International Business

Competing in the Global Marketplace

8e
By Charles W.L. Hill

Chapter 3

Differences in Culture

What Is Cross-Cultural Literacy?

Cross-cultural literacy is an understanding of how cultural differences across and within nations can affect the way in which business is practiced It is important for foreign businesses to gain an understanding of the prevailing culture of its host country, and that success requires a foreign firm to adapt to the culture Beware of ethnocentric behavior, or a belief in the superiority of ones own culture
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What Is Culture?
Culture is a system of values and norms that are shared among a group of people and that when taken together constitute a design for living
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 refers to 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 societys 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 A society is defined as a group of people that share a common set of values and norms
people who are bound together by a common culture

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 of culture (Figure 3.1) include
religion political and economic philosophies education language social structure
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What Is a Social Structure?

Social structure refers to a societys basic social organization Consider two dimensions:
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?

In Western societies, there is a focus on the individual, benefits include
common individual achievement dynamism of the U.S. economy high level of entrepreneurship

But, individualism creates a lack of company loyalty and failure to gain company specific knowledge
competition between individuals instead of team building less ability to develop a strong network of contacts within a firm
Copyright 2011 McGraw-Hill/Irwin

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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, the primacy of the value of group might also suppress individual creativity and initiative
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What Is Social Stratification?

Societies are stratified in two related ways
1. The degree of 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 class system - open stratification; social position can be changed through achievement or luck 2. The significance attached to social strata in business contexts
Class consciousness is a condition where people tend to perceive themselves in terms of their class background
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How Do Religious and Ethical Systems Differ?

Religion is a system of shared beliefs and rituals that are concerned with the realm of the sacred; Ethical systems are a set of moral principles, or values, that are used to guide and shape behavior
Religion and ethics are often closely intertwined

Four religions dominate society

1. 2. 3. 4. Christianity Islam Hinduism Buddhism

Confucianism is not a religion, but influences behavior and shapes culture in many parts of Asia
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World Religions

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What Is Christianity?
The largest religion in the world
20% of the worlds people identified as Christians

Found throughout Europe, the Americas, and other countries settled by Europeans The three main branches of Christianity: Catholic, Orthodox, and Protestant the latter has the most important economic implications
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?
The worlds second largest religion, with about 1 billion adherents
The central principle of Islam is that there is but one true omnipotent of God; people do not own property, but only act as stewards for God Teaching peace, justice, and tolerance supportive of business, but the way business is practiced is prescribed Islamic fundamentalists have gained political power in many Muslim countries and blame the West for many social problems; they are associated in the Western media with militants, terrorists, and violent upheavals
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What Is Hinduism?
Hinduism
practiced primarily on the Indian sub-continent focuses on the importance of achieving spiritual growth and development and believes that a moral force requires the acceptance of certain responsibilities, called dharma Hindus are valued by their spiritual rather than material achievements Hindu cultures reverence for the cow promotion and adding new responsibilities may not be important, or may be infeasible due to the employee's caste
Copyright 2011 McGraw-Hill/Irwin

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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, Korea, and Japan 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 includes both 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 English is the worlds most widely spoken language and is also becoming the language of IB Chinese is the mother tongue of the largest number of people, followed by English and Hindi knowledge of the local language is still beneficial 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 nations competitive advantage Japans excellent education system is an important factor underlying its economic success general education levels can be a good index for the kinds of products that might sell in a country
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How Does Culture Impact the Workplace?

Probably the most famous study of how culture relates to value in the workplace was conducted by Geert Hofstede, who identified four 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 extent to which different cultures socialize their members into accepting ambiguous situations and tolerating ambiguity 3. Individualism vs. collectivism 4. Masculinity vs. femininity the relationship between gender and work roles

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Work-Related Values for 20 Countries

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Was Geert Hofstede Right?

Hofstede later added a fifth dimension called Confucian dynamism , also long-term orientation
captures attitudes toward time, persistence, ordering by status, protection of face, respect for tradition, and reciprocation of gifts and favors

Hofstedes work has been criticized because

the assumption of 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, important to understand 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 e.g., Japan has been moving toward greater individualism
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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 managers must beware of ethnocentric behavior, or a belief in the superiority of one's own culture

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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Review Questions
1. Abstract ideas about what a group believes to be good, right, and desirable are called ___________. 2. The basic social organization of a society is its ___________. 3. The group is the primary unit of social organization in ___________.
a) Japan c) Switzerland b) the United States d) Mexico
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Review Questions
4. Which of the following is not characteristic of individualism?
a) individual achievement b) low managerial mobility c) low company loyalty d) entrepreneurial behavior

5. Which religion promotes the notion that a moral force in society requires the acceptance of certain responsibilities called dharma?
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Review Questions
6. The most widely spoken language in the world is ___________. 7. _________ focuses on how society deals with the fact that people are unequal in physical and intellectual capabilities. 8. Which refers to nonverbal communication such as facial expressions, personal space, and hand gestures?
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