CHAPTER 3 : Culture Environment Learning Objectives: Understand how culture impacts international business Concept and elements of culture Cross-culture comparisons Bribery and ethics in international business Social responsibility of MNCs Cross cultural training in preparing for international assignment Understand the principles of business negotiations abroad Business practices in host country

There are more than 160 definitions of culture “Communicable knowledge, learned behavior passed on from generation to generation” “ An Integrated system of learned behavior patterns that are distinguishing characteristic of the members of a given society “ The collective programming of the mind which distinguishes the members of one group or category from those of another

Element of Culture A. Language Spoken Language Written Language Official Language Body Language International Language B. Religion Beliefs and Norms Sacred Objects Philosophical Systems Prayer/ Rituals Leading Religious of the World

C. Values and Attitudes Toward Time (Monochronic (V.S) Polychronic) Achievement Work Change Risk Taking D. Education Literacy Level Formal Education Vocational Training Human Resource Planning Primary / Secondary / High education

E. Social Organization Social Institutions Authority Structure Interest Groups Status Systems Social Mobility F. Technology and Material Culture Science Invention Energy Systems Communications Tools and Objects Urbanization

G. Politics Nationalism National Interests Power Ideologies Political Risks Sovereignty H. Law Common Law Code Law Foreign law Home / Host Country Law Regulation / Antitrust Policy International Law

Cross-Culture Comparisons A. Edward Hall’s High-Context (V.S) Low-Context Cultures B. Hofstede’s Classification Scheme Individualism (V.S) Collectivism Power Distance Uncertainty Avoidance Masculinity Long-Termism C. Deal-Oriented (V.S) Relationship – Oriented Cultures Deal – Oriented Cultures Relationship – Oriented Cultures

Cultural Factors 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. It is considered a negative shape. The number 7 is considered bad luck in Kenya, good luck in Czech Republic and has magical connotation in Benin, Africa The number 10 is bad luck in Korea The number 4 is means Death in Japan Red represents witchcraft and death in many African countries

Cultural Difference between Japanese and American Individual lifestyles American A Culture of self-expression Japanese A Culture of Self restrain Cultural Background Clear expression of Joy and sorrow Ambiguous of joy and sorrow Reticence Unequivocal expression of “Yes/No”. Equivocal expression of “Yes/No”. Modesty Strong self-assertionWeak self-assertion Reserve Strong Personality Weak Personality Punctiliousness Excellent Negotiating skillPoor Negotiating skill Politeness Priority of self-interest Priority of harmony with others Obligation

Cultural Difference between Japanese and American Social Life American Society Japanese Society Dignity of Individuals“In the same boat” concept Dignity of individualsHuman relation oriented Individuals work ethicDependence on the group Great individuals freedomLack of individuals freedom Respect for rulesLow regard for rules A open and transparent society A close society, lacking in transparency Multi-cultural societyMono-cultural society A society excelling in creativity and versatility An orderly and uniform society Individual decisions over consensus Dependence on consensus A society which pursue that ideal A society which pursue harmony with reality

Cultural Differences between Japanese and American Business American Business Game concept: Business is a game in pursuit of profits under the rules of laws and contracts Efficiency-oriented and approximate accuracy simplicity, clarity, and quickness Quantity-oriented Short-term performance evaluation Easy layoffs, dismissals of employees, and selling of businesses Japanese Business Mutual trust-oriented business: business is based on trusting relationship among people rather than the rules of game Highly precision-oriented and perfectionism-high dependency on human awareness Quality-oriented Mid-to-long term evaluations Job security SOURCE : Norihiko Shimizu, “Today’s Taboos may be gone tomorrow,’ Tokyo Business, February 1995, p.51.

Cultural Differences between Japanese and American Business American Business Japanese Business Top down management Low mutual dependence between employers and employees Control of business by stockholders and the management Management by “force” Heavy dependence on machinery and technology, vs. Light dependence on human resources Excellent software-based technology development Heavy dependence on human resources bottom- up management and teamwork High mutual dependence between employers and employees Joint management of business by Employees and Employees Management by “motivation” Heavy dependence on human resources Inadequate software development ability Strong loyalty and fewer incentives Limited loyalty and incentive-oriented work ethics SOURCE : Norihiko Shimizu, “Today’s Taboos may be gone tomorrow,’ Tokyo Business, February 1995, p.51.

Corruption Perception Index* (Selected Countries 1997&1996)  The ranking is based on 52 countries studied  The maximum 10 would be corrupt free country  Bribery  Extortion  Subornation  Lubrication

Three Ethical Principles Principle Question Utilitarian EthicsDoes the action optimize the “common good” or beneficial of all constituencies? Rights of parties Does the action respect the rights of the individuals involved? Justice of fairness Does the action respect the canons of justice or fairness to all parties involved?

Ethical and social responsibility issues in multinational business decisions Does the decision efficiently optimize the common good and benefits of : The business firm (Stockholders, Profit, Growth, etc) Society (“The good of life”, Culture, Order, Justice, etc) The economy (Economic growth, Production and Distribution of goods/services) The individual (Freedom, Health and Welfare, Opportunity, Human dignity

Cross-Culture Training Methods (Ascending Order) Area Briefing Books Sensitivity Training Field Trips Experiential Field Experience Impact of Globalization Globally competent employees Ability to work with diverse cultures Overcoming the self-reference criterion (SRC)

Cross- Cultural Negotiations Non-Task sounding Task-Related Information Exchange Persuasion Concessions and agreement Try to access 3 videos produced by Big world UW-W library Cross-cultural communicating Cross-cultural understanding Cross-cultural negotiating

Selected Reference on Culture and Business Practices Around the World Video series from Big world : Cross-cultural understanding* Cross-cultural communicating* Cross-cultural negotiating* Do’s and taboos around the world by Roger Axtell, Wiley** Culturgrams Vol. I & II, Brigham Young University Press, 1999** International Business Etiquette by Ann Marie Sabath, Career Press  Latin America **  Europe **  Asia ** World Trade Press  Doing Business in Series* Cross-Cultural business behavior by R.R. Gesteland, Copenhagen Business School Press** Richard Hill : We Europeans. Europublications ** : Euromanagers and Matians. Europublications ** * Available at UW-W Library ** Available at GBRC (C2018)