Business
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Chapter4-DifferencesinCulture.pptxGlobal Business Today 10e
by Charles W.L. Hill
and G. Tomas M. Hult
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Lecture Script 6-1
National Differences
Chapter 4: Differences in Culture
Source: © Ashok Saxena/Alamy Stock Photo
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Listening to changing customer demands and monitoring your environment allow you and the firm to identify potential growth opportunities.
2
Main Learning Objectives
Disciplinary:
Identify how cultures differ and influence, positively or negatively, how you can business abroad
Essential:
Explain the implications, as international business managers, of how you could leverage the differences in cultures to benefit your globalization initiative
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Learning Objectives
LO 4-1 Explain what is meant by the culture of a society.
LO 4-2 Identify the forces that lead to differences in social culture.
LO 4-3 Identify the business and economic implications of differences in culture.
LO 4-4 Recognize how differences in social culture influence values in business.
LO 4-5 Demonstrate an appreciation for the economic and business implications of cultural change.
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Lecture Script 6-4
Opening Case: World Expo 2020 in Dubai, UAE
United Arab Emirates established in 1971
In top ten of countries with largest oil reserves in the world
Open-market economy includes seven emirates
Dubai rated as one of best places to live in the Middle East
Theme of World Expo 2020 “connecting minds, creating the future”
Expo will last six months where countries are expected to show what they can do: “nation branding”
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The foundation for this market economy lies in the collaboration between the seven emirates that are part of the UAE. They include the emirates of Abu Dhabi, Ajman, Dubai, Fujairah, Ras al-Khaimah, Sharjah, and Umm al-Quwain. Each emirate is governed by a hereditary emir, a system similar to succession planning in countries with royalty (king or queen) as the head of state.
Connecting minds is a great way to illustrate how people, companies, and countries can stress the importance of looking for similarities first and then focus on the similarities that outweigh the differences in creating strategic options.
The theme for Dubai’s World Expo 2020 is a direct connection to its cultural values and beliefs in facilitating connections and pioneering new ideas. The organizers expect 70 percent of the 25 million visitors to originate outside UAE, making it the most globally oriented World Expo in the event's long history.
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Lecture Script 6-5
Divide into Teams
Get to know your Country of choice even more!
How can we change the culture in the country that we are targetting?
What folkways & mores do we need to consider?
How does religion, and education influence our decisions?
Should we invest in the country?
Is an individualistic or collective society? How does it affect us?
Is social mobility important to us?
How does the spoken and unspoken language influence our decisions?
Do a quick cultural dimensions analysis and make suggestions. Use Geert Hofstede
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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 – it can and does evolve
Multinational enterprises can be engines of cultural change… How?
How many languages do you speak?
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Lecture Script 6-7
Cross cultural literacy is important to success in international business. The actions of MNEs can contribute to cultural change.
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What is Culture? 1 of 4
Scholars have not been able to agree on a simple definition
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 & consuming…
Society is a group of people sharing a common set of values and norms
How has a company shaped your culture?
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Lecture Script 6-9
LO 4-1 Explain what is meant by the culture of a society.
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.
What is Culture? 2 of 4
Values and Norms
Values - provide the context within which a society’s norms are established and justified. Abstract ideas about what a group believes to be good, right, and desirable.
Norms - the social rules that govern the actions of people toward one another
Folkways - the routine conventions of everyday life… dress code; eating habits; time; business rituals; greetings; personal space; manners…
Mores - norms that are seen as central to the functioning of a society and to its social life
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Lecture Script 6-10
A good example of folkways concerns attitudes toward time in different countries. People are keenly aware of the passage of time in the United States and northern European cultures such as Germany, Netherlands, and the Scandinavian countries. Businesspeople are very conscious about scheduling their time and are quickly irritated when their time is wasted because a business associate is late for a meeting or if they are kept waiting.
Mores include such factors as indictments against theft, adultery, incest, and cannibalism. In many societies, certain mores have been enacted into law.
Planning on Doing Business Internationally?
