Chapter 3 : SOCIO-CULTURAL FORCES

L01 : Explain the significance of culture for international business.

1. What is culture ?
Culture is the sum total of the beliefs, rules, techniques, institutions, and artifacts that
characterize human populations.

2. The significance of culture for international business.

Culture affects all business functions.
2.1. Marketing
In marketing, the wide variation in attitudes and values requires that many firms use
different marketing mixes in different markets.
Example :
* Coca Cola
The Coca Cola Company’s attempt to sell Diet Coke product on the Japanese market was
not successful because the Japanese do not consider themselves overweight and Japanese
women do not want to admit they are dieters turning to products whose label specifies
that. The company was forced to change the product name in Coke Light, and the
promotion emphasized keeping in shape by consuming the product, and not losing
weight.

* McDonalds
When opened in India, the company wasn’t forced only to remove the beef and pork
menus but also to reduce the prices of all goods which were sold in the restaurants. But
still despite the fall in prices recent statistics show that Mcdonalds in India raised their
profits by 8,9%.

* Pepsi
During its expansion into the Chinese market, Pepsi crafted "Pepsi Brings You Back To
Life." While this slogan packs a punch in the US market, the Chinese market was less
than thrilled. Pepsi's slogan was perceived as "Pepsi Brings Your Ancestors Back From
The Grave," which not only lacks a sophisticated marketing flare but also hits a sore spot
with Chinese consumers, who culturally hold a great deal of respect for their ancestors.
It's no wonder that Pepsi quickly retracted its marketing efforts on this campaign.
-> It’s important that each element of marketing be considered for its cultural relevance.

2.2. Human resource management

The national culture is also a key determinant for the evaluation of managers. In Great
Britain, an American general manager complained, people were promoted because of the
school they had attended and their family background but not for their accomplishments.
School ties are important in France, too.
 2.3. Production and Finance
* Production
Example:
A production manager who had been sent to Peru from the US was convinced that he
could motivate the workers to achieve higher productivity by instituting a more
democratic decision-making style. He brought in trainers from the home office to teach
the supervisors how to solicit suggestions and feedback from the workers. Shortly after
the new management style was introduced, the workers began quitting their jobs. When
asked why, they replied that the new production manager and his supervisors apparently
didn’t know what to do and were therefore asking the workers for advice. The workers
thought the company wouldn’t last long with that kind of management and they want to
quit before collapse, because then everyone would be hunting for a job at the same time.

* Finance
In order a company to pursue its goals and objectives it must be ensured with sufficient
funds. Sources that might be used for companies expanding vary between different
countries. For example, in countries as Japan and Germany usual form of sourcing
business is by having loan from a bank while in the USA and UK businesses rely more
on raising money by selling equity shares on the stock market.
In order to expand overseas, companies may choose to find the money from the host or
home country or even from the third country.
Example:
When McDonalds decided to open their first restaurant in Moscow in 1990 during the
Soviet Union. The company has used a joint venture with Moscow City Council. Despite
all the funds came from the franchisor from Canada and the US headquarters, the deal
was to pay to the City Council in order to be allowed to operate in Moscow. So the
agreement reflected the Soviet/Russian political system where business and state are
closely connected.

LO2: Identify the sociocultural components of culture.

1. Aesthetics: A culture’s sense of beauties and good taste
1.1. Art
* Colors: mean different things in different cultures.
Why colors are important and why we have to notice colors while entering a new
market? 
Research from the CCICOLOR – Institute for Color Research found that. “customers
generally make an initial judgment on a product within 90 seconds of interaction with
that product and about 62%-90% of that judgment is based on colour.”
Example:

Green Chewing Gum in China: An article in the Futurist (1997) describes a chewing gum
company who entered the Chinese market with green branding. The product’s sales were
terrible until the company found out that green is a sacred colour in China. In China,
green can also indicate infidelity, where the expression “wearing a green hat” means a
man is being cheated on by his wife. (No self-respecting man wears a green hat in China.
The company then changed their product branding to pink and saw their sales increase.
The article goes on to explain that “a product with the wrong color may not only fail in a
particular country, it may even offend entire cultures.”
Another example,  Yellow is the color of sunlight. Brands like IKEA, Lipton and
McDonald’s use yellow for their logos, which is explained below.
Western cultures: In most Western cultures, the color yellow brings the warmth of the
sun. That is the color of summer. However, in France and Germany, sometimes it's
jealousy.
On the other hand, Oriental / Asian cultures: Yellow also has a positive meaning in most
Asian cultures. In Japan, it is a royal color that represents courage and prosperity. In
Thailand, it's a lucky color alongside King Bhumibol's deceased. In China, however, it is
a symbol of pornography.

