DEDAN KIMATHI UNIVERSITY OF TECHNOLOGY

Lecturer: Dr. Rosemary Kagondu

INNOVATION & CREATIVITY

 One of the key requirements for entrepreneurial success is your ability to develop
and offer something unique to the marketplace. Over time, entrepreneurship has
become associated with creativity, the ability to develop something original,
particularly an idea or a representation of an idea. Innovation requires creativity,
but innovation is more specifically the application of creativity. Innovation is
the manifestation of creativity into a usable product or service. In the
entrepreneurial context, innovation is any new idea, process, or product, or a
change to an existing product or process that adds value to that existing product
or service.
 How is an invention different from an innovation?
 All inventions contain innovations, but not every innovation rises to the
level of a unique invention. For our purposes, an invention is a truly novel
product, service, or process.
 It will be based on previous ideas and products, but it is such a leap that it
is not considered an addition to or a variant of an existing product but
something unique.
 How is an invention different from an innovation? All inventions contain
innovations, but not every innovation rises to the level of a unique invention. For
our purposes, an invention is a truly novel product, service, or process. It will be
based on previous ideas and products, but it is such a leap that it is not considered
an addition to or a variant of an existing product but something unique.
 Creativity and innovation are what make the world go around and continue to
improve and evolve! There have been lots of great ideas and thoughts around the
creative and innovative process for entrepreneurs, as this is a key part of the
problem identification process.

RELATIONSHIP BETWEEN CREATIVITY, INVENTION AND INNOVATION

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  The word “Innovation” is often advertised and associated with growth,
potential, and the attitude to achieve more and do better.
 Along with “invention” and “creativity,” is sometimes used as a buzzword,
thrown around a lot but not properly understood.

Concept Description

Creativity ability to develop something original, particularly an idea or a

representation of an idea, with an element of aesthetic flair

Innovation change that adds value to an existing product or service

Invention truly novel product, service, or process that, though based on ideas and
products that have come before, represents a leap, a creation truly novel
and different

DESIGN THINKING
 We can consider these three concepts by relating them to design thinking. Design
thinking is a method to focus the design and development decisions of a product
on the needs of the customer, typically involving an empathy-driven process to
define complex problems and create solutions that address those problems.
 Complexity is key to design thinking. Straightforward problems that can be solved
with enough money and force do not require much design thinking. Creative
design thinking and planning are about finding new solutions for problems with
several tricky variables in play. Designing products for human beings, who are
complex and sometimes unpredictable, requires design thinking.
Example : Airbnb has become a widely used service all over the world. That has
not always been the case, however. In 2009, the company was near failure. The
founders were struggling to find a reason for the lack of interest in their properties
until they realized that their listings needed professional, high-quality
photographs rather than simple cell-phone photos. Using a design thinking
approach, the founders traveled to the properties with a rented camera to take
some new photographs. As a result of this experiment, weekly revenue doubled.
This approach could not be sustainable in the long term, but it generated the
outcome the founders needed to better understand the problem. This creative

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 approach to solving a complex problem proved to be a major turning point for the
company

 People who are adept at design thinking are creative, innovative, and inventive
as they strive to tackle different types of problems.
Consider Divya Nag, a millennial biotech and medical device innovation
leader, who launched a business after she discovered a creative way to
prolong the life of human cells in Petri dishes. Nag’s stem-cell research
background and her entrepreneurial experience with her medical
investment firm made her a popular choice when Apple hired her to run
two programs dedicated to developing health-related apps, a position she
reached before turning twenty-four years old.
 Creativity, innovation, inventiveness, and entrepreneurship can be tightly
linked. It is possible for one person to model all these traits to some degree.
Additionally, you can develop your creativity skills, sense of innovation, and
inventiveness in a variety of ways.

WHAT IS INNOVATION?
 So what does innovation really mean? And how does it differ
from invention and creativity in a business? A definition of innovation, invention
and creativity can be made:
 Innovation is the process of turning a new concept into commercial success or
widespread use. Innovation ties everything together in business.
 According to British Standards, Innovation is the successful exploitation of new
ideas.
 It involves turning an invention into a commercial success and encouraging its
widespread use.
 This is the stage where bold ideas, once properly developed, are brought to the
public eye. This is what Uber has achieved, now that its product is in use all over
the world and benefits people everywhere.

• Innovation involves the whole process from opportunity identification, ideation

or invention to development, prototyping, production marketing and sales, while
entrepreneurship only needs to involve commercialization (Schumpeter).

