The document discusses some of the key cultural issues companies face when entering new markets, including religion, norms, customs, and language. It emphasizes the importance of understanding the local culture and adopting localization strategies that incorporate cultural elements. This includes recruiting local employees, developing appropriate marketing and pricing strategies, and choosing export methods that appeal to the local community, such as cooperative exports. Understanding factors like attitudes, values, and economic conditions is also important for ensuring business strategies are culturally sensitive and positioned for success.

1. Cultural Issues a Company Faces when Emerging in a New
Market 11
CULTURAL ISSUES A COMPANY FACES WHEN
EMERGING IN A NEWMARKET
Chapter 1
Introduction
1.1 Background
A company can develop a new product or emerge in a new
market by using its ideas or those of others. However, there are
several issues, such as cultural problems, that it can encounter
during the entire process. Firms have to take cultural issues into
consideration before deciding to enter into a new market. Some
of cultural issues include religion, norms, customs, and
language. When a company has adequate knowledge and
information it needs, the process of emerging into a new market
will be less painful.
The most important thing for a company is to consider the
market it's about to enter, once it begins the process of
developing a business model and concept (Govindarajan and
Ramamurti 2011). The key to a successful venture is taking time
to understand the market, which means carrying market research
to evaluate every aspect of the market including cultural issues.
The reason for this study is that firms always look to expand to
new opportunities and markets, and for each new market that a
firm establishes itself in, there is always a different culture that
might sometimes generate different problems for the firm. This
paper aims to research the cultural issues that companies face
when emerging in the new market and how they solve the
issues. This study is hence so important since it will create a
guide to those firms planning to enter new markets. The guide
will provide the best way possible on how to avoid or/and deal
with cultural issues.

2. Overall aim Comment by Chi Maher: Overall aim missing
1.2 Objectives/Aims Comment by Chi Maher: You need 3
research Objectives
The objective of the research is to increase our understandings
of the various cultural issues that most companies face when
emerging in new markets.
1.3 ResearchQuestions
· How do firms gain understanding and knowledge concerning
the cultural issues of a new market?
· How do firms overcome these issues?
· What is the utmost efficient and effective technique to lessen
risk relating to cultural issues in new markets?
Chapter 2: Literature Review
Culture is the knowledge and characteristics of a particular
group of individuals encompassing religion, language, arts,
cuisine, social habits, and music. According to Hofstede Geert
"culture is the collective programming of the mind which
distinguishes the members of one human group from another"
(Hofstede 1991, p. 90). In general, culture is a way people do
their things. The chief cultural issues that an organization must
consider before entering a new market include religion, norms,
customs, and language. Over the years, the changing landscape
of technology has made it possible for people from different
sides or regions of the planet to interact, especially through
social networking sites. These interactions and information
exchange have opened regions to foreign people making it
possible for new organizations to move to such regions.
The most advantage that organizations have harnessed from
these interactions is the ability to learn about the cultural norms
of people from a particular region of interest. This way, the top
management can collaborate with relevant people within the
firm to develop and adapt business models and strategies with
the ability to succeed in the targeted market segment
(Logemann and Piekkari 2015, p.33). Importantly, it is essential
for organizations to adopt a localization strategy, which

