© 2013 Cengage Learning. All rights reserved. CHAPTER 3 GLOBAL2  PENG © David Lomax/Robert Harding/Glowimages.com 1

© 2013 Cengage Learning. All rights reserved. CHAPTER 3 LEARNING OBJECTIVES After studying this chapter, you should be able to: 1.Define culture and articulate its two main manifestations. 2.Articulate three ways to understand cultural differences. 3.Explain why understanding cultural differences is crucial for global business. 4.Explain why ethics is important. 5.Identify ways to combat corruption. 6.Identify norms associated with strategic responses when firms deal with ethical challenges. 7.Explain how you can acquire cross-cultural literacy. 2

© 2013 Cengage Learning. All rights reserved. ETHNOCENTRISM Ethnocentrism: A self-centered mentality held by a group of people who perceive their own culture, ethics, and norms as natural, rational, and morally right 3

© 2013 Cengage Learning. All rights reserved. CULTURE “the collective programming of the mind which distinguishes the members of one group or category of people from another.” Geert Hofstede 4

© 2013 Cengage Learning. All rights reserved. TWO COMPONENTS OF CULTURE 5 Culture LanguageReligion Lingua franca – a global business language. (ENGLISH)

RELIGION Religion is another major manifestation of culture  Knowledge about religions is crucial even for nonreligious managers Largest religions: Christianity billion Islam - 1 billion Hinduism million Buddhism million

CULTURAL DIFFERENCES: THE CONTEXT APPROACH Context The underlying background upon which social interaction takes place  Low-context cultures Communication is usually taken at face value without much reliance on unspoken context  High-context cultures Communication relies a lot on the underlying unspoken context, which is as important as the words used

© 2013 Cengage Learning. All rights reserved. CONTEXT APPROACH 10

CLUSTER APPROACH Groups countries that share similar cultures into a cluster. 11

DIMENSION APPROACH: 5 Dimensions 1. Power distance Extent to which less powerful members within a country expect and accept that power is distributed unequally 2. Individualism/Collectivism  Individualism Idea that an individual’s identity is fundamentally his or her own  Collectivism Idea that an individual’s identity is fundamentally tied to the identity of his or her collective group

DIMENSION APPROACH 3. Masculinity/Femininity Dimension of sex role differentiation 4. Uncertainty avoidance Extent to which members in a culture accept or avoid ambiguous situations and uncertainty 5. Long-term orientation How much emphasis is placed on perseverance and savings for future betterment

DIMENSION APPROACH Focuses on multiple dimensions of cultural differences both within and across cultures. Sources: G. Hofstede, “Cultural constraints in management theories,” Academy of Management Executive 7, no. 1 (1993): 81–94 and G. Hosftede, Cultures and Organizations: Software of the Mind (New York: McGraw-Hill, 1997) 25, 26, 53, 84, 113, 166. For newest update, see 14

© 2013 Cengage Learning. All rights reserved. CULTURAL DIFFERENCES AND GLOBAL BUSINESS 15

Ethics The principles, standards, and norms of conduct that govern Individual and firm behavior Code of conduct A set of guidelines for making ethical decision Ethical relativism Follows the cliché, “When in Rome, do as the Romans.” There is overlap between what is ethical and legal. But in some cases, what is legal may be unethical.

MANAGING ETHICS OVERSEAS Three Core Principles Respect for human dignity and basic rights Respect for local traditions Respect for institutional context © 2013 Cengage Learning. All rights reserved. Sources: T. Donaldson, “Values in tension: Ethics away from home,” Harvard Business Review (September-October 1996): 4–11 and J. Weiss, Business Ethics, 4th ed. (Cincinnati: South-Western Thomson, 2006). 17

CORRUPTION The abuse of public power for private benefits usually in the form of bribery, in cash or in kind. © 2013 Cengage Learning. All rights reserved.18

COMBATING CORRUPTION  Foreign Corrupt Practices Act (FCPA) A US law enacted in 1977 that bans bribery of foreign officials © 2013 Cengage Learning. All rights reserved.19

STRATEGIC RESPONSES TO ETHICAL CHALLENGES NORMS: prevailing practices of relevant players © 2013 Cengage Learning. All rights reserved.20

CULTURAL INTELLIGENCE Managers should enhance their cultural intelligence – an individual’s ability to understand and adjust to new cultures. Managers should be aware of the prevailing norms and their transitions globally. © 2013 Cengage Learning. All rights reserved.21

CULTURAL INTELLIGENCE © 2013 Cengage Learning. All rights reserved.22