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• Today it is said to involve the capacity to quickly adapt by adopting new
innovations (products, processes, strategies, organization, etc)
• Also, traditionally the focus has been on new products or processes, but recently
new business models have come into focus, i.e. the way a firm delivers value and
secures profits.

• Schumpeter argued that innovation comes about through new combinations made
by an entrepreneur, resulting in
 a new product,
 a new process,
 opening of new market,
 new way of organizing the business
 new sources of supply

 The most commonly used definition of an innovation is the one provided by the
OECD (2005) which is the implementation of a new or noticeably improved
product, service, process, marketing and organization method (Szłapka et al.
2017).
 The main issue on innovation is on its implementation and for a new product to
be considered an innovation it should be introduced into the market (Clark 2010).
 One of the key things on innovation is the support provided for by the
management since it is pertinent in creating a culture where each employee
embraces innovation as a crucial component of their work (Urban 2017. This
management support comprises provision of resources and creation of ideas that
stimulate innovation. New processes, marketing and organization methods
should be implemented by the firm for them to qualify as innovations. This
suggests that, without implementation there is no innovation to talk about
 Product innovation is the ability of a firm to identify and respond to new customer
needs through coming up with entirely new or noticeably improved products with
new product categories (Njeri 2017).
 This may involve noteworthy enhancements in the technical specifications,
materials and components and user friendliness of the products. Furthermore,
product innovation entails product line extension, introducing new features to the
product, product improvements and new-to-the-world product

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  Process innovation is defined as the introduction of new methods of operation and
tools that alters the way in which a business functions (Atalay, Anafarta, and
Sarvan 2013).
 This may involve critical changes in techniques, equipment and/or software
improvements that can adjust processes and increase efficiency in production or
service delivery systems of a firm (Njeri 2017).
 Marketing innovation is the operation of a new or considerably improved method
of promoting a firm’s products with the aim of interacting with customers at a
different level.
 There are innovations centered on the channels used by the firm to market its
products such as the market research adopted by the firm or messages used by the
firm to market its product
 According to the management thinker and author Peter Drucker, the key point
about innovation is that it is a response to both changes within markets and
changes from outside markets.
 For Drucker, classical entrepreneurship psychology highlights the
purposeful nature of innovation. Business firms and other
organizations can plan to innovate by applying either lateral or
linear thinking methods, or both.
 In other words, not all innovation is purely creative. If a firm wishes
to innovate a current product, what will likely matter more to that
firm is the success of the innovation rather than the level of creativity
involved.
 Drucker summarized the sources of innovation into seven
categories, as outlined in table

Drucker’s Seven Sources of Innovation

Source Description

The unexpected Looking for new opportunities in the market;

unexpected product performance; unexpected new
products as examples

The incongruity Discrepancies between what you think should be

and what is reality

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 Source Description

Process need Weaknesses in the organization, product, or

service

Changes in industry/market New regulations; new technologies

Demographics Understanding needs and wants of target markets

Changes in perceptions Changes in perceptions of life events and values

New knowledge New technologies; advancements in thinking; new

research

 One innovation that demonstrates several of Drucker’s sources is the use of cashier
kiosks in fast-food restaurants. McDonald’s was one of the first to launch these
self-serve kiosks. Historically, the company has focused on operational efficiencies
(doing more/better with less). In response to changes in the market, changes in
demographics, and process need, McDonald’s incorporated self-serve cashier
stations into their stores. These kiosks address the need of younger generations to
interact more with technology and gives customers faster service in most cases.
DIMENSIONS OF INNOVATION

 There are several types of innovation; Process, product/service, strategy,which

can vary in degree of newness: Incremental to radical, and impact: continuous to
discontinuous
 In business and economics, innovation is often divided into five types:
 Product innovation, which involves the introduction of a new good or service
that is substantially improved. This might include improvements in functional
characteristics, technical abilities, ease of use, or any other dimension.
 Process innovation involves the implementation of a new or significantly
improved production or delivery method.
 Marketing innovation is the development of new marketing methods with
improvement in product design or packaging, product promotion or pricing.
 Organizational innovation (also referred to as social innovation) involves the
creation of new organizations, business practices, ways of running organizations
or new organizational behavior.
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  Business Model innovation involves changing the way business is done in terms
of capturing value e.g. Compaq vs. Dell.

