Culture and Markets: Why the Same Offer Sells Differently in Neighboring Countries

Why a proven offer lands differently in a neighboring country

A business from Baden has been selling successfully to customers in southern Germany for years. Its first step abroad leads to France, an hour away. The offer is the same, prices are similar, and yet decisions take longer, conversations run differently, and some of the documents do not land. The reason rarely lies in the product.

This article asks: Why does the same offer sell differently in neighboring countries, and how can a business recognize beforehand which differences matter? To answer it, we first clarify the terms and a thinking model, then look at country scores and studies, weigh two readings, and derive a check for the next market. Cultural differences in sales describes how cultural dimensions work in individual customer conversations.

The thinking model: four kinds of distance according to Ghemawat

In 2001, the strategy scholar Pankaj Ghemawat presented a model he calls CAGE, after the initials of four kinds of distance between countries. His thesis: companies overestimate how attractive a market is because of its size and underestimate how much distance costs. Distance, however, is not only a matter of kilometers.

For neighboring countries, the model is particularly instructive. Geographically and administratively they are often very close; in the euro area, exchange rates and customs disappear. Culturally and economically, however, they can be considerably further away. Anyone who looks only at the map underestimates precisely these two axes.

An everyday analogy: two neighbors on the same street live only ten meters apart but can have completely different ideas about noise, gardening, and greetings. Proximity does not make differences smaller; it only makes them less visible, until the first dispute.

Neighboring countries are close on the map. In conversation they can be further away than a market on the other side of the world.

What cultural scores show for three neighboring markets

For the cultural axis, Hofstede's cultural dimensions provide a first reference point. The scores are averages for whole countries on a scale of roughly 0 to 100 and say nothing about an individual buyer. But they show where differences can be expected. The following scores come from The Culture Factor's current comparison tool and are the same ones Cultural differences in sales lists for further countries.

The scores suggest two differences that can become noticeable in sales. In France, power distance, the acceptance of unequally distributed power, is much higher. Decisions tend to lie at the top, the rank of the counterpart matters, and an offer that convinces the technical lead is not yet decided. In the Netherlands, achievement orientation, formerly called masculinity, is very low. Winner arguments and rankings persuade less there than consensus, quality of life, and a matter-of-fact, egalitarian manner. Then there is uncertainty avoidance, which at 86 in France is well above Germany's 65 and at 53 in the Netherlands below it.

For a business from Germany, this means: an offer that convinces with performance data, technical advantages, and a direct close fits the Netherlands' matter-of-fact style but not necessarily its tone. In France, it fits the desire for safeguards but meets a different decision path. These are hypotheses for preparation, not rules.

What studies show about near and distant markets

Research on psychic distance, the perceived foreignness of a market, has described a surprising pattern. In the classic understanding, companies should perform better in nearby, familiar markets. Several studies find the opposite, known since O'Grady and Lane (1996) as the psychic distance paradox. The explanation: in distant markets, companies expect differences and prepare thoroughly. In nearby markets, they assume similarity and overlook what is different.

Ciszewska-Mlinaric, Obloj, and Hülsdau (2019) studied European small and medium-sized enterprises and asked which foreign markets became strategically most important after entry. They used three different distance measures, including an index based on Hofstede's dimensions, to make the results robust. Contrary to expectations, psychically more distant markets became strategically more significant over time, not the nearby ones. Fonfara, Hauke-Lopes, and Soniewicki (2021) reached a similar finding with 201 companies from Poland: business in distant markets was seen as more complex and risky but brought better results. Their measurement, however, rests on managers' self-assessments.

A counterpoint comes from research on market selection. Ojala and Tyrväinen (2007) examined which target countries Finnish software companies chose. About 70 percent of the decisions could be explained by the size of the software market and geographic distance alone. Cultural distance played a smaller role. Priorities also shifted quickly from nearby countries to those with high purchasing power.

Two readings: does culture explain the difference or not?

There is also an example of the second reading on this platform. When bitcoin was introduced as legal tender in El Salvador, a cultural explanation seemed obvious, but the economic one proved more robust, as El Salvador and bitcoin shows. There too, a cultural influence could be neither ruled out nor proven.

I consider both readings compatible if one assigns them to the axes of the CAGE model. Whether a market pays off is decided mainly by size, proximity, and costs, the economic and geographic axes. How successfully a business sells there depends more on the cultural axis, and that is exactly the one underestimated with neighboring countries. Culture is thus rarely the reason to avoid a market, but often the reason why entry takes longer than planned.

The distance check before the next market

From the model and the findings, I derive the distance check: four questions, one per axis, that you answer before entering a neighboring market. It complements the market profile from Exports and sales, which compares markets by proximity, demand, and rules.

1. Cultural: who decides, and how do people talk?

   Compare the target country's cultural scores with Germany's and derive questions: who signs, how much relationship is needed first, how direct may criticism be? Test the assumptions with the first customers.

2. Administrative: which rules differ?

   Clarify the language of contracts and documents, standards, approvals, warranty, and payment habits. Outside the euro area, currency comes in, as Currency risks in exports describes.

3. Geographic: what does the distance cost?

   Calculate delivery, service, and visits. Proximity is a real advantage if you translate it into short response times.

4. Economic: does the price fit purchasing power?

   Check willingness to pay and local competition. Price differentiation discusses whether different prices per country can be fairly justified. Also roughly estimate the size of the market for your offer.

Scope and limits

The findings suggest a rule that applies beyond neighboring countries: prepare for nearby markets as if they were distant. This does not contradict the common advice to start with the most similar market. A nearby market remains a good first step because mistakes there are cheaper and distances short. It only becomes a good step if the business takes the differences seriously. Expanding into a new region describes, using the Uppsala model, how to expand step by step and commit resources only as knowledge grows.

The limits are clear. Cultural scores are national averages and have been revised several times. Studies of the psychic distance paradox measure distance differently and partly come from other countries and industries. Whether a German trades business in France faces the same questions as a Polish industrial company cannot be derived from them.

Conclusion: closeness on the map is not closeness in conversation

To the guiding question: the same offer sells differently in neighboring countries because distance has several axes. Geographically and administratively, France or the Netherlands are close; culturally and economically, they differ noticeably, for example in power distance, achievement orientation, and uncertainty avoidance. The CAGE model makes these axes visible. The psychic distance paradox explains why nearby markets in particular are underestimated. At the same time: culture does not explain everything; the choice of a market is usually decided by size, proximity, and costs.

A business recognizes the differences that matter beforehand by checking each axis separately and confirming or discarding its assumptions with the first customers.

• Complete the distance check with all four axes for the next foreign market.
• Compare the target country's cultural scores with Germany's and derive three questions for the first conversation.
• Clarify contract language, standards, and payment habits before the first offer.
• Hold an open conversation about differences with the first three customers and record the answers.