Chapter 3 Differences in Culture

3 - 3 McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. OPENING CASE: Guanxi—Ties That Bind McDonald’s in China. Just two years after opening its first store in China, McDonald’s was told that it would have to move, despite having a twenty-year lease. McDonald’s took the Beijing city government to court, but the court refused to enforce the lease. Observers noted that McDonald’s lacked the all- important guanxi that is critical for success in China. guanxi - network of relationships, nepotism… ,00.html

3 - 4 McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Differences in Culture Societies’ differ along cultural dimensions What is culture? How/why do social structure, religion, language influence cultural differences? What are differences between culture and values in the workplace (corporate culture)? Culture(both national and business customs) changes over time. What are some reasons behind this? Implications for business managers

3 - 5 McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. What is Culture? Culture: a society’s (group’s) system of shared, learned values and norms; these are the society’s (group’s) design for living -Values: abstract ideas about the good, the right, the desirable -Norms: social rules and guidelines; guide appropriate behavior for specific situations Folkways: norms of little moral significance -dress code; table manners; timeliness Mores: norms central to functioning of social life -bring serious retribution: thievery, adultery, alcohol

3 - 6 McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. What is Culture? “the collective programming of the mind which distinguishes the members of one human group over another… Culture, in this sense, includes systems of values; and values are among the building blocks of culture” Geert Hofstede

3 - 7 McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. National Culture Way to bound and measure culture for conduct of business culture is a key characteristic of society can differ significantly across national borders -also within national borders laws are established along national lines Culture is both a cause and an effect of economic and political factors that vary across national borders

3 - 8 McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Social Structure and Culture Unit of social organization: individual or group? Society may be stratified into classes or castes -High-low stratification -High-low mobility between strata The individual: building block of many Western societies -Entrepreneurship -Social, geographical and inter-organizational mobility The group: -Two or more associated individuals with a shared identity -Interact with each-other in specific ways on the basis of a common set of expectations.

3 - 9 McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Individual vs Group Societal Characteristics Individual -Managerial mobility between companies -Economic dynamism, innovation -Good general skills -Team work difficult, non-collaborative Exposure to different ways of doing business -e.g., U.S. companies Group -Loyalty and commitment to company -In-depth knowledge of company -Specialist skills -Easy to build teams, collaboration -Emotional identification with group or company -e.g., Japanese companies

McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Religion, Ethics and Culture Religion: system of shared beliefs about the sacred Ethical systems: moral principles or values that shape and guide behavior; often products of religion Major religious groups and some economic implications -Christianity protestant work ethic -Islam Islamic economic principles -Hinduismanti-materialistic, socially stratified -Buddhismanti-materialistic, social equality -Confucianismhierarchy, loyalty, honesty

McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Language: Culture Bound Language, spoken -“private” does not exist as a word in many languages -Eskimos: 24 words for snow -Words which describe moral concepts can be unique to countries or areas -Spoken language precision important in low- context cultures Language, unspoken -Context... more important than spoken word in high context cultures

McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. High/Low Context Cultures See E.T. Hall & M.R. Hall, Understanding cultural differences, 1990, Intercultural Press

McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Education and Culture Education -Medium through which people are acculturated -Language, “myths,” values, norms taught -Teaches personal achievement and competition -Critical to national competitive advantage Education system may be a cultural outcome

McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Culture and the workplace (Hofstede) Hofstede finds national culture dimensions meaningful to business Basis: -Work related values not universal -National values may persist over MNC efforts to create corporate culture -Home country values often used to determine HQ policies -MNC may create morale problems with uniform moral norms Purpose: understanding of business situations across-cultures MUST understand own culture AND other culture(s)

McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Power Distance -- (Hofstede) Degree of social inequality considered normal by people Distance between individuals at different levels of a hierarchy Scale: from equal (small power distance) to extremely unequal (large power distance)

McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Individualism Vs. Collectivism (Hofstede) Degree to which people in a country prefer to act as individuals rather than in groups Describes the relations between the individual and his/her fellows

McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Uncertainty Avoidance (Hofstede) Degree of need to avoid uncertainty about the future Degree of preference for structured versus unstructured situations -Structured situations: have tight rules may or may not be written down High uncertainty avoidance: people with more nervous energy (vs easy-going), rigid society, "what is different is dangerous."

McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Masculinity Vs. Femininity (Hofstede) Division of roles and values in a society Masculine values prevail: -assertiveness, success, competition Feminine values prevail: -quality of life, maintenance of warm personal relationships, service, care for the weak, solidarity

McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Confucian Dynamism (Hofstede) Attitudes towards -Time -Persistence -Status in society -“Face” -Respect for tradition -Gifts and favors

McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Cultural Change Over Time Change is slow and often painful Shifts away from “traditional values” towards “secular values” Changes with shift from “survival values” to “self-expression values”

McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Managerial Implications Ethnocentrism vs Polycentrism Must a company adapt to local cultures or can corporate -- often home-country dominated -- culture prevail? Cross-cultural literacy essential

McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Do some cultures offer a national competitive advantage over others? “Cultual Borrowing”