DRIVERS FOR INNOVATION

– Financial pressures to reduce costs, increase efficiency, do more with less, etc
– Increased competition
– Shorter product life cycles
– Value migration
– Stricter regulation
– Industry and community needs for sustainable development
– Increased demand for accountability
– Demographic, social and maket changes
– Rising customer expectations regarding service and quality
– Changing economy
– Greater availability of potentially useful technologies coupled with a need to
exceed the competition in these technologies

YOUNG KENYAN ENTREPRENEURS AT THE FOREFRONT OF TECH

INNOVATION
Young Kenyans are harnessing their country’s growing tech prowess to go into
business for themselves.
i) For example, Jamila Abbas and Susan Oguya, created a mobile application
called M-Farm. The application allows Kenyan farmers to access real time
market information, buy farm inputs from manufacturers and find buyers for
their produce, all through SMS.
ii) At Strathmore Univeristy, Asha Mweru launched Chochote,an e-commerce
platform with her classmates Ivy Wairimu and Victor Karanja. Chochote,
which is the Swahili word for “anything,” started as a simple classroom
assignment. The team of 4th year Strathmore students sought to connect buyers
and sellers on a platform based on excellent customer service, discounted
prices and home delivery. Currently, it targets consumers between the ages of
18 and 48. Chochote’s tagline is “not just anything.” It’s transitioning from
offering a wide range of products like electronics, cosmetics and clothing to a
narrower, more particular supply of unique crafts, jewelry and fashion items,
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 similar to Etsy. Ivy explained that, “Kenyans are very specific [about] what
they are buying. So, we [investigated and] found out what the specifics are,”
then decided to re-brand.
iii) In September , 2022, Kenyan students Lennox Omondi, Keylie Muthoni, Dullah
Shiltone and Brian Ndung’u were awarded the 2022 Hult Prize for their
innovation and took home 120 million! The entreprenuers who are students at
St Paul’s University in Kenya founded Eco-Bana which makes biodegradable
sanitary pads from banana fibre. During their pitch, Ndung’u said the
company plans to sell more than 3 million pads, generating over Sh6 billion
($50 million) and employ more than 2,000 people by 2024.
iv) Chris Kirubi . Chris Kirubi is likely the most popular business magnate in
Kenya with investment in virtually every sector. His fame grew over the years
because of his successful investments as it seems that everything he touches
turns to gold. The entrepreneur grew up in an impoverished home and lost his
parents at a young age. This motivated him to start working early, the exposure
giving him a great foundation that helped him build a massive business
empire.
v) Peter Munga is the ideal “From poverty to riches stories in Kenya.” He is the
founder of Equity Bank, one of Kenya’s largest commercial banks. Munga hails
from a humble background and grew up struggling a lot. Peter Munga today
is one of the most influential personalities in banking and has vast
investments in other firms that build his wealth.
CREATIVITY
 Entrepreneurial creativity and artistic creativity are not so different. You can find
inspiration in your favorite books, songs, and paintings, and you also can take
inspiration from existing products and services.
 You can find creative inspiration in nature, in conversations with other creative
minds, and through formal ideation exercises, for example, brainstorming.
 Ideation is the purposeful process of opening up your mind to new trains of thought that
branch out in all directions from a stated purpose or problem. Brainstorming is the
generation of ideas in an environment free of judgment or dissension with the goal
of creating solutions, is just one of dozens of methods for coming up with new
ideas.
 You can benefit from setting aside time for ideation. Reserving time to let your
mind roam freely as you think about an issue or problem from multiple directions

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 is a necessary component of the process. Ideation takes time and a deliberate effort
to move beyond your habitual thought patterns.
 If you consciously set aside time for creativity, you will broaden your mental
horizons and allow yourself to change and grow.

 Entrepreneurs work with two types of thinking. Linear thinking—sometimes

called vertical thinking—involves a logical, step-by-step process. In contrast,
creative thinking is more often lateral thinking, free and open thinking in which
established patterns of logical thought are purposefully ignored or even
challenged. You can ignore logic; anything becomes possible.
 Linear thinking is crucial in turning your idea into a business. Lateral thinking will
allow you to use your creativity to solve problems that arise. Figure below
summarizes linear and lateral thinking.

