this interesting and know for yourself that Sacred Games is not enough to win over the Indian audience.

Relevant: Why Is Netflix Unsuccessful In India?

3. Zara In India

“Does the Spanish fashion brand know that Indians celebrate Holi and are in love with colors?”

Well, Zara hasn’t been a complete failure but it has failed to respond to the cultural differences in business in India and Europe. But it’s growth continues at a snail’s pace. Zara entered the Indian market in 2010 and as of May 2018, it has 20 stores across India. However, H&M which entered the Indian market in 2015 had 32 stores by May 2018. Despite several paid Instagram influencers marketing the single tone clothes, India is slow to change its fashion sense.

  • High Price: You can’t sell the products to Indians at the same price you sell in Europe. On the other hand, similar clothes from GAP (American Clothing Brand) cost half the price. In fact, there are clothes that are made in India, Bangladesh, and Sri Lanka, shipped to Spain and again shipped back to India.
  • Limited Color Palette And Seasonal Variations: It seems that the vibrant colorful ‘ghagra-choli’ and ‘kurta-pajama’ is mightier than the unisex single tone clothing. Indian women will still love sarees or maybe even skirts, but not gender fluidized shirts and pants. Come on T-shirts, sweatshirts and pull-overs have always been gender neutral. Do you need people to be extra sensitive?
  • Consumer Behavior of Indians: A statistics shows that European women, on an average, visit a Zara store 17 times annually. I don’t recall average Indian women buying clothes 17 times a year. Indians know to save and that’s good for us!

4. Starbucks In Australia

With a per capita annual Coffee consumption of 1.8 kg, it is certainly conclusive that Aussies love coffee. Despite Australia’s love for instant coffee, the Seattle-based company, Starbucks, failed to click on the continent. In 2008, it had to close down 70% of its 90 stores in Australia.

Although it’s astounding for an outsider to assimilate the failure of the largest coffee chain in the world, experts attribute the failure of Starbucks to its lukewarm response to the local tastes. First of all, the Aussies are serious about the taste and they are not used to sweeter coffees. Gloria Jeans,  a local franchised-specialised coffeehouse company sells less flavored coffee and has over 500 stores in Australia.

Secondly, Starbucks seemed to rob the locals as it charged more than the local cafes. The photo below illustrates the coffee prices of different brands in Australia.

coffee prices in Australia

Today, Starbucks is not completely wiped out from the continent. However, it is operational only in the major cities like Brisbane, Melbourne, Canberra etc and basically targets the tourists. As of 2018, there are just 39 stores operational in Australia.

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