THE ROLE OF CULTURE IN INTERNATIONAL BUSINESS

What is Culture? Culture represents the specified learned norms of a society, based on attitudes, values, and beliefs Culture: the essential core of culture consists of traditional ideas and specially their attached values. Culture affects beliefs, values and behavior and the culture is shared and passes through the generations. Beliefs: Most obviously expressed in religion, but vary across cultures: EXAMPLES Middle East: Islam is a very important influence within society, Western societies which are predominantly Christian, the influence of religion is declining rapidly.

What is Culture? Values: the relative value attached to the individual versus the group varies from across national cultures, And affects the process of social interaction. EXAMPLE: Middle Eastern and Japanese societies place a strong emphasis on the collective view. By contrast, in the US and UK, individual prospective takes precedence over the collective view. Behavior: beliefs and values influence behavior, even in small ways such as daily habits.

Cultural Formation and Dynamics Cultural values may change through: - Change by Choice: takes place as a reaction to social and economic changes that present new alternatives. - Change by Imposition ( Cultural imperialism): occurs when countries introduce their legal systems into their colonies by prohibiting established practices and defining them as criminal. - The introduction of some, but not all, elements of an outside culture often is called creolization, indigenization, or cultural diffusion. 4

Cultural Orientations International businesses adopt an attitude towards foreign cultures Polycentrism: control is decentralized so regional managers can conduct business in a local manner. Ethnocentrism: belief that one’s own culture is superior and ignores important factors. Geocentrism: a hybrid of polycentrism and ethnocentrism, the middle ground 5

Cultural Factors at Play Cultural awareness Apparel Religion Language Identification and dynamics of cultures Behavior practices affecting business Timeliness Ethics Strategies for dealing with cultural differences Education Research 6

Identification of Cultures Cultures are derived with people with shared attitudes, values, and beliefs People also belong to national, ethnic, professional, and organizational cultures Points of reference: National Geographic Language Religion International business often changes cultures 7

Motivation Cultural difference in: Work ethic Greediness Leisure - Protestant work ethic Expectation of success and reward Perceived likelihood of success and reward is an important factor, which motivates a person’s behaviour toward working. In general, People have little enthusiasm: - For efforts that seem too easy or too difficult; - Where the probability of success or failure seems almost certain. 8

Information Processing Monochronic Cultures: People prefer to work sequentially. Polychronic Cultures: People prefer to work simultaneously on all tasks faced. Some cultures tend to focus first on the whole and then on the parts. Others focus first on the parts and then on the whole. Idealism: When people determine principles before they try to resolve small issues. Pragmatism: People focus on more on details rather than principles. 9

Alternative Classifications of National Cultural Characteristics Hofstede: developed four dimensions which can be used as a basis for comparison of national cultures: 1- Individualism versus Collectivism. 2- Power distance. 3- Uncertainty avoidance. Masculinity versus femininity. EXPLAINED IN DETAIL ON THE NEXT SLIDES

Classifications of National Cultural Characteristics - Hofstede 1- Individualism versus Collectivism: Members of an individualist society enjoy the challenge of hard work but demand alongside this the right to a private life. (North America & Western Europe) The collective societies emphasize the right of everybody to share access to good training and remuneration. (Latin America & Africa)

Classifications of National Cultural Characteristics - Hofstede 2- Power distance: Measures the degree of tolerance for differences in power in given national cultures. In the cultures which score highly on power distance, managers tend to have greater over their subordinates, And exercise of this power is accepted. Examples: Poorer nations are characterized by high power distance combined with collectivism. While richer Western countries which are individualist and low on power distance.

Classifications of National Cultural Characteristics - Hofstede 3- Uncertainty avoidance: Measures the extent to which people are nervous of the future and what may / may not happen. Cultures which score highly on uncertainty avoidance have a preference for trying to predict the future, and A general dislike of uncertainty and ambiguity in managerial and social situations.

Classifications of National Cultural Characteristics - Hofstede 4- Masculinity versus femininity: Here there is a stereotype. Masculine being used to describe a society which promotes a ‘macho’ norms and values of ability and earning power. Feminine cultures place a high value on interpersonal relationship, caring and the overall of quality of life. Japan was found to be the most masculine and Sweden the most feminine.

The Impact of Culture on International Marketing One of the major issues for international marketing managers is the extent to which it is possible for an international company to Sell identical products / services across the world. Maintaining a standard product design helps to keep costs down, But it also fails to recognize that customer tastes /needs may vary from one country to another.

The Impact of Culture on International Marketing In practice, culture might affect all of the following aspects of marketing: 1- Product. 2- Price. 3- Promotion. 4- Place

The Impact of Culture on International Marketing: 1- Product: It is very important if you are a company such as Uniliver, marketing washing powder across the world. If you try and sell a powder that is ineffective at the normal local temperature, You will not find many customers. Consequently, The way in which products are linked into culture may actually be quite subtle and require extensive local research in order to ensure marketing success.

The Impact of Culture on International Marketing: 2- Price: Price is a cultural issue because it needs to be matched to the level of economic development in a country. 3- Promotion: In practice, the most effective form of promotion will be culturally influenced. In the less developed world, billboard and radio advertising are likely to be more effective media. In contrast, in rich countries such as the USA, the use of the internet as a prime choice for advertisements is now commonplace.

The Impact of Culture on International Marketing: 4- Place: As the internationalization of business increases, place may become less important. Nonetheless, sometimes, especially food products, tend to be purchased in different places according to national culture.

Human Resource Management In a company that operates across international boundaries, it is likely that the staff will be of mixed nationalities and so This creates the possibility for cultural misunderstandings. In recruitment, some cultures will operate a very formalized recruitment process, Based on the specification of particular qualifications for each job and interviews and tests to assess the relative ability of applicants.

Human Resource Management In other cultures, the method of recruitment may be more informal, Based on employee network, educational background or personal recommendation. Familial societies such as those of Africa, Asia and Arabia view it as a personal duty to use one’s position to help other family members obtain work. Although such an approach would be deemed wholly inappropriate and unfair in the west.

Operations Management The richer and more developed societies are likely to have access to more sophisticated production technologies than Those which are poorer and with a population that is less well educated. In addition to the technology of production itself, there is also the question of how sophisticated is the information system that supports it.

Finance The sources that may be used by companies to expand their business tend to vary from country to country, As they reflect the political economy of the nation as well as its state of economic development. In some countries the usual form of business finance is bank borrowing, with the loans often underwritten by the state – Japan and Germany. In contrast, businesses in the USA and UK are much more reliant of raising money via the sale equity shares in the stock market.