1. Cross-Cultural Business2
Cross-Cultural Business
Welcome to Chapter 2, Cross-Cultural Business.
Copyright © 2014 Pearson Education, Inc.

2. Chapter Objectives
Describe culture and explain the significance of both national culture and subcultures
Identify the components of culture and describe their impact on international business
Describe cultural change and explain how companies and culture affect each other
Explain how the physical environment and technology influence culture
Describe two frameworks used to classify cultures and explain their practical use
In this chapter, you will come to understand the role of culture in international business.
You will also:
Learn the importance of national culture, subculture, and how each component of culture affects business activities.
Understand how cultures and companies change each other, and how the physical environment and technology influence cultures.
And acquaint yourself with two popular frameworks used to classify cultures.
Copyright © 2014 Pearson Education, Inc.

3. Haribo Problem: Not serving $2 billion subculture
Although Haribo was selling over 100 million gummi candies a day worldwide, it was not meeting the needs of a global subculture worth $2 billion a year.
Muslims and Jews who adhere to a strict religious diet could not eat the candies because of the pork-based substance that gives the candy its sticky, rubbery feel.
So, Haribo developed a special candy for this market by replacing the pork-based gelatin with a bacteria-based compound found in salad dressings and sauces.
Haribo now has a Jewish rabbi and a Muslim cleric oversee production to ensure that it adheres to their religious customs.
Problem: Not serving $2 billion subculture
Culprit: Pork-based gelatin in the candies
Solution: New bacteria-based compound
Copyright © 2014 Pearson Education, Inc.
2 - 3 3

4. X √ What is Culture? Cultural literacy Ethnocentricity
Set of values, beliefs, rules, and institutions held by a specific group of people
Cultural literacy
Detailed knowledge of a culture that enables a person to function happily and effectively within it √
Ethnocentricity
Belief that one’s own ethnic group or culture is superior to that of others X
Why should we try to avoid ethnocentricity?
1. It causes us to view other cultures in terms of our own and, therefore, overlook beneficial aspects of other cultures.
2. It also undermines our business projects if we are insensitive to cultural nuances.
Why should we work to develop cultural literacy?
1. Detailed knowledge about another culture can enable us to function happily and effectively within it.
2. It also brings companies closer to customers’ needs and can increase business competitiveness.
Copyright © 2014 Pearson Education, Inc.

5. Culture Matters: Creating a Global Mindset
Cultural
Adaptability
Bridging
the Gap
We can develop a global mindset in several ways:
Cultural adaptability means that a manager must be knowledgeable of an unfamiliar culture, then alter his or her behavior accordingly to lead multicultural teams.
Bridging the gap means employing creativity when Western management ideas are applied in Eastern cultures, and vice versa. For example, implementing “collective leadership” practices in Asia can better suit Asian values of group consensus.
Building global mentality involves developing openness and flexibility toward all things unfamiliar, understanding global business principles, and improving abilities to implement strategies.
Flexibility is key because the more behavioral the issue, the greater will be local culture’s influence on that issue.
Building
Global Mentality
Flexibility
Is Key
Copyright © 2014 Pearson Education, Inc.

6. National Culture Filmmaking and Broadcasting Guggenheim and
Nation states build museums and monuments to preserve the legacies of important events and people
Filmmaking
and
Broadcasting
Guggenheim
and
Hong Kong Disney
National culture generalizes across groups living within a nation. For example, British culture consists of English, Scottish, and Welsh influences.
Nations preserve the legacies of key events and important people instrumental in their cultural development.
Nations also intervene in business to preserve their cultures from being diluted by foreign influences.
Companies get involved in supporting culture, in part for the public relations benefits it provides.
Copyright © 2014 Pearson Education, Inc.

