How Language Barriers Affect International Business


In a golden era of globalization, mastery of a second or third language can go a long way towards increased revenueScott McCulloch reports. 

The gift of the gab has helped close many a sale. Doing it in a foreign language? That’s another thing altogether. 

Whether operating nationally or internationally, communication is the key to success. Yet it becomes even more important to a family business when language barriers and cultural nuances come into play 

recent report from Forbes Insights suggest that as more companies expand globally, having a multilingual workforce is a critical. 

The study, undertaken with language tech firm Rosetta Stone, shows that businesses with multilingual teams reported improved reputation within specific geographic markets. 

Employees also reap the benefits of language proficiency with improved performance, confidence and increased engagement at work. 

On the flip sidelanguage deficiencies among international workers can cost dearly. 

“Miscommunication could have a direct impact on profitability” 

Miscommunication could have a direct impact on expansion and profitability,” the report says. “An unsuccessful interaction with a customer could end a relationship.” 

International companies increasingly use expatfor key objectives that range from development of global managers to tighter controls on foreign subsidiaries, according to German researchers Helene Tenzer and Tassilo Schuster.  

Expatriates have become one of the most important strategic assets in multinational companies, they state in Language Barriers in International Assignments. 

Lack of fluency in the host country language can isolate expatfrom local colleagues. Yet many multinationals still tend to prioritize work-related competences in candidate selection for international assignments over communication and intercultural competencies. 

In an era of globalization this seems counterintuitive. Studies have long shown language diversity influences power relations in multinational corporations. 

That means employees can achieve informal power in a business if they are more proficient in relevant languages than their colleagues on the same formal level. 

English is considered the lingua franca of business. No surprizes there, yet there are costs associated with a unilingual workforce. 

Deficient language skills cost Britain’s economy almost £50 billion ($63 billion) per year, or 3.5% of GDP, according to government data. 

The US Committee on Economic Development suggests that American businesses lose more than $2 billion a year due to cultural misunderstandings. 

Looking at it from the point of view of an individual, even on conservative estimates, speaking another language often translates into a big earnings boost.  

English as business language accounts for around 30% of world GDP but is likely to decline in proportion to other business languages, according to IMF data. 

US employers are increasingly reliant on multilingual employees yet lose revenue opportunities due to skills shortages, according to an American Council on Teaching of Foreign Languages (ACTFL) report. 

The study, which canvassed 1,200 managers, found one in four US employers lost trade due to foreign language deficiencies among employees. 

More than half surveyed believe their foreign language demand will increase within five years.  

“We already know that language learning deepens our connections to other cultures, boosts confidence, strengthens decision-making and contributes greatly to national security,” says ACTFL Executive Director Howie Berman.  

“We also know language skills are necessary to produce the globally-competent employees that US businesses are seeking.  

Can bots boost foreign trade? AI offerhope of greater business efficiency. Yet researchers have found virtually no empirical evidence supporting promised strides in labor productivity and economic activity. 

Researchers at Washington University in St. Louis are connecting the dots between language translation – driven by AI – and increased international trade, according to a new report. 

Using data from eBay, which managed more than $14 billion in trade across more than 200 countries in 2014, the research team demonstrated that a moderate improvement in the quality of language translation increased trade between countries on eBay by 10.9%. 

Language barriers aside, miscommunication, even in a common languagecosts.  

The repercussions can be severe and widespread, according to a study by the Economist Intelligence Unit. 

Some 44% respondents in its survey of 403 US-based professionals said miscommunication caused a delay or failure to complete projects.  

In monetary terms18% said miscommunication led to the loss of a sale, nearly a third (30%) of which were valued between $100,000 and $999,999. 

It’s good to communicate in any language. It’s better to be clear and influential. 


Related Links:  

Communications and Conflict Management for Business Families 

Compass for Entrepreneurial Families 

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