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Analyzing the Cultural Perspectives of Doing Business with Israel

What are the major elements and dimensions of culture in Israel?

Before getting into an agreement with anyone or any organization on any given business, it is essential that the willing parties get to learn deeply about each other. Setting for an agreement before learning each other’s mode of operation, religion and the dos and don’ts, may spell danger in your endeavors. This, in effect, means that for two countries or regions to engage in any worthwhile business, their cultural dimensions need to allow business to flourish. The two countries or regions need to be coherent in their practices to allow for a smooth business experience. Israel and other rich business minded countries, such as the US and the UK are known to be one of the most difficult or rather challenging countries to carry out business in. The biggest question is: “Who is to blame for the alleged challenges?” From research, the most appropriate response to the above question is “The newcomers are to blame.” The reason as to why this is so is because the incomers carry with them the business culture in their mother countries to Israel and expect to nourish in the Israelites’ market. This cannot happen in Israel. At a time, we are reminded of the saying “When you go to Romans you have to do what the Romans do”. Research shows businesses travelling to Israel tend to forget this saying. If anything, Israel is known for what is called SABRA, a name derived from the plant cactus sabra that has thorns on the outside but is known to be very sweet. In terms of economic and industrial development, Israel is considered one of the most advanced countries in Southwest Asia. It is the second country in the world after the United States in the number of newly established companies, and it has the greatest representation in the list of NASDAQ companies outside of North America. However, let us narrow down to the key cultural issues to be fully considered by anyone who might be interested in setting up a business enterprise in Israel. To begin with, Israelis take a very different style in dealing with things, especially with greetings. For instance, it is not in normal character for an Israeli to extend his/her hand for a handshake. They are used to visual expressions coupled with a smile. In other countries such as England, on meeting a stranger walking along a road, one can say “Hi,” and show a smile on the face. In Israel things are different. If you smile to a stranger in Israel, he/she will frown and usually may want to know who you are. In addition, when communicating to someone, Israelis have a natural tendency to invade your space. That is, they will want to move as close as possible when communicating to somebody. If this happens, don’t be irritated. Your act of moving back makes an Israeli uncomfortable. Secondly, Israel believes in TODAY. They will always do anything that it may take to get their plans and activities done in a present tense. If you have an Israeli comrade and you are the kind of people who like talking about doing this and that tomorrow, then you can be dead sure that you will lose that so called friend. Family matters are usually discussed very late in the afternoon; when an Israeli is relaxed and trying to pinpoint some of the activities of the day. It is crucial to note that Israelis will not want their family or anything they hold as a secret to leak to other people outside them. The most interesting thing about the Israelis is how they communicate to one another. Israelis will always shout to one another when communicating. To a stranger, this may sound awkward but this is the way to go. If an Israeli speaks to you for a long session with a low tone, then you do not have to ask whether your communication was good or bad. It is obvious that your partner was not at ease with you. Israelis are always frank in their speech. They will ask you about anything they feel like they would want to know, even including the most sensitive topics such as marital information. In addition, Israelis are always set for any spontaneous action. That is, they are always prepared for anything at any time. They live for the moment. They are also gesture centered. They can communicate to one another by the use of body movements. They will raise their hands to imply that they have a point of order or signal their partners to wait for a while. It should be made clear that during Israeli meetings or conferences, Israeli will assume any sitting posture. For instance, one may seat spreading his legs apart. Israelis are best known for their powerful and tireless negotiation strategies. When visiting a market to sell or even buy an item, you can be sure that you will be convinced beyond any doubt that you are going to sell or buy that particular item. Prizes at which an item or items are sold are determined by the sellers and prizes slightly above the selling set to allow for negotiations. Negotiation is then struck by a potential buyer who by all means will try to win you so as to buy an item or items at his/her quoted price. This however is not the usual case because sometimes the Israeli may opt to immediately start at the final price because of the value they attach to time. This should not be mistaken for a defeat in the bargain session. Furthermore, the Israelis believe that if someone is your friend, then the best thing you can do to him or her when he/she has done something good is to award him or her. To this note, Israelis will most of the time invite their partners for dinner or something of the same, just to make their friendship real bonded. In such scenarios, you have to attend the invitation and enjoy the whole session with your friends. Remember this is something that has to happen often and as such you also have to learn how to also make him or her feel that you also value what he or she does in your company. In addition, it is understood that in Israel the citizens will always feel proud and more comfortable when referred to by their first names during any point of interaction. For the newcomers it is advisable to get used to this because it will make your integration and the rest of your times with your business partners very smooth. If all of these kinds of trends seem difficult to you, then, it becomes technically hard for one to thrive, especially in the business world in Israel culture. All of the above discussed points explaining the Israel business culture may seem as an obstacle to venturing into business deals in Israel. This is not true for people who have enough experience in Israel. If anything, Israel is the most simple and most welcoming country when it comes to business activities. What one needs to understand is how things are done. Remembering the introduction, I mentioned something to do with “when you go to Rome.” This should be taken as a loop hole to thriving business-wise in Israel. You should learn at least a good percentage of all that I have discussed and try to your best in implementing them. If you do this, then you should be set in getting the best out of Israel. Israel is also known to be a world leader in quite a number of things. I take you through quite a number of them in my attempt to actually create the true picture of how this country stands to the most suitable place to do business. To begin with, Israel is known to be among the leading countries in water protection technology and geothermal energy. Its advanced technology in software, telecommunications, and science makes it analogous to Silicon Valley in the United States. Intel and Microsoft companies built their first foreign research centers here; as did other companies- SAP, IBM, Cisco Systems, and Motorola. These facts speak volumes about their technological prowess and that they are a niche above the rest. The support for small and medium businesses is one of the priorities of the current economic policy in many countries. The state encourages businesses to reduce unemployment and provide jobs. In the West, there is an entire support system for small and medium-sized private companies. All developed countries are trying to carry out such forms of support, Israel being one of them.


