The Cultural

EnvironmentInternational Business Context

Delivered By M. Azam

Culture

Culture-–a society's personality–is defined

as a continuously changing totality of

learned and shared meanings, rituals,

norms, and traditions among the members

of an organisation or society.

The pivotal constituents of culture

Ideology–The manner in which individuals relate

to the environment and to others; this includes

attitudes toward time, space, possessions, and

referent others (peers).

Ecology-The manner in which society adapts to

its habitat, i.e., the distribution of resources

within an industrialized country versus a

developing country; the desire for efficiency,

space-saving devices, or green products.

Social Structure-–The organization of society.

National Culture & International

Business

Working in international business requires

a deep understanding of why people from

different background behave the way they

do. It is therefore critical for the

international manager to have an

understanding of national cultures, their

distinguishing characteristics and how

national culture impact behaviours

Languages

Languages has a prominent role as an

element of culture: The language one

learns in the community where one is born

and raised shapes and structures one's

world view

Spoken/written Languages

Poses a number of concerns to International Business Managers.

First, in terms of translation,

the diversity of languages creates numerous difficulties for marketers operating internationally. Even if the same language is shared by different countries, marketers should be aware of differences in meaning:

Example: Procter & Gamble sells "nappies" in the U.K., as opposed to "diapers"; the "boot" of the Ford automobile is actually its "trunk"; and housewives or househusbands who are "hoovering" in the U.K. may actually be "vacuuming" using an Electrolux vacuum cleaner.

Lost in Translation-India

Translation is expensive, especially in markets where multiple languages are spoken. For example, in India, there are more than 300 minor languages and 3,000 dialects. Only 15 distinct languages are widely spoken, however; Hindi, the official language, is spoken by 30 percent of the population, and English is widely used in administrative, commercial, and political life. To effectively communicate with this very promising multicultural market of approximately one billion, a firm's decisions on which language to use are crucial

Nonverbal Communication

Nonverbal Communication includes body

language, gestures, grimaces, eye contact, and

even silence. Silent communications, especially

gestures, have different meanings across cultures,

and marketing managers must be aware of them

in order to avoid embarrassing or costly mistakes.

Among the more important nonverbal

communication venues are the following:

Postures, Orientation, and

Oculesics

Postures, Orientation, and Oculesics refer

to individuals' positioning relative to their

counterpart and the use or avoidance of eye

contact during communication.

Examples-Handshake

In US/UK, Handshake with an eye contact this

perceives as forthright, take-charge attitude.

Handshake has to be firm and brief.

This same handshake, however, would be

perceived as arrogant and aggressive by an Asian

counterpart. In Asia, a soft handshake, a humble

posture, and avoidance of eye contact convey an

attitude of respect

Greeting

In Eastern Europe, a woman expects to

have her hand kissed (this also conveys

respect for her as a representative of her

gender), and men typically kiss each other

on the cheeks

Chronemics

Chronemics refers to the timing of verbal

exchanges. Americans expect prompt responses

and are uncomfortable with a slow response or

silence. They attempt to fill in the silence and to

further probe into the issue at hand to ensure that

their counterparts understand them. Other

nationalities–the Japanese, for instance–prefer to

use this "quiet time" as contemplation time,

where they evaluate the message.

Haptics

Haptics refers to the use of touch while

conversing. UK/US Culture is unusual, In

Latinate cultures tend to make extensive

use of touch in order to convey their

messages. A woman could expect to have

not just her shoulders, arms, and hands

touched, but also her hair and face, all with

good intentions.

Kinesics

Kinesics refers to the movement of part of the body in order to communicate.

The French and Italians, however, use hand gestures frequently to express themselves. It is important to understand the meanings of these gestures to function efficiently in these cultures. At the same time, it is wise not to assume that the gestures used in one's home country are identical with those used in other countries.

