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Chapter 5

Culture, Management Style, and Business Systems

Learning Objectives

LO1 The necessity for adapting to cultural differences

LO2 How and why management styles vary around the world

LO3 The extent and implications of gender bias in other countries

LO4 The importance of cultural differences in business ethics

LO5 The differences between relationship-oriented and information-oriented cultures

Business Customs in Global Marketing

Business etiquette is largely driven by cultural norms.

Cultural analysis often pinpoints market opportunities and gives companies a competitive edge.

What we learned in Chapter 4, particularly Hofstede’s cultural value dimensions, are applicable to business customs and how business is conducted in various countries. For example, in high power distance countries, authority and hierarchy need to be respected while conducting business.

Required Adaptation

Adaptation is a key concept in international marketing.

To successfully deal with individuals, firms, or authorities in foreign countries, managers should exhibit:

open tolerance

flexibility

humility

justice/fairness

ability to adjust to varying tempos

curiosity/interest

knowledge of the country

liking for others

ability to command respect

ability to integrate oneself into the environment

Unless marketers remain flexible by accepting differences in basic patterns of thinking, local business tempo, religious practices, political structure, and family loyalty, they are hampered, if not prevented, from reaching satisfactory conclusions to business transactions.

Cultural Imperatives, Electives, and Exclusives (1 of 2)

Cultural imperatives:

business customs and expectations that must be met, conformed to, recognized, and accommodated if relationships are to be successful

Cultural electives:

areas of behavior or customs that cultural aliens may wish to conform to or participate in but that are not required

Cultural imperatives are “must do” things in another culture, such as meeting and greeting, or exchange of business cards in Asian cultures (e.g., China, Japan and Korea). Cultural electives are optional activities that a foreigner may or may not want to engage in, such as drinking aperitifs (strong alcoholic drinks) before lunch in the Czech Republic or coffee in Saudi Arabia. No offense is taken if one refuses to participate in these cultural customs.

Cultural Imperatives, Electives and Exclusives (2 of 2)

Cultural exclusives:

customs or behavior patterns reserved exclusively for the locals and from which the foreigner is barred and must not participate

In general, politics and religion are taboo in conversations in many cultures, particularly for foreigners. In Mexico, McDonald’s used the national symbol of the Mexican flag on paper placemats and insulted the people (as you treat anything with the national symbol with the utmost respect). These are cultural exclusives, things you never engage in or do when in another culture.

Cultural elective or imperative?

BEIJING, CHINA: German Chancellor Angela Merkel and Chinese Prime Minister Wen Jiabao toast after the EU–China Business Summit at the Great Hall of the People in Beijing. The summit was boosted by the settlement of a trade row that had left 80 million Chinese-made garments piled up in European seaports, unable to be delivered to shops under a quota pact agreed to at the time. Drinking half a bottle is a cultural elective, but taking a sip is more of an imperative in this case.

American Culture and Management Style

There are at least three reasons to focus briefly on American culture and management style:

For Americans, it is important to be aware of the elements of culture influencing decisions and behaviors.

For those new to American culture, it is useful to better understand business associates from the U.S., as the U.S. market is the biggest export market in the world.

Since the late 1990s, American business culture has been exported around the world.

For Americans, a self-awareness will help adapt to working with associates in other cultures. This knowledge will help everyone be more patient while conducting business across borders. American business culture has been exported around the world, just as in the 1980s Japanese management practices were imitated almost everywhere.

The Impact of American Culture

Ways in which U.S. culture has influenced management style include, but are not limited to, the following:

“Master of destiny” viewpoint

Independent enterprise as the instrument of social action

Personnel selection and reward based on merit

Decisions based on objective analysis

Wide sharing in decision making

Never-ending quest for improvement

Competition produces efficiency

American culture is based on a few basic premises, such as reward based on merit and not group performance. Decisions are made objectively not subjectively. Also, it is a competitive business environment where continuous improvement is the goal.

