Chapter Six Copyright, John Wiley and Sons, Inc. Chapter Six three Learning Concepts – Chapter 6 1. Understand How Culture, Language, And Religion Influence International Investment And Trade. 2. Recognize How Corporate, National And Local Culture Interacts. …/… The Cultural Environment of International Business. The Cultural Environment of International Business.

Chapter Six Copyright, John Wiley and Sons, Inc. Chapter Six three Learning Concepts – Chapter 6 (cont) 3. Understand That Corporate Culture Probably Is Not Homogenous Throughout A Multinational Enterprise. 4. Recognize And Understand Major Models For Cultural Comparisons. The Cultural Environment of International Business. The Cultural Environment of International Business.

Chapter Six Copyright, John Wiley and Sons, Inc. Culture: Goodyear and Sumitomo Goodyear had to portray an international acquisition as an “alliance of equals” in order to help Sumitomo managers “save face” and create the conditions that made the acquisition possible. Why is this so?

Chapter Six Copyright, John Wiley and Sons, Inc. Culture: What is it?? Culture is the art and other manifestations of human intellectual achievement regarded collectively; it is the customs, civilization, and achievement of a particular time or people; is it the way of life of a particular society or group. Culture is the knowledge, beliefs, art, law, morals, customs, and other capabilities of one group, distinguishing it from other groups

Chapter Six Copyright, John Wiley and Sons, Inc. Culture and International Business Culture is very important to the practice of international business. Culture impacts the way strategic moves are presented. Culture influences decisions. Culture is the lens through which motivation occurs. Management, decision making, and negotiations are all influenced through culture. Culture influences nearly all business functions from accounting to finance to production to service.

Chapter Six Copyright, John Wiley and Sons, Inc. Culture and the “Liability of Foreign-ness” Culture is a key ingredient in the “liability of foreign- ness” described earlier in the Multinational Enterprise chapter. Culture is what makes international business practice difficult or easy, depending on how similar or different cultures are. Culture is both divisive and unifying.

Chapter Six Copyright, John Wiley and Sons, Inc. Culture does not explain everything While culture is very important to our understanding of international business, it does not explain everything that is different from one place to another. While culture explains some, other things like corporate strategy, structure, rivalry, governmental policy, and economics also help to explain success or failure in international business. Shenkar indicates that culture is not a residual variable; it is useful to know that it is not a primary variable either. It is one of many.

Chapter Six Copyright, John Wiley and Sons, Inc. Correlates of Culture: Overview Culture is correlated with other variables that vary cross-nationally, like language and religion. It is useful to remember that culture often cuts across religious, linguistic, and national borders. Religious, linguistic and national boundaries also often cut across cultures too.

Chapter Six Copyright, John Wiley and Sons, Inc. Correlates of Culture: Language Language is the means by which we communicate verbally. We use it for socialization and for communicating how values and norms are expressed and understood. According to the textbook, there are approximately 20 different language families that cut across national borders. Not only are words different, but also syntax and usages are also quite different between language families.

Chapter Six Copyright, John Wiley and Sons, Inc. Correlates of Culture: Verbal and Nonverbal Language Linguists study language. They also study the artifacts surrounding language. These are called:  Linguistics – or the meanings of words  Proxemics – or the distance that speakers stand from one another  Pragmatics – the cultural interpretations of words, gestures, and nonverbals  Nonverbals – The gestures and body language that accompanies spoken words

Chapter Six Copyright, John Wiley and Sons, Inc. Correlates of Culture: Verbal and Nonverbal Language It is important to remember, that for language to be truly useful to business people, they must understand the uses, distances, gestures and interpretations that accompany verbal communication. Without this broader understanding, cross cultural communication can quickly go away.

Chapter Six Copyright, John Wiley and Sons, Inc. Language: English has become a “Lingua-Franca” The term lingua franca denotes any knowledge shared by people of different national and linguistic origins. While people have tried Esperanto for inter-cultural communication, English is generally considered the world’s lingua franca. This does not, however, imply that it is not necessary to learn other languages. While English may be a business language, it may not be socially acceptable away from the business setting.

Chapter Six Copyright, John Wiley and Sons, Inc. Correlates of Culture: Religion Religion contains key values and norms that are reflected in a way of life. Largest religions:  Christianity  Islam  Hinduism  Buddhism  Confucianism  Sikhism  Judaism

Chapter Six Copyright, John Wiley and Sons, Inc. Correlates of Culture: Religion Religion influences international business practices. People try to adopt business practices that will satisfy religious tenets without sacrificing modern practices in business. Examples:  Islam – Banking  China – Calendar  Islam – Ramadan  Judaism – Kosherness

Chapter Six Copyright, John Wiley and Sons, Inc. National Culture Classifications Culture and Nation are not synonymous. National and cultural boundaries overlap partially, and there will be cultural differences in almost all nations. To make things simpler, however, scholars have created cultural typologies that try to describe cultural differences and ascribe them to national boundaries.

