QUESTION 1.1- INTERNATIONAL BUSINESS

MGMK 4710

INTERNATIONAL BUSINESS

Chapter 2. Cultural Environments

I. INTRODUCTION

For thousands of years, human beings have been in movement. Overtime however, different ways of transmitting information (in order to organize life) led to the rise of two distinct societal orientations (ways of organizing life). A societal orientation that emerges within a group of people is the outcome of a long-term narrative (series of events, debate, story-telling, discussions, teachings). In turn, societal orientations resulted in differences in what we call culture. There are two societal orientations: societies of action, and societies of order.

1. Societies of action (Western world):

- Individualism: people take action to achieve personal or self-interests

- Rights: when taking action, individuals claim rights

- Mobility: status quo is challenged, which often results in change and innovation

- Competition: each individual seeks to surpass others and be the best

2. Societies of order (Eastern and Southern world):

- Collectivism: individuals take action to achieve collective interests

- Responsibilities: people take action to fulfill duties established by the order

- Stability: status quo is preserved (questioning it is discouraged) to perpetuate the established order

- Cooperation: individuals work together for the common good

No group of people (e.g. a nation) is purely a society of action or a society of order. In societies of action, there is some degree of order (laws, guidelines, and principles set forth by formal and informal institutions). In societies of order, there is some degree of action taken for personal interests (individuals make decisions about formal education, work to do, place to leave, affiliation (e.g. religion).

II. CULTURE: FEW DEFINITIONS

Culture refers to learned values and norms shared by a group of people:

- Values: core beliefs about what is good, right and desirable (e.g. independence in the West, dependence in the East and South)

- Norms: behaviors and attitudes people adopt when facing specific circumstances (e.g. this behavior is “normal”)

Cultural distance represents the degree of similarity between two societies. Cultural change refers to the evolution that takes place overtime in people’s values and norms. Cultural change can happen depending on the degree of openness toward other cultures (e.g. through globalization), on diversity (pluralism leads to compromises which change a culture). When changes are brought about by imposition (e.g. colonization), cultural imperialism has occurred.

Cultural clusters are groupings of countries with similar characteristics. Examples of clusters are Anglo-Saxon, Germanic, Latin Europe, Arabs, Bantus (Black Africans from around the equator line down South to the tip of Africa), etc. Culture shock represents the trauma one experiences in a new and different culture because of having to learn to cope with a vast array of new cues and expectations. Reverse culture shock occurs when people return home, having accepted the culture encountered abroad and discovering that things at home have changed during their absence.

Low-context culture characterizes a group of people that rely on explicit, first-hand information that bears directly on a decision or situation; people say what they mean and mean what they say. High-context culture describes a group of people that rely on implicit, peripheral information and infer meaning from things communicated indirectly; relationships are very important. The United States and most of Northern Europe are considered to be low-context cultures. Most countries in Southern Europe are considered to be high-context cultures.)

III. DETERMINANTS OF CULTURE

Culture is shaped by several factors. The most important include among others nation-state, languages, and religion

A. The Nation as a Point of Reference

The nation provides a workable definition of a culture because the basic similarity among people within countries is both a cause and an effect of national boundaries. National identity is perpetuated through the rites and symbols of a country and a common perception of history. At the same time, various subcultures and ethnic groups may transcend national boundaries. While nations usually include various subcultures, ethnic groups and races, the nation legitimizes itself by mediating the different interests. Non-nations, that is, nations that fail in this role, either dissolve (e.g. Soviet Union, Sudan), or, as is the case in most African countries, experience political instability and civil wars (e.g. Congo, Kenya, Somalia, Nigeria).

B. Language as Both a Diffuser and Stabilizer of Culture

While a common language within a country serves as a unifying force, language diversity may lead to several sub-culture within a country. Isolation from other groups, especially because of language, tends to stabilize cultures. Often also, languages transcend national boundaries.

