International Business Homework : Country Analysis Report

Chapter04.pptm

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Global Business Today 9e

by Charles W.L. Hill

and Tomas Hult

© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

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Chapter 4

Differences

in Culture

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Learning Objectives

The learning objectives for this chapter are to:

Explain what is meant by the culture of a society.

Identify the forces that lead to differences in social culture.

Identify the business and economic implications of differences in culture.

Recognize how differences in social culture influence values in business.

Demonstrate an appreciation for the economic and business implications of cultural change.

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Introduction

Cross-cultural literacy - an understanding of how cultural differences across and within nations can affect the way in which business is practiced

There may be a relationship between culture and the costs of doing business in a country or region

Culture is not static

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Cross cultural literacy is important to success in international business. The actions of MNEs can contribute to cultural change.

What is Culture?

Question: What is culture?

Answer:

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

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Values refer to 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.

Values and Norms

Values - provide the context within which a society’s norms are established and justified

Norms - the social rules that govern the actions of people toward one another

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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Culture, Society, and the Nation-State

Society - a group of people who share a common set of values and norms

Nation- states are political creations that can contain a single culture or several cultures

Some cultures embrace several nations

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There is not a strict one-to-one correspondence between a society and a nation-state.

Determinants of Culture

The values and norms of a culture evolve based on:

Prevailing political and economic philosophies

A society’s social structure

The dominant religion, language, and education

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Determinants of Culture (continued from Slide 4-8)

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The Determinants of Culture

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Social Structure

A society's social structure is its basic social organization

Two dimensions to 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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Individuals and Groups

Group - an association of two or more individuals 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

Groups are common in many Asian societies

Many Western countries emphasize the individual

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Individuals and Groups (continued from Slide 4-11)

In societies where the individual is dominant:

Individual achievement and entrepreneurship are promoted

Encourages job switching, competition between individuals rather than team building, and a lack of loyalty to the firm

In societies where the group is dominant:

Cooperation and team work are encouraged and life time employment is common

Individual initiative and creativity may be suppressed

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Social Stratification

All societies are stratified on a hierarchical basis into social categories, or social strata

Usually defined by characteristics such as family background, occupation, and income

Societies differ in terms of:

The degree of mobility between social strata

The significance attached to social strata in a business context

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Country Focus: Using IT to Break India’s Caste System

Summary

This feature explores India’s caste system and the implications of the system. While many urban middle class citizens are not affected in a significant way by the caste system, for India’s rural population, the influence of the system is readily apparent. The government is strongly encouraging private companies to hire more lower caste individuals.

Suggested Discussion Questions

1. India’s castes system has been around for many years. Explain why its influence has diminished among educated urban middle class Indians.

Discussion Points: The caste system in India was officially abolished in 1949. However, it seems that urban citizens have benefited the most from its abolishment. For many rural Indians, the system is still very much in effect. Educated, urban middle class Indians make up the majority of employees in India’s high tech economy. They may work for large multinationals like Infosys and Wipro. Many students will probably attribute the relative freedom of these individuals to the presence of these large companies, and their need to hire the best people regardless of caste. In rural areas though, the caste system still has significant influence in daily life. One female engineer working for Infosys notes for example that as a member of a lower caste, she was not able to enter the homes of higher caste individuals. Yet the same engineer, a beneficiary of an Infosys training programs, now works for Infosys in a “higher caste” position.

2. Why are many private companies in India resisting the hiring quotas suggested by the government? Why might it be necessary to hire lower caste individuals?

Discussion Points: The Indian government has suggested that private companies make an effort to employ lower caste individuals. However, many companies are resisting the request using the argument that they want to hire qualified people who want to work hard, and not people who are available simply because of a quota system. Some companies however, recognize that there may be a place for lower caste individuals, especially has business grows. Infosys for example, offers special training to low caste members.

Lecture Note: To extend this discussion, consider {http://news.bbc.co.uk/2/hi/south_asia/7914229.stm} and {http://news.bbc.co.uk/2/hi/south_asia/6125940.stm}.

