International Business 10e

By Charles W.L. Hill

Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 4

Differences in Culture

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How Do Cultural Differences Affect International Business?

Understanding and adapting to the local cultural is important international companies cross-cultural literacy - an understanding of how

cultural differences across and within nations can affect the way in which business is practiced cross-cultural literacy is important for business

success A relationship may exist between culture and the

costs of doing business in a country or region MNEs can be agents of cultural change McDonald’s

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What Is Culture? Culture - a system of values and norms that are

shared among a group of people and that when taken together constitute a design for living

where values are abstract ideas about what a group believes

to be good, right, and desirable norms are the social rules and guidelines that

prescribe appropriate behavior in particular situations Society - a group of people who share a

common set of values and norms

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What Are Values And Norms? Values provide the context within which a

society’s norms are established and justified and form the bedrock of a culture Norms include folkways - the routine conventions of

everyday life mores - norms that are seen as central to the

functioning of a society and to its social life

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How Are Culture, Society, And The Nation-State Related? The relationship between a society and a

nation state is not strictly one-to-one Nation-states are political creations can contain one or more cultures A culture can embrace several nations

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What Determines Culture? The values and norms of a culture evolve

over time Determinants include religion political and economic philosophies education language social structure

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What Determines Culture? Determinants of Culture

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What Is A Social Structure? Social structure - a society’s basic social

organization Consider the degree to which the basic unit of social

organization is the individual, as opposed to the group

the degree to which a society is stratified into classes or castes

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How Are Individuals And Groups Different?

A group is an association of two or more people who have a shared sense of identity and who interact with each other in structured ways on the basis of a common set of expectations about each other’s behavior individuals are involved in families, work

groups, social groups, recreational groups, etc.

Societies place different values on groups

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How Are Individuals And Groups Different?

In Western societies, there is a focus on the individual individual achievement is common dynamism of the U.S. economy high level of entrepreneurship

But, creates a lack of company loyalty and failure to gain company specific knowledge competition between individuals in a company instead

of than team building less ability to develop a strong network of contacts

within a firm

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How Are Individuals And Groups Different?

In many Asian societies, the group is the primary unit of social organization discourages job switching between firms encourages lifetime employment systems leads to cooperation in solving business

problems But, might also suppress individual

creativity and initiative

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What Is Social Stratification? All societies are stratified on a

hierarchical basis into social categories, or social strata individuals are born into a particular stratum

Must consider 1. mobility between strata 2. the significance placed on social strata in

business contexts

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What Is Social Stratification? 1. Social mobility - the extent to which individuals

can move out of the strata into which they are born caste system - closed system of stratification in

which social position is determined by the family into which a person is born change is usually not possible during an

individual's lifetime class system - form of open social stratification position a person has by birth can be changed

through achievement or luck

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What Is Social Stratification? 2. The significance attached to social strata

in business contacts class consciousness - a condition where people

tend to perceive themselves in terms of their class background, and this shapes their relationships with others

an antagonistic relationship between management and labor raises the cost of production in countries with significant class differences

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How Do Religious And Ethical Systems Differ?

Religion - a system of shared beliefs and rituals that are concerned with the realm of the sacred

Four religions dominate society 1. Christianity 2. Islam 3. Hinduism 4. Buddhism 5. Confucianism is also important in influencing

behavior and culture in many parts of Asia

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How Do Religious And Ethical Systems Differ?

World Religions

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How Do Religious And Ethical Systems Differ?

Ethical systems - a set of moral principles, or values, that are used to guide and shape behavior Religion and ethics are often closely

intertwined Example: Christian or Islamic ethics

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What Is Christianity? Christianity the world’s largest religion found throughout Europe, the Americas, and

other countries settled by Europeans the Protestant work ethic (Max Weber, 1804) hard work, wealth creation, and frugality is the

driving force of capitalism

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What Is Islam? Islam the world’s second largest religion dating to AD 610 there is only one true omnipotent God an all-embracing way of life that governs one's being associated in the Western media with militants,

terrorists, and violent upheavals but, in fact teaches peace, justice, and tolerance

fundamentalists have gained political power and blame the West for many social problems

people do not own property, but only act as stewards for God

supportive of business, but the way business is practiced is prescribed

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What Is Hinduism? Hinduism practiced primarily on the Indian subcontinent focuses on the importance of achieving

spiritual growth and development, which may require material and physical self-denial

