International BusinessInternational Business

Chapter TwoChapter Two

The Cultural Environments The Cultural Environments Facing BusinessFacing Business

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2004 Prentice Hall, Inc2-1

Chapter ObjectivesChapter Objectives

Understand cultural environmentsUnderstand cultural environments Explain major causes of cultural Explain major causes of cultural

difference and changedifference and change Examine behavioral factors Examine behavioral factors

influencing countries business influencing countries business practicespractices

Examine cultural guidelines for Examine cultural guidelines for companies that operate companies that operate internationallyinternationally

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IntroductionIntroduction

CultureCulture represents the specified learned norms of a represents the specified learned norms of a society, based on attitudes, values, and beliefs. society, based on attitudes, values, and beliefs.

Major problems of cultural collision may occur Major problems of cultural collision may occur becausebecause::

A firm implements practices that do not reflect local A firm implements practices that do not reflect local customs and values;customs and values;

Its employees are unable to accept or adjust to Its employees are unable to accept or adjust to foreign behaviour.foreign behaviour.

Major Cultural IssuesMajor Cultural Issues

Problems arise in international business Problems arise in international business when:when:• Employees have subconscious reactionsEmployees have subconscious reactions• Employees assume all societal groups are Employees assume all societal groups are

similarsimilar• A company implements practices of work less A company implements practices of work less

well than intendedwell than intended• Employees encounter distress because of an Employees encounter distress because of an

inability to accept or adjust to foreign cultural inability to accept or adjust to foreign cultural behaviorsbehaviors

• Companies/employees are insensitive to Companies/employees are insensitive to foreign consumer preferencesforeign consumer preferences

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Cultural AwarenessCultural Awareness Firms must develop awareness about those cultures in

which they operate.

The amount of effort needed to do this depends on the similarities between or among countries, and the type of business operations undertaken .

Identification and Dynamics of Cultures

The Nation as a Point of ReferenceThe Nation as a Point of Reference

Cultural Formation and DynamicsCultural Formation and Dynamics

Cultural values may change throughCultural values may change through::- Change by Choice: Change by Choice: takes place as a reaction to social and takes place as a reaction to social and

economic changes that present new alternatives.economic changes that present new alternatives.- Change by Imposition (Change by Imposition (Cultural imperialism):

occurs when countries introduce their legal systems into their colonies by prohibiting established practices and defining them as criminal.

- The introduction of some, but not all, elements of an outside The introduction of some, but not all, elements of an outside culture often is called culture often is called creolization, indigenization, or creolization, indigenization, or cultural diffusion.cultural diffusion.

- Contact with other culturesContact with other cultures

Cultural Factors at PlayCultural Factors at Play Cultural awarenessCultural awareness

• ApparelApparel• ReligionReligion• LanguageLanguage

Identification and dynamics of Identification and dynamics of culturescultures

Behavior practices affecting Behavior practices affecting businessbusiness• TimelinessTimeliness• EthicsEthics

Strategies for dealing with Strategies for dealing with cultural differencescultural differences• EducationEducation• ResearchResearch

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Identification of CulturesIdentification of Cultures Cultures are derived with people with Cultures are derived with people with

shared attitudes, values, and beliefsshared attitudes, values, and beliefs People also People also belongbelong to national, ethnic, to national, ethnic,

professional, and organizational culturesprofessional, and organizational cultures Points of reference:Points of reference:

• NationalNational• GeographicGeographic• LanguageLanguage• ReligionReligion

International business often changes International business often changes culturescultures

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World Output by Language GroupWorld Output by Language Group

33%33%OtherOther2%2%HindiHindi3%3%ArabicArabic5%5%FrenchFrench7%7%GermanGerman7%7%SpanishSpanish10%10%MandarinMandarin33%33%EnglishEnglish

% OF WORLD OUTPUT% OF WORLD OUTPUTLANGUAGELANGUAGE

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Major Religions of the WorldMajor Religions of the World

1414JudaicJudaic2323SikhSikh

360,000360,000BuddhistBuddhist384,000384,000Chinese folkChinese folk811,000811,000HinduHindu

1,188,0001,188,000MuslimMuslim2,000,0002,000,000ChristianChristian

NUMBER OF ADHERENTS NUMBER OF ADHERENTS (in millions)(in millions)

RELIGIONRELIGION

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Behavioral Practices Affecting BusinessBehavioral Practices Affecting Business

Social Stratification SystemsSocial Stratification Systems• Individuals status with the cultureIndividuals status with the culture

Managerial groups may be highly valued Managerial groups may be highly valued Employees may be valued lessEmployees may be valued less

