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% 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% 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% 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,” according to 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.”
Other key findings from the report include:
- 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.
- Misunderstanding rooted in cultural differences poses the greatest obstacle to effective cross-border collaboration. 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.
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.
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About the Economist Intelligence Unit
The Economist Intelligence Unit (EIU) is the world's leading resource for economic and business research, forecasting and analysis. It provides accurate and impartial intelligence for companies, government agencies, financial institutions and academic organisations around the globe, inspiring business leaders to act with confidence since 1946. EIU products include its flagship Country Reports service, providing political and economic analysis for 195 countries, and a portfolio of subscription-based data and forecasting services. The company also undertakes bespoke research and analysis projects on individual markets and business sectors. More information is available at www.eiu.com or follow us on www.twitter.com/theeiu
The EIU is headquartered in London, UK, with offices in more than 40 cities and a network of some 650 country experts and analysts worldwide. It operates independently as the business-to-business arm of The Economist Group, the leading source of analysis on international business and world affairs.
About EF Education First
EF Corporate Language Learning Solutions, an EF Education First company, offers corporate language training for international businesses and public sector organizations. EF operates from a worldwide network of 400 language schools, offices in over 50 countries, and develops and runs an advanced online virtual language school and classroom. For more information please visit: www.ef.com/corporate.