MBA International Business Culture: Chapter 2

news , information,business,investment,helth news,business,politics news and information

English: An Inglehart-Welzel Cultural Map of the World: World Secular-Rational and Self Expression Values as a map of world cultures based on World Values Survey data (Photo credit: Wikipedia)

Median home values in the United States of America in 2005 (Photo credit: Wikipedia)

1.   INTRODUCTION

This chapter describes culture in the context of international business, explains how culture affects international business practices and competitiveness, and presents two methods of classifying cultures.

2.   WHAT IS CULTURE?

Culture is the set of values, beliefs, rules, and institutions held by a specific group of people. Main components include: aesthetics, values and attitudes, manners and customs, social structure, religion, personal communication, education, and physical and material environments.

1. Avoiding Ethnocentricity

1.   Ethnocentricity is the belief that one’s own ethnic group or culture is superior to that of others. It causes people to view other cultures in terms of their own and overlook beneficial aspects of other cultures.

2.   Ethnocentricity can undermine business projects when employees are insensitive to cultural nuances.

1. Developing Cultural Literacy

1.   Managers working directly in international business should develop cultural literacy—detailed knowledge about a culture that enables a person to function effectively within it.

2.   Cultural literacy brings a company closer to customer needs and improves competitiveness.

C.   National Culture and Subcultures

National culture generalizes (e.g., British culture: English, Scottish, and Welsh).

1.   National Culture

a.   Nation-states support and promote the concept of a national culture by building museums and monuments to preserve the legacies of important events and people.

b.   Nation-states intervene to help preserve their national cultures.

c.   Companies get involved in supporting culture, in part, for the public relations benefit.

2.   Subcultures

a.   A subculture is a group of people who share a unique way of life within a larger, dominant culture. It can differ from the dominant culture in language, race, lifestyle, values, attitudes, and so on.

b.   Companies must be mindful of subcultures when formulating business strategies (e.g., China has 50 ethnic groups).

c.   Decisions regarding product design, packaging, and advertising must consider distinct cultures.

d.   Subcultures also can extend beyond national borders.

3.   COMPONENTS OF CULTURE

Culture includes what people consider beautiful and tasteful, their underlying beliefs, their traditional habits, and how they relate to one another and their surroundings.

A.   Aesthetics

1.   Aesthetics is what a culture considers to be in “good taste” in the arts, the imagery evoked by certain expressions, and the symbolism of colors.

2.   Appropriate colors for advertising, product packaging, and even work uniforms can enhance success (e.g., Green in Islam).

3.   Blunders can result from selecting inappropriate colors and symbols for advertising, product packaging, and architecture.

4.   Music is deeply cultural and must be considered in promotions.

5.   It is also an important consideration in marketing over the Internet.

B.   Values and Attitudes

1. Values are ideas, beliefs, and customs to which people are emotionally attached. Affect work ethic and desire for material possessions. Some cultures value leisure; others hard work.
2. Attitudes are positive or negative evaluations, feelings, and tendencies that individuals harbor toward objects or concepts. Learned from role models and formed within a cultural context. More flexible than values.

3.   Attitudes toward Time

a.   Latin American and Mediterranean cultures are casual about time; people in Japan and the United States arrive promptly for meetings and keep tight schedules.

b.   Americans strive toward workplace efficiency and may leave work early if their work is done because they value individual results. Japanese look busy even when business is slow to demonstrate dedication—an attitude grounded in cohesion, loyalty, and harmony.

4.   Attitudes toward Work

a.   Some cultures have a strong work ethic, others stress a balanced pace in work and leisure (e.g., “Work to live, or live to work”).

b.   Many European nations are trying to foster an entrepreneurial spirit to achieve the job growth realized in the United States.

5.   Attitudes toward Cultural Change

A cultural trait is anything that represents a culture’s way of life including gestures, material objects, traditions, and concepts.

a.   Cultural diffusion is the process whereby cultural traits spread from one culture to another. Globalization and technology are increasing the pace of cultural diffusion and change.

b.   Cultural imperialism is the replacement of one culture’s traditions, folk heroes, and artifacts with substitutes from another.

c.   Culture can force companies to adjust business policies and practices, such as using situational management.

d.   Rapid cultural diffusion and increased human interaction across borders cause cultures to converge. Convergence is taking place in some market segments for some products.

