International Business 9e By Charles W.L. Hill McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 4 Differences in Culture

4-3 How Do Cultural Differences Affect International Business?  Understanding and adapting to the local cultural is important international companies  cross-cultural literacy - an understanding of how cultural differences across and within nations can affect the way in which business is practiced  cross-cultural literacy is important for business success  A relationship may exist between culture and the costs of doing business in a country or region  MNEs can be agents of cultural change  McDonald’s

4-4 What Is Culture?  Culture - a system of values and norms that are shared among a group of people and that when taken together constitute a design for living where  values are abstract ideas about what a group believes to be good, right, and desirable  norms are the social rules and guidelines that prescribe appropriate behavior in particular situations  Society - a group of people who share a common set of values and norms

4-5 What Are Values And Norms?  Values provide the context within which a society’s norms are established and justified and form the bedrock of a culture  Norms include  folkways - the routine conventions of everyday life  mores - norms that are seen as central to the functioning of a society and to its social life

4-6 How Are Culture, Society, And The Nation-State Related?  The relationship between a society and a nation state is not strictly one-to-one  Nation-states are political creations  can contain one or more cultures  A culture can embrace several nations

4-7 What Determines Culture?  The values and norms of a culture evolve over time  Determinants include  religion  political and economic philosophies  education  language  social structure

4-8 What Determines Culture? Determinants of Culture

4-9 What Is A Social Structure?  Social structure - a society’s basic social organization  Consider  the degree to which the basic unit of social organization is the individual, as opposed to the group  the degree to which a society is stratified into classes or castes

4-10 How Are Individuals And Groups Different?  A group is an association of two or more people who have a shared sense of identity and who interact with each other in structured ways on the basis of a common set of expectations about each other’s behavior  individuals are involved in families, work groups, social groups, recreational groups, etc.  Societies place different values on groups

4-11 How Are Individuals And Groups Different?  In Western societies, there is a focus on the individual  individual achievement is common  dynamism of the U.S. economy  high level of entrepreneurship  But, creates a lack of company loyalty and failure to gain company specific knowledge  competition between individuals in a company instead of than team building  less ability to develop a strong network of contacts within a firm

4-12 How Are Individuals And Groups Different?  In many Asian societies, the group is the primary unit of social organization  discourages job switching between firms  encourages lifetime employment systems  leads to cooperation in solving business problems  But, might also suppress individual creativity and initiative

4-13 What Is Social Stratification?  All societies are stratified on a hierarchical basis into social categories, or social strata  individuals are born into a particular stratum  Must consider 1.mobility between strata 2.the significance placed on social strata in business contexts

4-14 What Is Social Stratification? 1.Social mobility - the extent to which individuals can move out of the strata into which they are born  caste system - closed system of stratification in which social position is determined by the family into which a person is born  change is usually not possible during an individual's lifetime  class system - form of open social stratification  position a person has by birth can be changed through achievement or luck

4-15 What Is Social Stratification? 2.The significance attached to social strata in business contacts  class consciousness - a condition where people tend to perceive themselves in terms of their class background, and this shapes their relationships with others  an antagonistic relationship between management and labor raises the cost of production in countries with significant class differences

4-16 How Do Religious And Ethical Systems Differ?  Religion - a system of shared beliefs and rituals that are concerned with the realm of the sacred  Four religions dominate society 1.Christianity 2.Islam 3.Hinduism 4.Buddhism 5.Confucianism is also important in influencing behavior and culture in many parts of Asia

4-17 How Do Religious And Ethical Systems Differ? World Religions

4-18 How Do Religious And Ethical Systems Differ?  Ethical systems - a set of moral principles, or values, that are used to guide and shape behavior  Religion and ethics are often closely intertwined  ex. Christian or Islamic ethics

4-19 What Is Christianity?  Christianity  the world’s largest religion  found throughout Europe, the Americas, and other countries settled by Europeans  the Protestant work ethic (Max Weber, 1804)  hard work, wealth creation, and frugality is the driving force of capitalism

