International Business

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Chapter Two The Cultural Environments Facing Business


Chapter 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 cultural guidelines for companies that operate internationally

Learned norms based on values, attitudes, and beliefs of a group of people.

Culture is based on nationality, society, religion, gender, work organization, profession, age and income level.

Cultural Diversity
A means of gaining global competitive advantage by bringing together people of diverse backgrounds and experience.


Cultural Collision
• Culture collision occurs when different cultures come in contact. • Occurs in international business when:  A company implements practices that are less effective  Employees encounter distress because of difficulty in accepting or adjusting to foreign behaviors

Cultural Factors Affecting International Business Operations


Cultural Awareness
• Almost everyone agrees that national cultures differ but they disagree on what the difference are. • Problem areas that can hinder managers’ cultural awareness…  Subconscious reactions to circumstances  The assumption that all societal subgroups are similar


The Idea of a “Nation” – Delineating Cultures
We discuss the role of language and religion as influences on culture. 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


The Nation as a Cultural Mediator
A national culture must be flexible enough to

accommodate the diversity of various
subcultures, ethnic groups, races, and classes. Yet every nation boasts certain human, demographic, and behavioral characteristics that constitute its national identity


Country-By-Country Analysis
• Managers find this difficult to implement because, Subcultures exist within nations,

Similarities link groups from different countries


How Cultures Form and Change
Sources of Change: Both individual and collective values and customs may evolve over time. Change by Choice: Reaction to social and

economic situations.
Change by Imposition: Imposed introduction

into a culture of certain elements from an alien culture.


Language as Both a Diffuser and Stabilizer of Culture
A common language within a country is a unifying force


Major Language Groups: Population and Output


Religion As A Cultural Stabilizer
Centuries of profound religious influence continue to play a major role in shaping cultural values and behavior


Behavioral Practices Affecting Business
• Issues in Social Stratification  Social ranking is determined by: • Factors pertaining to you as an individual • Factors pertaining to your affiliation with certain groups


Group Affiliations Can Be:
• Ascribed or Acquired  Include those based on gender, family, age, caste, ethnic, racial, or national origin. For example British and German • A reflection of class and status  Include those based on religion, political affiliation, and professional and other associations

Social Stratification and Employment Practices
• Performance Orientation:
 Some nations base a person’s eligibility for jobs and promotions primarily on competence, but in others, competence is of secondary importance. For Example USA and JAPAN

• Open and Closed Societies
 The more egalitarian, or “open,” a society, the less importance of ascribed membership in determining rewards. For example (Malaysia, India) and Brazil

• Gender-Based Groups
 For example India and China

Social Stratification and Employment Practices
• Age-Based Groups  Many cultures assume that age and wisdom are correlated; thus, they often have a seniority-based system of advancement. For Example British and USA (Protect) and Switzerland and USA • Family-Based Groups  In some societies, family membership is more important than individual achievement. For Example China & Italy • Occupation
• In every society certain occupations are perceived as having greater economic value and social prestige than others. For Example Irish and Germany

Work Motivation
• Materialism and Motivation • Expectation of Success and Reward • Performance and Achievement: The MasculinityFemininity Index • Hierarchies of Needs


Hierarchy of Needs


Relationship Preferences
• Power Distance
 Power distance describes the relationship between superiors and subordinates. Hoftsede’s study states that when power distance is high, the management style is generally distant, i.e., autocratic or paternalistic.  Examples of countries ranking relatively high on power distance are Brazil, France, and Malaysia; those ranking relatively low are Austria, Japan, and the Netherlands.


Relationship Preferences
• Individualism Versus Collectivism
 Hoftsede’s study defines individualism as a person’s desire for personal freedom, time, and challenge.  His/her dependence on the organization is low, and self-actualization is a prime motivator.  Examples of countries ranking high on individualism are Australia, Britain, and the United States; those ranking high on collectivism are China, Mexico, and Japan.


Risk-Taking Behavior
• • • • Uncertainty Avoidance Trust Future Orientation Fatalism


Information and Task Processing
• Perception of Cues • Obtaining Information: Low Context versus High Context Cultures • Information Processing • Monochronic Versus Polychronic Cultures • Idealism Versus Practicality


• • • • • • Spoken and Written Language Silent Language Distance Time and Punctuality Body Language Prestige


Body Language Is Not A Universal Language


Degree of Cultural Differences
Cultural Distance when a company moves within

a cluster of culturally similar countries, it should
expect to encounter fewer cultural differences and to face fewer cultural adjustments. Cultural Friction a business interaction may be viewed negatively because of possible changes in power relationships and the sovereignty that sets countries apart.

Company and Management Orientations
• Polycentrism
 Belief that business units in different countries should act like local companies

• Ethnocentrism
 Conviction that one’s own culture is superior to that of other countries

• Geocentrism
 Requires companies to balance knowledge of their own organizational cultures with both home and host country needs, capabilities, and constraints


Strategies for Instituting Change
• • • • • • • • Value Systems Cost-Benefit Analysis of change Resistance to too much change Participation Reward Sharing Opinion Leadership Timing Learning Abroad


Future: What will happen to 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



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