Section ThreeInternational Environmental Forces

International Businessby Ball, McCulloch, Frantz,

Geringer, and Minor

6

Sociocultural ForcesSociocultural Forces

International Businessby Ball, McCulloch, Frantz,

Geringer, and Minor McGraw-Hill/Irwin Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

This chapter covers:

•The significance of culture for business

•The sociocultural components

•The significance of religion

•Cultural aspects of technology

•Trends of formal education

•The importance of language

•Classes of society and cultural dimensions

Chapter ObjectivesChapter Objectives

Understand the significance of culture for international business

Understand the sociocultural components of culture Appreciate the significance of religion to businesspeople Comprehend the cultural aspects of technology Grasp the pervasiveness of the Information Technology Era Understand why businesspeople must follow the trends of

formal education Appreciate the importance of the ability to speak the local

language Recognize the importance of unspoken language in

international business Discuss the two classes of relationships within a society Discuss Hofstede’s four cultural value dimensions6-2

Rules of Thumb for Cross Culture Rules of Thumb for Cross Culture BusinessBusiness

Be prepared Slow down Establish trust Understand the

importance of language

Respect the culture Understand the

components of culture

6-3

What is Culture?What is Culture?

Culture The sum total of beliefs, rules, techniques,

institutions, and artifacts that characterize human populations.

Consists of learned patterns of behavior common to the members of a given society.

The unique lifestyle of a particular group of people.

Ethnocentricity Considering your culture superior to all

others6-4

Living with Other CulturesLiving with Other Cultures First, realize that there

are many different cultures.

Then, learn the characteristics of those cultures. Spend a lifetime in a

country. Undergo an extensive,

highly sophisticated training program that covers the main characteristics of a culture.

6-5

Culture Affects All Business FunctionsCulture Affects All Business Functions

Marketing Variation in

attitudes and values requires firms to use different marketing mixes P&G Japanese

Camay commercials

Disneyland Paris

6-6

Human Resource Management Evaluation of

managers Production and

Finance Attitudes toward

authority Attitudes toward

change

Sociocultural ComponentsSociocultural Components

Components of Culture Aesthetics Attitudes and beliefs Religion Material Culture Education Language Societal

organization Legal characteristics Political structures6-7

AestheticsAesthetics

Art Colors, symbols, numbers

convey meaning Nike air symbol

Architectural styles different Feng shui

Music and Folklore Musical tastes vary Folklore discloses way of

life Cowboys in Chile or

Argentina Mexican singing cricket

6-8

Attitudes and BeliefsAttitudes and Beliefs

Attitude Toward Time Problem for

Americans Americans always

prompt Mañana attitude Siestas

Directness and drive Perceived to be

rudeness Deadlines

Liability in Asian cultures

6-9

Attitudes toward Achievement and Work “American live to

work, Germans and Mexicans work to live.”

Demonstration effect Result of having

seen others with desirable goods.

Job prestige Disdain for physical

labor

Attitudes and BeliefsAttitudes and Beliefs

Attitude Toward Change

The American firm is accustomed to the rapid acceptance by Americans of something new.

Europeans are fond of reminding Americans that they are a young nation lacking traditions.

The more consistent a new idea is with a society’s attitudes and experiences, the more quickly it will be adopted.

6-10

ReligionReligion

Responsible for many of the attitudes and beliefs affecting human behavior.Work Ethic

Protestant work ethicEuropeans and Americans generally

view work as a moral virtue and look unfavorably on the idle.

Confucian work ethicIn Asian countries, this is the same

as Protestant ethic.6-11

Asian ReligionsAsian Religions

Hinduism Caste system is

basis of the social division of labor.

Buddhism Jainism Sikhism (Indian) Confucianism

Inseparable from Chinese culture

Taoism Shintoism (Japan)

6-12

IslamIslam

About 1.3 billion followers This youngest faith is the

second largest after Christianity (2 billion adherents).

Founder of Islam is Muhammad Muhammad was not only

the prophet of God but also the head of state.

In Muslim nations, there is no separation of church and state.

Holy Book Koran

6-13

Five Pillars of Faith Confession of faith Five daily prayers Giving charity Ramadan fast Pilgrimage to Mecca

Jihad – holy war Two divisions

Sunni and Shiites Conflict gives rise to

violent clashes

Religious Population of the WorldReligious Population of the World

Insert Figure 6.1

Material CultureMaterial Culture

Refers to all human-made objects Concerned with how

people make things and who makes what and why.

Technology Mix of usable

knowledge that society applies and directs toward attainment of cultural and economic objectives

6-15

Material Culture - TechnologyMaterial Culture - Technology

Importance to International Companies Enables a firm to be

competitive in world markets.

Can be sold, or be embodied in the company’s products.

Can give a firm confidence to enter a foreign market.

6-16

Enables the firm to obtain better than usual conditions for a foreign market investment.

Enables a company with only a minority equity position to control a joint venture.

Can change the international division of labor.

Is causing major firms to form competitive alliances.

Material Culture - TechnologyMaterial Culture - Technology

Cultural Aspects of Technology Includes skills in

marketing, finance, and management

People not always ready to adapt to changes technology brings

Technological Dualism The side-by-side

presence of technologically advanced and technologically primitive production systems.

