International Environmental Forces Section Three International Environmental Forces International Business by Ball, McCulloch, Frantz, Geringer, and Minor

6 Sociocultural Forces International Business 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 Sociocultural Forces International Business by Ball, McCulloch, Frantz, Geringer, and Minor McGraw-Hill/Irwin Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 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 dimensions 6-2

Rules of Thumb for Cross Culture Business Be prepared Slow down Establish trust Understand the importance of language Respect the culture Understand the components of culture 6-3

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 others 6-4

Living 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 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 Components Components of Culture Aesthetics Attitudes and beliefs Religion Material Culture Education Language Societal organization Legal characteristics Political structures 6-7

Aesthetics Art Music and Folklore 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 Beliefs Directness and drive Deadlines 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 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

Religion Responsible for many of the attitudes and beliefs affecting human behavior. Work Ethic Protestant work ethic Europeans and Americans generally view work as a moral virtue and look unfavorably on the idle. Confucian work ethic In Asian countries, this is the same as Protestant ethic. 6-11

Asian 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

Islam 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 World Insert Figure 6.1

Material 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 - 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 - 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 - 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

Education 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 trends 6-19

Educational 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

Education 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 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

Language 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 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 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 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 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 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 Program We believe that an effective anticorruption strategy builds on five key elements: 1. Increasing Political Accountability 2. Strengthening Civil Society Participation 3. Creating a Competitive Private Sector 4. Institutional Restraints on Power 5. Improving Public Sector Management Source: www.worldbank.org

Business 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.

USAID 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

FCPA 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

Buddhism 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 Rates Source: www.uis.unesco.org