If a company is planning to start exporting a product, there are two basic questions that need to be asked. Is the product ready to be exported? And, is the company ready to export the product? Culturally, the product is either ready for a global market or not (and, if not, the company can modify it if the market is important enough). Company readiness is much more culturally sensitive. Having the appropriate cultural knowledge and skills are important. If you have the basic information about a company, you can use globalEDGETM’s diagnostic tool called CORE (Company Readiness to Export) to assess both product and company readiness to be exported. Try it out; how much better do you think Microsoft, which is everywhere in the world, will score compared with Questcor Pharmaceuticals (questcor.com), which was ranked number one on Forbes’ list of “America’s Best Small Companies” in 2013?
Sources: globalEDGE’s CORE diagnostic tool, http://globalEDGE.msu.edu;Badenhausen, K.,
“America’s Best Small Companies,” Forbes, October 9, 2013.
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What is Culture? 3 of 4
Culture, Society, and the Nation-State
Society reflects people who are bound together by a common culture
Nation-states are political creations that can contain a single culture or several cultures
Some cultures embrace several nations
Also possible to talk about culture at different levels within societies
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To complicate things further, it is also possible to talk about culture at different levels. It is reasonable to talk about “American society” and “American culture,” but there are several societies within America, each with its own culture. For example, in the United States of America, which is one country, one can talk about African American culture, Cajun culture, Chinese American culture, Hispanic culture, Indian culture, Irish American culture, and Southern culture.
What is Culture? 4 of 4
The 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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LO 4-2 Identify the forces that lead to differences in social culture.
Figure 4.1 The Determinants of Culture
How does if affect your choice of product/service?
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Social Structure 1 of 7
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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Social Structure 2 of 7
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
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LO 4-3 Identify the business and economic implications of differences in culture.
Social Structure 3 of 7
The Individual
Emphasized in Western countries
Individual achievement and entrepreneurship are promoted
Fosters managerial mobility
Encourages job switching, competition between individuals rather than team building, and a lack of loyalty to the firm
The Group (Collectivism)
Emphasized in non-Westernized countries (Japan)
Cooperation and teamwork are encouraged, and lifetime employment is common… changing
Individual initiative and creativity may be suppressed
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In a now-classic study of Japanese society, Nakane noted how this expresses itself in everyday life. Nakane goes on to observe that the primacy of the group to which an individual belongs often evolves into a deeply emotional attachment in which identification with the group becomes all-important in one’s life. One central value of Japanese culture is the importance attached to group membership
Social Structure 4 of 7
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
Does it exist in the USA?
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Lecture Script 6-18
LO 4-2 Identify the forces that lead to differences in social culture.
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 Structure 5 of 7
Social Stratification continued
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 Structure 6 of 7
Social Stratification continued
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
Social mobility in class system varies from society to society
Class system in U.S. less pronounced than in Britain
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The most rigid system is the caste system. The class system is less rigid.
Historically, British society was divided into three main classes: the upper class, which was made up of individuals whose families for generations had wealth, prestige, and occasionally power; the middle class, whose members were involved in professional, managerial, and clerical occupations; and the working class, whose members earned their living from manual occupations. The middle class was further subdivided into the upper-middle class, whose members were involved in important managerial occupations and the prestigious professions (e.g., lawyers, accountants, doctors), and the lower-middle class, whose members were involved in clerical work (e.g., bank tellers) and the less prestigious professions (e.g., schoolteachers).
Social Structure 7 of 7
Social Stratification continued
Significance
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
Evident in British society
Antagonism between labor and management can raise the costs of doing business
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LO 4-3 Identify the business and economic implications of differences in culture.
Class consciousness shapes peoples’ relationships with others.
Religious and Ethical Systems 1 of 8
Religion - a system of shared beliefs and rituals that are concerned with the realm of the sacred
Ethical system – a set of moral principles, or values, that are used to guide and shape behavior
Religions with the greatest following
Christianity (2.20 billion adherents)
Islam (1.60 billion adherents)
Hinduism (1.10 million adherents)
Buddhism (535 million adherents)
Confucianism shapes culture in many parts of Asia
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Lecture Script 6-22
LO 4-2 Identify the forces that lead to differences in social culture.
