Culture – Business – Marketing Oct 21, 2003

Globalization…. involves the increasingly rapid diffusion of economic innovation and resultant political and cultural adjustments. Critics claim the globalization entails most significantly the spread of TNC-friendly standardized macro-level operating environments which favor the interests of the TNCs by facilitating cost externalization and reducing TNC accountability to politicians and society

is an inevitable, unstoppable, and irreversible process Critics essentially view globalization as an ideological product developed and promoted by TNCs and shareholders as well as international business consultants Globalization….

is a universally beneficial process Critics contend that TNC executives and major investors are by far the major, if not sole, beneficiaries of the process Globalization….

is driven by consumer needs and preferences, with the role of government reduced to that of a consumer- servant bystanding facilitator Critics argue that TNC desires are what drives the spread of globalization Government officials are seen not as passive facilitators of consumer satisfaction, but rather as active facilitators of the global spread of TNCs’ goals Globalization….

Customer-servant TNCs are the central actors in the globalization process Critics do not dispute this--they do dispute the TNC’s claimed missionary-like role, contending that they are too large and powerful and that they are no longer loyal to the nations and people they claim to represent and enrich Globalization….

Then there is Culture… Visible culture: customs, clothing, rituals, material culture, physical habits. Invisible culture-Psychological Structures: thoughts, beliefs, superstitions, uses of space and time, values, expectations and assumptions about what is “normal” or “common sense”.

Cultural Conflict Cultural conflict arises when a person’s expectations of what is “normal” are violated. This causes an emotional reaction- anger, fear, confusion, disappointment.

Cultural Issues that impact International Business: Is “face” important? Independence or interdependence? Egalitarian or hierarchical? Task focused or relationship focused?

Cultural Issues that impact International Business: How important are “connections”? Status, titles, and family relationships? Gender-based expectations? Attitudes towards time?

Business Practices How important is relationship building in the target culture and how is it accomplished? Decision making: hierarchical or consensual? Negotiation tactics? How is conflict resolved?

Relationship Building Across Cultures Dietary and dining customs Gifts: expected? What kind is appropriate? How does one receive gifts? Appropriate dress: styles, colors, etc. Current events? Taboo subjects?

Case Study Company X had a booth at a convention where there were many Chinese attendees. At their booth, they were giving out promotional items, including cute green hats with the company logo. Unfortunately, none of the Chinese attendees would come near their booth. WHY?

In Some Countries... Patting someone on the back is considered unacceptable. Talking with your hands in your pockets is perceived as a sign of bad manners. Chewing gum or eating in public is perceived as vulgar. The “ok” or “thumbs up” gesture is lewd.

Strategies for Becoming a Globally Savvy Individual Detach from emotional reactions to differences- anger, dismay, confusion. Cultivate cultural mindfulness. Avoid judgment. Be flexible-find “A Third Way”.

Strategies for becoming a Globally Savvy Company Training!! 70% of US companies doing business internationally provide no cross-cultural training. Choose employees for international duties wisely-- they should be flexible, clear communicators who are comfortable in new situations, and culturally mindful.

Remember: Cross-cultural conflict arises when expectations are violated. Becoming Globally Savvy requires learning about yourself and the target culture(s) you are interacting with.

National culture “Nation”: is a useful way to define the boundaries of a society similarity because national boundaries “Nation”: is a useful way to bound and measure culture for conduct of business culture is a key characteristic of society and can differ significantly across national borders Can also vary significantly within national borders culture is both a cause and an effect of economic and political factors that vary across national borders laws are established along national lines

Individual vs Group Societal Characteristics Individual Managerial mobility between companies Economic dynamism, innovation Good general skills Team work difficult, non-collaborative Exposure to different ways of doing business e.g., U.S. companies Group Loyalty and commitment to company In-depth knowledge of company Specialist skills Easy to build teams, collaboration Emotional identification with group or company e.g., Japanese companies

Religion, Ethics and Culture Religion: system of shared beliefs about the sacred Ethical systems: moral principles or values that shape and guide behavior; often products of religion Major religious groups and some economic implications Christianity-protestant work ethic Islam -Islamic fundamentalism Hinduism-anti-materialistic, socially stratified Buddhism-anti-materialistic, social equality Confucianism-hierarchy, loyalty, honesty Major religious groups have significant sub-sets with distinct beliefs and varying economic implications

