international business

Cultural Dimensions The Cultural Dimensions may be broadly categorized as

The savvy global manager seeks to understand each of these dimensions as they impact decision making, negotiations, and ongoing operations critical to long-term success. The astute global manager knows how to effectively integrate the new culture with the existing culture.

1. Communication

2. Religion

3. Ethics

4. Values and Attitudes

5. Manners and Customs

6. Social Structures and Organizations

Page 38

Communication Global business professionals encounter various cultures throughout the world. Individuals and organizations within each culture communicate in manners unique to their culture. The necessity for the global business professional to understand the dimensions of culture has become increasingly important:

In international business, people of different cultures have difficulty communicating effectively without some caring and appreciation of each other’s points of view, values, and goals. If individuals do not attempt to develop this awareness, stereotyping of people, information, and behavior takes place. This eventually can lead to systematic discrimination.7

Communication between two cultures can be awkward if professionals do not conduct proper research. In the global business arena a misinterpretation can be very costly. As a result of using wrong or inappropriate words, business leaders from other countries may become offended and refuse to close important business deals. For instance, Japanese firms tend to involve the senior business officials in the negotiation of major business agreements. Prior to a meeting with a Japanese firm, U.S. negotiators must identify the senior Japanese executives to avoid embarrassment. Business leaders should provide important documents only to the senior Japanese executives at the start of the meeting. If global leaders do not follow this protocol, Japanese executives will perceive this as an insult and a show of disrespect. Successful MNCs acknowledge cultural differences and adapt parts of the business to recognize the unique differences and variables in communication. Major communication variables include different meanings of words across languages, verbal communication, non-verbal communication, and context (high and low).

Different Meanings of Words Across Languages

The various languages spoken throughout the world may use similar terminology; but, different meanings may exist for the same word or phrase. Differences in

accent and usage can lead to misunderstandings. Cross-cultural or cross- language barriers exacerbate the misunderstandings that arise when trying to communicate a message. Different cultures and languages may not always present or interpret messages in the same context. The effective global business manager recognizes these differences and makes every effort to understand the culture, not assuming that those in the foreign culture will understand him or her. Global businesses outside of the U.S. typically operate in multilingual environments or those in which more than one language is spoken.

Verbal

Verbal communication involves the actual speaking of words. In the United States, English is the dominant verbal language. In France, French is the dominant language. All countries have a spoken language. Effective global managers must become very familiar with the language that is spoken in the countries in which they intend to do business. Global business professionals must understand the appropriate times to use certain words and phrases in speaking the language of a host country.

Language affects communication in two ways: “(1) the ability to encode our thoughts and purposes clearly, and (2) the ability to formulate those thoughts and

purposes.”8 Effective cross-cultural communicators must know how to properly pronounce words, how to properly spell words, and how to use these words in proper grammatical form. Those doing business in a foreign nation may have to learn the language in order to make a respectable impression among the inhabitants of that country. This knowledge would result in more respect towards

the business person and their business firm.9

Four distinct areas relate to verbal communication: jargon and slang, acronyms,

humor, and vocabulary and grammar.10 Jargon and Slang are words, expressions, or terminology that is unique to people in a particular culture, profession, or group. Both words are similar in meaning with minor distinction being that slang can be thought of as informal word usage and jargon more technical. People use jargon and slang in business sessions or in everyday conversation. The expression “that’s par for the course” is a jargon statement that describes a particular situation where

the results meet the expectations. Acronyms are letters of the alphabet that represent a series of words. “FYI” is an abbreviation that means “for your information.”

When conducting international business, acronyms should not be used; these

letters will be confusing and misunderstood. Humor is the way individuals or cultures perceive or understand something as funny or comical. This should also be

avoided, because what is humorous in one country may be offensive or

misunderstood in another. Vocabulary is the body of words in a particular language, and its proper usage of those words. Grammar is the syntax and structural rules for the writing and composition of words in a language. All written communications should follow proper vocabulary usage and grammar rules. Sentences should be complete and properly punctuated. Abbreviations should not

be used when dealing with vocabulary and grammar.11

Page 39

Nonverbal

When conveying messages, non-verbal communication is just as important as

verbal communication. Nonverbal communication includes various forms of facial expressions and body language. While in foreign locations, the global business professional must be diligent in conducting comprehensive research (rather than just “doing one’s homework”) concerning the use of acceptable and unacceptable body language prior to arrival. “Doing one’s homework” implies meeting the minimum standard of competency for completing a job; whereas, conducting comprehensive research is going beyond the minimum job requirements to provide exemplary performance concerning global services and products. Those interested in doing business in other cultures must realize that well-accepted body language in their home country may be perceived as offensive in the country of business.