6-17

Appropriate Technology Choose the technology

that most closely fits the society using it

Can be labor-intensive, intermediate or capital-intensive

Bommerang Effect Technology sold to

copanies in another nation used to produce competing goods

Material Culture - TechnologyMaterial Culture - Technology

Information Technology Era

By the year 2000 the Internet economy

Already reached $850 billion.

Exceeded the size of the automobile and truck and life insurance industries.

Consumption Japanese wide use of automation

6-18

EducationEducation

Equips a person to take his or her place in adult society

Yardsticks Literacy rate

Must verify definition used

Kinds, quality and enrollment of schools

Amount per capita spent on education

Vocationally trained groups

Study trends6-19

Educational MixEducational Mix

European business schools patterned on American model because of Increased competition in the EU Return to Europe of American business

school graduates Establishment of American-type schools

with American faculties Trend in less developed countries to

emphasize humanities, law and medicine

6-20

EducationEducation Brain Drain

The emigration of highly educated professionals to industrialized nations

Reverse Brain Drain The return of highly

educated professionals to their home countries.

Korea and Taiwan are luring home engineers and scientists

6-21

Women’s Education Fall in illiteracy rate Most governments

now provide education for both genders

Educated women have fewer, healthier, and better educated children

Educated women achieve higher labor force participation and wages

Spoken LanguageSpoken Language

Language is the key to culture, and without it, people find themselves locked out of all but a culture’s perimeter

Spoken languages demarcate cultures Switzerland four separate cultures

Many languages can exist in a single country, but one usually serves as communication vehicle Lingua franca or link language English primary language of business

6-22

LanguageLanguage

Must speak the local language Still need translators Use back translations

to avoid errors Technical words do

not exist in all languages Usually resort to

English Many cultures avoid

saying anything disagreeable

6-23

Unspoken LanguageUnspoken Language

Nonverbal communication, such as gestures and body language. Gestures vary tremendously from one

region to another Closed doors convey different meanings Office size different in various cultures Conversational distance small in East Gift giving has specific etiquette in

each culture Gift or bribe?

6-24

Questionable PaymentsQuestionable Payments

Necessary in some countries to obtain action from the government

Foreign Corrupt Practices Act prohibits American firms from making questionable payments

6-25

Societal OrganizationSocietal Organization

Kinship Extended family

Includes blood relatives and relatives by marriage.

This is a source of employees and business connections.

Member’s responsibility Although the extended

family is large, each member’s feeling of responsibility to it is strong.

6-26

Associations Social units based on

age, gender, or common interest, not on kinship.

Age Manufacturers of

consumer goods are well aware of the importance of segmenting a market by age groups. This segmentation

often cuts across cultures.

Societal OrganizationSocietal Organization

Associations Gender

As nations industrialize, more women enter the job market and assume greater importance in the economy

Free association people joined

together by a common bond: political, occupational, religious or recreational

6-27

Understanding National CultureUnderstanding National Culture

Hofstede’s Dimensions of Culture

Individualism versus Collectivism Large versus Small Power Distance Strong versus Weak Uncertainty

Avoidance Masculinity versus Femininity

6-28

World Bank Anti-Corruption ProgramWorld Bank Anti-Corruption Program

We believe that an effective anticorruption strategy builds on five key elements:

1. Increasing Political Accountability2. Strengthening Civil Society Participation 3. Creating a Competitive Private Sector4. Institutional Restraints on Power 5. Improving Public Sector Management

Source: www.worldbank.org

Business Culture in BrazilBusiness Culture in Brazil Brazilians conduct business

only through personal connections. There must also be an implicit understanding that the business relationship will be long-term.

In Brazil, people quickly move to a first-name basis. Do not, however, use first names until you are invited to do so.

Maintain steady eye contact at all times; it is considered impolite to break eye contact.

Source: www.executiveplanet.com

Do not give anything that is obviously expensive. Your generosity will only cause embarrassment or be misinterpreted as a bribe.

Avoid giving items in black or purple, since these are the colors of mourning. Moreover, handkerchiefs are also associated with funerals.

Brazilians also consider themselves Americans. Consequently, don't use the phrase 'in America' when referring to the United States.

USAIDUSAID The ability to read and

write — or literacy — is a basic skill for people to live and work in today’s world. Yet more than 900 million adults are not literate, primarily in developing countries. More than 125 million children who should be in school are not. For this reason, USAID emphasizes programs of support for basic education and places a special emphasis on improving opportunities for girls, women and other underserved and disadvantaged populations.

Source: www.usaid.gov

FCPAFCPA

The FCPA covers all entities and individuals engaging in acts

within the territory of the United States in furtherance of the prohibited conduct, and it covers

U. S. citizens, resident aliens, entities established under U. S. law, and

publicly held corporations, including their officers, directors, employees, shareholders and agents, whether foreign or domestic, that are registered with the SEC as an issuer that participates in corrupt practices in any fashion outside the United States.

Source: www.abanet.org

BuddhismBuddhism As of June 2001, Buddhists in

Taiwan had registered 4,037 temples, 39 seminaries, five universities, three colleges, four high schools, 45 kindergartens, 30 nurseries, five orphanages, five retirement homes, one center for the mentally retarded, 64 institutions for proselytizing, three hospitals, four clinics, 118 libraries, and 28 publishing houses with 26 publications. There were also around 9,866 Buddhist clergy serving the 5.48 million Buddhists of Taiwan. Source: www.gio.gov.tw

World Illiteracy RatesWorld Illiteracy Rates

Source: www.uis.unesco.org