Entrepreneurs can be most effective if they use both linear and lateral thinking. (Attribution:
Copyright Rice University, OpenStax, under CC BY 4.0 license)

 Creativity is the act of channeling imagination into something concrete. It is the

very first stage of design, where ideas start to actually take form, and a plan can
be developed.
EXAMPLES OF CREATIVITY:
In the case of Uber, creativity was necessary in producing the concept of ride
sharing and of making driving jobs accessible to any individual.
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SOME KENYAN ENTREPRENEURS WHO BECAME CREATIVE ,STARTED
SMALL AND BECAME SUCCESSFUL (2021 IN BUSINESS HACKS)

 Successful and against-all-odds businessmen and women know how to survive

in a complicated industry. They form the biggest part of Kenyan entrepreneurs
who started small, taking advantage of an ecosystem they twisted to suit their
business growth needs. Indeed, these business moguls have created something
from nothing. Who are the most successful in Kenya?

i) Lorna Rutto is the founder of EcoPost, a firm that collects and recycles
plastic waste, manufacturing fencing posts from the recycled matter.
Lorna quit her banking job in 2010 to start this business, making her one
of the most successful female entrepreneurs in Kenya. Her primary intent
when starting the plastic recycling business was to create a sustainable
solution for the increasing plastic waste menace in Kenya. Her venture has
created a massive positive impact on the environment and great job
opportunities.
ii) Eric Kinoti easily makes the list of business moguls in Kenya that have
made it big because of his Systems East Africa company. The
entrepreneur's company make $1 million in sales revenue every year by
manufacturing military and relief tents, branded gazebos, restaurant
canopies, car shades, and so much more. His firm sells this to various clients
in Kenya and other regions in Africa. Eric Kinoti has been twice featured in
Kenya’s Top 40 Under 40. At some point, he was also listed in Forbes'Top
30 Under 30.
iii) Catherine Mahugu joins the list of self-made millionaires in Kenya. She is
the co-founder of Soko, an e-commerce platform that has formulated a great
foundation in Kenya. It is based in Kenya and San Francisco, USA. The
successful entrepreneur is a graduate from the University of Nairobi with a
bachelor’s degree in Computer Science. Catherine has been part of
numerous ICT projects. These include Stanford University's Nokia Africa
Research Centre Design Project, creating a mobile application for informal
communities.

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 iv) Danson Muchemi is the founder of one of Kenya’s leading e-payment
services, JamboPay. The firm is also active in web application and network
securities. JamboPay is also a recipient of the Google Innovation Awards in
Financial Services for 2013.
v) Joel Mwale started young and is today amongst Kenyan entrepreneurs that
started small and became successful. He is the founder of Sky Drop
Enterprises that purifies water and supplies to the public at half the market
price. The entrepreneur commenced this dream when he was only 14 years
old by establishing a borehole in his community. On top of his water
purifying business, Joel is the founder of Gigavia.com, an educational and
social networking website. This platform gives teachers and schools an
avenue to share academic material seamlessly.

INVENTION
 Invention is the physical creation of a new concept or idea. Nesta’s innovation
policy tookit, it is defined as the creation of an idea to do or make something
without verification that it works, or is commercially valuable. Invention cannot
occur without creativity, but just creativity is not enough to properly develop an
idea.
 Examples of invention:
 Product designs, business models, or working prototypes.
 Uber channeled invention in creating a solid and working business model, based
upon the ideas they had formed in the creation stage.

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HOW TO OVERCOME BARRIERS TO CREATIVITY AND INNOVATION

i) Your habits
 “Think disruptive!” “Be creative!” “Just leave the existing behind you!” Simply
think outside the box. Forget all barriers to creativity and innovation. And be
completely free in your mind. Imagine that you are working as a chartered
accountant. Why don’t you just throw everything you have learned about the
existing laws overboard? It’s going to be hard.
 We all have mental barriers to creativity and innovation in our heads. They work
– no matter whether you are developing a new innovation strategy, building an
innovation culture or looking for new suggestions for the continuous
improvement process.
 Imagine you see something unusual: a new idea, an unusual solution. Instead of
cheering, you first feel a sense of rejection. “That looks weird,” you think. Maybe
you also tend to say, “wierdo.” Why is that? Quite simple: Our brain
automatically prefers known solutions to unknown ones. This works faster than
constantly searching for new solutions.
ii) The Feasibility Barrier
 “Impossible!” Once you have an idea that somehow sounds strange or seems out
of reach, your head spits out a thousand objections as to why it can’t work. This
barrier to creativity and innovation is constantly in the way of idea generation and
idea development.
 “Much too expensive.” “We don’t have the right staff.” “This is practically
impossible.” The objections are often not unjustified: The path from the first idea
to successful innovation is really expensive, the necessary competencies do not
exist in the company and the idea cannot be implemented within existing
structures. But what now? If you want to successfully implement business
innovation, you must overcome this barrier.
iii) The Knowledge barrier
 Mindset and complacency. Core competency becomes core rigidity. Engineers
from a mechanical engineering company were interviewed. They had to develop
ideas for a significantly cheaper version of a system. But no matter which ideas
came up, the engineers kept saying: “Technically not feasible.” For three years
they tried, then they gave up. The management of the company finally assigned

