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International Business

Sixteenth Edition

Chapter 2

The Cultural Environments Facing Business

Learning Objectives

2-1 Explain why culture, especially national culture, is important in IB, but tricky to assess

2-2 Grasp the major causes of national cultural

formation and change

2-3 Discuss major behavioral factors influencing

countries’ business practices

2-4 Recognize the complexities of cross-cultural

communications

2-5 Analyze guidelines for cultural adjustment

Learning Objectives for Chapter Two.

Globalization and IB

Objective 2-1

What is Culture?

Bicultural and/or Multicultural

Relevant Groups/Dissimilar Groups

Learning Objective 1: Explain why culture, especially national culture, is important in IB, but tricky to assess.

The shared values, attitudes, and beliefs of a group of individuals constitutes a culture.

Bicultural or multicultural: meaning that they have internalized more than one national culture because of having dual or multiple citizenships, parents or spouses from another country, or lived abroad at an impressionable age.

Groups can hold more similar attitudes with like-groups abroad than with dissimilar groups in their own countries. For instance, urban people in Country A may have more in common with urban people in Country B than with rural people in their own country. As a consequence, when comparing nations culturally, one must be careful to examine relevant groups—differentiating between, say, the typical attitudes of rural and urban dwellers, or between managers and production workers.

Cultural Factors and the IB Environment

Objective 2-1

FIGURE 2.1 Cultural Factors Affecting IB Operations

Learning Objective 1: Explain why culture, especially national culture, is important in IB, but tricky to assess.

Figure 2.1 shows the cultural factors affecting IB operations

As noted, culture is part of the institutional and physical factors that affect the operating environment. They consist of:

Cultural awareness.

Identification and dynamics of cultures.

Behavioral practices affecting business.

Strategies for dealing with cultural differences.

This is the focus of this chapter.

Using Cultural Reference Points

Objective 2-1

Cultural reference points

Culture can be useful reference point

However, culture reference points may not always be accurate

Learning Objective 1: Explain why culture, especially national culture, is important in IB but tricky to assess.

While culture can be a useful reference point to determining values and attitudes, it isn’t always accurate due to:

• Not everyone therein shares the same values and attitudes,

• Subcultures exist within nations,

• Some people have internalized more than one culture, or

• Cultural similarities link groups from different countries.

Cultural Collision

Objective 2-1

What is cultural collision?

Deal-focus culture (DF)

Relationship-focus culture (RF)

Learning Objective 1: Explain why culture, especially national culture, is important in IB, but tricky to assess.

IB involves people from different national cultures, which affects every business function—managing a workforce, marketing and transporting output, purchasing supplies, dealing with regulators, and securing funds.

Sometimes issues can happen because cultures may have different values. When contact among divergent cultures creates problems, the situation is known as cultural collision. Cultural collision may cause:

• Ineffective business practices.

• Personal distress.

The latter had less compulsion to wrap things up, regarded small talk at a café as a means to identify acceptable business partners, and put dealings with friends ahead of business dealings. DF people typically view RF people as time-wasters, whereas RF people view DF people as offensively blunt.

An example of cultural collision: deal-focus (DF) culture, where people are primarily task-oriented; whereas relationship-focus (RF) culture is based more on getting to know potential business partners, and traditionally move slower.

Cultural Awareness Research

Objective 2-1

Shortcomings in cultural research

Dangers in cultural awareness research

Comparing countries by what people say

Variations within countries

Outdated research

Learning Objective 1: Explain why culture, especially national culture, is important in IB, but tricky to assess.

Some people have an innate ability to say and do the right thing at the right time, while others offend unintentionally or seem ignorant. Experts note, however, that businesspeople can improve their awareness and sensitivity and, by educating themselves, enhance the likelihood of succeeding abroad.

Part of this education may be to do cultural research before traveling abroad. However, there are some factors to be aware of

Shortcomings in cultural research include:

• Erroneous responses to questions.

• Relying on averages when there are variations.

• Overlooking changes.

Other dangers in cultural awareness research:

Comparing countries by what people say can be risky. Responses may be colored by the very culture one tries to understand. Some groups may be happiest when they’re complaining; some respond with what they think questioners want to hear. In responding to degrees of agreement, say on a scale of one to five, some cultures are more apt to select the middle point, others the extremes. Almost everyone agrees that national cultures differ, but they disagree on what the differences are and the importance of them.

Researchers focusing on national differences in terms of averages may overlook variations within countries. For instance, the average Scandinavian may be uncomfortable with bargaining, but assuming that a Swedish buyer for IKEA doesn’t expect to bargain on prices could be a grave mistake.14 And of course, personality differences make some people outliers in their own cultures, with no certainty that they’ll eventually integrate and conform to their national norms. Nevertheless, there is a marked difference among countries in the extent that people conform close to the countries’ average. When most people are close to the average, it is known as cultural tightness. When people are not, it is known as cultural looseness.

Because cultures evolve, research may be outdated. Our opening case, for instance, details some changing Saudi practices toward gender differences.