* Symbolic number: There are numbers with different symbolic meanings in different
countries, knowing what they mean in cultures helps us to avoid dilemmas.

The Chinese consider the number four an unlucky number since its Chinese
pronunciation sounds like the Chinese term for ”death.” Therefore, buildings in China do
not have a fourth floor, well, not physically, but in the buildings’ elevators, number 4 is
not included. Instead, they use the letter F. The same belief is true in Japan and South
Korea, and other Asian countries where Chinese is spoken. But the belief is not
applicable to Germany where the number is considered lucky, because it is associated
with the ”four-leaf clover” which is a symbol for luck.

* Beauty and the body

Having fair skin is an oriental beauty standard that stems from ancient traditions. In the
olden days, only rich people had fair skin because they did not have to work hard outside.
Smooth, flawless white skin is evidence of class differences. That is why Eastern people
today still want jade-white skin - so as not to be considered a poor farmer.
Westerners prefer healthier tanned skin because it shows a cheerful, lively lifestyle with
outdoor adventures. This is also a very attractive feature of the girls in Europe and
America, especially in the coastal areas.
Example: 
In October 2017, Dove also apologized for an ad posted on his Facebook showing a
woman of color turning into a white woman after taking a body care product from the
company. Dove acknowledged the images the company posted failed to express what
they really wanted and "regretted deeply for the insult it might cause." At that time, many
people also called for a boycott of this Unilever brand of products. Nivea also struggled
to advertise for the Middle East  using the message "pure white" to lead. It is not difficult
to perceive this advertisement as racist, even if it may be unintentional.

1.2. Music and Folklore

Musical commercials are generally popular Worldwide but tastes vary and the marketers 
must know what kind of music each Market refers.  Those who wish to steep  themselves
in a culture find it useful to study  its folklore, Which can disclose much about a society's
way of life. The incorrect use a folklore can sometimes cost the firm  a share market.
Example: When Procter & Gamble started selling its Pampers diapers in Japan, the
packaging featured an image of a stork delivering a baby. While the imagery may have
worked in the U.S., it never caught on with Japanese parents. After some research, the
company learned that customers were concerned and confused by the image of a stork on
the packaging. The tale of a stork delivering a baby to parents isn't part of Japanese
folklore. There, stories tell of giant floating peaches bringing babies to awaiting parents.

2. Attitude and belief: Every country has a set of attitudes and beliefs that influence 
nearly all aspects of human behaviors and help bringing orders to society and  its
individuals.

2.1. Attitude toward time

To Americans, punctuality is generally seen as a sign of virtue and reliability.  When a
person says that they will be at a certain place at a certain time, it is important to be there
at that time so as to maintain one’s credibility and reputation.  People who do not show
up on time will be seen as untrustworthy.  Others will think that they are not sufficiently
dedicated to their jobs to make them worthy of trust.
Punctuality is somewhat flexible in Spain: it’s normal to run anywhere from 15 to 20
minutes late unless it’s a business meeting or a bullfight.  Deadlines are typically flexible,
as well.
Most of the countries in Latin America share Spain’s relaxed attitude to time, punctuality
and deadlines. Despite the linguistic differences, that includes Brazil. In the rare instance
when timeliness is essential, the Brazilians will say that it’s on “English time.”
In contrast to Spain, in Germany and Japan everything runs like clockwork, and German
culture prioritises punctuality. For meetings, if you’re not ten minutes early, you’re
“late”.

2.2. Attitudes toward achievement and work

English-speaking countries such as England and the United States rank higher on
individual achievement and lower on the desire for security.