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 the task to an external company. Three months later, the device was ready to be
launched on the market.
 How did this happen? The management had underestimated the extent of the
knowledge barrier. The engineers involved thought that they knew everything
that was necessary to develop the device. Unfortunately, they missed one thing:
They didn’t know what they didn’t know. And because they didn’t notice it, they
didn’t know what they needed to know to drive innovation forward. The
knowledge barrier is one of the main barriers to creativity and innovation. It exists
because your creative potential is largely influenced by your personal experience
and knowledge, your character traits and your creative abilities.
iv) The Regulatory Barrier
 Policies and procedures, inflexible and rigid organizational structures, traditions,
and a culture of playing by the rules, are keeping employees from participating,
stifling any innovative or creative processes.
 This barrier to creativity and innovation becomes active at an early stage. Before
you even start thinking in a new direction, it suggests, “You can’t do that.” The
main reason for this is our upbringing: “You mustn’t do that.” That’s not what
we do.”
 In professional life, we are perfect rule chameleons: we quickly adapt to the rules of our
environment. Unfortunately, too perfect: By constantly wanting to do everything
right, we unconsciously develop barriers to creativity and innovation. By
constantly making predictions about what might not be allowed, we shut
ourselves off from the possibilities that a deliberate breach of the rules would
entail.
 The regulatory barrier is also active in invisible laws, such as market laws. “The
market works this way and that.” This statement can be made until someone
redefines the rules of the market.
 Richard Branson of Virgin Airlines is such a rule-breaker. For him it is almost a
hobby to study the rules of a market, to break them and to penetrate the market.
The regulatory barrier also becomes active if you make the innovation process
too rigid in your innovation management. Innovation teams are more concerned
about following the rules of the next step than about the innovation itself.
v) The Contradiction Barrier
 This barrier to creativity and innovation is the downside of what is often admired
as “clear leadership”. In the beginning, managers are admired for their determined
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 line and their commitment. Things change at some point. But they stubbornly hold
on to what has been tried and tested. Why is that?

 As soon as a discrepancy is imminent, the contradiction barrier in your head

signals: “Stop!” Because we tend to always present a logical and comprehensible
picture to the outside world. Everything that seems contradictory is tremendous
to us: Yesterday we were against it – today we are in favour of it, we feel
uncomfortable with that.

GLOBAL ENTREPRENEURSHIP
 Global entrepreneurs are those who seek out and conduct new and innovative
business activities like exporting, licensing, opening a new sales office, or
acquiring another venture across national borders. And global entrepreneurship
refers to entrepreneurship done on a worldwide basis.
 Globalization has changed the way businesses operate drastically. And the impact
that entrepreneurs can have across the entire world is breathtaking.
 Moving out from your borders and becoming a global entrepreneur is a positive
and profitable career move. The person who holds the title can be extremely
wealthy, powerful, and treated as a role model.

ADVANTAGES OF GLOBAL ENTREPRENEURSHIP:

 You get the opportunity to grow the business in new markets.
 You will meet new experts and talents.
 Your customer’s reach expands.
 You will learn the workings of foreign markets and compete with them.
 You are less dependent on seasonal trends.
 Any entrepreneur that takes their brand to international markets has the
opportunity to impact the society by encouraging economic growth and creating
new jobs.

Example: Starbucks Coffee – Going Global One Cup at a Time

Howard Schultz, who led the purchase of Seattle-based Starbucks Coffee in 1987 for
$250,000, later boasted, “Starbucks is going to be a global brand, in the same genre as
Coke and Disney.” By 2003, Starbucks had grown from 15 stores and 100 employees in
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1987 to more than 65,000 employees serving more than 22 million customers worldwide
each week. By the year 2020, facts indicated that the company is the largest coffeehouse
company in the world with 32,660 stores across the globe in 2020. In 2019, it recorded
31,256 stores worldwide. Starbucks year-over-year growth almost doubled in the last
decade. (Source: Starbucks, 2020)

CHALLENGES FACED BY GLOBAL START-UPS:

 The logistical problems and psychic barriers created by distance and by differences
in culture, language, education systems, religion, and economic development
levels.
 As startups already have so many various things to spend on and in such a
situation, accommodating the world's various workweek schedules can be
difficult.
 Managing the different nations' political, regulatory, judicial, tax, and labor
environments.

