By Ronald A. Norelli
Norelli & Company
The pace of commerce between North Carolina and Germany is accelerating, as evidenced by recently inaugurated direct flights to Frankfurt. And while overseas travel has become easier, American and German business executives still struggle at times because they often view their worlds through different business and cultural filters.
While some of these differences may seem superficial, they can lead to disasters in executing international growth strategies. Oftentimes, success depends on whether executives from Germany and the U.S. are willing to take the time to learn and appreciate their differences.
For example, a German manufacturer of some of the highest quality cabinet hinges in the world targeted the U.S. for expansion. The company’s engineering and design prowess was second to none worldwide, and management was certain that the quality of the company’s product would quickly win over a substantial share of the American market.
Before making the leap into the U.S., however, the company wisely conducted market research, asking architects and home builders their views on the product and whether they would specify it for new home construction. Much to the German company’s surprise, while architects and builders were duly impressed by the product quality, they indicated they probably would not specify it for new homes.
To much of the American market, cabinet hinges are commodities, and it doesn’t matter if the hinge will work flawlessly in 20 years. The primary concern is the impact of the cost of hinges on the overall price of a new home. The cheaper the hinge – at a minimal performance and aesthetic level – the better.
Based on this information, the German company decided that the U.S. was not a good expansion opportunity after all.
This example evidences a common difference between German and American business cultures. For Germans, product engineering is paramount, and the superior product sells itself. For Americans, product quality is important, but just as important are cost-benefit considerations, marketing and brand positioning.
There are other examples of how German and U.S. business cultures can differ:
- Management perspective on work – German executives pride themselves on "living the business," and they display a passion for their work even when they do not own the business. They may not understand an American manager who views his place in the business as "just a job."
- Management backgrounds – American and German executives often have divergent backgrounds. While German executives are typically trained in engineering and operations, U.S. managers commonly rise through the ranks of finance, sales or marketing.
- Management styles – In the U.S., the ability to delegate details to subordinates is valued highly. German executives, on the other hand, are encouraged to immerse themselves in every detail; they take pride in knowing how every facet of the business operates and consider it their jobs.
- U.S. market perception – The vastness of the U.S. market often confounds German companies, who may have difficulty understanding U.S. market segments and their diverse needs. While Germans believe one size should fit all, Americans believe there should be an infinite variety of choices in product features, colors and prices, all of which are being compounded by our infatuation with e-business.
- U.S. distribution systems – Another feature of the U.S. economy that can be daunting for German companies is our nation’s distribution system. The complex labyrinth of distributors, dealers and marketing agreements that are often bringing products to market in the U.S. can be unappreciated by German-based executives.
- American workforce – The U.S. does not have apprenticeship programs that produce highly-skilled craftspeople common in Germany. As a result, German companies may perceive that U.S. workers lack technical skills relative to their German counterparts, and they can be right.
- Slower to act – The German business community tends to take a long-term view, which at times slows their decision making. In Germany, certain regulatory environments place limits on quick, decisive action, such as layoffs or restructuring, while in the U.S., we have a legal system that provides a relatively wide range of freedom with strategic business decisions. Also, in the U.S., we champion executives who act decisively and quickly, especially in unstable business situations.
While differences between U.S. and German cultures and business practices can be challenging, they are being surmounted every day. The important point is a relatively simple one – that German and U.S. executives need to learn and appreciate their differences in an economy that is becoming more global by the Internet minute.
Ronald A. Norelli is chairman and chief executive officer of Norelli & Company, a Charlotte, N.C.-based strategic management consulting firm that assists companies with strategy development and implementation on a global basis. He regularly consults with German-based international companies regarding their U.S. business interests.