1. International Business4
International Business
Differences in Culture

2. Learning Objectives Culture Determinants of culture
Dimensions of culture
HR Policies & Culture

3. Culture
“A system of values and norms that are shared among a group of people and that when taken together constitute a design for
living” –Hofstede, Namenwirth and Weber
“Different countries, different customs”
A Complex whole which includes knowledge, belief, art, morals, law, custom, and other capabilities acquired by man as a member of society.

4. Components of Culture
Value are abstract ideas about a group believes to be a good, right and desirable.
Eg- democracy, freedom, justice, love, social obligations.
Norms are the social rules and guidelines that prescribe appropriate behavior in a particular situation.

5. Different types norms
(i) Folkways are the routine conventions of everyday life. Symbol behavior and rituals.
eg- General social conventions such as dress codes, manners, and attitudes towards time.
(ii) Mores are serious standards of behavior, addressing people’s behavior in areas such as gender, religion, family.
-norms that are seen as central to the functioning of a society and its social life.
-Violating mores an bring serious retribution.
Eg- Theft, adultery, incest, and cannibalism.

6. Culture, society and nation states
Society is a group of people who share a common culture.
No one-to-one correspondence between society and a nation-state.
-Nation states are political creations (“imaginary lines drawn on earth)
- Many cultures can co-exist within one nation-state.
- Many nations have one common culture.

7. The Determinants of Culture
Religion
Social Structure
Political Philosophy
Culture
Norms
Value
System
Language
Economic Philosophy
Education

8. Social structure Two dimensions
Extend to which society is group or individually oriented
* Group is association of 3 or more individuals who share identity and interact in structured ways.
* Individual is basic building block in social organization in individualistic societies.
Degree of stratification into castes or classes
- Social mobility
-Significance to business

9. Social Structure: Individual vs. Group orientation
Individualistic societies tend to view individual achievements as being more important than group membership.
Group societies see groups as the primary unit of social organization.
Group Membership: Close cooperation in company and stakeholders can improve overall performance.
Emphasis on individual performance can be both beneficial and harmful:
Encourages entrepreneurship and creation of new industries, products and services
Can lead to high degree of managerial mobility
(Lack company-specific experience, knowledge and network)
Group members
-often form deep emotional attachments
-see group membership as all important
Emphasis on the group can be both beneficial and harmful:
-Creates mutual self-help and collective action
-Discourage managers and workers from moving from company to company
-Discourages entrepreneurship

10. Social Structure: Social Stratification
It refers to the fact that all societies are stratified on a hierarchical basis of social categories.
Strata are typically defined on the basis of characteristics such as family background, occupation, and income.
Societies are stratified to some degree but they differ in 2 related ways:
-Social mobility refers to the extent to which individuals can move out of the strata into which they are born. 2 types: Caste system (Most rigid: India) and Class system (Less rigid-Social mobility is possible: UK)

11. Social Structure: Social Stratification
- Class Consciousness refers to a condition where people tend to perceive themselves in terms of their class background and this shapes their interaction and relationship with others. (UK: High industrial disputes due to class consciousness-loss of competitive advantage in global economy).
In US, class membership depends on individual economic achievements.

12. Religion and Ethical System
Religion is a system of shared beliefs and rituals that are concerned with realm of sacred.
Ethical System are Set of moral Principles or values that are used to guide or shape behavior.
Most of the world’s ethical systems are product of religions (except Confucianism).
Christianity (2.2 billion- Mainly in Europe & Americas, Africa):
-Economic implications: Protestant ‘work ethic’ considered
-one of the foundations of capitalism; emphasis on individual religious freedom a possible force in development of concepts of individual economic and political freedom
Islam (1.6 billion):
-Economic implications: free enterprise (legitimate profit must be done in a righteous, socially beneficial and prudent way- contractual obligations; no exploitation & deception)
-Special case: the riba (interest) not permitted; employ other techniques of mudarabah (profit sharing scheme) or murabaha (bank buys the product and sells it to the firm for a price having a markup)

13. Religion and Ethical System
Hinduism (950 million- mainly in India)
Economic implications: focuses on importance of achieving spiritual growth and development (progression to nirvana) and ascetic lifestyle, so source of motivation may be different. Residual ideas of caste concept may remain in older employees.
Buddhism (500 million)
Economic implications: focuses on spiritual growth, following the Noble Eightfold path (right seeing, thinking, speech, action, living, effort, mindfulness and meditation), and the afterlife, so sources of motivation may be different. Less severe than Hindu Culture.
Confucianism (official ethical system in China till 1949)
Economic implications: principles of loyalty, reciprocal obligations (guanxi & guanxi wang), and honesty may lead to reduction of business costs in Confucian Societies. Eg- Japanese Automobiles.

