Country Factors: Differences in Culture

Cross-cultural literacy

an understanding of how cultural differences across and within nations can affect the way in which business is practical

Culture affecting the way business practical

• Cultural differences create a common bond among people

• Numerous values and norms exist in these cultural systems that might affect international business

• Culture can and does evolve

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 (shared assumptions about things ought be)

Form the bedrock of a culture

Provide the context for establishing and justifying a society’s attitude toward:

• Individual freedom

• Democracy

• Truth and justice

• Honesty

• Loyalty

• Social obligation

• Role of women

• Love and sex

• Marriage

Norms

are the social rules and guidelines that prescribe appropriate behavior in particular situations. Social rules shape people’s actions toward one another. Norms can be divided into folkways and mores

Society

refers to a group of people who share a common set of values and norms

• There is not a strict one-to-one relationship between a society and nation-state

• Nation-states are political creations that can contain one or more cultures

• Similarly, a culture can embrace serveral nations

Folkways

• Routine conventions of everyday life

• Actions of little moral significance

• Include rituals and symbolic behavior

• Dress code, eating habits, time orientation, rituals, etc..

• Violating folkways will not be considered evil and bad

Mores

• Norms seen as centrla to the functioning of a society

• Have much greater significance than folkways

• Violating more can bring serious retribution

• Theft, adultery, incest, cannibalism

• Ex> consumption of alcohol in different countries

Characteristics of Culture":

Learned behaviours through:

• Observation

• Sharing and transferring

Characteristics of Culture:

Accumulation of solutions to common problem by:

• Accident

• Learning

• Borrowing (Cultrure Diffusion)

Other characteristics of Culture besides learned behaviors and accumulation of solutions

• All elements are interrelated

• Composed of explicit and implicit layers

• Dynamic and evolutionary

The Determinants of culture

The values and norms of a culture are the evolutionary product of a number of factors at work in a society including:

• religion

• political philosophies

• economic philosophies

• education

• language

• social structure

Social structure

refers to a society’s basic social organization (how is the society organized)

Dimension of social structure:

Individuals vs groups:

The degree to which the basic unit of social organization is the indiviual, as opposed to the group

Dimension of social structure:

Social stratification

The degree to which a society is stratified into classes or castes

A group

an association of two or more people who have a shared sense of identiy and who interact with each other in structured ways on the basic of a common set of expectations about each other’s behavior

Differ in terms of the degree to which the group is viewed as the primary means of social organization

• Often prevalent in Eastern societies

• Social status of an individual is determined by standing of the group to which they belong to as much by their individual performance

• Often expressed in a high degreee of group affiliation and the lack of managerial mobility

Individualism

• Often prevalent in Western societies

• Not only reflected in the political and economic organizations

• How people perceive themselves and relate to each other in social and business settings

• Social status of an individual is not a function of where they work but their individual performance

• Often expressed in a high degree of entrepreneurship and managerial mobility

• Makes team building more difficult

Social Stratification

• Social Strata: societies are stratified on a hiearchical basis into social categories

• Typically defined on the basis of:

  • Family background

  • Occupation

  • Income

What aspects do cultures differ from each other?

• Degree of social mobility between social strata

• Significance attached to social strata in business

Social mobility

is the extend to which individuals can move out of the strata into which they are born

Caste system

is a closed system of stratification in which social position is determined by the family into which a person is born, and change in that position is usually not possible during an individual’s lifetime

class system

is a form of open social stratification in which the position a person has by birth can be changed through his or her achievement or luck

Significance

The social stratification of a society is significant if it affects the operation of business organizations

Class consciousness

a condition where people tend to perceive themselves in terms of their class background, and this shapes their relationships with others

In cultures where class consciousness is high, the way individuals from different classes work together maybe very prescribed and strained

Geert Hofstede experiments 1967-1973

Geert Hofstede collected data on employee attitudes and values (more than 100,000 individuals)

Compared the dimensions of culture across 40 countries

Identified four dimensions of culture:

• Power distance

• Uncertainty avoidance

• Individualism versus Collectivism

• Masculinity versus femininity

Power distance

Focuses on how a society deals with the fact that people are unequal in physical and intellectual capabilities

Individualism versus collectivism

focuses on the relationship between the individual and his or her fellows

Uncertainty avoidance

measures the extend to which different cultures socialize their members into accepting ambiguous situations and tolerating uncertainty

Masculinity versus femininity

looks at the relationship between gender and work roles

Criticism of Hofstede’s research

• Assumption 1:1 correspondence between culture and the nation-state questionable

• Researchers may have been culturally bound (Euro and Americans)

• Individuals work at IBM

• Certain social classes were excluded

• Analysis is not dynamic vs development of culture over time

• Not complete

• No influence on business tested

Hofstede laser expansion

fifth dimension: Confucian dynamism: captures attitudes toward time, persistence, ordering by status, protection of face, respect for tradition, and reciprocation of gifts and favors

Cultural change

Culture evolves overtime, although changes in value systems can be slow and painful for a society

Social turmoil

is an inevitable outcome of cultural change

As countries become economically stronger:

cultural change is particularly common

Implications for Managers

1. A need to develop cross-cultural literacy

2. A connection between culture and national competitive advantage

3. A connection between culture and ethics in decision making

Cross cultural literacy implication

• Observe and study foreign cultures

• Necessity for international trade and FDI

Culture and national competitive advantage implication

• Value & norms of a count → costs of doing business in that country → ability of firms to establish a competitive advantage in the global marketplace

• Which nations might be a resource (HR, R&D)

• Which nations might be a market (early adopters)

• Which nation might a production site

Culture and business ethics implication

Many ethical principles are universal, others are culturally bound