Influences on Cultural Change

Objective 2-2

Sources of Change

Choice

Imposition

Learning Objective 2-2: Grasp the major causes of national cultural formation and change.

Culture is transmitted in various ways—from parent to child, teacher to pupil, social leader to follower, peer to peer. Developmental psychologists believe that most people acquire their basic value systems, especially core values, as children

Sources of change:

Change by choice: change by choice may occur because social and economic situations present people with new alternatives.

Change by imposition: imposing certain elements from an alien culture, such as a forced change in laws by a dominant country that, over time, becomes part of the subject culture.

Diffusers and Stabilizers of Culture: Language

Objective 2-2

Language

Insert Map 2.2

Learning Objective 2-2: Grasp the major causes of national cultural formation and change.

Language as a diffuser and stabilizer of culture:

Language is at the heart of social identity. Common language fosters a sense of shared identity

Language is probably the most noticeable aspect of culture because it limits contact among people who can’t communicate with each other. Although a nation may have a single official language, the reality is much more complex, e.g. a nation may have many dialects

As you can see from this map. Religion helps shape cultural identity.

Diffusers and Stabilizers of Culture: Religion

Objective 2-2

Religion

Insert Map 2.3

Learning Objective 2-2: Grasp the major causes of national cultural formation and change.

Religion as a cultural stabilizer.

Religion has been a cultural stabilizer because centuries of religious influence continue to shape cultural values even in those societies where the practice of religion has been declining.

As you can see from this map religion plays a large role in developing culture.

Behavioral Practices Affecting Business: Social Stratification

Objective 2-3

Social stratification

Group Memberships

Examples

Learning Objective 2-3: Discuss major behavioral factors influencing countries’ business practices.

Every culture ranks people. Such social stratification creates hierarchies and influences a person’s class, status, and financial rewards within that culture.

A way to classify people’s group memberships for example: Those usually determined by birth are ascribed group memberships, including gender, family, age, caste, and ethnic, racial, or national origin. Acquired group memberships include those based on religion, political affiliation, educational place and achievement, and profession.

Group membership examples:

Ethic and racial groups.

Gender based groups.

Age based groups.

Family based groups.

Behavioral Practices Affecting Business: Work Motivation

Objective 2-3

Work motivation

Levels of materialism

Trade off between productivity and leisure time

Success and reward

Masculinity-femininity index

Learning Objective 2-3: Discuss major behavioral factors influencing countries’ business practices.

Highly motivated employees (toward work) are normally more productive than workers who aren’t. Further, higher worker productivity impacts companies’ efficiency and countries’ economic development.

Materialism (the level of) affects motivation: how much material items are valued.

Productivity and leisure time trade off: Some cultures value leisure time more than others do. They push to work shorter hours, take more holidays and vacations, and generally spend more time and money on leisure activities.

Expectation of success and reward is the perceived likelihood of success and its rewards versus failure influence work motivation.

The masculinity–femininity index measures attitudes toward achievement. A high-masculinity score indicates a preference for “live to high-masculinity individuals show admiration for successful achievers, little sympathy for the unfortunate, preference to be better than others rather than on a par with them, and a money-and-things orientation. (They also strongly prefer role differences between the genders.) A high-femininity score denotes the opposite. It indicates a people orientation rather than work orientation and a preference for quality of life.

Behavioral Practices Affecting Business: Relationship Preferences

Objective 2-3

Relationship preferences

Power Distance

Individualism vs. Collectivism

Learning Objective 2-3: Discuss major behavioral factors influencing countries’ business practices.

Power distance is a measurement of employee preferences of interaction between superiors and subordinates. With high power distance, people prefer little consultation between bosses and subordinates. They also prefer management styles that are either autocratic (ruling with unlimited authority) or paternalistic (regulating subordinate conduct by supplying their needs). With low power distance, they prefer “consultative” styles.

High individualism describes a preference to fulfill leisure time, build friendships, and improve skills independently of the organization. People with high individualism also prefer to receive direct monetary compensation as opposed to fringe benefits, and they prefer to engage in personal decision-making and on-the-job challenges. High collectivism, in contrast, typifies an employee’s penchant for dependence on the organization through training, satisfactory workplace conditions, and good benefits.

Behavioral Practices Affecting Business: Risk Taking Behaviors

Objective 2-3

Risk taking behaviors

Uncertainty avoidance

Trust

Future orientation

Fatalism

Learning Objective 2-3: Discuss major behavioral factors influencing countries’ business practices.

Uncertainty avoidance describes a trait of being uncomfortable with ambiguity. Where this trait is strong, most employees prefer to follow set rules even if they believe that breaking them may be in the company’s best interests. They also tend to stay with current employers for a long time

Level of trust for people in general

A future orientation denotes a willingness to delay gratification in order to reap more in the future.

Fatalism If people are fatalistic, they’re less likely to accept the basic cause-and-effect relationship between work and reward. Thus, managers are less apt to sway them with cause-and-effect logic than by making personal appeals

Activity Minute:

Do you think the US has high or low uncertainty avoidance? How does this compare to other places you’ve been?