15. Language Spoken Verbal cues Language structures perception of world
Unspoken
Body language
Personal space
One obvious way in which countries differ is language. By language, we mean both the spoken and the unspoken means of communication.

16. World Output by Language Group
33%
Other 2%
Hindi 3%
Arabic 5%
French 7%
German
Spanish
10%
Mandarin
English
% OF WORLD OUTPUT
LANGUAGE

17. Hand Gestures Mean Different Things in Different Countries
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18. Hand Gestures Mean Different Things in Different Countries (cont’d)
© 2005 Prentice Hall Inc. All rights reserved.

19. Language Strategies in International Business
Get references for translators
Ensure the translator is familiar with technical vocabulary for the business
Do a back translation
Use simple words
Avoid slang
Repeat words and ask questions
Expect the extra time communication will take

20. Education Formal education plays a key role in a society
Formal education: the medium through which individuals learn many of the language, conceptual, and mathematical skills that are indispensable in a modern society
Also supplements the family’s role in socializing the young into the values and norms of a society
Schools teach basic facts about the social and political nature of a society, as well as focusing on the fundamental obligations of citizenship
Cultural norms are also taught indirectly at school
Examples include: respect for others, obedience to authority, honesty, neatness, being on time
Part of the “hidden curriculum”
The use of a grading system also teaches children the value of personal achievement and competition
From an international business perspective, one important aspect of education is its role as a determinant of national competitive advantage. The availability of a pool of skilled and educated workers seems to be a major determinant of the likely economic success of a country. The general education level of a country is also a good index of the kind of products that might sell in a country and of the type of promotional material that should be used. For example, a country where more than 70 percent of the population is illiterate is unlikely to be a good market for popular books. Promotional material containing written descriptions of mass-marketed products is unlikely to have an effect in a country where almost three-quarters of the population cannot read. It is far better to use pictorial promotions in such circumstances.

21. Education
Education can be a source of competitive advantage if a country can offer skilled or trained employees.
Also, be a location of choice in international business.
Eg-trend to outsource IT jobs to India due to trained engineers
Post-war Economic Success of Japan.
Products and promotion should be based on population’s education.
From an international business perspective, one important aspect of education is its role as a determinant of national competitive advantage. The availability of a pool of skilled and educated workers seems to be a major determinant of the likely economic success of a country. The general education level of a country is also a good index of the kind of products that might sell in a country and of the type of promotional material that should be used. For example, a country where more than 70 percent of the population is illiterate is unlikely to be a good market for popular books. Promotional material containing written descriptions of mass-marketed products is unlikely to have an effect in a country where almost three-quarters of the population cannot read. It is far better to use pictorial promotions in such circumstances.

22. Other determinants of Culture
Political Philosophy:
- Political systems can be assessed in 2 dimensions: the degree to which they emphasize collectivism as opposed to individualism; and the degree to which they are democratic or totalitarian.
Collectivism advocates state intervention in economic activity (in case of communism, a total dictatorship).
Individualism advocates democratic ideals and free market economies.

23. Other determinants of Culture
Economic Philosophy:
3 types of economic systems:
A Market economy (prices are free of control; private ownership is predominant)
A Command economy (prices are set by central planners; productive assets are owned by state; private ownership is forbidden)
- A Mixed economy (has elements of both)

24. Other determinants of Culture
Implications:
The rate of economic progress depends on the extent the country has well-functioning market economy in which property rights are protected.
Benefits of doing business in a country are function of size of market (population), its present wealth (purchasing power) and future growth prospects.
Costs of doing business increases where political payoffs are essential to gain market access; supporting infrastructure is underdeveloped; adhering to regulations is costly.
Risks of doing business is higher with political instability; economic mismanagement; lack of safeguards against property rights violations.
Investing in a poor country with growth opportunities can gain first-mover advantages to pay back substantial dividends later.

25. Culture and Workplace
Study of the relationship between culture and workplace: Geert Hofstede
40 countries
100,000 individuals
From an international business perspective, one important aspect of education is its role as a determinant of national competitive advantage. The availability of a pool of skilled and educated workers seems to be a major determinant of the likely economic success of a country. The general education level of a country is also a good index of the kind of products that might sell in a country and of the type of promotional material that should be used. For example, a country where more than 70 percent of the population is illiterate is unlikely to be a good market for popular books. Promotional material containing written descriptions of mass-marketed products is unlikely to have an effect in a country where almost three-quarters of the population cannot read. It is far better to use pictorial promotions in such circumstances.

