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Press Release

2012
27 4

Poor Communication and Language Skills of Employees are Constraining International Growth Prospects of Companies

EF Education First, London, Wednesday 25th April 2012 -- According to a global report out today, almost half of executives (49%) admit that communication misunderstandings and messages lost in translation have stood in the way of major international business deals and resulted in significant losses for their company. Brazilian and Chinese companies have been affected even more so with 74% and 61% respectively reporting financial losses as a result of failed cross-border transactions. This is of concern given many businesses are looking to new markets to unlock opportunities and grow their companies overseas.

The report, based on a global survey of 572 senior executives from private and public sector organisations worldwide and a series of in-depth interviews, was carried out by the Economist Intelligence Unit (EIU) and sponsored by EF Education First (EF). It reveals that almost two thirds of those surveyed (64%) think differences in language and culture have made it difficult to gain a foothold in foreign markets. And an overwhelming majority of executives believe that if cross-border communication were to improve at their company, then profits (89%), revenue (89%) and market share (86%) would each increase significantly.

However, despite the realisation that cross-border communications skills are inextricably linked to their company’s financial health, a significant proportion of companies are not taking sufficient action to address the root causes of misunderstandings. Almost half (47%) say their companies do not offer enough training to hone their employees’ language and communication skills, and two fifths (40%) believe there is not enough emphasis placed on recruiting or selecting people who are suited to cross-cultural environments. Linguistic diversity is considered by some margin to be a greater problem in Latin America and Southern Europe than elsewhere. For example, 38% in Brazil and 40% in Spain believe the language barrier to be a significant hindrance to effective cross-border relations.

Commenting on the findings, Christoph Wilfert, President, EF Corporate Language Learning Solutions said: “The boundaries between old and new economies are increasingly blurred, and those same economies are evermore entwined and interdependent. Today’s businesses leaders need to ensure their employees are equipped with the right skills to communicate across borders effectively and efficiently”.   He continued, “Newer economies will fail on their internationalization plans, and older economies, who are already struggling, will find it almost impossible to regain their competitive foothold if businesses do not devote the appropriate time and resources into improving the international language skills of their key staff. It has never been so critical as it is today”.

The report also highlighted the pivotal role of English language in international business expansion, with the majority of executives emphasising the need for their employees to be proficient in English in order to compete on a global scale. According to the survey, English is the language that most executives (68%) think employees will need to know in order for their companies to grow successfully outside their home markets, followed by Mandarin (8%) and Spanish (6%).

Interestingly, the gap between current usage and the desired level of proficiency in English is greatest in China, showing the country’s increasingly external-facing business outlook. Only 9% of Chinese executives said that half their workforce now uses a foreign language in their job, but 86% also said their employees will need to know English if their companies are to carry out their international strategies successfully.

For more information, please visit: http://www.ef.com/competing-across-borders

About EF Education First

EF Corporate Language Learning Solutions, an EF Education First company, is the world leader in corporate language training for international businesses and public sector organizations. Over 1,500 organizations and 15 million students worldwide have now put their trust in us for their language training needs. EF operates from a worldwide network of 400 language schools, offices in over 50 countries, dedicated executive-only schools in Cambridge, London and Boston, and develops and runs the world’s most advanced online virtual language school and classroom. For more information please visit: www.ef.com/corporate

About the Economist Intelligence Unit

The Economist Intelligence Unit (EIU) is the world's leading resource for economic and business research, forecasting and analysis. It provides accurate and impartial intelligence for companies, government agencies, financial institutions and academic organizations around the globe, inspiring business leaders to act with confidence since 1946. EIU products include its flagship Country Reports service, providing political and economic analysis for 195 countries, and a portfolio of subscription-based data and forecasting services. The company also undertakes bespoke research and analysis projects on individual markets and business sectors. More information is available at www.eiu.com or follow us on www.twitter.com/theeiu

The EIU is headquartered in London, UK, with offices in more than 40 cities and a network of some 650 country experts and analysts worldwide. It operates independently as the business-to-business arm of The Economist Group, the leading source of analysis on international business and world affairs.

Research methodology

Competing across borders: how cultural and communication barriers affect business is an Economist Intelligence Unit report, sponsored by EF Education First. It explores the challenges companies face when they have to operate or compete in increasingly international markets. Specifically, this paper assesses the role that cross-border communication and collaboration play in the success or failure of companies with ambitions that are not hostage to national borders.

The Economist Intelligence Unit bears sole responsibility for the content of this report. The findings do not necessarily reflect those of the sponsor.

The report draws on two main sources for its research and findings:

A global survey of 572 executives, conducted in February and March 2012. Approximately one-half of respondents (47%) were C-level or board level executives, and over one-half (53%) were from companies with annual revenue in excess of US$500m. All respondents represented companies with either an international presence or plans for international expansion. Just over one-half (51%) of the respondents’ companies are headquartered in western Europe; almost one-fifth (17%) are headquartered in Asia Pacific; nearly one in ten (9%) have headquarters in North America, and 8% are based in Latin America. The rest of the companies represented in the survey are from Africa, eastern Europe and the Middle East. 

A series of in-depth interviews with independent experts and senior executives from a number of major companies.

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