Paralinguistics

Paralinguistics refers to nonverbal aspects of speech that include emotional intonation, accents, and quality of voice. Again, a louder, more aggressive intonation denoting self-assurance and strength in some cultures, such as that of the United States, may be perceived as threatening or insulting by other cultures, where softness is equated with politeness and respect. In the cultures of West Africa, laughter indicates embarrassment, discomfort, or surprise, whereas in some other cultures, laughter is discouraged altogether

Appearances

Appearances refer to one's physical attire and overall grooming. Each culture has its own expectations and norms with regard to what is appropriate in different circumstances. For example, Western business attire for men consists of a well-tailored dark suit, complemented by a conservative shirt and tie and elegant shoes; Western business attire for women may also consist of a well-tailored suit or a conservative dress and high heels (European dress codes allow for a more casual look or a more personal style than North American dress codes).

Olfactions

Olfactions refer to the use of odors to convey

messages. Typically, such messages have a

religious meaning: Incense is frequently used to

purify the air of evil presence in both temples and

churches, as well as in private homes. Finally,

odors are evaluated differently in different

cultures. For example, U.S. culture finds body

odors and garlic breath as offensive, whereas

East Asian cultures avoid consumption of dairy

products believed to cause intolerably bad breath.

The Nonverbal Language

High- Versus Low-Context Cultures

In low-context cultures, what is said is

precisely what is meant. For example, in the

United States, Canada, Germany, and

Switzerland, a verbal message carries the full

meaning of the sentence.

In high-context cultures, such as those of East

Asia, the Middle East, and North Africa, the

context of the message–the message source, his

or her standing in society or in the negotiating

group, level of expertise, tone of voice, and body

language–are all meaningful.

Religion

Religion defines a society's relationship to the

supernatural and, as a result, determines

dominant values and attitudes. Religious beliefs

are important determinants of consumer

behavior: Purchase motivation; consumption

preferences and patterns; customs and business

practices; attitudes toward authority, family,

peers, and foreigners; as well as attitudes toward

material possessions, cultural values, and norms,

among others, can all be traced to religion.

Religious Orientation &

International Business

The Protestant religion stresses hard work and frugality and is linked to the development of capitalism and economic emancipation.

Judaism, with its disdain for ignorance and sloth, stresses education and has led to industrial development

Islam dictates social etiquette and consumption and bans the use of interest rates, affecting, respectively, the relationship between men and women in society and in the workplace; discouraging the consumption of pork products and alcohol; and requiring procedures to reconcile Islamic banking laws with Western banking practices–by, for example, charging periodic fees, rather than interest.

The Hindu religion encourages a family orientation and dictates a nine-tier class structure and strict dietary constraints, affecting the workplace hierarchy and discouraging the consumption of animal products–beef, in particular

Religion and Business Days

Christianity predominates, it is customary

to work full days Monday through Friday

and a half day on Saturday. In Islamic

countries, businesses are closed on Friday,

the holy day of Islam. And, in Israel, the

Shabbat (Saturday) is the day of worship

when all businesses close.

Religion and Gender Role

In the most traditional Islamic countries,

women's business activities are channeled

toward interaction in a women-only

environment. As such, a salesman cannot

engage in door-to-door selling in Saudi

Arabia, for instance, in an effort to appeal

to the woman of the house.

Values

Values are enduring beliefs about a specific mode of conduct or desirable end-state; they guide the selection or evaluation of behavior, and are ordered by importance in relation to one another to form a system of value priorities. Values guide individuals' actions, attitudes, and judgments, which are derived from and continuously modified through personal, social, and cultural learning, ultimately affecting their product preferences and their perception of products.

Norms

Norms are derived from values and are defined as rules that dictate what is right or wrong, acceptable or unacceptable. To be successful in the markets where the firm is currently operating or where it is planning a presence, marketers need to be capable of discerning between the following:

What an outsider must or must not do (cultural imperative)

What locals may do but an outsider cannot (cultural exclusive)

What an outsider may or may not do (cultural adiaphora)

Imperative

refer to what one must or must not do in a

certain culture. Respecting rank and

position, especially in more formal

societies, is crucial in developing a lasting

relationship. In Germany, for example,

individuals in a close business relationship

would address each other formally, by their

last names, for decades.

