International Business Environments & Operations

International Business Environments & Operations
Daniels ● Radebaugh ● Sullivan International Business Environments and Operations 14e by Daniels, Radebaugh, and Sullivan Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

The Cultural Environments Facing Business
Chapter 2 The Cultural Environments Facing Business Chapter 2: The Cultural Environment Facing Business Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Learning Objectives To understand methods for learning about cultural environments To analyze the major causes of cultural difference and change To discuss behavioral factors influencing countries’ business practices To understand guidelines for cultural adjustment The Learning Objectives for Chapter 2 are To understand methods for learning about cultural environments To analyze the major causes of cultural difference and change To discuss behavioral factors influencing countries’ business practices To understand guidelines for cultural adjustment Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Introduction Learning Objective 1: To understand methods for learning about cultural environments Learning Objective 1: To understand methods for learning about cultural environments. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Introduction Culture refers to the learned norms based on values, attitudes, and beliefs of a group of people Culture is an integral part of a nation’s operating environment every business function is subject to potential cultural differences What is culture? Culture refers to the learned norms based on values, attitudes, and beliefs of a group of people. Culture can be based on nationality, ethnicity, gender, religion, work organization, profession, age, political party membership, income level, and so on. International business activities incorporate people from all different groups and backgrounds, thus, every business function is subject to cultural differences. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Introduction Cultural Factors Affecting International Business Operations This Figure shows the cultural factors affecting international business operations. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Introduction Companies need to decide when to make cultural adjustments Fostering cultural diversity can allow a company to gain a global competitive advantage by bringing together people of diverse backgrounds and experience Most people recognize that cross-country differences exist, but they don’t always agree on exactly what they are. It can be beneficial to foster cultural diversity in some cases. Bringing together people of diverse backgrounds and experience can give companies a deeper knowledge about products and services and ways in which to produce and deliver them. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Introduction But, cultural collision can occur when a company implements practices that are less effective or when employees encounter distress because of difficulty in accepting or adjusting to foreign behaviors But keep in mind that cultural collision can create problems. Companies doing business in another country must determine which of that nation’s business practices differ from their own and then decide what adjustments, if any, are necessary in order to operate efficiently. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Cultural Awareness Problem areas that can hinder managers’ cultural awareness… Subconscious reactions to circumstances The assumption that all societal subgroups are similar Managers that educate themselves about other cultures have a greater chance of succeeding abroad In order to increase their chance for success, managers need to develop their awareness of and sensitivity to other cultures. They can do this by educating themselves. Gathering some basic research on another culture can be instructive. In addition, managers should consider the information they gather to determine if it perpetuates unwarranted stereotypes, covers only limited facets of a country and its culture, or relies on outdated data. Managers should also observe the behavior of those people who have garnered the kind of respect and confidence they themselves will need. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Culture and the Nation-State
The nation is a useful definition of society because similarity among people is a cause and an effect of national boundaries laws apply primarily along national lines language and values are shared within borders rites and symbols are shared along national lines We often use the idea of a nation when we talk about culture. In general, within national borders, people largely share such essential attributes as values, language, and race. There is a feeling of “we” that casts foreigners as “they.” Rites and symbols—flags, parades, rallies—and the preservation of national sites, documents, monuments, and museums promote a common perception of history and perpetuates national identity. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Culture and the Nation-State
Country-by-country analysis can be difficult because subcultures exist within nations similarities link groups from different countries Need to focus on relevant groups Note though that subcultures do exist within nations and groups from different nations can actually be quite similar. International managers need to focus on relevant groups—differentiating, for example, between the typical attitudes of rural dwellers and those of urban dwellers, or those of young people versus old people. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

How Cultures Form and Change
Learning Objective 2: To analyze the major causes of cultural difference and change Learning Objective 2: To analyze the major causes of cultural difference and change. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