26. Culture in the Workplace
Four dimensions of culture
Power distance - cultures are ranked high or low on this dimension based on the particular society’s ability to deal with inequalities. In HPD, inequalities in power & wealth, physical & intellectual capabilities are high.
Individualism versus collectivism - this dimension focuses on degree to which individuals in a society are integrated into groups. In collective societies, groups are laced with undoubted loyalty & support.
Uncertainty avoidance - this dimension measures the extent to which a culture socializes its members into accepting ambiguous situations and tolerating uncertainty. High UAD go for rules & guidelines, prefer job security, career patterns, retirement benefits.
Masculinity versus femininity - this dimension looks at the relationship between gender and work roles. Masculinity is defined as preference in society for achievement, heroism and material rewards for success. Femininity represents a preference for cooperation, modesty, caring for weak and quality of life; gender roles are less sharply distinguished.
Of considerable importance for an international business with operations in different countries is how a society’s culture affects the values found in the workplace. Management process and practices may need to vary according to culturally determined work related values. For example, if the cultures of the United States and France result in different work-related values, an international business with operations in both countries should vary its management process and practices to account for these differences. Probably the most famous study of how culture relates to values in the workplace was undertaken by Geert Hofstede.44 As part of his job as a psychologist working for IBM, Hofstede collected data on employee attitudes and values for more than 100,000 individuals from 1967 to These data enabled him to compare dimensions of culture across 40 countries. Hofstede isolated four dimensions that he claimed summarized different cultures—power distance, uncertainty avoidance, individualism versus collectivism, and masculinity versus femininity.

27. Culture and Workplace
Study of the relationship between culture and workplace: Geert Hofstede
40 countries
100,000 individuals
Four Dimensions of culture
Power distance
Individualism vs. Collectivism
Uncertainty avoidance
Masculinity vs. Femininity
From an international business perspective, one important aspect of education is its role as a determinant of national competitive advantage. The availability of a pool of skilled and educated workers seems to be a major determinant of the likely economic success of a country. The general education level of a country is also a good index of the kind of products that might sell in a country and of the type of promotional material that should be used. For example, a country where more than 70 percent of the population is illiterate is unlikely to be a good market for popular books. Promotional material containing written descriptions of mass-marketed products is unlikely to have an effect in a country where almost three-quarters of the population cannot read. It is far better to use pictorial promotions in such circumstances.

28. Hofstede’s Framework (cont’d)
Individualism
The degree to which people prefer to act as individuals rather than a member of groups.
Collectivism
A tight social framework in which people expect others in groups of which they are a part to look after them and protect them.
© 2005 Prentice Hall Inc. All rights reserved.

29. Culture and Workplace
Study of the relationship between culture and workplace: Geert Hofstede
40 countries
100,000 individuals
Four Dimensions of culture
Power distance
Individualism vs. Collectivism
Uncertainty avoidance
Masculinity vs. Femininity
From an international business perspective, one important aspect of education is its role as a determinant of national competitive advantage. The availability of a pool of skilled and educated workers seems to be a major determinant of the likely economic success of a country. The general education level of a country is also a good index of the kind of products that might sell in a country and of the type of promotional material that should be used. For example, a country where more than 70 percent of the population is illiterate is unlikely to be a good market for popular books. Promotional material containing written descriptions of mass-marketed products is unlikely to have an effect in a country where almost three-quarters of the population cannot read. It is far better to use pictorial promotions in such circumstances.

32. Hofstede’s Framework (cont’d)
Long-term Orientation
Cultures with high Confucian Dynamism that emphasizes the future, thrift, and persistence. Values are more future-oriented.
Short-term Orientation
Cultures with low Confucian Dynamism that emphasizes the past and present, respect for tradition, and fulfilling social obligations. Values are more past & present-oriented.
© 2005 Prentice Hall Inc. All rights reserved.

34. Major Cultural Issues Problems arise in international business when:
Employees have subconscious reactions
Employees assume all societal groups are similar
Employees encounter distress because of an inability to accept or adjust to foreign cultural behaviors
Companies/employees are insensitive to foreign consumer preferences

35. Cultural Orientations
International businesses adopt an attitude towards foreign cultures
Polycentrism: control is decentralized so regional managers can conduct business in a local manner
Ethnocentrism: belief that ones own culture is superior and ignores important factors
Geocentrism: a hybrid of polycentrism and ethnocentrism, the middle ground
Companies MUST evaluate their practices to ensure they account for national cultural norms

36. World’s Most Powerful Women
1Angela Merkel, Chancellor, Germany   
2 Janet Yellen Chair, US Federal Reserve
3 Melinda Gates Philanthropist, US
4 Dilma Rousseff President, Brazil
5 Christine Lagarde Managing director, IMF, France
6 Hillary Clinton Former state secretary, US
7 Mary Barra CEO, General Motors, US
8 Michelle Obama First lady, US
9 Sheryl Sandberg COO, Facebook, US
10 Virginia Rometty CEO, IBM, US