7. Subculture
People who share a unique way of life within a larger culture (language, race, lifestyle, attitudes, etc.)
EXAMPLES
Goth, Punk, Emo
China’s Dialects
Groups in U.S.
Subcultures can differ from the dominant culture in language, race, lifestyle, values, attitudes, and so forth.
Companies must be mindful of subcultures when formulating business strategies. For example, China has 50 ethnic groups within its territory.
Subcultures can also extend beyond national borders.
Decisions regarding product design, packaging, and advertising must consider distinct subcultures so as to not offend them.
Copyright © 2014 Pearson Education, Inc.

8. Discussion Question
Why should business people try to avoid ethnocentricity and develop cultural literacy?
Why should business people try to avoid ethnocentricity and develop cultural literacy?
Copyright © 2014 Pearson Education, Inc.

9. Answer to Discussion Question
Ethnocentricity distorts our view of other cultures and causes us to overlook important human and environmental differences among cultures.
Cultural literacy improves the ability of managers to manage employees, develop and market products, and conduct negotiations in local markets.
Answer:
Ethnocentricity distorts our view of other cultures and causes us to overlook important human and environmental differences among cultures. Cultural literacy improves the ability of managers to manage employees, develop and market products, and conduct negotiations in local markets.
Copyright © 2014 Pearson Education, Inc.

10. Personal communication
Components of Culture
Physical
environments
Education
Personal communication
Religion
Social structure
Manners & customs
Values & attitudes
Aesthetics
Culture
Culture’s components include: aesthetics, values and attitudes, manners and customs, social structure, religion, personal communication, education, and physical and material environments.
Copyright © 2014 Pearson Education, Inc.

11. Aesthetics Music Painting Dance Drama Architecture
We define aesthetics as all that a culture considers to be in “good taste” in the arts, the imagery evoked by certain expressions, and the symbolism of colors.
In business, this means choosing appropriate colors for advertising, product packaging, and even work uniforms to improve the odds for success.
Blunders can result from selecting inappropriate colors and symbols for advertising, product packaging, and architecture.
Copyright © 2014 Pearson Education, Inc.

12. Ideas, beliefs, and customs to which people are emotionally attached
Values and Attitudes
Values
Attitudes
Positive or negative evaluations, feelings, and tendencies people hold toward objects or concepts
Ideas, beliefs, and customs to which people are emotionally attached
The values that people hold dear affect their work ethic and desire for material possessions.
Attitudes are learned from role models, formed within a cultural context, and are more flexible than values.
Latin American and Mediterranean cultures are casual about time, whereas people in Japan and the United States arrive promptly for meetings and keep tight schedules.
Likewise, some cultures have a strong work ethic while others stress a balanced pace in work and leisure.
Freedom
Responsibility
Honesty
Time
Work
Cultural change
Copyright © 2014 Pearson Education, Inc.

13. Spread of cultural traits across cultures causes much cultural change
Cultural Diffusion
Spread of cultural traits across cultures causes much cultural change
Cultural diffusion is the process whereby cultural traits spread from one culture to another, thereby causing cultural change.
Do you think people in this village in northern Namibia view the world any differently since they acquired satellite TV?
Copyright © 2014 Pearson Education, Inc.
2 - 13 13

14. Manners and Customs Manners Customs
Appropriate behavior, speech, and dressing in general
Customs
Traditional ways or behavior in specific circumstances
In-depth knowledge of manners and customs improve a manager’s abilities and help avoid mistakes abroad.
Manners are generally acceptable ways of behaving, speaking, and dressing.
Customs are habits and behaviors in specific circumstances and situations.
Copyright © 2014 Pearson Education, Inc.

15. Folk Popular Gift Giving Customs
Managers do well to understand local customs where they work.
A folk custom dates back generations in a culture and is practiced within a homogeneous group of people. Celebrating the Dragon Boat Festival in China is a folk custom.
A popular custom is practiced by a heterogeneous group or by several groups. The playing of golf worldwide is considered a popular custom.
Gift giving involves giving token gifts to business and government associates, yet the proper type of gift can differ across cultures.
Copyright © 2014 Pearson Education, Inc.

