The Cultural Environment

of International Business

-International Business-
 Culture
Learned norms based on values, attitudes, and
beliefs of a group of People.

Culture is the software of the mind.

It is the social programming that runs the way
we think , act and perceive ourselves.
Culture is learned, shared, and transmitted from
one generation to the next.

Culture can be passed from parents to children,

by social organizations, special interest groups,
the government, schools, and religious
institutions.
 Cultural Shock
Cultural shock is a feeling of confusion ,
insecurity and anxiety caused by strangeness
of the new environment.

Environmental changes some times produce

cultural shock.
 Cultural Diversity
 Differences among cultures across the
world

 A means of gaining global competitive

advantage by bringing together people of
diverse backgrounds and experience
 Onion skin/icebergs and culture
Artifacts and creations

Values

Basic
Assumptions

(modified from Schein)

 The elements of
Culture are
interrelated and
reinforce each other.

 British Culture is its class

system.
 Australian Culture is very
multicultural due to the
diversity in nationalities that
have origins in foreign
cultures.
Culture as a learned
behavior is adaptive

 Culture changes in response to

external forces that affect society.
 Urban societies around the world
have enormous similarities due to the
impact of multinational corporations,
technology and tourism.
How Do Cultural Differences
Affect International Business?

 Understanding and adapting to the

local culture is important for
international companies
◦ cross-cultural literacy - an
understanding of how cultural
differences across and within
nations can affect the way in
which business is practiced
 A relationship may exist between
culture and the costs of doing
business in a country or region
◦ MNEs can be agents of cultural
change
Culture as a:

problem/threat opportunity/resource

culture gets “in the way culture as a source of competitive

advantage
Hofstede’s Cultural Dimensions
 Hofstede’s Cultural Dimensions
Power
Distance

Extent to which less powerful members of institutions and

organizations accept that power is distributed unequally

◦ High power distance countries:

◦ People blindly obey the orders of their superiors

◦ Centralized and tall organization structures

◦ Low power distance countries:

◦ Decentralized and flatter organization structures,

◦ Positional power is not distinctive

 Hofstede’s Cultural Dimensions Cont..
Uncertainty
Avoidance

Extent to which people feel threatened by ambiguous situations

and have created beliefs and institutions that try to avoid such
situations

◦ High uncertainty avoidance countries:

◦ People have high need for security,

◦ Strong belief in experts and their knowledge,

◦ Structured organizational activities,

◦ More written rules & regulations

◦ Less risk taking by managers

Hofstede’s Cultural Dimensions Cont..

Low uncertainty avoidance countries:

◦ People are more willing to accept risks associated with the
unknown,
◦ Less structured organizational activities
◦ Fewer written rules.
◦ More risk taking by managers,
◦ Higher employee turnover
◦ More ambitious employees
 Hofstede’s Cultural Dimensions Cont..

Individualism/
Collectivism

Individualism: Tendency of people to look after

themselves and their immediate family only

◦ Countries high in individualism:

◦ Tend to be wealthier

◦ Greater individual initiative

◦ Promotions based on market value

Hofstede’s Cultural Dimensions Cont..

Collectivism: Tendency of people to belong to

groups or collectives and to look after each other in
exchange for loyalty
◦ Countries high in collectivism:

◦ Tend to be poorer

◦ Less individual initiative

◦ Promotions based on seniority

 Hofstede’s Cultural Dimensions Cont..
Masculinity/
Femininity

Masculinity: a culture in which the dominant social

values are success, money and things
◦ Countries high in masculinity:

◦ Great importance on earnings, recognition, advancement,

challenge, and wealth.

◦ High job stress.

Hofstede’s Cultural Dimensions Cont..

Femininity: A culture in which the dominate social

values are caring for others and the quality of life

Countries high in femininity:

Great importance on cooperation, friendly atmosphere,
employment security, group decision making, and living
environment.

Low stress and more employee freedom.

 Hofstede’s Cultural Dimensions Cont..
Short Term / Long
term

Long-term orientation: Is the extent to which

people accept delayed gratification of material,
social, and emotional needs.
These cultures focus on long-term goals, investment
in the future, and are prepared to sacrifice short-term
profit.

Short-term orientation:
These cultures focus on short-term goals, current
consumption, and are not prepared to sacrifice short-
term profit.
 Cultural Dimension Scores for 12 countries

100 100
Japan U.S.A
France Netherlands
Great Britain
Mexico
Brazil
Uncertainty Germany Germany Individualism
Avoidance Arab Countries
France
Netherlands West Africa
Japan
50 50
Brazil
U.S.A Indonesia Arab Countries
Great Britain Mexico
Hong Kong

Hong Kong
West Africa
Indonesia
0 50 10 50 0
Power Distance 0 Masculinity

20
How Does Culture
Impact The Workplace?
Work-Related Values for 20 Countries
Activity 10 minutes
Is language the essence of
culture? Discuss
What Is The Role of Language In Culture?
 Language - the spoken and unspoken (nonverbal communication such as facial
expressions, personal space, and hand gestures) means of communication
◦ Chinese is the mother tongue of the largest number of people
◦ English is the most widely spoken language in the world and is also becoming the
language of international business
◦ but, knowledge of the local language is still beneficial, and in some cases, critical
for business success
◦ failing to understand the nonverbal cues of another culture can lead to
communication failure
Language Differences
 English is widely considered the language of
international business
◦ More people use English to conduct business than
any other language
 Advantages of using English
◦ Understood by many
◦ Ideas can be expressed in many ways
◦ Large number of business-related words
◦ Concise and precise

3
Learning a Second Language

 Consider learning
language of dominant
trading partners.
 Learning a country’s
language helps you
understand the
culture.

3
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

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

Multi-cultural teams• “The central operating mode
for global enterprises is the
creation, organization, and
management of multi-
cultural teams – groups that
represent diversity in
functional capability,
experience levels, and
cultural backgrounds.

• Rheinsmith, “The Manager’s

Guide to Globalization”Page 27
(1993)
Multi-cultural teams
• Guidelines for diagnosing the effectiveness of multicultural teams

• Begin as one would with mono-cultural teams until there is a problem that appears
to have a cultural basis.

• Differences in national culture, while important, are usually secondary

• The mistake made by many managers is not that they leap to cultural solutions from
personal differences, but that they do not know enough about cultural
differences to determine whether or not they are a factor.
Adjusting to the environment