Chapter 4 Differences in Culture INB 372 Lecture By: Ms. Adina Malik (ALK)

Introduction Cross-cultural literacy (an understanding of how cultural differences across and within nations can affect the way in which business is practiced) is important to success in international business. Example: Case-McDonalds found that to succeed in India, they have to play by the Indian rules. There may be a relationship between culture and the costs of doing business in a country or region. Example: Class divisions (management and labor) in Great Britain led to industrial disputes, thereby increased the cost of doing business during the 1960s and 1970s. Culture is not static, and the actions of MNEs can contribute to cultural change. Example: McDonalds in India helped to change the dining culture there, drawing people away from traditional restaurants to fast-food outlets.

What is 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. Values are the abstract ideas about what a group believe to be good, right and desirable. Norms are the social rules and guidelines that prescribe appropriate behavior in particular situations and can be further subdivided into Folkways (the routine conventions of everyday life/ rituals and symbolic behavior): good social manner, appropriate dress code in a particular situation, eating with correct utensils, neighborly behavior, etc. Mores (norms that are seen as central to the functioning of a society and to its social life): they have much greater significance than folkways and violation can bring serious justice such as theft, cannibalism, etc. A society is a group of people who share a common set of values and norms.

What is Culture Example: Passage of time (United States and Northern European culture such as Germany and Britain Vs. Arab, Latin and Mediterranean culture). (folkways) Japanese business executive bow and present his/her business card with the expectation of acknowledgement. (folkways) Drinking alcohol in in Saudi vs. USA (mores)

The Determinants of Culture

Social Structure A society's social structure is its basic social organization Two dimensions to 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 (layered) into classes or castes

Individuals and Groups

Social Stratification All societies are stratified on a hierarchical basis into social categories, or social strata (usually defined by characteristics such as family background, occupation, and income) Societies differ in terms of : the degree of mobility between social strata the significance attached to social strata in a business context

Social Mobility This refers to the extent to which individuals can move out of the strata into which they are born. Caste system: A caste system is a closed system of stratification in which social position is determined by the family into which a person is born. Change of strata is not usually possible within lifetime. Some caste system depends on occupation such as shoemakers, butchers, etc. There were four main castes and several thousand sub-castes in India. The system was banned in 1949. Refer to the Case Study: ‘Breaking India’s Caste System’

Social Mobility Class system: This is less rigid form of social stratification in which social mobility is possible. Class system is open stratification in which the position a person has by birth can be changed through his or her own achievements and/or luck. Example: British society has three different classes; upper class (wealth, prestige and power accumulated through generations), middle class (Upper middle class-Lawyers, accountants, doctors; Lower middle class-bank tellers, school teachers, etc.) and working class.

Significance From business perspective, the stratification of a society is significant if it affects the operation of business organization. Class consciousness refers to a condition where people tend to perceive themselves in terms of class background and this shapes their relationship with members of other classes. If social mobility is high, then people are less class conscious. Example: USA has high mobility, so people are less class conscious and have limited implication on business. Contrarily, UK society is class conscious as social mobility is low. Antagonism between labor and management can raise the costs of doing business. Antagonism-hostility, enmity, hatred, resentment, etc.

Religious and Ethical System Religion: A system of shared beliefs and rituals that are concerned with the realm of the sacred Ethical system: A set of moral principles or values that guide and shape behavior. Most of the world’s ethical systems are the product of religion. Different religions have their own ethical system. Example: Islam prohibits payment of interest. So banks operating in Islamic nations should consider this. Religion may affect international business. E.g. McDonalds in India supply mutton patty (Maharaja Mc) as beef is taboo in Hindu religion. Women in Middle East cannot be involved in market research openly/ Single women can not work

Language Language can be divided into two major elements; the spoken and unspoken language. Spoken language Chinese, English, Hindi, Russian & Spanish are top languages as mother tongue. English, French, Spanish and Chinese are most widely spoken languages. English is becoming the language of international business. So it is important to speak the widely spoken language. However, knowledge of the local language is beneficial, and in some cases, critical for business success Case of General Electric: ‘Internationalization’ of Management

Language Unspoken Language Unspoken language refers to non-verbal communication. Unspoken language, such as gestures, body languages, facial expressions, etc. play an important role. Failure to understand these non verbal cues might create communication failure. Example- smile is a sign of joy; thumbs up is a gesture to indicate ‘it’s all right’ in America and Europe, while this gesture is obscene in Greece. Personal space while talking to someone

Education Education plays a dominant role as a determinant of national competitive advantage. Availability of skilled and educated workers seems to be a major determinant of the likely economic success. E.g. Japan According to Porter good education system is not only a determinant of national competitive advantage, but it is also an important factor guiding the location choices of international business. E.g. India’s IT industry. The general education level is in also the indicator of the kind of products that might sell in a country and the type of promotional material that should be used. E.g. selling and promoting books become difficult if 70% of the people of a country cannot read. Countries that spend significant percentage of their GNP on education are likely to prosper.

Culture and Workplace Different countries have different work related values. Management process and practices may need to vary according to culturally determined work-related values. Hofstede’s Theory of Culture He conducted the research during 1967-1973 as an IBM Psychologist and included 100,000 employees of IBM in 40 countries. The purpose of the research was to identify difference of employees’ values and attitudes. The theory helped to compare and contrast between the nations. This is the benchmark for other cultural theories. He identified four dimensions: Power Distance, Uncertainty Avoidance, Individualism versus Collectivism & Masculinity versus Femininity.

Hofstede’s Theory of Culture Power Distance: This dimension focused on how a society deals with the fact that people are unequal in physical and intellectual capabilities. High power distance societies let inequalities grow over time into inequalities of power and wealth. (Hierarchical organizational structure & bureaucracy) Low power distance societies try to lower such inequalities as much as possible. (Encourage flat organization structure and increased cooperation)

Hofstede’s Theory of Culture Uncertainty Avoidance: This dimension measures the extent to which different cultures socialize their members into accepting ambiguous situations and tolerating uncertainty. High uncertainly avoidance culture values rules & regulation, commitment, job securities and less entrepreneurial. Low uncertainly avoidance culture values readiness to take risk and resistance to accept change.

Hofstede’s Theory of Culture Individualism versus Collectivism: This dimension focuses on relationship between the individual and his or her fellows. Individualism implies that Individual achievement and freedom is highly valued. In societies where collectivism is emphasized, ties between individuals are tight, people live in extended families and everyone look after each other. Masculinity versus Femininity: This dimension looks at the relationship between gender and work roles. In masculine cultures, gender roles are sharply differentiated (men and Women have specific job), while in feminine cultures, gender roles are less differentiated (no difference is made between men and women in the same job). Masculine: USA, Germany, Ireland (Masculine traits include assertiveness, individual achievement, power, strength, material success, competitiveness, etc.) Feminine: Spain, Thailand, Korea (Feminine traits include emotions, caring, relationship oriented. Etc.)

Implications for Managers Culture is not constant; it evolves. Economic progress and globalization seem to be two important engines of cultural change. One danger confronting a company that goes abroad for the first time is being ill-informed. Cross-cultural literacy is thus very important. To develop cross-cultural literacy, international business need to employ host country nationals, build a cadre of cosmopolitan executives and guard against the danger of ethnocentric behavior. The value system and norms of a country can affect the cost of doing business in that country. Cosmopolitan: familiar with and at ease in many different countries and cultures. Ethnocentric: belief in the superiority of one's own ethnic group. If you refused to bow when greeting a Japanese friend, insisting on shaking hands instead, you'd be displaying your ethnocentrism, or your belief that your own culture is superior to others.