Source: “Map 14,” Allen, John L., Student Atlas of World Politics, 10th ed. McGraw-Hill Education.
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Religious and Ethical Systems 2 of 8
Christianity
Most widely practiced religion
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
Protestantism gave individuals more freedom to develop their own relationship with God which may have paved way to economic freedom
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Lecture Script 6-24
LO 4-3 Identify the business and economic implications of differences in culture.
He argued that Protestant ethics emphasizes the importance of hard work and wealth creation (for the glory of God) and frugality (abstinence from worldly pleasures). According to Weber, this kind of value system was needed to facilitate the development of capitalism. Protestants worked hard and systematically to accumulate wealth.
Religious and Ethical Systems 3 of 8
Islam
Adherents of Islam are referred to as Muslims
One true omnipotent God
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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LO 4-2 Identify the forces that lead to differences in social culture.
Other major principles of Islam include (1) honoring and respecting parents, (2) respecting the rights of others, (3) being generous but not a squanderer, (4) avoiding killing except for justifiable causes, (5) not committing adultery, (6) dealing justly and equitably with others, (7) being of pure heart and mind, (8) safeguarding the possessions of orphans, and (9) being humble and unpretentious.38 Obvious parallels exist with many of the central principles of both Judaism and Christianity.
Religious and Ethical Systems 4 of 8
Islam continued
Economic Implications of Islam
Koran establishes explicit economic principles many of which are pro-free enterprise
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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LO 4-3 Identify the business and economic implications of differences in culture.
Islamic Banks
Islamic banks function differently than conventional banks in the world, as the Islamic banks cannot pay or charge interest.
Source: © Ali Al Saadi/AFP/Getty Images
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Religious and Ethical Systems 5 of 8
Islam continued
Economic Implications of Islam continued
Prohibits payment or receipt of interest
Mudarabah
Similar to profit sharing
Most widely used
Includes a price markup
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Under mudarabah, when an Islamic bank lends money to a business, rather than charging that business interest on the loan, it takes a share in the profits that are derived from the investment. Many believe that a mudarabah system is less efficient than a conventional Western banking system.
In a murabaha contract, when a firm wishes to purchase something using a loan—let’s say a piece of equipment that costs $1,000—the firm tells the bank after having negotiated the price with the equipment manufacturer. The bank then buys the equipment for $1,000, and the borrower buys it back from the bank at some later date for, say, $1,100, a price that includes a $100 markup for the bank.
Religious and Ethical Systems 6 of 8
Hinduism
World’s oldest religion
Moral force in society requires the acceptance of certain responsibilities called dharma
Believe in reincarnation and karma
Individuals should be judged by their spiritual achievements
Promotion and adding new responsibilities may not be the goal of an employee, or may be infeasible due to the employee's caste… This too is changing
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LO 4-2 Identify the forces that lead to differences in social culture.
.
Hinduism is practiced primarily on the Indian sub-continent. Note though that India today is a dynamic entrepreneurial society
Hindus also believe in karma, the spiritual progression of each person’s soul
Religious and Ethical Systems 7 of 8
Buddhism
Suffering originates in people’s desire for pleasure
Stress spiritual growth and the afterlife, rather than achievement while in this world
The Noble Eight Path
Buddhism does not support the caste system, so individuals do have some mobility and can work with individuals from different classes
Entrepreneurial activity is acceptable
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Siddhartha offered the Noble Eightfold Path as a route for transformation. This emphasizes right seeing, thinking, speech, action, living, effort, mindfulness, and meditation. Unlike Hinduism, Buddhism does not support the caste system.
Religious and Ethical Systems 8 of 8
Confucianism
Until 1949, official ethical system of China (Korea and Japan as well)
Not a religion
High moral and ethical conduct and loyalty to others
Attain personal salvation through right action
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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Language 1 of 3
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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Can You Speak the Most Important Languages?