Differences in Management Styles Around the World (1 of 4)

Authority and Decision Making

In high-PDI countries subordinates are not likely to contradict bosses, but in low-PDI countries they often do

Three typical patterns exist:

Top-level management decisions

Decentralized decisions

Committee or group decisions

Top-level management decision making is generally found in situations in which family or close ownership gives absolute control to owners, and businesses are small enough to allow such centralized decision making.

In countries such as Mexico and Venezuela where a semi-feudal, land-equals-power heritage exists, management styles are characterized as autocratic and paternalistic. Decision-making participation by middle management tends to be deemphasized; dominant family members make decisions that tend to please the family members more than to increase productivity. This description is also true for government-owned companies in which professional managers have to follow decisions made by politicians, who generally lack any working knowledge about management.

Differences in Management Styles Around the World (2 of 4)

Decentralized decision making allows executives at different levels of management to exercise authority over their own functions.

Committee decision making is by group or consensus. Committees may operate on a centralized or decentralized basis, but the concept of committee management implies something quite different from the individualized functioning of the top management and decentralized decision-making arrangements.

Differences in Management Styles Around the World (3 of 4)

Management Objectives and Aspirations

Security and mobility

Personal life

Affiliation and social acceptance

Power and achievement

Differences in Management Styles Around the World (4 of 4)

Personal security and job mobility relate directly to basic human motivation and therefore have widespread economic and social implications.

For many individuals, a good personal and/or family life takes priority over profit, security, or any other goal.

In some countries, acceptance by neighbors and fellow workers appears to be a predominant goal within business.

Although there is some power seeking by business managers throughout the world, power seems to be a more important motivating force in South American countries.

To the Japanese, personal life is company life. Many Japanese workers regard their work as the most important part of their overall lives. The Japanese work ethic—maintenance of a sense of purpose—derives from company loyalty and frequently results in the Japanese employee maintaining identity with the corporation.

Exhibit 5.1 Annual Hours Worked

Source: OECD, Labor Market Indicators, 2012.

	2000	2010
United Kingdom	1700	1647
Canada	1775	1702
Germany	1473	1419
Netherlands	1435	1377
Japan	1821	1733
Norway	1455	1414
United States	1814	1778
S. Korea	2512	2193
Mexico	1888	1866
Italy	1861	1778

In Exhibit 5.1: Americans appear to be in the middle of hours worked, far above the northern Europeans and way below the South Koreans.

Communication Styles

Differences in Communication Styles

Face-to-face communication

Internet communication

According to Edward T. Hall, the symbolic meanings of time, space, things, friendships, and agreements vary across cultures

Hall places eleven cultures along a high-context/low-context continuum

Communication in a high-context culture depends heavily on the contextual (who says it, when it is said, how it is said) or nonverbal aspects of communication

Communication in a low-context culture depends more on explicit, verbally expressed communications

Note: Patterned after E. T. Hall.

Exhibit 5.2 Context, Communication, and Cultures: Edward Hall’s Scale

High-context versus low-context culture score for different countries, based on Hall’s classification.

Differences in the American and Japanese office structure

Speaking of office space: Notice the individualism reflected in the American cubicles and the collectivism demonstrated by the Japanese office organization.

The pictures demonstrate office space in the U.S. and Japan. The U.S. is more individualistic, with more space and higher walls between cubicles. Japan is more collectivistic.

Formality and Tempo

Level of formality in addressing business clients by first name

Level of formality in addressing your boss by first name

Tempo or speed in getting “down to business”

Perception of time varies in many cultures

P-Time versus M-Time

M-time, or monochronic time, typifies most North Americans, Swiss, Germans, and Scandinavians.

Monochronic time divides time into small units and is concerned with promptness. M-time is used in a linear way, and it is experienced as almost tangible, in that one saves time, wastes time, bides time, spends time, and loses time.

Most low-context cultures operate on M-time, concentrating on one thing at a time.

P-time, or polychronic time, is more dominant in high-context cultures.