French-speaking countries and areas such as France and the province of Quebec in
Canada, although similar to the English-speaking countries, give greater importance to
security and somewhat less to challenging work.
Latin American and Southern European countries find individual achievement somewhat
less important; Southern Europeans place the highest emphasis on job security.
Germany ranks high on security and fringe benefits and among the highest on getting
ahead.
3. Religion
Religion is responsible for many of the attitudes and beliefs affecting human behaviour.
Worldwide, religion is one of the key factors in workplace cultural diversity. Employees
want religious beliefs and practices to be accommodated, including time during the
workday for rituals, and time off from work for observances.
3.1. Work ethic
Europeans and Americans are believed to view work as a moral virtue and look
unfavorably on the idle. This view may stem from the Protestant work ethic, which is the
duty to glorify God by hard work and the practice of thrift.
In Asian countries where Confucianism is strong, people follow the Confucian work
ethic, which is similar to PWE. However, because of other factors, Japanese employers
find that younger workers may not have the same dedication to jobs as their predecessors
had.

3.2. Religions
People from the Western world will encounter some very different notions about God,
people, and reality in Asian religions. Several primary religions in Asia: India with
Hinduism, Buddism, Jainism and Sikhism; China with Confucianism and Taoism, Japan
with Shintoism. Islam and Animism are also the other two prominent religion.
Failing to recognize or understanding different religions and respecting the needs of
individual, can lead to conflict and business failure.
Example: McDonald’s defeat in India is an example. Most Indians are Hindus and this
religion considers that eating beef is against the God and leads to bad luck. Anti-beef
campaigners from the Hindu nationalist Bharatiya Janata Party and a related group, Shiv
Sena, smeared cow dung on a Ronald McDonald figure as part of a protest in 2001. The
campaigners filed a lawsuit over claims that McDonald's used beef fat to cook french
fries, and refused to accept the restaurant chain's assurances that it only used vegetable
oil. In 2009 Hindus also objected to TV commercials that referred to pujas - a Hindu
religious ceremony. It took years before McDonald’s realized the serious vegetarianism
 of the average Indian citizen. Now McDonald’s has opened two vegetarian restaurants
and has a menu that is almost unrecognizable compared to its American restaurants.
 Managers must respect the religious beliefs of others and adapt business practices to the
religious constraints present in other cultures. Of course, to be able to do this, they must
first know what those beliefs and constraints are.

4. Material Culture
Material Culture refers to all human-made objects and is concerned with how people
make things (technology) and who makes what and why (economics).
The technology of a society is the mix of the usable knowledge that the society applies
and directs to the attainment of cultural and economic objectives. It is significant in the
improvement of living standards and a vital factor in the competitive strategies of
multinational firms.
Why is it important to international companies?
1. It enables a firm to be competitive or even attain leadership in world market.
Eg: Samsung, a Korean corporation, was first known for its cheap and unimpressive
electronics. However, because of its expertise in the design of special imaging technology
(HDR Elite, Qled,...), Samsung leads global TV market for 14th straight year. First
Samsung Galaxy Unpacked online event in last month December attracted 56 million
viewers from around the world.
2. It can be sold (via licensing or management contract), or it can be embodied in the
company’s products.
3. It can give a firm confidence to enter a foreign market even when other companies
are already established there.
4. It can enable the firm to obtain better-than-usual conditions for a foreign market
investment because the host government wants the technology that only the firm has E.g:
Permission for a wholly owned subsidiary in a country where the government normally
insists on joint ventures with a local majority. IBM, confident of its superior technology,
insisted on and obtained permission from the Mexican government to set up a wholly
owned subsidiary when other computer manufacturers were forced to accept local
partners.
5. It can enable a company with only a minority equity position to control a joint ven-
ture and preserve it as a captive market for semiprocessed inputs that it - but not the joint
venture-produces.
6. It can change the international division of labor. Some firms that moved production
overseas where labor was chcaper have returned to their home countries because
production methods based on new technology have reduced the direct labor content of
their products.
7. It is causing major firms to form competitive alliances in which each partner shares
technology and the high costs of research and development. This is known as strategic
technology leveraging, which is the concept of using external technology to complement
rather than substitute for internal technology.
* Cultural Aspects of Technology are important to international managers, because new
production methods and new products often require that people change their beliefs and
ways of living. If workers have been accustomed to the conditions of cottage industries in
which each individual performs all the operations, they find it difficult to adjust to the
monotony of tightening a single bolt. Generally, the greater the difference is between the
old and the new method or product, the more difficult it is for the firm to institute a
change.
* Technological Dualism is a prominent feature of many developing nations. That is the
side-by-side presence of technologically advanced and technologically primitive
production systems. It is the result of the host government's insistence that foreign
investors import only the most modern machinery rather than used but serviceable
equipment that would be less costly and could create more employment.
Sometimes the preferences are reversed. A host government may prefer labor-intensive
processes, while the foreign firm prefers automated production both. To understand
which policy the host government is following, management must study its laws and
regulations and talk with host country officials.