Mastering your own native language is critically important to doing business in your own home country. Mastering the language of a foreign country (or subcultures) with which you want to do business is also an added value in any cross-cultural relationship. English leads the way in terms of business languages, but which languages are important after English? Spanish? No, not necessarily. The three languages that are important for business after English are Mandarin Chinese, French, and Arabic. Spanish is fifth, so it is clearly important, but not as useful as English, Mandarin, French, and Arabic because of the number of people who speak these languages. Do you agree with the rank order of these languages? Why or why not?
Source: S. Kim, “Top 3 Useful Foreign Languages for Business Excludes Spanish,” ABC News, September 1, 2011. http://abcnews.go.com/blogs.
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Language 2 of 3
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.
Language 3 of 3
Unspoken Language
Unspoken language - nonverbal cues
Examples include facial expressions and hand gestures
Can be important for communication
Personal space
Many nonverbal cues are culturally bound and because they may be interpreted differently, can result in misunderstandings
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Unspoken Language
4-36
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The Psychology of Language
4-37
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Education
Formal education is the medium through which individuals learn many of the language, conceptual, and technical 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
Porter points to an excellent education system as an important factor in explaining the country’s postwar economic success
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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LO 4-2 Identify the forces that lead to differences in social culture.
Culture and Business 1 of 3
Geert Hofstede isolated five dimensions that summarized different cultures
Power distance
Individualism versus collectivism
Uncertainty avoidance
Masculinity versus femininity
Long-term versus short-term orientation
Indulgence versus restraint
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LO 4-4 Recognize how differences in social culture influence values in business.
Hofstede’s power distance dimension focused on how a society deals with the fact that people are unequal in physical and intellectual capabilities
The individualism versus collectivism dimension focused on the relationship between the individual and his or her fellows
Hofstede’s uncertainty avoidance dimension measured the extent to which different cultures socialized their members into accepting ambiguous situations and tolerating uncertainty.
Hofstede’s masculinity versus femininity dimension looked at the relationship between gender and work roles
The long-term versus short-term orientation dimension refers to the extent to which a culture programs its citizens to accept delayed gratification of their material, social, and emotional needs.
Indulgence refers to a society that allows relatively free gratification of basic and natural human drives related to enjoying life and having fun. Restraint refers to a society that suppresses gratification of needs and regulates it by means of strict social norms.
Culture and Business 2 of 3
Hofstede’s work has been criticized
Assumes a one-to-one relationship between culture and nation-state
Research may be culturally bound
Informants only worked within a single industry – computers – and within one company – IBM.
Certain social classes excluded from research
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Culture and Business 3 of 3
Hofstede’s work represents a starting point for managers trying to understand cultural differences
Global Leadership and Organizational Behavior Effectiveness instrument
World Values Survey
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The Global Leadership and Organizational Behavior Effectiveness (GLOBE) instrument is designed to address the notion that a leader’s effectiveness is contextual
The World Values Survey (WVS) is a research project spanning more than 100 countries that explores people’s values and norms, how they change over time, and what impact they have in society and business
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
As countries get richer, there is a shift from “traditional values” to “secular rational” values and from “survival values” to “well-being values”
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LO 4-5 Demonstrate an appreciation for the economic and business implications of cultural change.
For another illustration of cultural change, consider Japan. Some academics argue that a major cultural shift has been occurring in Japan, with a move toward greater individualism.74 The model Japanese office worker, or “salaryman,” is characterized as being loyal to his boss and the organization to the point of giving up evenings, weekends, and vacations to serve the organization, which is the collective the employee is a member of. However, a new generation of office workers may not fit this model.
Focus on Managerial Implications 1 of 3
CROSS-CULTURAL LITERACY AND COMPETITIVE ADVANTAGE
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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Focus on Managerial Implications 2 of 3
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
Individuals must also beware of SRC (Self Reference Criterion)
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Focus on Managerial Implications 3 of 3
Culture and Competitive Advantage
Connection between culture and competitive advantage
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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Lecture Script 6-46
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