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What Impact do the elements of culture have on business in the nation?

The cultural diversity existent in Israel is advantageous when looked at from a business perspective. There hospitality has played a massive role in enticing investors, local and foreign with equal measure. International relations in Israel may provide a number of advantages to foreign companies. These include the fact that Israel is the only country which has a free trade agreement with the United States, Canada, as well as with a number of countries in Eastern Europe and the Far East. It means that Israel is a kind of a business bridge between different regions of the world and such the most appropriate point to run a business. This is because it has a wide market created by these big countries which of course provide a great market for their goods and services on the market.

Academic and business sectors of the country are well represented in the world's largest scientific, technical, and financial centers, as well as in various international programs and projects for the development of innovative technologies, thereby allowing foreign partners unique access to information and funding. Such links, or rather, connections, ensure quality education to both citizens and even the incomers, which in this case imply anyone in the country as a businessperson. Improvements in the technological side may ensure that potential buyers and sellers can easily get in touch through such links as Google, Facebook, Twitter and any other interactive platforms. This will ensure a wider market area hence narrowing down the aspects of losses occurring in one’s business endeavors. The cohesion created between this country and other large countries such the USA, UK, and Canada amongst other superior nations, is a surety that peace prevails in Israel and hence investors cannot be threatened by security matters.

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The equity in participation in Israeli companies in foreign high-tech projects can significantly increase the level of competition in co-produced technologies and products. In the area of high technology, agricultural technology, communications, security and other areas, Israel has a significant and yet untapped potential of co-development on global markets of high technology.

At the same time, the Israeli economy is not self-sufficient and is dependent on foreign aid, especially on that from the United States. Israel leads in the total amount of aid received from the United States after World War II (including even Western Europe). American aid forms 4.4% of the Israeli budget.

The first Jewish immigrants brought to Palestine the cultural property adopted in the countries they came from. This tendency persisted later as well; it was marked by other Western cultural influences as well (American in particular). Culture and art are actively working on the formation of the Israeli national character, which was built over the centuries as a result of the Jewish living in different civilizations. Music, literature, theater, visual arts, dance, and cinema reflect the cultural heritage of the Jewish people and the world of modern Israel. Now, Israel is the second largest country in the world after the United States in high-tech concentration.

Israel maintains diplomatic relations with 163 countries and has 94 diplomatic missions. Among the closest allies of Israel appear the Unites States, UK, Germany, India, and Turkey.

Now we can highlight the promising areas of business in Israel. They are:

1. Outsourcing

96% of accounting services in Israel are based on the principle of outsourcing, more than 60% are the services in search and recruitment, more than 65% are the services offered by programmers, systems analysts, and web managers - that is, in the area of IT-outsourcing.

