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Ch4-CulturalEnvironmentsFacingBusiness1.pptChapter Four
The Cultural Environments Facing Business
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Chapter Objectives
- To understand culture and cultural evolution, and its significance for the MNEs
- To understand the cultural variables impacting business practices, and how regions differ on these variables
- To learn about cultural distance, cultural clusters, and how to manage cultural differences
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Opening Case
- In Saudi Arabia, women are not permitted to drive. Women own 20% of all Saudi businesses, but most can sell only to female customers. If they have to deal with male clerks or customers, adult male relatives must serve as chaperons.
- Four young Saudis, who had studied and lived abroad, opened a fashionable family oriented mixed-gender restaurant – Java Lounge.
- At Java Lounge, during the day, men coming with female accompaniment must use a separate entrance and sit upstairs, with downstairs reserved for the families and female groups. In the evening, both floors are for families only.
- This is similar to the Saudi retail stores, where upstairs are exclusively or the female shoppers and female employees, and downstairs are for the male employees only, who sell even cosmetics to the customers of either sex.
- Saudis spend a lot of time on idle chit chat at such lounges. One UK company’s salespeople, who were compensated on the basis of the number of calls made, tried to be aggressive, but were deemed rude and had to pack and leave.
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Culture and Cultural Evolution
- Culture refers to behavioral norms based on the values, attitudes, beliefs and practices of a group of people. People often belong to different groups, each with their distinct ‘sub-cultures’.
- Culture is shaped by historical as well as contemporary factors. . In other words, cultures evolve. For instance, a new Saudi TV channel has women with uncovered faces serving as anchors and interviewing men.
- Cultural evolution may be voluntary, where people evaluate and adopt modified attitudes, beliefs, and practices (e.g. Western educated Saudi), where some groups or nations promote their own approaches as the most civilized and rational attitudes, beliefs, and practices (e.g. sensitivity to MTV’s children reach).
- Cultural evolution is conditioned by deep-rooted ideologies and emotional convictions. If businesses threaten the religious or regional identities, they may experience protests and failure.
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Cultural Variables Impacting Business Practices
- The GLOBE framework provides nine cultural variables, which may be grouped into three issue categories.
A. Social Motivations. Correlation with space, time and entities
Power Distance: Power distance refers to power inequities in a society. - High power distance cultures
- offer some people superior opportunities, resources, and authority based on their ascribed or acquired affiliation to particular identity groups.
- Senior executives often make centralized decisions, using a paternalistic style, without any consultation with their subordinates.
- These cultures are less egalitarian or open - some regions or groups or organizations enjoy more opportunities, resources and authority, and seek social control and status-quo to maintain their privileged positions over the social space.
Southern Asia and Latin America are high power distance.
Nordic societies are low power distance.
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Social motivations….
2. Gender egalitarianism: Empowerment of women, with an equal access to opportunities, resources, and decision making power.
In high gender egalitarian societies,
- required by law to have a minimum percentage of women as employees and in leadership roles, and to offer generous and compensated maternity leaves.
- women have access to all type of occupations, and women’s compensation for particular jobs is comparable to that of men.
- “female roles” such as nursing are de-feminized, and “male roles” such as leadership are de-masculinized.
- traditional division of labor restructured – men are not primarily breadwinners, women are not primarily homemakers.
In low gender egalitarian societies, privileged identities appropriate disproportionate share of accrued value over time.
Nordic and Eastern Europe are high gender egalitarian.
Middle East, Confucian Asia, Southern Asia are low.
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Social motivations….
3. Family and group-based Collectivism (or universalism-particularism): Refers to the strong particularistic ties, resource sharing, preference, loyalty, and commitment to the members of family, kinship, ethnicity, religion, geography, friendship groups.
In family and group-based collectivist cultures:
- family very important and family ties very strong.
family businesses are a dominant form of organization, even among the large firms
family members and their confidants may hold all key leadership roles, even if they lack professional qualifications or experience.
Southern Asia and Latin America are high group collectivist.
Germanic societies are low group collectivist.
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Worker/ Human motivations. Correlation with space, time and entities
1. Assertiveness
In assertive cultures (Germanic), people strive to manage space by being tough, persuasive, and confrontational in their interactions and negotiations.
In less assertive cultures (Nordic, Middle East), people strive to manage space through harmony and soft and gentle approaches, which include trying to find a middle ground and taking time to build mutually beneficial relationships.
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Worker/ Human Motivations
2. Performance Orientation: Refers to the competence, potential, and performance based opportunities and rewards in a society.
In high performance oriented cultures, organizations tend to
- use pay-for-performance (i.e. rewards based on results), and
- base their lay off decisions on performance-to-salary ratios (i.e. letting go employees who earn disproportionate to what they perform).
Anglo, Germanic and Confucian societies are high performance.
Entrenched masculine performance practices in Germanic and Confucian societies make people aspire for more leisure time/ less performance.
Probability of success and rewards matters: Latin Americas aspire for performance orientation, but entrenched power structures make it difficult in practice. Similarly, low probabilities during the communist era and later, cultivated low aspirations for and practice of performance orientation in Eastern Europe.
Religious diversity, reflecting diversity of perspectives, is associated with performance orientation; not any particular religious ideology.
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Worker/ Human motivations
3. Institutionalized collectivism: Refers to an emphasis on the collective interests of an organization or an institution.
