1. International Business Environments & Operations
Chapter 2
The Cultural Environments
Facing Business
International Business Environments and Operations 15e by Daniels, Radebaugh, and Sullivan
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2. Introduction
Culture refers to the learned norms based on values, attitudes, and beliefs of a group of people
Group of people have different cultures. E.g., youth culture, national culture, organizational culture
People from different cultures differ on values, attitudes, and beliefs
Culture is an integral part of a nation’s operating environment
It is important for companies to understand and adjust to ever-changing operating environments.
every business function is subject to potential cultural differences
What is culture? Culture refers to the learned norms based on values, attitudes, and beliefs of a group of people. Culture can be based on nationality, ethnicity, gender, religion, work organization, profession, age, political party membership, income level, and so on. International business activities incorporate people from all different groups and backgrounds, thus, every business function is subject to cultural differences.

3. Cultural Factors Affecting International Business Operations
Introduction
Cultural Factors Affecting International Business Operations
This Figure shows the cultural factors affecting international business operations.

4. Knowing Culture
Business involves people: Every business employs, sells to, buys from, and is owned and regulated by people.
Every business function (managing, marketing, transporting, purchasing, dealing, security funds) is subject to cultural differences
International Business involves people from different cultures

5. Advantages of knowing and sensitivity to Culture
Companies need to decide when to make cultural adjustments
Fostering cultural diversity can allow a company to gain a global competitive advantage
(Cultural diversity: bringing together people of diverse backgrounds and experience)
Cultural collision occur when divergent cultures come into contact
TWO conditions
when a company implements practices that are less effective
when employees encounter distress because of difficulty in accepting or adjusting to foreign behaviors
Most people recognize that cross-country differences exist, but they don’t always agree on exactly what they are. It can be beneficial to foster cultural diversity in some cases. Bringing together people of diverse backgrounds and experience can give companies a deeper knowledge about products and services and ways in which to produce and deliver them.

6. Cultural Awareness Learning the cultural differences
Discuss the cause of cultural differences, rigidities, and changes
Consult with knowledgeable people at home and abroad
Go there directly and interact with people
Problem areas that can hinder managers’ cultural awareness:
Subconscious reactions to circumstances
The assumption that all societal subgroups are similar (ethnocentrism)
Comparisons may be incorrect if responses were corrected for social desirability
Specific variations are overlooked when averages are observed
Cultures evolve and change over time
In order to increase their chance for success, managers need to develop their awareness of and sensitivity to other cultures. They can do this by educating themselves. Gathering some basic research on another culture can be instructive. In addition, managers should consider the information they gather to determine if it perpetuates unwarranted stereotypes, covers only limited facets of a country and its culture, or relies on outdated data. Managers should also observe the behavior of those people who have garnered the kind of respect and confidence they themselves will need.

7. Culture and the Nation-State
Nation as a point of reference
Similarity among people is a cause and an effect of national boundaries
People share attributes such as values, language, race
National identity represented through rites and symbols like flags, parades, rallies, and preservation of national sites, documents, monuments, and museums (promote a common perception of history)
laws apply primarily along national lines
Country-by-country analysis can be difficult because subcultures, ethnic groups, races, and classes exist within nations
similarities link groups from different countries
We often use the idea of a nation when we talk about culture. In general, within national borders, people largely share such essential attributes as values, language, and race. There is a feeling of “we” that casts foreigners as “they.” Rites and symbols—flags, parades, rallies—and the preservation of national sites, documents, monuments, and museums promote a common perception of history and perpetuates national identity.

8. How cultures Form and Change
Transformed from parent to child, teacher to pupil, social leader to follower, and peer to peer
By age 10, most children have their basic value systems
Both individual and collective values may evolve over time
Sources of Change
Change by choice: as a reaction to social and economic situations that present people with new alternatives
Change by imposition (cultural imperialism): imposed introduction of certain elements into a culture from an alien culture, such as, forced change in law by an occupying country, overtime become part of the subject culture.

