MGT 3660: International Business

Session 5: Differences in Culture

Announcement
No classes on January 23 and 25
Use these times to prepare international business presentation I

International business presentation I on January 28 and 30

Team presentation

Team adjustment
A solid class list will come out in a week

Please, submit a hard copy of closing case on time

Warm-up Quiz
Distribution of warm-up quiz
Average: 7.41 Standard deviation: 1.58 Distribution
18 16 14

12
10 8 6 4 2 0 5 6 7 8 9 10

Congrats: Matthew, Dylan (Kase), Abjijan, Samuel (Morgan), Arjun, Nishitkumar, Yuhyeu, Ann, Kasmi

Warm-up Quiz
True or false questions

Learning Objectives
After this session, we can do followings:
Explain what is meant by the culture of a society Identify the forces that lead to differences in social culture Identify the business and economic implications of differences in culture Recognize how differences in social culture influence values in the workplace Demonstrate an appreciation for the economic and business implications of cultural change

Where We Are
Concepts of globalization
Chapter 1

Country differences
Chapter 2-5

The global trade and investment environment

Chapter 6-9

The strategy and structure of international business

Chapter 13-15

Business operation
Chapter 16-20

Class Activities
Discuss with your team Choose two countries that appear to be culturally diverse. Compare the cultures of those countries and then indicate how cultural differences influence
(a) the costs of doing business in each country (b) the likely future economic development of that country (c) business practices.

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Local Culture and International Business

Understanding and adapting to the local culture is important to international companies
cross-cultural literacy - an understanding of how cultural differences across and within nations can affect the way in which business is practiced cross-cultural literacy is important for business success

Culture
Culture - a system of values and norms that are shared among a group of people and that when taken together constitute a design for living where
values are abstract ideas about what a group believes to be good, right, and desirable Values provide the context within which a societys norms are established and justified and form the bedrock of a culture norms are the social rules and guidelines that prescribe appropriate behavior in particular situations folkways - the routine conventions of everyday life mores - norms that are seen as central to the functioning of a society and to its social life

Society - a group of people who share a common set of values and norms

Determinants of Culture
The values and norms of a culture evolve over time Determinants include

Social Structure
Social structure - a societys basic social organization 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

Individuals and Groups

In Western societies, there is a focus on the individual
individual achievement is common dynamism of the U.S. economy high level of entrepreneurship

But, creates a lack of company loyalty and failure to gain company specific knowledge
competition between individuals in a company instead of than team building less ability to develop a strong network of contacts within a firm

Individuals and Groups

In many Asian societies, the group is the primary unit of social organization
discourages job switching between firms encourages lifetime employment systems leads to cooperation in solving business problems

But, might also suppress individual creativity and initiative

Social Stratification
All societies are stratified on a hierarchical basis into social categories, or social strata
individuals are born into a particular stratum

Must consider
mobility between strata caste system - closed system of stratification in which social position is determined by the family into which a person is born change is usually not possible during an individual's lifetime class system - form of open social stratification position a person has by birth can be changed through achievement or luck the significance placed on social strata in business contexts class consciousness - a condition where people tend to perceive themselves in terms of their class background, and this shapes their relationships with others an antagonistic relationship between management and labor raises the cost of production in countries with significant class differences

Religious and Ethical Systems

Religion - a system of shared beliefs and rituals that are concerned with the realm of the sacred Four religions dominate society
Christianity Islam Hinduism Buddhism Confucianism is also important in influencing behavior and culture in many parts of Asia

Religious and Ethical Systems

Ethical systems - a set of moral principles, or values, that are used to guide and shape behavior
Religion and ethics are often closely intertwined ex. Christian or Islamic ethics

Christianity
Christianity
the worlds largest religion found throughout Europe, the Americas, and other countries settled by Europeans the Protestant work ethic (Max Weber, 1804) hard work, wealth creation, and frugality is the driving force of capitalism

