Module 5: Culture and International Business Uncertainty Avoidance pertains to the level of

uncertainty a society is willing to tolerate.

ULO
Value dimensions are developed by Hofstede, which
1. To identify the various framework that explains the
pertain to the wide unconscious preferences for one
various cultural environment
business practice to another.
2. To evaluate the basic cause of the cultural difference.
ESSENTIAL KNOWLEDGE
3. To explain the effect of culture in influencing business
Culture pertains to learned norms arising from the
practices.
attitude, beliefs, and values of people.
4. To promote the campaign against corruption in
 Simultaneously, individuals belong to various
business.
groups representing different cultures or
An essential skill that international business manager is subcultures.
respectable knowledge of the diversity of cultural  Moreover, cultural influences affect all business
knowledge that influences decisions. functions. Hence, any foreign practice
companies want to implement becomes less
Cross-cultural literacy – a healthy understanding of effective than planned if employees cannot
other people's culture. adjust or accept foreign customs.
 It includes the cultural difference that exists  Firms operating in a foreign country must
among and within nations that significantly determine which business practices differ in
influence the conduct of business. the host country or make the calibrated
 The international business operation failed due adjustments.
to the cultural insensitivity of managers who  Further, for a global firm, competitive
disregard the cultural factors. advantage is the outcome of cultural diversity.
 Cultural sensitivity needs the ability to Though people disagree on the impact of cross-
empathize with other cultures and understand cultural differences on there, they agree it
another person's perspective in another culture. exists. Managers must develop a critical
 A manager who understands the variable that awareness of various cultures. Also,
composed a country's culture, dimension, distinguished differences in multiple cultures
nature can draw benefits and appreciate its exist.
effect on work and organizational process.  Culture is composed of the normative or
 A more heightened cultural awareness allows expected pattern of behavior, ideas, values and
managers to develop compatible functions and attitudes, and material objects.
policies for organizing, controlling, leading, and  Two individuals share at least one culture.
planning in an international setting. Hence a prudent manager needs to examine
 The success of formulating and implementing groupings of individuals within a society.
organizational objectives and strategies largely  As managers encounter the many various
depends on the culture's necessary adaptation cultural patterns, there is a natural chance to
process. Also, cultural adaption greatly become overwhelmed by differences and miss
enhances workforce diversity around the globe. commonalities. Even sociologist tends to focus
on the uniqueness of each culture and seldom
METALANGUAGE compare the similarities between them. Yet all
Individualism pertains to the person's tendency to societies wanting to survive must deal with
attend to their needs and families at the expense of basic universal needs that must be met, general
society. cultural characteristics emerge. At the
foundation level, differences in the details of
Power distance refers to how a culture accepts patterns in culture exist since various societies
differences between people in organizational develop different methods of meeting society's
hierarchies. needs.
The study of cultural differences  The managers and subordinates tend to regard
each other as equal in power, resulting in better
The Hofstede framework and the Kluckhohn–
cooperation and harmony.
Strodtbeck framework are the two schools of thought
 Most likely, an autocratic manager is rejected in
in studying cultural differences. By checking these two
low power distance countries.
frameworks assist international managers in
understanding the way organization function.

The proposed Hofstede is a valuable framework for

understanding the fundamental value cause
organizational behavior and for appreciating different
cultures. Based on the outcome of a study in 1980 from
more than 100,000 IBM employees in 50 countries, the
study identified four value dimensions:

