International

Business
Environments & Operations

Chapter 2
The Cultural Environments
Facing Business
 What is Culture?
“A system of values (belief & attitude)
and norms (social rule) that are shared
among a group of people and that when
taken together constitute a design for
living.”
- Hofstede, Namenwirth, and Weber

Ethnocentricity Cultural literacy

Belief that one’s own Detailed knowledge of a
ethnic group or culture culture that enables a

X
is superior to that of person to function

√
others effectively within it
 Cultural Factors Affecting
International Business Operations
Culture is an integral part of a nation’s
operating environment
every business function is subject to potential
cultural differences
 Cultural adjustments
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
 Why doesn’t
McDonald’s
sell
Beef and Pork
hamburgers in
India?
 Cultural Collision
Cultural collision can occur …..

when a company implements practices that

are less effective

when employees encounter distress

because of difficulty in accepting or
adjusting to foreign behaviors
Avoiding Cultural Collisions
People on both sides of the context barrier
must be trained to make adjustments.

Background information is essential when

explaining anything. Cultural Awareness

Do not assume the newcomer is self-reliant.

Country-by-country analysis can be difficult

because subcultures exist within nation- Need to
focus on relevant groups
How Cultures Form and Change
Cultural value systems are established
early in life but may change through

Change by choice
Change by imposition (cultural imperialism)

Cultural diffusion-contact with other

culture
Creolization-mixing culture element
 Patterns of Diffusion
Diffusion refers to how something spreads.
A drop of ink, for example, will spread
through a glass of water until the ink and
water blend into a single mixture.
 Impact of Cultural Diffusion
Positive Impacts Negative
Access to Impacts
information and Loss of local
ideas businesses
Access to Loss of cultural
products identity
New
entertainment
 Cultural Diffusion
The spread of cultural ideas, practices,
or goods from one group of people to
another

Oreo sign outside a grocery store in

China
 Local businesses

Walmart could cause local stores to

go out of business, then people are
forced to shop at Walmart
 Introduces new negatives
(such as health problems)

New kinds of soda, such as Sprite and Coca-Cola

introduced a huge increase in cavities and tooth
decay in China
 Behavioral Practices
Affecting Business

1-Issues in Social Stratification

2- Work Motivation
3-Relationship Preferences
4- Risk-taking Behavior
5- Information and Task Processing
6-Communications
 1- Social Stratification
Group affiliations can be
Ascribed group memberships (by
birth)
based on gender, family, age, caste, and
ethnic or national origin

Acquired group memberships

based on religion, political affiliation,
professional association

Two other factors that are important

education and social connections
 Social Stratification

Caste system
• A form of closed system of Five different levels of
stratification in which social
the Indian caste system
position is determined by:
1. Priest
~ the family into which a
2. Ruler, Warrior,
person is born
Landowner
•Change in that position is
3. Merchants
usually not possible during
4. Artisans, Farmers
an individual's lifetime
5. Outside class system -
Immobility and inherited
status known as
‘Untouchables’
• Examples: Japan, India
22
Types of Stratification Systems

Caste Systems
• Closed stratification system
• Resources and social rewards
distributed based on ascribed statuses
• Lifelong status determined by that of
parents
• Prohibits marriage outside of caste
• Caste system in India has been
challenged but still plays a major role
 Social Stratification
British class system
Class system 1. The upper class – involve
wealthy and powerful
people
•A form of open social
stratification in which the
2. The upper-middle class –
position a person has by
members involve in
birth
important occupations and
can be changed through his
the prestigious professions
or her achievement or luck
3.The lower-middle class –
•Examples: US, Britain,
members involve in clerical
China
work and the less
prestigious professions 24
 2-Work Motivation:
How Much Do People Value Work?

