Culture in International Business: Comprehensive Notes (LO 3-1 and LO 3-2)
What Is Culture and Why It Is Important
Culture affects all business activity across functions in international contexts; it shapes beliefs, values, behaviors, and norms that guide how organizations operate and how people interact.
Two core ideas emphasized in the module:
Culture is the foundational architecture of our minds; it manifests in social systems and helps solve shared problems (quote by Nicholas Athanassiou).
Managers must recognize that cultures differ and that ethnocentricity (the belief that one’s own culture is superior) can impede cross-cultural work.
Definitions of culture (several useful perspectives):
Anthropologists view culture as the sum total of beliefs, rules, techniques, institutions, and artifacts that characterize human populations.
At the individual level, culture can be understood as the worldviews, social rules, and interpersonal dynamics within a group in a specific time/place.
Four widely cited propositions about culture:
1) Culture is learned, not innate.
2) The aspects of culture are interrelated.
3) Culture is shared, patterned, and mutually constructed through social interaction.
4) Culture defines the boundaries of different groups.
The iceberg model: surface culture vs deep culture
Surface culture is visible and tangible, while deep culture consists of beliefs, attitudes, and values learned in childhood.
The analogy is often depicted as an iceberg: the visible 10% above water and the hidden 90% below waterline (, ).
Deep culture vs surface culture in practice
Deep culture includes assumptions about marriage, social roles, communication styles, and decision-making practices that are not immediately observable.
Surface cues include language use, dress, rituals, and public behavior.
Cultural learning for international managers (Hall’s framework)
E. T. Hall proposes two paths to learn about another culture:
Spend a lifetime in the culture.
Undergo an extensive training program that covers main characteristics, including language.
Intensive study goes beyond a country briefing and aims to understand how culture institutionalizes human behavior.
Real-world constraint: many newcomers must balance fast-start needs with the time required for in-depth cultural learning.
Practical learning approach for managers
Start with factual knowledge about another culture.
Develop nuanced understandings of cultural differences; seek additional training when necessary.
Expect ethnocentric tendencies in newcomers and plan to address them through education and exposure.
Frameworks and institutions mentioned
GLOBE Research Project (Robert House): ongoing research to better understand how culture affects leadership across cultures.
The module encourages exploring cultural differences and leveraging them for effective management.
Marketing: How Culture Shapes Marketing Strategy
The core idea: cultural attitudes and values vary across markets, requiring different marketing mixes (product, packaging, price, promotion).
Deep market understanding is necessary: marketers must uncover how customers interpret events and how they think the world should be.
Examples of culturally tuned marketing for a luxury car:
Germany: emphasize technological and performance specifications.
United States: emphasize visual and experiential elements.
Common marketing missteps when entering foreign markets (costly but instructive):
Cranberry liqueur "Bogs" in the UK; "bog" is slang for outhouse.
"Irish Mist" and Rolls-Royce "Silver Mist" in Germany; "mist" means dung/manure.
Gerber in French-speaking markets: the word "gerber" means vomiting.
Pepsodent whitening toothpaste in Southeast Asia; consumers chew betel nuts to darken teeth, affecting product appeal.
Cake mix in Japan; research used baked cakes, while many Japanese homes lack ovens, misaligning product concept (cake to be baked from mix).
Dolce & Gabbana ads in China: a Chinese model struggling to eat Italian food with chopsticks criticized as sexist, racist, and culturally insensitive; show-cause for backlash and apology/withdrawal.
Lessons from these examples
Early research must reflect actual consumer contexts (e.g., typical kitchens, typical cooking practices).
Marketing campaigns must align with local values and avoid outdated stereotypes; address language nuances and cultural symbols.
Acquiring cultural knowledge is costly but often cheaper than recovering from a marketing disaster.
The value of market insight over surface impressions
Firms should invest in deep market understanding to design campaigns that resonate culturally and avoid affronts.
Human Resources: Culture in Motivating, Evaluating, and Managing People
Cultural values influence motivation and performance evaluation.
Individualism vs. collectivism: some cultures reward individual effort; others emphasize group effort.
Attitudes toward social status
Is social status earned through achievements or inherited from family background and schooling?
US: promotions often tied to personal accomplishments; UK example: family background and schooling influence careers in the "right" institutions.
Policy application and fairness
Some cultures expect universal application of policies; others expect policies to vary by individual and situation.
Attitudes toward authority
Patronage vs. first among equals: how managers relate to subordinates.
Views on annual reviews: as crediting growth vs. extracting higher output.
HR practices reflect deep cultural values and can shape employee behavior and organizational climate.
Production and Procurement: Culture in Operations and Sourcing
Cultural change tolerance affects adoption of new production methods.
Plant layout and work organization reflect cultural norms:
Sequential, linear culture: assembly line focus on task first.
Uddevalla approach (Volvo, Sweden, 1980s): small, autonomous, circular teams assembling an entire car in hours.
Resource acquisition (procurement) culture
Asia: procurement often organized through a web of social relationships and friendships (trust-based, relational).
United States: price transparency and formal contracts dominate.
Relationship-driven deals in Japan
Personal relationships matter; declining an invitation to a social activity like hashigo (pub crawl) can jeopardize a deal.
Contracting and enforcement differences
Brazil: supply contracts often require flexibility in interpretation and enforcement due to changing laws and conditions.