Language and Culture Language, spoken “private” does not exist as a word in many languages Eskimos: 24 words for snow Words which describe moral concepts unique to countries or areas: “face” in Asian cultures, “filotimo” in Greece Spoken language precision important in low-context cultures Language, unspoken Context... more important than spoken word in low context cultures

High/Low Context Cultures

Cultural Distance Geographic and cultural (or psychic) distance between two countries may not be equivalent Key concept which can affect IB strategy and conduct

Cultural Difference Reconciliation Ethnocentrism vs Polycentrism Must a company adapt to local cultures or can corporate culture -- often home-country dominated -- prevail? Cross-cultural literacy essential

Basic Aspects of Society and Culture Culture – “ways of living” that are transmitted from one generation to another Two broad categories of culture Material culture Nonmaterial culture

Material and Nonmaterial Culture Material culture Also referred to as physical culture Includes physical objects and artifacts such as clothing and tools Nonmaterial culture Also referred to as subjective or abstract culture Includes intangibles such as religion, perceptions, attitudes, beliefs, and values

The Adoption Process The mental stages through which an individual passes from product adoption to purchase Five stages of the adoption process 1. Awareness 2. Interest 3. Evaluation 4. Trial 5. Adoption

Major Factors Affecting Adoption Rate of Innovation Relative advantage How a new product compares with existing products in the eyes of customers CDs replacing vinyl records Compatibility The extent to which a product is consistent with existing values and past experiences of adopters Failure of Sony Batamax; Success of VHS-VCRs

Major Factors Affecting Adoption Rate of Innovation Complexity The degree to which an innovation or new product is difficult to understand and use Prerecorded videocassette used to set VCR clock Divisibility The ability of a product to be tried and used on a limited basis without great expense Mayonnaise in plastic packets in Latin America

Major Factors Affecting Adoption Rate of Innovation Communicability The degree to which benefits of an innovation or the value of a product may be communicated to a potential market Phillips not communicating message correctly about digital cassette recorder led to poor sales of product

Environmental Sensitivity Reflects the extent to which products must be adapted to the culture-specific needs of different national markets High environmentally sensitive products Food and turbine generating equipment Low environmentally sensitive products Integrated circuits

Cross-Cultural Differences and Similarities Similarities across Cultures Some similarities across cultures have been uncovered by researchers Russian and U.S. managers both: Carry out traditional management, communication, human resources, and networking activities Use organizational behavior modification successfully Korean and U.S. employees both: Are more committed to the organization when they occupy higher level positions, have more tenure in their position, and are older Are more committed to the organization when the structure is more employee-focused and the organizational culture is perceived in a more positive light

Cross-Cultural Differences and Similarities Many Differences across Cultures MNCs have discovered that they must understand the cultures where they plan to do business and modify their approaches appropriately Foreign subsidiaries differ in the standards used to: evaluate personnel provide wages and benefits Based on Hofstede’s work, can link cultural clusters to compensation strategies Useful to develop a contingency model to analyze HRM practices on a country-by-country basis Conventional wisdom and common assumptions about HRM practices in certain countries often are incorrect

General Similarities Across Cultures Managerial behaviors in Russia communication HRM traditional management networking Application of O.B. Mod. in Russia Organizational commitment in Korea

General Differences Across Cultures HRM activities labor laws wages vacation time maternity leave compensation group Vs. individual incentives

Differences - Sports Activities U.S.A--Baseball, Football, Hunting, Golf, Tennis, Swimming, Wrestling, Boxing Mexico--Soccer, Bullfights, Hunting, Swimming, Wrestling, Boxing U.K.--Cricket, Soccer, Hunting, Golf, Tennis, Boxing Germany--Soccer, Golf, Swimming Japan--Baseball, Golf, Karate, Sumo Wrestling

Doing Business in…… China, India, Russia, Arab countries…..