The motivation to work differs across

cultures
❖ Materialism and Motivation
the desire for material wealth is a prime
motivation to work
people are more eager to work when the
rewards for success are high
In countries with high work centrality, people
tend to work more hours per week
High levels of work centrality may lead to
dedicated workers
In some culture LESS value on Leisure
time and more on Productivity

Example of FRANCE and US

Among 30 countries, France have most

vacations, 135 min per day drinking and
eating and 530 min sleeping

American spend 74 min per day in eating

and drinking and 518 minutes in sleeping
 Work Motivation:
Masculinity-femininity index

high masculinity score prefers

“to live to work” than “to work
to live”

A u s t r i a High Masculinity
and Sweden Femininity
 Work Motivation:
Expectation of Success and Reward
Motivation toward work is influenced by the
perceived likelihood of success and its
rewards versus failure. Generally, people
have little enthusiasm for effort when the
likelihood of success seems too easy or too
difficult.
In cultures in which the probability of
economic failure is almost certain and the
perceived rewards of success are low, people
tend—not surprisingly—to view work as
necessary but unsatisfying, mainly because
they foresee little benefit to themselves
 Work Motivation:
Hierarchy of needs theory
Hierarchy of needs theory
fill lower-level needs before moving to higher
level needs
The ranking of needs differs among
cultures
3- Relationship Preferences
Relationship preferences differ by culture
Power distance
high power distance implies little superior-
subordinate interaction (e.g., Mexico, South
Korea, India)
low power distance implies consultative style e.g.,
Austria, Finland, Ireland)
 Low power distance High power Distance
culture culture
Boss and employees treat one Employees respect managers and
another as equals + equals rights managers expect obedience

Decentralisation of the power Centralisation of the power

The ideal boss is a democrat The ideal boss is an autocrat

-Subordinates expect to be -Subordinates expect to be told what to

consulted / do /
-Boss expect initiatives from -Boss is expected to take all the
employees initiatives

People disapprove of status- Privileges for managers are expected-

Narrow range of salaries Wide range of salaries

Less formal social interaction Formal social interaction

 Relationship Preferences:
I n d i vi d a l i m a n d C ol l ect i vi m

High individualismcountries:
(e.g., U.S., Canada, Sweden)
High collectivism countries: –
(e.g., Indonesia, Pakistan)
 4- Risk Taking Behavior
Risk taking behavior differs across cultures
Uncertainty avoidance
handling uncertainty
 Hofstede’s Cultural Dimensions:
U n c e r t a in t y A v o id a n c e - people
feel threatened by ambiguous situations
High uncertainty avoidance countries:
high need for security- people worried
strong belief in experts and their knowledge
structure organizational activities
more written rules
less managerial risk taking
(e.g., Germany, Japan, Spain)

Low uncertainty avoidance countries:

people more willing to accept risks of the unknown
less structured organizational activities
fewer written rules
more managerial risk taking
more ambitious employees
(e.g., Denmark and Great Britain)
4- Risk Taking Behavior
Trust
degree of trust among people (Norwegians vs
Brazilians, trust is high monitoring cost is low)
Future orientation
delaying gratification Switzerland, the
(Netherlands, and Canada than in Russia,
Poland, and Italy, easy to compensate)
Fatalism
attitudes of self-determination (mexico)
 5-Information and
Task Processing
Cultures handle information in different
ways

Obtaining information
low context versus high context cultures

Information processing
Monochronic versus polychronic cultures
Idealism versus pragmatism
High-context vs Low-context cultures
High-context cultures
Emphasize on establishing and strengthening
relationships in the communication process
Non-verbal communication is as important as
verbal communication
Examples: Asians, Arabians, Latin Americans

Low-context cultures
Emphasize on exchanging information and is
less focused on building relationships
Pay more attention on spoken words and less
attention on non-verbal communication (body
language, eye movement
Examples: Americans, Canadians, Australians,
Germans
 Monochronic vs. Polychronic
Monochronic cultures
Like to do just one thing at a time
Orderliness
They do not value interruptions.
The Germans tend to be monochronic

Polychronic cultures
Like to do multiple things at the same time.
A manager's office in a polychronic culture
typically has an open door, a ringing phone and a
meeting all going on at the same time.

