International Business

Competing in the Global Marketplace

8e

By Charles W.L. Hill

Chapter 3

Differences
in Culture
 What Is Cross-Cultural Literacy?
Cross-cultural literacy is an understanding of
how cultural differences across and within
nations can affect the way in which business is
practiced
It is important for foreign businesses to gain an
understanding of the prevailing culture of its
host country, and that success requires a
foreign firm to adapt to the culture
Beware of ethnocentric behavior, or a belief in
the superiority of one’s own culture
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 What Is Culture?
 Culture is a system of values and norms that are
shared among a group of people and that when
taken together constitute a design for living
values are abstract ideas about what a group
believes to be good, right, and desirable
norms are the social rules and guidelines that
prescribe appropriate behavior in particular
situations
 Society refers to a group of people who share a
common set of values and norms

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What Are Values and Norms?
Values provide the context within which
a society’s norms are established and
justified and form the bedrock of a
culture
Norms include
folkways - the routine conventions of
everyday life
mores - norms that are seen as central to the
functioning of a society and to its social life
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 How Are Culture, Society, and
The Nation-State Related?
The relationship between a society and a
nation state is not strictly one-to-one
A society is defined as a group of people that
share a common set of values and norms
people who are bound together by a common
culture
Nation-states are political creations
can contain one or more cultures
A culture can embrace several nations
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 What determines Culture?
The values and norms of a culture evolve
over time
Determinants of culture (Figure 3.1)
include
religion
political and economic philosophies
education
language
social structure

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 What Is a Social Structure?

Social structure refers to a society’s basic

social organization
Consider two dimensions:
the degree to which the basic unit of social
organization is the individual, as opposed to
the group
the degree to which a society is stratified into
classes or castes

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 How Are Individuals and
Groups Different?
 In Western societies, there is a focus on the
individual, benefits include
common individual achievement
dynamism of the U.S. economy
high level of entrepreneurship
 But, individualism creates a lack of company loyalty
and failure to gain company specific knowledge
competition between individuals instead of team
building
less ability to develop a strong network of contacts
within a firm
Copyright © 2011 McGraw-Hill/Irwin 3-9
 How Are Individuals and
Groups Different?
In many Asian societies, the group is the
primary unit of social organization
discourages job switching between firms
encourages lifetime employment systems
leads to cooperation in solving business
problems
But, the primacy of the value of group might
also suppress individual creativity and
initiative

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 What Is Social Stratification?
Societies are stratified in two related ways
1. The degree of social mobility - the extent to which
individuals can move out of the strata into which they
are born
 caste system - closed system of stratification in which
social position is determined by the family into which a
person is born
 class system - open stratification; social position can
be changed through achievement or luck
2. The significance attached to social strata in business
contexts
 Class consciousness is a condition where people tend to
perceive themselves in terms of their class background

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 How Do Religious and
Ethical Systems Differ?
 Religion is a system of shared beliefs and rituals
that are concerned with the realm of the sacred;
Ethical systems are a set of moral principles, or
values, that are used to guide and shape behavior
 Religion and ethics are often closely intertwined
 Four religions dominate society
1. Christianity
2. Islam
3. Hinduism
4. Buddhism
 Confucianism is not a religion, but influences
behavior and shapes culture in many parts of Asia
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World Religions

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 What Is Christianity?
The largest religion in the world
20% of the world’s people identified as Christians
Found throughout Europe, the Americas, and
other countries settled by Europeans
The three main branches of Christianity:
Catholic, Orthodox, and Protestant – the latter
has the most important economic implications
the Protestant work ethic (Max Weber, 1804)
hard work, wealth creation, and frugality is the
driving force of capitalism
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 What Is Islam?
 The world’s second largest religion, with about 1
billion adherents
The central principle of Islam is that there is but one
true omnipotent of God; people do not own property,
but only act as stewards for God
Teaching peace, justice, and tolerance
supportive of business, but the way business is
practiced is prescribed
Islamic fundamentalists have gained political power in
many Muslim countries and blame the West for many
social problems; they are associated in the Western
media with militants, terrorists, and violent upheavals