4-20 What Is Islam?  Islam  the world’s second largest religion dating to AD 610  there is only one true omnipotent God  an all-embracing way of life that governs one's being  associated in the Western media with militants, terrorists, and violent upheavals  but, in fact teaches peace, justice, and tolerance  fundamentalists have gained political power and blame the West for many social problems  people do not own property, but only act as stewards for God  supportive of business, but the way business is practiced is prescribed

4-21 What Is Hinduism?  Hinduism  practiced primarily on the Indian sub-continent  focuses on the importance of achieving spiritual growth and development, which may require material and physical self-denial  Hindus are valued by their spiritual rather than material achievements  promotion and adding new responsibilities may not be important, or may be infeasible due to the employee's caste

4-22 What Is Buddhism?  Buddhism  has about 350 millions followers  stresses spiritual growth and the afterlife, rather than achievement while in this world  does not emphasize wealth creation  entrepreneurial behavior is not stressed  does not support the caste system, individuals do have some mobility and can work with individuals from different classes

4-23 What Is Confucianism?  Confucianism  ideology practiced mainly in China  teaches the importance of attaining personal salvation through right action  high morals, ethical conduct, and loyalty to others are stressed  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

4-24 What Is The Role Of Language In Culture?  Language - the spoken and unspoken (nonverbal communication such as facial expressions, personal space, and hand gestures ) means of communication  countries with more than one language often have more than one culture  Canada, Belgium, Spain

4-25 What Is The Role Of Language In Culture?  Language is one of the defining characteristics of culture  Chinese is the mother tongue of the largest number of people  English is the most widely spoken language in the world  English is also becoming the language of international business  but, knowledge of the local language is still beneficial, and in some cases, critical for business success  failing to understand the nonverbal cues of another culture can lead to communication failure

4-26 What Is The Role Of Education In Culture?  Formal education is the medium through which individuals learn many of the language, conceptual, and mathematical skills that are indispensable in a modern society  important in determining a nation’s competitive advantage  Japan’s postwar success can be linked to its excellent education system  general education levels can be a good index for the kinds of products that might sell in a country  ex. impact of literacy rates

4-27 How Does Culture Impact The Workplace?  Management processes and practices must be adapted to culturally-determined work-related values  Geert Hofstede studied culture using data collected from 1967 to 1973 for 100,000 employees of IBM  Hofstede identified four dimensions that summarized different cultures

4-28 How Does Culture Impact The Workplace?  Hofstede’s dimensions of culture: 1.Power distance - how a society deals with the fact that people are unequal in physical and intellectual capabilities 2.Uncertainty avoidance - the relationship between the individual and his fellows 3.Individualism versus collectivism - the extent to which different cultures socialize their members into accepting ambiguous situations and tolerating ambiguity 4.Masculinity versus femininity -the relationship between gender and work roles

4-29 How Does Culture Impact The Workplace? Work-Related Values for 20 Countries

4-30 How Does Culture Impact The Workplace?  Hofstede later expanded added a fifth dimension called Confucian dynamism or long-term orientation  captures attitudes toward time, persistence, ordering by status, protection of face, respect for tradition, and reciprocation of gifts and favors  Japan, Hong Kong, and Thailand scored high on this dimension  the U.S. and Canada scored low

4-31 Was Hofstede Right?  Hofstede’s work has been criticized for several reasons  made the assumption there is a one-to-one relationship between culture and the nation-state  study may have been culturally bound  used IBM as sole source of information  culture is not static – it evolves  But, it is a starting point for understanding how cultures differ, and the implications of those differences for managers

4-32 Does Culture Change?  Culture evolves over time  changes in value systems can be slow and painful for a society  Social turmoil - an inevitable outcome of cultural change  as countries become economically stronger, cultural change is particularly common  economic progress encourages a shift from collectivism to individualism  globalization also brings cultural change

4-33 What Do Cultural Differences Mean For Managers? 1.It is important to develop cross-cultural literacy  companies that are ill informed about the practices of another culture are unlikely to succeed in that culture  To avoid being ill-informed  consider hiring local citizens  transfer executives to foreign locations on a regular basis  Managers must also guard against ethnocentrism  a belief in the superiority of one's own culture

4-34 What Do Cultural Differences Mean For Managers? 2.There is a connection between culture and national competitive advantage  suggests which countries are likely to produce the most viable competitors  has implications for the choice of countries in which to locate production facilities and do business