1. © 2013 Cengage Learning. All rights reserved. CHAPTER 3 GLOBAL2  PENG © David Lomax/Robert Harding/Glowimages.com 1

2. © 2013 Cengage Learning. All rights reserved. CHAPTER 3 LEARNING OBJECTIVES After studying this chapter, you should be able to: 1.Explain where informal institutions come from. 2.Define culture and articulate its two main manifestations. 3.Articulate three ways to understand cultural differences. 4.Explain why understanding cultural differences is crucial for global business. 5.Explain why ethics is important. 6.Identify ways to combat corruption. 7.Identify norms associated with strategic responses when firms deal with ethical challenges. 8.Explain how you can acquire cross-cultural literacy. 2

3. © 2013 Cengage Learning. All rights reserved. LO1: WHERE DO INFORMAL INSTITUTIONS COME FROM? Informal institutions Socially transmitted information, part of the heritage we call cultures, ethics, and norms. 3

4. © 2013 Cengage Learning. All rights reserved. LO1: ETHNOCENTRISM Ethnocentrism: A self-centered mentality held by a group of people who perceive their own culture, ethics, and norms as natural, rational, and morally right 4

5. © 2013 Cengage Learning. All rights reserved. LO2: CULTURE “the collective programming of the mind which distinguishes the members of one group or category of people from another.” Geert Hofstede 5

6. © 2013 Cengage Learning. All rights reserved. LO2: TWO COMPONENTS OF CULTURE 6 Culture LanguageReligion Lingua franca – a global business language.

7. © 2013 Cengage Learning. All rights reserved. LO3: CONTEXT APPROACH Context is the background against which interaction takes place. 7

8. © 2013 Cengage Learning. All rights reserved. LO3: CLUSTER APPROACH Groups countries that share similar cultures into a cluster. 8

9. © 2013 Cengage Learning. All rights reserved. LO3: DIMENSION APPROACH Focuses on multiple dimensions of cultural differences both within and across cultures. Sources: G. Hofstede, “Cultural constraints in management theories,” Academy of Management Executive 7, no. 1 (1993): 81–94 and G. Hosftede, Cultures and Organizations: Software of the Mind (New York: McGraw-Hill, 1997) 25, 26, 53, 84, 113, 166. For newest update, see http://www.geerthofstede.com. 9

10. © 2013 Cengage Learning. All rights reserved. LO4: CULTURAL DIFFERENCES AND GLOBAL BUSINESS  Contracts in high-context vs. low-context countries.  Preparations for countries in other clusters.  Empowerment in high and low distance countries.  Entrepreneurship and individualism. 10

11. © 2013 Cengage Learning. All rights reserved. LO4: CULTURAL DIFFERENCES AND GLOBAL BUSINESS 11

12. © 2013 Cengage Learning. All rights reserved. LO5: ETHICS The principles, standards, and norms of conduct governing individual and firm behavior. There is overlap between what is ethical and legal. But in some cases, what is legal may be unethical. 12

13. LO5: THE IMPORTANCE OF ETHICS Three views on firms’ ethical motivations:  Negative view  Positive view  Instrumental view © 2013 Cengage Learning. All rights reserved.13

14. LO5: MANGAING ETHICS OVERSEAS Three Core Principles Respect for human dignity and basic rights Respect for local traditions Respect for institutional context © 2013 Cengage Learning. All rights reserved. Sources: T. Donaldson, “Values in tension: Ethics away from home,” Harvard Business Review (September-October 1996): 4–11 and J. Weiss, Business Ethics, 4th ed. (Cincinnati: South-Western Thomson, 2006). 14

15. LO6: CORRUPTION The abuse of public power for private benefits usually in the form of bribery, in cash or in kind. © 2013 Cengage Learning. All rights reserved.15

16. LO6: COMBATING CORRUPTION  Transparency International  Foreign Corrupt Practices Act (FCPA) © 2013 Cengage Learning. All rights reserved.16

17. LO7: STRATEGIC RESPONSES TO ETHICAL CHALLENGES © 2013 Cengage Learning. All rights reserved.17

18. LO8: CULTURAL INTELLIGENCE Managers should enhance their cultural intelligence – an individual’s ability to understand and adjust to new cultures. Managers should be aware of the prevailing norms and their transitions globally. © 2013 Cengage Learning. All rights reserved.18

19. LO8: ACQUIRING CULTURAL INTELLIGENCE Three phases… Awareness Knowledge Skills © 2013 Cengage Learning. All rights reserved.19

20. LO8: CULTURAL INTELLIGENCE © 2013 Cengage Learning. All rights reserved.20

21. DEBATE: ARE CULTURES CONVERGING OR DIVERGING? Some argue for a convergence toward “modern” Western values such as individualism and consumerism. Divergence – others argue that Westernization in consumption does not indicate Westernization of values. Or…Crossvergence © 2013 Cengage Learning. All rights reserved.21