P-time is characterized by multi-tasking and by “a great involvement with people.”

The American desire to get straight to the point and get down to business is a manifestation of an M-time culture, as are other indications of directness. The P-time system gives rise to looser time schedules, deeper involvement with individuals, and a wait-and-see-what-develops attitude. Some are similar to Japan, where appointments are adhered to with the greatest M-time precision but P-time is followed once a meeting begins.

Overall Pace	Country	Walking 60 Feet	Postal Service	Public Clocks
1	Switzerland	3	2	1
2	Ireland	1	3	11
3	Germany	5	1	8
4	Japan	7	4	6
5	Italy	10	12	2
6	England	4	9	13
7	Sweden	13	5	7
8	Austria	23	8	9
9	Netherlands	2	14	25
10	Hong Kong	14	6	14
11	France	8	18	10

Exhibit 5.3 (1 of 3) Speed Is Relative

Rank of 31 countries for overall pace of life [combination of three measures: (1) minutes downtown pedestrians take to walk 60 feet, (2) minutes it takes a postal clerk to complete a stamp-purchase transaction, and (3) accuracy in minutes of public clocks].

Source: Robert Levine, “The Pace of Life in 31 Countries,” American Demographics, November 1997. Reprinted with permission of Robert Levine.

How fast does it take pedestrians to walk 60 feet downtown in different cultures? The longer it takes, the more polychronic the culture is. Accuracy of public clocks is also an indication of M-time versus P-time.

Source: Robert Levine, “The Pace of Life in 31 Countries,” American Demographics, November 1997. Reprinted with permission of Robert Levine.

Overall Pace	Country	Walking 60 Feet	Postal Service	Public Clocks
12	Poland	12	15	8
13	Costa Rica	16	10	15
14	Taiwan	18	7	21
15	Singapore	25	11	4
16	United States	6	23	20
17	Canada	11	21	22
18	South Korea	20	20	16
19	Hungary	19	19	18
20	Czech Republic	21	17	23
21	Greece	14	13	29

Exhibit 5.3 (2 of 3) Speed Is Relative

Source: Robert Levine, “The Pace of Life in 31 Countries,” American Demographics, November 1997. Reprinted with permission of Robert Levine.

Overall Pace	Country	Walking 60 Feet	Postal Service	Public Clocks
22	Kenya	9	30	24
23	China	24	25	12
24	Bulgaria	27	22	17
25	Romania	30	29	5
26	Jordan	28	27	19
27	Syria	29	28	27
28	El Salvador	22	16	31
29	Brazil	31	24	28
30	Indonesia	26	26	30
31	Mexico	17	31	26

Exhibit 5.3 (3 of 3) Speed Is Relative

Negotiations Emphasis

Differences with respect to the product, its price and terms, services associated with the product, and finally, friendship between vendors and customers

Negotiating process is complicated, and the risk of misunderstanding increases when negotiating with someone from another culture

Attitudes brought to the negotiating table by each individual are affected by many cultural factors and customs often unknown to the other participants and perhaps unrecognized by the individuals themselves

Market Orientation

American companies are embracing the market orientation philosophy

Other countries are still in the traditional production, product, and selling orientations

Gender Bias in International Business

The gender bias against women managers exists in some countries

Women are not easily accepted in upper-level management roles in Asia, the Middle East, and Latin America (although this is changing)

Gender bias poses significant challenges in cross-cultural negotiations

Gender bias is an issue in international negotiations. Women may not be easily accepted in certain cultures (e.g., the Middle East and Latin America). This poses challenges in cross-cultural negotiations.

Societal attitudes toward women in Tokyo and Riyadh

Two ways to prevent the harassment of women. Mika Kondo Kunieda, a consultant at the World Bank in Tokyo, explains, “I ride in a special women-only metro car that runs between 7:20 and 9:20 am. The cars were created in 2005 due to frequent complaints that women were being groped and sexually harassed. I was a victim a few times when I was younger, and it was—and still is—a humiliating experience. I had to learn how to position myself against moves even in the most overcrowded train. Now, I’ve seen a few men get visibly anxious when they realize they’ve accidentally boarded a car during women-only time!” One interpretation of the Koran specifies the cover-up pictured here in Riyadh, Saudi Arabia.