1. power distance,

2. uncertainty avoidance,

3. individualism, Uncertainty avoidance is the second value dimension

4. masculinity. that pertains to how an individual feels vulnerable to
uncertain situations.
On the other side, the Kluckhohn–Strodtbeck
framework identified six cultural dimensions for the  Countries (Greece, Portugal, and Japan) with
international manager to identify: high uncertainty avoidance adopt strict laws to
which people obey closely and a firm sense of
1. control of the environment, nationalism.
 This value in a business context results in
2. focus on events,
informal procedures and rules requiring a
3. control versus trust, greater sense of responsibility and more
security.
4. life accomplishments, i
 Managers with low-risk decision subordinates
5. ndividual versus group on person's welfare, depict common lifetime employment and lower
aggressiveness.
6. public or private conduct of activities.  In countries ( the US, Great Britain, and
The first dimension is Power distance is defined as the Denmark) with a lower level of uncertainty
level of societal recognition of the unequal distribution avoidance, people tolerate protest and similar
of power in the organization. activities and depict less nationalism.
 Consequently, some managers assume more
 Inequalities in power are normal in the risk in a less formal and less structured
workplace based on the hierarchy, a manager, company, and people have high job mobility.
and subordinates relationships.
 In countries (the Philippines, Malaysia, and Individualism is the third dimension, pertains to
Mexico), individuals acknowledge high power people's tendency to look after their immediate family
distance, respecting the manager's formal and themselves only and abandon the needs of society.
position in the hierarchy and avoiding  In countries (Australi, Great Britain, and the
circumventing the chain of command. US), achievement, individual initiative, and
Predictably, the respectful response results in democracy are highly valued. The relationship
autocratic leadership in a centralized structure. between organization and individual is one of
 On the other side, people observe a low power independence on an economic level.
distance in countries such as Israel, Denmark,  Low individualism dominates in countries such
and Austria. as Panama and Pakistan. C
  Collectivism prevails with tight emotional level of assertiveness (New Zealand and
dependence on membership to a group and a Switzerland).
cohesive belief in group decisions described as
The four cultural dimensions are not in a vacuum.
a tight social framework.
Instead, these are interrelated, interdependent, and
In collectivity countries such as Japan, the people complex in their effect on behaviors and attitudes within
believe in the group's will compared to an individual. the work environment.
Their universal collectivism imposes control through
Once more, international managers must note that
social pressure, humiliation, and fear over individual
assessing an entire country based on one cultural value
members. Japanese values saving face and harmony
dimension is basic.
compared to individualism that focuses on
independence, autonomy, and self-respect. Compared Hence, a potential oversimplification for the differences
to individualistic societies, hiring and promotion are may happen based on individuals, regions, and
based on paternalism rather than achievement in subcultures. A possible study is to replicate Hofstede's
collectivist societies. research in this period and observe whether the
countries studied within the same categories remained
 The use of quality circles as a management
the same. Assuming many countries shifted from one
practice in Japanese organizations focuses on
value dimension to the next due to complications of the
the group decision-making process in a
business environment, brain drain multiculturalism,
collectivity society.
technological advancement and globalization, and many
 In the theory of Hofstede, countries with high
more.
individualism also have a higher gross national
product (GNP) characterized with a greater
liberal political system compared with those
countries with low individuals. Hence there is a
strong association among political system,
wealth, individualism, and balanced power.
 Other researchers discovered that group setting
differs between collectivist and individualistic
societies such as in the US, social loafing is
common.
 Working alone, people tend to perform better
than when working as part of a group.
Comparatively a study between the US and
Culture in the Workplace – Particularly, culture
China, a collectivist society, the Chinese did not
assumes a significant management purpose on specific
show loafing compared to the Americans.
management functions.
Masculinity pertains to the level of traditionally
 Imposing a new set of values and beliefs on
maintaining values such as lack of concern, materialism,
another society is specifically noticeable. For
and assertiveness.
instance, American managers plan activities,
 In comparison, values such as quality of life, regulate them, and pass judgment according to
relationship, and respect for others. For a belief that people have direct control over its
instance, in Austria and Japan, women are outcome, instead of assuming that any plan's
expected to raise children and stay at home success depends on Allah's will, as managers of
with high masculine society. any Islamic nation tend to believe.
 Generally, impinging on employees' lives is  People in the world relate and understand
significant job stress and organizational interest. others based on their culture, called the self-
One finds less job stress and less conflict in reference criterion.
countries with low masculinity, women  As an initial step, international managers should
appointed in high-level jobs, and a decreased increase their cultural sensitivity by
 understanding their culture. This level of minimizing inappropriate behavior and
awareness assists them in protecting against misunderstanding.
adopting an ethnocentric or parochial attitude.
The objective of the training is to facilitate adjustment
 Ethnocentrism is an attitude based on the
to the new environment, thereby reducing culture
assumption that their doing methods are always
shock, anxiety, and disorientation in properly behaving
the best in any condition.
in an unfamiliar culture.
 Parochialism happens when an American
expects other countries to adopt a behavior The experience of distress causes culture shock because
pattern typical in America immediately. the person loses the familiar sign used to interact, and
the situation requires them to observe new cultural
signals and expectations.