5. Language
5.1. Spoken Language

Language is the key to culture, and without it, people find themselves looked out of all
but a culture’s perimeter. At the same time, in learning a language, people can’t
understand the nuances, double meanings of words, and slang unless they also learn the
other aspects of the culture.
*Languages Delineate Cultures
*English, the Link Language of Business
When many spoken languages exist in a single country, one language usually serves as
the principle vehicle for communication across cultures. English is the lingua franca – a
foreign language used to communicate among a nation’s diverse cultures that have
diverse languages.
*Must Speak the Local Language
Even though more and more businesspeople are speaking English, when they buy, they
often insist on doing business in their own language. The seller who speaks the local
language has a competitive edge, Moreover, knowing the language of the area indicates
respect for its culture and people.

Example: International marketing mistakes

KFC
While most businesses try to make a good impression when expanding into a foreign
country, fried chicken franchise KFC got off on the wrong foot when it opened in
China in the late 1980s. When the company opened its doors in Beijing, the restaurant
accidentally translated its famous slogan "Finger-lickin' good" to "Eat your fingers off."
In the end, the blunder didn't hurt KFC too badly: It's the top fast-food restaurant in China
today, with more than 5,000 restaurants.

Pepsi
The company behind the fizzy drink has certainly found success in China. After all, you
don't spend the early part of 2020 expanding operations in the country with a $705
million purchase of a major snack maker if things go wrong. Of course, this is possible
because Pepsi learned from their past mistakes. Initially, Pepsi's slogan "Pepsi Brings
You Back to Life" was debuted in China as "Pepsi Brings You Back from the Grave an
especially awkward move in a culture where ancestral worship is huge. Though it may
work as Halloween promotional material (zombies coming back just to taste the drink),
it's not good for much else.

*Translation.
Example: Ford
Auto giant Ford found that in Belgium, enticing customers with a dead body in every car
isn't the best way to make a sale. Hoping to highlight the cars' excellent manufacturing,
Ford launched an ad campaign in the European country that execs thought said "Every
car has a high-quality body." However, when translated, the slogan read, "Every car has a
high-quality corpse" — far from the image they were hoping to invoke.

5.2. Unspoken language

Unspoken language: Nonverbal communication, such as gestures and body language.

*Gestures
Although gestures are a common form of cross-cultural communication, gestures vary
from one region to another. For instance, Americans and most Europeans understand the
thumbs-up gesture to mean "all right," but in southern Italy and Greece, it transmits the
message for which we reserve the middle finger. Making a circle with the thumb and the
forefinger is friendly in the United States, but it means you're worth nothing" in France
and Belgium and is a vulgar sexual invitation in Greece and Turkey.

*Closed Doors
Americans know that one of the perquisites of an important executive is a large office
with a door that can be closed. Normally, the door is open as a signal that the occupant is
ready to receive others, but when it is closed, something of importance is going on.
Contrary to the American open - door policy, Germans regularly keep their doors closed.
This means that he or she considers open doors sloppy and disorderly.

*Office Size
Although office size is an indicator of a person's importance, it means different things in
different cultures. In the United States, the higher the status of the executive, the larger
and more secluded the office, but in the Arab world, the president may be in a small,
crowded office.

*Conversational Distance
Cultural experts report that conversational distances are smaller in the Middle East, and
possibly larger in Asia, than the Western average. Conversational distances vary by
gender as well as culture, and comfortable distance may also vary by the degree of
familiarity of the parties involved: We have an intimate distance for embracing or
whispering (6 to 18 inches), a personal distance for conversations among good friends
(1.5 to 4 feet), a social distance for conversation among acquaintances (4 to 12 feet), and
a public distance for public speaking (12 feet or more).

5.3 The language of gift giving

Gift giving is an important aspect of every businessperson's life both hero and overseas.
Entertainment outside office hours and the exchange of gifts are part of the process of
getting better acquainted.