3. incorporates religion, norms, customs, and language of the local
people in the model and strategies. Ideally, the targeted people
have to feel that they are part of the company, which would then
make them to support the company. Therefore, it is mandatory
for the new entrants in the market to initiate and actualize
various corporate social responsibilities as well as adopting a
localization strategy.
2.1 Culture Categories
One has to understand the diverse cornerstones of culture, to
understand the various issues that firms face when entering new
markets. Culture can be categorized into various categories for
easy understanding. The sense of space and self is the first
category. Self-identity and appreciation can be expressed
differently in a different culture. For example, it is more okay
to boast in some cultures, whereas people have a habit of being
humble in other cultures (MacCormack et al. 1980). People are
structured and formal in some cultures, whereas others are
flexible and informal.
The other category of culture is body language and spoken
language. Body language differs between different cultures.
People speak different languages with different dialects in
various parts of the world. Body language is somehow
universal; however, signals and gestures have a different
explanation in different cultures. For instance, most European
culture prefers hugging as a sign of greeting while in some
Asian nations, culture abhors body contact especially when it
involves people of different gender. In particular, most nations
where Islam is the dominant religion advises against shaking
hands people of opposite gender. The differences in these
practices imply that the ways of greeting also vary. For
instance, Cambodians greet by one person touching their chest
and bowing to the other person, who must be older than them or
occupy a higher sociocultural class (Jensen 2017, p.137). On the
other hand, people in many African nations prefer handshaking
as compared to hugging or pecking. Therefore, the top
management is responsible for understanding the practices

4. pertinent to the targeted market and liaising with the relevant
stakeholders to adopt a business model and strategy with high
efficacy.
There are diverse feeding habits and diets in different cultures.
For instance, many Americans and Europeans eat a lot of beef,
which is unacceptable among Hindus. Jews and Muslims are not
permitted to eat pork, whereas several Swedes have distinct
harm for Christmas. The food generally varies from culture to
culture, and the way food is served and eaten also differ. Food
is eaten directly with bare hands in some cultures, while in
other cultures, individuals use wooden sticks and many more.
Comment by Chi Maher: Reference required
People have different norms and values in different cultures. In
several parts of the world, individuals try to survive due to the
absence of food and water, whereas individuals in other regions
concentrate on upgrading their standards of livings through
material possessions and better employment. Success is
frequently measured in wealth in the United States, whereas in
other regions such as Pacific Island, success is measured on the
bases of how much an individual shares his/her wealth.
Attitude and beliefs of people are other significant factors of
culture. This is an aspect of culture that is difficult to measure.
People have different attitudes and cultures. Religion has the
same effect on the attitudes of people, but a person interprets a
message might be different from the other interpretation.
Generally, message interpretations depend on attitudes, norms,
and religion. Understanding this concept is imperative because
the new market entrants must develop and implement
promotional activities intended to introduce the products or
services of the company to the customers. The only known way
for an organization to enter a new market and mount a stiff
competition with the existing players is when the potential
customers in the market segment can comprehend the message.
In this respect, it is advisable to use promotional methods and
messages that would reach many people in the market and be
understood. As long as the customers interpret the messages in

5. the advertisements as intended by the organization, they would
demand for the products and services, especially when they
prove more superior and advantageous in comparison to the
existing products. Comment by Chi Maher: Same as above
Comment by Chi Maher: Sae as above
Apart from message interpretation, the top management must
also understand the attitudes of the host people towards certain
tendencies. For instance, environmental protection is one of the
most crucial responsibilities of organizations when they enter a
new market. This responsibility has crept to the top of the CSRs
pile due to the heightened calls on the need to slow climate
change. Different types of pollution undermine the quality of
life of people, and therefore, it is necessary for firms to play
critical roles in ensuring that their operations do not jeopardize
lives of the host people. This is principally crucial in societies
where people are much concerned with environmental
protection. Comment by Chi Maher: Reference your work
throughtout
Additionally, the adopted localization strategy must make
people feel that they are part of the company. The human
resources department must adopt a recruitment framework that
hires local people. These people would help the company to
understand the local market much better, thereby positioning it
as a competitive player in the local market.
The competitiveness of the company would depend on its
market share. Through recruiting the local people, the company
would receive the support of people within the market segment,
which would be instrumental in cementing the operations of the
organization within the industry. Even so, the organization has
to adopt the human resource department with the local market
since the variables that influence job satisfaction,
organizational commitment, and employee motivation varies
across culture. Some studies have indicated that the failure of
firms to align the human resource department with the cultural
profile of the locals is one of the main reasons for the failure of
organizations in foreign markets. Also, performance appraisals

