International Business

INTERNATIONAL CULTURE
Chapter 5
 INTRODUCTION
• The number of workers employed by foreign-owned companies has grown
significantly over the past 20 years as a result of the expanding activities of foreign
affiliates of MNEs around the world.
• For many people, both employers and employees, this has brought home the realities
of globalization.
• An estimated 53 million people globally now work for foreign companies. Companies
such as Motorola, General Motors, British Petroleum, and General Electric are among
the largest private-sector employers in economies such as Malaysia and Singapore.
• This growing multicultural workforce, part of the increasingly global patterns of
exchange and interaction makes it more and more important to understand how
people’s preferences, beliefs, and values differ.
• Understanding international cultural differences allows us to be aware of and adapt to
the differences that matter for managers
WHAT IS CULTURE?
• Culture can be defined as “the sum total of the beliefs, rules,
techniques, institutions, and artifacts that characterize human
populations” or “the collective programming of the mind.”
• Sociologists generally talk about the socialization process, referring to
the influence of parents, friends, education, and the interaction with
other members of a particular society as the basis for one’s culture.
These influences result in learned patterns of behavior common to
members of a given society.
 Elements of culture
• Language is critical to culture because it is the primary means used to
transmit information and ideas.
• Knowledge of local language can:
- permit a clearer understanding of a situation;
- provide access to local people;
- allows the person to pick up nuances, implied meanings, and other
information that is not stated outright.
 Religion
• Religions influence lifestyles, beliefs, values and attitudes and can have
a dramatic effect on the way people in a society act toward each other
and towards those in other societies.
• Religion also influences:
- the work habits of people;
- the work and social customs (from the days of the week on which people work
to their dietary habits);
- politics and business.
 Values and attitudes
• Values: basic convictions that people have regarding what is right and
wrong, good and bad, important and unimportant.
• Attitude: a persistent tendency to feel and behave in a particular way
toward some object.
Customs and manners
• Customs: common or established practices.
• Manners: behavior regarded as appropriate in a particular society.
Corporate culture
• Corporate culture is a term used to characterize, how the managers
and employees of particular companies tend to behave.
• Corporate culture is also used by human resource managers and
senior management in their attempts to proactively shape the kind of
behavior (“innovative”, “open”, “dynamic”, etc.) they hope to nurture
in their organizations.
• Promoting a distinctive corporate culture is also expected to enhance
the sense of community and shared identity that underpins effective
organizations.
 Corporate culture examples
• Netflix, is one of the leading technology
companies in the world as a 7-billion-dollar
industry, and one of the
great examples of company culture. The
common-sense approach to work allows
them to have one of the highest standards
set for their employees in the business
world. How does Netflix maintain these
high standards? As an alternative to
extensive rules and processes, Netflix opts
for increases in  friendly environment, and parks. Employees
employee responsibility and freedom. They
don’t worry about how many hours
someone works, but the accomplishments
that come from those hours. Netflix also
understands that new hires are investments.
As such, it’s important to reward high
performers and eliminate low performers
through company culture.
‍ oogle has been an icon in terms
G •
of examples of company culture for years.
They have single-handily set the tone for
thousands of companies today. What does
Google do differently? Well, the perks and
benefits begin with free meals, employee
social gatherings, financial bonuses and open
presentations by high-level executives. Other
admirable quirks include gyms, a dog-
are thought to be driven, talented and among
the cream of the crop. The message? Care
about your employees and they will care for
you.
Twitter is the true definition of a team-
orientated environment that employees
rave about. The employees enjoy health
and fitness classes, rooftop meetings,
and continued education through
Twitter University. The friendly
environment also allows for feedback at
all levels of management through
designated meetings. The biggest reason
Twitter is one of the
top examples of company culture?
People that work at Twitter believe what
they’re doing matters. That will always
be the biggest boost to productivity.
The importance of culture in different business contexts
Influences of culture on international management
• Culture influences strategic management in a number of ways:
Work attitudes
- for example, work ethics, organization commitment, etc.
Achievement motivation
- the desire to accomplish objectives and achieve success.
Time and future
- for example: punctuality, decision-making time constraints, time expectations on
implementation of plans, etc.
Ethics
- standards of conduct and morality.
Culture and strategic management
• Cross-cultural management issues arise in a number of situations,
including:
- Within a firm: Work attitudes, achievement motivation, time and future and
ethics, etc.
- Between firms: M&As, joint ventures, alliances and buyer-supplier
relationships.
- Between a firm and customers: Dealing with customers.
National stereotypes and key dimensions of culture
Two approaches to culture
• Two different approaches to looking at culture:
• the psychic or psychological level, which focuses on the
“internalized” norms, attitudes and behavior of individuals from a
particular culture;
• the institutional level, which looks at national (or education,
economic institutions as well as in group) culture embodied in
institutions (government, business organizations).
 Hofstede’s four cultural dimensions
• Power distance: measures the degree to which less powerful members of
organizations and institutions accept the fact that power is not
distributed equally.
• Uncertainty avoidance: measures the extent to which people feel
threatened by ambiguous situations and have created institutions and
beliefs for minimizing or avoiding those uncertainties.
Individualism vs. Collectivism
• Individualism: the tendency of people to look after themselves and their
immediate family only.
• Collectivism: the tendency of people to belong to groups who look after
each other in exchange for loyalty.
Masculinity vs. femininity
• Masculinity: the degree to which the dominant values of a society are
success, money and material goods.
• Femininity: the degree to which the dominant values of a society are
caring for others and the quality of life.
Cross-cultural management
Useful strategies for managing cultural
diversity
• Some useful strategies for managing cultural diversity
• Recognize diversity.
- Build diversity issues into recruitment, HRM planning, strategy, location decisions,
alliances and partnerships.
- Identify where and to what degree local divisions should be encouraged or
empowered to take the lead in expressing and managing diversity.
- Encourage cross-border discussion and interaction as well as focused training.
- Aim for a cultural balance in particular areas of strategic and tactical decision-
making.
- Lead from the top.
 Multinational organizational structures: imperialist or
independent?
• Ethnocentric: top management is dominated by home-country nationals and procedures
and management styles are “transferred” from head office and “imposed” on regional
subsidiaries in place of local “ways of doing things”.
• In ethnocentric approach, home-country nationals are dispatched to fill in key position of a
subsidiary in host-country. The mind set of management is ‘what work at home, will work
here’.
• Some of the reasons to pursue ethnocentric management system are lack of qualified
personal, competency or special technical knowledge in Host-country. 
• The need for centralized control, risk management, needs for parent-subsidiary to maintain
good communication and coordination are another reasons to practice ethnocentric
management.
• However, there are several limitations associated with ethnocentric system where Host-
country has limited opportunity for career promotion and leads to high turnover.
• Adaptation of expatriates to host country takes much longer time and often leads to poor
decision and cross-cultural conflict may occur.
• Typical example of ethnocentric approach company are Japanese
firms such as Panasonic, Sony and Hitachi.
• In MasTec organization, the staffing approach for subsidiaries in
Thailand, Vietnam and India adopted ethnocentric system due to lack
of competency of Host-country and the needs for corporate
communication.
• Polycentric: firms tend to act like a federation of semi-autonomous
organizations with financial controls or strict reporting structures
holding them together.
• In polycentric staffing approach, multinational firms rely on the Host-
country to run the business operation and rarely home-country are
transferred to foreign subsidiary. Each subsidiary is treated as an
independent business entity with decision making autonomy.
• Geocentric: An equal sharing of power and responsibility between
headquarters and subsidiary.