Analysis of the Chilean consumer market

Before the coming of the Spanish in the 16th century, northern Chile was under Inca rule while the Mapuche inhabited central and southern Chile. Although Chile declared its independence in 1810, decisive victory over the Spanish was not achieved until 1818. In the War of the Pacific from 1879 to 1883, Chile defeated Peru and Bolivia and won its present northern regions. After a series of elected governments, a three-year-old Marxist government of Salvador Allende was overthrown in 1973 by a military coup, whom ruled until a freely elected president was installed in 1990.

Economic policies, maintained consistently since the 1980s, have contributed to steady growth, reduced poverty rates by over half, and have helped secure the country’s commitment to democratic and representative government. Chile has increasingly assumed regional and international leadership roles befitting its status as a stable, democratic nation.

Chile is located in Southern South America, bordering the South Pacific Ocean, between Argentina and Peru. With a total area of 756,102km, Chile is the longest country on earth, it stretches over 4,300 km (2,700 mi) along the southwestern coast of South America, its width never exceeds 240 km, making the country more than eighteen times longer than its widest point.

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Chile has a population of 16,601,707 as of July 2010. People at the age of 15year old and above are able to read and write. Chilean speaks Spanish as their official language, Mapudungun, German and English. Religion wise, They are divided into main a few of them, majority as following,

Chile has a market-oriented economy characterized by a high level of foreign trade and a reputation for strong financial institutions and sound policy that have given it the strongest sovereign bond rating in South America. Exports account for more than one-fourth of GDP, with commodities making up some three-quarters of total exports. Copper alone provides one-third of government revenue. During the early 1990s, Chile’s reputation as a role model for economic reform was strengthened when the democratic government of Patricio AYLWIN – which took over from the military in 1990 – deepened the economic reform initiated by the military government.

(Chilean Central Bank, 2009)

The above figure are the GDP of Chile. Growth in real GDP averaged 8% during 1991-97, but fell to half that level in 1998 because of tight monetary policies implemented to keep the current account deficit in check and because of lower export earnings – the latter a product of the global financial crisis. A severe drought worsen the situation in 1999, reducing crop yields and causing hydroelectric shortfalls and electricity rationing, and Chile experienced negative economic growth for the first time in more than 15 years. In the years since then, growth has averaged 4% per year. Chile deepened its longstanding commitment to trade liberalization with the signing of a free trade agreement with the US, which took effect on 1 January 2004. Chile claims to have more bilateral or regional trade agreements than any other country.

2)Cultural Analysis

Chile, as a fascinating Latin American nation, it is the longest country with a long history. Chile has managed to adopt an American culture without losing its own essential identity, its traditions and customs. The Following three theory were used to analysis Chile.

2.1)Greet Hofstede’s Cultural Dimensions

( Greet Hofstede ‘ itim, 2010)

2.1.1 Uncertainly Avoidance Index

Chile has score extremely high for uncertainty avoidance index, which indicate that the society have low level of tolerance for uncertainty. Thus, Strict rules, policies, laws and regulations are being adopted and implemented to reduce or minimize uncertainty in this country. By doing this, is to keep everything in order. Chile being a Catholic country, religion also plays a major role in politics and therefore can influence how businesses are run. Overall this society is very risk adverse and does not accept changes.

2.1.2 Collectivism Index

Chile has a low Individualism rank of 23. This is manifest in a close long-term commitment to member as ‘group’, be extended family, or extended relationships. Loyalty is the most important for a collectivist culture, and over use most other societal rules and regulations. The society fosters strong relationships where everyone takes responsibility for mates of their group.

2.1.3 Power Distance Index

Power distance described as the degree of equality or inequality between people in a particular society. With its second highest ranked score of 63, Chile’s power distance describe a high inequality distance between subordinates and their superiors. Subordinates in Chile’s society do not receive any responsibilities and expectation but they need take over those blame for erroneous situations. It is not common for higher-level executives to associate with the ‘common’ workers, especially outside of work.

2.2)Trompenaars cultural dimensions for Chile

Trompenaars cultural dimensions are theories to deal with the relationship with people, those theories use seven dimensions to define different cultural relationship. The following are the seven dimensions for Chile.

2.2.1 Individualism Versus Communitarianism

According to the theory, Chilean are more towards Communitariansim. Which refer people regard themselves as part of an organizational or group. While doing business with them, patience play an important part and aiming to build lasting relationship with them.

2.2.2 Universalism versus Particularism

Chile is more close to a high Particularism country. In this dimension, it is focus more on relationship and trust than formal rules for business. In this culture, legal contract are customized and the relationship between them and their business partner changes the way how deals work out.