C. Religion as a Cultural Stabilizer

Religion can be a strong shaper of values and beliefs and is a major source of both cultural imperatives and taboos. Buddhism, Christianity, Hinduism, Islam, and Judaism represent just some of the religions whose specific beliefs have shaped culture.

IV. BEHAVIORAL PRACTICES AFFECTING BUSINESS

Culture affects business practices - everything from decisions about what

products to sell, to decisions about organizing, financing, managing, and

controlling operations. Some of the more important aspects of culture that impact

business are discussed below.

A. COMMUNICATIONS

Communication problems may arise when moving from one country to another, even though both countries share the same official language. Of course, problems also arise when moving from one language to another.

1. Spoken and Written Language. Translating one language into

another can be very difficult because (a) some words do not have a precise translation, (b) the common meaning of words is constantly evolving, (c) words may mean different things in different contexts, and (d) a slight misuse of vocabulary or word placement may change meanings substantially. Further, while jokes and laughter have universal appeal, much humor does not. Therefore, words must be chosen very carefully, because poor translations may have tragic consequences in business

2. Silent Language. Silent language incorporates the wide variety of

non-verbal cues through which messages are sent. Color associations, the distance between people during conversations, the perception of time and punctuality, a person’s body language are all very significant. Misunderstandings in any of these areas can be serious.

B. Social Stratification

Every culture in some way values some people more than others.

1. Ascribed and Acquired Membership.

People fall into social stratification systems according to group memberships that, in turn, determine a person’s degree of access to economic resources, prestige, employment, social relations, and power. Ascribed group memberships are defined at birth and are based on characteristics such as gender, family, age, caste, and ethnic, racial, or national origin. Acquired group memberships are based on one’s choice of affiliations, such as political party and religion. Social stratification affects business practices.

2. Gender-Based Groups (see web site regarding gender in politics).

Strong country-specific differences exist in attitudes toward the roles of males and females in society and the workplace, as well as the types of jobs regarded as “male” or “female.” Increasingly, barriers to employment based on gender are easing. As the composition of jobs becomes less physical and more creative and/or technical, the relative demand for female employees is also increasing.

3. Age-Based Groups.

Many cultures assume that age and wisdom are correlated; thus, they often have a seniority-based system of advancement. In others, there is an emphasis on knowledge, skills, and perhaps even youth (who can easily accept change).

4. Family-Based Groups.

In some societies, family membership is more important than individual achievement. Where there is low trust outside the family, such as in China and southern Italy, small family-run companies are generally quite successful, but they often have difficulty expanding beyond the family.

C. WORK MOTIVATION

Employees who are motivated to work long and hard are generally more

productive than those who are not. On an aggregate basis, this will have a

positive effect on economic development and national competitiveness.

1. Materialism and Motivation. Countries differ in their degree of materialism. In some societies, such as Japan and the United States, people desire less leisure time than others, such as much of Europe. Some argue that Protestant Western countries were the most economically developed because of their emphasis on hard work and investment. This view of work as a path to salvation is known as the “Protestant ethic.” In rural India, however, where minimal material achievement is a desirable end in itself, any added productivity will likely be taken in the form of leisure, rather than income.

2. Productivity/Leisure Trade-Off. Some cultures place less value on leisure time. This can impact many social and employment aspects, such as, vacations, holidays, and the amount of money spent on leisure activities.

3. Expectation of Success and Reward. Although the same tasks performed in different countries will have different probabilities of success, different rewards for success, and different consequences for failure, people will usually work harder at any task when the reward for success is greater than the consequence of failure. The greatest enthusiasm for work exists when high uncertainty of success is combined with the likelihood of a very positive reward for success and little or none for failure.

4. Hierarchies of Needs. Maslow’s hierarchy of needs states that people will try to fulfill lower-order physiological needs before satisfying (in order) their security, affiliation, esteem, and self-actualization needs. This theory can be especially helpful for differentiating the reward preferences of employees in different countries, who may likely rank some of their higher-order needs differently.