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2. IT, Information Security, Mobile

These industries in Israel are not only well developed, but they are also among the most promising ones. In addition to direct business support, public money is being invested in research and development. Normally, it looks like this: a detailed description of the technology of the new idea goes to a venture fund (often public). The inventor signs the contract with the fund about cooperation on the project and gets funding thereafter. When the final product goes to the market and shows to be effective, it is sold with a registered firm right holder and shares the proceeds on the sale between the investor and the developer.

3. Bet on the high-tech

Modern Israel is one of the world leaders in the area of high technology. Its high-tech sector has gained worldwide recognition. In addition, this area is constantly fueled by foreign investments. This was the case of ICQ in the Tel Aviv Company Mirabilis in 1998, which was sold for $407 million to the American giant America Online (AOL).

Many technologies, such as the program for the protection of local computer networks, which was originally designed for military purposes, have been successfully delivered to the mass production by the leading Israeli company Check Point Software Technologies and have enjoyed high demand abroad.

Now, one of the "hot" sectors for investment in Israelis is optics. Israeli companies are working on a wide range of products.

4. Services

Here there are all kinds of services, from outsourcing to shoe repair services. The demand for such services is huge and hence the need to ensure their availability on the market. In addition to domestic services, highly valued are legal services, such as consulting, analytical services in the Internet (audit and promotion, for example), and advertising services. In the recent years, business connections between the countries of Israel, America, and Europe have increased.

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5. Restaurant business

This concept existed due to a proposal by a certain chef, who after investigating found that such a business endeavor could make some significant contribution to the nation. This idea was then put to test and finally found viable. The next move was to carry out an analysis to ascertain the plans that led to the development of the restaurants in Israel. Everything that is associated with food has always been profitable. Since Israel comprises a huge number of different cultures and traditions, there is always a place for restaurant business. Uzbek, Georgian, Italian, French, and Russian snack bars, restaurants, cafes, and bistros are among those that are already successfully functioning in Israel.

6. Recycling

This generally refers to the act of reusing something that has already been used in one way or the other. Recycling is a practice assumed to control so many things or minimize on the use of the raw material used in the manufacture or the production of that particular product.  On the other hand, it may be used to avoid the pollution of the environment. Such things that need to be or can be recycled may include: nylon bags, plastic materials, etc. Because Israel has a lot of history, but little territory, processing and recycling of waste is extremely urgent. A small firm that offers services such as recycling plastic containers can quickly move in the market.

Such industries as the diamond industry, medical equipment, and tourism also belong in the category of promising business areas to create new companies in. However, it is also paramount to note that recycling has in itself, has its pros and cons:


1. It reduces the rate of pollution on the water bodies and the land in general.

2. One is able sustain energy since one converts wastes into important produce.

3. Recycling reduces the rate of carbon consumption hence reducing the amount of harmful gases in the atmosphere.

4. One reduces by a great margin the waste that would end up in incinerators.


Though recycling may seem to have so many merits, it has been opposed on different grounds, some of which are brought forth by its demerits or cons as discussed below:

1. It does not fully contribute to the reduction of the quantity of wastes.

2. It has to be done in large quantities since doing it on a small scale leads to high overheads for the farm that practices it.

3. The country may find it very expensive and hence opt for other alternatives such as the use of incinerators.

In Israel, there is an organization in support of small and medium sized businesses. They offer several schemes, with the loan sizes ranging from 20 thousand to 600 thousand shekels at the rate of 3% to 7.25%. These institutions include banks, angel investors, etc. Just to mention their duties and how they operate, one can look at their mode of financing these small businesses. For example, the angel investors, these are the kind of investors, who by the time one is looking or searching for a potential sponsors, come your way and are willing to provide all that you may need for your business. Usually, they will not ask for repayment of the capital they give to such small scale business starters. On the other hand, banks, as already mentioned earlier, will give out loans for a specified duration after which the loaned has to repay back their loans usually plus some rates or profits to cater for the running of their day to day activities. The rates are already mentioned at the introductory part. Rates at commercial banks are slightly higher, but they look quite acceptable, even though Israel is not considered a credit paradise: local banks pay about 3% on deposits, lending money to entrepreneurs on 9% interest at 3-4% inflation rate.