2.2.3 Neutral versus Emotional

Chile are more towards neutral culture, meaning that emotions are not shown to others. While doing business with Chilean, it is advise to write as detail as possible on the paper before summiting to them and keep in mind that lack of emotion doesn’t means that they are not interested in the business.

2.2.4 Diffuse versus Specific cultures

Chile has high diffuse meaning that Chileans prefer to devote time to discuss others, their family, and background before a business arrangement is made. They always have a good relationship with their business partner, because they can control their public space and private space as well.

2.2.5 Achievement versus Ascription

Obviously, Chile has high level of achievement culture. As people in the USA, Germany and Finland, Chileans are measured by how successful they are in their jobs and what an individual has done. While doing business with Chilean it is important that they have enough data, technical advisers and knowledgeable people to convince them that they are proficient and remember to respect Chilean knowledge and information from them.

2.2.6 Time (Pass, Present, Future)

People in Chile prefer to do their work sequential. They are to do things in one activity at a time, keep appointment strictly and set schedule and stick to it. Chilean are also future-oriented cultures, thus focusing on opportunities and limitless scope that can have which this will let Chilean to get interest in it.

2.2.7 The Environment

People in Chile believe that they can influence to their environment. Such like Chileans always competitive with natural when they born, because different area has different geographical regions in Chile, and frequently earthquakes are taking part in Chile.

2.3)Edward T. Hall

Edward T. Hall discovered one of cultural dimension which is the most important dimension and the most difficult to define. It is information that surrounds a communication and helps convey the message.

2.3.1 High Context Country

After analyzing, Chile indicated to be a high context country, people tend to rely on their history, their status, their relationship and their religion. Most of Chileans like to send some implicit messages, with use of metaphor and reading between the lines and use more non-verbal language. Chilean do not have any outward reaction, they are more reserved, they have strong sense of family or group. The Strong people bonds with affiliation to family and community. It is high commitment to relationship. Chilean think of time is open and flexible, they consider process is more important than the end.

3)Recommendation

3.1)Decision Making

3.1.1 High Power Distance

Chilean business culture is highly hierarchical and decision makers are more autocratic than in other countries. Decision makers sometimes do not seek a consensus before making decisions. Chileans believe decision makers have been chosen because they have more experience, so therefore, unnecessary, and even inappropriate for them to consult with lower-ranking individuals when decision-making. Decision makers are usually top executives who will consider the best interest of the group or organization. Chileans organisation culture expects employees to work within clear lines of authority. The act of insubordination is totally not tolerable.

3.1.2 High Uncertainty Avoidance

Chileans also believed that decision making must be a slow process that requires much patience, especially when it comes to negotiating business. Attempts to rush or putting pressure are not likely to succeed, especially when Chileans hate to be rushed. Chileans are often uneasy with change and tend to avoid taking risk as much as they could. If they were to make a risky decision, the only way to ease their discomfort and make them feel secure is providing useful information, for instance by explaining business portfolio, and outlining areas of additional support or by offering guarantees and warranties.

3.1.3 Long-Term Oriented

Chileans are always formal when it comes to talking business terms, at least until a personal relationship has been developed. When doing business in Chile it is also important to have a wide business network. This is a country where human relationship prevails over human capability. An interpersonal relationship that shows loyalty to your business contacts is essential to business success. They may as well demonstrate concerns for employees that go beyond the work concerns. Which include matters that are concern with family background, personal hobby, and other practical life issues.

3.1.4 Low-Individualism

Chileans prefer working in groups, each and every group member’s interest will be taken into account. Although, decision makers do not always seek consensus of those employees but they still demonstrate team work as it is part of Chilean working culture. Often time, decisions are made by a collective group or top level and discussion were submitted from a collective group of lower level manager. (From lower group which are subordinates to top level referring to mangers or CEO.)

3.1.5 High-masculinity

Chileans believed that females are considered inferior when it comes to handling business deals and can hardly attain positions of similar capability and authority as men. As a visiting business woman manager to Chile, it is important to have at least a letter of recommendation from a high position from own company may help a lot. It is tough for a female counterpart. In other words, a male business counterpart work in Chile is preferred; otherwise it may turn a business deal sour.

3.2)Communication

3.2.1 Verbal Communication styles in Chile

Every country have their own verbal communication styles, Chile too. The following diagram shows the different styles in Chile,

Verbal Communication Styles in Chile

*UA: Uncertainty Avoidance, PD: Power Distance

Chile is a high context culture as mention in the cultural analysis, Firstly, communication are in indirect style, where they do not have to rely on language alone to communicate with others. Facial expressions, voice intonation and timing plays a major roles in conveying information. Second, succinct style, means that people say few words and allow pauses, silence and understatement to convey the meaning of message. Third, Contextual Style, it focus on the speaker and relationship of the parties. Lastly, affective style is characterized by language that require listener to note what is being said and the way being said by the speaker. Those are the major characteristics of verbal style in Chile.

