1. Differences in culture
CHAPTER 5
Differences in culture

2. Learning objectives
LO 5.1 Know what is meant by the culture of a society.
LO 5.2 Identify the forces that lead to differences in culture.
LO 5.3 Identify the business and economic implications of differences in culture.
LO 5.4 Understand how differences in culture influence the conduct of business.
LO 5.5 Develop an appreciation for the economic and business implications of cultural change.

3. Introduction It is important to have cross-cultural literacy:
an understanding of how cultural differences across and within nations can affect the way business is practised.
There is a relationship between culture and doing business in a country.
Japan was successful because of their culture.
Cultures change over time.

4. 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’.
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5. What is culture? Values and norms Values: Norms:
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.
Norms:
are the social rules and guidelines that prescribe appropriate behaviour in particular situations
can be subdivided further 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.
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6. What is culture? Values and norms
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.
Attitude towards time
Time as ‘money’
Time is ‘elastic’.
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7. What is culture? Values and norms Rituals and symbols
Rituals and symbols are the most visible manifestations of a culture and constitute the outward expression of deeper values.
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.

8. The determinants of culture
Figure 5.1 The determinants of culture

9. Social structure
A society’s social structure is its basic social organisation.
Two dimensions to consider:
the degree to which the basic unit of social organisation is the individual, as opposed to the group
the degree to which a society is stratified into classes or castes.
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10. Social structure Individuals and groups The individual The group
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.
The group
In many Asian societies, the group is the primary unit of social organisation.
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11. Social structure 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.
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 change in 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.
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12. Social structure Social stratification Significance
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.
Class consciousness is a condition where people tend to perceive themselves in terms of their class background, and this shapes their relationships with others.
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13. Social structure Social stratification Significance
In cultures where there is a great deal of consciousness over the class of others, the way individuals from different classes work together may be very prescribed and strained in some cultures.
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.

14. 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.
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15. Religious and 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.
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16. Religious and ethical systems
Dominant religions across the world
Map 5.1 Predominant world religions
SOURCE: John L. Allen, Student Atlas of World Politics, 9th edn, map 12. Copyright © McGraw-Hill Companies, Inc. All rights reserved. Reprinted by permission of McGraw-Hill Contemporary Learning Series.
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17. Religious and ethical systems
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.
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18. Religious and ethical systems
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.
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19. Religious and ethical systems
Islam
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 which they have been entrusted with.
While Islam is supportive of business, the way business is practiced is prescribed.
Emerging Markets: The Rise of Islamic Banking in Malaysia
Summary
This feature focuses on changes in the Malaysian banking system as the country adopts Islamic banking methods. Because Islamic banks cannot pay or charge interest, they must find an alternate means of making money. Currently, Malaysian banks are experimenting with two different Islamic banking methods, the mudarabah (a contract similar to a profit-sharing scheme) and the murabaha (a contract that involves a mark-up that is paid directly to the bank).
Suggested Discussion Questions
1. Describe the basic difference between Islamic banking and conventional Western banking. Compare and contrast the two Islamic banking methods that are being considered by Malaysian banks. Which method is more likely to be adopted? Explain your answer.
2. Discuss the transition process from conventional Western banking to the Islamic system. What challenges should banks be prepared for?
BIGSTOCK
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20. Religious and ethical systems
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.
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 found in some other religions.
Promotion and adding new responsibilities may not be the goal of an employee, or may be infeasible due to the employee’s caste.
Another Perspective: Adapting to Suit the Local Palate
Summary
This feature describes the unique challenges faced by McDonald’s in India. The cow is considered sacred in India’s Hindu culture, prompting McDonald’s to alter its menu to offer mutton and chicken alternatives to its traditional beef burgers.
Suggested Discussion Questions
How did McDonald’s change its product line to meet the needs of the Indian market? Does the Indian version of McDonald’s still maintain the company’s identity?
How do other countries alter the McDonald’s menu?
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21. Religious and ethical systems
Buddhism
Buddhists stress spiritual growth and the afterlife, rather than achievement while in this world.
Economic implications of Buddhism
Buddhism, practiced 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.
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22. Religious and ethical systems
Confucianism
Religion or philosophy?
Confucianism is practiced mainly in China and teaches the importance of attaining personal salvation through right action.
The need for high moral and ethical conduct and loyalty to others is central in Confucianism.
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23. Religious and ethical systems
Confucianism
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.
In modern organisations based in 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.
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24. Religious and ethical systems
Confucianism
Economic implications of Confucianism
Confucian ethics stress that superiors are obliged to reward the loyalty of their subordinates by bestowing blessings on them.
This Confucian ethic is central to the Chinese concept of guanxi, which refers to relationship networks supported by reciprocal obligations.
Confucian thinkers emphasise that, although dishonest behaviour may yield short-term benefits for the transgressor, dishonesty does not pay in the long run.
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25. Religious and ethical systems
Superstitions
Like religion, superstitions play an important role in the daily life of people as well as impacting on how business is conducted.
The 5000-year-old Chinese culture is rich in traditions and superstitions.
Numbers play a particularly important role for the Chinese, with their faith in lucky numbers influencing daily life, from choosing a car number plate, phone number, house or apartment number.
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26. Religious and ethical systems
Superstitions
It is no coincidence that the Beijing Olympics began at 8 pm on 8 August 2008 (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, ‘ba’.)
Superstitions are not confined to the Chinese, as many cultures have these beliefs; e.g. the number 13 in Australia and many Western countries—lucky for some, unlucky for others.