Behavioral Practices Affecting Business

Objective 2-3

Information and Task processing

Perception of cues

Low and high context cultures

Monochromic and polychromic

Whole vs. the Parts

Idealism vs. Pragmatic

Learning Objective 2-3: Discuss major behavioral factors influencing countries’ business practices.

Perception of cues: As a rule, we’re selective in perceiving cues—features that inform us about the nature of something. We may identify things through any of our senses, and each sense can provide information in various ways, such as seeing color, depth, and shape through vision.

Low and high context cultures: low-context cultures, ones where people generally regard as relevant only firsthand information that bears directly on the subject at hand. Businesspeople will spend little time on small talk and tend to get to the point. In high-context cultures, people tend to understand and regard indirect information as pertinent. Processing information: All cultures process information inasmuch as they categorize, plan, and quantify.

In monochromic cultures people normally prefer to work sequentially, such as finishing transactions with one customer before dealing with another. Conversely, polychromic people are more comfortable when working simultaneously on a variety of tasks (multitasking).

Some cultures tend to focus first on the whole and then on the parts; others do the opposite. When asked to describe an underwater scene in which one large fish was swimming among some smaller fish, most Japanese first described the overall picture, whereas most Americans first described the large fish.

Similarly, some cultures prefer to establish overall principles before they try to resolve small issues—an approach sometimes labeled idealism. Cultures in which people focus more on details than on abstract principles are said to be pragmatic.

Challenges Communicating Across Cultures

Objective 2-4

Translation of written and spoken language

Silent language

Colors

Distance

Time

Body language

Prestige

Learning Objective 2-4: Recognize the complexities of cross-cultural communications

Translating one language into another is not as straightforward as it may seem. Some words simply don’t have direct translations.

The following, each originally composed to assist English-speaking guests, have appeared on signs in hotels around the world:

JAPAN: “You are invited to take advantage of the chambermaid.”

NORWAY: “Ladies are requested not to have children in the bar.”

SWITZERLAND: “Because of the impropriety of entertaining guests of the opposite sex

in the bedroom, it is suggested that the lobby be used for this purpose.”

We constantly exchange messages through a host of non-spoken and non-written cues that form a silent language

Colors For a product to succeed, its colors must coincide with consumers’ frame of reference. Colors invoke distinct connotations in different countries, such as being lucky or unlucky or being associated with a specific business

Distance For example, in the United States people tend to maintain larger distances during conversations or when conducting business than people in Mexico do. And except for handshakes, there is little or no touching in the United States, whereas touching one another in Mexico is quite common.

Time Different perceptions of time and punctuality also may create confusion. U.S. businesspeople usually arrive before a business appointment time, a few minutes late for dinner at someone’s home, and a bit later still for large social gatherings. In another country, the concept of punctuality in any or all of these situations may be different.

Body language Body language, or kinesics, is the way people walk, touch, and move their bodies. Very few have universal meanings. A Greek, Turk, or Bulgarian may indicate “yes” with a sideways movement of the head that could be construed as “no” in the United States and much of Europe.

Prestige Another factor in silent language relates to a person’s status, particularly in an organizational setting. U.S. managers typically place great faith in physical things as cues to prestige and may underestimate the status of foreign counterparts who lack large, plush corner offices on high floors. Foreigners may underestimate U.S. counterparts who perform their own services, such as opening doors, fetching coffee, and answering unscreened phone calls.

Guidelines for Cultural Adjustment

Objective 2-5

Degrees of adjustment

Host society acceptance

Degree of cultural differences

Ability to adjust

Company and Management orientations

Learning Objective 2-5: Analyze guidelines for cultural adjustment.

After managers identify key cultural differences abroad, must they alter their customary practices to succeed there? Can people overcome culturally related adjustment problems when working abroad? Here are impacts on the degrees of adjustment:

Host country acceptance of other cultures and other ways of doing things.

Degree of cultural differences for example, language, religion, economic development.

Ability to adjust: culture shock—the frustration that results from having to absorb a vast array of new cultural cues and expectations. some people experience reverse culture shock when they return, having become partial to aspects of life abroad that are not options back home.

Company and management orientations:

A polycentric organization believes it should act abroad like companies there.

Ethnocentrism reflects the conviction that one’s own practices are superior to those of other countries.

Between the extremes of polycentrism and ethnocentrism, geocentrism integrates home- and host-country practices as well as introducing some entirely new ones.

Strategies for Instituting Change

Objective 2-5

Approaches to successful changes:

Value systems

Resistance

Participation

Reward sharing

Opinion leadership

Bicultural

Timing

Learning abroad

Learning Objective 2-5: Analyze guidelines for cultural adjustment.

Approaches to successful change:

Value systems: If something contradicts core values, it will likely not be accepted.

Resistance to too much change: make changes slowly over time instead of many changes at once.

Participation: Discuss problems with stakeholders.

Reward sharing: Show workers the value of the change.

Opinion leadership: Use channels of influence to get change to happen

Biculturals as mediators: Utilize the skills and knowledge of people who know about both cultures.

Timing: The timing must be right for the change to be successful

Learning abroad: As companies gain more experience abroad, it makes change easier.