Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Global Business Today 7e by Charles W.L. Hill

3-2 Chapter 3 Differences in Culture

3-3 Introduction  Cross-cultural literacy - an understanding of how cultural differences across and within nations can affect the way in which business is practiced  important to success in international business  There may be a relationship between culture and the costs of doing business in a country or region  Culture is not static  the actions of MNEs can contribute to cultural change

3-4 What is Culture? Question: What is culture?  Culture is a system of values (abstract ideas about what a group believes to be good, right, and desirable) and norms (the social rules and guidelines that prescribe appropriate behavior in particular situations) that are shared among a group of people and that when taken together constitute a design for living  A society is a group of people who share a common set of values and norms

3-5 What is Culture?  There is not a strict one-to-one correspondence between a society and a nation-state  nation- states are political creations that can contain a single culture or several cultures  some cultures embrace several nations  Culture arises from  prevailing political and economic philosophies  a society’s social structure  the dominant religion, language, and education

3-6 Social Structure Question: What is social structure?  A society's social structure is its basic social organization Two dimensions to consider:  the degree to which the basic unit of social organization is the individual, as opposed to the group  the degree to which a society is stratified into classes or castes

3-7 Social Structure  In societies where the individual is emphasized  individual achievement and entrepreneurship are promoted  but, this can encourage job switching, competition between individuals in a company rather than team building, and a lack of loyalty to the firm  In societies where the group is emphasized  cooperation and team work are encouraged and life time employment is common  but, individual initiative and creativity may be suppressed

3-8 Social Structure  All societies are stratified on a hierarchical basis into social categories, or social strata  Social mobility refers to the extent to which individuals can move out of the strata into which they are born  the most rigid system is the caste system  a less rigid system is the class system

3-9 Religious and Ethical Systems Question: What is religion?  Religion is a system of shared beliefs and rituals that are concerned with the realm of the sacred  Christianity - the most widely practiced religion  Islam - an all-embracing way of life that governs one's being  Hinduism - focuses on the importance of achieving spiritual growth and development  Buddhism - stresses spiritual growth and the afterlife rather than achievement while in this world  Confucianism - teaches the importance of attaining personal salvation through right action

3-10 Religious and Ethical Systems Question: What is an ethical system?  Ethical systems - a set of moral principles, or values, that are used to guide and shape behavior  the ethical practices of individuals within a culture are often closely intertwined with their religion

3-11 Language  Countries differ in terms of language or means of communication  There are two forms language  spoken  unspoken  Language is one of the defining characteristics of culture

3-12 Education  Formal education is the medium through which individuals learn many of the language, conceptual, and mathematical skills that are indispensable in a modern society  The knowledge base, training, and educational opportunities available to a country's citizens can also give it a competitive advantage in the market and make it a more or less attractive place for expanding business  The general education level of a country is a good indicator of the types of products that might sell in that location or the type of promotional materials that might be successful

3-13 Culture and the Workplace Question: How does a society's culture impact on the values found in the workplace?  Geert Hofstede isolated four dimensions that summarized different cultures 1.Power distance 2.Individualism versus collectivism 3.Uncertainty avoidance 4.Masculinity versus femininity

3-14 Culture and the Workplace 1.Power distance - how a society deals with the fact that people are unequal in physical and intellectual capabilities 2.Individualism versus collectivism - the relationship between the individual and his or her fellows 3.Uncertainty avoidance - the extent to which different cultures socialize their members into accepting ambiguous situations and tolerating ambiguity 4.Masculinity versus femininity - the relationship between gender and work roles  Hofstede later added a fifth dimension, Confucian dynamism - captures attitudes towards time, persistence, ordering by status, protection of face, respect for tradition, and reciprocation of gifts and favors

3-15 Cultural Change  Culture evolves over time, although changes in value systems can be slow and painful for a society  social turmoil is an inevitable outcome of cultural change  cultural change is particularly common as countries become economically stronger

3-16 Implications for Managers Differences in culture imply that  there is a need for managers to develop cross-cultural literacy  there is a connection between culture and national competitive advantage  there is a connection between culture and ethics in decision making