In institutionally collective societies (Nordic, Confucian), people
- are predisposed to trust, and agree that “Most people can be trusted.” Trust helps foster communication and collaboration.
- collectively share credit for success and blame for failure.
- expect organizations to invest in training and working conditions that promote collaboration and teamwork.
In institutionally individualistic societies (Latin America), people
- seek individual challenges, goals, and incentives, and may distrust cooperative behavior as a ploy of those in power.
- tend not to trust their collaborators, making cross-border alliances more challenging.
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C. Ecological Motivations. Correlation with space, time and entities
1. Uncertainty avoidance: Refers to an emphasis on knowledge and technology, physical and emotional safety, and law and order.
In some societies, notably those with high economic development in Northern Europe and Anglo, uncertainty avoidance is practiced by emphasizing professional education and experience, and proven techniques and technology. At the same time, these societies value innovation and change, and are willing to support experimentation.
In other societies, notably in the Middle East, Latin America, and Eastern Europe, uncertainty tolerating innovation, change and experimentation is part of daily practices, because of a large gap between the infrastructure and the aspirations. These and most other emerging markets, also value uncertainty avoiding investments into knowledge, technology, and resources that would bring order safety, order, and predictability.
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Ecological Motivations…
2. Future orientation:
* an emphasis on planning and investing in intellectual properties and other assets which accrue benefits over a period of time.
* involves foregoing instant materialism, consumption & gratification.
* includes recognition of sustainable benefits for future generations.
In some societies, notably those with highest levels of quality of life in Northern Europe, future orientation is practiced through a well established socio-economic infrastructure. At the same time, these societies value present human happiness, and are committed to foster enjoyment of individual or collective endowments.
In other societies, notably in the Middle East, Latin America, and Eastern Europe, meeting present expectations, consumption, and resource needs of the people is a daily challenge, because of high aspirations. These and most other emerging markets also value planning and sustainable legacy for future generations.
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Ecological motivations…
3. Humane orientation: Refers to a genuine concern about people, demonstrated through warmth, kindness, caring, generosity, hospitality, servitude, moral righteousness, emotional commitment, and social justice in all relationships.
All societies of the world value humane orientation, but differ in how much they practice it.
Some of the world’s economically least advanced societies with lowest qualities of life in Sub-Saharan Africa and Southern Asia rank highest on the practices of humane orientation. With significant bottom of the pyramid populations, they rely on helping each other in the old world style in times of mutual needs.
Most Continental European societies – excluding the Nordics – rank lowest on the practices of humane orientation.
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Managing Cultural Differences
Cultural distance and Cultural Clusters
- Cultural distance is a measure of how different cultures of two societies are. The term, psychic distance, is used to capture differences in cultural as well as other environment variables, such as social, economic, legal, political, and technological.
- The GLOBE program groups societies based on their similar cultural and other environmental features into ten regional clusters.
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Nordic Europe
Anglo
Germanic Europe
Latin Europe
Sub-Sahara Africa
Eastern Europe
Middle East
Confucian Asia
Southern Asia
Latin America
Philippines
Indonesia
Malaysia
India
Thailand
Ecuador
El Salvador
Columbia
Bolivia Brazil
Guatemala
Argentina
Costa Rica Venezuela
Mexico
Denmark
Finland
Sweden
Canada
U.S.A.
Australia
Ireland
England
South Africa
(White Sample)
New Zealand
Austria
The Netherlands
Switzerland
Germany
Israel
Italy
Switzerland
(French Speaking)
Spain
Portugal
France
Zimbabwe
Namibia
Zambia
Nigeria
South Africa
(Black Sample)
Greece
Hungary
Albania
Slovenia
Poland
Russia
Georgia
Kazakhstan
Turkey
Kuwait
Egypt
Morocco
Qatar
Singapore
Hong Kong
Taiwan
China
South Korea
Japan
Regional Clusters According to GLOBE
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Managing Cultural Differences
Costs and Benefits of Cultural Differences
- Cultural differences often require greater adaptation and accommodation to local culture, and can bring embarrassment and huge costs to the firms. They also offer unique opportunities for learning from cultural diversity.
Cultural Competence
- When employees go to a different culture, they often encounter culture shock – the frustration of recognizing and making sense of cultural differences. With increased cultural competence, employees are able to find ways to
- apply some of their own home culture practices,
- adapt and learn some of the local culture practices, and
- innovate and evolve some unique integrative approaches that best meet the cultural norms and aspirations of the MNE as well as host constituencies.
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- Hydro Generation (HG) is a U.S.-based specialist in power generation, with plants in 16 countries. Charles Martin, a 29-year-old American has been assigned by HG to manage the preliminary stage of the construction of a large dam in Uganda. Martin’s specific assignment was to (i) work with Ugandan government authorities and villagers to gain support and necessary permission for the construction, (ii) establish an office and hire people who would be responsible for local operations, and (iii) help foreign visitors get settled and feel comfortable living and working in Uganda. Vice President James Green wondered whether to continue to employ Martin in Uganda for the construction phase of the project. In particular, Green was concerned about Martin’s lifestyle, some of his business practices, and his participation in Ugandan tribal rituals. Green worried that Martin’s practices were counter to both HG’s corporate culture and methods of operating elsewhere, that some of his actions bordered on the unethical, and that some might actually be illegal under U.S. law.
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