27. 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.
Unspoken language
Unspoken language such as facial expressions and hand gestures can have different interpretations in different cultures. Misunderstandings are common.
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28. Language Kinesics: gestures are not universal
Figure 5.2 Kinesics: gestures are not universal. This common gesture has different meanings internationally.
SOURCE: Roger E. Axtell, Gestures, New York: John Wiley, 1998.

29. 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, training and educational opportunities available to a country’s citizens can also give it a competitive advantage in the market and make it a more or less attractive place for expanding business.

30. 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 that may help us understand differences in culture were proposed by Edward Hall and Mildred Hall, and by Geert Hofstede.
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31. 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.
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32. Culture and the workplace
Cultural context
Low-context culture:
A culture in which the speaker’s message is conveyed explicitly by spoken words.
Most of the individualistic Western countries such as Australia, New Zealand, the United States, Canada and most of Western Europe tend to be low-context cultures. In these countries explicit communication is preferred.
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33. Culture and the workplace
Cultural context
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.
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34. Culture and the workplace
Cultural context
Geert Hofstede isolated four dimensions that he claimed summarised different cultures:
Power distance focuses on how a society deals with the fact that people are unequal in physical and intellectual capabilities.
Individualism versus collectivism focuses on the relationship between the individual and his or her fellows.
Uncertainty avoidance measures the extent to which different cultures socialise their members into accepting ambiguous situations and tolerating ambiguity.
Masculinity versus femininity looks at the relationship between gender and work roles.
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35. Culture and the workplace
Cultural context
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, which is now referred to as long-term orientation:
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.
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36. Culture and the workplace
Work-related values for selected countries (Hofstede)
Table 5.1 Work-related values for selected countries

37. 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.

38. Focus on 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 behavior, or a belief in the superiority of one’s own culture.
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39. Focus on managerial implications
Culture and competitive advantage
For international companies, the connection between culture and competitive advantage is important because:
the connection suggests which countries are likely to produce the most viable competitors
the connection between culture and competitive advantage has important implications for the choice of countries in which to locate production facilities and do business.
Internet Extra: To learn more about international business etiquette, go to
Choose a country, then find three fun facts about your country. Compare these to those in other countries. What are some areas where cultural misunderstandings could occur?
How does Hofstede assess your country? Based on what you’ve read, do you agree?

40. Summary of main themes
This chapter 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.
Culture is not static. It can and does evolve, although the rate at which culture can change is the subject of some dispute.