The use of inappropriate or wrong body language could be quite costly to a corporation. Business travelers and corporations may be unable to counteract the negative perceptions of inappropriate body language. Consequently, host country officials may decide to discontinue business relations with a MNC due to misinterpreted body language. One small incident can be very detrimental to all future business negotiations.

High Context vs. Low Context

Context is another major cross-cultural communication variable to consider. Cultures that rely primarily on nonverbal and subtle situational cues in

communication are considered high-context cultures. On the other hand, cultures that rely primarily on words to convey meaning in communication are

considered low-context cultures.12 High-context refers to societies or groups where people have close connections over a long period of time. As a result of years of interaction with each other, many aspects of cultural behavior are not made explicit because most members know what to do and what to think.

High-Context Communication

Communication in high-context cultures implies considerably more trust by both parties. Despite how an outsider may perceive this type of communication, casual and insignificant conversation is important because it reflects the desire to build a relationship and create trust. Oral agreements imply strong commitments in high- context cultures.

Less verbally explicit communication

Less written/formal information

More internalized understanding of what is communicated

Long term relationships

Strong boundaries—”insiders” vs. “outsiders”

Knowledge is situational and relational

Low-context refers to societies where people tend to have many connections of shorter duration. In these societies, cultural behavior and beliefs may need to be spelled out explicitly so that those coming into the cultural environment know how to behave. In low-context cultures enforceable contracts will tend to be in writing, precisely worded, and highly legalistic. Low-context cultures value directness.

Managers are expected to be explicit and precise in conveying intended meaning.13

Low-Context Communication

As can be seen by the comparison of high-context cultures and low-context cultures, many subtle nuances exist. Since the communication styles are very

Rule oriented: people play by external rules

More knowledge is codified, public, external, and accessible

More interpersonal connections of shorter duration

Knowledge is more often transferable

Page 40

different, the wrong message can easily be sent, or the communication can be misinterpreted. Does this mean that high-context cultures are more effective in terms of communication than low-context cultures? The answer is no. Regardless of the cultural-communication context the differences must be understood, and proper actions must be displayed at the appropriate time.

Religion The term religion may mean many things to different people. When discussed across cultures the topic of religion is open for misunderstanding. This misunderstanding may originate from either a preconceived notion or a lack of knowledge concerning the topic. Global business professionals must understand

and be well versed in this important cultural aspect. In general, religion has been defined as an action or conduct indicating a belief in, reverence for, and desire to please a divine ruling power; the exercise or practice of rites or observances implying a particular system of faith and worship. The following brief summaries of the major world religions may be helpful in understanding this cultural variable in the global business environment.

Christianity

Jesus Christ of Nazareth is the central figure in Christianity. Jesus was conceived by Incarnation and born around 3 AD to the Jewish virgin, Mary. He is fully man in that He was born to Mary, and yet he is the only begotten Son of God, living a perfect and sinless life. Jesus performed numerous miracles, taught with absolute authority about his Father in heaven, and proclaimed that He was the Christ, the Son of God. For this, he was crucified at the age of thirty-three. Christ’s suffering and death upon the cross paid for the sins of all mankind; and through Him, God grants salvation to anyone who believes in Christ’s sacrifice. Following Christ’s death He rose from the grave and returned to the earth, appearing to over five hundred of his followers and telling them of the Kingdom of God, to which He was going. He also promised His disciples that He would return one day to bring all believers with him to that Kingdom to enjoy eternal life in the presence of God.

The only authoritative Christian holy text is the Bible, which includes the Old Testament (also considered sacred to Judaism and Islam) and the New Testament. The Old Testament chronicles the history of God’s plan for man through Abraham’s descendants who had been promised a Savior by God and were waiting for Him. The New Testament is unique to Christianity in that it focuses on the figure of Jesus and His teachings. Christians believe that Jesus is the foretold Savior of the Old Testament; therefore, Christians are not looking for a savior but are waiting for the return of Jesus so that He can take them to his Kingdom, or Heaven. The Apostle’s Creed contains the core beliefs of Christianity. This document distinguishes Christianity from other religions and proclaims Christian doctrine in a concise manner. It reads as follows:

I believe in God the Father Almighty, maker of heaven and earth. And in Jesus Christ, His only Son, our Lord; who was conceived by the Holy Spirit, born of the Virgin Mary, suffered under Pontius Pilate, was crucified, died and was buried. He descended into hell; the third day He rose again from the dead; He ascended into heaven and is seated at the right hand of God the Father Almighty; from there He shall come to judge the living and the dead. I believe in the Holy Spirit, the holy Christian Church, the Communion of Saints, the Forgiveness of sins, the Resurrection of the body, and the Life everlasting. Amen.14