C.   Manners and Customs

It is important to understand manners and customs to avoid mistakes abroad. In-depth knowledge improves the abilities of managers.

1. Manners are appropriate ways of behaving, speaking, and dressing in a culture (e.g., conducting business during meals in the United States).

2.   Customs are habits or ways of behaving in specific circumstances that are passed down through generations in a culture. Customs define appropriate habits or behaviors in specific situations.

a.   Folk customs are behaviors, dating back generations, practiced within a homogeneous group of people (e.g., dragon boat festival in China).

b.   A popular custom is behavior practiced by a heterogeneous group or by several groups (e.g., blue jeans, “burgers ’n fries”).

c.   Although giving token gifts to business and government associates is customary, the proper type of gift varies.

d.   Cultures differ in their legal and ethical rules regarding bribery. The U.S. Foreign Corrupt Practices Act prohibits companies from giving large gifts to win business favors, applies to U.S. firms operating at home and abroad.

D.   Social Structure

Social structure embodies a culture’s fundamental organization, including groups and institutions, social positions and relationships, and resource distribution.

1. Social Group Associations

A social group is a collection of two or more people who identify and interact with one another. Contribute to identity and self-image.

a.   Family

1. Nuclear family consists of immediate relatives, including parents, brothers, and sisters. Prevails in Australia, Canada, United States, and in Europe.
2. Extended family includes grandparents, aunts and uncles, cousins, and relatives through marriage. More important in Asia, Middle East, North Africa, and Latin America.

b.   Gender

1. Gender refers to socially learned traits associated with, and expected of, men or women. Sociologists regard gender as a category—people who share some status.
2. Countries vary regarding gender equality at work.

2.   Social Status

a.   Social stratification is the process of ranking people into social layers according to family heritage, income, and occupation.

b.   Top layer: royalty, government officials, and business leaders. Middle layer: scientists, medical doctors, and others with a university education. Bottom layer: manual and clerical workers with vocational training or secondary-school educations.

c.   Rankings can and do change over time.

3.   Social Mobility

a.   Social mobility is the ease with which individuals can move up or down a culture’s “social ladder.”

b.   Caste system: people are born into a social ranking, with no opportunity for social mobility.

c.   Class system: personal ability and actions decide status and mobility. Highly class-conscious cultures can offer less mobility but experience more class conflict.

E.   Religion

Human values often derive from religious beliefs. Different religions take different views of work, savings, and material goods. Beliefs influence competitiveness, economic development, and business strategies.

1.   Christianity

a.   Founded in Palestine 2,000 years ago among Jews who believed that Jesus of Nazareth was the messiah. With 2 billion followers, it is the world’s single largest religion.

b.   More than 300 denominations but most are Roman Catholic, Protestant, or Eastern Orthodox.

c.   Roman Catholics are to refrain from placing materialism above God and people. Protestants believe that salvation comes from faith in God and that hard work gives glory to God.

d.   Christian organizations sometimes get involved in social causes that affect business policy (e.g., Ryanair, Hyundai).

1. Islam
   1. Founded by Muhammad in 600 A.D. in Mecca, Saudi Arabia—the holy city of Islam. World’s second largest religion with 1.3 billion adherents. Word Islam means “submission to Allah” and Muslim means “one who submits to Allah.”
   2. Religion strongly affects the goods and services acceptable to Muslim consumers (e.g., alcohol, pork, interest on loans).

3.   Hinduism

a.   Founded 4,000 years ago in present-day India, where more than 90 percent of its nearly 900 million adherents live.

b.   Some say it is a way of life rather than a religion. Caste system is integral to the Hindu faith. Believe in reincarnation—rebirth of the human soul at the time of death. Do not eat or willfully harm living creatures as they may be reincarnated human souls.

c.   Cows considered sacred animals so eating beef is not allowed (e.g., McDonald’s replaces beef with lamb).

4.   Buddhism

a.   Founded 2,600 years ago in India by a Hindu prince named Siddhartha Gautama. About 380 million followers, mostly in Asia: China, Tibet, Korea, Japan, Vietnam, and Thailand.

b.   Promotes a life centered on spiritual rather than worldly matters. Buddhists seek nirvana (escape from reincarnation) through charity, modesty, compassion for others, restraint from violence, and general self-control.