Similarly, a manager may experience subculture shock,

especially if transferred to another part of the country.

Experiencing a "minority" culture made the manager

feel an outsider due to unpreparedness to the culture
encountered. In situations wherein expatriates,
corporate-based employees, and locally hired people
need to interact. There are plenty of situations for
frustration, misunderstanding, and chaos.
Lack of cultural sensitivity in any company, large or In culture, the high and low context pertains to how
small, has demonstrated this with the detrimental the message is communicated.
result. After examining his own culture, the manager
should establish a practical cross-cultural relation to  It was Edward T. Hall who developed this
develop cultural sensitivity. It is not enough for cultural concept.
managers to be aware of cultural variables but must
Latin America, Asia, and Africa are classified as high-
appreciate cultural diversity and possess the skills to
context cultures, which means that a significant level of
create constructive working relationships with anyone.
importance is contained in the physical context of the
Cross-cultural Management and Training message.

In determining the relative competitiveness of different  People in this culture tend to communicate
markets, the international managers must be aware of indirectly, and the recipient needs to decode
their skills and biases, which may unduly create a subtle the message's implicit content.
influence in their resource allocation and strategies.  On the other hand, people who send the
message meticulously and carefully create it
Inherent to their role is to understand the culture, deal while the recipient is expected to read it within
with time pressures, and master more social context.
responsibilities.  Practically, the message lacks verbal directness
Hence proper preparation for cross-cultural interaction comparable to a low-context culture.
is crucial. In everyday operations, practical differences  Often in a high context culture, body language is
and problems in cross-cultural adjustment are more important than the verbal message.
presented to them. The US and Western Europe are low-context
Though training in public affairs and language is direct, cultures, and people are direct and explicit in their
it is not the same with cross-cultural training, which is communications.
complex and deals with inherent behaviors. The ideal  They expect communication is direct and
result of this training is the ability of managers to frank.
interact with host-country individuals smoothly, hence  The objective is to eliminate doubt or
minimize misunderstanding.
  They want the message direct to the point. look and dress alike. Even if people have a common
A business transaction tends to be choice of words in a business setting, they do not think
confusing between people in a high and low alike.
context.
In the current globalization, vast cultural differences
 People in high context cultures tend to read
remain to influence how people conduct business.
the body language rather than listen to the
Culture affects business in terms of distribution, sales
words, opposite to the low context culture.
and marketing, risk-taking, managing projects,
negotiation and decision making, business protocols,
and pace of business.

Many people around the world still consider making

money as the core business principle. Managers
perceived culture as a non-essential issue in the big
business paradigm. Though people focus on the
business's profitability, people conduct business with
people they trust, like, and understand. All of these
issues are determined through culture.

The effect of culture on business is all-encompassing.

