1. Culture! Thursday, November 2

2. What is culture? « Culture is the integrated sum total of learned behavioral traits that are shared by members of a society » (Hoebel). « Culture is the integrated sum total of learned behavioral traits that are shared by members of a society » (Hoebel). What are some examples of learned behavioral traits that are shared in society? What are some examples of learned behavioral traits that are shared in society?

3. 3 fundamentals: Culture is a total pattern of behavior that is consistent and compatible in its components. It is not a collection of random behaviors… Culture is a total pattern of behavior that is consistent and compatible in its components. It is not a collection of random behaviors… Culture is a learned behavior. It is not biologically transmitted. It depends on environment, not heredity. Culture is a learned behavior. It is not biologically transmitted. It depends on environment, not heredity. Culture is behavior that is shared by a group of people, a society. It is the distinctive way of life of a people. Culture is behavior that is shared by a group of people, a society. It is the distinctive way of life of a people.

4. Learned behavior can mean almost anything, from the way we dress to the way we speak to the food we choose to eat. Whenever we brush our teeth, cross our legs, send our parents' a birthday card, kiss someone, listen to music, or go out for recreation we are practicing learned behaviors which are a part of our culture.

5. So what should be know about Culture Understanding the cultural environment will help in analyzing the other macro- environments (political, legal, economic…)

6. Two levels of cultural diversity External cultural diversity External cultural diversity Cultural determinants influencing purchasing and consumption behaviors (Who buys? What? Where? How? Why?) Cultural determinants influencing purchasing and consumption behaviors (Who buys? What? Where? How? Why?) Cultural determinants influencing negotiations (relationships with suppliers, buyers, partners) Cultural determinants influencing negotiations (relationships with suppliers, buyers, partners) Internal cultural diversity Internal cultural diversity Observed within all MNCs Observed within all MNCs Cultural differences that affect the way subsidiaries work together Cultural differences that affect the way subsidiaries work together Explicit culture: languages, behavior, know-how, institutions (directly observable) Implicit culture: moral values, learning process, beliefs

7. A new term to add A subsidiary, in business, is an entity which is controlled by another entity. The controlled entity is called a company or Corporation. A subsidiary, in business, is an entity which is controlled by another entity. The controlled entity is called a company or Corporation.businesscompany Corporationbusinesscompany Corporation The most common way that control of a subsidiary is achieved is through the ownership of shares in the subsidiary by the company. These shares give the company the necessary votes to determine the composition of the board of the subsidiary and so exercise control. The most common way that control of a subsidiary is achieved is through the ownership of shares in the subsidiary by the company. These shares give the company the necessary votes to determine the composition of the board of the subsidiary and so exercise control.

8. There are quite a few reasons why companies have subsidiaries, but one of the most important one is. Risk: Many businesses use subsidiaries to manage risk. This is achieved usually by setting up a subsidiary corporation to undertake the higher risk venture. If that venture subsequently become subject to litigation or liability, legally the subsidiary corporation would be liable and not the parent (unless the parent made guarantees, in which case the parent is liable for the guarantees it made). Risk: Many businesses use subsidiaries to manage risk. This is achieved usually by setting up a subsidiary corporation to undertake the higher risk venture. If that venture subsequently become subject to litigation or liability, legally the subsidiary corporation would be liable and not the parent (unless the parent made guarantees, in which case the parent is liable for the guarantees it made). Risk

9. According to Hoebel… There are 3 types of cultural norms in terms of behavior: 10% of norms are technical: 10% of norms are technical: explicit, logical and transferable; written norms of a society (laws, technical manuals, rules, etc…) explicit, logical and transferable; written norms of a society (laws, technical manuals, rules, etc…) 30% of norms are formal: 30% of norms are formal: explicit, moral and transmissible; traditions of a culture; learned through education (manners, courtesy…) explicit, moral and transmissible; traditions of a culture; learned through education (manners, courtesy…) 60% of norms are informal: 60% of norms are informal: implicit, instinctive and imitated; facial expressions, body language, cultural perspective on time and space…) implicit, instinctive and imitated; facial expressions, body language, cultural perspective on time and space…)

10. How do we measure cultural distance? Hofstede’s Cultural Index - National character survey - 116.000 IBM employees - 43 countries and 20 languages Five different poles make up the cultural index: - Power distance - Uncertainty avoidance - Individualism - Masculinity - (Long term orientation)