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 What Is Hinduism?
Hinduism
practiced primarily on the Indian sub-continent
focuses on the importance of achieving spiritual
growth and development and believes that a
moral force requires the acceptance of certain
responsibilities, called dharma
Hindus are valued by their spiritual rather than
material achievements
Hindu culture’s reverence for the cow
promotion and adding new responsibilities may
not be important, or may be infeasible due to the
employee's caste
Copyright © 2011 McGraw-Hill/Irwin 3-16
 What Is Buddhism?
Buddhism
has about 350 millions followers
stresses spiritual growth and the afterlife,
rather than achievement while in this world
does not emphasize wealth creation
entrepreneurial behavior is not stressed
does not support the caste system, individuals
do have some mobility and can work with
individuals from different classes

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 What Is Confucianism?
Confucianism
ideology practiced mainly in China, Korea, and
Japan
teaches the importance of attaining personal
salvation through right action
high morals, ethical conduct, and loyalty to
others are stressed
three key teachings of Confucianism - loyalty,
reciprocal obligations, and honesty - may all lead
to a lowering of the cost of doing business in
Confucian societies

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 What Is the Role of
Language in Culture?
 Language includes both the spoken and unspoken
(nonverbal communication such as facial
expressions, personal space, and hand gestures)
means of communication
countries with more than one language often have
more than one culture
English is the world’s most widely spoken language
and is also becoming the language of IB
Chinese is the mother tongue of the largest number
of people, followed by English and Hindi
knowledge of the local language is still beneficial
failing to understand the nonverbal cues of another
culture can lead to communication failure

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 What Is The Role of
Education In Culture?
Formal education is the medium through
which individuals learn many of the language,
conceptual, and mathematical skills that are
indispensable in a modern society
important in determining a nation’s competitive
advantage
Japan’s excellent education system is an
important factor underlying its economic success
general education levels can be a good index for
the kinds of products that might sell in a country

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 How Does Culture
Impact the Workplace?
 Probably the most famous study of how culture
relates to value in the workplace was conducted by
Geert Hofstede, who identified four dimensions of
culture
1. Power distance – how a society deals with the fact
that people are unequal in physical and intellectual
capabilities
2. Uncertainty avoidance – the extent to which different
cultures socialize their members into accepting
ambiguous situations and tolerating ambiguity
3. Individualism vs. collectivism
4. Masculinity vs. femininity – the relationship between
gender and work roles

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Work-Related Values for 20 Countries

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 Was Geert Hofstede Right?
 Hofstede later added a fifth dimension called
Confucian dynamism , also long-term orientation
captures attitudes toward time, persistence,
ordering by status, protection of face, respect for
tradition, and reciprocation of gifts and favors
 Hofstede’s work has been criticized because
the assumption of one-to-one relationship between
culture and the nation-state
study may have been culturally bound
used IBM as sole source of information
culture is not static – it evolves
 But, important to understand how cultures differ, and
the implications of those differences for managers

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 Does Culture Change?
Culture evolves over time
changes in value systems can be slow and
painful for a society
Social turmoil - an inevitable outcome of
cultural change
as countries become economically stronger,
cultural change is particularly common
e.g., Japan has been moving toward greater
individualism

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 What Do Cultural Differences
Mean For Managers?
1. It is important to develop cross-cultural
literacy
 companies that are ill informed about the practices
of another culture are unlikely to succeed in that
culture
 managers must beware of ethnocentric behavior, or
a belief in the superiority of one's own culture
2. There is a connection between culture and
national competitive advantage
 suggests which countries are likely to produce the
most viable competitors
 has implications for the choice of countries in which
to locate production facilities and do business
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 Review Questions
1. Abstract ideas about what a group believes
to be good, right, and desirable are called
___________.
2. The basic social organization of a society is its
___________.

3. The group is the primary unit of social

organization in ___________.
a) Japan b) the United States
c) Switzerland d) Mexico
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 Review Questions
4. Which of the following is not characteristic
of individualism?
a) individual achievement
b) low managerial mobility
c) low company loyalty
d) entrepreneurial behavior
5. Which religion promotes the notion that a
moral force in society requires the
acceptance of certain responsibilities called
dharma?
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 Review Questions
6. The most widely spoken language in the
world is ___________.
7. _________ focuses on how society deals with
the fact that people are unequal in physical
and intellectual capabilities.
8. Which refers to nonverbal communication
such as facial expressions, personal space,
and hand gestures?

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