Culture!Culture!

Thursday, November 2Thursday, November 2

What is culture?What is culture?

« Culture is the integrated sum total of « Culture is the integrated sum total of learned behavioral traits that are shared by learned behavioral traits that are shared by members of a society » (Hoebel).members of a society » (Hoebel).

What are some examples of learned What are some examples of learned behavioral traits that are shared in society?behavioral traits that are shared in society?

3 fundamentals:3 fundamentals:

Culture is a total pattern of behavior that is Culture is a total pattern of behavior that is consistent and compatible in its components. consistent and compatible in its components. It is not a collection of random behaviors…It is not a collection of random behaviors…

Culture is a learned behavior. It is not Culture is a learned behavior. It is not biologically transmitted. It depends on biologically transmitted. It depends on environment, not heredity.environment, not heredity.

Culture is behavior that is shared by a group Culture is behavior that is shared by a group of people, a society. It is the distinctive way of of people, a society. It is the distinctive way of life of a people.life of a people.

Learned behavior can mean almost anything, Learned behavior can mean almost anything, from the way we dress to the way we speak from the way we dress to the way we speak to the food we choose to eat. to the food we choose to eat. Whenever we brush our teeth, cross our legs, Whenever we brush our teeth, cross our legs, send our parents' a birthday card, send our parents' a birthday card, kiss someone, listen to music, or go out for kiss someone, listen to music, or go out for recreation we are practicing learned recreation we are practicing learned behaviors which are a part of our culture. behaviors which are a part of our culture.

So what should be know about So what should be know about CultureCulture

Understanding the cultural environment will Understanding the cultural environment will help in analyzing the other macro-help in analyzing the other macro-environments (political, legal, economic…)environments (political, legal, economic…)

Two levels of cultural diversityTwo levels of cultural diversity

External cultural diversityExternal cultural diversity Cultural determinants influencing purchasing and consumption Cultural determinants influencing purchasing and consumption

behaviors (Who buys? What? Where? How? Why?)behaviors (Who buys? What? Where? How? Why?) Cultural determinants influencing negotiations (relationships with Cultural determinants influencing negotiations (relationships with

suppliers, buyers, partners)suppliers, buyers, partners)

Internal cultural diversityInternal cultural diversity Observed within all MNCsObserved within all MNCs Cultural differences that affect the way subsidiaries work togetherCultural differences that affect the way subsidiaries work together

Explicit culture: languages, behavior, know-how, institutions (directly observable)

Implicit culture: moral values, learning process, beliefs

A new term to addA new term to add

A A subsidiarysubsidiary, in , in businessbusiness, is an entity which , is an entity which is controlled by another entity. The is controlled by another entity. The controlled entity is called a controlled entity is called a companycompany or or CorporationCorporation..

The most common way that control of a The most common way that control of a subsidiary is achieved is through the subsidiary is achieved is through the ownership of shares in the subsidiary by the ownership of shares in the subsidiary by the company. These shares give the company company. These shares give the company the necessary votes to determine the the necessary votes to determine the composition of the board of the subsidiary composition of the board of the subsidiary and so exercise control. and so exercise control.

There are quite a few reasons why companies have There are quite a few reasons why companies have subsidiaries, but one of the most important one is.subsidiaries, but one of the most important one is.

RiskRisk: Many businesses use subsidiaries to : Many businesses use subsidiaries to manage risk. This is achieved usually by manage risk. This is achieved usually by setting up a subsidiary corporation to setting up a subsidiary corporation to undertake the higher risk venture. If that undertake the higher risk venture. If that venture subsequently become subject to venture subsequently become subject to litigation or liability, legally the subsidiary litigation or liability, legally the subsidiary corporation would be liable and not the corporation would be liable and not the parent (unless the parent made parent (unless the parent made guarantees, in which case the parent is guarantees, in which case the parent is liable for the guarantees it made).liable for the guarantees it made).

According to Hoebel…According to Hoebel…

There are 3 types of cultural norms in terms of There are 3 types of cultural norms in terms of behavior:behavior:

10% of norms are 10% of norms are technicaltechnical: : explicit, logical and transferable; written norms of a explicit, logical and transferable; written norms of a

society (laws, technical manuals, rules, etc…)society (laws, technical manuals, rules, etc…)

30% of norms are 30% of norms are formalformal: : explicit, moral and transmissible; traditions of a explicit, moral and transmissible; traditions of a

culture; learned through education (manners, culture; learned through education (manners, courtesy…)courtesy…)

60% of norms are 60% of norms are informalinformal:: implicit, instinctive and imitated; facial expressions, implicit, instinctive and imitated; facial expressions,

body language, cultural perspective on time and body language, cultural perspective on time and space…)space…)

How do we measure cultural distance?How do we measure cultural distance?