Lecture Note: For more on India’s caste system, go to {http://www.npr.org/programs/specials/racism/010828.caste.html}.

Social Stratification (continued from Slide 4-13)

Four basic principles of social stratification:

It is a trait of society, not a reflection of individual differences

It carries over a generation to the next generation

It is generally universal, but variable

It involves not just inequality but also beliefs

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Social Stratification (continued from Slide 4-14)

Social mobility- the extent to which individuals can move out of the strata into which they are born

Caste system - social position is determined by the family into which a person is born, and change in that position is unlikely

Class system - the position a person has by birth can be changed through achievement or luck

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The most rigid system is the caste system. The class system is less rigid.

Social Stratification (continued from Slide 4-15)

Question: What is the significance of social stratification for business?

Answer:

In cultures where class consciousness (where people tend to perceive themselves in terms of their class background) is high, the way individuals from different classes work together may be prescribed

Antagonism between labor and management can raise the costs of doing business

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Class consciousness shapes peoples’ relationships with others.

Religious and Ethical Systems

Religion - a system of shared beliefs and rituals that are concerned with the realm of the sacred

Religions with the greatest following are:

Christianity (2.25 billion adherents)

Islam (1.65 billion adherents)

Hinduism (1.07 million adherents)

Buddhism (500 million adherents)

Confucianism shapes culture in many parts of Asia

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Religious and Ethical Systems (continued from Slide 4-17)

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World Religions

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Religious and Ethical Systems (continued from Slide 4-18)

Ethical systems - a set of moral principles, or values, that are used to guide and shape behavior

The ethical practices of individuals within a culture are often closely intertwined with their religion

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Christianity

Christianity is the most widely practiced religion

Question: What are the economic implications of Christianity?

Answer:

In 1904, Max Weber suggested that it was the Protestant work ethic (focus on hard work, wealth creation, and frugality) that was the driving force of capitalism

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Christianity is common throughout Europe, the Americas, and other countries settled by Europeans.

Islam

Islam is an all-embracing way of life that governs one's being

One true omnipotent God

Question: What is Islamic fundamentalism?

Answer:

In the Western media, Islamic fundamentalism is associated with militants, terrorists, and violent upheavals

Fundamentalists have gained political power in many Muslim countries, and have tried to make Islamic law the law of the land

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While Islamic fundamentalism is viewed negatively in the Western media, the vast majority of Muslims claim that Islam teaches peace, justice, and tolerance.

Islam (continued from Slide 4-21)

Question: What are the economic implications of Islam?

Answer:

Under Islam, people do not own property, but only act as stewards for God and thus must take care of that which they have been entrusted with

Islam is supportive of business, but the way business is practiced is prescribed

Businesses that are perceived to be making a profit through the exploitation of others, by deception, or by breaking contractual obligations are unwelcome

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Country Focus: Islamic Capitalism in Turkey

Summary

This feature examines the debate surrounding Turkey’s membership in the European Community. Turkey has indicated that it would like to be a part of the regional bloc, but many are concerned that because the country’s dominant religion is Islam, it would not be a good fit. Others however, argue that these fears are unfounded. Supporters of Turkey’s membership in the European Union note that the country’s central region is home to many thriving entrepreneurial ventures.

Suggested Discussion Questions

1. Explain the concept of guanxi. How did Mintz’s guanxiwang help his company becomes so successful?

Discussion Points: Guanxi literally means relationships, although in business settings in can better be understood as “connections.” The concept of guanxi is deeply rooted in Chinese culture and Confucianism. The Chinese will often cultivate a guanxiwang, or “relationship network,” for help. In China, there is a tacit acknowledgement that if you have the right guanxi, legal rules can be broken or bent. Mintz made connections with two Chinese men who had access to high ranking government officials. Through these men, Mintz was able to secure permission to film commercials in locations that are normally closed to outsiders.

