International Business Chapter 3 Differences in Culture How

International Business

Chapter 3 Differences in Culture

How Do Cultural Differences Affect International Business? Ø Understanding and adapting to the local cultural is important international companies Ø cross-cultural literacy - an understanding of how cultural differences across and within nations can affect the way in which business is practiced Ø A relationship may exist between culture and the costs of doing business in a country or region Ø MNEs can be agents of cultural change 4 -3

What Is Culture? Ø 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 Ø values are abstract ideas about what a group believes to be good, right, and desirable Ø norms are the social rules and guidelines that prescribe appropriate behavior in particular situations Ø Society - a group of people who share a common set of values and norms 4 -4

How Are Culture, Society, And The Nation-State Related? Ø The relationship between a society and a nation state is not strictly one-to-one Ø Nation-states are political creations Øcan contain one or more cultures Ø A culture can embrace several nations Øthe values and norms of a culture evolve over time 4 -5

What Determines Culture? Determinants of Culture 4 -6

What Is A Social Structure? Ø Social structure - a society’s basic social organization Ø A group is an association of two or more people 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 Ø individuals are involved in families, work groups, social groups, recreational groups, etc. 4 -7

What Is Social Stratification? Ø All societies are stratified on a hierarchical basis into social categories, or social strata 1. 2. Social mobility - the extent to which individuals can move out of the strata into which they are born Ø caste system Ø class system The significance attached to social strata in business contacts Ø class consciousness 4 -8

How Do Religious And Ethical Systems Differ? Ø Religion - shared beliefs and rituals that are concerned with the realm of the sacred 1. 2. 3. 4. 5. Christianity Islam Hinduism Buddhism Confucianism influences behavior and culture Ø Ethical systems - a set of moral principles, or values, that are used to guide and shape behavior 4 -9

What Is The Role Of Language In Culture? Ø Language - the spoken and unspoken (nonverbal communication such as facial expressions, personal space, and hand gestures) means of communication Ø Chinese is the mother tongue of the largest number of people Ø English is the most widely spoken language in the world and is also becoming the language of international business Ø but, knowledge of the local language is still beneficial, and in some cases, critical for business success Ø failing to understand the nonverbal cues of another culture can lead to communication failure 4 -10

What Is The Role Of Education In Culture? Ø Formal education is the medium through which individuals learn many of the language, conceptual, and mathematical skills that are indispensable in a modern society Ø important in determining a nation’s competitive advantage ØJapan’s postwar success can be linked to its excellent education system Ø general education levels can be a good index for the kinds of products that might sell in a country Øex. impact of literacy rates 4 -11

How Does Culture Impact The Workplace? Ø Hofstede’s dimensions of culture: 1. Power distance - how a society deals with the fact that people are unequal in physical and intellectual capabilities 2. Uncertainty avoidance - the relationship between the individual and his fellows 3. Individualism versus collectivism - the extent to which different cultures socialize their members into accepting ambiguous situations and tolerating ambiguity 4. Masculinity versus femininity -the relationship between gender and work roles 4 -12

How Does Culture Impact The Workplace? Work-Related Values for 20 Countries 4 -13

How Does Culture Impact The Workplace? Ø Hofstede later expanded added a fifth dimension called Confucian dynamism or long-term orientation Øcaptures attitudes toward time, persistence, ordering by status, protection of face, respect for tradition, and reciprocation of gifts and favors ØJapan, Hong Kong, and Thailand scored high on this dimension Øthe U. S. and Canada scored low 4 -14

Does Culture Change? Ø Culture evolves over time Øchanges in value systems can be slow and painful for a society Ø Social turmoil - an inevitable outcome of cultural change Øas countries become economically stronger, cultural change is particularly common Øeconomic progress encourages a shift from collectivism to individualism Øglobalization also brings cultural change 4 -15

What Do Cultural Differences Mean For Managers? 1. It is important to develop cross-cultural literacy Ø companies that are ill informed about the practices of another culture are unlikely to succeed in that culture 2. There is a connection between culture and national competitive advantage Ø suggests which countries are likely to produce the most viable competitors Ø has implications for the choice of countries in which to locate production facilities and do business 4 -16