Effective managers recognize that culture affects how to
best manage employees based on their priorities and
values. At the same time affect the function of
The concept of ethnocentrism is related to the distribution, sales, and marketing, which affects the
discussion of culture. business analysis and decisions.
 It is the view of a person that their culture is Managers dealing with people from other cultures may
central and other cultures are evaluated about discover that their management styles, communication,
it. and business practices are different from their
 It is similar to the person believing that their expectations. Managers need to understand the culture
culture is the center of the solar system around of people they deal with to succeed in business
which different cultures revolve. interaction and achieve business goals. For instance, key
 Pessimistically, it is a belief that one's culture is understanding is needed in communication, decision-
superior to others. making, body language, management, authority, and
 However, it is natural for a person to see the time and deadlines perception.
world in the context of one's culture,
accompanied by unconscious biases that Managers should set aside unverified ideas and
refrained from considering other cultures endeavor not to use their own value system when
objectively. judging individuals from other cultures. Instead, they
 The challenge for a manager is to overcome must note that there are just different ways of dealing
that view that their cultural values, habits, and with people. Different cultures express various concepts
perception are superior to others. of ethics and time. An innovative manager will attempt
 This attitude has a significant effect on business to understand cultural concepts. For managers in a small
relations. Managers can overcome such firm, there is no room for committing cultural error
behavior if they practice empathy and extend attributed to cultural miscommunications and
understanding of other's cultures. misunderstandings, which significantly impact their
survival.
Culture Impacts Local Business Practices
Managers need to understand cultural differences
In today's globalization, managers often overlook that regardless of whether the firms are selling in new
cultural differences are no longer essential. It is markets, home country, and ethnic markets in various
unrealistic to think that people think alike since they markets. Culture affects communication for business
sources from multiple countries. The manager's level of assist in understanding thinking and critical issues
understanding of the culture affects their ability to manager deals on a strategic and operational basis.
engage in manufacturing and distribution, conduct
People analyzing history to understand politics and
advertising and marketing campaigns, conduct sales,
social changes tend to discover changes in thinking and
negotiate deals, maintain business relationships, or
philosophy. Norms acceptable a hundred years ago
enter the local market. Mistakenly, people send or
might not be today.
receive the wrong signal or message. Consequently,
managers get lost in the cultural maze. Moreover, there A sense of ethics is shaped by a number of religious
are several situations in which deals can be successful if factors, cultural and social factors. These are influential
the issue is on business alone, but cultural issues to a person since their early childhood: the family,
interfere. As important as the market or financial school, and society trained children onwards how to
analysis is the conduct of cultural analysis. think, behave and act appropriately. Ethical behavior is
generally accepted in a specific culture.
It is vital to understand any country's political and
historical events in which a manager intends to transact Culture affects local values, which influence global
business. A manager should take note of the cultural business ethics.
background and sphere of people they deal with. These
are the foundation for their counterpart's perspective.  Differences exist among cultures in considering
Managers must not forget that culture is shaped by the importance of particular ethical behaviors.
centuries of experience, and disregarding cultural  For instance, bribery is common among many
differences put the business at a disadvantage. countries. Though many people disapprove of
it, they think it necessary.
Global Business Ethics  The manager's social programming, values, and
experiences from their early childhood
Ethics is a branch of philosophy that studies morality,
influence them. These elements affect how a
which distinguishes good and bad, justice and virtue,
manager understands an issue and evaluates
right or wrong.
correct or incorrect behavior.
 Ethics affect many fields including, science,  Even managers in a specific culture have a
medicine, government, and business. The field varied opinion on ethical or unethical behavior,
of ethics covers ethics in stages that focus on depending on the person's socioeconomic
how people apply particular tasks or issues. status, education, and experience
 It is the process of recommending, defending,
Similar to any case, there is a difference between
and systematizing the concept of right or wrong
standard practice and ethical behavior. Even if people
behavior.
know right or wrong, it is acceptable to discriminate
 Ethics is divided into three general subjects:
against certain cultures. Managers understand that
1. Applied ethics – examine particular ethical issues ethical action is a normal practice. Any inconsistencies
such as capital punishment, environmental issues, and encourage ethical actions. It is clear to managers that
animal rights. religion can shape value-based ethical teaching, though
ethics is not religion. Western philosophy has rapidly
2. Normative ethics – deals with a more practical
spread over the world for the last three centuries, and a
situation that controls right and wrong conduct
significant mode of global business focused on equality
3. Meta-ethics – examines the source of ethical and individual rights. The philosophy promotes equal
principles and their meaning rights and opportunity, which is applied in
management, employment, and operations.
 It focuses on finding the universal truth, the role
of reason in ethical judgment, the will of good,
and the meaning of ethical terms