WHY “GO GLOBAL?”

 Offset sales declines in the domestic market

 Increase sales and profits
 Lower manufacturing and product costs
 Improve competitive position
 Raise quality levels
 Become more customer-oriented

BEFORE GOING GLOBAL, ASK:

 Is there a profitable foreign market in which our firm has the potential to be
successful over the long run?
 Do we have and are we willing to commit adequate resources of time, people,
and capital to a global campaign?
 Are we considering going global for the right reasons?

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  Do we understand the cultural differences, history, economics, value systems,
opportunities, and risks of conducting business in the countries we are
considering?
 Is there a viable exit strategy for our company if conditions change or the new
venture is not successful?
 Can we afford to go global ?

COMPETENCIES GLOBAL ENTREPRENEURS NEED

All entrepreneurs must be able to identify opportunities, gather resources, and strike
deals. They all must also possess soft skills like vision, leadership, and passion. To win
globally, though, they must hone four additional competencies.

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 i) Articulating a global purpose.
 Developing a crystal clear rationale for being global is critical. In 1999, for example,
Robert Wessman took control of a small pharmaceuticals maker in his native
Iceland. Within weeks, he concluded that the generics player had to globalize its
core functions—manufacturing, R&D, and marketing—to gain economies of scale,
develop a large product portfolio, and be first to market with drugs as they came
off patent. Since then, Actavis has entered 40 countries, often by taking over local
companies. Wessman faced numerous hurdles, but he stuck to the strategy.
Actavis now makes 650 products and has 350 more in the pipeline. In 2007, it
generated revenues of $2 billion and had become one of the world’s top five
generics manufacturers.
ii) Alliance building.
Start-ups can quickly attain global reach by striking partnerships with large
companies headquartered in other countries. However, most entrepreneurs have
to enter into such deals from positions of weakness. An established company has
managers who can conduct due diligence, the money to fly teams over for
meetings, and the power to extract favorable terms from would-be partners. It has
a reasonable period within which to negotiate a deal, and it has options in case
talks with one company fail. A start-up has few of those resources or bargaining
chips. Start-ups also have problems communicating with global partners because
their alliances have to span geographic and psychic distances.
iii) Supply-chain creation.
Entrepreneurs must often choose suppliers on the other side of the world and
monitor them without having managers nearby. Besides, the best manufacturing
locations change as labor and fuel costs rise and as quality problems show up.
Start-ups find it daunting to manage complex supply networks, but they gain
competitive advantage by doing so. Sometimes the global supply chain lies at the
heart of the business opportunity.
HOW YOU CAN GO GLOBAL
 Being a global entrepreneur is not a cakewalk. Various prominent companies
took years to launch themselves in the global market.
 You cannot connect with the customers, investors, market until and unless you
understand the culture of the country you want to work with. If you are not
focusing on it, take this as the time because no amount of business experience
will help you succeed. For this, you can hire locals, and they will help you out of
this.
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CULTURE IN GLOBAL ENTREPRENEURSHIP

Understanding a country’s culture where you want to start your business or start
a new venture is like learning a success tip. It helps you in effective communication
and helps you in decision making
 Cultural adaptation in international business encompasses organizational culture
as well as national cultures and traditions. It helps the organizations to have a
better understanding of how local businesses and the workforce function.
IMPORTANCE AND ROLE OF CULTURE IN INTERNATIONAL BUSINESS
 Culture has various definitions, but in the simplest terms, culture refers to the
norms, beliefs, ideas, attitudes, and social behavior of an individual or society. In
a way, culture is the coming together of different experiences, values, beliefs, and
ideas that influence the behavior and attitude of a community, a particular person,
or a group. Some essential cultural elements are religion, language, gender roles,
social structure and dynamics, traditions, laws, and customs.
 Cultural adaptation in international business encompasses organizational culture
as well as national cultures and traditions. It helps the organizations to have a
better understanding of how local businesses and the workforce function.
 Culture in international business strongly influences personal style, from an
individual’s dressing sense to interacting with others. Each culture has its customs
and formalities for business negotiations and meetings.
 Every society has its own “cultural themes,” which have a substantial impact on
how that culture does business.