3.2.2 Communication with a Chilean

Spanish is their first language, thus when communicating in English, speak in simple and easy to understand English, try to speak slowly and pause frequently to allow for interpretation. Avoid slang and jargon as they may have different explanation of words used, so use words that will not mislead them and cost misunderstanding. Speak softly, Chilean dislike loud and they will feel that you are being rude. Chilean often leave little space while interacting with one and other, such as standing in a close distance and placing a hand on the shoulder when talking to you. Do not push them away or step back, they will feel that you are not comfortable with them. Remember to maintain eye contact with them as they convey it as trust, sincerity and interest. Chilean uses a lot of non-verbal communication, thus take note of this. When they are intercepting the conversation, they are not being rude but they have interest in the topic. Some of the good topic are about their family, children and history and avoid topic which link to politics and human rights, Argentina and their country. Lastly do not call them American as they sanative about this.

3.2.3 Business meeting with Chilean

A firm handshake is important for first impression. Since Chile are a relationship driven culture, initiate meeting should be used to build relationship with them and establish trust. Started with non business topic and wait for them to open to change topic. Take note that time is not the essence in Chile, thus being patient is important and meeting long than expected. Provide all information to them during the meeting as Hofstede’s cultural dimensions stated that their uncertainly avoidance index is high. Lastly never openly criticize their work or anyone.

3.3)Problem Solving

As mentioned, the contradictory that Chilean top level do not seek consensus of lower level when making decision; however in most cases, they will consult with lower level to reach greater support when doing problem solving. Although decisions are reached at the top of the company they will still look into inputs from every stakeholder. Since Chileans believe a business deal should be a “win-win” situation, they will try to find the best solutions that are in the best interest of all.

3.4)How to manage Conflict

Conflict in Chile are refer as expressive-oriented approach, meaning that there will be no clear explanation of the conflict situation as they do not want to get in a confrontational situation with one and others.

3.4.1 9 step for conflict resolution

When there are conflict, there will be a 9 step guide for conflict resolution that able to use. 1) Be prepared: since Chilean are likely will not get into confrontation situation with others, ignoring the situation will do not good for both the company and the staff, thus first step of it was be prepared about going into the talk. Do little self-examination about the issue first, which will help to leads to a peaceful conversation with others. 2)Don’t wait: the conflict have to resolve sooner or later, thus by doing it earlier will help the conflict from getting bigger. 3) Find a private place: Do not have a talk in a public area, which Chilean will not like it. Find a relax and cool place and sit down to have a talk. 4)Be aware of body language: Chilean uses a lot of non verbal communication, thus be careful about this. Maintain eye contact, voice tone and control your expression will be good. 5)Share feeling: most conflict started because of emotional, so try to avoid it and be more logic about it. 6 Identify the Problem: giving specific detail about the issue by both party. 7)Listen actively: listen to the issue rise by another party, listen with an open heart. 8)Find a Solution together: after know what the problem is, try to solve it. Listen to other party about his/her ideas for option and discuss the ideas by giving reason and explain why. 9)Agree: when both party agree to the solution, thank each other for willing to resolve the problem, this will improve both party relationship too.

3.5)Human Resource

Company should identify and select the best candidate (Manager) to be able work and adapt in Chile. Company should provide 1) Training: Cultural, Language, Spouse/Children

2) Social Support

3.5.1 1)Training

Cultural ‘ The manager should foster an understanding of Chile culture, its values, and its diversity. In other words, to lessened the culture shock he/she is going to face. A taboo to be taken into that we all should avoid when in Chile is to discuss politics especially the Pinochet era unless we have knowledge about it or if we are just talking with someone close like family or close friends. Pinochet loyalists still exist all over the country; it is just as much as the number of people who actually look up to Hitler in Germany.

Language ‘ Be it verbal languages (Spanish and English) or body languages, we ought to have a little knowledge of that. For example, having a rounded palm (in the shape of a spider) and facing up is as good as saying that your listener is a moron in a vulgar manner.

Spouse/Children ‘ Spouse and children of the manager should foster all the above mentioned points and they are to sacrifice their friends and family for a complete unfamiliar environment. This is almost impossible, as children are most resistant to these environmental changes.