Example:
In Japan, it is polite to offer or receive a gift using both hands. It is customary to wait
until later when the giver is not present, to open the gift. One never gives an unwrapped
gift or visits Japanese home empty-handed. The Japanese use gift giving to convey
thoughtfulness and consideration for the receiver, who over time builds up trust and
confidence in the giver. White and yellow flowers are not good choices for gifts because
in many areas they connote death.
The French avoid giving gifts at the first business meeting. When invited to someone’s
home, flowers, champagne and chocolates are generally appropriate.

6. Societal Organization
6.1. Kinship
The family is the basic unit of institutions based on kinship. Unlike the American family,
who is generally composed of the parents and their children, families in many nations
especial the developing ones-are extended to include all relatives by blood and by
marriage.

*Extended Family
For the foreign firm, the extended family is a source of employer and business
connections. The trust that people place in their relatives, however distant, may motivate
them to buy from a supplier owned by their cousin's cousin, even though the price is
higher. Local personnel managers are prone to fill the best jobs with family member
regardless of their qualifications.

*Member's Responsibility
Although the extended family is large, each member's feeling of responsibility to it is
strong. An individual's initiative to work is discouraged if he she is asked to share
personal earnings with unemployed extended-family members no matter what the kinship
is. Responsibility to the family is frequently a cause of high absenteeism in developing
countries, where the worker is often called home to help with the harvest. Managements
have spent large sums to provide comfortable housing for workers and their immediate
families, only to find them living in crowded conditions after members of their extended
families have moved in.

6.2 Associations
*Age
Manufacturers of consumer goods are well aware of the importance of segmenting a
market by age groups, which often cut across cultures. However, international marketers
may go too far if they assume that young people everywhere exert the same buying
influence on their parents as they do here. Kellogg's attempt to sell cereals in Great
Britain through children was not successful because English mothers are less influenced
by their children with respect to product choice than are American mothers.

*Gender
As nations industrialize, more women enter the job market and thus assume greater
importance in the economy. This trend is receiving further impetus as the women's
movement for equality of the sexes spreads to the traditionally male-dominated societies
of less developed countries. While the Chinese husband is sometimes referred to as the
minister of defense," the wife is the "minister of the interior."

*Free Association
Free-association groups are composed of people joined together by common bond, which
can be political, occupational, recreational, or religious.

6.3. Entrepreneurial Spirit

One common interest that may be unexpected by many people is the desire to be an
entrepreneur. We may assume that some countries may have a more intrinsically
entrepreneurial culture than others, and this turns out to be true, but the countries with
more would be may be unexpected.

L03 : Discuss Hofstede’s cultural value dimensions.

1. Individualism vs collectivism
According to Hofstede, people in collectivistic cultures belong to groups that are
supposed to look after them in exchange for loyalty, whereas people in individualistic
cultures are supposed to look after only themselves and the immediate family. Therefore,
organizations operating in collectivistic cultures are more likely to rely on group decision
making than are those in individualistic cultures, where the emphasis is on individual
decision making.
2. Large vs small power distance
Power distance is the extent to which members of a society accept the unequal
distribution of power among individuals. In large-power-distance societies, employees
believe their supervisors are right even when they are wrong, thus employees do not take
any initiative in making nonroutine decisions. On the other hand, a participative
management style of leadership is likely to be productive for an organization in a low-
power-distance country.

3. Strong vs weak uncertainty avoidance

Uncertainty avoidance is the degree to which the members of a society feel threatened by
ambiguity and are rule-oriented. Employees in high-uncertainty-avoidance cultures, such
as Japan, Greece and Portugal, tend to stay with their organizations for a long time. In
contrast, those from low-uncertainty-avoidance nations, such as the US, Singapore,
Denmark, are much more mobile.

4. Masculinity vs femininity.
The masculinity-femininity dimension is the degree to which the dominant values in a
society emphasize assertiveness, acquisition of money and status, and achievement of
visible and symbolic organizational rewards (masculinity) compared to the degree to
which they emphasize relationships, concern for others, and the overall quality of life
(femininity).
Table 1. Scores for Hofstede’s value dimensions :

Country Power Uncertainty Individualism Masculinity

Distance Avoidance
Mexico 81 82 30 69
Venezuela 81 76 12 73
Colombia 64 80 13 64
Peru 90 87 16 42
Chile 63 86 23 28
 Portugal 63 104 27 31
US 50 46 91 62
Australia 49 51 90 61
South Africa 49 49 65 63
New Zealand 45 49 79 58
Canada 39 48 80 52
Great Britain 35 35 89 66
Ireland 28 35 70 68