Global Business Today

10e
by Charles W.L. Hill
and G. Tomas M. Hult
 National Differences

Source: © Ashok Saxena/Alamy Stock Photo

Chapter 4: Differences in Culture
 Learning Objectives
LO 4-1 Explain what is meant by the culture of a society.
LO 4-2 Identify the forces that lead to differences in social
culture.
LO 4-3 Recognize how differences in social culture influence
values in business.
LO 4-4 Demonstrate an appreciation for the economic and
business implications of cultural change.
 Introduction
▪ Cross-cultural literacy - an understanding of how
cultural differences across and within nations can
affect the way in which business is practiced
▪ There may be a relationship between culture and the
costs of doing business in a country or region
▪ Culture is not static – it can and does evolve
▪ Multinational enterprises can be engines of cultural
change
 What is Culture? 1 of 4
Scholars have not been able to agree on a simple
definition
✓ Culture is a system of values and norms that are shared
among a group of people and that when taken together
constitute a design for living
✓ Society is a group of people sharing a common set of
values and norms
 What is Culture? 2 of 4
Values and Norms
✓ Values - provide the context within which a society’s norms
are established and justified
✓ Norms - the social rules that govern the actions of people
toward one another
▪ 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
 What is Culture? 3 of 4
Culture, Society, and the Nation-State
✓ Society reflects people who are bound together by a
common culture
▪ Nation-states are political creations that can contain a single
culture or several cultures
▪ Some cultures embrace several nations
▪ Also possible to talk about culture at different levels within
societies
 What is Culture? 4 of 4
The Determinants of Culture
✓ The values and norms of a culture evolve based on:
▪ Prevailing political and economic philosophies
▪ A society’s social structure
▪ The dominant religion, language, and education
Figure 4.1 The Determinants of Culture
 Social Structure 1 of 7
▪ A society's social structure is its basic social
organization
✓ Two dimensions to 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
 Social Structure 2 of 7
Individuals and Groups
✓ Group - an association of two or more individuals who
have a shared sense of identity and who interact with each
other in structured ways on the basis of a common set of
expectations about each other’s behavior
 Social Structure 3 of 7
▪ The Individual
✓ Emphasized in Western countries
✓ Individual achievement and entrepreneurship are
promoted
✓ Fosters managerial mobility
✓ Encourages job switching, competition between
individuals rather than team building, and a lack of
loyalty to the firm
▪ The Group
✓ Emphasized in non-Westernized countries (Japan)
✓ Cooperation and team work are encouraged and life time
employment is common
✓ Individual initiative and creativity may be suppressed
 Social Structure 4 of 7
Social Stratification
✓ All societies are stratified on a hierarchical basis into social
categories, or social strata
▪ Usually defined by characteristics such as family background,
occupation, and income

✓ Societies differ in terms of

▪ The degree of mobility between social strata
▪ The significance attached to social strata in a business context
 Social Structure 5 of 7
Social Stratification continued
✓ Four basic principles of social stratification
1. It is a trait of society, not a reflection of individual differences
2. It carries over a generation to the next generation
3. It is generally universal, but variable
4. It involves not just inequality but also beliefs
 Religious and Ethical Systems 1 of 8
▪ Religion - a system of shared beliefs and rituals that
are concerned with the realm of the sacred
▪ Ethical system – a set of moral principles, or values,
that are used to guide and shape behavior
▪ Religions with the greatest following
✓ Christianity (2.20 billion adherents)
✓ Islam (1.60 billion adherents)
✓ Hinduism (1.10 million adherents)
✓ Buddhism (535 million adherents)
✓ Confucianism shapes culture in many parts of Asia
Map 4.1 World Religions

Source: “Map 14,” Allen, John L., Student Atlas of World Politics, 10th ed. McGraw-Hill Education.
 Religious and Ethical Systems 2 of 8
Christianity
✓ Most widely practiced religion
✓ In 1904, Max Weber suggested that it was the Protestant
work ethic (focus on hard work, wealth creation, and
frugality) that was the driving force of capitalism
✓ Protestantism gave individuals more freedom to develop
their own relationship with God which may have paved
way to economic freedom
 Religious and Ethical Systems 3 of 8
Islam
✓ Adherents of Islam are referred to as Muslims
✓ One true omnipotent God
✓ In the Western media, Islamic fundamentalism is
associated with militants, terrorists, and violent upheavals
✓ Fundamentalists have gained political power in many
Muslim countries, and have tried to make Islamic law the
law of the land
 Religious and Ethical Systems 4 of 8
Islam continued
✓ Economic Implications of Islam
▪ Koran establishes explicit economic principles many of which are
pro-free enterprise
▪ Under Islam, people do not own property, but only act as stewards
for God and thus must take care of that which they have been
entrusted with
• Islam is supportive of business, but the way business is practiced is
prescribed
• Businesses that are perceived to be making a profit through the
exploitation of others, by deception, or by breaking contractual
obligations are unwelcome
 Islamic Banks

