3 Embarrassing Examples of Cross-Cultural Business Failures
Maybe you’ve seen this scene before while on vacation. It usually goes something like this: a frustrated tourist tries to communicate with a local that doesn’t speak a word of English. The tourist, baffled by the lack of comprehension from the local, simply speaks English LOUDER and sloooower. The same words are repeated, over and over again. Of course, this doesn’t help with communication at all. Both the tourist and the local end up exasperated.
Anthony Karge Published Oct 10, 2018
It’s a ridiculous but fairly common scene. As silly as these exchange are, similar misunderstandings and miscommunication happen on a massive scale in the business world. Some companies, lead by the best and brightest leaders, flush away billions of dollars due to complete cross-cultural failures.
These following stories show why it’s critical to understand your customers and business partners in other parts of the world. Failing to do so leads to disaster. These examples go beyond mere mistranslations and insensitive advertisements. Rather, they reveal deep-rooted flaws that stem from a profound lack of cross-cultural understanding.
Wal-Mart in Germany: A Company Culture That Didn’t Fit
Wal-Mart’s expansion in Germany was nothing short of a disaster. Almost a decade after launching in Germany, Wal-Mart couldn’t find anyone willing to pay a cent for its assets. Due to the high costs of laying off workers in Germany, Wal-Mart essentially paid a competitor in 2006 to take over its real estate and employee liabilities.
How did Wal-Mart, who enjoyed so much success in the US, China, and other countries, get to that point? By failing to understand the culture of their employees and their customers. Here are a few places where Wal-Mart dropped the ball, according to my German colleagues who shopped at the store.
Germans don’t like – or at least aren’t very used to – very friendly customer service. Having a greeter at the entrance was unsettling. Having staff smile at customers was also strange–some male shoppers thought female employees were flirting with them.
Team spirit is a big part of American Wal-Mart stores, with team members doing a morning chant to motivate everyone for the rest of the day. Chanting in Germany is best suited for soccer matches and nowhere else, so there were reports of employees hiding in the bathroom in horror to avoid the morning chant.
Even in higher-end German grocery stores, it’s customary for shoppers to bag their own groceries. No shopper wants somebody else touching their groceries after paying. Having Wal-Mart cashiers bag the groceries themselves was considered a big no-no.
All those things came together to create an uncomfortable atmosphere for both employees and customers. Of course, there were problems beyond the culture misunderstandings. Wal-Mart simply wasn’t as competitive on pricing compared to long-established German discounters like Aldi. Still, syncing with German culture would have helped as they tried to build the brand within the country.
General Mills’ Cake Mix in Japan: A Breakdown in Market Research
General Mills was ready to succeed in Japan in the 1960s. Their line of pre-packaged cake mixes was a huge hit in the US, where customers valued the convenience of needing just water, eggs, and the mix to produce a cake. Surely, that convenience would be appreciated by busy Japanese customers. Cake might not be as ingrained into Japanese culture as in the US, but there still seemed to be a strong market opportunity. What could go wrong?
The product launch was a complete failure, and it had nothing to do with whether Japanese consumers liked cake or not. The reason for the failure was glaringly obvious after the fact: just 3 percent of Japanese homes at the time had an oven. Realizing their market research problem, General Mills repurposed the cake mix to work in the much more common rice cookers. That never really caught on, so General Mills withdrew their cake mixes from the market.
Fast Food in China: How McDonald’s Lost to KFC
No fast food company does international expansion as well as McDonald’s. Meanwhile, competitor KFC always lagged behind the Golden Arches, especially in Asia. When China opened up its borders to international companies in the late 1980s, it would have been safe to bet that McDonald’s would continue its dominance.
That never happened, however. Today, McDonald’s has half the presence that KFC does when it comes to total stores, while losing out to KFC in revenue per store and margin. There are a number of reasons for KFC’s success, such as being first to the market, building a strong supply chain, and deploying a more strategic expansion plan. However, a big reason for KFC’s success is that it adapted to the local culture while McDonald’s initially refused to cater to the tastes of Chinese customers.
McDonald’s had great success with its line of American-style burgers when expanded to Japan and other Asian countries. They stubbornly decided to roll out the same line of product that worked in nearby countries. The difference between those countries and China is that the latter had no frame of reference for burgers. The country was closed of for so long that burgers seemed too strange and fore. KFC, meanwhile, had the advantage of offering fried chicken, which is a familiar food for people in China. They also took active steps to localize their menus for the Chinese market, and their wildly successful breakfast menu featuring staples like congee is a testament to their localization efforts.
McDonald’s has since learned from its mistakes and and enjoys a strong position in China’s fast food market. But due to their botched rollout, they’re still a lagging competitor to KFC’s market position. A little localization goes a long way, especially when it’s done correctly from the start.