16. Discussion Question
Customs differ from _______ in that they define appropriate ways or behaviors in specific situations.
a. Values
b. Attitudes
c. Manners
Customs differ from _______ in that they define appropriate ways or behaviors in specific situations.
a. Values
b. Attitudes
c. Manners
Copyright © 2014 Pearson Education, Inc.

17. Answer to Discussion Question
Customs differ from _______ in that they define appropriate ways or behaviors in specific situations.
a. Values
b. Attitudes
c. Manners
The correct answer is c. Manners
Copyright © 2014 Pearson Education, Inc.

18. Manager’s Briefcase: A Globetrotter’s Guide to Meetings
Familiarity
Personal Space
Religious Values
Business Cards
Comedy
Body Language
Successful business meetings in other cultures are often correlated with displaying good manners in the local culture:
Managers should avoid the temptation to get too familiar too quickly.
They should respect how the local culture treats personal space.
They will want to be sure that their behavior does not offend religious values.
Business cards should be given and received according to how it is done in the local culture.
Comedy must be used cautiously because it often does not translate well across languages and cultures.
Body language can convey many unintended signals to people of other cultures.
Copyright © 2014 Pearson Education, Inc.
2 - 18 18

19. Social Structure
Social group Two or more people who identify and interact with each other
Social stratification Process of ranking people into social layers
Social mobility Ease of moving up or down a culture's "social ladder"
Social groups contribute to an individual’s identity and self-image.
A nuclear family includes only immediate relatives, including parents, brothers, and sisters.
An extended family includes grandparents, aunts, uncles, cousins, and relatives through marriage.
Gender refers to socially learned traits associated with men or women. Cultures differ in their views of gender equality at work.
Social stratification involves how a culture ranks people into social layers according to family heritage, income, and occupation.
Social mobility refers to the ease with which someone can move up or down a culture’s “social ladder.”
A caste system restricts people to the social ranking into which they were born.
A class system lets personal ability and actions decide social status and mobility.
Copyright © 2014 Pearson Education, Inc.

20. World Religions Origin of Human Values Christianity Islam Hinduism
Buddhism
Confucianism
Judaism
Shinto
Of the many denominations within Christianity, Roman Catholics are expected to place God and people above material ambitions. Protestants believe faith in God brings salvation and that hard work glorifies God.
The word Islam means “submission to Allah.” For devout Muslims, religion determines acceptable goods and services. Strict Muslims do not drink alcohol, eat pork, or charge interest on money lent.
In Hinduism, the caste system influences people’s way of life and occupations. Strict Hindus do not eat or harm living creatures because they believe in reincarnation—rebirth of the human soul at the time of death.
Buddhism promotes a life centered on spiritual rather than worldly matters. Buddhists seek nirvana (escape from reincarnation) through charity, modesty, compassion, nonviolence, and general self-control.
A life focused on money, above all else, violates strict beliefs in Confucianism. Businesses in South Korea reflect Confucian thought in their rigid organizational structure and reverence for authority.
In Judaism, fully observant Jews eat only “kosher” foods and do not eat pork and shellfish. Work schedules might need adjustment for key Jewish holidays and the Sabbath (from sundown Friday to sundown Saturday).
Shinto, the native religion of Japan, teaches sincere and ethical behavior, loyalty and respect toward others, and enjoyment of life. In the workplace, Shinto fosters a loyal workforce and good labor–management cooperation.
Copyright © 2014 Pearson Education, Inc.

