5-1 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Chapter 5 D ifferences in C ulture 5

5-2 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Lecture/Chapter Topics What is Culture? Determinants of Culture Culture and the Workplace Cultural Change Managerial Implications

5-3 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. What is Culture? Scholars have never been able to agree on a simple definition of culture. Geert Hofstede defined culture as ‘the collective programming of the mind which distinguishes the members of one human group from another. … Culture, in this sense, includes systems of values; and values are among the building blocks of culture’.

5-4 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. What is Culture? Values and Norms –Values  are abstract ideas about what a group believes to be good, right, and desirable  provide the context within which a society’s norms are established and justified, and form the bedrock of a culture

5-5 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. What is Culture? Values and Norms (Cont’d) –Norms  are the social rules and guidelines that prescribe appropriate behaviour in particular situations  can be subdivided into two major categories: the routine conventions of everyday life and other norms that are seen as central to the functioning of a society and to its social life

5-6 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. What is Culture? Norms (Cont’d) –The Routine Conventions of Everyday Life  Generally, these are social conventions concerning things such as the appropriate dress code in a particular situation, good social manners, eating with the correct utensils, neighbourly behaviour, and the like.

5-7 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. What is Culture? Norms (Cont’d) –Attitude to Time  Time as ‘money’  Time is ‘elastic’ –Rituals and Symbols  Rituals and symbols are the most visible manifestations of a culture and constitute the outward expression of deeper values.

5-8 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. What is Culture? Norms (Cont’d) – Culture, Society and the Nation-State  A society can be defined as a group of people that share a common set of values and norms; that is, a group bound together by a common culture.

5-9 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture The values and norms of a culture are the evolutionary product of a number of factors at work in a society –Prevailing political and economic philosophies –Social structure –Dominant religion –Language –Education

5-10 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture

5-11 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture Social Structure –A society's social structure is its basic social organisation. –Two dimensions to consider: i.the degree to which the basic unit of social organisation is the individual, as opposed to the group ii.the degree to which a society is stratified into classes or castes

5-12 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture The Individual –A focus on the individual, and individual achievement, is common in many Western societies. –This contributes to the dynamism of the US economy, but can lead to a lack of company loyalty and failure to gain company- specific knowledge, competition between individuals in a company rather than team building, and a limit on people's ability to develop a strong network of contacts within a firm.

5-13 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture The Group –In many Asian societies, the group is the primary unit of social organisation. –This may discourage job switching between firms, encourage lifetime employment systems and lead to cooperation in solving business problems, but might also suppress individual creativity and initiative.

5-14 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture Social Stratification –All societies are stratified on a hierarchical basis into social categories, or social strata. Social Mobility –Social mobility is the extent to which individuals can move out of the strata into which they are born.

5-15 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture Social Mobility (Cont’d) –A caste system is a closed system of stratification in which social position is determined by the family into which a person is born, and changing that position is usually not possible during an individual's lifetime. –A class system is a form of open social stratification in which the position a person has by birth can be changed through his or her achievement or luck.

5-16 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture Significance of Social Stratification –The stratification of a society is significant if it affects the operation of business organisations.  In American society, the high degree of social mobility and the extreme emphasis on individualism limit the impact of class background on business operations.  In a country such as Great Britain, however, the relative lack of class mobility and the differences between classes have resulted in the emergence of class consciousness.

5-17 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture Significance of Social Stratification (Cont’d) –Class consciousness is a condition where people tend to perceive themselves in terms of their class background, and this shapes their relationships with others. –In cultures where there is a great deal of consciousness of the class of others, the way individuals from different classes work together (i.e. management and labour) may be very prescribed and strained.

5-18 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture Significance of Social Stratification (Cont’d) –An antagonistic relationship between management and labour classes, and the resulting lack of cooperation and high level of industrial disruption, tends to raise the costs of production in countries characterised by significant class divisions. In turn, this can make it more difficult for companies based in such countries to establish a competitive advantage in the global economy.

5-19 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture Religious and Ethical Systems –Religion  Religion is a system of shared beliefs and rituals that are concerned with the realm of the sacred.  The religions with the greatest following are Christianity, Islam, Hinduism, and Buddhism.  Confucianism (philosophy) influences behaviour and shapes culture in many parts of Asia.