5.   Confucianism

a.   Founded 2,500 years ago by exiled politician and philosopher Confucius. China is home to most of the 225 million followers.

b.   Confucian thought ingrained in the cultures of Japan, South Korea, and nations with large numbers of ethnic Chinese, including Singapore.

c.   South Korean business practice reflects Confucian thought in its rigid organizational structure and reverence for authority (e.g., Korean-style management in overseas subsidiaries).

d.   For centuries, people despised merchants because earning money violated Confucian beliefs. Many Chinese moved to Indonesia, Malaysia, Singapore, and Thailand to do business.

6.   Judaism

a.   Founded more than 3,000 years ago and 18 million followers. Was the first religion to teach belief in one God. Orthodox (“fully observant”) Jews make up 12 percent of Israel and constitute an increasingly important economic segment.

b.   Important observances are Rosh Hashanah (the Jewish New Year), Yom Kippur (the Day of Atonement), Passover (the Exodus from Egypt), and Hanukkah (a victory over the Syrians).

c.   Employers must be aware of Jewish holidays. Because Sabbath lasts from sundown on Friday to sundown on Saturday, work schedules might need adjustment.

d.   Marketers must take into account foods banned among observant Jews (e.g., pork and shellfish prohibited, meat stored and served separately from milk) and “kosher” foods.

7.   Shinto

a.   Means “way of the gods” and arose as the native religion of the Japanese. Teaches sincere and ethical behavior, loyalty and respect toward others, and enjoyment of life. Shinto claims about 4 million strict adherents in Japan.

b.   Shinto beliefs are reflected in the workplace through lifetime employment (although this is waning today) and the traditional trust extended between firms and customers.

c.   Japanese competitiveness in world markets has benefited from loyal workforces, low employee turnover, and good labor–management cooperation.

F.   Personal Communication

Every culture has a communication system to convey thoughts, feelings, knowledge, and information through speech, writing, and actions. A culture’s spoken and body language can help explain people’s thoughts and behaviors.

1.   Spoken and Written Language

1. Linguistically different segments of a population are often culturally, socially, and politically distinct.
2. Companies have made language blunders in their international business dealings.
3. A lingua franca is a third or “link” language that is understood by two parties who speak different languages.
4. Some languages are dying out, whereas some languages are growing, including Mandarin, Spanish, and English.

2.   Body Language

a.   Communicated through unspoken cues, including hand gestures, facial expressions, physical greetings, eye contact, and the manipulation of personal space.

b.   Communicates information and feelings and differs among cultures. Most is subtle and takes time to interpret.

c.   Proximity is an element of body language; standing too close may invade personal space and appear aggressive.

G.   Education

Education passes on traditions, customs, and values. Cultures educate young people through schooling, parenting, religious teachings, and group memberships. Families and other groups provide informal instruction about customs and how to socialize with others.

1.   Education Level

a.   Excellent basic education attracts high-wage industries that invest in training and increase productivity. Skilled, well-educated workforce attracts high-paying jobs; a poorly educated one attracts low-paying jobs.

b.   Newly industrialized economies in Asia owe much of their economic development to solid education systems.

2.   The “Brain Drain” Phenomenon

a.   Brain drain: departure of highly educated people from one profession, geographic region, or nation to another.

b.   Reverse brain drain: professionals return to their homelands.

H.   Physical and Material Environments

These heavily influence a culture’s development and pace of change.

1.   Physical Environment

a.   Topography: all physical features that characterize the surface of a geographic region. Cultures isolated by impassable mountains or large bodies of water are less exposed to the cultural traits of others and change slowly. Topography impacts product needs.

b.   Topography impacts personal communication (e.g., mountains and the Gobi Desert consume two thirds of China).

c.   Climate affects where people settle and directs systems of distribution (e.g., Australian desert, jungles, coastal areas).

1. Climate plays a large role in lifestyle, clothing, and work habits, such as organizing production schedules for idled machines.

2.   Material Culture

Includes all technology a culture uses to manufacture goods and provide services, and can measure a culture’s technological advancement.

a.   A firm enters a market under one of two conditions: (1) demand for its products has developed, or (2) the market is capable of supporting its production operations.

b.   Changes in material culture can change other aspects of culture.

c.   Many nations display uneven levels of material culture across geography, markets, and industries.

