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The library of essays of Proakatemia

CULTURAL CONSIDERATIONS IN MARKET ENTRY 



Kirjoittanut: Thais Santos Araujo - tiimistä SYNTRE.

Esseen tyyppi: Akateeminen essee / 3 esseepistettä.
Esseen arvioitu lukuaika on 11 minuuttia.

Written by Thais Araujo and Lucas Alvim

  1. Introduction

    When preparing a market entry strategy, the culture of the new market should in any case be overlooked. The culture, influences heavily the choices and preferences of consumers. If a business is able to adapt to the cultural setting where they are, they will more easily connect with the local consumers, building trust and creating a long lasting relationship. Being aware of the cultural setting of the market not only helps when entering the market, but it also shows that the business respects the culture. By giving importance to the cultural aspects, the business can prepare their market entry strategy to align with the expectations and preferences of the consumers.

    In this essay, we will go through the importance of understanding the culture of a market when preparing to enter said market.

    This essay will specifically refer to the Pikku-Brasilia project from the company SYNTRE Osk to explore the topic. By focusing on PB (Pikku-Brasilia), we can dig in into practical examples and insights to show the challenges and strategies associated with navigating cultural factors when entering a new market. As the project was an MVP, this case study approach can meaningfully share real lessons and provide a concrete context for understanding of the dynamic interaction between cultural considerations of different cultures entering specifically in the Finnish market.

    1. KEY TERMS:
      1. MVP: minimum viable product. 
      2. PB (Pikku-Brasilia): açaí sorbet kiosk in Tampere.
      3. Market entry: all the activities involved in bringing a product or service to a new market.
  2. The Impact of Culture on Market Entry

    The culture of a society is the reflection of the people’s traditions, values, norms, and customs. The culture is going to affect the experiences, beliefs, and values that consumers have, which consequently will affect their attitudes, emotions, social norms, intentions, and behaviors.

    A great way of seeing the cultural differences of different societies is by the Hofstede´s cultural dimensions theory. It is a framework made by Geert Hofstede to analyze the cultural differences between countries. The theory has six different cultural dimensions that are expressed on a scale from zero to one-hundred, to help understand the differences in values, behaviors, and social norms between countries. The six dimensions are: 

    1. Individualism vs collectiveness. It is the strength of the ties that people have to each other within their society. On a society that is high on the individualism scale, there is high value put into people’s personal time, enjoyment of challenges, expectation of individual rewards, respect for privacy and freedom. While on a society that is low on the individualism scale, it is valued that people build skills and master something, people work for intrinsic rewards and maintaining harmony within the group has more importance than other issues. 
    2. Power distance index. It is the level of inequality that exists and is tolerated between people with power and without it. On a society where there is a high power distance there tend to be more centralized organizations, more complex hierarchies and large gaps in compensation, authority, and respect. In societies where there is a smaller power distance, there are flatter hierarchies and supervisors and employees are considered more equals. 
    3. Masculinity vs feminity. Is the distribution of roles between men and women. In a masculine society the roles overlap less between man and women and men are expected to be assertive. In a feminine society, the roles overlap more and modesty is seen as a great characteristic. In a more masculine society there are stronger egos and money and achievements are seen as important. While in a more feminine society, people are more relationship-oriented and focus on quality of life. 
    4. Uncertainty avoidance index. It measures the tolerance to ambiguity and uncertainty. In a society with a high uncertainty avoidance, people prefer structure, rules and formalized procedures. While in societies with lower uncertainty avoidance, there is more openness to change and innovation and less sense of urgency. 
    5. Long-term orientation vs short-term orientation. It is the time horizon people in a society show. In a society with a longer-term orientation, persistence and perseverance are valued and there are more concerns about the future. In societies with shorter-term orientation, there is respect for traditions, priority to fulfill social obligations and more focus on the present and past. 
    6. Indulgence vs restraint. The amount that the society allows an individual to enjoy life and have fun. In a society where there is higher indulgence, freedom is speech has importance, people are optimistic and personal happiness is important. In societies where there is higher restraint, there is more controlled and rigid behavior and people are pessimistic. (Bartlett, 2022)

  3. CULTURAL AND PERSONAL KNOWLEDGE AFFECT CONSUMER BEHAVIOUR 
    Cultural knowledge is the beliefs that most people in a society share. It is what is considered normal and how things are supposed to work in a specific society. Everyone, in addition to the cultural knowledge that is shared between people in their society, has personal knowledge. That is their own individual set of beliefs that might in some cases go against what their society thinks.