Islamic banks
function differently
than conventional
banks in the world,
as the Islamic
banks cannot pay
or charge interest.
Source: © Ali Al Saadi/AFP/Getty Images
 Religious and Ethical Systems 5 of 8
Islam continued
✓ Economic Implications of Islam continued
• Prohibits payment or receipt of interest
• Mudarabah
• Similar to profit sharing
• Murabaha
• Most widely used
• Includes a price markup
 Religious and Ethical Systems 6 of 8
Hinduism
✓ World’s oldest religion
✓ Moral force in society requires the acceptance of certain
responsibilities called dharma
✓ Believe in reincarnation and karma
✓ Individuals should be judged by their spiritual
achievements
✓ Promotion and adding new responsibilities may not be the
goal of an employee, or may be infeasible due to the
employee's caste
 Religious and Ethical Systems 7 of 8
Buddhism
✓ Suffering originates in people’s desire for pleasure
✓ Stress spiritual growth and the afterlife, rather than
achievement while in this world
✓ The Noble Eight Path
✓ Buddhism does not support the caste system, so
individuals do have some mobility and can work with
individuals from different classes
✓ Entrepreneurial activity is acceptable
 Religious and Ethical Systems 8 of 8
Confucianism
✓ Until 1949, official ethical system of China
✓ Not a religion
✓ High moral and ethical conduct and loyalty to others
✓ Attain personal salvation through right action
✓ 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
 Language 1 of 3
▪ Countries differ in terms of language or means of
communication
▪ There are two forms language:
✓ Spoken
✓ Unspoken
▪ Language is one of the defining characteristics of
culture
 Language 2 of 3
Spoken Language
✓ Countries with more than one spoken language often have
more than one culture
▪ Chinese is the mother tongue of the largest number of people in
the world
▪ English is the most widely spoken language in the world, and is
becoming the language of international business
 Verbal Communication Styles

Context is information • When the verbal style is

surrounds and helps convey elaborate, talk is of high
the message. quality.
• High-context societies have • When verbal style is
coded and implicit exacting, there is a moderate
messages amount of talk
• Low-context societies have • When verbal style is succinct,
explicit messages. there is a low amount of talk.
✓ In indirect verbal styles, ✓ A contextual style focuses on
messages are implicit and the speaker and role
indirect. relationships.
✓ In direct verbal styles, ✓ A personal style focuses on
messages are explicit and the speaker and personal
direct. relationships.
 Language 3 of 3
Unspoken Language
✓ Unspoken language - nonverbal cues
▪ Examples include facial expressions and hand gestures
▪ Can be important for communication
▪ Personal space

✓ Many nonverbal cues are culturally bound and because

they may be interpreted differently, can result in
misunderstandings
 Nonverbal Communication