Polychronic cultures include the French and the

Americans.
 Idealism Versus Pragmatism
Idealism some cultures prefer to establish overall
principles before they try to resolve small issues—an
approach sometimes labeled idealism. Japan
Pragmatism Cultures in which people focus more
on details than on abstract principles are said to be
pragmatic. USA.
Interactions between types
can be problematic.
A German businessman cannot
understand why the person he is meeting
is so interruptible by phone calls and
people stopping by.
Is it meant to insult him?
When do they get down to business?

Similarly, the American employee of a

German company may be disturbed by all
the closed doors - it seems cold and
unfriendly.
 6- Communications
Cross border communications do not
always translate as intended

Spoken and written language

Silent language
Color
Distance (distance people maintain during conversations or
when conducting business-USA vs Mexico)
Time and punctuality
Body language
Prestige (organizational setting)
Vocabulary AMERICAN BRITISH
Apartment Flat
American Argument Row
& British Lawyer Solicitor
English Bathroom Loo
Can Tin
sometimes
Cookie Biscuit
have Diaper Nappy
different Elevator Lift

words for Eraser Rubber

Flashlight Torch
the same Fries Chips
things -- Gas Petrol
Mail Post
Ways to Avoid Saying
NO
 Spoken and Written -Formality

Examples:

A written note might say,

"Would you like to go out to lunch? “

The person who would write that note,

might alternatively say, in person,
"You wanna go out for lunch? "
 Spoken Communication
Motorola face difficulty assigning cell
phone numbers in China because certain
sound in Mandarin came out wrong

If the number end in 54 7424

You will sound as if you are saying
I die, my wife dies and my child dies
 Opening a meeting
Germany Formal intro. Sit down. Begin.

Finland Formal intro. Cup of coffee. Sit down. Begin.

USA Informal intro. Cup of coffee. Jokes. Begin.

Formal intro. Cup of tea.

UK 10 min small talk. Casual beginning.

Formal intro. 15 min small

France talk. Begin.

Formal intro. Protocol seating. Green tea. 15/20 min sm

Japan talk. Signal from senior member. Begin.

Spain/ 20/30 min small talk while others arrive.

Begin when all are there.
Italy
Number

5 10 15 20 25 of51

minutes
Adapted from Richard D.
Lewis
 Communications
Body Language Is Not A Universal Language
Non-Verbal Gestures
Non-Verbal Gestures
Non-Verbal Gestures
 CROSS-CULTURAL MEANINGS AND ASSOCIATIONS OF
INDIVIDUAL COLORS
GREEN: Represents danger or disease in
Malaysia, envy in Belgium, happiness in
Japan and sincerity, trustworthiness in
China.

BLACK: In western countries black is

colour of mourning whereas in some
countries is associated with power.

WHITE: Symbolizes mourning or death in

East Asia, but happiness and purity in
Australia, New Zealand and USA
When United Airlines first started
flying from Hong Kong, they gave all
of their passengers a white carnation
as a complimentary gift. many of
passengers refused to accept the gift.
The reason for the refusal was that
white carnations represent death or
bad luck in many parts of Asia. As a
result, the airline decided to change
the color of the carnations to red.
 Dealing with
Cultural Differences
Learning Objective 4:

To understand guidelines for

cultural adjustment
Do managers have to alter their customary
practices to succeed in countries with
different cultures?
Must consider
Host society acceptance (not
hampering deeply, baharain)
Degree of cultural differences
and distance- [similarity
among culture cause lower
adjustment-usa/ uk, india/bd]
Do managers have to alter their customary
practices to succeed in countries with
different cultures?
Must consider
Cultural Shock- the frustration that results from
having to absorb a vast array of new cultural
cues and expectations (adjustment stage,
Reverse culture shock
Company and management orientation
 Dealing with
Cultural Differences
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
 Strategies for Instituting
Change
Value Systems (contradictory vs accept)
Cost-Benefit Analysis of change (holiday
to motivate employee)
Resistance to too much change
(gradually)
Participation (taking opinion from
stakeholders-strength of resistance)
Reward Sharing (giving benefit whose
support is needed- USA, China)
 Strategies for Instituting
Change
Opinion Leadership
Timing (labor-saving production method, labor shortage)
Learning Abroad (examine economies and businesses abroad)