Chapter Six Copyright, John Wiley and Sons, Inc. National Culture: Hofstede Geert Hofstede’s cultural typology is the most often used. It is based upon a study of 100,000 IBM employees who work in IBM divisions throughout the world. Hofstede’s survey revealed four underlying dimensions of culture: Power Distance, Uncertainty Avoidance, Individualism/Collectivism, and Masculinity/Femininity.

Chapter Six Copyright, John Wiley and Sons, Inc. Hofstede: Power Distance Power Distance is the extent to which hierarchical differences are accepted in society and articulated in term of deference to higher and lower social and decision levels in organization. Artifacts of high PD:  Centralization  # Org. Levels- Height  # Supervisors  Wage Differentials  Values, White & Blue Collar Work

Chapter Six Copyright, John Wiley and Sons, Inc. Hofstede: Uncertainty Avoidance Uncertainty Avoidance is the extent to which uncertainty and ambiguity are tolerated. Artifacts of high UA:  Standardization  Structured activities  Written rules  Specialists  No risk tolerance  Ritualistic behavior

Chapter Six Copyright, John Wiley and Sons, Inc. Hofstede: Individualism/Collectivism I/C is the extent to which the self or the group constitutes the center point of identification for the individual. Individual self interest is pursued individually, or as a part of a group. Artifacts of I/C  Firm as “family”  Utilitarian decision making  Group performance

Chapter Six Copyright, John Wiley and Sons, Inc. Hofstede: Masculinity/Femininity refers to the extent to which traditional masculine values, like aggressiveness and assertiveness, are valued. Artifacts of M/F  Sex Roles Minimized  More Women In Jobs  Interpersonal Skills Rewarded  Intuitive Skills Rewarded  Social Rewards Valued

Chapter Six Copyright, John Wiley and Sons, Inc. Hofstede: Criticisms Hofstede has been subject to broad criticism. Among the criticisms:  Single company’s data, with a large Multinational Enterprise having a strong corporate culture.  Time dependent results, which are an artifact of the time of data collection and analysis.  Business culture, not values culture, representing a reflection of business culture at IBM and not national culture of the countries IBM operates within. …/…

Chapter Six Copyright, John Wiley and Sons, Inc. Hofstede: Criticisms  Non-exhaustive, doesn’t identify all the cultural dimensions possible, but just a few.  Partial geographic coverages, cover only a portion of the world’s cultures and countries.  Western bias, which values western business ideals.  Attitudinal rather than behavioral measures, with no connection between employee attitudes and employee behaviors.  Ecological fallacy, national level data generalized into individual behavior.

Chapter Six Copyright, John Wiley and Sons, Inc. Other Classifications Used in International Business  Schwartz’s classification, a conceptualization of values.  Trompenaars and Hampden-Turner’s classification, which is a strong competitor to Hofstede, where cultures are measured on Universalism/Particularism; Communitarianism/Individualism; Neutralism/Emotionalism; diffuse/specific values; value of achievement/ascription; and attitudes toward time and the natural environment. …/…

Chapter Six Copyright, John Wiley and Sons, Inc. Other Classifications Used in International Business  Hall’s High/Low context.  Ronen/Shenkar’s cultural synthesis for Multinational Enterprise strategy.  Huntington’s seven civilizations.

Chapter Six Copyright, John Wiley and Sons, Inc. National Culture and Corporate Culture Corporate Culture is the culture adopted, developed and disseminated in an organization. Corporate culture can deviate from national norms, but that depends upon the strength of culture and the values and practices tied to it.

Chapter Six Copyright, John Wiley and Sons, Inc. Layers of Corporate Culture Hofstede and Trompenaars/Hampden-Turner have corporate culture classification systems that create typologies on Value Dimensions and Practices; the family, the Eiffel Tower, the Guided Missile, and the Incubator.

Chapter Six Copyright, John Wiley and Sons, Inc. Layers of Corporate Culture: Other Layers  Ethnicity  Industry  Demographics  Ideology

Chapter Six Copyright, John Wiley and Sons, Inc. Layers of Corporate Culture: Key Cultural Issues  Cultural Etiquette  Cultural Stereotyping  Cultural Distance  Cultural Convergence and Divergence