The Importance of Cultural Intelligence in International Business

We’ve been hearing the words “Cultural Intelligence” everywhere we go lately. So what is cultural intelligence and why is it so important to global businesses?

Cultural intelligence is the ability for people, organizations, and businesses to relate to culturally diverse situations and work effectively in them. It is a vital aspect to international businesses because every country they are based in requires a different cultural approach and the ability to get well with the consumers you are working with. Global collaboration has become a significant aspect for the success of businesses and this cannot occur if businesses do not have the resources, knowledge, and talents of cultural IQ.

The development of cultural IQ between employees can be complicated, time-consuming, and costly. However, many argue that it is worth the investment because it boosts corporate reputation, achieves better results in cross-cultural organizations, and allows the company to adapt quickly to different environments. The Chartered Institute of Personnel and Development (CIPD) and the Society of Human Resource Management (SHRM) carried a survey in 2012 to find out what was the best method to enhance cultural intelligence within organizations and businesses. The result stated that customized programs were the highest ranked method which meant that the best approach was developing a program specific to an individual company’s needs and knowledge gaps. Also, companies are now looking for leaders and employees with high competencies when it comes to cultural IQ. For example, Coca-Cola’s high potential leader program requires that every participant is tested for cultural intelligence through the Cultural Intelligence Centre. It is important for businesses to know how well you interact and communicate with people different than yourself.

With the increase of merging markets, businesses are being forced to make their international products adaptable to different local cultures in which they are sold. This process is called “glocalization” and in order to implement this, it is necessary that businesses have cultural intelligence. McDonald’s Corp. is the world’s largest restaurant chain and it operates in 119 different countries. That being said, McDonald’s implements different menus depending on the country it is operating in. For example, the restaurants operating in India have an extensive vegetarian menu. Also, America is one of the countries being faced with a rapid rise of Asian, Hispanic, and African-American populations which is making companies more aware of the importance to act and innovate differently depending on these multicultural groups.

Companies are becoming more and more aware of the importance of cultural intelligence and are still figuring out the right ways to implement this. Supporting diversity associations, donating to non-profit service groups, and increasing their advertising to target customers are not authentic ways of implementing cultural intelligence.