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4&5 Culture, Management Style, and Business Systems

Chapter Learning Objectives

Definitions and Origins of Culture

The necessity for adapting to cultural differences How and why management styles vary around the world The extent and implications of gender bias in other countries The importance of cultural differences in business ethics The differences between relationship-oriented and information-oriented cultures

McGraw-Hill/Irwin International Marketing, 13/e

2007 The McGraw-Hill Companies, Inc., All Rights Reserved.


Definitions and Origins of Culture

Most traditional definitions of culture around the notion that culture is the sum of the values, rituals, symbols, beliefs, and thought processes that are learned, shared by a group of people, and transmitted from generation to generation. Individuals learn culture from social institutions through:
- Socialization (growing up) - Acculturation (adjusting to a new culture)

Origins, Elements, and Consequences of Culture

Insert Exhibit 4.4



Definitions and Origins of Culture (contd)

Geography History The political economy Technology

Definitions and Origins of Culture (contd)

Social institutions
- Family
Favoritism of boys in some cultures

- Religion
Misunderstanding of beliefs

- School
No country has been successful economically with less than 50% literacy.



Definitions and Origins of Culture (contd)

- The media
Media time has replaced family time

Elements of Culture
Cultural values
Individualism/Collectivism Index Power Distance Index Uncertainty Avoidance Index Cultural Values and Consumer Behavior

- Government
Governments try to influence the thinking and behaviors of adult citizens.

- Corporations
Most innovations are introduced to societies by companies

- Marriage - Funerals



Elements of Culture (contd)

- Language
Linguistic distance

Cultural Knowledge
Factual knowledge vs. interpretive knowledge
- Has meaning as a straightforward fact about a culture but assumes additional significance when interpreted within the context of the culture.
Mexico is 98% Catholic Being Catholic within Mexico

- Aesthetics as Symbols
Insensitivity to aesthetic values can offend, create a negative impression, and, in general, render marketing efforts ineffective or even damaging.

- To make light of superstitions in other cultures when doing business there can be an expensive mistake.

Cultural sensitivity and tolerance

- Being attuned to the nuances of culture so that a new culture can be viewed objectively, evaluated and appreciated. - Cultures are not right or wrong, better or worse, they are simply different. - The more exotic the situation, the more sensitive, tolerant, and flexible one needs to be.
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Thought processes
- Difference in perception
Focus vs. Big-Picture

Global Perspective Do Blondes Have More Fun in Japan?

Culture, including all its elements, profoundly affects management style and overall business systems Americans
- Individualists

Required Adaptation
Adaptation is a key concept in international marketing.
As a guide to adaptation, all who wish to deal with individuals, firms, or authorities in foreign countries should be able to meet 10 basic criteria:
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- Consensus oriented & committed to the group

Central & Southern Europeans

- Elitists and rank conscious

Knowledge of the management style existing in a country and a willingness to accommodate the differences are important to success in an international market.

1) open tolerance 2) flexibility 3) humility 4) justice/fairness 5) ability to adjust to varying tempos 6) curiosity/interest 7) knowledge of the country 8) liking for others 9) ability to command respect 10) ability to integrate oneself into the environment
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Degree of Adaptation
Essential to effective adaptation is awareness of ones own culture and the recognition that differences in others can cause anxiety, frustration, and misunderstanding of the hosts intentions. The self-reference criterion (SRC) is especially operative in business customs. The key to adaptation is to remain American but to develop an understanding of and willingness to accommodate the differences that exist.

Cultural Imperatives
The business customs and expectations that must be met and conformed to or avoided if relationships are to be successful. Friendship motivates local agents to make more sales. The significance of establishing friendship cannot be overemphasized, especially in those countries where family relationships are close. In some cultures a persons demeanor is more critical than in other cultures What may be an imperative to avoid in one culture is an imperative to do in another.
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Cultural Electives and Exclusives

Cultural electives:
- Relate to areas of behavior or to customs that cultural aliens may wish to conform to or participate in but that are not required. - A cultural elective in one county may be an imperative in another. - Cultural electives are the most visibly different customs and thus more obvious.

The Impact of American Culture on Management Style

Master of destiny viewpoint vs. future is controlled by an higher order. Independent enterprise as the instrument of social action company and work take precedence over family, friends, etc. Personnel selection and reward based on merit vs. family, friends personal relationships. Decisions based on objective analysis and data vs. intuition. Wide sharing in decision making vs. highly centralized Never-ending quest for improvement vs. maintain status quo. Competition producing efficiency vs. consensus and working together.
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Cultural exclusives:
- Those customs or behavior patterns reserved exclusively for the locals and from which the foreigner is barred.