    Cultural knowledge may kick in when consumers are making fast judgments or decisions as they have their cultural knowledge as default. For example, when driving down a road and seeing a billboard with an advertisement, people are more likely to be influenced by it if it aligns with their culture. But when there is time for thinking and considering the customer’s options, personal knowledge takes a bigger role. For example, when the customer is thinking about their different options and searching for more information about them for example on the internet, the fact that the advertisement aligns with their culture will most likely have a lesser impact on their decision making. As the individual will assess the options and think about the cultural norm and challenge it based on their preferences, making them consider also their own experiences and perspectives in addition to the cultural factor. (Laplante 2005)

    Almost a foolish example, but relevant enough, PB has a concrete example of failure related to approaching costumers and facing challenges understanding the customer’s behavior. Açaí sorbet is the main menu item from PB kiosk, and funny enough, almost no one knows what is an açaí sorbet in Finland. Googling for “açaí “and “Finland” words, now in 2023, is not possible to find relevant knowledge about the food experience, taste or even availability in the Finnish market. There’s an interesting news from 2017 when a grocery store owner in Finland thought the taste was so bad that he sold each unit 450ml package for 0,79€ (Arponen-Oikarinen 2017). The practical learning came when PB team tried to run a few tasting sessions for people walking in the street right in front of the kiosk. The expectation was that people would accept the free sample opportunity and after the tasting, turn these people into potential clients later during the summer.

    For PB’s team surprise, no one accepted the free samples. No proper deeper research was held to understand why not, but it was at least proved that the Finnish client behavior doesn’t include to accept free unknown exotic food in the street. It might sound obvious for a Finnish reader and even unrealistic that PB tried this approach. Although, from the Brazilian and Portuguese background perspectives which were the shareholders background who tried this approach, it was nothing but a very common practice.

    After observing the clients for at least a month, PB team learned one customer behavior that would facilitate the experience of approaching new customers. Inviting the people to come over to the kiosk, explaining who we were and what we were selling created the minimum trust and dialogue to finally make a bridge to the question: would you like to try?

  4. CULTURAL COMPETENCES
    Cultural competencies are very important when entering a market in a different culture than yours as they will allow you to understand the communication styles, avoid cultural insensitivity, and build trust, which will lead to creating and taking care of long-term relationships.

    Bonita Wiliams defined cultural competencies as “the ability of individuals and systems to work or respond effectively across cultures in a way that acknowledges and respects the culture of the person or organization being served”. Developing cultural competencies will allow people to work efficiently in a new cultural context and work efficiently with people from different cultures.

  5. HOW TO IMPROVE CULTURAL COMPETENCE

    Improve cultural and global knowledge. If you want to understand a cultural point of view better, it is important to learn about the culture and current events involving said culture. Learning about a culture´s practices, beliefs and values can help when working with a person from that culture, as it will help to understand some of their point of view and motivations. Learn about the history of the culture as a lot of times, historical events may be the background for current events. As for example why some phrases that may seem neutral, bring up negative feelings, like “Where are you from” as phrases like this one may have a history of usage to oppress people from that culture.

    Self-assessment. Understanding that everyone has biases and prejudices, is important to improve cultural competencies, as when that is understood, you can start to reflect on your own biases and prejudices. Biases can come from our experiences, background or personal demographic and they exist even if we don’t acknowledge them. The biases and prejudices become an issue when you fail to acknowledge them, as then you may let them influence you leading to discriminatory actions towards others. But if we acknowledge our biases, we can actively work to diminish their role in our interactions with others.