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The following aspects look at the significance of culture in international business to better
understand how it shapes global companies:
i) Entry Into New Markets
 Conducting international business involves entering new markets. Companies
must display sensitivity towards different cultures when dealing with foreign
clients or planning a marketing campaign for their foreign subsidiaries. Business
executives should start by studying the local market's beliefs, values and
customs.

ii) Business negotiations

 Different cultures have distinct perspectives on business negotiations. While some
consider negotiations a signed contract between two parties, others view it as the
beginning of a strong business relationship. Therefore, it’s important to
understand how your counterpart views a negotiation’s purpose, whether they
want to build a long-term rewarding relationship or are looking at it as a one-time
deal.

iii) Personal styles

 Culture in international business strongly influences personal style, from an
individual’s dressing sense to interacting with others. Each culture has its customs
and formalities for business negotiations and meetings.
 Hence, knowing the subtleties of foreign cultures and respecting appropriate
formalities go a long way in making the right impression and bagging crucial
business deals.
iv) Team organization
 Culture is a decisive factor that affects how organizations negotiate a deal. While
some believe in consensus decision-making, others believe in the supremacy of a
single leader who takes all decisions.
 Whether the culture promotes hierarchical roles or societal equality, these values
affect all parties in a business deal. Hence, business executives should understand
how teams in different cultures organize and participate in decision-making.
v) Inclusion and diversity
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  An organization that welcomes cross-cultural people, ideas, and customs create a
benchmark as an inclusive and diverse workspace.

 Sensitivity and acceptance of diverse cultures help create a dynamic and talented
workforce. Plus, these values leave a lasting impression on clients, customers,
investors, and stakeholders.

INTERNATIONAL BUSINESS AND CROSS-CULTURAL CHALLENGES

The relationship between culture and international business has its rough patches. Below
we have enlisted a few of the cross-cultural challenges that affect businesses globally

i) Understanding local business practices

 One of the core cultural issues in international business is the failure of

organizations to understand local business customs. Ignorance of how to conduct
business in a foreign country without considering cultural, political, and economic
influences is a significant roadblock in international trade.
 In some Asian countries, culture strongly influences how the workforce responds
to management roles. In Japan, social hierarchies are valued, and seniors are paid
the utmost respect. However, in the US, there is a comparatively flat
organizational structure.

ii) Identifying regional differences

 Most often, organizations focusing on the bigger picture overlook regional

differences in emerging markets. Subcultures go beyond regional and ethnic
variations to include other elements, such as differences in female and male
consumer behavior and thinking.

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iii) Adapting business models to the local market

 Culture strongly influences consumer attitude and behavior. However, many

companies go by the one-size-fits-all approach without realizing that
personalization is the secret to creating a large and diverse customer base.
 Entrepreneurs must restructure their business models to reflect local customs,
habits, and preferences of different buyer personas.

iv) Adapting human resource policies

 Attracting, retaining, and leveraging global talent can be challenging for a

culturally ignorant foreign company that employs local staff. Organizational
commitment, job satisfaction, motivation, and conflict resolution vary across
cultures.
 The key to understanding these differences is rethinking the human resource
policies to accommodate local cultural profiles. Human Resource teams should be
aware of the cultural differences while recruiting and communicating with foreign
employees.

v) Creating a diverse and inclusive workplace

 A diverse and inclusive workplace attracts and retains top global talent, responds
to the diverse needs of customers, increases access to new clients, fosters creativity,
and drives innovation.
 Diversity and inclusion issues vary across nations, and one shall take note that
bias, discrimination, and cultural conflicts are barriers to international trade.

vi) Adapting management practices

 Every organization has unique management models and practices with specific
underlying cultural principles. While it sounds perfect, the problem arises when
these practices dissipate across cultures without factoring in cultural variations. It
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 becomes the organization’s responsibility to educate its staff on how to overcome
the multiple layers of cultural barriers.

ADDRESSING THE CULTURAL BARRIERS IN INTERNATIONAL BUSINESS

 Given the significance of culture in international business and the cross-cultural

challenges involved, it makes sense to know how to overcome the cultural
barriers in international business.
 Effective and successful cross-cultural management in international business can
be daunting.
 It is not enough to be aware of the cultural barriers disrupting international
business relations - you must also be prepared to tackle the issues.