21. Modernization and Traditional Beliefs
Does globalization endanger traditional beliefs, such as living a life void of materialistic ambitions?
Buddhism instructs its followers to live a simple life void of materialistic ambitions.
As globalization pries open Asian markets, can cultures modernize and yet retain their traditional values and beliefs?
Copyright © 2014 Pearson Education, Inc.
2 - 21 21

22. Language Blunders
Japanese knife manufacturer labeled its exports to the United States with “Caution: Blade extremely sharp! Keep out of children.”
English sign in a Moscow hotel read, “You are welcome to visit the cemetery where famous Russians are buried daily, except Thursday.”
Sign for non-Japanese-speaking guests in a Tokyo hotel read, “You are respectfully requested to take advantage of the chambermaids.”
Sign in English at Copenhagen ticket office read, “We take your bags and send them in all directions.”
Braniff Airlines’ English-language slogan “Fly in Leather” was translated into “Fly Naked” in Spanish.
These are just a few of the many language blunders companies have made in their international business dealings.
Advertising slogans and company documents should be carefully translated so messages are received precisely as intended.
Copyright © 2014 Pearson Education, Inc.

23. Global Sustainability: Speaking in Fewer Tongues
Many endangered languages
Yet English, Mandarin, and Spanish are expanding
Lost languages means lost knowledge
Linguists are recording most threatened languages
As many as one-half of the world’s roughly 6,000 languages may be gone by the end of this century.
Meanwhile, English, Mandarin, and Spanish are increasingly popular.
A lost language means the loss of cultural, spiritual, and intellectual knowledge.
Linguists are hurrying to make audio, video, and written recordings of the most endangered languages.
Copyright © 2014 Pearson Education, Inc.
2 - 23

24. Lingua Franca ¿Hola? Guten Tag? Hello?? Ni Hao? Bonjour? Hello!!!
A lingua franca is a third or “link” language that is understood by two parties who speak different languages.
Interestingly, although only 5 percent of the world’s population speaks English as a first language, it is the most common lingua franca in international business.
Copyright © 2014 Pearson Education, Inc.

25. Mixed Signals
Body Language is communicated through unspoken cues, including hand gestures, facial expressions, physical greetings, eye contact, and the manipulation of personal space.
People use it to communicate information and feelings and it differs significantly among cultures.
Copyright © 2014 Pearson Education, Inc.

26. Discussion Question
How does an understanding of the spoken, written, and body language in a market abroad contribute to business success?
How does an understanding of the spoken, written, and body language in a market abroad contribute to business success?
Copyright © 2014 Pearson Education, Inc.

27. Answer to Discussion Question
Knowledge of a culture’s spoken, written, and body language gives international managers insight into why people think and act the way they do.
Answer:
Knowledge of a culture’s spoken, written, and body language gives international managers insight into why people think and act the way they do.
Copyright © 2014 Pearson Education, Inc.

28. Education
Cultures pass on traditions, customs, and values through schooling, parenting, group memberships, etc.
Education level
Well-educated attract high-paying jobs, while poorly educated attract low-paying manufacturing jobs
An excellent education system attracts high-wage industries that invest in training and result in increased productivity.
A skilled, well-educated workforce attracts high-paying jobs; a poorly educated one attracts low-paying jobs.
Brain drain refers to the departure of highly educated people from one profession, geographic region, or nation to another.
Reverse brain drain is when these highly educated individuals return to their homelands.
Brain drain
Departure of highly educated people from one profession, geographic region or nation to another
Copyright © 2014 Pearson Education, Inc.

29. Problem of Illiteracy
As we see in this table, some countries have a long way to go in increasing their literacy rate.
Worldwide, around 800 million adults remain illiterate.
Copyright © 2014 Pearson Education, Inc.

30. Physical and Material Culture
These influence a culture’s development and pace of change
Topography
Physical features characterizing the surface of a geographic region
Climate
Weather conditions of a geographic region
Topography plays an important role in defining a culture. Cultures isolated by mountains or water are less exposed to other cultures’ traits and so change more slowly. Topography affects people’s product needs and personal communication.
Climate affects where people settle and directs systems of distribution to the most efficient routes. It defines lifestyle, clothing, and work habits, such as organizing production schedules for idled machines during certain seasons of the year.
Material culture can be used to measure a culture’s technological advancement. Material culture often varies across geography, markets, and industries. A company enters a market when demand for its products has developed, or the market is capable of supporting its production operations.
Material Culture
Technology used to manufacture goods and provide services
Copyright © 2014 Pearson Education, Inc.

