Global Business Management (MGT380) Lecture #3: International Business Environment-Culture

Learning Objectives To understand the effect of culture on international business To get familiar with the importance of values & attitudes for global business To know the sources of knowledge To analyse the culture To understand the training challenges

Quick Recap of Last lecture 4 types Business Orientation Globalization stages(Purely domestic firm, small foreign activity, International company, Multinational, transnational) Drivers: Liberalization, Technology (Death of distance, no boundaries), MNCs, WWW, Product development costs, Competition, Regional integration, Leverage-advantages by experience(experience transfer, economy of scale, resource utilization, global strategy)

Restraining forces: External and Internal International business decision making: 1. need to see objectives, resources, market potential, environmental factors 2. market selection 3. entry mode 4.Int structure decision Business Environment (domestic, international, global), self-reliance criterion Culture: Integrated system of learned behaviour patterns that characteristics of the members of any given society

High-context Vs Low-context culture Elements of culture Language Religion Manners and customs

Mini-cast study of Lecture-2: Nestle Nestle, the largest food company has headquarter in Switzerland, but its products can be found all over the world. Unlike the common way to make different websites for different markets by simply having an extension of Swiss site, Nestle developed difference websites for each country, like US, UK, Japan, Philippine.

Questions to think are: By not having the extension websites they are rejecting the basic assumption ‘Internet culture overcome any differences of national culture’. Can you think of any reason? (This a traditional approach- as oppose to cookie-cutter approach- to market itself even in an unconventional business format) Despite having similar products, why Nestle have different websites for each market, why? (give importance to cultural differences) Visit these websites and identity how Nestle responds to the cultural differences

Culture: Values and attitude Values are shared beliefs or group norms within the society and attitudes are evaluations of alternatives based on values. Effect on Planning, decision making, strategy implementation, evolution Japanese and Chinese values are different

Reference: Book- Czenkota et al. Page 43

Culture: Material element It refers to the impact of technology, and as a result how a society organizes its activities. Economic infrastructure Social infrastructure Financial infrastructure IT has been the major cause of change. Cultural convergence

Culture: Aesthetics & Education Each culture has clear statement for what is acceptable and what is not. For example: Nudity, color Formal or informal education plays an important role in passing on and sharing of culture. Education level also affect the international business, e.g. human capital, marketing (visual aid)

Culture: Social institutions Social institutions affect the way people relate to each other. Family unit Organizational culture and national culture should be aligned, e.g. class system

Sources of cultural knowledge Two types of knowledge Objective/factual: communication, education, R&D Experimental: by involving oneself in new culture

Good companies provide their managers opportunity to learn the culture, i.e., Nestle Reference: Book- Czenkota et al. Page 49

Cultural Analysis Culture life styles can be classified into four dimension: Individualism Power distance Uncertainty avoidance Masculinity

Figure 2.3 Culture Dimension Scores for Twelve Countries (0 = low; 100 = high)

Reference: Book- Czenkota et al. Page 53

Training challenges Objective of formal training programs is to foster four critical characteristics: Preparedness Sensitivity Patience Flexibility It helps managers in negotiations, formalizing contracts, and management.

Cross – Cultural Training Methods (Page 56 of Czinkota et al.)

Critical Thinking question Choose two countries where religion has strong influence. Compare the cultures of those countries and indicate how cultural differences influence (a) business practices (b) costs of doing business in each country.

Summary of today’s lecture Values are shared beliefs or group norms within the society and attitudes are evaluations of alternatives based on values. Material element: It refers to the impact of technology, and as a result how a society organizes its activities (Economic infrastructure, social infrastructure, financial infrastructure). Cultural convergence Each culture has clear statement for what is acceptable and what is not

Education plays an important role in passing on and sharing of culture Two types of knowledge (i) Objective/factual: communication, education, R&D (ii) Experimental: by involving oneself in new culture Culture life styles can be classified into four dimension: Individualism, Power distance, Uncertainty avoidance, Masculinity