1 Chapter 10 International Strategic Management

2 Why go International? Increasing competition at home Need to grow Low cost production Reduce tariffs Gain economies of scale Use excess capacity Capitalize on lower taxes, wage rates, inflation Locate near natural resources

3 Understanding Culture Culture is the human-made part of human environment--the sum total of knowledge, beliefs, art, morals, laws, customs, and any other capabilities and habits acquired by humans as members of society. Culture is a collection of shared values and beliefs that are reflected in “acceptable” behavior by a specific group of people –life and death –work, achievement, wealth –security, status –authority, responsibility –risk and uncertainty –individualism, collectivism –science and the scientific method

4 Examples of Cultural Factors 4-2 Never touch the head of a Thai or Pass an object over it, the head is considered sacred in Thailand. Avoid using triangular shapes in Hong Kong, Korea, and Taiwan since the triangle is considered a negative shape. The number 7 is considered bad luck in Kenya and good luck in the Czech Republic and has Magical connotation in Benin, Africa. The number 10 is bad luck in Korea. The number 4 means death in Japan. Red represents witchcraft and death in many African countries, while it is a positive color in Denmark. The color white is associated with death in Asia. SOURCE: Business America, July 12, 1993

5 Cultural Differences Between Japanese and Americans’ Individual Lifestyles Clear expression of joy and sorrow Unequivocal expression of “Yes/No” Strong self-assertion Strong personality Excellent negotiating skills Priority of self-interest Cultural Background Reticence Modesty Reserve Punctiliousness Politeness Obligation Ambiguous expression of Joy/Sorrow Equivocal expression of “Yes/No” Weak self-assertion Weak personality Poor negotiating skills Priority of harmony with others Japanese A Culture of Self-restraint Americans A Culture of Self-expression SOURCE: Norihiko Shimizu, “Today’s Taboos may be gone Tomorrow,” Tokyo Business, February 1995, p

6 Cultural Differences Between Japanese and Americans Social Life 4-4 Dignity of individuals Individual work ethic Great individual freedom Low regard for rules An open and transparent society Multi-cultural society A society excelling in creativity and versatility Individual decisions over consensus A society which pursues the ideal Human relations oriented Dependence on the group Lack of individual freedom Respect for rules A closed society, lacking in transparency Mono-cultural society An orderly and uniform society Dependence on consensus A society which pursues harmony with reality Japanese Society “In the Same Boat” Concept American Society Dignity of Individuals SOURCE: Norihiko Shimizu, “Today’s Taboos may be gone Tomorrow,” Tokyo Business, February 1995, p.50.

7 National Culture National culture refers to relatively enduring personality traits that are “common or standardized in a given society.”

8 Five Dimensions of National Culture Individualism vs Collectivism Power Distance Uncertainty Avoidance Masculinity vs Femininity Confucian Dynamism (or Long-Term Orientation)

9 Individualism vs Collectivism Individualism: social ties between individuals in a culture are very loose. People are expected to look after their own self-interest and perhaps the self-interest of their immediate family. Society provides a large measure of individual freedom. Canada, Italy, the U.K., and the U.S. score high on this trait. Collectivism: social ties between individuals are very tight. People are born into collectives or in-groups--e.g., family, religion, tribe, village. People are expected to protect the in-group in return for receiving the protection of the group. Colombia, Iran, Japan, and Taiwan score high on this trait.

10 Power Distance How society deals with the fact that people are unequal due to differences in physical and intellectual capacities, as well as power and wealth. High PD Cultures - more autocratic and its members accept differences in power and wealth, e.g., France, India, Mexico, the Philippines, and Singapore. Low PD Cultures - feel that people should be more equal and differences in power and wealth are less acceptable, e.g., Australia, Israel, the Netherlands, the U.K., and the U.S.

11 Uncertainty Avoidance How different cultures deal with the fact that the future is uncertain. Low UA Cultures - accept uncertainty. Take each day as it comes, tend to take risks easily. They are tolerant of behavior and opinions different from their own, since they do not feel threatened by them, e.g., Canada, Hong Kong, Singapore, the U.S. High UA Cultures - anxiety about the unpredictability of the future is manifested in grater nervousness, emotionality, and aggressiveness. Technology, law and religion are used to build institutions that try to create security and avoid risk, e.g.., Belgium, France, Greece, and Portugal.

12 Masculinity Versus Femininity Masculinity - The division of sex roles in society is maximized, with men taking the more assertive and dominant roles, and women taking the more service- oriented and caring roles. Masculine societies reflect traditionally masculine values: the importance of showing off, of performing, of making money, of “big is beautiful”, e.g., Germany, Italy, and Venezuela. Femininity - The dominant values for both men and women are those traditionally associated with the female role: not showing off, caring for others, valuing personal relationships, “small is beautiful”, e.g., Denmark, Spain, Sweden, and Thailand.

13 Confucian Dynamism Long-Term Orientation - is reflected in cultures where thrift and persistence are highly valued; these values tend to be characteristic of cultures in which Confucian philosophy has had a strong influence and in which social obligations to the in- group are strong, e.g., Japan. Short-Term Orientation - is reflected in culture where consumption and impatience dominate; self-interest supersedes group interest, e.g., U.S.

14 Some Attributes of American Managers Compared to Foreign Managers - Have a Lower Tolerance for Silence - Are More Action-Oriented - Place Greater Emphasis on Short-Term Results - Use First Names More Quickly in Doing Business - Place a Higher Priority on Time - Place More Significance on Material Wealth - Emphasize Competitiveness and Individualism More than Modesty, Team Spirit, & Patience ©1999 Prentice Hall

15 Comparing Management Styles Across Countries West Germany Switzerland Spain Italy Denmark Japan France Netherlands India United States Great Britain High Conformity High Individualism ©1999 Prentice Hall

16 Environmental Adaptation Adjusting to a country’s culture (uncontrollable environment) is critical. Consider and adjust your frame of reference. Avoid cultural errors by being aware of cultural relativism—judgments and strategies are based on experience, and experience is interpreted by each manager in terms of his/her own culture.

17 Self-Reference Criterion (SRC) SRC - unconscious reference to one’s own cultural values, experience, and knowledge as a basis for decisions (e.g., social distance). Control the SRC problem in international business by recognizing its existence in our behavior. Be sensitive to differences in cultures and ask questions when in doubt.

18 Being Globally Aware  To be Globally Aware is to be: Objective Tolerant of Cultural Differences  Knowledgeable of: Cultures History World Market Potentials Global Economic and Social Trends 1-9