4.   CLASSIFYING CULTURES

People in different cultures respond differently in similar business situations. Two ways to classify cultures based on characteristics such as values, attitudes, and social structure.

A.   Kluckhohn–Strodtbeck Framework

The Kluckhohn–Strodtbeck Framework compares cultures along six dimensions, asking the following questions:

1. Do people believe that their environment controls them, that they control the environment, or that they are part of nature?
2. Do people focus on past events, on the present, or on the future implications of their actions?
3. Are people easily controlled and not to be trusted, or can they be trusted to act freely and responsibly?
4. Do people desire accomplishments in life, carefree lives, or spiritual and contemplative lives?
5. Do people believe that individuals or groups are responsible for each person’s welfare?
6. Do people prefer to conduct most activities in private or in public?

a.   Dimensions of Japanese Culture:

1. Japanese believe in a delicate balance between people and environment that must be maintained.
2. Japanese culture emphasizes the future.
3. Japanese culture treats people as quite trustworthy.
4. Japanese are accomplishment oriented for employers and work units.
5. Japanese culture emphasizes individual responsibility to the group and group responsibility to the individual.
6. The culture of Japan tends to be public.

B.   Hofstede Framework

The Hofstede Framework grew from a study of more than 110,000 people working in IBM subsidiaries by Dutch psychologist Geert Hofstede. He developed five dimensions for examining cultures.

1.   Individualism versus Collectivism: Identifies the extent to which a culture emphasizes the individual versus the group.

a.   Individualist cultures value hard work, entrepreneurial risk-taking, and freedom to focus on personal goals.

b.   Collectivist cultures feel a strong association to groups, including family and work units. The goal is to maintain group harmony and work toward collective rather than personal goals.

2.   Power Distance: Identifies the degree to which a culture accepts social inequality among its people.

a.   Large power distance is characterized by inequality between superiors and subordinates. Organizations are hierarchical, with power derived from prestige, force, and inheritance.

b.   Small power distance means equality, with prestige and rewards equally shared between superiors and subordinates. Power derives from hard work and is considered more legitimate.

c.   Refer to Figure 2.2. Tight grouping of nations within the five clusters (plus Costa Rica): African, Asian, Central and South American, and Middle Eastern nations in Quadrant 1 (cultures with large power distance and lower individualism). Quadrants 2 and 3 include Australia and the nations of North America and Western Europe (cultures high in individualism and smaller power distance scores).

3.   Uncertainty Avoidance: Identifies the extent to which a culture avoids uncertainty and ambiguity.

a.   Cultures with large uncertainty avoidance value security, place faith in strong systems of rules and procedures, have lower employee turnover, formal rules for employee behavior, and more difficulty implementing change.

b.   Low uncertainty avoidance cultures are more open to change and new ideas.

c.   Refer to Figure 2.3. Quadrant 4 contains nations characterized by small uncertainty avoidance and small power distance, including Australia, Canada, Jamaica, the United States, and many Western European nations. Quadrant 2 contains many Asian, Central American, South American, and Middle Eastern nations—nations having large power distance and large uncertainty avoidance indexes.

4.   Masculinity versus Femininity: Identifies the extent to which a culture emphasizes masculinity versus femininity.

a.   Cultures scoring high are characterized by personal assertiveness, accumulation of wealth, and entrepreneurial drive.

b.   Cultures scoring low have relaxed lifestyles, with more of a concern for others than material gain.

5.   Long-Term Orientation: Indicates a society’s time perspective and an attitude of overcoming obstacles with time. It attempts to capture the differences between Eastern and Western cultures.

a.   Cultures scoring high (strong long-term orientation) value respect for tradition, thrift, perseverance, and a sense of personal shame.

b.   Cultures scoring low are characterized by individual stability and reputation, fulfilling social obligations, and reciprocation of greetings and gifts.

5.   BOTTOM LINE FOR BUSINESS

In this chapter we discussed many of the cultural differences among nations that affect international business. We saw how problems can erupt from cultural misunderstandings and learned how companies can improve their performance with cultural literacy. Localizing business policies and practices can promote success. Understanding a people’s values, beliefs, rules, and institutions makes managers more effective at their jobs.