5-20 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture Religious and Ethical Systems (Cont’d) –Ethical systems  Ethical systems are a set of moral principles, or values, that are used to guide and shape behaviour.  The ethical practices of individuals within a culture are often closely intertwined with their religion.

5-21 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture Dominant Religions across the World

5-22 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture Christianity –Christianity is the largest religion and is common throughout Europe, the Americas and other countries settled by Europeans. –Economic implications of Christianity:  The Protestant work ethic: At the turn of the century Weber suggested that it was the Protestant work ethic (focus on hard work, wealth creation, and frugality) that was the driving force of capitalism.

5-23 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture Islam –Islam extends the underlying roots of Christianity to an all- embracing way of life that governs one's being. –Islamic fundamentalism  In the West, Islamic fundamentalism is associated in the media with militants, terrorists, and violent upheavals. However, the vast majority of Muslims point out that Islam teaches peace, justice, and tolerance.  Fundamentalists have gained political power in many Muslim countries, and have tried to make Islamic law the law of the land.

5-24 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture Islam (Cont’d) –Economic implications of Islam  In Islam, people do not own property, but only act as stewards for God and thus must take care of that with which they have been entrusted.  While Islam is supportive of business, the way business is practised is prescribed.

5-25 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture Hinduism –Hinduism, practised primarily on the Indian subcontinent, focuses on the importance of achieving spiritual growth and development, which may require material and physical self-denial.

5-26 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture Economic Implications of Hinduism –Since Hindus are valued by their spiritual rather than material achievements, there is not the same work ethic or focus on entrepreneurship as is found in some other religions. –Promotion and adding new responsibilities may not be the goal of an employee, or may not be feasible owing to the employee's caste.

5-27 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture Buddhism –Buddhists stress spiritual growth and the afterlife, rather than achievement while in this world. –Buddhism, practised mainly in South-East Asia, does not support the caste system, so individuals do have some mobility and can work with individuals from different classes.

5-28 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture Confucianism –Religion or philosophy? –Confucianism, practised mainly in China, teaches the importance of attaining personal salvation through right action. –The need for high moral and ethical conduct and loyalty to others is central to Confucianism.

5-29 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture Economic Implications of Confucianism –Three key teachings of Confucianism — loyalty, reciprocal obligations and honesty — may all lead to a lowering of the cost of doing business in Confucian societies. –In Confucian thought, loyalty to one’s superiors is regarded as a sacred duty — an absolute obligation.

5-30 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture Economic Implications of Confucianism (Cont’d) –In modern organisations based on Confucian cultures, the loyalty that binds employees to the heads of their organisation can reduce the conflict between management and labour. –The concept of reciprocal obligations is important. –Confucian ethics stress that superiors are obliged to reward the loyalty of their subordinates by bestowing blessings on them.

5-31 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture Economic Implications of Confucianism (Cont’d) –This Confucian ethic is central to the Chinese concept of guanxi, which refers to relationship networks supported by reciprocal obligations (which we discussed in the Opening Case). –Confucian thinkers emphasise that, although dishonest behaviour may yield short-term benefits for the transgressor, it does not pay in the long run.

5-32 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture Superstitions –Like religion, superstitions play an important role in the daily life of people, and impact on how business is conducted. –The 5000-year-old Chinese culture is rich in traditions and superstitions.

5-33 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture Superstitions (Cont’d) –Numbers play a particularly important role for the Chinese and their faith in lucky numbers influences daily life, e.g. when choosing a car number plate, phone number or house or apartment number. –Examples of good numbers: 6, 8, 9 –An example of a bad number: 4

5-34 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture Superstitions (Cont’d) –It is no coincidence that the Beijing Olympics will begin at 8 pm on 8/8/08. The number ‘eight’ is considered lucky or associated with wealth (eight in Chinese is pronounced in a similar manner to the word for making money ‘Fa’). –Superstitions are not confined to the Chinese — many cultures have these beliefs, e.g. ‘13’ in Australia and many Western countries: lucky for some, unlucky for others.

5-35 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture Language –Language, both spoken and unspoken, is one of the defining characteristics of culture. –Spoken language  While English is the language of international business, knowledge of the local language is beneficial, and in some cases critical, for business success.