Judaism

Judaism is a monotheistic religion which believes that the world was created by a single, all-knowing divinity. God designed all things within that world to have meaning and purpose as part of a divine order. According to the teachings of Judaism, God’s will for human behavior was revealed to Moses and the Israelites at Mount Sinai. The Torah, or commandments, which decreed how humans should live, was a gift from God. The beliefs of Judaism can be seen in the words of Moses Maimonides, a Spanish Jew who in the twelfth century condensed the beliefs into a concise thirteen articles of faith. It reads as follows:

Page 41

1. I believe with perfect faith that the Creator, blessed be His Name, is the Creator and Guide of everything that has been created; He alone has made, does make, and will make all things.

2. I believe with perfect faith that the Creator, blessed be His Name, is One, and that there is no unity in any manner like unto His, and that He alone is our God, who was, and is, and will be.

3. I believe with perfect faith that the Creator, blessed be His Name, is not a body, and that He is free from all the properties of matter, and that He has not any form whatever.

4. I believe with perfect faith that the Creator, blessed be His Name, is the first and the last.

5. I believe with perfect faith that to the Creator, blessed be His Name, and to Him alone, it is right to pray, and that it is not right to pray to any being besides him.

6. I believe with perfect faith that all the works of the prophets are true.

7. I believe with perfect faith that the prophecy of Moses, our teacher, peace be unto him, was true and that he was the chief of the prophets, both of those who preceded and of those who followed him.

8. I believe with perfect faith that the whole Torah, now in our possession, is the same that was given to Moses, our teacher, peace be unto him.

9. I believe with perfect faith that this Torah will not be changed and that there will never be any other Law from the Creator, blessed be His name.

Three branches of Judaism circulate that form the framework for the type of lifestyle and beliefs of Jewish individuals: (1) Orthodox or traditionalists who observe most of the traditional dietary and ceremonial laws of Judaism; (2) Conservatives, who do not hold to the importance of a Jewish political state but put more emphasis on the historic and religious aspects of Judaism, doctrinally falling somewhere between the Orthodox and Reform branches; and (3) the Reform or liberal wing of Judaism, which is culture and race oriented with little consensus on doctrinal or religious belief.

10. I believe with perfect faith that the Creator, blessed be His name, knows every deed of the children of men, and all their thoughts, as it is said. It is He that fashioned the hearts of them all, that gives heed to all their works.

11. I believe with perfect faith that the Creator, blessed be His Name, rewards those who keep His commandments and punishes those that transgress them.

12. I believe with perfect faith in the coming of the Messiah; and, though he tarry, I will wait daily for his coming.

13. I believe with perfect faith that there will be a revival of the dead at the time when it shall please the Creator, blessed be His name, and exalted be His Fame

for ever and ever. For Thy salvation I hope, O Lord.15

Islam

The teachings of Islam include aspects of both faith and duty. Muslims receive instruction only from those who consider themselves adequately learned in theology or law. Muslims base their doctrine on the teachings in the Qur’an (Koran), the scripture of Islam. Muhammad’s disciples have said that sometime during the seventh century A.D., the Angel Gabriel dictated the contents to him, infallible and without error. For Muslims, the Qur’an is the word of God and the carrier of the revelation of Muhammad who is the last and most perfect of God’s messengers to mankind. Six Articles of Faith comprise the main doctrines of Islam. All Muslims are expected to believe the following:

In addition to believing the Six Articles of Faith, Muslims observe the Five Pillars of Faith, which are duties each Muslim must perform.

1. There is one true Allah, who alone is the creator of the universe.

2. Angels exist and interact with human lives. They are made of light, and each has different purposes or messages to bring to earth. Each man or woman has two angels who record his actions; one records good deeds, the other bad deeds.

Page 42

3. The four inspired books include the Torah of Moses, the Psalms (Zabin) of David, the Gospel of Jesus Christ (Injil) and the Qur’an. All but the Qur’an have been corrupted by Jews and Christians.

4. God has spoken through numerous prophets throughout time. The six greatest are Adam, Noah, Abraham, Moses, Jesus, and Muhammad. Muhammad is the last and greatest of Allah’s messengers.

5. Last Days: The last day will be a time of resurrection and judgment. Those who follow Allah and Muhammad will go to Islamic heaven, or Paradise. Those who do not will go to hell.