Exhibit 5.4 Few and Far Between

Female directors on corporate boards as a percentage of total.

Percent of women executives in different countries.

Business Ethics (1 of 2)

Business ethics is complex in the international marketplace because value judgments differ widely among culturally diverse groups.

Corruption is varyingly defined from culture to culture.

Business Ethics (2 of 2)

Different levels of corruption, bribery, and fraud exist worldwide.

Bribery creates a major conflict between ethics and profitability.

The international organization Transparency International is curbing corruption through international and national coalitions encouraging governments to establish and implement effective laws, policies, and anti-corruption programs.

Rank	Country	CPI Score
1	Denmark	91
2	New Zealand	91
3	Finland	89
4	Sweden	89
5	Norway	86
5	Singapore	86
7	Switzerland	85
8	Netherlands	83
9	Australia	81
9	Canada	81
11	Luxembourg	80

Source: Corruption Perceptions Index 2013, www.transparency.org. Reprinted from Corruption Perceptions Index. Copyright © 2013, Transparency International: the global coalition against corruption. Used with permission. For more information, visit http://www.transparency.org

Exhibit 5.5 (1 of 5) Transparency International Corruption Perceptions Index 2013

Higher numbers correspond to a perceived lower level of public sector corruption. The top 25 (4 tied for #22), the BRIC countries, and the bottom 20 are shown; see http://www.transparency.org for the most complete and up-to-date listings. http://cpi.transparency.org/cpi3013/ for the complete 2013 listings.

Rank	Country	CPI Score
12	Germany	78
12	Iceland	78
14	United Kingdom	76
15	Barbados	75
15	Belgium	75
15	Hong Kong	75
18	Japan	74
19	United States	73
19	Uruguay	73
21	Ireland	72
22	Bahamas	71

Exhibit 5.5 (2 of 5) Transparency International Corruption Perceptions Index 2013

Rank	Country	CPI Score
22	Chile	71
22	France	71
22	Santa Lucia	71
BRIC Countries
72	Brazil	42
80	China	40
94	India	36
127	Russia	28
Bottom 20
153	Angola	23
154	Republic of Congo	22

Exhibit 5.5 (3 of 5) Transparency International Corruption Perceptions Index 2013

Rank	Country	CPI Score
154	Democratic Republic of Congo	22
154	Tajikistan	22
157	Burundi	21
157	Myanmar	21
157	Zimbabwe	21
160	Cambodia	20
160	Eritrea	20
160	Venezuela	20
163	Chad	19
163	Equatorial Guinea	19
163	Haiti	19
167	Yemen	18

Exhibit 5.5 (4 of 5) Transparency International Corruption Perceptions Index 2013

Rank	Country	CPI Score
168	Syria	17
168	Turkmenistan	17
168	Uzbekistan	17
171	Iraq	16
172	Libya	15
173	South Sudan	14
174	Sudan	11
175	Afghanistan	8
175	North Korea	8
175	Somalia	8

Exhibit 5.5 (5 of 5) Transparency International Corruption Perceptions Index 2013

Rank	Country	Score
1	Netherlands	8.8
1	Switzerland	8.8
3	Belgium	8.7
4	Germany	8.6
4	Japan	8.6
6	Australia	8.5
6	Canada	8.5
8	Singapore	8.3
8	United Kingdom	8.3

Source: Bribe Payers Index 2011, www.transparency.org. Reprinted from Bribe Payers Index. Copyright © 2011, Transparency International: the global coalition against corruption. Used with permission. For more information, visit http://www.transparency.org.

