International Business

11e

By Charles W.L. Hill

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 Chapter 4

Differences
in
Culture
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 How Do Cultural Differences
Affect International Business?
 Understanding and adapting to the local cultural
is important international companies
 cross-cultural literacy - an understanding of how
cultural differences across and within nations can
affect the way in which business is practiced
 cross-cultural literacy is important for business
success
 A relationship may exist between culture and the
costs of doing business in a country or region
 MNEs can be agents of cultural change
 McDonald’s

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 What Is Culture?
 Culture - a system of values and norms that are
shared among a group of people and that
when taken together constitute a design for
living
where
 values are abstract ideas about what a group believes
to be good, right, and desirable
 norms are the social rules and guidelines that
prescribe appropriate behavior in particular situations
 Society - a group of people who share a
common set of values and norms
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 What Are Values And Norms?
 Values provide the context within which a
society’s norms are established and
justified and form the bedrock of a culture
 Norms include
 folkways - the routine conventions of
everyday life
 mores - norms that are seen as central to the
functioning of a society and to its social life

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 How Are Culture, Society,
And The Nation-State Related?
 The relationship between a society and a
nation state is not strictly one-to-one
 Nation-states are political creations
 can contain one or more cultures
 A culture can embrace several nations

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 What Determines Culture?
 The values and norms of a culture evolve
over time
 Determinants include
 religion
 political and economic philosophies
 education
 language
 social structure

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 What Determines Culture?
Determinants of Culture

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 What Is A Social Structure?
 Social structure - a society’s basic social
organization
 Consider
 the degree to which the basic unit of social
organization is the individual, as opposed to
the group
 the degree to which a society is stratified into
classes or castes

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 How Are Individuals
And Groups Different?
 A group is an association of two or more
people who have a shared sense of
identity and who interact with each other in
structured ways on the basis of a
common set of expectations about each
other’s behavior
 individuals are involved in families, work
groups, social groups, recreational groups,
etc.
 Societies place different values on
groups
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 How Are Individuals
And Groups Different?
 In Western societies, there is a focus on the
individual
 individual achievement is common
 dynamism of the U.S. economy
 high level of entrepreneurship
 But, creates a lack of company loyalty and
failure to gain company specific knowledge
 competition between individuals in a company instead
of than team building
 less ability to develop a strong network of contacts
within a firm

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 How Are Individuals
And Groups Different?
 In many Asian societies, the group is the
primary unit of social organization
 discourages job switching between firms
 encourages lifetime employment systems
 leads to cooperation in solving business
problems
 But, might also suppress individual
creativity and initiative

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 What Is Social Stratification?
 All societies are stratified on a
hierarchical basis into social categories,
or social strata
 individuals are born into a particular
stratum
 Must consider
1. mobility between strata
2. the significance placed on social strata in
business contexts

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 What Is Social Stratification?
1. Social mobility - the extent to which individuals
can move out of the strata into which they are
born
 caste system - closed system of stratification
in which social position is determined by the family
into which a person is born
 change is usually not possible during an
individual's lifetime
 class system - form of open social
stratification
 position a person has by birth can be changed
through achievement or luck

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 What Is Social Stratification?
2. The significance attached to social strata
in business contacts
 class consciousness - a condition where people
tend to perceive themselves in terms of their class
background, and this shapes their relationships with
others
 an antagonistic relationship between management
and labor raises the cost of production in
countries with significant class differences

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 How Do Religious And
Ethical Systems Differ?
 Religion - a system of shared beliefs and
rituals that are concerned with the realm of the
sacred
 Four religions dominate society
1. Christianity
2. Islam
3. Hinduism
4. Buddhism
5. Confucianism is also important in influencing
behavior and culture in many parts of Asia

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 How Do Religious And
Ethical Systems Differ?
World Religions

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 How Do Religious And
Ethical Systems Differ?
 Ethical systems - a set of moral
principles, or values, that are used to
guide and shape behavior
 Religion and ethics are often closely
intertwined
 Example: Christian or Islamic ethics

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 What Is Christianity?
 Christianity
 the world’s largest religion
 found throughout Europe, the Americas, and
other countries settled by Europeans
 the Protestant work ethic (Max Weber,
1804)
 hard work, wealth creation, and frugality is the
driving force of capitalism

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 What Is Islam?
 Islam
 the world’s second largest religion dating to AD 610
 there is only one true omnipotent God
 an all-embracing way of life that governs one's being
 associated in the Western media with militants,
terrorists, and violent upheavals
 but, in fact teaches peace, justice, and
tolerance
 fundamentalists have gained political power and
blame the West for many social problems
 people do not own property, but only act as stewards
for God
 supportive of business, but the way business is
practiced is prescribed
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 What Is Hinduism?
 Hinduism
 practiced primarily on the Indian subcontinent
 focuses on the importance of achieving
spiritual growth and development, which may
require material and physical self-denial
 Hindus are valued by their spiritual rather than
material achievements
 promotion and adding new responsibilities
may not be important, or may be infeasible
due to the employee's caste