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8. Weapon Trading

The State of Israel has reached a high level of development of science and technology. In addition, Israeli minds successfully develop new weapons. The Israeli Army is one of the best armies in the world and uses 83% of arms and ammunition of its own production except aircraft. In a hostile environment, weapons should always be in constant readiness for use. In August 2012, the U.S. Congressional Research Service (CRS) issued a report in which Israel was called one of the leading suppliers and buyers of weapons in the world. Israel purchased fifth-generation fighters, submarines from Germany, but to see real picture of their sales we have to look at numbers.

In the years of 2004-11, Israel has signed contracts to sell weapons for $12.9 billion, putting it in eighth place among the eleven largest arms supplier in the world (after the US, Russia, France, Britain, Germany, China and Italy). Israel and the United States have reevaluated their financial and military commitment. Israel had received over $21 billion in U.S. security assistance. This figure does not include the $19 billion in direct military aid. According to the United States, Israel remains the single largest client to the United States each year.  As many may know, Israel is considered the United States’ closest ally. The Bilateral relationship between the two countries covers many areas. They have a strong security dialogue, joint military planning and combined military research. 

Israel and American relationship in defense industry is very important. Israeli military high-tech–they are relatively small companies, creating the most advanced weapons. They require sophisticated technological equipment, some of which is only available in the U.S. This is the basement for cooperation. With doing business with the United States, Israel has built a comprehensive standing army. Israel has become one of the most powerful forces in that area. The Israel Defense Force (IDF) is well put together. This force is furnished with an arsenal of the latest and most advanced military hardware.  The development of such a sophisticated defense is rarely known in that area of the world.  The market of military hardware is not always perfect.  The country has faced a shrinking market for military hardware.  Israel defense concerns have made many efforts to employ more research into devising products for non-military markets. This is to adapt defense technology for civilian applications. Israel highly depends on the relationship with its supporters. Many would understand that Israel is politically an independent country, but this is true only in the declaration of State Independency. Because the country (Israel) currency is not very stable, the prices on the house market are set in U.S. dollars.

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Except for the special, extremely rare cases, the Israeli legislation does not impose restrictions on the nationality of the shareholders and the employees of the companies operating in Israel. In fact, all officers, directors, and shareholders can be foreign nationals or residents. Conducting business in Israel could be done through a variety of legal forms, which are:
1. Companies
2. Partnerships
3. Cooperatives
4. Commercial agencies
5. Joint ventures

6. Branches and representative offices of foreign companies
7. Non-profit enterprises

All business activities and its organizational and legal forms are regulated by the Israel Law "About Companies" (1999).

It is very promising today to do business in Israel. Economists say the country is a good trading partner with great potential. It has many important high-tech success stories. Israel is second after California in developing high-tech technologies. The VoIP-telephone, voice mail, internet fire walls, instant messaging, etc. were all designed and created in Israel.

How do both of the above items compare with US culture and Business?

The culture in Israel defers marginally from that in the United States. The business environment also has contrasting aspects even though there are a few noteworthy similarities. It is worthwhile to note that Israel has a very developed economy. Even without huge natural resources, it has managed to make significant progress in the intensive development of industry and agriculture.

The main share of exports goes to the processed diamonds, high-tech equipment, advanced technologies in agriculture, electronics, security systems, and medical equipment. Israel also exports machinery and equipment, rough and polished diamonds, chemicals, textiles and clothing, agricultural technologies, food, metals etc. It imports commodities, raw materials, military equipment, capital goods, rough diamonds, oil (fuel), etc.

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Israelis have different approaches to work, e.g. styles in the organization of meetings, presentations, and negotiations, building client relationships, etc. Without understanding these subtleties, difficulties and misunderstandings may emerge, thus resulting in productivity declining. Even the fact that Israelis speak English does not ensure mutual understanding. For example, if an American says "I might do this differently", meaning "The way it is getting done now is wrong and needs to be changed", an Israeli might understand: "The way you are doing it is not reasonable, since in what was spoken out there is no mention that there is any problem with the way we are doing it". And, vice versa, if an Israeli says, "You are wrong", this might mean "I disagree with your point of view and I want to discuss it more, so that we can reach an agreement on the correct view". However, an American might understand: "There is no room for discussion. You better back off.” In addition, you have to understand how they see you in order to be successful when doing business with Israelis.

Unlike the American culture, which is monochromic, where one leads and the other one is the subject, the Israeli culture is a polychromic one, focusing primarily on relationships. In a culture like this, feelings and emotions are primary, objective facts are secondary. One has to be sure to take into account the difference in mentalities. In addition, understanding the history and the culture of the country is essential.