Doing Business in China China is trying to become a power in the world economy Still difficult for foreign MNCs to do business in China or to make a profit Technical competence is the primary criterion for doing business in China Time is the major cultural difference between many Western countries and China Guanxi Good connections that result in lower costs, increased business, greater prospecting opportunities, and facilitation of future transactions

Doing Business in China  Emphasis on trust and mutual connections  Meetings start with small talk  Host indicates when meetings begin and end  Slow in forming a an action plan, but stick with decisions once made  Reciprocity is important  Negotiations are often carried out through intermediaries to reduce the risk of losing face

Doing Business in China (cont.) When dealing with the Chinese, one must: Be a good listener Realize that China is a collective society Understand that the Chinese are less animated than Westerners Understand that the Chinese place values and principles above money and expediency Allow Chinese host to signal the beginning of a meeting Understand that Chinese are slow to decide on a course of action, but stick to the decision once made Understand that reciprocity is important in negotiations Not display emotions during negotiations Rely on a long-term perspective to view negotiations

Doing Business in India Punctuality is important No personal questions Titles are important No public displays of affection Beckoning done with the palm turned down When eating or accepting things, use the right hand- the left is considered unclean The namaste gesture can be used to greet people Bargaining for goods and services is common

Doing Business in India Growing number of MNCs have been attracted to India Government has helped attract foreign investment by lifting bureaucratic restrictions Most Indian businesspeople speak English Indians are tolerant of outsiders The country is multilingual and multicultural Indians have a strong sense of history

Doing Business in Russia Build personal relationships with partners Use local consultants Consider business ethics Be patient Stress exclusivity - Deal with just one firm at a time Face to face communication is expected Keep financial information personal Research the company Stress mutual gain Clarify terminology Be careful about compromising or settling things quickly

Doing Business in France  Use a quick hand shake with some pressure in the grip  Punctuality is extremely important  During a meal, small talk is acceptable, but personal questions and the subject of money are never brought up  Great importance is placed on neatness and taste

Doing Business in France French culture is markedly different from U.S. culture Social class and status are very important in France In contrast to Americans, the French are: More sardonic More tolerant of different points of view More inclined to determine a person’s trustworthiness on the basis of personal characteristics rather than accomplishments Less motivated by competition More inclined to have highly centralized organizations with rigid structures Less moved to industriousness and more concerned with the quality of life

Doing Business in Arab Countries Never display feelings of superiority Do not take credit for joint efforts Efforts to sidestep red tape can be regarded as disrespect for legal and government institutions Connections are extremely important Patience is critical to business transactions

Doing Business in Arab Countries Arab cultures are distinctly different from Anglo cultures Arabs have a different understanding of time Less commitment to punctuality Arabs are fatalistic Destiny is in the hands of God, not under the control of an individual Status in Arabian society determined by family, and not necessarily by personal achievements Arabs often act on the basis of emotion rather than logic Arabs rely on elaborate and ritualized greetings Arabs rely on administrative channels to get most work done

Managing across Cultures - Strategy

Strategy for Managing across Cultures MNC strategies must address the cultural similarities and differences in their varied markets Globalization Production and distribution of products and services of a homogeneous type and quality on a worldwide basis National responsiveness Need to understand the different consumer tastes in segmented regional markets and respond to different national standards and regulations imposed by autonomous governments and agencies Need to adapt tools and techniques for managing the local workforce

Managing across Cultures (cont.) Meeting the Challenge Globalization imperative Belief that one worldwide approach to doing business is the key to both efficiency and effectiveness Factors that help develop strategies for different cultures Diversity of worldwide industry standards demand by local customers for differentiated products Importance of being an insider Difficulty of managing global organizations Need to allow subsidiaries to use their own abilities and talents and not be restrained by headquarters Challenges of adjusting global strategies to regional markets local market conditions, strengths and weaknesses of its subsidiaries, give subsidiary autonomy to address local demands

Many Differences across Cultures MNCs have discovered that they must understand the cultures where they plan to do business and modify their approaches appropriately Foreign subsidiaries differ in the standards used to: evaluate personnel provide wages and benefits Based on Hofstede’s work, can link cultural clusters to compensation strategies Useful to develop a contingency model to analyze HRM practices on a country-by-country basis Conventional wisdom and common assumptions about HRM practices in certain countries often are incorrect

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