Managing an investment is a business and financial process that succeeds only when the party taking the risk has full confidence in their partner. Intercultural communication and project-based thinking are merely prerequisites for this process.
Intercultural communication in four business cultures of the world
In intercultural communication, investors from different cultural backgrounds bring diverse norms of behaviour and communication to the investment process. These differences can influence business negotiations, the decision-making process, and the effectiveness of cooperation.
Four business cultures that have been broadly analysed in the literature.
1. American investors
- Directness and straightforwardness: Americans are generally direct and straightforward in business negotiations. They often get straight to the point, expressing their opinions or expectations in a clear and assertive manner.
“But they are cautious when expressing criticism; there is no such thing as something; they are only positive” – added Katalin Varga. - Fast decision-making: Americans value fast and efficient decision-making highly. Time is money, so business negotiations are usually about getting results quickly.
- Focus on contracts: US investors place strong confidence in contracts and legal agreements, valuing them as crucial for ensuring business commitments. They document agreements in formal contracts.
2. Asian investors (e.g. China, Japan, South Korea)
- Building relationships and trust: in Asian business cultures, especially in China and Japan, long-term relationships and mutual trust are essential. Negotiations often take longer because initial meetings focus on building personal relationships.
- Indirect communication: in Asian cultures, people tend to be less direct. They avoid the word “no” and prefer to use polite terms. Reading between the lines and paying attention to non-verbal cues is essential.
- Hierarchy and respect: hierarchy and respect are typically emphasised in Asian corporate culture. The words of an older or senior manager can be decisive, and the respect demonstrated during negotiations reflects a commitment to the partner.
3. European investors
- Formality and precision: Formality and precision are highly valued in European business cultures, particularly in Germany and the UK. During negotiations, accuracy, detailed planning and well-prepared presentations are expected.
- Longer decision-making process: in many European countries, decision-making can take longer because of the need for thorough analysis and consensus.
- Direct communication but diplomacy: Europeans are generally direct in their business communication but maintain a sense of diplomacy. They express their opinions directly but respectfully and follow cultural norms.
4. Middle Eastern (e.g. Muslim) investors
- Personal relationships and trust: business relationships in Muslim culture are often based on personal relationships and trust. They need to take time to build relationships before negotiations.
- Respecting religious and cultural customs: religion plays a vital role in Muslim countries, so it is important to respect religious and cultural customs, such as prayer times or Ramadan, when negotiating business.
- Indirect communication and politeness: similar to Asian cultures, Muslim investors often communicate indirectly and emphasise politeness. They also avoid using the word “no”. Sensitive issues are to be handled with care.
“However, for business success, it is important to understand and respect the cultural backgrounds of our partners” – emphasised Katalin Varga.
“Knowing the externalities of another culture, such as rules of behaviour and customs, is only the tip of the iceberg. Understanding the underlying values and basic assumptions behind these externals is crucial. Effective collaboration requires a deep understanding of, and respect for the values and inner compass of the other culture, recognising them as equal to our own.”
Intercultural communication:
acceptance and project-based thinking rather than protocol
Erin Meyer is a professor at INSEAD, a leading international business school. The Culture Map framework she has developed enables managers to identify their leadership preferences as accurately as possible in international business communication and to compare their methods with the leadership styles of other cultures.
“Based on Erin Meyer’s work, in my experience, I have found that everything is based on mutual respect” – explained Katalin Varga. “And the first, most visible element of this process is the adherence to protocol, which builds on the factors encompassed by Meyer’s Culture map and culminates in the third step, the acceptance of the underlying values and equality!”
“What surprised me at first, in a positive sense, is that in this course, students have to speak as much in class as the lecturer, the curriculum is very relevant and exciting, and I also like the fact that they consciously select the candidates from all over the world.” – said Katalin Varga in our previous blog article. Since 2023 she has been studying at Oxford University on a postgraduate global business course, during which she gained considerable experience in intercultural communication and project management at the international level.
However, Katalin Varga believes that in addition to intercultural communication, project-based thinking and investment processes are equally, if not more, important prerequisites for successful business cooperation.
Communication of investment processes:
cultural respect and acceptance, cooperation, operational linkage
The first condition for all this is to assemble a strong team. According to Katalin Varga, the participants in the investment process must meet several criteria, such as:
- Only experts who are relevant to the topic or subtopic should join the team.
- People may not highlight it, but it is worth noting that it is essential in the process that the participant is sufficiently motivated.
- Of course, people should fully understand their field, i.e., be an expert.
It is recommended that these teams be structured so that there are only a few participants and that the number of participants can be managed flexibly, i.e., some experts should be released, and others brought in from time to time if the project level deems it necessary.
The project-based approach is designed to serve the project process, which has a predictable and thus also traceable course for the investor, such as:
investment objective ownership relations typification of employees search for a factory, property insurance launching local community connections with public authorities
“Of course, many questions can arise at these stages, and an investor taking a risk must answer them meaningfully. Therefore, the investor must ensure they have even the tiniest bit of information.”
– added Katalin Varga, who also shared a personal story about how one of the foreign investment partners of Pannon Group found it very strange that employees in Hungary – compared to her country – have so many vacation days.
An investment process relies not only on protocol and intercultural communication but also on creating an atmosphere of trust and acceptance of the partner’s culture. When combined with professional, project-based thinking, this approach can lead to success.
Pannon Group is also a market player in business consulting, real estate and industrial park development, tourism development, agriculture and insurance.