3.5.2 2)Social Support

The hardest part of working in a totally new culture and environment is not just adapting to it. It is how an individual deal with the emotional pain and social support is a key in dealing with emotional pain. Friends and family may not be there with you all the time especially in situations like this, but somehow he/she have a find a way to structure the daily routine so that he/she will have interaction most of the time.

3.5.3 Individual ability needed

These selected individual that belief they have the ability in themselves to work in Chile.

1) Self- Esteem ‘ From the figure, it shows that an individual often feeling excited at the beginning of the stage where they know they will be working in Chile for a period of time. However, this is also the stage where an individual’s self-esteem is strong and is enthusiastic about being able to work as they develop a positive notion of Chile altogether. (For instance, they think the grass is green on the other side.)

2) Others orientation ‘ Self-esteem remains at positive level and are open to working with people. The relations and communications with people determine the possibility of descending into the denial stage. For instance, Managers may make comparisons to all the merits at what they use to be doing and the demerits because subordinates did not necessary communicate well or meet the expectations.

3) Perceptual orientation ‘ ‘Putting myself in the shoes of others’ (Empathise) occur at this stage and managers develop patience in guiding subordinates through work due to work and culture indifferences. Managers take the time and effort in guiding through indifferences to work things out.

4) Cultural Toughness – To be working in other countries can be a good opportunity for an individual career development. However, there’s a high chance when an individual faces culture shocks that affect their life deeply he/she couldn’t accept the fact. Cultural toughness refers to the resilience of a person that determines he/she to have the ability to battle through the stage of depression (due to culture shock), having that said, it is either they breakthrough and excel or the shock could haunt them forever.

3.6)Marketing

3.6.1 Language

Chilean’s dominant language is Spanish and minority speaks English. It is encouraged that managers ‘keep it short and simple’. It is advisable to avoid abbreviations, jargons, slangs, capitalisation and inappropriate punctuations may cause misunderstandings. E-mails are a common tool for business organizations in today’s environment, it is important to keep messages short and direct just so to prevent information overflow.

3.6.2 Religion

As majority of the Chileans are Roman Catholics and which they strongly believe that committing adultery is as good as committing felony. Therefore, it is advisable that managers who are married are not to get involve in extra marital affair.

3.6.3 Perception

Chileans emphasize very much on personal dressing. Very often they can seem overdressed and they expect others to do the same. As a manager working in Chile we have to adapt to that because we are a marketing tool ourselves. As an organization counterpart (Singapore manager working in Chile) it is rude or rather inappropriate to dress sloppy. A good posture and proper appearance are very important in Chile, proper etiquette and table manners are as important. First impressions can have a huge impact on a person’s perception.

3.7)Negotiation

3.7.1 Attitudes and styles

Their style of negotiation is integrative, which they believe in the concept of win-win scenario. They are usually cooperative and willing to compromising which will help the negotiation to move forward. Treating them with respect and trust vice versa they will do the same to you. Avoid aggressiveness and open confrontation is strongly recommended. Always remain calm, patient, friendly and persistent which will reduce unhappiness with them. If a dispute arise, by showing willingness to compromise and show flexibility will help to reach resolution. Chilean focus on long-term commitment and benefit from a business contract.

3.7.2 Pace of Negotiation , Tactics and Relationship Building

While negotiating with Chilean, they view impatience as a sign of being rude to them. Be patient and control your emotions if there are any inevitable delays. Chile is a very relationship oriented country, be prepare to make several trips before having the contract signed. Throughout the trip it is important to let them build trust in you as while you are gathering information about them, they will be doing the same thing too. During the negotiating, Chilean often jump back and forth between topic, it maybe cause confusing, irritating or annoying. However do not show irritation or anger when encountering this style. As it is the way they do in their country.

Chilean are often very straight forward and serious when comes to negotiating, they uses deceptive techniques occasionally such as fake non-verbal messages, pretending not interested in the deal or misrepresenting an item’s value. However do not do the same thing back to them, as it might damage the business relationship. Do not ever use pressure tactics on them as they may choose to terminate the deal as Chilean will view that the deal will not build a long-term relationship.

3.7.3 Bargaining

Studies have shown that Chileans does not like bargaining and dislike haggling and even with intensive bargaining, it may only lead to little movement. During the exchange, remain respectful, cool and most importantly avoid confrontation and reaffirm the relationship with them. Intangible benefit sometimes are more desirable to Chilean instead of the financial gain.

3.7.4 Agreement

Chilean believe that business partner commitment is much more important rather than in a written contract. Always wrote down the agreement as oral statements is not dependable in Chile. After signing the contract, it is still important to maintain a good relationship with them as contracts in Chile are usually dependable.