Exclusive

refer to activities that are appropriate only for

locals and from which an individual from a

foreign country is excluded. For example,

whereas a citizen of Kenya is likely to show

allegiance to the government of Daniel arap Moi

by wearing a pin in his party's colors bearing his

picture, a foreigner wearing such a pin would not

only raise eyebrows, but he or she also may be

perceived as attempting to interfere in the

country's internal affairs.

Adiaphoras

refer to customs that a foreign

representative may engage in, but

conformity in this respect is not required.

Eating with chopsticks in East Asia,

drinking banana beer in East Africa,

greeting a woman by kissing her hand in

Hungary or Romania are all examples of

adiaphoras.

National & Geographical

Characteristics

Each country is thought to have a distinct

set of behavior and personality

characteristics, characteristics that may be

shared by a number of countries in a

certain geographical region.

Time Orientation:

time relevant to marketers is related to the manner in which tasks are approached. Monochronic time (m-time) is attributed to individuals who usually do one thing at a time, and in sequence. individuals tend to be prompt and to adhere strictly to agendas; countries where individuals typically operate on monochronic time are Germany, Switzerland, Austria, the Scandinavian countries and the countries of Benelux, the UK/US and Canada. Polychronic time (p-time) is attributed to individuals who tend to perform multiple tasks at once; for these individuals, time is not linear but, rather, fluid. They are less likely to adhere to schedules, and they consider business as an opportunity for socializing.

Business Hours & Business Days

The hours of doing business differ from country to country.

9-5 in UK/US

In countries where the climate is too hot to permit work at mid-day, businesses open early, at seven, and close for two to three hours at noon, to re-open again at two in the afternoon

Gift Giving

In the US bringing a bottle of wine to one's host is perfectly appropriate; not appropriate for a similar occasion in the Middle East, where Islamic religion prohibits alcohol.

In Middle East, bringing food or drink to the home of one's host could represent an insult, implying that the host's food is inadequate.

cutlery in Latin America, signifying cutting off a relationship or handkerchiefs in Latin America and in Southern and Eastern Europe, signifying a final, imposed separation, usually death; handkerchiefs and small hand towels are typically given as gifts at funerals of the Eastern Orthodox faith

Socializing

If a International Business Manager is

planning on a working breakfast or a

working lunch, or on discussing business

over dinner, as is often done in the United

States. No appropriate In the countries of

South America and in many countries in

Europe, a meal is widely seen as an

important occasion to personally get to

know one's business counterpart;

Hofstede Theory

According to Geert Hofstede, there is no such thing as a

universal management method or management theory

across the globe. Even the word 'management' has

different origins and meanings in countries throughout

the world. Management is not a phenomenon that can be

isolated from other processes taking place in society. It

interacts with what happens in the family, at school, in

politics, and government. It is obviously also related to

religion and to beliefs about science.

Hofstede Dimensions:

Power Distance

Uncertainty Avoidance & Risk Taking

Masculinity versus Femininity

Individualism vs Collectivism

Time Orientation

Power Distance

power distance (the degree of inequality

among people which the population of a

country considers as normal)

Power distance

This refers to the manner in which interpersonal relationships are formed when differences in power are perceived. In some cultures, a vertical relationship is typical, whereas, in others, relationships are based on equality and informality.

In UK/US/Australia, for instance, individuals customarily address each other on a first-name basis, regardless of rank. Latin America, Eastern Europe, the Middle East, for example), it is a flagrant mistake to address a superior informally or for a superior to mingle with underlings

Uncertainty avoidance

uncertainty avoidance (the degree to

which people in a country prefer structured

over unstructured situations)

Uncertainty Avoidance & Risk

Taking:

Uncertainty avoidance refers to the extent to which

individuals feel threatened by uncertainty, risk, and

ambiguous situations and thus adopt beliefs, behaviors,

and institutions that help them to avoid the uncertainty.

In countries where uncertainty avoidance is high, there is

a feeling that what is different is dangerous; consumers

are resistant to change and focused on risk avoidance and

reduction. In cultures low in uncertainty avoidance, there

is a feeling that what is different, such as new products

and services, is interesting and worth exploring.