Islam
Islam
the worlds second largest religion dating to AD 610 there is only one true omnipotent God an all-embracing way of life that governs one's being associated in the Western media with militants, terrorists, and violent upheavals but, in fact teaches peace, justice, and tolerance fundamentalists have gained political power and blame the West for many social problems people do not own property, but only act as stewards for God supportive of business, but the way business is practiced is prescribed

Hinduism
Hinduism
practiced primarily on the Indian sub-continent focuses on the importance of achieving spiritual growth and development, which may require material and physical self-denial Hindus are valued by their spiritual rather than material achievements promotion and adding new responsibilities may not be important, or may be infeasible due to the employee's caste

Buddhism
Buddhism
has about 350 millions followers stresses spiritual growth and the afterlife, rather than achievement while in this world does not emphasize wealth creation entrepreneurial behavior is not stressed does not support the caste system, individuals do have some mobility and can work with individuals from different classes

Confucianism
Confucianism
ideology practiced mainly in China teaches the importance of attaining personal salvation through right action high morals, ethical conduct, and loyalty to others are stressed 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

Role of Language in Culture

Language - the spoken and unspoken (nonverbal communication such as facial expressions, personal space, and hand gestures ) means of communication
countries with more than one language often have more than one culture Canada, Belgium, Spain

Role of Language in Culture

Language is one of the defining characteristics of culture
Chinese is the mother tongue of the largest number of people English is the most widely spoken language in the world English is also becoming the language of international business but, knowledge of the local language is still beneficial, and in some cases, critical for business success failing to understand the nonverbal cues of another culture can lead to communication failure

Role of Education in Culture

Formal education is the medium through which individuals learn many of the language, conceptual, and mathematical skills that are indispensable in a modern society
important in determining a nations competitive advantage Japans postwar success can be linked to its excellent education system general education levels can be a good index for the kinds of products that might sell in a country ex. impact of literacy rates

Culture and Workplace

Management processes and practices must be adapted to culturally-determined work-related values Geert Hofstede studied culture using data collected from 1967 to 1973 for 100,000 employees of IBM
Hofstede identified four dimensions that summarized different cultures

Culture and Workplace

Hofstedes dimensions of culture:
Power distance - how a society deals with the fact that people are unequal in physical and intellectual capabilities Uncertainty avoidance - the relationship between the individual and his fellows Individualism versus collectivism - the extent to which different cultures socialize their members into accepting ambiguous situations and tolerating ambiguity Masculinity versus femininity -the relationship between gender and work roles

Culture and Workplace

Work-Related Values for 20 Countries

Culture and Workplace

Hofstede later expanded added a fifth dimension called Confucian dynamism or long-term orientation
captures attitudes toward time, persistence, ordering by status, protection of face, respect for tradition, and reciprocation of gifts and favors Japan, Hong Kong, and Thailand scored high on this dimension the U.S. and Canada scored low

Was Hofstede Right?

Hofstedes work has been criticized for several reasons
made the assumption there is a one-to-one relationship between culture and the nationstate study may have been culturally bound used IBM as sole source of information culture is not static it evolves

But, it is a starting point for understanding how cultures differ, and the implications of those differences for managers

Dynamics of Culture
Culture evolves over time
changes in value systems can be slow and painful for a society

Social turmoil - an inevitable outcome of cultural change

as countries become economically stronger, cultural change is particularly common economic progress encourages a shift from collectivism to individualism globalization also brings cultural change

What Do Cultural Differences Mean For Managers?

It is important to develop cross-cultural literacy
companies that are ill informed about the practices of another culture are unlikely to succeed in that culture

To avoid being ill-informed

consider hiring local citizens transfer executives to foreign locations on a regular basis

Managers must also guard against ethnocentrism

a belief in the superiority of one's own culture

What Do Cultural Differences Mean For Managers?

There is a connection between culture and national competitive advantage
suggests which countries are likely to produce the most viable competitors has implications for the choice of countries in which to locate production facilities and do business

Next Time
Ethics in International Business

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