1. Fourth Edition International Business

2. CHAPTER 3 Differences in Culture

3. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-3 Chapter Focus We need to learn: Business success in different countries requires cross cultural literacy. People are ain’t what you see..

4. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-4 Chapter Focus We need to learn: Business success in different countries requires cross cultural literacy. People are ain’t what you see. Values are different.

5. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-5 Chapter Focus We need to learn: Business success in different countries requires cross cultural literacy. People are ain’t what you see. Can we follow the adage “when in Rome do as the Romans do”

6. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-6 Chapter Focus We need to learn: Business success in different countries requires cross cultural literacy. People are ain’t what you see. Can we follow the adage “when in Rome do as the Romans do” Some Cultural attributes cause cost of doing business to increase. What are they in the US?

7. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-7 Chapter Focus We need to learn: Business success in different countries requires cross cultural literacy. People are ain’t what you see. Can we follow the adage “when in Rome do as the Romans do” Some Cultural attributes cause cost of doing business to increase. What are they in the US? Cultures change.

8. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-8 What is Culture? A system of norms and values shared among a group of people and, when taken together, constitute a design for living.

9. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-9 Norms Norms: Social rules and guidelines that prescribe appropriate behavior in particular situations. They stem from:

10. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-10 Norms Norms: Social rules and guidelines that prescribe appropriate behavior in particular situations. They stem from Folkways: Routine conventions of everyday life.

11. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-11 Norms Norms: Social rules and guidelines that prescribe appropriate behavior in particular situations. They stem from Folkways: Routine conventions of everyday life. Violations of folkways does not constitute villainy or a character flaw.

12. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-12 Norms Norms: Social rules and guidelines that prescribe appropriate behavior in particular situations. They stem from Folkways: Routine conventions of everyday life. Mores (Essential accepted traditional customs that often become a part of the legal code): They are central to functioning of a society and its social life.

13. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-13 Values Values are: The bedrocks of culture.

14. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-14 Values Values are: The bedrocks of culture. Have emotional significance to individuals and the society

15. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-15 Values Values are: The bedrocks of culture. Have emotional significance to individuals and the society These are abstract ideas about what a group believes to be good, right, and desirable.

16. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-16 Determinants of Culture Culture: Norms and Value Systems Economic Philosophy

17. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-17 Determinants of Culture Culture: Norms and Value Systems Economic Philosophy Political Philosophy

18. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-18 Determinants of Culture Culture: Norms and Value Systems Economic Philosophy Political Philosophy Social Structure

19. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-19 Determinants of Culture Culture: Norms and Value Systems Economic Philosophy Political Philosophy Religion Social Structure

20. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-20 Determinants of Culture Culture: Norms and Value Systems Economic Philosophy Political Philosophy Religion Language Social Structure

21. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-21 Determinants of Culture Culture: Norms and Value Systems Education Economic Philosophy Political Philosophy Religion Language Social Structure

22. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-22 Social Structure Western Structure Is based on:

23. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-23 Social Structure Individualism and Western Structure Is based on:

24. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-24 Social Structure Entrepreneurship Individualism and Western Structure Is based on:

25. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-25 Social Structure Hard to Build Teams Entrepreneurship Individualism and Western Structure Is based on:

26. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-26 Social Structure Mobile Managers Hard to Build Teams Entrepreneurship Individualism and Western Structure Is based on:

27. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-27 Social Structure Mobile Managers Hard to Build Teams Lack of Loyalty Entrepreneurship Individualism and Western Structure Is based on:

28. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-28 Social Structure Group is defined as two or more individuals with a shared sense of identity

29. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-29 Social Structure Group is Group is defined as two or more individuals with a shared sense of identity

30. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-30 Social Structure Group An Eastern Approach to Group is defined as two or more individuals with a shared sense of identity

31. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-31 Social Structure Identity. It leads to Group is An Eastern Approach to Group is defined as two or more individuals with a shared sense of identity

32. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-32 Social Structure Identity. It leads to Group Eastern Nonmobile Managers Group is defined as two or more individuals with a shared sense of identity

33. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-33 Social Structure Lifetime Employment Identity Group Eastern Nonmobile Managers Group is defined as two or more individuals with a shared sense of identity

34. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-34 Social Structure Mobile Managers Hard to Build Teams Lack of Loyalty Entrepreneurship Individual Western And therefore, lack of Entrepreneurship Lifetime Employment Identity Group Eastern Nonmobile Managers Group two or more individuals with a shared sense of identity

35. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-35 Social Stratification Typically is defined by family background, occupation, and income.

36. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-36 Social Stratification Caste: Virtually no mobility

37. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-37 Class Consciousness: May play a role in a firm’s operations Social Stratification Class: some social mobility

38. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-38 Religion Shared beliefs and rituals concerned with the realm of the sacred. Ethical Systems: Moral principles or values used to guide and shape behavior. Shapes attitudes toward work and entrepreneurship and can affect the cost of doing business.

39. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-39 World’s Religions

40. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-40 Religion and Economic Implications Christianity “”Protestant Work Ethic” and “The Spirit of Capitalism””. Islam Favors market-based systems. “The Spirit of Capitalism””. No payment or receipt of interest. Hinduism Asceticism may have an impact. Caste system plays a role. Buddhism Little emphasis on entrepreneurial behavior. Confucianism Loyalty, reciprocal obligations, and honesty in dealings.

41. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-41 Language Allows people to communicate.

42. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-42 Language Allows people to communicate. Structures the way the world is perceived.

43. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-43 Language Allows people to communicate. Structures the way the world is perceived. Directs attention to certain features of the world rather than others.

44. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-44 Language Allows people to communicate. Structures the way the world is perceived. Directs attention to certain features of the world rather than others. Helps define culture.

45. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-45 Language Allows people to communicate. Structures the way the world is perceived. Directs attention to certain features of the world rather than others. Helps define culture. Creates separatist tendencies?

46. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-46 Spoken Language

47. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-47 Nonspoken Language Nonverbal cues: eyebrows fingers/thumbs hand gestures feet personal space body gestures

48. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-48 Education Formal education supplements family role in teaching values and norms

49. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-49 Education Formal education supplements family role in teaching values and norms Cultural norms such as respect, obedience, honesty

50. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-50 Education Formal education supplements family role in teaching values and norms Cultural norms such as respect, obedience, honesty Value of personal achievement and competition

51. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-51 Education Formal education supplements family role in teaching values and norms Obligations of citizenship Cultural norms such as respect, obedience, honesty Value of personal achievement and competition

52. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-52 Education Formal education supplements family role in teaching values and norms Focus on facts of social and political nature of society Obligations of citizenship Cultural norms such as respect, obedience, honesty Value of personal achievement and competition

53. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-53 Education Formal education supplements family role in teaching values and norms Focus on facts of social and political nature of society Obligations of citizenship Cultural norms such as respect, obedience, honesty Medium to learn language, conceptual, and math skills Value of personal achievement and competition

54. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-54 Education Formal education supplements family role in teaching values and norms Focus on facts of social and political nature of society Obligations of citizenship Cultural norms such as respect, obedience, honesty For int’l business, it is a determinant of national competitive advantage Medium to learn language, conceptual, and math skills Value of personal achievement and competition

55. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-55 Hofstede Study (IBM) is a general way to look at differences between cultures.

56. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-56 Hofstede Study (IBM) is a general way to look at differences between cultures. 4 dimensions:

57. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-57 Hofstede Study (IBM) is a general way to look at differences between cultures. 4 dimensions: Power distance: How does the society deals with both physical and intellectual diversity of citizens.

58. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-58 Hofstede Study (IBM) is a general way to look at differences between cultures. 4 dimensions: Power distance: How does the society deals with both physical and intellectual diversity of citizens. High power distance: those that allow inequalities to grow over time into inequality of wealth and power.

59. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-59 Hofstede Study (IBM) is a general way to look at differences between cultures. 4 dimensions: Power distance: How does the society deals with both physical and intellectual diversity of citizens. High power distance: those that allow inequalities to grow over time into inequality of wealth and power. Low power distance: those that play down these inequalities

60. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-60 Hofstede Study (IBM) is a general way to look at differences between cultures. 4 dimensions: Power distance: Individualism versus collectivism.

61. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-61 Hofstede Study (IBM) is a general way to look at differences between cultures. 4 dimensions: Power distance: Individualism versus collectivism. Uncertainty avoidance: How much uncertainty and ambiguity is encouraged by the society.

62. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-62 Hofstede Study (IBM) is a general way to look at differences between cultures. 4 dimensions: Power distance: Individualism versus collectivism. Uncertainty avoidance: How much uncertainty and ambiguity is encouraged by the society. Masculinity versus femininity.

63. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-63 Hofstede Study (IBM) is a general way to look at differences between cultures. 4 dimensions: Power distance: Individualism versus collectivism. Uncertainty avoidance: How much uncertainty and ambiguity is encouraged by the society. Masculinity versus femininity. But: Assumption of one-to-one relationship between culture and nation-state.

64. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-64 Hofstede Study (IBM) is a general way to look at differences between cultures. 4 dimensions: Power distance: Individualism versus collectivism. Uncertainty avoidance: How much uncertainty and ambiguity is encouraged by the society. Masculinity versus femininity. But: Assumption of one-to-one relationship between culture and nation-state. Research may be culturally bound.

65. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-65 Hofstede Study (IBM) is a general way to look at differences between cultures. 4 dimensions: Power distance: Individualism versus collectivism. Uncertainty avoidance: How much uncertainty and ambiguity is encouraged by the society. Masculinity versus femininity. But: Assumption of one-to-one relationship between culture and nation-state. Research may be culturally bound. Respondents worked within a single company.

66. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-66 Hofstede Study (IBM) is a general way to look at differences between cultures. 4 dimensions: Power distance: Individualism versus collectivism. Uncertainty avoidance: How much uncertainty and ambiguity is encouraged by the society. Masculinity versus femininity. But: Assumption of one-to-one relationship between culture and nation-state. Research may be culturally bound. Respondents worked within a single company. Work is beginning to look dated (1967-1973).

67. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-67 Work Related Values for Selected Countries Table 3.1

68. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-68 Culture is Dynamic Cultural Change

69. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-69 Culture and Competitive Advantage The connection suggests: Which countries are likely to be the most viable competitors. Which countries in which to locate production facilities and do business.

70. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-70 Culture and Ethics Do the “right” thing. Thomas Donaldson’s Three Principles:

71. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-71 Culture and Ethics Do the “right” thing. Thomas Donaldson’s Three Principles: Respect for core human values (human rights), which determine the absolute moral threshold for all business activities.

72. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-72 Culture and Ethics Do the “right” thing. Thomas Donaldson’s Three Principles: Respect for core human values (human rights), which determine the absolute moral threshold for all business activities. Respect for local tradition.

73. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-73 Culture and Ethics Do the “right” thing. Thomas Donaldson’s Three Principles: Respect for core human values (human rights), which determine the absolute moral threshold for all business activities. Respect for local tradition. Context matters when deciding what is right and what is wrong.