6. Divine Decree: Allah has devised the law of nature and religion; Allah holds Supreme power over these laws, which are operating in the universe, and the

principles for spiritual and material thing have been laid down by him.16

A sixth religious duty associated with the Five Pillars is Jihad, or Holy War. This duty requires that if the situation warrants, men must go to war to defend or spread Islam. If killed, they are guaranteed eternal life in Paradise.

1. Shahadah: One must state, “there is no God but Allah, and Muhammad is the Prophet of Allah” publicly to become a Muslim.

2. Salat: Prayer must be done five times a day (upon rising, at noon, mid- afternoon, after sunset, and before going to sleep) towards the direction of Mecca. The call to prayer is sounded by the muezzin (Muslim crier) from a tower (minaret) within the mosque.

3. Zakat: Muslims are legally required to give one-fortieth of their income to the needy. Since those to whom alms are given are helping the giver achieve salvation, no sense of shame results from receiving charity.

4. Sawm: During the holy month of Ramadan, faithful Muslims fast from sunrise to sunset each day. This develops self-control, devotion to God, and identity with the needy.

5. Hajj: Each Muslim is expected to make the pilgrimage to Mecca at least once in his or her lifetime, if he has the means to do it and is physically capable of the trip. This pilgrimage is an essential part of gaining salvation, so the old or infirm

may send someone in their place. It involves a set of rituals and ceremonies.17

Page 43

Hinduism

Hinduism has no specific founder or theology. It developed as the combination of religious practices of Aryan tribes, who migrated from central Asia around 1500 B.C. to India, and the early inhabitants of India, the Harappans. Over time, both groups developed similar religious belief systems: Aryan polytheism and Harappan sanctity of fertility. The predominantly Aryan society eventually developed the caste system, which ranked society according to occupational class. The caste system is structured as follows:

The higher a person’s caste the more that person is blessed with the benefits and luxuries life has to offer. Although the caste system was outlawed in 1948, the Hindu people of India still embrace the system and recognized it as the proper way to stratify society.

Hinduism is based on the concept that human and animal spirits reincarnate or come back to earth to live many times in different forms. The belief that souls move up and down an infinite hierarchy, depending on the behaviors they practiced in their life, is visible in many of the Hindu societal policies. As the caste system survives, charity towards others is unheard of, because Hindus believe that each individual deserves to be in the social class in which they were born. A person is born into the highest class because he or she behaved well in a past life. A person is born into poverty and shame because of misbehaviors in a past life.

A Hindu can be polytheistic (more than one god), monotheistic (one god), pantheistic (god and the universe are one), agnostic (unsure if god exists), or

1. Brahmins or the priests

2. Kshatriyas or the king-warrior class

3. Vaishyas or the merchants, farmers, Sutras laborers, craftspeople

4. Harijahns or the “untouchables.” These individuals are believed to be descended from the Harappan aboriginal people. They are extremely poor and discriminated against.

atheistic (no god) and still claim to be Hindu. This open theology makes discussing basic beliefs difficult because many ideas and definitions of Hinduism exist.

Central to Hinduism are the concepts of reincarnation, the caste system, merging with Brahman (or the ultimate reality), finding morality, and reaching Nirvana (the peaceful escape from the cycle of reincarnation). The Hindu paths to salvation include the way of works (rituals), the way of knowledge (realization of reality and self -reflection), and the way of devotion (devotion to the god that you choose to follow). If the practitioner follows the paths of these ways, salvation can be

achieved.18

Buddhism

Buddhism is a religion that is based on the teachings of Siddhartha Gautama, the son of a wealthy landowner born in northern India (now part of Nepal) around 560 B.C. In order to achieve spiritual peace, Gautama renounced his worldly advantages and became known as Buddha, or “the enlightened one.” He preached his religious views his entire life throughout South Asia. The five precepts of Buddhism include the following:

Other precepts apply only to monks and nuns:

1. Kill no living thing

2. Do not steal

3. Do not commit adultery

4. Tell no lies

5. Do not drink intoxicants or take drugs

1. Eat moderately and only at the appointed time

2. Avoid that which excites the senses

3. Do not wear adornments

4. Do not sleep in luxurious beds

5. Accept no silver or gold19

Page 44

Confucianism

Confucius (K’ung Fu Tzu), born in 551 BC, wandered through many states of China giving advice to its rulers and accumulating a small band of students. His writings deal primarily with individual morality and ethics and the proper exercise of political power by the rulers. In China and other areas in Asia, the social ethics and moral teachings of Confucius are blended with the Taoist communion with nature and the Buddhist concepts of the afterlife; this forms a set of complementary, peacefully coexistent, and ecumenical religions. Taoism originates with Tao (pronounced “Dow”) meaning “path or the way.” The term is basically indefinable and has to be experienced.