6. differ across cultures due to the underlying differences in the
conflict resolution modalities and giving and receiving of
feedback (Luo and Shenkar 2017, p.72). Therefore, the pinnacle
management must align the practices of the human resource
debarment with the cultural profile of the host region to raise
the likelihood of success.
2.2 Deciding the Mode of Entry
A firm has to choose the means of entry when it decides to
emerge into a new market. This decision is thought to be
affected by the following aspects: external factors, internal
factors, favorite mode characteristics, and so on. The most
interesting factor in our study is the external factors because
cultural issues belong to external factors that face a firm (Zhang
et al. 2007). The socio-culture comprises of language, cultural
characteristics, and education level, to name a few. The socio-
cultural issues influence a choice of means of entry for a
company because it can generate internal indecision in the
business and by that, it will influence their choice. Perhaps,
deciding on the best entry model is the hardest for an
organization that wants to emerge in a new market (Azhar and
Lin 2017, p.15). The people concerned with the development of
business models and entry strategies must liaise with numerous
stakeholders to position the company on the brink of success.
Importantly, conducting a PESTEL analysis would help reveal
internal and external variables that are likely to determine the
success of the firm. For instance, studies have indicated that the
failure of the firm to understand the local legal and ethical
issues is one of the underlying causes of company failure.
Globally, the operations of firms are governed by the existing
laws and ethical guidelines, which ensure that these operations
do not undermine the rights of any stakeholder. Therefore, the
apex leadership in a company intending to enter a new market
must understand the local legal and ethical issues to develop a
strategy that can foster the success of the firm.
Apart from the local legal and ethical issues, organizations must
also understand the socio-cultural and economic variables of the

7. targeted market segment. As pointed out earlier, adopting a
localization strategy positions the company on the brink of
success. Some of the elements within this strategy that a firm
must consider include spending power of the targeted
customers, the cultural norms, educational level of most people,
and their overall attitudes. Normally, a society that has a high
literacy percentage expects much from the entities. For
instance, people from such communities would likely demand
that organizations act by the laws of the land along with
protecting environment. Failure of the organization to practice
this would attract the anger of the locals, thereby shaking the
continued operation of the firm.
Furthermore, the spending capacity of the targeted customers
determines the type of pricing strategy adopted by the
organization (Davcik and Sharma 2015, p. 770). There are
various pricing strategies that firms can adopt when entering a
new market segment. The adopted pricing strategy must
incorporate the purchasing power of the targeted people along
with the quality of the products or services. Some of the most
popular pricing strategies that a firm can adopt when emerging
in a new market are penetration and premium.
Ideally, the penetration strategy is adopted to assist the
company in entering a new market and expanding its customer
bases. In most cases, penetration pricing is lower than the
existing market prices, which plays a crucial role in attracting
and retaining customers. The major drawback of this strategy is
that it leads to narrower profit margins and might cause the
company to go under when the established companies also
decide to lower their prices. Conversely, the premium pricing
strategy generates the illusion of quality and exclusivity. In
simple terms, those products or services offered at high prices
generate the feeling that they are of high quality, thereby
making people to increase their demand for them. However, this
strategy should only be used when the potential customers in
the market segment have a high purchasing power. Due to this
condition, this strategy is mostly applied in societies where

