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T.J. Joseph

Cultural Environmentof International

Business

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Introduction International business success requires cross-cultural

literacy

An understanding of how cultural differences across

and within nations may affect the business

Ex: In China, guanxi(relationships backed by

reciprocal obligations), are central to getting business

done, but in West it is bribery or corruption

EX: Class divisions led to high level of industrial

disputes and thus high cost of doing business in

Britain compared to Switzerland, Germany or Japan

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What is Culture?

Culture is that complex whole which includesknowledge, belief, art, morals, law, custom, and other

capabilities acquired by man as a member of society.

- Edward Tylor

A system of values and norms that are shared among a

group of people and that when taken together

constitute a design for living.- Hofstede, Namenwirth, and Weber

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Components of CultureValues

Abstract ideas about what a group believes to be good,

right, and desirable

Reflect a persons sense of right and wrong or what

ought to be.Norms

Norms are the social rules that govern peoples actions

toward one another

Society

Society refers to a group of people who share a common

set of values and norms

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Values

Values forms the bedrock of a culture

They provide the context within which a societys

norms are established and justified

They include attitudes toward

Individual freedom, Truth, Justice, Honesty, Loyalty,

Social obligations, love, sex, marriage, etc.

Values are also reflected in the political and

economic systems

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Norms

Folkways: Routineconventions of everyday

life

Little moralsignificance

Generally, social

conventions such as

dress codes, social

manners, and neighborly

behavior

Ex: Attitude towards time

Mores: Norms central tothe functioning of

society and its social life

Greater significance than

folkways

Violation can bring serious

retribution

Theft, adultery, incestand cannibalism

Ex: Alcohol drinking in US

and Saudi Arabia

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Culture, Society, and the

Nation State

A societyis a group of people bound together by a

common culture

There is not a strict one-to-one correspondence

between a society and a nation state

Nation State:

Is a political creation May contain a single culture or several cultures

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The Determinants of Culture

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Social Structure

Social structure refers to its basic social organization

Two dimensions that are particularly important

include:

The extent to which society is group or

individually oriented

Degree of stratification into castes or classes

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Religious and Ethical Systems

Religion: a system of shared beliefs and rituals Ethical systems: a set of moral principles, or values, that

are used to guide and shape behavior

Most of the worlds ethical systems are the product of religions

Among the thousands of religions in the world today, four

dominate in terms of numbers of adherents:

Christianity with 1.7 billion adherents

Islam with 1 billion adherents

Hinduism with 750 million adherents

Buddhism with 350 million adherents

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Language

Language is one of the defining characteristics of a

culture

Spoken language

Language-based cultures or stratas

Learning local language has considerable advantage

Ex: GMs Chevrolet Nova in Spanish

Unspoken language

Include body languages

Ex: A circle with thumb and the forefingera friendly

gesture in US, a vulgar in Greece and Turkey

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Education

Formal education plays a key role in a society

It is the medium through which individuals learn many

of the language, conceptual, and mathematical skills

that are indispensable in a modern society

Also supplements the familys role in socializing the

young into the values and norms of a society

Ex: Respect for others, obedience to authority, honesty,

neatness, being on time

Schools teach basic facts about the social and political

nature of a society, as well as focusing on the

fundamental obligations of citizenship

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Culture in the Workplace

How a societys culture affects values in the workplace?

Management process and practices of international

business need to vary according to culturally determined

work-related values

Most famous study by Geert Hofstede, a psychologist

worked for IBM

Collected data on employee attitude and values for more

than 1 lakh individuals from 1967 to 1973 across 40countries

Different cultures were summarized intofour dimensions

and created an index score for each of them

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Culture in the Workplace

Hofstedes Four dimensions of culture

Power distance - cultures are ranked high or low on this

dimension based on the particular societys ability to deal

with inequalities

Individualism versus collectivism - this dimension focuseson the relationship between the individual and his/her

fellows within a culture

Uncertainty avoidance - this dimension measures the

extent to which a culture socializes its members intoaccepting ambiguous situations and tolerating uncertainty

Masculinity versus femininity- this dimension looks at the

relationship between gender and work roles

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Work-Related Values for 20 Selected Countries

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Problems with Hofstede

Assumes one-to-one relationship between culture

and the nation state

Research may have been culturally bound

Survey respondents were from a single industry

(computer) and a single company (IBM)

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Cultural Change

Culture is not a constant; it evolves over time

Since 1960s American values toward the role of

women have changed

Japan moved toward greater individualism in the

workplace

Globalization will continue to have impacts on

cultures around the world

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Managerial Implications

Cross-cultural literacy

Culture and competitive advantage

Culture and business ethics

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References

1. Chapters 3, International BusinessbyCharles W. Hill and Arun K. Jain, Tata McGrawHill publication.

2. Chapter 2, International Business byOdedShenkar and Yadong Luo, Wiley publication.