9. How cultures Form and Change
Contact among countries brings change (people travel and access foreign information through a variety of sources)
The process is known as cultural diffusion
When cultural diffusion results in mixing cultural elements, the process is known as creolization

10. Language: Cultural Diffuser and Stabilizer
A common language within a country is a unifying force. Language is an integral part of a culture
Therefore, linguistic changes are regulated
A shared language between nations facilitates international business
Native English speaking countries account for a third of the world’s production
English is the main international language of business; functional and operating language
English media is very influential in promoting US lifestyle
Hybrid tongue: intrusion of English into another language: Spanglish and Chinglish
Language acts both as a diffuser of culture and as a stabilizer. On one hand, a common language unifies a culture. However, when people from different areas speak the same language, culture spreads more easily. So, there’s greater cultural homogeneity among all English-speaking countries and among all Spanish-speaking countries than there is between English-speaking countries and Spanish-speaking countries.
When nations share a language, business is easier because there’s no need for time consuming and expensive translations.
Often, people studying languages choose the ones that are most useful in interacting with other countries.

11. Religion: Cultural Stabilizer
Religion impacts almost every business function
Centuries of profound religious influence continue to play a major role in shaping cultural values and behavior (Buddhism, Hinduism, Islam, Christianity, etc.)
many strong values are the result of a dominant religion
Religion may lead to much disagreement and violence
Religion inhibits production and/or sale of certain products or work activities at certain time or day
Religion also acts as a cultural stabilizer. Dominant religions can have a profound influence in shaping cultural values and behavior.
Many religions even impact specific beliefs that may affect business, such as inhibiting the sale of certain products or the performance of work at certain times. McDonald’s, for example, recognizes the Hindu and Muslim influences in India and chooses not to sell beef or pork in the country. Similarly, El Al, the Israeli national airline, does not fly on Saturday, the Jewish Sabbath.
When rival religions or factions fight for political control in a country, business is often negatively affected. You might think of property damage, broken supply chains, or breaches in connections with customers as examples.

12. 1- Social Stratification
Behavioral Practices Affecting Business
1- Social Stratification
Attitudes and values constitute cultural variables
Decisions about what products to sell AND decisions about organizing, managing, and controlling operations are influenced by attitudes and behaviors within cultures
Social ranking (social class or status within a culture) is determined by
an individual’s achievements and qualifications
an individual’s affiliation with, or membership in, certain groups
Social stratification determines an individual’s class, status, and financial rewards within a culture. It’s determined by individual achievements and qualifications, and by affiliation and membership in groups.

13. Social Stratification
Group affiliations can be
Ascribed group memberships (affiliation determined by birth)
Gender, family, age, caste, and ethnic, racial, or national origin
Acquired group memberships (by choice)
based on religion, political affiliation, professional association
Two other factors that are important
education (how much and from where) and social connections (who do you know and in what places)
An individual may belong to a group because of age, gender, family, racial, or ethnic variables. This is known as ascribed group membership. When membership is based on religion, political affiliation, or professional association it’s an acquired group membership.
In general, equalitarian societies tend to put more emphasis on acquired group membership. Keep in mind that education and social connections also impact an individual’s rank in a society.

14. More on Social Stratification
Performance orientation: competence or seniority (humaneness)
Open vs Closed societies: Open or egalitarian societies give less importance to ascribed group membership
Gender-based: gender equality and discriminations or choices of profession
Age-based: age of vote, marry, license to drive, buy alcohol, retire, serve the nation
Family-based: stay with family run business
Prestige of jobs: some jobs win more social respect and are better paid

15. 2- Work Motivation
The motivation to work and Work ethics differ across cultures
Materialism: The desire for material wealth is a prime motivation to work
promotes economic development– allows higher productivity and low production costs
Rewards offered and rewards expectation: People are motivated to work when the rewards for success are high
masculinity-femininity index
high masculinity score prefers “to live to work” than “to work to live”. They are more assertive, aggressive, and confronting.
Low masculinity scorers prefer smooth and friendly social relationships, consider welfare
The desire to work differs across cultures. In countries where material wealth is valued, there is generally a greater motivation to work. This of course, also helps to promote economic development. In fact, the higher level of development that exists in some countries can be explained by the work of Max Weber who suggested that self-discipline, hard work, honesty, and a belief in a just world foster work motivation and, thus, economic growth.
Typically, people are also more eager to work when the potential rewards are high.
We can also measure attitudes toward work and achievement using the masculinity-femininity index. The degree to which individuals are assertive, confrontational, and aggressive in their relationships with others varies across borders. These attitudinal differences help explain why an international company may encounter managers abroad who behave differently from what it expects or prefers.

16. Work Motivation Hierarchy of needs theory
Individuals will fill lower-level needs before moving to higher level needs
Once a need is satisfied, it is no more motivating
Different cultures place different degree of importance to different needs
That is, there are
Different reward preferences
The hierarchy-of-needs theory suggests that people fill lower-level needs before filling higher level needs. An understanding of this theory is helpful to managers as they make decisions regarding reward preferences of employees in different countries. In very poor countries, for example, workers might be motivated with enough compensation to simply satisfy their needs for food and shelter. Workers in other countries may be motivated by other needs.