The adherents of Confucianism consider it to be a philosophy of life not a religion.

According to Confucius the nature of man is fundamentally good and inclined towards goodness. Perfection of goodness can be found in sages and saints. Every man should attempt to reach the ideal by leading a virtuous life, possessing a very noble character, and doing his duty unselfishly with sincerity and truthfulness. He who possesses a good character and divine virtue is a princely type of man. The princely man sticks to virtue, but the inferior man clings to material comfort. The princely man is just, but the inferior man expects rewards and favors. The princely man is dignified, noble, magnanimous, and humble; but, the inferior man is mean, proud, crooked, and arrogant. In the “Great Learning,” Confucius revealed the step by step process by which one attains self-development and by which it flows over into the common life to serve the state and bless mankind.20

Shinto

Shinto is an ancient Japanese religion that originated about 500 BC and was originally a mixture of nature worship, fertility cults, divination techniques, hero worship, and shamanism. Its name is derived from the Chinese words “shin tao” and is translated “The Way of the Gods.”

Unlike most other religions Shinto has no real founder, no written scriptures, no body of religious law, and a very loosely-organized priesthood. The Yamato dynasty consolidated its rule over most of Japan in the eighth century AD. Divine origins were ascribed to the imperial family, which then established Shinto as an official religion of Japan along with Buddhism. This situation remained until after the end of World War II, which resulted in the complete separation of Japanese religion from politics. The Emperor was forced by the U.S. army to renounce his divinity at that time.21

Of all the dimensions of culture, the religious dimensions typically provide the ethical foundations that define business relationships overseas. Those cultures that deny the existence of God through the practices of agnosticism or atheism still require standards of morality and conduct essential to the orderly functioning of society. The astute global business professional is well versed in the ethical foundations for both the home and host nations in which he or she is doing business.

Ethics

Ethics is the study of morality and standards of conduct. U.S. firms have developed and implemented standards of conduct for employees to serve as guidelines as to how they should comport themselves when representing the company. Some firms have employed knowledgeable consultants and subject-matter experts to teach corporate ethics, hoping to ensure that employees will conduct themselves in an ethical manner. What one culture considers moral may not be accepted as moral by another. A discussion of the concepts of ethics logically follows a discussion of religion because the two can be very related. On the other hand, one should consider the two issues separately, as ethical standards are not always a result of religious standards—although they are in many cases. One only needs to consider the founding of the United States of America. The religious beliefs and faith of the Founding Fathers greatly influenced the writing of the Declaration of Independence and the U.S. Constitution. These documents continue to influence, in part, what many consider ethical conduct today. However, some cultures might not accept the religious and ethical aspects of the founding documents. Understanding the ethics of a particular culture is important when it comes to doing business in that culture.

Page 45

Definitions

A more specific definition of ethics can be explained as the discipline dealing with

what is good and bad and with moral duty and obligation. Business Ethics is the study of ethical dilemmas, values, and decision making in the world of business. Business ethics should not be considered a separate disciple from ethics. International business ethics examines the many practical issues that result from the international context of business. In the global context, the cultural relativity of ethical values receives more emphasis than when considering domestic business ethics. Universal values do exist to form the basis for international business ethics, such as those relating to killing, lying, cheating, etc.

The ethical differences between cultures can be both vast and complex. One example of ethical differences can be seen in the exploitation of children in the workforce in Third World nations. Other cultures do not universally accept the ethics driving specific laws that govern the employment of children in the U.S. The global business professional may encounter this ethical dilemma while working overseas and have to craft strategies that are in line with the ethical standards of the business. The trafficking of narcotic drugs provides another example of ethical differences across cultures. U.S. law prohibits the trade of these harmful substances, yet it may be legal, even ethical, in other nations to engage in such trade. One should note, no legitimate business operating overseas would engage in drug trafficking to the U.S. Those firms involved in the legitimate global business community recognize that they have a social responsibility to their trading partners, based upon mutually agreed ethical principles.

Ethical Issues the Global Business Professional Must Examine

Compare business ethical traditions across cultures.

Compare business ethical traditions from various religious

perspectives.

Understand the ethical concerns of conducting international

business transactions, including property rights and transparency.

Understand and respond appropriately to varying global

standards, including various wage and labor practices.

Understand the ethics of outsourcing and other potentially

controversial issues associated with globalization.

