Socio cultural closeness and distance

By Lucas Juan Manuel Alonso Alonso.

 

  1. Socio-Cultural Closeness

Socio-cultural closeness among the home country and the host country (or host countries) is related to factors such as common/similar language, comparable educational level and cultural characteristics, similar types of business and industrial practices, workplace norms…etc.

When you start an internationalisation process you are expanding a business abroad; it is exporting an organizational structure, values, method, management style…Therefore, in many occasions, a similar type of business and industrial practices can be a greater closeness factor than a common or similar language; bear in mind that the home country’s language can be useful for the host country (for instance, countries where the native language is not commonly spoken in the world) but it is not identified with the home country’s culture.

A similar type of business and industrial practices in the host country will enable you to generate synergies, easier introduction of products/services, set up alliances, less bureaucracy… A comparable educational level and cultural characteristics are other important factors of socio-cultural closeness.  As in the case of similar types of business and industrial practices, similar cultural characteristics in the host country, such as traditions, religion, life style, way of doing business and trade, form of government, etc., are going to make the internationalisation process easier.

As a result of socio-cultural closeness it doesn’t necessary to make many changes in your marketing strategy.  Therefore, the internationalisation strategy will have competitive advantages in costs and flexibility.  Similar types of business, lifestyles, origins, spending habits, cultural characteristics, cultural traditions, form of government and trade (…etc.) in home and host country are powerful factors in order to make easier to expand your business abroad; partnerships, alliances, and cross-border trading will be easier too, as well as it is more feasible larger amount of trade and DFI flows.

Socio-cultural closeness among the home country and the host country (or host countries) reduces uncertainty and favours a greater commitment of resources in internationalisation provided that the level of risk in the host country (or host countries) is considered acceptable. It is easy to see that the main requirement to commit resources in a foreign market is the country socio-political stability.  Socio-cultural closeness will not be attractive if the host country has high rates of corruption and isn’t able to offer security over the investment.  Then, considering as acceptable the level of country-risk involved, an ideal situation would be socio-cultural closeness with countries that represent large markets with high growth rates.

  1. Socio-Cultural Distance

Socio-cultural distance generates:

  • Greater uncertainty.  This greater uncertainty is not derived from the host country’s risk, which on the contrary can be a very safe country (good sovereign rating…), but the risk exposure to different culture of that in the country home.

  • Reduces the possibility that the home country’s companies carry out the internationalisation process via direct investment.

  • Modes of entry into foreign markets that involve a smaller commitment of resources.  Export is a way of internationalisation that fewer resources committed, but in some cases it is important to be aware of keeping exports steady.  A sporadic export to certain countries (for instance, some Asia countries) can damage the brand image of the company.

Sometimes is quite possible to find, low country-risk, better and larger markets with high growth rates in countries with which we have greater socio-cultural distance.  Therefore, better business opportunities may take place in countries with greater socio-cultural differences.  Select people who are able to suit to cross-cultural environments, setting up multicultural teams, request information from consultants and agencies abroad about the different barriers, partnerships with host country’s local nationals… are, among many others, ways to reduce the risk exposure derived from socio-cultural distances.

As a result of new information technologies the way people get news (and be in touch) has changed; therefore, it is necessary to define appropriate approaches (mainly when there is socio-cultural distance) based on the specific and fast changing needs of the foreign target group.  It is important to be aware that be in contact with people from different cultures (interconnectedness) it doesn’t mean to know their cultures.  Besides, not only it is necessary to know the culture (this is only the first step, the necessary but not sufficient condition) of the host country but the most important thing is to understand it.

Socio-cultural distance can have a positive effect, becoming useful for international expansion, when the host country wants to import products, services, or a lifestyle of a foreign country.  But in these cases the brand image of the home country (often such a country brand image is intimately associated to the quality of its products or services, ways to carry out business, credibility…) is essential.

Sometimes, as a consequence of social-cultural distance, in some countries will be more appropriate to use sub-brands rather than carrying out deep and expensive changes in the features of products/services.

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