 Create a culturally aware workplace

 One of the best ways to overcome cultural differences in global business is to

create space for the cultural requirements of your colleagues and employees in a
foreign country.
 For instance, factor in cultural and religious holidays, customs, and dietary needs
and integrate them into your organization’s policies to make everyone feel
included.

 Promote open communication

 International business and cross-cultural communication go hand-in-hand.

Promoting a culture of open communication is the only way culturally diverse
teams can overcome their differences and work together.
 Global leaders must lead by example. They should promote open
communications, listen to everyone’s opinions, and create a safe and transparent
workspace.
 Employees should have a safe space to talk about their challenges without any
judgment.

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  Engage in diversity training

 When companies try to include and accept people from diverse cultural
backgrounds, they take one step in the right direction of overcoming cultural
barriers in international business.
 Diversity training is an effective tool that allows employees to identify hidden
prejudices, biases, and other obstacles and create opportunities wherein
employees can learn how to embrace diversity.

 Cultivate a shared company culture

 When you have a culturally diverse team, the best way to unite the members is by
establishing a strong company culture reflecting the interests of all team members.
 As a team leader, ensure that your team functions like one unit to discuss
differences, voice grievances, and find solutions to business challenges. When
members work remotely, it’s crucial to create a team culture beyond stereotypes.

 Understand the local culture

 Before you get busy conducting business operations in a new market, focus on
understanding the region’s business practices.
 Instead of taking a full-blown global approach, start with a localized mindset and
gradually implement changes in your business.

CULTURAL DIFFERENCES IN INTERNATIONAL BUSINESS

 Recognizing how culture influences international business is indispensable to

avoiding misunderstandings among employees and clients and create a stellar
image in new markets.
 Accepting cultural diversity in global organizations gives you a broad spectrum
of business experience and novel insights to tackle real-world business problems.

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 Culture in international business differs from the general meaning of culture per
se, affecting global companies in five broad areas: interaction, communication,
organizational hierarchy, and workplace etiquette.

 Interaction

 Professional gestures and interactions that are acceptable in one culture may be
offensive or inappropriate in a different cultural setup.
 Thus, if you are accustomed to shaking hands, making eye contact, and kissing
people on the cheek as part of formal interactions in your country, the same may
not apply to foreign clients and business partners.
 Learning about acceptable and suitable business etiquette becomes crucial.
 For instance, while the Japanese consider addressing someone by their first name
in a first meeting disrespectful, Americans are more comfortable using first names
in a formal setup.

 Communication

 Communication methods vary across cultures. So, understanding the language

and communication style of your target market is an excellent way to bridge
cultural gaps in the international business arena.
 For example, Israeli and American cultures emphasize straightforward methods
of communication, unlike the Japanese, who rely on indirect communication.
Likewise, Finns tend to be brief and use direct communication strategies, whereas
Indians typically communicate in indirect and subtle ways.

 Organizational hierarchy

 Different cultures perceive organizational hierarchy differently. When expanding

into new markets, you must realize that your host country’s approach and
attitude towards the corporate structure may differ from yours. Hence, it could

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 be challenging to define roles in cross-cultural teams or determine who has the
authority on the other side.
 While Japan has a straightforward organizational structure promoting hierarchy,
Sweden has a flat organizational hierarchy that emphasizes equality.
 While the Chinese and Japanese stress consensus decision-making, it is more
common for American teams to have a leader with ultimate authority.

 Workplace etiquette

 Differences in workplace etiquette are a vital consideration when discussing

culture's impact on international business. When you engage with multinational
teams, you will encounter stark differences in workplace etiquette, reflecting
cultural diversity.
 Let’s consider punctuality. You must reach in time when dealing with American,
Japanese, Russian, or South Korean clients and colleagues. On the other hand,
arriving early for an appointment is standard in Germany. But when in Malaysia,
China, Mexico, Ghana, or Nigeria, arriving late for meetings is acceptable.

 Negotiation Style

 While engaging in international business, negotiation becomes a principal

component. The way people behave and communicate reflects their negotiation
style. Organizations must understand the accepted negotiation norms in different
countries and act accordingly.
 For instance, in some Asian countries, negotiations are deemed crucial for building
stronger business relations. However, it is seen as a contract focusing on a win-
lose process in Spain.

A Framework for Understanding Culture

 Culture has many definitions. My own definition is that culture is our collective
experience as a society, and its impact on our reaction and decision-making
relative to every-day facts and circumstances.
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