International Business

The Cultural
Environment
of Business
- Culture ….. ‘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, leading to learned patterns of
behavior common to societal members.
- Cultural differences are always debatable (as they have measurable criteria).
- Key elements of culture include language, religion, values, attitudes, customs,
and norms of a group or society.
- Language is perhaps the most important key to understanding culture in general
and the specific values, beliefs, attitudes, and opinions of a particular individual
or group.
- English is widely accepted as the language of business
- Official language of many global institutions and companies … for Toyota, NEC, Hitachi, and IBM
Japan, English-speaking ability is a prerequisite for promotion.
- Religion (via a set of shared core values) influences culture.
- Protestants hold strong beliefs about the value of delayed gratification, saving, and investment,
(spirit of capitalism) during the Industrial Revolution…..r ather than spend, consume, enjoy
life now, their religious beliefs prompted them to seek longer-term rewards (including
those in the after-life).
- There are parallels with the Confucian and Shinto work ethics….spiritual rewards as
tied to hard work and commitment to the fruits of industry.
- Point of discussion: Religion-based cultural views in Asia?
Corporate culture …. a
term used to characterize how the
managers and employees of a firm tend to behave.
- also used by HRM and senior management 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.
• Point of discussion:
• Find out organizations with a distinctive corporate culture. How has it enhanced its
sense of community and shared identity?
CULTURE IN DIFFERENT BUSINESS CONTEXTS
• Cross-cultural management issues arise in a
range of business contexts.
• Within individual firms, managers from a
foreign parent company need to understand
that local employees from the host country
may require different organization structures
and HRM procedures.
• In cross-border mergers and acquisitions
(M&As) expected synergies depend on
establishing structures and procedures that
encompass both cultures in a balanced way.
• Cross-border joint ventures, alliances, or
buyer–supplier relationships between two or
more firms also require a cultural
compromise.
• For firms to sell successfully to foreign
customers requires culturally sensitive
adaptations to products, services, marketing,
and advertising.
Ethnocentrism … the belief that one’s own way of doing things is superior
to that of others.

Recognize differences, combine advantages that stem from different styles

and approaches, adjust and adapt to succeed with different people, different
partnerships, in different markets.

Cultural convergence … the growing similarity between national cultures

(beliefs, values, aspirations, consumers preferences) – global brands, media.

Americanization …. homogenization of global consumer preferences

through the ubiquity of McDonald’s, Coca-Cola, and Ford) overstate the
similarities between groups of people around the world. What do you think??
NATIONAL STEREOTYPES AND KEY DIMENSIONS OF CULTURE
Culture at two levels
■ The psychic or psychological level … focus: internalized norms, attitudes,
behavior of individuals from a particular culture (psychic distance is a
measure of differences between groups).
■ The institutional level … focus: national (or group) culture embodied in
institutions (government, education, and economic institutions as well as in
organizations).
- Nationality and culture tend to coincide, although nations
encompass a wide variety of institutions, religions, beliefs, and patterns of
behavior, and distinctive subcultures can always be found within individual
countries.
Hofstede’s four dimensions of culture
-Dutch psychologist who conducted one of the earliest and best-known
cultural studies in management, on IBM’s operations in 70 countries around
the world.
- Psychic distance …. Measures similarity or difference between two cultures,
measurable distance between the home market and a foreign market.
- Power distance …. extent to which a culture accepts that power in
organizations is distributed unequally.
High power distance equates with steep organizational hierarchies, with more
autocratic leadership and less employee participation in decision making.
- Uncertainty avoidance … degree to which members of a society feel
uncomfortable with risk and uncertainty.
- High uncertainty avoidance (Japan, Argentina, France) meanshigh priority
placed on rituals, routines, and procedures in organizations and society in
general.
- Countries with low uncertainty avoidance (Denmark, UK, India,US) tend to
emphasize flexibility and informality rather than bureaucracy.
- Individualism … the extent to which people are supposed to take care of
themselves and be emotionally independent from others.
- Masculinity … value attributed to achievement, assertiveness, and material
success (Japan, Mexico, Germany, UK) as opposed to the stereotypical
feminine values of relationships, modesty, caring, and the quality of life
(Sweden, Netherlands, Denmark) according to Hofstede.
 The GLOBE dimensions of culture
• The Global Leadership and Organizational Behavior Effectiveness project (GLOBE, 1992)
involved 150 researchers collecting data on cultural values and management and leadership
attributes from 18,000 managers across 62 countries.
• Gender differentiation. The degree to which gender role differences are maximized: South
Korea, Egypt, India, and the China are high; Hungary, Poland, and Denmark are low.
• Uncertainty avoidance. A reliance on societal norms and procedures to improve
predictability, a preference for order, structure, and formality: Sweden, Switzerland, and
Germany are high; Russia, Bolivia, and Greece are low.
• Power distance. Russia, Thailand, and Spain are high; Denmark, the Netherlands, and Israel
are low.
• Institutional collectivism (individualism vs. collectivism). Promoting active participation in
social institutions: Sweden, South Korea, and Japan are high; Greece, Argentina, and Italy are
low.
• In-group/family collectivism. A pride in small-group membership, family, close friends, etc.:
Iran, India, and China are high; Denmark, Sweden, and New Zealand are low.
• Performance orientation. Singapore, Hong Kong, and the United States are high; Russia,
Argentina, and Italy are low.
• Humane orientation. An emphasis on fairness, altruism, and generosity: Ireland, Malaysia,
and Egypt are high; Germany, Spain, France, Singapore, and Brazil are low.
Cross-cultural Management
End of lecture 2
Discussion…..