    Beyond tolerance. Tolerating different cultures is good, but not optimal as tolerance can mean putting up with something undesirable. Instead try to be affirming, appreciative and inclusive of different cultures and to learn more information about their actions.  (Guzman 2016)

  6. COMPONENTES OF CULTURAL COMPETENCE
    Cultural competence can be divided into three components:

    1. Active listening. If the intention is to really learn from what another person is saying and understand their motivations, then active listening should be done. Active listening is when in a conversation, give full attention, give reflective responses, show empathy, withhold judgment, show empathy and not interrupting. It is more than just listening to what is being said but trying to understand the content and the emotions given by the person speaking. So that after the conversation the other person feels heard and understood and you are able to ask more questions to learn more about it.
    2. Empathy. A good way of picturing empathy is by saying “Walk in the other person’s shoes”.  Empathy is trying to understand a person’s point of view and the conclusions they take from their life and experiences. No need to agree on the point of view and conclusions, but at least understand the other person’s point of view and conclusions.
    3. Engagement. When interacting instead of criticizing individuals, concentrate on behaviors and situations, steering clear of judgmental statements. Keep the feedback during the conversation in context as it will open up the dialogue and possibly help you to learn more about the topic in question. (Guzman 2016)

  7. Case Studies of Cultural Considerations in Market Entry
    1. PIKKU-BRASILIA BACKGROUND ENTERING THE MARKET

      Pikku-Brasilia had a unique ownership structure with three business owners hailing from distinct nationalities—Brazilian, South Korean, and Portuguese. Beyond the diverse international management background, the brand’s products stood out by themselves by diverging from the typical Finnish offerings. Pikku-Brasilia’s menu proudly featured a selection of popular Brazilian food.

      As a business starting in Finland, we stick to the Finnish power distance index thinking on one of the six cultural dimensions theories. Finland is characterized by predominantly flat hierarchies in most organizations compared to the global norm. Consequently, right from the outset, our company, PB, took this cultural perspective into account when entering the Finnish market. In this framework, all shareholders are considered equal. Although they may have distinct roles, their level of responsibility remains the same. This sort of equitable approach empowers all business partners to express their opinions and collectively steer the company in the direction they believe is best. (Guzman 2016)

      All business partners were granted the freedom to influence the project however they understand would be a good fit. Our intention was to align with the power distance index, but we ended up learning about the consequences of this approach. The business partners not only faced the challenges of reacting to issues, but also cultivated a sense of ownership, which proved crucial for the smooth operation of the business throughout the entire summer.

      This is one concrete example of cultural perspective PB hold to firmly during your first steps in the Finnish market.

  8. Challenges and Risks of Ignoring Cultural Considerations

    As said before, overlooking the cultural dimensions of a market is a significant error. In the popular book “Kiss, Bow, or Shake Hands,” authors Morrison and Conaway thoroughly examine cultural variations at a broad level. They shed light on observable cultural external behaviors that become apparent when they are not appropriately understood. For instance, while it’s customary to greet work colleagues with a kiss in South America, some Nordic countries strictly adhere to personal space boundaries, and crossing them is considered inappropriate.  (Morrison & Conaway 2012)

    The example highlights that what might be considered a customary practice in one cultural setting could be perceived quite differently in another. This serves as a clear illustration of how cultures can clash and show the critical importance of carefully considering cultural nuances when stepping into a new market.

    This contrast for misunderstandings and misinterpretations that can have implications for businesses aiming to establish a presence in diverse markets. Consequently, a comprehensive understanding of cultural intricacies becomes not just a beneficial asset but a crucial factor in the success of market entry strategies.

  9. Strategies for Cultural Adaptation

    Understanding cultural differences is not a barrier but a gateway to innovative and successful business strategies. In international business, a diverse cultural background can be a distinct advantage. For instance, businesses with an international touch can present themselves as unique and exotic, offering products or services that bring a fresh perspective to the market. This uniqueness in the business can attract people who want something new and authentic experiences. (Hofstede 1992)

    In the case of Pikku-Brasilia’s MVP launch in Tampere during the summer of 2023, the incorporation of cultural elements likely played a crucial role in shaping the reception of their product.

    Drawing on the assumed minimalist and trustworthy image associated with Nordic cultures, business owners can tailor their approaches to build a brand that resonates with the values and expectations of the local population.

    By embracing and understanding cultural nuances, businesses can create marketing campaigns, products, and services that align with the preferences and expectations of the target audience. This cultural intelligence not only enhances market entry strategies but also fosters a deeper connection with consumers, ultimately contributing to the success and sustainability of the business venture. Therefore, far from being a hindrance, cultural awareness becomes an invaluable tool for businesses seeking to thrive in diverse markets.

