International Business

10e

By Charles W.L. Hill

Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Chapter 4

Differences
in Culture
 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

4-3
 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

4-4
 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

4-8
 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

4-9
 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

4-12
 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

4-17
 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

4-26
 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 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 20 Countries

4-29
 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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