• Ascribed (qualified) group membershipsAscribed (qualified) group memberships Gender, family, age, class, and ethnic, racial Gender, family, age, class, and ethnic, racial

or national originor national origin

• Acquired (obtain) group membershipsAcquired (obtain) group memberships Religion, political affiliations, and professional Religion, political affiliations, and professional

and other associationsand other associations

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United States “Values”United States “Values” COMPETENCE!COMPETENCE! Intolerance for discrimination based upon:Intolerance for discrimination based upon:

• GenderGender• RaceRace• AgeAge• ReligionReligion

Although equality is not applied perfectly, in Although equality is not applied perfectly, in many other cultures, this competence is of many other cultures, this competence is of secondary importancesecondary importance

Since our values may seem radical to foreigners it Since our values may seem radical to foreigners it is of extreme importance that international is of extreme importance that international businesses spend the resources to determine businesses spend the resources to determine what foreign cultures they can ethically and what foreign cultures they can ethically and effectively conduct business ineffectively conduct business in

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Characteristic-Based Groups Characteristic-Based Groups

Gender-based groupsGender-based groups• ChinaChina• IndiaIndia• AfghanistanAfghanistan

Age-based groups (United States)Age-based groups (United States) Family-based groupsFamily-based groups Occupation (United Kingdom)Occupation (United Kingdom)

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MotivationMotivationCultural difference in:Cultural difference in:

• Work ethicWork ethic• Greediness Greediness • LeisureLeisure

- Protestant work ethic- Protestant work ethic• Expectation of success and rewardExpectation of success and rewardPerceived likelihood of success and reward is

an important factor, which motivates a person’s behaviour toward working.

In general, People have little enthusiasmlittle enthusiasm:- For efforts that seem too easy or too difficult;- Where the probability of success or failure

seems almost certain.2-11

The highest degrees of enthusiasm occur when the uncertainty (success is uncertain) is high.

In general, people will usually work harder at any task when the reward for success is high compared with that of failure.

In cultures where the probability of economic failure is almost certain and the perceived rewards of success are low, there is a tendency to view work as necessary but unsatisfying.

The greatest enthusiasm for work exists where high uncertainty of success is combined with the likelihood of a very positive reward for success and little or none for failure.

• Need HierarchyNeed Hierarchy

Relationship PreferencesRelationship Preferences Power distance: relationship Power distance: relationship

between superiors and between superiors and subordinatessubordinates

Individualism vs. Individualism vs. collectivismcollectivism• United States is clearly United States is clearly

different from Japandifferent from Japan• China is clearly different from China is clearly different from

MexicoMexico Risk-taking behaviorRisk-taking behavior

• Uncertainty avoidanceUncertainty avoidance• TrustTrust• Future orientationFuture orientation• FatalismFatalism

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Power DistancePower Distance

When power distance is highWhen power distance is high: the management style is : the management style is usually distant (autocratic or paternalistic).usually distant (autocratic or paternalistic).

When power distance is lowWhen power distance is low: managers tend to interact : managers tend to interact with and consult their subordinates.with and consult their subordinates.

Individualism vs. CollectivismIndividualism vs. Collectivism

Individualism:Individualism: A person’s desire for personal A person’s desire for personal freedom, time and challenge.freedom, time and challenge.

Low dependence on the organizationLow dependence on the organization Self-actualization.Self-actualization.

CollectivismCollectivism

Collectivism: A person’s dependence on Collectivism: A person’s dependence on and allegiance to the organization.and allegiance to the organization.

Focus on physical and emotional needs.Focus on physical and emotional needs.

Differences in Information and Task Differences in Information and Task ProcessingProcessing

We perceive, obtain, and process We perceive, obtain, and process information differently.information differently.

We also reach conclusions differently.We also reach conclusions differently.1.1. Perception of cuesPerception of cues2.2. Obtaining informationObtaining information

Low-context cultures (United States)Low-context cultures (United States)3.3. Information ProcessingInformation Processing

Sequentially or simultaneouslySequentially or simultaneously Focused or broadFocused or broad Handling principles or small issues Handling principles or small issues

firstfirst

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Perception of CuesPerception of Cues People perceive signals selectivelyPeople perceive signals selectively.. People identify what things are through People identify what things are through

their senses.their senses.

Obtaining informationObtaining information Low-Context CulturesLow-Context Cultures: Most people consider : Most people consider

firsthand information to be the only firsthand information to be the only information relevant to the decision to be information relevant to the decision to be made.made.

High-Context CulturesHigh-Context Cultures: Most people believe : Most people believe that minor information is valuable to that minor information is valuable to decision making and conclude meanings decision making and conclude meanings from things said indirectly.from things said indirectly.

