International Business

by
Daniels and Radebaugh

Chapter 2
Cultural Environments
Facing Business
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Objectives
To relate the problems and methods of learning about
cultural environments
To explain the major causes of cultural difference and
change
To examine behavioral factors influencing countries’
business practices
To examine cultural guidelines for companies that operate
internationally

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Introduction
Culture
• The specific learned norms based on attitudes,
values, and beliefs that exist in every nation
• An integral part of external environments
Problems of cultural collision occur when
• Company practices work less effective than intended
• Employees’ are unable to accept or adjust to
foreign environment
Sensitivity and adjustment

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 Cultural Influences on International Business

EXTERNAL INFLUENCES
OPERATIONS

PHYSICAL AND
SOCIETAL FACTORS
• Political policies and OBJECTIVES
legal practices
• Cultural factors
• Economic forces
• Geographical influences
• Cultural awareness STRATEGY
• Identification and
dynamics of cultures
• Behavioral practices
COMPETITIVE
affecting business
ENVIRONMENT • Strategies for dealing
with cultural differences MEANS

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Cultural Awareness
Problems that hinder cultural awareness
• Subconscious reactions to circumstances (?Apology)
• Assumption that all societal subgroups are similar (?
Border)
Cultural awareness can be improved
• Research descriptions of specific cultures
• Observe behavior or respected foreign nationals
• Study foreign market directly
Company’s need for cultural knowledge increases as it
• Moves from one to multiple foreign functions
• Increases the number of countries in which it operates
• Moves from similar to dissimilar foreign environments

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Identification and Dynamics of Cultures
The nation as a point of reference
• Each nation has certain human, demographic, and
behavioral Characteristics that give it a national identity
(Chinese offspring)
– people share values, language, and race
• Laws governing business apply along national lines
• Problems using a country-by-country approach
– individual differences within a country
– similarities link groups from different countries

Deal-focus (DF) culture vs Relationship-focus (RF) culture

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Identification and Dynamics of Cultures (cont.)
Language as a cultural stabilizer
• Culture spreads rapidly when people from different areas
speak the same language
• Stronger adherence to a culture if it does not share its
language with other peoples
• English, French, and Spanish are widespread (Don’t
know)
– most of IB conducted in English
Religion as a cultural stabilizer
• Religion has a strong influence on values (?tie)
• Specific beliefs may affect business
– not all nations that practice the same religion have
the same constraints on business
– where rival religions vie for political control, resulting
strife may disrupt business

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Behavioral Practices Affecting Business
Social stratification systems
• Every culture values some people more than others,
thereby dictating social class or status
• Ascribed group membership based on:
• gender, family, age, and caste
• ethnic, racial, or national origin
• Acquired group membership based on
– religion, political affiliation, and professional and other
associations
• Characteristics that affect status differently from country
to country include
– Competence—competition versus cooperation
– gender-based groups
– age-based groups
– family-based groups
– occupation

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Behavioral Practices Affecting Business (cont.)
Motivation—countries differ in how much people are motivated
to work and why
• Materialism and leisure
– countries differ in emphasis on materialism
– Protestant ethic—work a means to salvation
• Expectation of success and reward— people are more
eager to work if:
– rewards for success are high (chris party)
» same tasks performed in different countries may
have different rewards for success and
consequences of failure
– there is some uncertainty of success
» same task performed in different countries may
have different probabilities of success

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Behavioral Practices Affecting Business (cont.)
Masculinity index—degree of admiration for success, sympathy
for unfortunate, preference for being better than others
• High masculinity cultures
– roles differentiated by gender
– men should dominate
• Low masculinity culture
– need for smooth social relationships
– employee and social welfare has higher priority than
growth and efficiency
Need hierarchy—lower-order needs must be fulfilled prior to
higher-order needs
• Workers in poor countries motivated by lower-order
needs
• People from different countries may rank needs
differently

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Relationship Preferences
Power distance—describes relationship between superiors and
subordinates
• High—people prefer little consultation
– autocratic or paternalistic management
• Low—consultative styles preferred
– easier to implement worker participation
Individualism versus collectivism
• Individualism—low dependence on organization and
desire for personal time, freedom, and challenge
– self-actualization a prime motivator
• Collectivism—dependence on organization
– value secure physical and social environments
• Influences how employees interact with their colleagues
• Influences marketing strategies

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Risk-Taking Behavior
Uncertainty avoidance
• High—prefer set rules and lifetime employment
– supervisors need to be precise when issuing
directives
– customers less willing to try new products
Trust
• Leads to lower cost of doing business
Fatalism—belief in inevitability of events rather than self-
determination
• High fatalism—people plan less for contingencies

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Information and Task Processing
Perception of cues
• Cues perceived selectively
• Each culture is able to perceive some subjects more
precisely than other cultures perceive them
Obtaining information
• Low-context culture—focuses on firsthand information
that bears directly on issues to be decided
• High-context culture—focuses on information peripheral
to the issue to be decided

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Strategies for Dealing with Cultural Differences
Making little or no adjustment
• Host cultures do not always expect foreigners to adjust to
them
• Less adjustment necessary when moving to a country
with a similar culture
Communications
Spoken and written language
• Difficult to directly translate one language into another
Silent language
• tions, sense of appropriate distance, time and status
cues, and body language (kinesics)
Culture Shock
Frustration from having to learn to cope with new cultural cues
and expectations

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 Stages of Culture Shock
High

Understanding
Acceptance of New Culture

Elation

Frustration
Low
1 2 3 4 5 6
Months Living in New Culture
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Company and Management Orientations
Polycentrism
• Overly cautious response to cultural variety
– imitation of local practices
• Decentralized structure
– home office may lose control over local operations
Ethnocentrism
• Belief that home-country practices and objectives should
prevail
• Ignores important local factors
• Believes that change is not difficult
Geocentrism
• Between polycentrism and ethnocentrism
• Based on informed knowledge of home- and host-country
needs, capabilities, and constraints
• Preferred approach to IB

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Strategies for Instituting Change
Value system
• The more a change upsets important values, the more
resistance it will engender
Cost benefit of change
• Company must consider the expected cost-benefit
relationship of any adjustments it makes abroad
Resistance to too much change
• Resistance to change may be lower if the number of
changes is not great
• Make fewer demands at one time and phase in other
policies more slowly
Participation
• Discussing proposed change with stakeholders in
advance may reduce resistance
• Participation must not violate prevailing value system

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Strategies for Instituting Change (cont.)
Reward sharing
• Employees are more apt to support change when they
expect personal or group rewards
Opinion leaders
• Should be convinced first about benefits of change
• Can help speed up the acceptance of change
Timing
• Change should be timed to occur when resistance is likely
to be low
• Must attend to attitudes and needs of culture
Learning abroad
• International companies should learn things abroad that
they can apply at home

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4) When divergent cultures come in
contact, ________ occurs. A)
power distance B) culture shock C)
cultural collision D) group
membership Answer: C

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