17. Relationship Preferences
Relationship preferences interacting with superiors/subordinates
Power distance
high power distance implies little superior-subordinate interaction or little consultation
autocratic (ruling with unlimited authority) or paternalistic (regulating conduct by supplying needs) management style
low power distance implies consultative/participative style
Individualism versus collectivism
high individualism – welcome challenges
high collectivism – prefer safe work environment
Relationships preferences – and more specifically the interactions between bosses, subordinates, and peers – also differ from country to country.
Power distance refers to the general relationship between superiors and subordinates. Where it is high, people prefer little consultation between superiors and subordinates. Employees usually prefer one of two management styles: autocratic -ruling with unlimited authority - or paternalistic - regulating conduct by supplying needs. Where power distance is low, they prefer “consultative” styles.
Individualism is characterized by a preference for fulfilling leisure time and improving skills outside the organization. It also implies a low preference for receiving compensation in the form of benefits and a high preference for personal decision making and on-the-job challenges.
In contrast, collectivism encourages dependence on the organization and a preference for thorough training, satisfactory workplace conditions, and good benefits.

18. Risk Taking Behavior Risk taking behavior differs across cultures
Uncertainty avoidance (preference for ‘known’) and handling uncertainty
prefer to stay with the same employer; with clear job instructions
Trust (degree of trust among people)
High trust leads to investments and innovations
Future orientation
delaying gratification (e.g., retirement plans)
Fatalism
attitudes of self-determination versus belief in pre-destined fate or will of God
How people approach risk also varies from country to country. Four types of risks are important: uncertainty avoidance, trust, future orientation, and fatalism.
In cultures where there is high uncertainty avoidance employees prefer following set rules even if breaking them may be in the company’s best interest. Similarly, many consumers are not prepared to risk being early adopters of products.
In cultures where trust is high, the cost of doing business tends to be lower because managers don’t spend much time fussing over every possible contingency and monitoring every action for compliance with certain business principles.
Business decisions can also be influenced by a culture’s attitude toward the future and whether it’s worthwhile to delay gratification in order to invest for the future.
Finally, if people believe strongly in self-determination, they may be willing to work hard to achieve goals and take responsibility for performance. But if they’re fatalistic and believe every event in life is inevitable, they’re less likely to accept the basic cause-and-effect relationship between work and reward.

19. Information and Task Processing
Cultures handle information in different ways
Perception of cues
Obtaining information
low context cultures: prefer first hand and directed to the point information
high context cultures: seek peripheral and indirect information
Obtaining and processing information
Ordering and classifying (e.g., First name and surname)
How information is perceived, obtained, and processed differs from country to country.
In low context cultures people generally regard only firsthand information that bears directly on the subject at hand as being relevant. Managers typically spend little time on small talk and tend to get to the point. In contrast, in high-context cultures people see seemingly peripheral information as pertinent and infer meanings from things said either indirectly or casually.
In monochronic cultures people prefer to work sequentially. So, for example, a transaction with one customer is completed before dealing with another. But in a polychronic culture, people often feel more comfortable working simultaneously on a variety of tasks, such as dealing immediately with multiple customers who need service.
Cultures that prefer to establish overall principles before tackling smaller details take an approach called idealism, while those that focus more on details than on abstract principles take a pragmatic approach.
Keep in mind that an individual’s approach to information processing can affect business in a number of ways. In a culture of pragmatists like the United States, for example, labor negotiations tend to focus on well-defined issues—say, hourly pay increases for a specific bargaining unit. However, in an idealist culture like that of Argentina, labor disputes tend to blur the focus on specific demands as workers tend to rely first on mass action—such as general strikes or political activities—to publicize basic principles.

