Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section three chapter nine Concept Preview After reading this chapter, you should be able to: Sociocultural Forces Their Impact on International Business 1. understand the significance of culture 2. appreciate the importance of religion to business people 3. comprehend the cultural aspects of technology 4. envision the pervasiveness of the international Technology Era 5. understand why business people must follow worldwide trends in formal education

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section three chapter nine Concept Preview continued After reading this chapter, you should be able to: Sociocultural Forces Their Impact on International Business 6. discuss the impact of “brain drain” and “reverse brain drain” on developed and developing countries 7. appreciate the importance of being able to speak the local language 8. recognize the importance of the unspoken language on international business 9. discuss the two classes of relationships within a society 10. discuss Hofstede’s four cultural value dimensions

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section three 9-3 Six Rules of Thumb for Doing Business across Cultures  Be prepared  Slow down  Establish trust  Understand the importance of language  Respect culture  Understand the components of culture

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section three 9-4 Sociocultural Forces Culture  Culture is the sum total of beliefs, rules, techniques, institutions, and artifacts that characterize human populations.  Culture is learned, not innate.  The various aspects of culture are interrelated.  Culture is shared.  Culture defines the boundaries of different groups. Culture and International Business  Cultures differ from our own  Learn the characteristics and adapt to them  spend a lifetime  undergo training including language  Culture impacts all business functions

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section three 9-5 Sociocultural Components Aesthetics — a culture’s sense of beauty and good taste as expressed in arts, drama, music, folklore and dances.  Art  form aspects of art, color, and form because of symbolic meanings they convey  Music and Folklore  musical commercials are generally popular worldwide—what do they prefer—tastes vary

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section three 9-6 Sociocultural Components Attitudes and Beliefs— influence human behavior and bring order to a society  Attitudes  time  achievement and work  prestigious jobs  change

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section three Sociocultural Components Religion  Protestant ethic-work is a virtue (also called Confucian in Japan and Shinto in Asia)  Asian religions Hinduism Buddhism Jainism ConfucianismTaoism Shintoism SikhismFeng shui 9-7

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section three 9-8 Table 9.1 Estimated Religious Population of the World (thousands) sample) Non- Area AtheistsChristiansJewsMuslims religious Africa440360, ,6603,567 Asia175,450303,1274,257778,362752,759 Europe 40,845555,6142,432 32,032 90,389 Latin America 3,010455,8191,084 1,356 16,053 North America 1,850255,5425,8365,53021,315 Oceania , ,845 World (millions) 222 1,95513,8661,126,325889,928 Source: World Almanac 1998, p 654.

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section three 9-9 Sociocultural Components Material Culture  Man-made objects—  how people make things—technology  who makes what and why—economics  Technology of a society  is the mix of usable knowledgeable  the society applies to the attainment of cultural and economic objectives  it exists, is some form, in every cultural organization

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section three Technology Superiority and International Companies  Enables a firm to be competitive  Attain leadership in world markets  Can be sold or emboldened in company’s products  Can give a firm confidence to enter foreign markets  If host government wants the technology; get better conditions for foreign market investment  Can change the international division of labor  Is causing major form to form competitive alliances (strategic technology leveraging) 9-10

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section three 9-11 Cultural Aspects of Technology  New methods often require people to change their ways and beliefs  High GNP--high level of technology  Dualism-old exists with the new  Appropriate technology  not only economically feasible but  energy-efficient and nonpolluting  Boomerang effect  Level of technology has widespread impact  Affects size of the investment  Quality & number of workers employed  Kinds and quality of production inputs  What the facility can produce  If and when country can export  Government controls  abuses in the sale of technology  laws to control purchase of technical assistance  prohibit licensees from exporting  oblige licensees to purchase raw materials from licensor  many host governments are relaxing controls— technology stimulates economic growth

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section three 9-12 Sociocultural Components Education  Measures  literacy rates  amount spent on education  enrollments  kinds of schools and enrollments  underestimate vocational education  definition of literacy  Brain drain  Reverse brain drain  Adult literacy  Women’s education  Educational mix  business schools use American Model  increased competition— demands for better- trained managers  return to Europe of American business school graduates  assistance of American universities

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section three Percentage of Adults Aged in Post-High School Education 9-13 Figure 9.2 Low-IncomeLower-MiddleUpper-Middle High-Income IncomeIncome * *1992. Source: World Development Report, 1997, 1993, 1997 (New York World Development Bank, 1991, 1993, 1997), pp ,

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section three Scientists and Engineers Admitted to the US (year and sex, ) 9-14 Figure 9.3a 0 Source: National Science Foundation, “Immigrants, Engineers, and Technicians: 1993,” (January 11, 1998).

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section three Scientists and Engineers Admitted to the US (by region of birth: 1993) 9-15 Figure 9.3b 0 WesternEasternNear andFar East AfricaNorth andSouthAll other EuropeEuropeMiddleCentralAmericaareas East Source: National Science Foundation, “Immigrants, Engineers, and Technicians: 1993,” (January 11, 1998).

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section three 9-16 Sociocultural Components Language  Spoken language is the key to culture  Languages delineate cultures  Lingua franca—link language  used to communicate across a nation’s diverse cultures that has diverse languages  English-the language of business  Necessary to speak the local language  Translation/Interpretation  Technical manuals, catalogs, advertising  back translation methods  technical words  Unspoken language such as gesture and body language  gestures  closed doors  office size  conversational distance  gift giving  acceptable  gift or bribe?

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section three Differences in What’s Worrying the Swiss (percent)* 9-17 Figure 9.6 *Carried out by Isopublic on a representative sample of respondents from all sections of the population between May 4 and July 8, Source: “What’s Worrying the Swiss?” Bulletin (Zurich: Credit Suisse, April 1988), p. 4.

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section three Sociocultural Components Societal Organization  Pattern of relationships defining and regulating the manner in which members interface with each other  Kinship—family  Associations  age  gender  common interest  free association—class mobility 9-18

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section three Understanding National Cultures  Individualism vs. collectivism  collectivist cultures look after people in exchange for loyalty  individualistic cultures—people look after themselves and their families  Power distance  extent to which members accept the unequal distribution of power among individuals  large  employees believe supervisors are right even when they are wrong  employees do not take the initiative  small  participate style of management is likely to be productive Hofstede’s Dimensions of Management  Uncertainty avoidance  the degree to which members of a society fell threatened by ambiguity and are reluctant to take risks  high risk-avoidance cultures— employees tend to stay with their firms for a long time  high risk cultures—employees resistant to organizational change  low risk-avoidance cultures—highly mobile  Masculinity vs. Femininity  masculinity  emphasis on assertiveness  acquisition of money and status  achievement of visible and symbolic organizational rewards  femininity  emphasis on people relationships  concern for others  overall quality of life 9-19

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section three Scores for Hofstede’s Value Dimensions PowerUncertainty CountryDistanceAvoidance Individualism Masculinity Mexico Venezuela Colombia Peru Chile Portugal United States Australia South Africa (SAF) New Zealand Canada Great Britain Ireland Table 9.2

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section three Plot of Selected Nations Power Distance and Uncertainty Avoidance 9-21 Figure 9.10 Ireland New Zealand Australia United States Great Britain Canada South Africa Colombia Chile Venezuela Mexico Peru Portugal LOW HIGH UNCERTAINTY AVOIDANCE POWER DISTANCE

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section three Plot of Selected Nations Individualism and Power Distance 9-22 Figure 9.11 Ireland New Zealand Australia United States Great Britain Canada South Africa Colombia Chile Venezuela Mexico Peru Portugal LOW HIGH INDIVIDUALISM POWER DISTANCE