Doing business in a country with strong cultural identity can be challenging for multinational companies.

Sunday, 01 August 2021
Starbucks once failed in Israel and Australia for cultural reasons. Starbucks once failed in Israel and Australia for cultural reasons. StockSnap on Pixabay

Understanding cultural differences and integrating them into strategic business operations should be taken very seriously. Cultural mistakes have been the cause of many business failures around the world.

A few examples of business failures

Back in 1992, Walt Disney planned to replicate the success of Disneyland in the U.S. and in Japan in Europe by launching a pilot project in Paris, France. The giant entertainment company attempted to explain its struggle as the impact of the recession in Europe in the early 1990’s. In reality, first, the French government and intellectuals have developed a certain contempt for Americanism after the World War II. A series of other issues explain that failure. Alcohol ban in the park sounded absurd to French people who are used to enjoying wine at lunch time. French people were not used to takeaways and their staffs have not been trained enough to understand the eating habits and the daily habits of French people in general. Later, to address the situation, a French citizen has been appointed as director and the new team adjusted the company’s human resources management and policies. Up until today, Disneyland in Paris is one of the most appreciated attractions in Europe.

Another example of cultural mistake would be that of the American famous coffee chain Starbucks in Tel Aviv. In 2002, an Israeli company opened a first Starbucks coffee shop and planned to open 20 more within one year. That never happened. A well-developed coffee culture is rooted in the Israeli society. They enjoy gathering and enjoying either a cappuccino or an espresso, needless of a long list of options in the Starbucks menu considered too complicated. The market being too small for Starbucks, the franchise has failed to come back to Israel until recently. All hope is not gone. Even though no coffee shop has been opened, a pop-up store distributing free samples to customers operated last April and May. A story to be continued!

Let us stay in Israel. The giant KFC made a tremendous mistake when they ignored how Israelis – the majority of whom are Jews – follow religiously kosher laws. Besides, in a country where chicken is considered a staple food for most households, a customer needed a viable reason enough to visit and buy at KFC. As of 2021, KFC is present in five locations in Israel after a series of “come-and-go” since the 1980’s.

More giant American multinational corporations have failed due to cross-cultural mistakes. Starbucks failed in Australia; so did Walmart in Germany. That is why cultural awareness must be taken seriously when embarking on an international effort. A preliminary in-depth assessment of the uniqueness of national cultures should be carried out, covering aspects like environment, legislation, local values and traditions, the population’s lifestyle and daily habits, just to name a few.

2020’s shoppers would not buy a product only because it is affordable and beautifully designed. They buy it based on the story the product is telling, a story they can relate to or a story in line with their values and convictions. Multinational companies should never underestimate cultural considerations, especially when targeting markets with strong cultural identities.

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