31. Kluckhohn-Strodtbeck Framework
Relation to nature
Time orientation
Trust and control
Material or spiritual
Responsibility to others
View of personal space
This framework compares cultures by answering the following six 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?
Copyright © 2014 Pearson Education, Inc.

32. Individualism vs. collectivism Masculinity vs. femininity
Hofstede Framework
Individualism vs. collectivism
Power
distance
Masculinity vs. femininity
Uncertainty
avoidance
This framework compares cultures along five dimensions:
Individualism versus Collectivism. Individualist cultures value hard work, entrepreneurial risk-taking, and freedom to focus on personal goals. Collectivist cultures emphasize a strong association with family and work groups to maintain harmony and to work toward collective goals.
Power Distance. Large power distance means greater inequality between superiors and subordinates, more hierarchical organizations, and power derives from prestige, force, and inheritance. Small power distance implies more equally shared prestige and rewards, and power derives from hard work and is often considered more legitimate.
Uncertainty Avoidance. Cultures having large uncertainty avoidance tend to value security, systems of rules and procedures, low employee turnover, and relatively slower change. Those with low uncertainty avoidance are more open to change and new ideas.
Masculinity versus Femininity. Cultures with high masculinity versus femininity scores emphasize assertiveness, the accumulation of wealth, and an entrepreneurial drive. Cultures rating low on masculinity versus femininity value relaxed lifestyles and are more concerned for others than they are with material gain.
Long-term Orientation. Cultures scoring high on long-term orientation place value on respect for tradition, thrift, perseverance, and a sense of personal shame. Cultures scoring low on long-term orientation tend to value individual stability and reputation, fulfilling social obligations, and reciprocation of greetings and gifts.
Long-term
orientation
Copyright © 2014 Pearson Education, Inc.

33. Individualism vs. Collectivism
Power Distance &
Individualism vs. Collectivism
This graph plots cultures according to the dimensions of power distance and individualism versus collectivism.
We see a tight grouping of nations within the five clusters, with Costa Rica on its own.
Quadrant 1 includes cultures with larger power distance and lower individualism. These nations are found in Africa, Asia, Central and South America, and the Middle East.
Quadrants 2 and 3 include cultures having higher individualism and smaller power distance scores. These are Australia and countries in North America and Western Europe.
Source: Geert Hofstede, “The Cultural Relativity of Organizational Practices and Theories,” Journal of International Business Studies, Fall 1983, p. 82.
Copyright © 2014 Pearson Education, Inc.

34. Uncertainty Avoidance
Power Distance &
Uncertainty Avoidance
This graph plots cultures according to the dimensions of power distance and uncertainty avoidance.
Quadrant 4 includes cultures with small uncertainty avoidance and small power distance. These are Australia, Canada, Jamaica, the United States, and most nations in Western Europe.
Quadrant 2 includes cultures with large power distance and large uncertainty avoidance. These are found in Asia, Central America, South America, and the Middle East.
Source: Geert Hofstede, “The Cultural Relativity of Organizational Practices and Theories,” Journal of International Business Studies, Fall 1983, p. 84.
Copyright © 2014 Pearson Education, Inc.

35. Discussion Question
Cultures with small ____________ tend to display greater equality and a more equal distribution of rewards.
a. Individualism
b. Power distance
c. Uncertainty avoidance
Cultures with small ____________ tend to display greater equality and a more equal distribution of rewards.
a. Individualism
b. Power distance
c. Uncertainty avoidance
Copyright © 2014 Pearson Education, Inc.

36. Answer to Discussion Question
Cultures with small ____________ tend to display greater equality and a more equal distribution of rewards.
a. Individualism
b. Power distance
c. Uncertainty avoidance
The correct answer is b. Power distance
Copyright © 2014 Pearson Education, Inc.

37. Copyright © 2014 Pearson Education, Inc.
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.
Copyright © 2014 Pearson Education, Inc.