11. Hofstede’s cultural index Power distance (PDI): shows class or social structure. It shows how well a society accepts an uneven distribution of power in organizations and institutions and focuses on the degree of equality, or inequality, between people in the country’s society. Power distance (PDI): shows class or social structure. It shows how well a society accepts an uneven distribution of power in organizations and institutions and focuses on the degree of equality, or inequality, between people in the country’s society. Uncertainty avoidance (UAI): shows how threatened a society feels by uncertain or unstable situations. It focuses on the level of tolerance for uncertainty and ambiguity within the society. Uncertainty avoidance (UAI): shows how threatened a society feels by uncertain or unstable situations. It focuses on the level of tolerance for uncertainty and ambiguity within the society. Individualism (IDV): focuses on the degree that society reinforces individual or collective achievement and interpersonal relationships. It distinguishes between societies where the group and being a member is important (collectively) and societies where the group is less important (individualism). Individualism (IDV): focuses on the degree that society reinforces individual or collective achievement and interpersonal relationships. It distinguishes between societies where the group and being a member is important (collectively) and societies where the group is less important (individualism).

12. Hofstede’s cultural index Masculinity (MAS): focuses on the degree the society reinforces, or does not reinforce, the traditional masculine work role model of male achievement, control and power. Indicates the degree of gender differentiation and the importance of masculine values (assertiveness, money, material goods…). Masculinity (MAS): focuses on the degree the society reinforces, or does not reinforce, the traditional masculine work role model of male achievement, control and power. Indicates the degree of gender differentiation and the importance of masculine values (assertiveness, money, material goods…). Long-term orientation (LTO): focuses on the degree the society embraces, or does not embrace, long-term devotion to traditional, forward thinking values. Indicates whether the country prescribes to the values of long-term commitments and respect for tradition. Long-term orientation (LTO): focuses on the degree the society embraces, or does not embrace, long-term devotion to traditional, forward thinking values. Indicates whether the country prescribes to the values of long-term commitments and respect for tradition.

13. Examples of Hofstede’s Dimensions

14. Uncertainty Avoidance Index (UAI) deals with a society's tolerance for uncertainty and ambiguity; it ultimately refers to man's search for Truth. Uncertainty Avoidance Index (UAI) deals with a society's tolerance for uncertainty and ambiguity; it ultimately refers to man's search for Truth. It indicates to what extent a culture programs its members to feel either uncomfortable or comfortable in unstructured situations. Unstructured situations are novel, unknown, surprising, different from usual. Uncertainty avoiding cultures try to minimize the possibility of such situations by strict laws and rules, safety and security measures, and on the philosophical and religious level by a belief in absolute Truth; 'there can only be one Truth and we have it'. It indicates to what extent a culture programs its members to feel either uncomfortable or comfortable in unstructured situations. Unstructured situations are novel, unknown, surprising, different from usual. Uncertainty avoiding cultures try to minimize the possibility of such situations by strict laws and rules, safety and security measures, and on the philosophical and religious level by a belief in absolute Truth; 'there can only be one Truth and we have it'. People in uncertainty avoiding countries are also more emotional, and motivated by inner nervous energy. The opposite type, uncertainty accepting cultures, are more tolerant of opinions different from what they are used to; they try to have as few rules as possible, and on the philosophical and religious level they allow many currents to flow side by side. People within these cultures are not expected by their environment to express emotions. People in uncertainty avoiding countries are also more emotional, and motivated by inner nervous energy. The opposite type, uncertainty accepting cultures, are more tolerant of opinions different from what they are used to; they try to have as few rules as possible, and on the philosophical and religious level they allow many currents to flow side by side. People within these cultures are not expected by their environment to express emotions.

15. Intracultural differences Few cultures are homogeneous in terms of cultural traits and norms. Few cultures are homogeneous in terms of cultural traits and norms. Intracultural differences based on nationality, religion, race, language or geographic areas have resulted in the emergence of distinct subcultures. Intracultural differences based on nationality, religion, race, language or geographic areas have resulted in the emergence of distinct subcultures. It is important to distinguish relevant cross- cultural and intracultural differences and isolate potential opportunities and problems. It is important to distinguish relevant cross- cultural and intracultural differences and isolate potential opportunities and problems. However, international business may act as a change agent by introducing new products or ideas or practices. However, international business may act as a change agent by introducing new products or ideas or practices.

16. To summarize on culture… Cultural distance is essential in international business Cultural distance is essential in international business Culture is complex and multi-dimensional Culture is complex and multi-dimensional Acculturation (adjusting and adapting to a specific culture other than one’s own) is one of the keys to success in international operations Acculturation (adjusting and adapting to a specific culture other than one’s own) is one of the keys to success in international operations