Hofstede’s Cultural IndexHofstede’s Cultural Index

- National character survey- National character survey- 116.000 IBM employees- 116.000 IBM employees- 43 countries and 20 languages- 43 countries and 20 languages

Five different poles make up the cultural index:Five different poles make up the cultural index:- Power distance- Power distance- Uncertainty avoidance- Uncertainty avoidance- Individualism- Individualism- Masculinity- Masculinity- (Long term orientation)- (Long term orientation)

Hofstede’s cultural indexHofstede’s cultural index

Power distance (PDI)Power distance (PDI): shows class or social : shows class or social structure. It shows how well a society accepts an structure. It shows how well a society accepts an uneven distribution of power in organizations and uneven distribution of power in organizations and institutions and focuses on the degree of equality, or institutions and focuses on the degree of equality, or inequality, between people in the country’s society.inequality, between people in the country’s society.

Uncertainty avoidance (UAI)Uncertainty avoidance (UAI): shows how : shows how threatened a society feels by uncertain or unstable threatened a society feels by uncertain or unstable situations. It focuses on the level of tolerance for situations. It focuses on the level of tolerance for uncertainty and ambiguity within the society.uncertainty and ambiguity within the society.

Individualism (IDV):Individualism (IDV): focuses on the degree that focuses on the degree that society reinforces individual or collective achievement society reinforces individual or collective achievement and interpersonal relationships. It distinguishes and interpersonal relationships. It distinguishes between societies where the group and being a between societies where the group and being a member is important (collectively) and societies member is important (collectively) and societies where the group is less important (individualism).where the group is less important (individualism).

Hofstede’s cultural indexHofstede’s cultural index

Masculinity (MAS):Masculinity (MAS): focuses on the degree the focuses on the degree the society reinforces, or does not reinforce, the society reinforces, or does not reinforce, the traditional masculine work role model of male traditional masculine work role model of male achievement, control and power. Indicates the achievement, control and power. Indicates the degree of gender differentiation and the degree of gender differentiation and the importance of masculine values (assertiveness, importance of masculine values (assertiveness, money, material goods…).money, material goods…).

Long-term orientation (LTO):Long-term orientation (LTO): focuses on the focuses on the degree the society embraces, or does not degree the society embraces, or does not embrace, long-term devotion to traditional, forward embrace, long-term devotion to traditional, forward thinking values. Indicates whether the country thinking values. Indicates whether the country prescribes to the values of long-term commitments prescribes to the values of long-term commitments and respect for tradition.and respect for tradition.

Examples of Hofstede’s DimensionsExamples of Hofstede’s Dimensions

Uncertainty Avoidance Index (UAI)Uncertainty Avoidance Index (UAI) deals with a society's deals with a society's tolerance for uncertainty and ambiguity; it ultimately refers to tolerance for uncertainty and ambiguity; it ultimately refers to man's search for Truth. man's search for Truth.

It indicates to what extent a culture programs its members to It indicates to what extent a culture programs its members to feel either uncomfortable or comfortable in unstructured feel either uncomfortable or comfortable in unstructured situations. Unstructured situations are novel, unknown, situations. Unstructured situations are novel, unknown, surprising, different from usual. Uncertainty avoiding cultures surprising, different from usual. Uncertainty avoiding cultures try to minimize the possibility of such situations by strict laws try to minimize the possibility of such situations by strict laws and rules, safety and security measures, and on the and rules, safety and security measures, and on the philosophical and religious level by a belief in absolute Truth; philosophical and religious level by a belief in absolute Truth; 'there can only be one Truth and we have it'. 'there can only be one Truth and we have it'.

People in uncertainty avoiding countries are also more People in uncertainty avoiding countries are also more emotional, and motivated by inner nervous energy. The emotional, and motivated by inner nervous energy. The opposite type, uncertainty accepting cultures, are more opposite type, uncertainty accepting cultures, are more tolerant of opinions different from what they are used to; they tolerant of opinions different from what they are used to; they try to have as few rules as possible, and on the philosophical try to have as few rules as possible, and on the philosophical and religious level they allow many currents to flow side by and religious level they allow many currents to flow side by side. People within these cultures are not expected by their side. People within these cultures are not expected by their environment to express emotions. environment to express emotions.

Intracultural differencesIntracultural differences

Few cultures are homogeneous in terms of Few cultures are homogeneous in terms of cultural traits and norms.cultural traits and norms.

Intracultural differences based on nationality, Intracultural differences based on nationality, religion, race, language or geographic areas religion, race, language or geographic areas have resulted in the emergence of distinct have resulted in the emergence of distinct subcultures.subcultures.

It is important to distinguish relevant cross-It is important to distinguish relevant cross-cultural and intracultural differences and cultural and intracultural differences and isolate potential opportunities and problems.isolate potential opportunities and problems.

However, international business may act as a However, international business may act as a change agent by introducing new products or change agent by introducing new products or ideas or practices.ideas or practices.

To summarize on culture…To summarize on culture…

Cultural distance is essential in international Cultural distance is essential in international businessbusiness

Culture is complex and multi-dimensionalCulture is complex and multi-dimensional

Acculturation (adjusting and adapting to a Acculturation (adjusting and adapting to a specific culture other than one’s own) is one specific culture other than one’s own) is one of the keys to success in international of the keys to success in international operationsoperations