How Cultural Competence leads to Competitive Advantage for Business?

Globalisation has brought in new challenges and contradictions. To navigate the relativity and complexity of multicultural global workplace and marketplace the leaders and managers must develop cultural competence or cultural fluency, i.e., an awareness and skill with global mindset.

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Atsushi Funakawa has listed five components of Cultural Competency:

i. Geocentric mindset

ii. Strategic focus (on company, customers, community, competitor and communication)

iii. Cross-cultural communication skills

iv. Culturally sensitive management processes

v. Synergy learning systems

All the five elements are interrelated. Integration of cultural competence into competitive strategies leads to competitive advantage. Proctor & Gamble lost $200 million from 1973 (when it entered Japanese market) to 1987. However, by 1990, Japan became the second largest foreign market (first being Germany).

Success was possible due to developing cultural competence by:

i. Understanding the customer’s habits, biases and attitudes

ii. Customizing products to the market

iii. Becoming sensitive to Japanese cultural differences

iv. Penetrating the multilayered distribution chain

v. Selling corporation as well as the brands.

Not only market entry/access or share, the success of cross-border mergers, acquisitions and joint ventures (the today’s business buzz where Indian Corporate sector is doing so well) hinges on melting different organisational culture. The trend of networking (interconnectedness) of markets processes and operations across cultures have changed the criteria for competitive advantage.

Speed, responsiveness, flexibility, effectiveness, and ever-increasing rate of innovation have made organisations to understand that competitive advantage depends on the individuals with global mindset and competencies, which create, support and sustain the organisation and individuals (not sharing the same cultural background).

The cultural orientations model helps us to develop an accurate approach to access communicate with and appeal to customers.