How Cultures Form and Change
Cultural value systems are established early in life but may change through choice or imposition cultural imperialism contact with other cultures cultural diffusion creolization Culture is learned – from parent to child, teacher to student, peer to peer, and so on. So, while cultural value systems tend to be established early in life, they can change. Change can be by choice or it can be imposed – this type of change is called cultural imperialism. Cultural value systems can also change as a result of contact with other cultures. This is known as cultural diffusion. When this change results in mixing cultural elements, the process is known as creolization. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Language: Cultural Diffuser and Stabilizer
A common language within a country is a unifying force A shared language between nations facilitates international business Native English speaking countries account for a third of the world’s production English is the international language of business Language acts both as a diffuser of culture and as a stabilizer. On one hand, a common language unifies a culture. However, when people from different areas speak the same language, culture spreads more easily. So, there’s greater cultural homogeneity among all English-speaking countries and among all Spanish-speaking countries than there is between English-speaking countries and Spanish-speaking countries. When nations share a language, business is easier because there’s no need for time consuming and expensive translations. Often, people studying languages choose the ones that are most useful in interacting with other countries. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Distribution Of The World’s Major Languages This Map shows the distribution of the world’s major languages. Notice the large number of English speaking, French speaking, and Spanish speaking countries. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Major Language Groups: Population and Output This Figure shows the relationship between major language groups and world output. Notice the importance of English as a language of international business. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Religion: Cultural Stabilizer
Religion impacts almost every business function Centuries of profound religious influence continue to play a major role in shaping cultural values and behavior many strong values are the result of a dominant religion Religion also acts as a cultural stabilizer. Dominant religions can have a profound influence in shaping cultural values and behavior. Many religions even impact specific beliefs that may affect business, such as inhibiting the sale of certain products or the performance of work at certain times. McDonald’s, for example, recognizes the Hindu and Muslim influences in India and chooses not to sell beef or pork in the country. Similarly, El Al, the Israeli national airline, does not fly on Saturday, the Jewish Sabbath. When rival religions or factions fight for political control in a country, business is often negatively affected. You might think of property damage, broken supply chains, or breaches in connections with customers as examples. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Religion: Cultural Stabilizer
Distribution Of The World’s Major Religions This Map shows the distribution of major religions around the world. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Behavioral Practices Affecting Business
Learning Objective 3: To discuss behavioral factors influencing countries’ business practices Learning Objective 3: To discuss behavioral factors influencing countries’ business practices. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Social Stratification
Social ranking is determined by an individual’s achievements and qualifications an individual’s affiliation with, or membership in, certain groups Social stratification determines an individual’s class, status, and financial rewards within a culture. It’s determined by individual achievements and qualifications, and by affiliation and membership in groups. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Social Stratification
Group affiliations can be Ascribed group memberships based on gender, family, age, caste, and ethnic, racial, or national origin Acquired group memberships based on religion, political affiliation, professional association Two other factors that are important education and social connections An individual may belong to a group because of age, gender, family, racial, or ethnic variables. This is known as ascribed group membership. When membership is based on religion, political affiliation, or professional association it’s an acquired group membership. In general, equalitarian societies tend to put more emphasis on acquired group membership. Keep in mind that education and social connections also impact an individual’s rank in a society. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Work Motivation The motivation to work differs across cultures Studies show the desire for material wealth is a prime motivation to work promotes economic development people are more eager to work when the rewards for success are high masculinity-femininity index high masculinity score prefers “to live to work” than “to work to live” The desire to work differs across cultures. In countries where material wealth is valued, there is generally a greater motivation to work. This of course, also helps to promote economic development. In fact, the higher level of development that exists in some countries can be explained by the work of Max Weber who suggested that self-discipline, hard work, honesty, and a belief in a just world foster work motivation and, thus, economic growth. Typically, people are also more eager to work when the potential rewards are high. We can also measure attitudes toward work and achievement using the masculinity-femininity index. The degree to which individuals are assertive, confrontational, and aggressive in their relationships with others varies across borders. These attitudinal differences help explain why an international company may encounter managers abroad who behave differently from what it expects or prefers. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Work Motivation Hierarchy of needs theory fill lower-level needs before moving to higher level needs The ranking of needs differs among cultures The hierarchy-of-needs theory suggests that people fill lower-level needs before filling higher level needs. An understanding of this theory is helpful to managers as they make decisions regarding reward preferences of employees in different countries. In very poor countries, for example, workers might be motivated with enough compensation to simply satisfy their needs for food and shelter. Workers in other countries may be motivated by other needs. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Work Motivation The Hierarchy of Needs and Need-Hierarchy Comparisons