  10. Conclusion
    In the ever-changing world of international business, cultural considerations stand as a super important and determinant of market entry success. As explored in this essay, understanding and adapting to the cultural nuances of a new market are not mere options but essential strategies for businesses seeking sustainable growth and consumer connection.

    The importance of cultural considerations in market entry is evident from the Pikku-Brasilia (PB) project, a vivid case study reflecting the challenges and successes associated with entering the Finnish market. The diverse ownership structure of PB, representing Brazilian, South Korean, and Portuguese backgrounds, underlines the complexity of cultural dynamics. From the beginning, PB recognized the significance of the Finnish power distance index, fostering an equal approach that empowered all shareholders, creating not just a business but a collective ownership.

    The impact of culture on consumer behavior, exemplified by Hofstede’s cultural dimensions theory, underscores the need for businesses to comprehend the complexity of societies they enter. From individualism to uncertainty avoidance, cultural dimensions influence consumer attitudes, behaviors, and preferences, shaping the success or failure of market strategies.

    Pikku-Brasilia’s experience with introducing açaí sorbet in the Finnish market serves as a small example of cultural misalignment. The initial failure to tempt customers with free samples highlighted a confrontation between cultural expectations and business practices. However, through quick observation and adaptation, the PB team learned to bridge the cultural gap, showing the significance of cultural competencies in establishing meaningful connections with diverse consumer bases, especially the market entry one.

    Challenges and risks arise when cultural dimensions are overlooked, as demonstrated by the contrast between customary practices in South America and Nordic countries. Misunderstandings rooted in cultural differences can have profound implications for businesses venturing into diverse markets. Consequently, a nuanced understanding of cultural intricacies emerges as a pivotal factor in the success of market entry strategies.

    Strategies for cultural adaptation are not barriers but gateways to innovation and success. Embracing and understanding cultural nuances enables businesses to adjust their approaches, creating unique and authentic experiences that can echo positively with local population of the entry market. 

    In conclusion, cultural awareness is not a obstacle but an important tool for businesses trying to thrive in a new market for them. The call to action is clear: prioritize cultural understanding in global expansion efforts. As businesses continue to navigate the interconnected global marketplace, cultural considerations will remain the compass guiding them toward success, sustainability, and a genuine connection with consumers worldwide.

  11. REFERENCES

    Arponen-Oikarinen, L. (2017) ‘Pahanmakuinen Acaisorbetti’ Mennyt kuin Kuumille Kiville – kauppias: ‘Onhan Tuo Aivan Hirveää’, Ilta-Sanomat. Available at: https://www.is.fi/ruokala/ajankohtaista/art-2000005354100.html (Accessed: 07 December 2023).

    Bartlett, R. (2022) Hofstede’s cultural dimensions, Blog.RichieBartlett.com. Available at: https://blog.richiebartlett.com/Politics_%E6%94%BF%E6%B2%BB%E7%9A%84/Hofstedes-Cultural-Dimensions/ (Accessed: 25 November 2023).

    Guzman, M. et al. (2016) G1375 · index: Youth & Families, families, Cultural Competence: An Important Skill Set for the 21st Century. Available at: https://extensionpublications.unl.edu/assets/html/g1375/build/g1375.htm (Accessed: 07 December 2023).

    Hofstede, G. (1992) Culture’s consequences: International differences in work-related values. Newbury Park, CA: Sage Publ.

    LaPlante, A. (2005) When does culture matter in marketing?, Stanford Graduate School of Business. Available at: https://www.gsb.stanford.edu/insights/when-does-culture-matter-marketing (Accessed: 07 December 2023).

    Morrison, T. and Conaway, W.A. (2012) Kiss, Bow, or shake hands: Sales and marketing: The Essential Cultural Guide – from presentations and promotions to communicating and closing. New York: McGraw-Hill.

    Williams, B. (2001) Accomplishing Cross Cultural Competence in Youth Development Programs. Available at: https://archives.joe.org/joe/2001december/iw1.php (Accessed: 07 December 2023).  

 

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