D. DIMENSIONS OF CULTURAL DIFFERENCES

The most used framework to explain the impact of behavioral practices on business is Hofstede’s dimensions of culture. According to Hofstede, six dimensions can help to understand differences among cultures:

1. Individualism versus collectivism: individualism indicates a person’s desire

for personal freedom, time, and challenge. His/her dependence on the organization

is low, and self-actualization is a prime motivator. Western countries led by the

United States are individualistic societies. Collectivism indicates a person’s

dependence on and allegiance to the organization, as well as his/her desire for

training, collaboration, and shared rewards. A prime motivator is a safe physical

and emotional environment. African, Asian and Latin American countries are

collectivist societies.

2. Power distance: it describes the relationship between superiors and subordinates. When power distance is high, the management style is generally distant, i.e., autocratic or paternalistic. When power distance is low, managers tend to interact with and consult their subordinates during the decision-making process. Power distance is high in Brazil and low in Sweden

3. Masculinity versus feminity: it describes the extent to which the role of gender is differentiated. High-masculinity countries such as Japan maintain a sharp role differentiation along gender lines. High-feminity countries such as Sweden are characterized by less gender-based role differentiation

4. Uncertainty avoidance: it describes one’s tolerance of risk (the extent to which the members of a society accept ambiguous, complex and changing, thus unpredictable situations). In societies where people avoid uncertainty, workers need precise directions and the prospect of long-term employment, while consumers are wary about trying new products. In societies where people tolerate uncertainty, workers are willing to be creative and to move to new jobs, while consumers accept the risk of being the first to try new products. Examples of countries ranking high on uncertainty avoidance are Belgium and Portugal; those ranking low are Britain and Denmark.

5. Future (or long-term) orientation: it is defined as the extent to which the members of a society emphasize perseverance and savings for their future well-being. In societies where future orientation is higher, workers will more likely be motivated by types of delayed compensation, such as retirement programs (future orientation is high in Canada, the Netherlands, Switzerland, China and Japan). In societies where future orientation is low, workers tend to live for the present, they seek gratification and invest for the present (short-term orientation). Future orientation is low in Italy, Poland, Russia and the United States.

6. Indulgence: It is the extent to which people allow themselves to do what they want or to have something enjoyable. Mexico is high in indulgence (people are indulgent). China is very low in indulgence (people are restrained as they try to control their desires and impulse). Indulgence is based on the way people have been raised, the way small children are socialized.

V. DEALING WITH CULTURAL DIFFERENCES

Once a company identifies cultural differences in the foreign countries in which it operates, it needs to determine whether to adapt its business practices? This depends on a firm’s ability to manage cultural differences and make necessary adjustments when operating abroad?

A. Host Society Acceptance

If products and operations do not run counter to deep-seated attitudes, or if the host country is willing to accept foreign customs as a trade-off for other advantages, significant adjustments may not be required.

B. Degree of Cultural Differences

Countries may be relatively similar to one another because they share the same language, religion, geographical location, ethnicity, and/or level of economic development. Generally, a firm should have to make fewer adjustments when moving within a culturally similar cluster than when it moves from one distinct cultural cluster to another.

C. Company and Management Orientations

Whether and to what extent a firm and its managers adapt to foreign cultures also depends on the policies of the company and the attitudes of its managers. There are three management orientations:

1. Ethnocentrism. Ethnocentrism represents a belief that one’s own

culture is superior to others, and that what works at home should work abroad. Excessive ethnocentrism may lead to costly business failures.

2. Polycentrism. Polycentrism represents a managerial approach in

which foreign operations are granted a significant degree of autonomy, in order to be responsive to the uniqueness of local cultures and other conditions.

3. Geocentrism. Geocentrism represents a managerial approach in which

foreign operations are based on an informed knowledge of both home and host country needs, capabilities, and constraints.