• Chronemics refers to the way

• Kinesics is body movement in which time is used in a
and facial expression. culture.
• Communicating through eye • In a monochronic time
contact/gaze is oculesics. schedule, things are done in a
• Communicating through linear fashion.
bodily contact is known as • In a polychronic time
haptics. schedule, people multitask
• Proxemics—people use and place higher value on
physical space to convey involvement than on
messages. completion.
• Intimate distance, personal • Chromatics is the use of color
distance, social distance, and to communicate messages.
public distance.
 Education
▪ Formal education is the medium through which
individuals learn many of the language, conceptual, and
technical skills that are indispensable in a modern society
▪ The knowledge base, training, and educational
opportunities available to a country's citizens can also
give it a competitive advantage in the market and make it
a more or less attractive place for expanding business
✓ Porter points to an excellent education system as an important
factor in explaining the country’s postwar economic success
▪ The general education level of a country is a good
indicator of the types of products that might sell in that
location or the type of promotional materials that might
be successful
 Culture and Business
Geert Hofstede isolated five dimensions that
summarized different cultures
1. Power distance
2. Individualism versus collectivism
3. Uncertainty avoidance
4. Masculinity versus femininity
5. Long-term versus short-term orientation
✓ A move to add a sixth dimension: indulgence versus
restraint
 Hofstede’s Cultural Dimensions
• Power Distance
– The extent to which less powerful members
accept that power is distributed unequally
• High power distance countries: people blindly obey
superiors; centralized, tall organizational structures
(Mexico, South Korea, India)
• Low power distance countries: flatter, decentralized
organizational structures, smaller ratio of supervisor to
employee (Austria, Finland, Ireland)
 Hofstede’s Cultural Dimensions
• Uncertainty Avoidance
– The extent to which people feel threatened by
ambiguous situations; create beliefs/institutions to try
to avoid such situations
• High uncertainty avoidance countries: high need for security,
strong belief in experts and their knowledge; structure
organizational activities, more written rules, less managerial
risk taking (Germany, Japan, Spain)
• Low uncertainty avoidance countries: people more willing
to accept risks related to unknown, less structured
organizational activities, fewer written rules, more
managerial risk taking, higher labor turnover, more
ambitious employees (Denmark and Great Britain)
 Hofstede’s Cultural Dimensions
• Individualism
– The extent to which people look after themselves and
immediate family only
• Collectivism
– The tendency of people to belong to groups and to
cẩn thận trong việc
look after each other in exchange for loyalty sử dụng tiền, hard
work
• High individualism countries: wealthier, Protestant work
ethic, greater individual initiative, promotions based on
market value (U.S., Canada, Sweden)
• High collectivism countries: poorer, less support of
Protestant work ethic, less individual initiative, promotions
based on seniority (Indonesia, Pakistan, China, Mexico)
 Hofstede’s Cultural Dimensions
• Masculinity
– A cultural characteristic in which the dominant social
values are success, money, and things
• Femininity
– A cultural characteristic in which the dominant social
values are caring for others and quality of life
• High masculine countries: stress earnings, recognition,
advancement, challenge, wealth; high job stress (Germanic
countries)
• High feminine countries: cooperation, friendly atmosphere,
employment security, group decision making; low job stress
(Norway)
 Hofstede’s Cultural Dimensions
• Time Orientation (1988)
– A cultural characteristic dealing with society’s
search for virtue
• Long-term oriented societies: focus on the future, able
to adapt traditions when conditions change, tend to
save and invest, focus on achieving long-term results
(Asian countries)
• Short-term oriented cultures: focus on quick results,
do not tend to save, service to others, belief in
absolutes, value stability and leisure (U.S., UK, Spain)
 Hofstede’s Cultural Dimensions
• Indulgence vs. Restraint (2010)
– Indulgent: trait related to relative happiness based on
instant gratification
– Restraint: a cultural characteristic based on regulating
and controlling behavior according to social norms
• Indulgent societies: perceived happiness, life in control,
positive emotions, basic needs satisfied (U.S., UK, Australia,
Chile)
• Restrained societies: less happiness, sense of helplessness,
less likely to remember positive emotions, basic needs not
always met (Asia countries, Russia, India, China, Egypt,
Romania)
 Culture and Business
Hofstede’s work has been criticized
✓ Assumes a one-to-one relationship between culture and
nation-state
✓ Research may be culturally bound
✓ Informants only worked within a single industry –
computers – and within one company – IBM.
✓ Certain social classes excluded from research
 Culture and Business
▪ Hofstede’s work represents a starting point for
managers trying to understand cultural differences
▪ Global Leadership and Organizational Behavior
Effectiveness instrument
▪ World Values Survey
Comparing the Cultural Dimension Research:
Hofstede and the GLOBE Project
 Focus on Managerial Implications 1 of 3
CROSS-CULTURAL LITERACY AND COMPETITIVE
ADVANTAGE
There is a need for managers to develop cross-cultural
literacy
1. There is a connection between culture and national
competitive advantage
2. There is a connection between culture and ethics in
decision making
 Focus on Managerial Implications 2 of 3
Cross-Cultural Literacy
✓ Firms that are ill-informed about the practices of another
culture are unlikely to succeed in that culture
✓ Individuals must also beware of ethnocentric behavior
▪ Belief in the superiority of one's own culture
 Focus on Managerial Implications 3 of 3
Culture and Competitive Advantage
✓ Connection between culture and competitive advantage
▪ It suggests which countries are likely to produce the most viable
competitors
▪ It has implications for the choice of countries in which to locate
production facilities and do business
 Summary
In this chapter we have
✓ Explained what is meant by the culture of a society.
✓ Identified the forces that lead to differences in social
culture.
✓ Identified the business and economic implications of
differences in culture.
✓ Recognized how differences in social culture influence
values in business.
✓ Demonstrated an appreciation for the economic and
business implications of cultural change.