CHAPTER 04: DIFFERENCES IN CULTURE

Q. Demonstrate an appreciation of the economic and business implications of cultural change.

Ans. Culture is not a constant; it evolves over time. Changes in value systems can be slow and
painful for a society. International business is different from national business because countries
and societies are different. Societies differ because their cultures vary. Their cultures vary
because of profound differences in social structure, religion, language, education, economic
philosophy, and political philosophy. Three important implications for international business
flow from these differences. The first is the need to develop cross-cultural literacy.
Businesspeople need not only to appreciate that cultural differences exist but also to appreciate
what such differences mean for international business. A second implication centers on the
connection between culture and national competitive advantage. A third implication looks at the
connection between culture and ethics in decision making.
Critical thinking and discussion questions:
Q1. Outline why the culture of a country might influence the costs of doing business in that
country. Illustrate your answer with examples.
Ans. The basic values and norms of country can affect the cost of doing business in that country.
Sometimes cultural difference between countries can cause a negative impact when conducting
free market businesses.  Take for example Walmart wanting to expand its operation in India.  It
attempted to do so but buying out local farms and small stores.  As it did it was able to lower
prices for simple vegetables such as tomatoes and potatoes.  Thinking that Indians would buy
into this strategy Walmart opened up shop.  Indians may be price conscious as much as
Americans but to them loyalty and integrity meant more.  As soon as the Indians found out that
local jobs for the average citizen was being cut they immediately stopped buying from Walmart. 
Sometimes moral and ethics and taking care of neighbors is more important than buying things
for the cheapest price.  The American culture is embedded with how best to save cost when
shopping.  People are always trying to find the best deal.  But they do not care about the ethics
and morality of the process.  Many cultures; Germany and India included care a lot more about
what happens downstream.
Q2. Do you think that business practices in an Islamic country are likely to differ from business
practices in US? If so, how?
Ans. The cultural differences between a Muslim country and the US will cause business
practices to differ dramatically. The public role women can take, appropriate etiquette (including
simple things like not passing objects with the left hand), holidays, and wining and dining all
differ from patterns in the US. But beyond these, the underlying ideal and understanding of the
role of business differs. The importance of fairness to all parties in all relations means that over-
aggressiveness and self-interest may not be well received, and breaking an agreement, even if
technically/legally permissible, may be viewed as inappropriate and the sign of a huge character
flaw. Finally, the prohibitions on interest payments in some Muslim countries means that the
wording of the terms of an agreement must be careful so that "fair profits" are not construed as
being "interest payments."
Q3. Choose two countries that appear to be culturally diverse. Compare the cultures of those
countries and then indicate how cultural differences influence:
 The cost of doing business in each country.
 The likely future economic development of that country.
 Business practices.
Ans. I would like to choose two countries such as America and China that appear to be culturally
diverse in terms of cost involved, future economic development, and business practices. In the
United States, doing business can be very easy as everyone does businesses in comparison to
China. However, cultural differences teach different values, norms, beliefs, language,
educational institutes, religions, and aesthetics etc. so that for instance what might be polite in
the U.S. could be highly insulting in China. Some of the major cultural differences between
America and China are as follows:
a)      Cost of doing business in each country: In the US, it could be easy to set up any
businesses due to liberal policies regarding business activities whereas China has strict policies
to open up new businesses. Unlike the US, China has more economical factors of production
such as men, machine, material and management. China has totalitarian economic system so that
it could take years to get permissions for doing business activities. On the contrary, America has
free market economic system so that running everything is quite easy but of course labor costs
are very high in the US.
b)     The likely future economic development: Although there are no much more differences
in the economic growth, according to world bank report, economic growth of China were10.6%
in 2010, 9.5% in 2011, 7.8% in 2012, 7.7% in 2013, and 7.4% in 2014 whereas American’s
economic growth were 2.5% in 2010, 1.6% in 2011, 2.3 % in 2012, 2.2% in 2013, and 2.4% in
2014 respectively. The difference in economic growth indicates that China is going to be world’s
economic growth by 2025, followed by the US, India and Japan respectively.
c)      Business Practices: Chinese businessmen want to value more on building relationship
with buyers but American don’t like to do so. In the same way, Chinese want to interact face-to-
face whereas American avoids this system. While this can slow down the pace of business, trust
is at a premium in the Chinese business culture. Don't be surprised if a business partner asks you
about your personal life or even your finances. This is a sign of interest, not indication of
rudeness or disrespect. While making business decisions, Chinese believe in group decision, and
finally say by the “boss”, American, on the other hand, believe in individual and made by a
single person. Chinese are quite, reserved and often make a clumsy communication but most of
American are outspoken, eloquent and make an effective communication.
In short, we can say that there will always be differences in doing businesses in different cultures
or nations. Thus, businessmen should be able to address these differences before entering into an
international business so that they can be successful and achieve a competitive advantage over its
rivals.