1. © 2001 Prentice Hall2-1 International Business by Daniels and Radebaugh Chapter 2 Cultural Environments Facing Business

2. © 2001 Prentice Hall2-2 Objectives To relate the problems and methods of learning about cultural environments To explain the major causes of cultural difference and change To examine behavioral factors influencing countries’ business practices To examine cultural guidelines for companies that operate internationally

3. © 2001 Prentice Hall2-3 Introduction Culture The specific learned norms based on attitudes, values, and beliefs that exist in every nation An integral part of external environments Problems of cultural collision occur when Company practices work less well than intended Employees’ are unable to accept or adjust to foreign environment Every business function subject to cultural problems

4. © 2001 Prentice Hall2-4 Cultural Influences on International Business EXTERNAL INFLUENCES COMPETITIVE ENVIRONMENT PHYSICAL AND SOCIETAL FACTORS Political policies and legal practices Cultural factors Economic forces Geographical influences OPERATIONS OBJECTIVES MEANS STRATEGY Cultural awareness Identification and dynamics of cultures Behavioral practices affecting business Strategies for dealing with cultural differences

5. © 2001 Prentice Hall2-5 Cultural Awareness Problems that hinder cultural awareness Subconscious reactions to circumstances Assumption that all societal subgroups are similar Cultural awareness can be improved Research descriptions of specific cultures Observe behavior or respected foreign nationals Study foreign market directly Company’s need for cultural knowledge increases as it Moves from one to multiple foreign functions Increases the number of countries in which it operates Moves from similar to dissimilar foreign environments Converts from external to internal handling of international operations

6. © 2001 Prentice Hall2-6 Identification and Dynamics of Cultures The nation as a point of reference Each nation has certain human, demographic, and behavioral Characteristics that give it a national identity –people share values, language, and race Laws governing business apply along national lines Problems using a country-by-country approach –individual differences within a country –similarities link groups from different countries Cultural formation and dynamics Value systems set early in life, but may change Values may change due to choice or imposition –cultural imperialism IB increases change in cultures and governments

7. © 2001 Prentice Hall2-7 Identification and Dynamics of Cultures (cont.) Language as a cultural stabilizer Culture spreads rapidly when people from different areas speak the same language Stronger adherence to a culture if it does not share its language with other peoples English, French, and Spanish are widespread –most of IB conducted in English Religion as a cultural stabilizer Religion has a strong influence on values Specific beliefs may affect business –not all nations that practice the same religion have the same constraints on business –where rival religions vie for political control, resulting strife may disrupt business

8. © 2001 Prentice Hall2-8 Behavioral Practices Affecting Business Social stratification systems Every culture values some people more than others, thereby dictating social class or status Ascribed group membership based on: –gender, family, age, and caste –ethnic, racial, or national origin Acquired group membership based on –religion, political affiliation, and professional and other associations Characteristics that affect status differently from country to country include –Competence—competition versus cooperation –gender-based groups –age-based groups –family-based groups –occupation

9. © 2001 Prentice Hall2-9 Behavioral Practices Affecting Business (cont.) Motivation—countries differ in how much people are motivated to work and why Materialism and leisure –countries differ in emphasis on materialism –Protestant ethic—work a means to salvation –most people consider economic achievement to be commendable, regardless of culture Expectation of success and reward— people are more eager to work if: –rewards for success are high »same tasks performed in different countries may have different rewards for success and consequences of failure –there is some uncertainty of success »same task performed in different countries may have different probabilities of success

10. © 2001 Prentice Hall2-10 Behavioral Practices Affecting Business (cont.) Masculinity index—degree of admiration for success, sympathy for unfortunate, preference for being better than others High masculinity cultures –roles differentiated by gender –men should dominate Low masculinity culture –need for smooth social relationships –employee and social welfare has higher priority than growth and efficiency Need hierarchy—lower-order needs must be fulfilled prior to higher-order needs Workers in poor countries motivated by lower-order needs People from different countries may rank needs differently

11. © 2001 Prentice Hall2-11 Relationship Preferences Power distance—describes relationship between superiors and subordinates High—people prefer little consultation –autocratic or paternalistic management Low—consultative styles preferred –easier to implement worker participation Individualism versus collectivism Individualism—low dependence on organization and desire for personal time, freedom, and challenge –self-actualization a prime motivator Collectivism—dependence on organization –value secure physical and social environments Influences how employees interact with their colleagues Influences marketing strategies

12. © 2001 Prentice Hall2-12 Risk-Taking Behavior Uncertainty avoidance High—prefer set rules and lifetime employment –supervisors need to be precise when issuing directives –customers less willing to try new products Trust Leads to lower cost of doing business Fatalism—belief in inevitability of events rather than self-determination High fatalism—people plan less for contingencies

13. © 2001 Prentice Hall2-13 Information and Task Processing Perception of cues Cues perceived selectively Each culture is able to perceive some subjects more precisely than other cultures perceive them Obtaining information Low-context culture—focuses on firsthand information that bears directly on issues to be decided High-context culture—focuses on information peripheral to the issue to be decided Information processing All cultures have ordering and classifying systems –Monochronic—preference for sequential work –Polychronic—comfortable working on several tasks simultaneously Idealism versus pragmatism

14. © 2001 Prentice Hall2-14 Strategies for Dealing with Cultural Differences Making little or no adjustment Host cultures do not always expect foreigners to adjust to them Less adjustment necessary when moving to a country with a similar culture Communications Spoken and written language Difficult to directly translate one language into another Silent language Color associations, sense of appropriate distance, time and status cues, and body language (kinesics) Culture Shock Frustration from having to learn to cope with new cultural cues and expectations

15. © 2001 Prentice Hall2-15 Months Living in New Culture 1 2 3 4 5 6 Acceptance of New Culture High Low Frustration Understanding Elation Stages of Culture Shock

16. © 2001 Prentice Hall2-16 Company and Management Orientations Polycentrism Overly cautious response to cultural variety –imitation of local practices Decentralized structure –home office may lose control over local operations Ethnocentrism Belief that home-country practices and objectives should prevail Ignores important local factors Believes that change is not difficult Geocentrism Between polycentrism and ethnocentrism Based on informed knowledge of home- and host-country needs, capabilities, and constraints Preferred approach to IB

17. © 2001 Prentice Hall2-17 Strategies for Instituting Change Value system The more a change upsets important values, the more resistance it will engender Cost benefit of change Company must consider the expected cost-benefit relationship of any adjustments it makes abroad Resistance to too much change Resistance to change may be lower if the number of changes is not great Make fewer demands at one time and phase in other policies more slowly Participation Discussing proposed change with stakeholders in advance may reduce resistance Participation must not violate prevailing value system

18. © 2001 Prentice Hall2-18 Strategies for Instituting Change (cont.) Reward sharing Employees are more apt to support change when they expect personal or group rewards Opinion leaders Should be convinced first about benefits of change Can help speed up the acceptance of change Timing Change should be timed to occur when resistance is likely to be low Must attend to attitudes and needs of culture Learning abroad International companies should learn things abroad that they can apply at home