Exhibit 5.6 (1 of 3) Transparency International Bribe Payers Index 2011*

*Based on responses to questions such as: In the business sectors with which you are most familiar, please indicate how likely companies from the following countries are to pay or offer bribes to win or retain business in this country (respondent’s country of residence). The Index ranks the likelihood of companies from 28 leading economies to win business abroad by paying bribes—higher scores correspond to perceived lower levels of bribe paying internationally.

Rank	Country	Score
10	United States	8.1
11	France	8.0
11	Spain	8.0
13	South Korea	7.9
14	Brazil	7.7
15	Hong Kong	7.6
15	Italy	7.6
15	Malaysia	7.6
15	South Africa	7.6
19	Taiwan	7.5

Exhibit 5.6 (2 of 3) Transparency International Bribe Payers Index 2011*

Rank	Country	Score
19	India	7.5
19	Turkey	7.5
22	Saudi Arabia	7.4
23	Argentina	7.3
23	United Arab Emirates	7.3
25	Indonesia	7.1
26	Mexico	7.0
27	China	6.5
28	Russia	6.1

Exhibit 5.6 (3 of 3) Transparency International Bribe Payers Index 2011*

Bribery: Variations on a Theme (1 of 3)

Bribery

Voluntarily offered payment by someone seeking unlawful advantage

Extortion

Payments are extracted under duress by someone in authority from a person seeking only what they are lawfully entitled to

Bribery: Variations on a Theme (2 of 3)

Lubrication

Involves a relatively small sum of cash, a gift, or a service given to a low-ranking official in a country where such offerings are not prohibited by law

Subornation

Involves giving large sums of money—frequently not properly accounted for—designed to entice an official to commit an illegal act on behalf of the one offering the bribe; involves breaking the law

Bribery: Variations on a Theme (3 of 3)

Agent Fees

When a businessperson is uncertain of a country’s rules and regulations, an agent may be hired to represent the company in that country

It’s often a legal and useful procedure

If a part of that agent’s fee is used to pay bribes, the intermediary’s fees are being used unlawfully

The Foreign Corrupt Practices Act, which prohibits American executives and firms from bribing officials of foreign governments, has had a positive effect.

Ethical Decisions

Difficulties arise in making decisions, establishing policies, and engaging in business operations in five broad areas:

employment practices and policies

consumer protection

environmental protection

political payments and involvement in political affairs of the country

basic human rights and fundamental freedoms

A Framework for Ethical Principles

(1) Utilitarian ethics

Does the action optimize the “common good” or benefits of all constituencies? And, who are the pertinent constituencies?

(2) Rights of the parties

Does the action respect the rights of the individuals involved?

(3) Justice or fairness

Does the action respect the canons of justice or fairness to all parties involved?

Information-Oriented (IO)	Relationship-Oriented (RO)
Low context	High context
Individualism	Collectivism
Low power distance	High power distance (including gender)
Bribery less common	Bribery more common*
Low distance from English	High distance from English
Linguistic directness	Linguistic indirectness
Monochronic time	Polychronic time
Internet	Face-to-face
Focus on the foreground	Background
Competition	Reduce transaction costs

Exhibit 5.7 Dimensions of Culture: A Synthesis

*We note that Singapore, Hong Kong, Japan, and Chile do not fit all the rules here. Most would agree that all four are relationship-oriented cultures.

Summary (1 of 2)

Management styles differ around the world. Some cultures appear to emphasize the importance of information and competition, while others focus more on relationships and transaction cost reductions.

Business behavior is derived in large part from the basic cultural environment in which the business operates and, as such, is subject to the extreme diversity encountered among various cultures and subcultures.

Environmental considerations significantly affect the attitudes, behavior, and outlook of foreign businesspeople.

Summary (2 of 2)

Varying motivational patterns inevitably affect methods of doing business in different countries.

International variation characterizes contact level, ethical orientation, negotiation outlook, and nearly every part of doing business.

Sensitivity, however, is not enough; the international trader must be constantly alert and prepared to adapt when necessary.