Chapter 4 - Differences in Culture

Culture may make opportunities or challenges for MNEs

Cross-cultural literacy

understanding of how cultural differences across and within nations can affect the way business is practiced

modernism and globalization

Culture

is rooted in values and norms

collection of values, beliefs, behaviors, customs, and attitudes that distinguish one society from another

Characteristics of Culture

learned behavior

interrelated

adaptive

shared

Values

ideas about what a group believes to be good, right, and desirable

Norms

social rules and guidelines that prescribe appropriate behavior in particular situation

Society

a group of people sharing a common set of values and norms

Values

provides the context within which a society’s norms are established and justified

invested with emotional significance

• ‘freedom’, ‘security’ - global police

often reflected in the economic systems of a society

• ‘individual freedom’ - free market capitalism

Norms

social rules that govern people’s actions

folkways

• violations not a serious matter

• U.S. and Latin - time, Japan - bow, business card

Mores

• have greater moral significance than other

• Saudia Arabia - drinking alcohol

Nation-States

political creations

a nation can have several cultures, and cultures can embrace several blanks

French culture / Canada, Africa, India / Scandinavian, Islamic

Determinants of Culture

religion

political philosophy

economic philosophy

education

language

social structure

Two Dimensions Explain Differences Among Cultures

the basic unit of social organization is the individual, as opposed to the group

individualistic vs. collectivistic

The Individual

basic building block of social organization

• emphasis on blank achievement

• entrepreneurship, innovation

• high managerial mobility between companies (personal brand)

The Group

primary unit of social organization in non-western societies

• importance of blank membership/identification

• Japan (lifetime employment, lack of entrepreneurship)

Social Stratification

all societies are stratified on a hierarchical basis into social categories, or social strata

• individuals are born into a particular stratum, which affects life chances

4 basic principles

• trait of society

• carries over into next generation

• generally universal but variable

• involves not just inequality but also beliefs

Social Mobility

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

varies among societies

Caste System

social position determined by family (closed & rigid system)

India has four main castes (officially abolished in 1949)

Class System

form of open and less rigid social stratification

position can be changed through achievement or luck

Significance

affects business operations

class consciousness

UK (management vs. labor), China (urban dweller vs. rural peasantry)

Makes it difficult to establish a competitive advantage in a global economy

Religion

a system of shared beliefs and rituals that are concerned with the realm of the sacred

Ethical System

a set of moral principles, or values, that are used to guide and shape behavior

most are the product of religions

four dominant religion

• Christianity

• Islam

• Hinduism

• Buddhism

Christianity

the world’s largest religion

found throughout Europe, the Americas, and other countries settled by Europeans

Catholic, Orthodox, Protestant

Economic Implications of blank

• Max Weber - Protestantism and the modern capitalism

• Importance of hard work, wealth creation and frugality

• Breaking away from the hierarchical religious life

  • → individual freedom → entrepreneurship

Islam

the world’s second largest religion dating to A.D. 610 monotheistic, one true omnipotent God (Allah)

Fundamentalism

• associated in the western media with militants, terrorists, and violent upheavals (misleading)

• Muslims teach peace, justice, and tolerance

Economic Implications

• The Koran - many pro-free enterprise principles, protection of private property, concern with social justice

• prohibits the payment or receipt of interest (law)

Hinduism

practiced primarily on the Indian subcontinent

focus on achieving spiritual growth and development, which may require material and physical self-denial

economic implications

• valued by their spiritual rather than material achievements

• promotion and adding new responsibilities may not be important, or may be infeasible due to the employee’s caste

Buddhism

mostly, in central and southeast Asia, China, Korea, Japan

stresses spiritual growth and the afterlife, rather than achievement while in this world

Economic Implications

• does not emphasize wealth creation

• entrepreneurial behavior is not stressed culturally, but still acceptable

• does not support the caste system, individuals do have some mobility and can work individuals from different classes

Confucianism

practiced mainly in China

teaches the importance of attaining personal salvation through right action

high morals, ethical conduct, and loyalty to others

Economic Implications

• 3 teachings - loyalty, reciprocal obligations, and honesty - may all lead to a lowering of the cost of doing business in societies

• Guanxi - relationship (reciprocal obligation)

Spoken Language

structures the way we see the world

countries with more than 1 language often have more than 1 culture

• Canada, Belgium, Spain, Cyprus

Chinese is the mother tongue of the largest number of people

English is becoming the language of international business

Ex. ‘Mist-Stick,’ ‘Nova’

Unspoken Language

Nonverbal Communication

• often culturally bound

• personal space

Formal Education

medium through which individuals learn languages and other skills

socializes the young into the values and norms of a society

• citizenship and culture

provides a national competitive advantage

• Japan, India

index - the kind of sales products, the type of promotional material

Hofsted’s Dimensions of Culture

power distance - power tolerance vs. power respect

uncertainty avoidance - uncertainty acceptance vs. uncertainty avoidance

individualism vs. collectivism

masculinity vs. feminity

time orientation - long-term vs. short-term orientation

and more recently - indulgence vs. restraint

Criticism of Hofstede’s research on culture

assumes a one-to-one correspondence between culture and the nation-state when many countries have more than one culture

may be culturally bound

focused on a single industry

A leader’s effectiveness is contextual

embedded in the societal and organizational norms, values, and beliefs of the people being led

World Values Survey (WVS)

explores people’s values and norms, how they change over time, and what impact they have in society and business

Timplications for Business Practice

cultural literacy and competitive advantage

Cultural Literacy and Competitive Advantage

need to develop cross-cultural literacy

Ethnocentrism

“my country is better, we should do things my countries way”

Implications for Managers

companies that are ill informed about the practices of another culture are unlikely to succeed in that culture. it is important to develop cross-culture literacy

• hire local citizens

• transfer executives to foreign locations

• avoid “ethnocentric behavior”