Corporate Social Responsibility

Ethically speaking, one of the most important issues global business professionals may face is that of being socially responsible in the cultures in which they choose to do business. Nothing will sour the relationship between a foreign business and the community in which it operates more quickly than the perception that the

company is operating in a way that is harmful to that community. Socially responsible corporations investigate ways in which to reinvest in those communities by readily contributing in terms of growth and economic development. Greed and corruption must be avoided at all costs, both by global businesses and their trading partners.

Page 46

The Issue of Corruption

Corruption is a major concern for those engaged in global business. The issue of corruption has been addressed across the globe in numerous venues such as international conferences, policy forums, government official speeches, international organizations, including the OECD and Transparency International— an international nongovernmental organization. Government leaders increasingly cite corruption as a reason for withholding foreign aid or debt relief. Many believe that a nation’s inability to pay interest on its loans is due to its leaders siphoning off national earnings into their own bank accounts. Thus, extending aid or canceling the debt may encourage further corruption. While many international initiatives to combat corruption focus on developing nations, these nations are increasingly being scrutinized by potential investors as well. “Corruption is a source of concern for governments, entrepreneurs, private individuals,

nongovernmental organizations, companies and indeed for society as a whole.”22

A strong correlation exists between poverty and corruption. This correlation reinforces the growing evidence that corruption hampers efforts to lift people out of poverty and provide them with new economic opportunities. Corruption clearly results in the misallocation of resources and tends to be more prevalent where

political will and governance systems are weak in combating corruption.23

Corruption helps to fuel poverty especially when high-level public officials steal from their nations or mismanage public resources intended to finance their people’s aspirations for a better life. In many parts of the world, government officials have lined their own pockets instead of funding development such as new roads, schools, and hospitals. Corruption eventually may lead to economic stagnation and increase economic and social disparities over time—when the high costs of providing public services and low capacities to collect taxes occur together. Investment opportunities and economic growth do not materialize easily in places where corruption is rampant. Investors are demanding a higher assurance of market integrity to mitigate potential risks from poor governance. Government leaders can address corruption more effectively when a strong political

will exists to combat it—by enforcing countries’ laws criminalizing bribery and

prosecuting corrupt individuals at all levels of society.24

How Transparency International Succeeds by Following Its Mission

Curb corruption through international and national coalitions,

encouraging governments to establish and implement effective

laws, policies, and anticorruption programs.

Strengthen public support and understanding for anticorruption

programs and enhance public transparency and accountability in

international business transactions and in the administration of

public procurement.

Encourage all parties involved in international business

transactions to operate at the highest levels of integrity.25

Transparency International (TI) is an international non-governmental organization dedicated to fighting corruption worldwide. Because the resource materials are from U.S. companies, the primary focus of the guidelines is compliance with the Foreign Corrupt Practices Act. However, the material can also be adapted for compliance with non-U.S., anti-bribery initiatives, including those of

the OECD.26

As a result of Securities and Exchange Commission (SEC) investigations in the mid -1970s, over four-hundred U.S. companies admitted making questionable or illegal payments in excess of $300 million to foreign government officials, politicians, and political parties. The abuses ran the gamut from bribery of high foreign officials to secure some type of favorable action by a foreign government to so-called facilitating payments that allegedly ensured that government functionaries

discharged certain ministerial or clerical duties. Congress enacted the Foreign Corrupt Practices Act (FCPA) to bring a halt to the bribery of foreign officials and to restore public confidence in the integrity of the U.S. business system.

The FCPA was intended to have and has had an enormous impact on the way American firms do business. Several firms that paid bribes to foreign officials have been the subject of criminal and civil enforcement actions. These actions resulted in large fines, suspensions, debarment from federal procurement contracting, and employee jail time. To avoid such consequences, many firms have implemented detailed compliance programs to prevent and detect any improper payments by employees and agents.

Following the passage of the FCPA Congress became concerned that U.S. companies were operating at a disadvantage compared to foreign companies. These foreign companies routinely paid bribes and in some countries were permitted to deduct the cost of such bribes as business expenses on their taxes. In 1988 Congress directed the Executive Branch to commence negotiations in the OECD to obtain the agreement of the U.S. major trading partners to enact legislation similar to the FCPA. In 1997 the U.S. and thirty-three other countries signed the OECD Convention on Combating Bribery of Foreign Public Officials in