High Context vs. Low context Cultures

Insert Exhibit 5.1

P-Time versus M-Time

Monochronic time:
- Tend to concentrate on one thing at a time - Divide time into small units and are concerned with promptness - Most low-context cultures operate on M-Time

Polychronic time:
- Dominant in high-context cultures - Characterized by the simultaneous occurrence of many things - Allows for relationships to build and context to be absorbed as parts of high-context cultures.

Most cultures offer a mix of P-time and M-time behavior, but have a tendency to be either more P-time or M-time in regard to the role time plays. As global markets expand more businesspeople from P-time cultures are adapting to M-time.
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Negotiations Emphasis
Business negotiations are perhaps the most fundamental business rituals. The basic elements of business negotiations are the same in any country.
- They relate to the product, its price and terms, services associated with the product, and finally, friendship between vendors and customers.

Gender Bias in International Business

Women represent only 18% of the employees who are chosen for international assignments. In many cultures women are not typically found in upper levels of management, and men and women are treated very differently.
- Asia, Middle East, Latin America

Prejudices toward women in foreign countries Cross-mentoring system

- Lufthansa

One standard rule in negotiating is know thyself first, and second, know your counterpart.

Executives who have had international experience are more likely to get promoted, have higher rewards, and have greater occupational tenure.
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Bribery: Variations on a Theme
Bribery and Extortion:
- Voluntary offered payment by someone seeking unlawful advantage is bribery. - If payments are extracted under duress by someone in authority from a person seeking only what he are she is lawfully entitled to that is extortion.

6 The Political Environment:

A Critical Concern

Subornation and Lubrication:

- Lubrication involves a relatively small sum of cash, a gift, or a service given to a low-ranking official in a country where such offerings are not prohibited by law. - Subornation involves giving large sums of money, frequently not properly accounted for, designed to entice an official to commit an illegal act on behalf of the one offering the bribe.
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McGraw-Hill/Irwin International Marketing, 13/e 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.

Global Perspective
One of the most undeniable and crucial realities of international business is that both host and home governments are integral partners. A government controls and restricts a companys activities by encouraging and offering support or by discouraging and banning or restricting its activities. International law recognizes the sovereign right of a nation to grant or withhold permission to do business within its political boundaries and to control where its citizens conduct business.
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Stability of Government Policies

Issues that can affect the stability of a government:
- Radical shifts in government philosophy when an opposing political party ascends to power. - Pressure from nationalist and self-interest groups. - Weakened economic conditions - Bias against foreign investment - Conflicts between governments

Five main political causes of instability in international markets:

- Some forms of government seem to be inherently unstable - Changes in political parties during elections can have major effects on trade conditions - Nationalism - Animosity targeted toward specific countries - Trade disputes themselves
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Nationalism is an intense feeling of national pride and unity, an awakening of a nations people to pride in their country. National interest and security are more important than international relations. The more a country feels threatened by some outside force or as the domestic economy declines, the more nationalistic it becomes in protecting itself against intrusions. Nationalism comes and goes as conditions and attitudes change, and foreign companies welcomed today may be harassed tomorrow and vice versa.

Political Risks of Global Business

Confiscation the seizing of a companys assets without payment. Expropriation where the government seizes an investment but some reimbursement for the assets is made. Domestication when host countries gradually cause the transfer of foreign investments to national control and ownership through a series of government decrees by mandating local ownership and greater national involvement in a companys management.

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Economic Risks
Exchange controls
- Stem from shortages of foreign exchange held by a country.

Economic Risks (continued)

Tax controls
- A political risk when used as a means of controlling foreign investments.

Local-content laws
- Countries often require a portion of any product sold within the country to have local content.

Price controls
- Essential products that command considerable public interest
Pharmaceuticals Food Gasoline

Import restrictions
- Selective restrictions on the import of raw materials to force foreign industry to purchase more supplies within the host country and thereby create markets for local industry

Labor problems
- Labor unions have strong government support that they use effectively in obtaining special concessions from business.

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Lessening Political Vulnerability (continued)

Strategies that MNCs use to minimize political vulnerability and risk:
Joint ventures Expanding the investment base Licensing Planned domestication Political bargaining Political payoffs

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