Hindus are valued by their spiritual rather than material achievements

promotion and adding new responsibilities may not be important, or may be infeasible due to the employee's caste

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What Is Buddhism? Buddhism has about 350 millions followers stresses spiritual growth and the afterlife,

rather than achievement while in this world does not emphasize wealth creation entrepreneurial behavior is not stressed does not support the caste system, individuals

do have some mobility and can work with individuals from different classes

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What Is Confucianism? Confucianism ideology practiced mainly in China teaches the importance of attaining personal

salvation through right action high morals, ethical conduct, and loyalty to

others are stressed three key teachings of Confucianism - loyalty,

reciprocal obligations, and honesty - may all lead to a lowering of the cost of doing business in Confucian societies

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What Is The Role Of Language In Culture?

Language - the spoken and unspoken (nonverbal communication such as facial expressions, personal space, and hand gestures ) means of communication countries with more than one language often

have more than one culture Canada, Belgium, Spain

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What Is The Role Of Language In Culture?

Language is one of the defining characteristics of culture Chinese is the mother tongue of the largest number of

people English is the most widely spoken language in the

world English is also becoming the language of international

business but, knowledge of the local language is still beneficial,

and in some cases, critical for business success failing to understand the nonverbal cues of another

culture can lead to communication failure

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What Is The Role Of Education In Culture?

Formal education is the medium through which individuals learn many of the language, conceptual, and mathematical skills that are indispensable in a modern society important in determining a nation’s competitive

advantage Japan’s postwar success can be linked to its

excellent education system general education levels can be a good index for the

kinds of products that might sell in a country Example: impact of literacy rates

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How Does Culture Impact The Workplace?

Management processes and practices must be adapted to culturally determined work-related values

Geert Hofstede studied culture using data collected from 1967 to 1973 for 100,000 employees of IBM Hofstede identified four dimensions that

summarized different cultures

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How Does Culture Impact The Workplace?

Hofstede’s dimensions of culture: 1. Power distance - how a society deals with

the fact that people are unequal in physical and intellectual capabilities

2. Uncertainty avoidance - the relationship between the individual and his fellows

3. Individualism versus collectivism - the extent to which different cultures socialize their members into accepting ambiguous situations and tolerating ambiguity

4. Masculinity versus femininity -the relationship between gender and work roles

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How Does Culture Impact The Workplace?

Work-Related Values for 20 Countries

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How Does Culture Impact The Workplace?

Hofstede later expanded added a fifth dimension called Confucian dynamism or long-term orientation captures attitudes toward time, persistence,

ordering by status, protection of face, respect for tradition, and reciprocation of gifts and favors Japan, Hong Kong, and Thailand scored high on

this dimension the U.S. and Canada scored low

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Was Hofstede Right? Hofstede’s work has been criticized for several

reasons made the assumption there is a one-to-one

relationship between culture and the nation-state study may have been culturally bound used IBM as sole source of information culture is not static – it evolves

But, it is a starting point for understanding how cultures differ, and the implications of those differences for managers

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Does Culture Change? Culture evolves over time changes in value systems can be slow and

painful for a society Social turmoil - an inevitable outcome of

cultural change as countries become economically stronger,

cultural change is particularly common economic progress encourages a shift from

collectivism to individualism globalization also brings cultural change

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What Do Cultural Differences Mean For Managers?

1. It is important to develop cross-cultural literacy companies that are ill informed about the

practices of another culture are unlikely to succeed in that culture

To avoid being ill-informed consider hiring local citizens transfer executives to foreign locations on a

regular basis Managers must also guard against

ethnocentrism a belief in the superiority of one's own culture

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What Do Cultural Differences Mean For Managers?

2. There is a connection between culture and national competitive advantage suggests which countries are likely to

produce the most viable competitors has implications for the choice of countries

in which to locate production facilities and do business