Page 47

International Business Transactions. The anti-bribery provisions of the FCPA make it unlawful for a U.S. person, and certain foreign issuers of securities, to make a corrupt payment to a foreign official for the purpose of securing business with or directing business to any person. Since 1998 these provisions also apply to foreign

firms and persons who attempt corrupt payments while in the United States.27

Values and Attitudes

The study of culture must include values and attitudes. Values are generally accepted beliefs about what is right and wrong. Values are an interpretation of culture by societal members. A society derives its culture from its history and environment. The developed values of a society influence the members of the society. The values are a basis for developing social norms and decision making. If a citizen behaves according to social norms, the society accepts and respects the individual. If the citizen behaves contrary to social norms, he or she stands out and

may be subject to correction. An attitude is the manifestation of values, beliefs,

feelings, and states of mind.28

To value something is to consider or rate it highly. In a cultural context, a value would then be anything that a particular culture holds in high esteem. An attitude is “a mental position with regard to a fact or state or a feeling or emotion toward a fact or state.”An attitude is what one thinks or feels about someone or something. Values and attitudes are interrelated, as attitudes often shape values, and vice versa.29

Variances in Attitudes

The astute global business professional recognizes the variances in attitudes between the home culture and the host culture. Differences in attitudes toward time, work, change, gender, social status, and social mobility impact all stages of the business relationship. Time differences effect meeting attendance as well as ongoing employee attendance. Gender differences impact female employment.

Concept of Time

Different cultures approach the concept of time and corresponding time management practices very differently. For example, in some South American

cultures, meeting might begin thirty minutes late.30 French businesspeople are also

relaxed about time but find it rude to visit unannounced.31 Middle-Eastern nations that are predominantly Muslim do not hold a schedule tightly; however, it is advisable that the visitor be on time. Further, executives and managers in Middle- Eastern cultures often prefer an open office space design, which often results in frequent interruptions. Thus, visitors who value time should invite Middle-Eastern executives and managers to meet away from the business to minimize the

interruptions.32

U.S. business leaders tend to view time as a resource; time is allocated and used to deliver maximum value to the organization. Australian, Japanese, Canadian, and British business leaders also see punctuality as respectable. German business leaders place great value on punctuality, but decisions are rarely made in a hasty manner. Many meetings may be required because negotiators typically must receive approval from an advisory board before action is taken. Italians expect visitors to be punctual, but the Italian businessperson may be acceptably late. Like the Germans, Italians make decisions slowly because of a slow bureaucracy and legal

system.33

Some cultures view work as the purpose for life. Other cultures view work as means to support life. Global business professionals must make this important distinction as a misunderstanding in this area can be debilitating. For example, workers in some European nations, (e.g. France and Italy) are accustomed to taking one- month-long vacations every summer. Most Italian workers take the month of August for vacation. The same occurs in France during July and August. The global business professional should be prepared for the cultural value placed on vacation, as vacation may take priority over work. This cultural tendency will impact production during the affected month, as well as, others in the supply chain who rely on the Italian and French organizations to provide resources or support. The

Page 48

mass vacation does not preclude Italy or France from consideration for expansion by an international manager. Rather, the cultural approach to a summer vacation requires the manager to plan for shut down so that it does not impact other operations. Another example affects time during the day. In Mexico, lunch begins

between 2:00 p.m. and 3:00 p.m. and may last three to four hours.34 The impact of this attitude will be lost production time or management challenges when trying to adjust to the local culture.

Dealing with Change

Cultural attitudes differ in the approach to change. A culture that is open to change encourages creativity and individualism. Germany targets its children into education tracks that fit the learner, thus developing a society of technical experts instead of developers. Without the tension created in school that challenges students to be creative in how they learn, there will be little creativity in later productive years. Japan, with its group orientation, is producing experts at reverse engineering rather than design. Japanese industry has become very successful by mastering production efficiency through Total Quality Management and Quality Circles—both team-oriented efforts. Societies readily accept change in a culture that rewards creative thinking and embraces diversity. The United States and Canada are examples of cultures that embrace change. These cultures lead the world in technological innovation, transportation, and agricultural sciences.