This Figure shows the hierarchy of needs and need-hierarchy combinations. Note that needs are broken down into physiological needs, security needs, affiliation needs, esteem needs, and self-actualization needs. The way in which these needs are ranked differs among countries. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Relationship Preferences
Relationship preferences differ by culture Power distance high power distance implies little superior-subordinate interaction autocratic or paternalistic management style low power distance implies consultative style Individualism versus collectivism high individualism – welcome challenges high collectivism – prefer safe work environment Relationships preferences – and more specifically the interactions between bosses, subordinates, and peers – also differ from country to country. Power distance refers to the general relationship between superiors and subordinates. Where it is high, people prefer little consultation between superiors and subordinates. Employees usually prefer one of two management styles: autocratic -ruling with unlimited authority - or paternalistic - regulating conduct by supplying needs. Where power distance is low, they prefer “consultative” styles. Individualism is characterized by a preference for fulfilling leisure time and improving skills outside the organization. It also implies a low preference for receiving compensation in the form of benefits and a high preference for personal decision making and on-the-job challenges. In contrast, collectivism encourages dependence on the organization and a preference for thorough training, satisfactory workplace conditions, and good benefits. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Risk Taking Behavior Risk taking behavior differs across cultures Uncertainty avoidance handling uncertainty Trust degree of trust among people Future orientation delaying gratification Fatalism attitudes of self-determination How people approach risk also varies from country to country. Four types of risks are important: uncertainty avoidance, trust, future orientation, and fatalism. In cultures where there is high uncertainty avoidance employees prefer following set rules even if breaking them may be in the company’s best interest. Similarly, many consumers are not prepared to risk being early adopters of products. In cultures where trust is high, the cost of doing business tends to be lower because managers don’t spend much time fussing over every possible contingency and monitoring every action for compliance with certain business principles. Business decisions can also be influenced by a culture’s attitude toward the future and whether it’s worthwhile to delay gratification in order to invest for the future. Finally, if people believe strongly in self-determination, they may be willing to work hard to achieve goals and take responsibility for performance. But if they’re fatalistic and believe every event in life is inevitable, they’re less likely to accept the basic cause-and-effect relationship between work and reward. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Information and Task Processing
Cultures handle information in different ways Perception of cues Obtaining information low context versus high context cultures Information processing Monochronic versus polychronic cultures Idealism versus pragmatism How information is perceived, obtained, and processed differs from country to country. In low context cultures people generally regard only firsthand information that bears directly on the subject at hand as being relevant. Managers typically spend little time on small talk and tend to get to the point. In contrast, in high-context cultures people see seemingly peripheral information as pertinent and infer meanings from things said either indirectly or casually. In monochronic cultures people prefer to work sequentially. So, for example, a transaction with one customer is completed before dealing with another. But in a polychronic culture, people often feel more comfortable working simultaneously on a variety of tasks, such as dealing immediately with multiple customers who need service. Cultures that prefer to establish overall principles before tackling smaller details take an approach called idealism, while those that focus more on details than on abstract principles take a pragmatic approach. Keep in mind that an individual’s approach to information processing can affect business in a number of ways. In a culture of pragmatists like the United States, for example, labor negotiations tend to focus on well-defined issues—say, hourly pay increases for a specific bargaining unit. However, in an idealist culture like that of Argentina, labor disputes tend to blur the focus on specific demands as workers tend to rely first on mass action—such as general strikes or political activities—to publicize basic principles. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Communications Cross border communications do not always translate as intended Spoken and written language Silent language Color Distance Time and punctuality Body language Prestige Communication across cultures can be problematic when communications are not translated with the same meaning as intended. This problem can occur with not only with spoken and written language and but also with silent language. Even a slight misuse of words or phrases can have a significant impact on the meaning of a message. Moreover, it’s important to recognize that even when two countries share a language problems can exist. For example, some 4,000 words have different meanings in British and American English. Silent language refers to a host of nonverbal cues. How these physical cues or “body language” are perceived and interpreted varies between cultures. Many Western countries, for instance, associate black with death ,while white has the same connotation in some parts of Asia. Similar differences exist with perceptions of time and punctuality. In the United States, people usually arrive early for business appointments, a few minutes late for dinner at someone’s home, and a bit later still for large social gatherings. In other countries though, the concept of punctuality in any or all of these situations may be different. The appropriate distance people maintain during conversations and prestige also differs between countries. For Americans, the customary distance for a business discussion is 5 to 8 feet; for personal business, it’s 18 inches to 3 feet. The much smaller distances common in Latin America can make many Americans quite uncomfortable. Likewise, a U.S. manager who places great faith in objects as cues to prestige may underestimate the status of foreign counterparts who don’t value large, plush offices on high floors. A foreigner may underestimate U.S. counterparts who perform their own services, such as opening their own doors, fetching their own coffee, and answering unscreened phone calls. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Communications Body Language Is Not A Universal Language
These images show how a simple gesture is interpreted quite differently around the world. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Dealing with Cultural Differences
Learning Objective 4: To understand guidelines for cultural adjustment Learning Objective 4: To understand the guidelines for cultural adjustment. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Do managers have to alter their customary practices to succeed in countries with different cultures? Must consider Host society acceptance Degree of cultural differences cultural distance Ability to adjust culture shock and reverse culture shock Company and management orientation So, are managers required to change their customary practices to match those of the host culture? The answer is not always clear. In general, host cultures don’t expect that foreign managers will totally conform with their norms and values, but it is important that they understand and respect the local culture. Managers need to consider how they will be received by the host country, and make adjustments accordingly. In many cases, host countries are willing to view foreigners differently. Managers should also be aware that closely clustered countries may not be as alike as they seem, and so adjustments may be necessary in some cases. Women’s roles and behavior, for example, differ substantially from one Arab country to another even though Arab countries overall are similar culturally. Sometimes, managers going abroad experience culture shock—the frustration that results from having to absorb a vast array of new cultural cues and expectations, and then reverse culture shock when they return home. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Three company and management orientations Polycentrism business units abroad should act like local companies Ethnocentism home culture is superior to local culture overlook national differences Geocentrism integrate home and host practices Companies and managers doing business abroad will typically take one of three basic approaches when dealing with foreigners. Those that take a polycentric approach believe that business units abroad should act like local companies. In contrast, those that take an ethnocentric orientation believe that the home culture is superior to the local culture, and therefore national differences can be overlooked. Finally, those that integrate both home and host practices have a geocentric orientation. Managers should recognize that excessive polycentrism or ethnocentrism can be dangerous. A geocentric approach is often the safest. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Strategies for Instituting Change
Value Systems Cost-Benefit Analysis of change Resistance to too much change Participation Reward Sharing Opinion Leadership Timing Learning Abroad Companies that choose a geocentric approach to their operations will often combine both home and host practices requiring that people in both countries adapt to some degree. Companies may face some resistance to these changes, and so must manage the process carefully. There are various ways to implement changes. Companies may need to promote changes in value systems. A cost-benefit analysis of change can reveal whether a change makes sense. Moving too quickly can create additional resistance to change. Many companies find that encouraging stakeholders to become involved in change and sharing the rewards of making changes can be beneficial. Similarly, using the right channels of influence and the right timing can make a big difference in whether change is accepted. Finally, companies should recognize that they can gain important knowledge from other companies in the market. Emulating their methods can often be successful. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

The Future of National Cultures
Scenario 1: New hybrid cultures will develop and personal horizons will broaden Scenario 2: Outward expressions of national culture will continue to become homogeneous while distinct values will remain stable Scenario 3: Nationalism will continue to reinforce cultural identity Scenario 4: Existing national borders will shift to accommodate ethnic differences What will happen to national cultures in the future? Only time will tell. One scenario is that new hybrid cultures will develop and personal horizons will broaden. Another scenario suggests that outward expressions of national culture will continue to become homogeneous while distinct values will remain stable. A third scenario is that nationalism will continue to reinforce cultural identity. Finally, a fourth scenario suggests that existing national borders will shift to accommodate ethnic differences. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

International Business Environments & Operations

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