20. Information and Task Processing
Types of Cultures in how they prcoess information and tasks
Monochronic (work sequentially) polychronic (work simultaneously on various tasks)
Idealism (focus on whole and then parts/issues/details
Pragmatism (focus on parts first and then whole)

21. Selective Perceptions
Selective in perceiving cues
Color (e.g., colors of joy and sadness)
Depth (attention to details; vocabular)
Shape (decent or bold)

22. Communications
Cross border communications do not always translate as intended
Spoken and written language
Silent language (other than spoken or written)
Color (hue and intensity)
Distance (proximity)
Time and punctuality (time as an event)
Body language (kinesics): how people walk, touch, or move their bodies
Prestige (perform services by oneself or otherwise)
Communication across cultures can be problematic when communications are not translated with the same meaning as intended. This problem can occur with not only with spoken and written language and but also with silent language.
Even a slight misuse of words or phrases can have a significant impact on the meaning of a message. Moreover, it’s important to recognize that even when two countries share a language problems can exist. For example, some 4,000 words have different meanings in British and American English.
Silent language refers to a host of nonverbal cues. How these physical cues or “body language” are perceived and interpreted varies between cultures. Many Western countries, for instance, associate black with death ,while white has the same connotation in some parts of Asia. Similar differences exist with perceptions of time and punctuality. In the United States, people usually arrive early for business appointments, a few minutes late for dinner at someone’s home, and a bit later still for large social gatherings. In other countries though, the concept of punctuality in any or all of these situations may be different.
The appropriate distance people maintain during conversations and prestige also differs between countries. For Americans, the customary distance for a business discussion is 5 to 8 feet; for personal business, it’s 18 inches to 3 feet. The much smaller distances common in Latin America can make many Americans quite uncomfortable. Likewise, a U.S. manager who places great faith in objects as cues to prestige may underestimate the status of foreign counterparts who don’t value large, plush offices on high floors. A foreigner may underestimate U.S. counterparts who perform their own services, such as opening their own doors, fetching their own coffee, and answering unscreened phone calls.

23. Body Language Is Not A Universal Language
Communications
Body Language Is Not A Universal Language
These images show how a simple gesture is interpreted quite differently around the world.

24. Dealing with Cultural Differences
Do managers have to alter their customary practices to succeed in countries with different cultures?
Must consider
Host society acceptance/willingness to accommodate
Degree of cultural differences (language, religion, geography, economic development)
cultural distance
GLOBE: Global Leadership Organizational Behavior Effectiveness- clusters countries based on values, attitudes of middle managers towards leadership characteristics
So, are managers required to change their customary practices to match those of the host culture? The answer is not always clear. In general, host cultures don’t expect that foreign managers will totally conform with their norms and values, but it is important that they understand and respect the local culture.
Managers need to consider how they will be received by the host country, and make adjustments accordingly. In many cases, host countries are willing to view foreigners differently. Managers should also be aware that closely clustered countries may not be as alike as they seem, and so adjustments may be necessary in some cases. Women’s roles and behavior, for example, differ substantially from one Arab country to another even though Arab countries overall are similar culturally.
Sometimes, managers going abroad experience culture shock—the frustration that results from having to absorb a vast array of new cultural cues and expectations, and then reverse culture shock when they return home.

25. Cultural Differences Ability to adjust
culture shock (exposure to foreign practices and having to absorb new cues and expectations may be traumatic
Stages of adjusting abroad: Delight, depression and confusion, settlement and job satisfaction
reverse culture shock (after spending some time in another culture, things at home country appear confusing upon return)
Company and management orientation
Adaptation depends on the host and home country culture

26. Dealing with Cultural Differences
Three company and management orientations
Polycentrism
business units abroad should act like local companies
Ethnocentism
home culture is superior to local culture
overlook national differences
Geocentrism
integrate home and host practices
Companies and managers doing business abroad will typically take one of three basic approaches when dealing with foreigners. Those that take a polycentric approach believe that business units abroad should act like local companies. In contrast, those that take an ethnocentric orientation believe that the home culture is superior to the local culture, and therefore national differences can be overlooked. Finally, those that integrate both home and host practices have a geocentric orientation.
Managers should recognize that excessive polycentrism or ethnocentrism can be dangerous. A geocentric approach is often the safest.

27. Strategies for Instituting Change
Value Systems
Cost-Benefit Analysis of change
Resistance to too much change
Participation
Reward Sharing
Opinion Leadership
Timing
Learning Abroad
Companies that choose a geocentric approach to their operations will often combine both home and host practices requiring that people in both countries adapt to some degree. Companies may face some resistance to these changes, and so must manage the process carefully.
There are various ways to implement changes. Companies may need to promote changes in value systems. A cost-benefit analysis of change can reveal whether a change makes sense. Moving too quickly can create additional resistance to change. Many companies find that encouraging stakeholders to become involved in change and sharing the rewards of making changes can be beneficial. Similarly, using the right channels of influence and the right timing can make a big difference in whether change is accepted. Finally, companies should recognize that they can gain important knowledge from other companies in the market. Emulating their methods can often be successful.