2. Compare the difference between doing business in the West and doing business in China.

Discussion Points: A basic difference between doing business in the West and doing business in China involves how legal agreements are handled. In the advanced economies of the West, business transactions are conducted and regulated by the centuries-old framework of contract law, which specifies the rights and obligations of parties to a business contract and provides mechanisms for seeking to redress grievances should one party in the exchange fail to live up to the legal agreement. China does not have the same infrastructure. Personal power and relationships or connections (guanxi), rather than the rule of law, have always been the key to getting things done in China.

Language

Countries differ in terms of language or means of communication

There are two forms language:

Spoken

Unspoken

Language is one of the defining characteristics of culture

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Spoken Language

Countries with more than one spoken language often have more than one culture

Chinese is the mother tongue of the largest number of people in the world

English is the most widely spoken language in the world, and is becoming the language of international business

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Knowledge of the local language is beneficial, and in some cases, critical for business success.

Unspoken Language

Unspoken language - nonverbal cues

Examples include facial expressions and hand gestures

Can be important for communication

Many nonverbal cues are culturally bound and because they may be interpreted differently, can result in misunderstandings

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Education

Formal education is the medium through which individuals learn many of the language, conceptual, and mathematical skills that are indispensable in a modern society

The knowledge base, training, and educational opportunities available to a country's citizens can also give it a competitive advantage in the market and make it a more or less attractive place for expanding business

The general education level of a country is a good indicator of the types of products that might sell in that location or the type of promotional materials that might be successful

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Culture and Business

Question: How does a society's culture impact on the values found in the workplace?

Answer:

Geert Hofstede isolated four dimensions that summarized different cultures

Power distance

Individualism versus collectivism

Uncertainty avoidance

Masculinity versus femininity

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Culture and Business (continued from Slide 4-30)

Power distance - how a society deals with the fact that people are unequal in physical and intellectual capabilities

Individualism versus collectivism - the relationship between the individual and his or her fellows

Uncertainty avoidance - the extent to which different cultures socialize their members into accepting ambiguous situations and tolerating ambiguity

Masculinity versus femininity - the relationship between gender and work roles

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Culture and Business (continued from Slide 4-31)

Hofstede added Confucian dynamism - captures attitudes towards time, persistence, ordering by status, protection of face, respect for tradition, and reciprocation of gifts and favors

A sixth dimension called indulgence versus restraint may be added where indulgence refers to a society that allows relatively free gratification of basic and natural human drives related to having fun, and restraint refers to a society that suppresses gratification of needs and regulates it by means of strict social norms

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Culture and the Workplace

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Work Related Values for 15 Select Countries

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Cultural Change

Culture evolves over time, although changes in value systems can be slow and painful for a society

Social turmoil is an inevitable outcome of cultural change

Cultural change is particularly common as countries become economically stronger

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Managerial Implications

Differences in culture imply that:

There is a need for managers to develop cross-cultural literacy

There is a connection between culture and national competitive advantage

There is a connection between culture and ethics in decision making

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Cross-Cultural Literacy

Individuals and firms must develop cross-cultural literacy

Firms that are ill-informed about the practices of another culture are unlikely to succeed in that culture

Individuals must also beware of ethnocentric behavior

Belief in the superiority of one's own culture

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Culture and Competitive Advantage

The connection between culture and competitive advantage is important because:

It suggests which countries are likely to produce the most viable competitors

It has implications for the choice of countries in which to locate production facilities and do business

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Internet Extra: To learn more about international business etiquette, go to {http://www.cyborlink.com}.

Choose a country, then find three fun facts about your country. Compare these to those in other countries. What are some areas where cultural misunderstandings could occur?

How does Hofstede assess your country? Based on what you’ve read, do you agree?

Summary

In this chapter we have:

Explained what is meant by the culture of a society.

Identified the forces that lead to differences in social culture.

Identified the business and economic implications of differences in culture.

Recognized how differences in social culture influence values in business.

Demonstrated an appreciation for the economic and business implications of cultural change.

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