Masculinity versus Femininity

masculinity versus femininity (the extent

to which a culture is conducive to

dominance, assertiveness and acquisition

of things versus a culture which is more

conducive to people, feelings and the

quality of life)

Masculinity versus Femininity

Masculinity is the degree to which a national culture is characterized by assertiveness, wealth, material success, ambition, and achievement.

Australia, Canada, Great Britain, and the United States

Femininity is the degree to which a national culture is characterized by nurturing, benevolence, equality, caring for the weak, and preserving the environment are emphasized

Far East Asia, Scandinavian

individualism versus

collectivism

individualism versus collectivism (the

extent to which people feel they are

supposed to take care for or to be cared for

by themselves, their families or

organizations they belong to)

Individualism vs Collectivism

Individualism refers to the degree to which people in a country prefer to act as individuals, in their self-interest.

UK, USA, Australia

Collectivist cultures refers to require acting in group interest and stress on subordination to collectivity

Latin America, Asia, and the Middle East,

Individualism vs Collectivism

Other inappropriate gifts are cutlery in Latin America, signifying cutting off a relationship or handkerchiefs in Latin America and in Southern and Eastern Europe, signifying a final, imposed separation, usually death; handkerchiefs and small hand towels are typically given as gifts at funerals of the Eastern Orthodox faith

long-term versus short-term

orientation

long-term versus short-term orientation

(long-term: values oriented towards the

future, like saving and persistence - short-

term: values oriented towards the past and

present, like respect for tradition and

fulfilling social obligations)

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In a high power distance cultures

the following may be observed

Those in authority openly demonstrate their rank.

Subordinates are not given important work and

expect clear guidance from above.

Subordinates are expected to take the blame for

things going wrong.

The relationship between boss and subordinate is

rarely close/personal.

Politics is prone to totalitarianism.

Class divisions within society are accepted.

If you are working with or going to a country

with a higher PDI than yours then

- give clear and explicit directions to those working

with you. Deadlines should be highlighted and

stressed.

- do not expect subordinates to take initiative.

- be more authoritarian in your management style.

Relationships with staff may be more distant than

you are used to.

- show respect and deference to those higher up the

ladder. This is usually reflected through language,

behaviour and protocol.

- expect to encounter more bureaucracy in

organizations and government agencies.

In a low power distance

culture

Superiors treat subordinates with respect and do not

pull rank.

Subordinates are entrusted with important

assignments.

Blame is either shared or very often accepted by the

superior due to it being their responsibility to

manage.

Managers may often socialise with subordinates.

Liberal democracies are the norm

Societies lean more towards egalitarianism

If you are working with or going to a country

with a lower PDI than yours then

- don't expect to be treated with the usual respect or

deference you may be used to.

- people will want to get to know you in an informal

manner with little protocol or etiquette.

- be more inclusive in your management or

leadership style as being directive will be poorly

interpreted.

- involve others in decision making.

- do not base judgements of people on appearance,

demeanor, privileges or status symbols.

In a country that scores highly on the

individualism scale the following

traits are common

. A person's identity revolves around the "I"

. Personal goals and achievement are strived for

. It is acceptable to pursue individual goals at the

expense of others

. 'Individualism' is encouraged whether it be

personality, clothes or music tastes

. The right of the individual reign supreme; thus laws

to protect choices and freedom of speech

If you are working or doing business in a

country with a higher individualism score

than yourself then...

. As an individual you are expected to work on your own and

use your initiative.

. Prepare yourself for a business environment that may be less

reliant on relationships and personal contacts

. Business and personal life may very well be kept separate.

. Employees or subordinates will expect the chance to work on

projects or solve issues independently. Being to intrusive into

their work may be interpreted negatively.

. It is not uncommon for people to try and stand out from the

rest. This may be during meetings, presentations or even

during group work.

. Bear in mind that a certain amount of individual expression is

tolerated, i.e. people's appearance, behaviour, etc.

In a country that scores low on the

individualism scale the following traits are

common...