5-36 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture Language (Cont’d) –Unspoken language  Unspoken language such as facial expressions and hand gestures can be important for communication. However, because these can have different interpretations in different cultures, misunderstandings are common.

5-37 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture Unspoken Language –Kinesics: Gestures are not universal

5-38 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Determinants of Culture Education –Formal education is the medium through which individuals learn many of the language, conceptual and mathematical skills that are indispensable in a modern society. –The knowledge base and training and educational opportunities available to a country's citizens can give that country a competitive advantage in the market and make it a more or less attractive place for expanding business.

5-39 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Culture and the Workplace Of considerable importance for an international business with operations in different countries is how a society’s culture affects the values found in the workplace. Two of the most famous theories on how cultures differ were proposed by Hall and Hall and Geert Hofstede.

5-40 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Culture and the Workplace Cultural Context –Hall and Hall highlighted the cultural differences between countries by using the concept of context, where context equates to cues and other information present in a situation such as tone of voice and gestures. –They divided the extremes of context into high and low context, with a range in between.

5-41 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Culture and the Workplace Cultural Context (Cont’d) –Low Context Culture  A culture in which the speaker’s message is conveyed explicitly by the spoken words.  Most of the individualistic Western countries such as Australia, New Zealand, the United States and Canada and most of Western Europe tend to be low-context cultures.  In these countries explicit communication is preferred.

5-42 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Culture and the Workplace Cultural Context (Cont’d) –High Context Culture  A culture in which the context of a discussion is as important as the actual words spoken.  Most countries in Asia, the Middle East, Latin America and Africa have high-context cultures.  In these countries, people refrain from explicitly expressing feelings and thoughts and important information is embedded in the context.

5-43 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Culture and the Workplace Geert Hofstede isolated four dimensions that he claimed summarised different cultures: 1.Power Distance  is focused on how a society deals with the fact that people are unequal in physical and intellectual capabilities 2.Individualism Versus Collectivism  is focused on the relationship between the individual and his or her fellows

5-44 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Culture and the Workplace Geert Hofstede’s four dimensions that summarise different cultures (Cont’d): 3.Uncertainty Avoidance  Measures the extent to which different cultures socialise their members into accepting ambiguous situations and tolerating ambiguity 4.Masculinity Versus Femininity  Looks at the relationship between gender and work roles

5-45 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Culture and the Workplace Hofstede subsequently expanded his original research to include a fifth dimension that he argued captured additional cultural differences not brought out in his earlier work. He referred to this dimension as Confucian dynamism, but it is now referred to as long-term orientation.

5-46 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Culture and the Workplace Long-term Orientation –This measures the extent to which a society adheres to values about time, persistence, ordering by status, protection of face, respect for tradition and reciprocation of gifts. –East Asian countries such as Japan, Hong Kong and Thailand scored high on long-term orientation, while nations such as Australia and New Zealand scored low.

5-47 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Culture and the Workplace Work-related Values for Selected Countries (Hofstede)

5-48 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Cultural Change Culture is not a constant; it evolves. Economic progress and globalisation seem to be two important engines of cultural change. Culture evolves over time, although changes in value systems can be slow and painful for a society. As countries become economically stronger, cultural change is particularly common.

5-49 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Managerial Implications Cross-Cultural Literacy –Individuals and firms must develop cross-cultural literacy. –International businesses that are ill-informed about the practices of another culture are unlikely to succeed in that culture. –Individuals must also beware of ethnocentric behaviour, or a belief in the superiority of one's own culture.

5-50 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Managerial Implications Culture and Competitive Advantage –For international companies, the connection between culture and competitive advantage is important because:  this connection suggests which countries are likely to produce the most viable competitors  this connection has important implications for the choice of countries in which to locate production facilities and do business

5-51 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang. Summary of Main Themes In this chapter, we explored how differences in culture across and within countries can affect international business through several themes. The first theme is that business success in a variety of countries requires cross-cultural literacy. Another theme developed in this chapter is that a relationship may exist between culture and the cost of doing business in a country or region. The theme of culture not being static seems to be borne out by the British example, although the rate at which culture can evolve is the subject of some dispute.