Information ProcessingInformation Processing Monochronic Cultures: People prefer to Monochronic Cultures: People prefer to

work sequentially.work sequentially. Polychronic Cultures: People prefer to Polychronic Cultures: People prefer to

work simultaneously on all tasks faced.work simultaneously on all tasks faced.

Some cultures tend to focus first on Some cultures tend to focus first on the the wholewhole and then on the parts. Others focus and then on the parts. Others focus first on first on the partsthe parts and then on the whole. and then on the whole.

Idealism: When people determine Idealism: When people determine principles before they try to resolve small principles before they try to resolve small issues.issues.

Pragmatism: People focus on more on Pragmatism: People focus on more on details rather than principles.details rather than principles.

Communication ProblemsCommunication Problems

Spoken and Written LanguageSpoken and Written Language- Be sensitive to accurate translationsBe sensitive to accurate translations- Some words do not have a direct Some words do not have a direct

translation.translation.- Languages and the common meaning of Languages and the common meaning of

words are constantly changing.words are constantly changing.- Words may mean different things in Words may mean different things in

different contexts.different contexts.- Misusing words may change the meaning Misusing words may change the meaning

significantly.significantly.- Rules for choosing translators.Rules for choosing translators.

Language Strategies Language Strategies

Get references for translatorsGet references for translators Ensure the translator is familiar with Ensure the translator is familiar with

technical vocabulary for the businesstechnical vocabulary for the business Do a back translationDo a back translation Use simple wordsUse simple words Avoid slangAvoid slang Repeat words and ask questionsRepeat words and ask questions Expect the extra time communication will Expect the extra time communication will

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Language GroupsLanguage Groups

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Silent LanguageSilent Language

Be tolerant of differing perceptions of Be tolerant of differing perceptions of timetime

Understand the message sent by body Understand the message sent by body languagelanguage

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Accommodation to ForeignersAccommodation to Foreigners

Advantages of adjusting to the host Advantages of adjusting to the host country culture.country culture.

International companies have sometimes International companies have sometimes succeeded in introducing new products, succeeded in introducing new products, technologies,and operating procedures to technologies,and operating procedures to foreign cultures with little adjustment.foreign cultures with little adjustment.

- Introductions did not significantly contradict deep-Introductions did not significantly contradict deep-seated values.seated values.

- The host society may be willing to accept foreign The host society may be willing to accept foreign customs as a trade-off for other advantages.customs as a trade-off for other advantages.

Cultural Distance and SimilarityCultural Distance and SimilarityWhen doing business in a When doing business in a similar culturesimilar culture, companies, companies:: Usually have to make fewer adjustments.Usually have to make fewer adjustments. May overlook subtle differences.May overlook subtle differences.

Culture ShockCulture Shock

Some people get frustrated when entering a Some people get frustrated when entering a different culture.different culture.

Even when differences are not significant, Even when differences are not significant, culture culture shock shock can happen: can happen: the frustration that results the frustration that results when having to learn and cope with a vast array of when having to learn and cope with a vast array of new cultural values and expectations.new cultural values and expectations.

Reverse Culture ShockReverse Culture Shock: when some people : when some people encounter culture shock when they return to their encounter culture shock when they return to their home countries because they have learned to home countries because they have learned to accept what they have encountered abroad.accept what they have encountered abroad.

Cultural OrientationsCultural Orientations International businesses adopt an attitude towards foreign International businesses adopt an attitude towards foreign

culturescultures

Polycentrism: control is decentralized so regional Polycentrism: control is decentralized so regional managers can conduct business in a local managers can conduct business in a local

manner.manner.

Disadvantages:Disadvantages:• A company that is too polycentric may avoid

transferring home-country practices or resources that actually may work well abroad.

• To compete effectively with local companies, an international company must perform certain functions in a distinct way.

• Excessive polycentrism may lead to extensive imitation of host-country practices, which may lead to losing innovative superiority.

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• Ethnocentrism: belief that one’s own culture is Ethnocentrism: belief that one’s own culture is superior and ignores important factors superior and ignores important factors

• Geocentrism: a hybrid of polycentrism and Geocentrism: a hybrid of polycentrism and ethnocentrism, the middle groundethnocentrism, the middle ground

Companies MUST evaluate their practices Companies MUST evaluate their practices to ensure they account for national to ensure they account for national cultural normscultural norms

Cultural InfluencesCultural Influences

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Hierarchy ComparisonsHierarchy Comparisons

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Chapter ReviewChapter Review

Understand cultural environmentsUnderstand cultural environments Explain major causes of cultural Explain major causes of cultural

difference and changedifference and change Examine behavioral factors Examine behavioral factors

influencing countries business influencing countries business practicespractices

Examine cultural guidelines for Examine cultural guidelines for companies that operate companies that operate internationallyinternationally

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