. "We" is more important that "I"

. Conformity is expected and perceived positively.

. Individual's desires and aspirations should be

curbed if necessary for the good of the group.

. The rights of the family (or for the common good)

are more important.

. Rules provide stability, order, obedience.

If you are working or doing business in a

country with a lower individualism score

than yourself then

. Note that individuals will have a strong sense of

responsibility for their family which can mean they

take precedence over business.

. Remember that praise should always be directed to

a team rather than individuals as otherwise this may

cause people embarrassment. Reward teams not

people.

. Understand that promotions depend upon seniority

and experience-not performance and achievement.

. Decision making may be a slow process, as many

individuals across the hierarchy will need to be

consulted

Below are some of the common traits

found in countries that score highly

on the uncertainty avoidance scale

. Usually countries/cultures with a long history.

. The population is not multicultural, i.e.

homogenous.

. Risks, even calculated, are avoided in business.

. New ideas and concepts are more difficult to

introduce.

If you are working or doing business in a

country with a higher uncertainty

avoidance score than yourself then

. Don't expect new ideas, ways or methods to be readily

embraced. You need to allow time to help develop an

understanding of an initiative to help foster confidence.

. Involve local counterparts in projects to allow them a

sense of understanding. This then decreases the element

of the unknown.

. Be prepared for a more fatalistic world view. People

may not feel fully in control and are therefore possibly

less willing to make decisions with some element of the

unknown.

. Remember that due to a need to negate uncertainty

proposals and presentations will be examined in fine

detail. Back up everything with facts and statistics.

Some of the common traits found in

countries that score low on the

uncertainty avoidance scale include

. Usually a country with a young history, i.e.

USA.

. The population is much more diverse due to

waves of immigration.

. Risk is embraced as part of business.

. Innovation and pushing boundaries is

encouraged.

If you are working or doing business

in a country with a lower uncertainty

avoidance score than yourself then. Try to be more flexible or open in your approach to new

ideas than you may be used to.

. Be prepared to push through agreed plans quickly as

they would be expected to be realised as soon as possible.

. Allow employees the autonomy and space to execute

their tasks on their own; only guidelines and resources

will be expected of you.

. Recognize that nationals in the country may take a

different approach to life and see their destiny in their

own hands.

Below are some of the common traits

found in countries that score low on the

masculinity scale

. In life the main priorities are the family,

relationships and quality of life

. Conflicts should ideally be solved through

negotiation

. Men and women should share equal positions in

society

. Professionals "work to live", meaning longer

vacations and flexible working hours

If you are working or doing business

in a country with a higher

masculinity score than yourself then. To succeed in this culture you will be expected to make sacrifices in

the form of longer work hours, shorter holidays and possibly more

travel.

. Be aware that people will discuss business anytime, even at social

gatherings.

. Avoid asking personal questions in business situations. Your

colleagues or prospective partners will probably want to get straight

to business.

. People are not always interested in developing closer friendships.

. Communication style that is direct, concise and unemotional will be

most effective in this environment.

. People will use professional identity, rather than family or contacts,

to assess others.

. Self-promotion is an acceptable part of the business culture in this

competitive environment.

Below are some of the common traits

found in countries that score high on

the masculinity scale

. Life's priorities are achievement, wealth and

expansion

. It is acceptable to settle conflicts through

aggressive means

. Women and men have different roles in society

. professionals often "live to work", meaning

longer work hours and short vacations

If you are working or doing business

in a country with a lower masculinity

score than yourself then

. Recognize that people value their personal time.

They prioritise family and take longer holidays.

Working overtime is not the norm.

. Small talk at social (or business) functions will

focus on an individual's life and interests rather than

just business.

. Personal questions are normal rather than intrusive.

. In business dealings trust weighs more than

projected profit margins and the like.

. Nepotism is seen as a positive and people openly

show favouritism to close relations.

Fons Trompennar

Riding the Waves of Culture, Seven

Cultures of Capitalism, Building Cross-

Cultural

Fons Trompennar-Dimensions of

Culture

Universalism vs. Particularism: What is

more important, rules or relationships?