These concepts help managers understand global

business ethics in the present sense. It is the means to
Effect of Ethics on Global Business to making or breaking business relations
with the locals in the country.
Corruption and bribery are the top lists of unethical
behavior in business. Managers must expect that cultural norms, in the
beginning, may make life difficult for the firm.
 Though the two are critical issues in business,
global business ethics is much broader,  Some cultures consider the firm assuming the
affecting the environment, social paternal figure.
responsibilities, and human resources.  Firing employees from their job are deemed to
 These are the social, moral, and ethical be unethical. For example, In Japan, workers are
behavior in global perception: expected to demonstrate lifelong loyalty to the
company, and in exchange, the firm must
1. ethics and corruption,
provide lifelong employment. However, the
2. ethics and management, 1990s recession in the country forced the
Japanese a change of attitude. Companies in
3. corporate social responsibilities. Japan campaigned to change the unethical
Ethics affects several management areas, corporate perception of laid-off workers.
mission, research and development, marketing, Increasingly, global businesses attempt to market their
human resource, and operations. Specifically, those product not only on the desirable features of the
areas that deal with human resource and product but also on their environmental and social
employment ethics differs from various culture. merits.
The local culture affects the perception of the  Companies with unethical practices may find
employer-employee relationship. Most cultures do their global profitability affected due to people
not have a clear rule in preventing discrimination boycotting their products. Firms understand the
based on sex, gender, disability, or age. Although risk.
there could be laws enacted against discrimination,  However, issues in ethics become more
people may still follow the social practices and complicated, and the appropriate ethical
norms. response often becomes difficult to define. For
People perceived their role in the organization instance, the issue of cloning affects the
based on their culture. pharmaceutical companies or forfeits profit in
exchange for distributing medicine to people in
 For instance, gender issues depend on the Africa who can hardly afford the cost of the
local perception n the role of women in drug.
society.  Tobacco is another sensitive issue. In the
 A senior manager working in the US may Philippines, health proponents advocate for the
think several hundred times about sending total elimination of smoking. However, there
women to negotiate to Saudi Arabia. Firms are thousands of families' farmers and workers
often judge whether a person can be whose livelihood depends on the tobacco
practically based on their gender, race, sex, industry.
or ethnicity-based on the overall value in
the culture. Although those companies Corruption
listed in Global Fortune 500 can make Is the act of giving or receiving an advantage in an
management decisions without reference illegal, immoral, or inconsistent with one's duty or
to their host country, they are exempt since violating the rights of others.
most companies want to engage with these
wealthy firms. Contrary to other less known  Patronage is the outcome of corruption. It is
firms, they may find that adhering to the not always ethical are the culturally acceptable
norms of their host country is the first step norms.
  Formerly, sexism, racism was acceptable, but as
society moved towards modernism, these
became unacceptable.
 In some business regions, conflict arises in some
cultures, such as in the area of gift-giving, in
which other cultures may consider these as
bribery.
 In many countries, managers paying bribes is
still common in the form of grease payments
which intend to expedite the processing,
decision, and transaction in favor of the briber.
For instance, in Mexico and India, grease
payment is necessary for a faster installation of
phones.
 Transparency International monitors illegal
behavior such as misappropriation, laundering,
and bribery in the public sector for 180
countries through a survey of expatriates in the
country.
 A Corruption Perception Index (CPI) is assigned
a rating in the country. In 2020, the Philippines
was ranked 115th. Some of the most reputable
companies face ethical issues and the law.

In 2015 the Environmental protection Agency 482,000

diesel passengers sold in the US cars were recalled. The
researchers discovered that these Volkswagen
manufactured vehicles violated the threshold for the
emitted nitrogen oxide. Moreover, the company
installed illegal software in the car that can detect if the
vehicle is undergoing a test and change its performance
to pass the emission test. Further investigation revealed
that there are 11 million estimated cars with the
software. The US government ordered VW a fine of $25
billion, and the company reported an operating loss of
$1.77 billion. Published research reported that 59
premature deaths would occur due to the excess
emission of illegal VW cars