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 What Is Buddhism?
 Buddhism
 has about 350 millions followers
 stresses spiritual growth and the afterlife,
rather than achievement while in this world
 does not emphasize wealth creation
 entrepreneurial behavior is not stressed
 does not support the caste system, individuals
do have some mobility and can work with
individuals from different classes

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 What Is Confucianism?
 Confucianism
 ideology practiced mainly in China
 teaches the importance of attaining personal
salvation through right action
 high morals, ethical conduct, and loyalty to
others are stressed
 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

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 What Is The Role
Of Language In Culture?
 Language - the spoken and unspoken
(nonverbal communication such as
facial expressions, personal space, and
hand gestures ) means of
communication
 countries with more than one language often
have more than one culture
 Canada, Belgium, Spain

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 What Is The Role
Of Language In Culture?
 Language is one of the defining characteristics
of culture
 Chinese is the mother tongue of the largest number of
people
 English is the most widely spoken language in the
world
 English is also becoming the language of international
business
 but, knowledge of the local language is still beneficial,
and in some cases, critical for business success
 failing to understand the nonverbal cues of another
culture can lead to communication failure

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 What Is The Role
Of Education In Culture?
 Formal education is the medium through which
individuals learn many of the language,
conceptual, and mathematical skills that are
indispensable in a modern society
 important in determining a nation’s competitive
advantage
 Japan’s postwar success can be linked to
its
excellent education system
 general education levels can be a good index for the
kinds of products that might sell in a country
 Example: impact of literacy rates

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Understanding the culture of a country or region can
provide multinational enterprises with a valuable
competitive advantage and help them to avoid missteps that
could negatively affect their chances at success.

Imagine your school is a country of its own. How would you

describe its culture to a business considering investing
there? What are some values or norms that would be
important for an outsider to understand? Which of the six
determinants of culture play the most significant role in
shaping your school culture?

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 How Does Culture
Impact The Workplace?
 Management processes and practices
must be adapted to culturally determined
work-related values
 Geert Hofstede studied culture using
data collected from 1967 to 1973 for
100,000 employees of IBM
 Hofstede identified four dimensions that
summarized different cultures

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 How Does Culture
Impact The Workplace?
 Hofstede’s dimensions of culture:

1. Power distance - how a society deals with

the fact that people are unequal in physical
and intellectual capabilities
2. Uncertainty avoidance - the relationship
between the individual and his or her fellows
3. Individualism versus collectivism - the extent
to which different cultures socialize their
members into accepting ambiguous
situations and tolerating ambiguity
4. Masculinity versus femininity - the
relationship between gender and work roles
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 How Does Culture
Impact The Workplace?
Work-Related Values for 15 Selected Countries

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 How Does Culture
Impact The Workplace?
 Hofstede later expanded added a fifth
dimension called Confucian dynamism or
long-term orientation
 captures attitudes toward time, persistence,
ordering by status, protection of face,
respect for tradition, and reciprocation of
gifts and favors
 Japan, Hong Kong, and Thailand scored high on
this dimension
 the U.S. and Canada scored low

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 Was Hofstede Right?
 Hofstede’s work has been criticized for several
reasons
 made the assumption there is a one-to-one
relationship between culture and the nation-state
 study may have been culturally bound
 used IBM as sole source of information
 culture is not static – it evolves
 But, it is a starting point for understanding how
cultures differ, and the implications of those
differences for managers

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 Does Culture Change?
 Culture evolves over time
 changes in value systems can be slow and
painful for a society
 Social turmoil - an inevitable outcome of
cultural change
 as countries become economically stronger,
cultural change is particularly common
 economic progress encourages a shift from
collectivism to individualism
 globalization also brings cultural
change
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 What Do Cultural Differences
Mean For Managers?
1. It is important to develop cross-cultural literacy
 companies that are ill informed about the
practices of another culture are unlikely to
succeed in that culture
 To avoid being ill-informed
 consider hiring local citizens
 transfer executives to
foreign locations on a
regular basis
 Managers must also guard against
ethnocentrism
 a belief in the superiority of one's own
culture
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 What Do Cultural Differences
Mean For Managers?
2. There is a connection between culture
and national competitive advantage
 suggests which countries are likely to
produce the most viable competitors
 has implications for the choice of countries
in which to locate production facilities and
do business

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