Individualism vs. Collectivism: Do we

function as individuals or in a group?

Neutral vs. Affective: Do we hide or

display our emotions?

Fons Trompennar-Dimension of

Culture

Specific vs. Diffuse: Is responsibility specifically

assigned or diffusely accepted?

Achieved Status vs. Ascribed Status: Do we have

to prove ourselves to receive status or is it given

to us?

Time Orientation: Do we do things one at a time

or several things at once? - Are we oriented

toward the past, present, or future?

Internal vs. External Orientation: Do we control

our environment or are we controlled by it?

Fons TrompennarRiding the Waves of Culture, Seven Cultures of Capitalism,

Building Cross-Cultural

Universalism vs. particularism (What is

more important, rules or relationships?)

Individualism vs. collectivism (Do we

function in a group or as individuals?)

Neutral or affective (Do we display our

emotions?)

Fons TrompennarRiding the Waves of Culture, Seven Cultures of Capitalism,

Building Cross-Cultural

Specific vs. diffuse (Is responsibility

specifically assigned or diffusely

accepted?)

Achievement vs. ascription (Do we have to

prove ourselves to receive status or is it

given to us?)

Fons Trompennar

Riding the Waves of Culture, Seven Cultures of

Capitalism, Building Cross-Cultural

Sequential vs. syncronic (Do we do things

one at a time or several things at once?)

Internal vs. external control (Do we control

our environment or are we controlled by

it?)

Merger-Culture

According to a KPMG International study,

83% of mergers and acquisitions fail due to

mismanagement of cultures

Merging balance sheets it turns out is far

easier than merging cultures. Executives

must therefore analyze the culture of the

two companies before considering a

merger or acquisition

Difficult but not impossible

Good news! while culture is usually not

changed quickly, processes are available to

understand the “legacy” cultures of both

merged and acquired organizations and to

create a new culture for supporting the new

enterprise strategy.

CLARIFYING CULTURE

Culture is the pattern of norms, values,

beliefs and attitudes that influence

individual and group behaviour within the

organization. In short, culture is “the way

we do things.” Culture therefore is not an

independent variable in the business

equation; rather it exists or should exist to

support the business strategy.

ASSESSING THE CULTURE

While unquestionably, organizational

culture is the “soft side” of business reality,

we know it can be a real M&A buster. It is

critical to first understand and assess the

current culture of both companies involved

in the M&A process, giving ample weight

to issues of culture during due diligence.

ASSESSING THE CULTURE

Purpose of cultural due diligence is not to

eliminate culture clash-an unlikely event

even in the best of circumstances, nor is it

to find a perfect fit between two

organization. But while a wide gap is

unhealthy, the best mergers occur when a

fair amount of culture differentiation

prompts debate about what is best for the

combined organization

UNDERSTANDING VALUES

Values are a key element in assessing

culture- values that are both explicitly

stated as well as those that are implicitly

held in an organization. In an M&A

situation, it is key that both types are

examined and intimately understood.

CULTURAL INTEGRATION

After understanding of the current culture,

compared that with the goals of the merged

organisation....Time to think through what

it will take to implement that strategy.

This process requires consideration of a

number of factors, including organization

structure, operating and decision-making

apparatus, reward systems and people-

related issues.

Project Plan for the Integration

- Establish the Strategic Context Early On

This can be formulated by asking and

answering basic questions about the vision,

product and market scope, critical issues,

competitive advantage etc of the

prospecting merger companies.

Project Plan for the Integration

- Communications

An important element for managing a

company’s culture in preparing for M&A

activities. It is even more important in the

period leading up to and following closure

of the deal.

- Identify and Resolve Important Cultural

Differences

CULTURE DOES MATTER

Creating a cohesive culture from two distinct

entities is a challenge. But in today’s business

environment characterized by large numbers of

M&As, it is very essential that companies take

cultural issues seriously as they do financial ones.

Attention to culture has proven to make the key

difference between success and failure.

Otherwise, the urge to merge may prove to be a

costly impulse.

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