What are the implications for US businesses that wish to conduct business in the region of Israel?

For US based business organizations to get a piece of the cake by exploiting the rich Israeli market, they need to conform. They need to start with forging alliances that go a long way in enhancing customer loyalty and providing a stable base for establishment of long-standing contacts. The basis for the formation of a business alliance or a partnership is mutually beneficial long-term cooperation. Mutual trust is a prerequisite for forming a business alliance. For doing business in Israel, it is important for America to understand the subtleties of the culture of this country. If you choose a right way in business, you will surely be successful. Besides choosing the right way of business, there are differences in the cultural aspect.  The difference can be in Israel and American business culture and the way that these two countries apply that to their business practices.  The United States and Israel know that decision making is based on objective data, policies, and procedures.  This will provide much positive operating efficiency and reduce conflict within the market place.

Achieving a full integration will not be easy, even for experienced players. The first step would be investing in promising Israeli venture capital funds, and the simplest absorption will be easy to implement. A more difficult challenge would be to achieve the necessary level of research and development and to implement the investment plans. This requires a deep knowledge of the sector a close contact with the leading local venture capitalists, and a focus on integration.

The integration of innovative products in Israel would enhance the competitiveness of the companies that are investing. In turn, Israel would also benefit from these trends. The diversification of funding sources and the integration of Israel into the global innovation enterprise network makes Israeli companies and the sector as a whole more stable. Further development, in turn, would allow the government to focus on issues such as tax reforms and deregulation. Most companies in Israel are subject to company tax on profits at the rate of 36% on taxable income. In regards to personal taxation, this country generally imposes tax on other sources of income. Israel also have a so called “double taxation relief”. Foreign investors, such as the United State, that takes advantage of the double taxation treaties can withdraw any profits earned in Israel under the taxation plan.

The success of any business lies in its business idea, accepted by the market, as well as in professionalism, the desire to make profit as much as possible, and, of course, in one’s luck. In conclusion, one should mention that many US businessmen are already prospering in Israel. Israel has been always known to show meaningful attitudes toward Americans. Promoting business in the market area has never been easy on any level. American and Israeli business ethics could be seen as a strength and weakness.  It will be interesting to see how Israel and American culture can coordinate their methods to fit into new interrelated and transitional global business model. Some key concerns for American business that are wishing to conduct  business in Israel lie in the sections of financial reporting differences, pricing and business ethics.

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Israel is an important player in the world of business. Global business has brought attention to Israeli culture and this has a great effect on the country as a whole.  The United States has and always will be part of the success of Israel economy success. By major trades such as weapons and technology, Israel can move forward as a county moving into the next generation. With trades comes profit. With profit comes a better economy. This is what will make a strong generation. Ethics is also a huge factor.  America and Israel share a similar business ethic that is the heart of honest business.


Israel is one of the countries that are known to be the most difficult and even challenging in terms of conducting business. However, it is the second country in the world after the United States in the number of newly established companies. There reason for this lies within the versatile policy of Israel, which regulates each sphere of the country’s development. Its policies and the cultural aspects of both the nation and the people dictate by and large the favorable markets that the Israeli consumer market is.

The Israeli economy is substantially developed; it has managed to achieve a significant progress in the intensive development of the industry and agriculture, even without immense natural resources. Nevertheless, it is not self-sufficient as it depends on the foreign aid, especially from the United States. In the area of high technology, communications, agricultural technology, security and other areas, Israel has a significant and yet untapped potential of co-development on global markets of high technology. However, its advanced technology in software, telecommunications and science contributes vastly towards various companies building their foreign research centers in Israel. The state is not only involved in various international programs and projects for the development of innovative technologies, but is well represented in the world's largest scientific, technical, and financial centers as well, which gives its foreign partners a unique access to information and funding.

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However, the state has also made the support for small and medium businesses one of the priorities of the current economic policy by encouraging businesses to reduce unemployment and provide jobs. In addition, diverse countries, such as the United States, Canada, as well as a number of countries in Eastern Europe and the Far East, have a free trade agreement with Israel, which makes it easier to establish a mutually advantageous trade. Consequently, the relations of Israel with other countries provide a considerable market for goods and services, while being a business bridge between different regions of the world.



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