The Role of Gender

Cultural attitudes differ in terms of the role of gender. Some cultures treat women as equals, while others view women as subservient. If a culture does not consider women eligible to work outside the home, an international manager knows that the workforce and diversity are limited. Women have affected German culture in powerful ways twice in the last century. Though Germany was a historically male-dominated society, women were pivotal in caring for injured soldiers during World War II and assisting in reconstruction after the war. The second instance occurred during the transition after the Berlin Wall came down. As the German economy grew, women were needed to satisfy the demand for

labor.35 Iranian women were pivotal in the revolution that overthrew the Shah in 1979; however, in the post-revolution society, many women’s freedoms have been curtailed. Once again, they must wear a veil. However, Iranian women do work

outside of the home, and they do have the right to vote.36 Gender differences in Mexico have been narrowing since the 1970s. The number of women in the workforce has more than doubled in the last fifteen years as educated women are pursuing careers. Unfortunately, wages are lower for women than men, and women

are often subjected to sexual harassment.37

Social Status

Cultural attitudes differ by social status structures. The cultural attitude of social status impacts business. Training and promotional opportunities from within are limited whenever a culture forbids mobility across social classes. This suppression minimizes potential motivation techniques and creativity. Four social classes exist in Iran: Upper, Middle, Working, and Lower. The upper class includes large landowners, industrialists, financiers, and high-ranking clergy. Middle-class members are professionals, business and landowners, high-ranking government officials and military officers, teachers, and low-ranking clergy. The working class is made up of skilled labor. The lower class consists of unskilled labor and the

unemployed.38 France is another country with stratified social classes as citizens are not expected to make large jumps from one class to another.

Page 49

Business Manners and Customs across National Cultures Etiquette, manners, and cross-cultural or intercultural communication have become critical elements required for the global business professional. As international, multinational, transnational, multi-domestic, and global business continues to expand and bring people closer, the most important element of successful business outcomes may be the appreciation and respect for regional, country, and cultural differences. Understanding cultural diversity is a critical success factor for the global business professional.

Gaining insight into the cultural dynamics of a country or region can be very helpful in understanding why people act the way they do. This insight also reveals the appropriate ways one should act while in that country.

Local Social Customs Global Professionals Should Know and Respect

General information, including population, cultural heritage,

language, and religion.

Appearances, including do’s and don’ts involving dress, clothing,

body language, and gestures.

Behavior, including do’s and don’ts involving dining, gift giving

meetings, customs, protocol, negotiation, and general behavioral

guidelines.

Communication, including do’s and don’ts involving greetings,

introductions, and conversational guidelines.

Social Structures

In terms of its application to cross-border commerce, the term social structure of a culture is considered as being the arrangement of and relations between members of the society and its corresponding social institutions, social groups, statuses, and roles.

The term institution has a number of meanings:

Regardless of the meaning, it is important to note that there is usually an

established and enduring pattern of social relationships among members. Social institutions may be further delineated as traditional (family, religion, politics, economics, education, etc.) and nontraditional (science and technology, mass media, medicine, sport, the military, etc.).

Inadequacies in social institutions may engender many social problems within a culture. The educational institution’s failure to prepare individuals for the job market and alterations to the structure of the economic institution significantly influence unemployment.

Social institutions are made up of social groups of two or more people who have a

common identity, who interact, and who form a social relationship. Social groups

A significant practice, relationship, or organization in a society or culture.

the institution of marriage

Something or someone firmly associated with a place or thing.

she has become an institution in the theater

An established organization or corporation (such as a bank or university) especially of a public character.

financial institutions

A facility or establishment in which people (such as the sick or needy) live and receive care typically in a confined setting and often without individual consent. 39

Page 50

are further classified as primary (involve small numbers of individuals and are characterized by intimate and informal interaction) or secondary (involve small or large numbers of individuals, are task oriented, and are characterized by impersonal and formal interaction).

Social groups may be categorized by statuses. Status may be defined in two ways: as position or rank in relation to others, or as relative rank in a hierarchy of

prestige. Ascribed status is the social status a person is assigned at birth or assumed involuntarily later in life. It is a position that is neither earned nor chosen

but assigned.40 These rigid social designators remain fixed throughout an individual’s life and are inseparable from the positive or negative stereotypes that are linked with one’s ascribed statuses.

The practice of assigning such statuses to individuals exists cross-culturally within all societies and is based on gender, race, family origins, and ethnic backgrounds. For example, a person born into a wealthy family has a high ascribed status based solely on the social networks and economic advantages that one gains from being born into a family with more resources than others.

In contrast, an achieved status is a social position a person takes on voluntarily that reflects both personal ability and merit. An individual’s occupation tends to fall under the category of an achieved status; for example, a teacher or a firefighter.

Individuals have control over their achieved statuses insofar as there are no restrictions associated with their ascribed statuses that could potentially hinder their social growth. Ascribed status plays an important role in societies because it can provide the members with a defined and unified identity. No matter where an individual’s ascribed status may place him or her in the social hierarchy, most has a set of roles and expectations that are directly linked to each ascribed status and thus, provides a social personality. For example, the status of a manager includes one role for interacting with superiors and another role for interacting with

subordinates.41