8. most of the targeted customers are within the middle or rich
classes. Concisely, an organization emerging in a new market
must utilize a localization strategy, which would also include a
pricing strategy that matches the socio-economic and cultural
variables of the potential customers.
2.3 Method of Exports
The products of a country are both manufactured in either the
third country market or domestic market and then indirectly or
directly exported to a new market or a new country. Export is
the most common means for the initial entry of a company and
is essential in evaluating the market growth. It is normally the
distinctive way for firms to initiate entry to external markets,
which changes towards foreign-based activities. The major
types of export methods include cooperative exports, direct
exports, and indirect exports.
Cooperative exports are when a company collaborates with
other companies in exporting functions (Michaely 1977, P.50).
Direct exports are when the firm itself carry out the exporting
processes, and also the company is in direct connection with the
intermediary. Indirect export, on the other hand, is when the
firm indirectly carry out the exporting processes. As an
alternative, a domestic corporation, for example, export house
or trading company accomplish those activities. When entering
a new market, the company must do all it can to attract and
retain the potential customers. This can only be achieved by
adopting a localization strategy, which focuses on empowering
and motivating the community. Based on this requirement, a
company emerging in a new market must utilize cooperative
exports as a strategy to build and expand its market share.
Importantly, the selected company must have an exceptional
reputation in the market, thereby helping the new entrants to
make good strides. The fact that the new entrant collaborates
with the local existing company to export the produced products
would auger well with the community. For most outsiders, this
would be a perfect expression of the company in its bid to
support the community. Therefore, the apex management in a

9. company entering a new market must select the cooperative
exportation strategy, which would appeal to both the emotions
and logic of the potential customers, thereby promoting the
growth of the company.
2.4 Economic Model Comment by Chi Maher: References
required
There are different economic models established to evaluate
how cultural issues affect the decision of a company to emerge
in a new market. There are four main types of economic models
used to tell a story about the performance of the economy of the
targeted market. These models include simulation, visual,
empirical, and mathematical. The models used in exploring the
economy put in consideration the behaviour of the customers in
the market. Visual models provide the pictures and charts that
illustrate the performance of the economy. For instance, the line
graphs could show the variation of a nation’s GDP over a given
period. The main advantage of these models is that an
individual can read and understand them with easy and within a
short time. The decision-makers in an organization can then
make the expansion decisions based on the graphical
representation of the changes in the economy. A very popular
visual representation of the economy focuses on the supply and
demand curves in a nation or a region. Demand is based on the
purchasing power of people, which depends on the
socioeconomic variables within the society. Therefore, the
visual models showing high demand would indicate that the
socioeconomic variables in the society are attractive for
business operations. This is the most popular model applied by
business organizations to understand the performance of the
economy before deciding to expand and venture.
2.4.1 PESTEL model
The PESTEL model categorizes six key types of the external
environment that have an influence on a company. These factors
include economic, social, political, environmental,
technological, and legal factors. The PESTEL model is suitable
for viewing the future effects of environmental aspects to the

10. company. The socio-cultural factors are the most interesting
aspect of the model to this study (Issa et al 2010). The
sociocultural factors include income distribution, lifestyle
changes, population demographics, attitudes to leisure and
work, consumerism, education level, and social mobility.
Moreover, the political variables have a profound influence on
the business climate in a nation. For instance, a move by the
national government to scale up taxes would likely lead to
inflation. This might not be great for business operations.
Therefore, decision-makers must explore the political variables
existing in a region before deciding on entry. Environmental
and legal issues must also be explored and adhered to when an
organization enters a new market segment. As pointed out
earlier, environmental protection has become a popular
initiative for many organizations globally. In this respect,
management must explore the legal policies regarding
environment protect within the target region and adhere to the
policies accordingly. Today, technology has become a
cornerstone of many operations. Although an organization can
import technology, it is also important to have an idea of how
technology-developed a region is before entering the market.
Comment by Chi Maher: Same as above
2.5 Marketing and Culture
Culture varies from one state to another. A company, therefore,
has to strategize its marketing approach to fit the values and
principles of a particular country. Culture entails individuals'
beliefs, attitudes, and values, what works in a particular state
may not work in another. Culture plays a crucial role for a firm
when it comes to understanding consumer behaviour, therefore,
culture influences customer's consumption at the end of the day
(Deshpande and Webster 1989). It is important for firms to
carry thorough marketing research to know how a particular
aspect works in an external market, to assist them in selecting
the perfect promotional mix that is suitable for the culture of a
particular country (Webster 1995, p.10). A company needs to
design the market mix: price, product, people, and promotion to

11. fit the culture of a particular country.
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