United States: more common to rely on detailed written agreements and strict enforcement.
Implications for supply chain management
Managers must balance relational dynamics with formal contracts; tailor procurement strategies to local norms while maintaining governance standards.
Culture, Ethnocentricity, and Learning Across Borders
Ethnocentricity: belief that one’s own culture is superior; newcomers may face resistance when introducing their home culture’s approaches in another market.
Observing cultural differences in practice
In Japan, it is common to ask someone’s age when first meeting; language and social status cues require age-based terminology and respectful forms.
Two-step learning approach (Hall) revisited
Accept cultural differences as a starting point.
Learn the characteristics of other cultures to adapt, including language, social norms, and business etiquette.
Practical takeaway for managers
Begin with awareness of ethnocentrism, then pursue targeted, practical cultural knowledge.
Use cultural frameworks to anticipate differences and plan accommodations in management, communication, and negotiation.
Cultural learning beyond quick briefings
True mastery requires broader knowledge: subcultures, regional variations, and organizational cultures within host markets.
Culture: Definitions, Structure, and the Iceberg Model
What is culture? Several useful, overlapping definitions:
The sum total of beliefs, rules, techniques, institutions, and artifacts that characterize human populations.
The individual worldviews, social rules, and interpersonal dynamics that define a group in a specific time/place.
Four core propositions about culture (reiterated):
Culture is learned.
Different aspects of culture are interrelated.
Culture is shared, patterned, and mutually constructed via social interaction.
Culture defines group boundaries.
Deep culture vs surface culture (iceberg analogy)
Surface culture: norms, symbols, rituals that are visible and easily observed.
Deep culture: beliefs, values, attitudes learned in childhood that govern behavior.
Relevance for managers
Understanding both surface and deep culture helps explain why people act as they do in business contexts and how to interact effectively.
Accounting and Finance Across Cultures
Culture shapes accounting controls and trust assumptions
Tight controls across the organization reflect a culture with low trust; looser controls reflect higher reliance on social norms and trust.
Governance style: formal, rule-based systems vs. norms-based systems.
International treasury challenges in cross-cultural settings
Local banks may prioritize who the treasurer is more than the balance sheet quality due to cultural norms.
Creative accounting in some contexts can be used to manage tax burden, affecting reliability of financial statements.
Illustrative example: Italy tax filing mismatch
A U.S. executive filed Italian tax documents as in New York, contrary to local advice that Italian tax payment is negotiated; outcome: overpayment.
Culture facts and contrasts in accounting practices
EU accounting: broadly based on principles; US accounting: based on a collection of detailed rules.
Implications for international finance
Financial reporting, auditing, and tax planning require sensitivity to local norms, legal regimes, and trust structures.
Leadership Across Cultures
Preferred leadership styles vary by culture in terms of:
The typical leader-subordinate relationship: hierarchical vs. lateral.
Paternalistic vs. participative or heroic leadership models.
Path to leadership: internal promotion vs. appointment based on status or family connections.
Communication style: directness vs. indirectness and use of metaphors.
Tolerance for conflict: openly disagreeing vs. maintaining harmony and saving face.
Country-specific example
In Japan, leadership often has a paternalistic flavor where a firm's director may play a role in vetting a member’s prospective spouse.
The GLOBE project and leadership research
The discussion points to the GLOBE Research Project (Robert House) as a major source of cross-cultural leadership findings.
Emphasizes that leadership expectations and effectiveness are culturally contingent.
Practical implications for global managers
When selecting leaders, consider cultural fit with local expectations and organizational norms.
Use cross-cultural leadership insights to tailor communication, decision-making, and conflict resolution.
Learning and development implications
Encourage direct experience, subculture exposure, and language study; consider participating in or leveraging the GLOBE framework for leadership development.
Key Takeaways and Practical Implications for International Managers
Always start from the premise that cultures differ and ethnocentricity is common.
Do not rely solely on surface cues; invest in understanding deep cultural values and norms.
Customize strategies for each function (Marketing, HR, Production/Procurement, Accounting/Finance, Leadership) to reflect local cultural realities.
Use a combination of factual knowledge and nuanced training to shorten the time needed for cross-cultural competence.
Leverage frameworks and tools (e.g., iceberg model, Hall’s learning paths, GLOBE studies) to structure learning and decision-making.
In negotiations and contracts, balance relational/cultural considerations with formal governance to achieve reliable outcomes.
Recognize that culture is both a constraint and an opportunity: it can create friction but also enable more effective, locally resonant business practices.
Summary of Core Concepts (at-a-glance)
Culture is learned, interrelated, shared, and boundary-defining; it shapes how organizations function.
Surface culture vs. deep culture: only a small portion is visible; most important beliefs and values lie below the waterline.
Ethnocentricity can impede cross-cultural interaction; learning and adaptation are essential.
Marketing, HR, Production/Procurement, and Accounting/Finance are all influenced by cultural norms and require culturally informed strategies.
Leadership practices vary across cultures; understanding GLOBE insights helps tailor leadership development.
Practical strategies include accepting cultural differences, pursuing deep cultural knowledge, and leveraging subcultural insights and international experiences.
References to Key Figures and Studies Mentioned
Nicholas Athanassiou, Northeastern University: quote on culture as foundational architecture.
E. T. Hall: two paths to learning culture (life-long immersion or extensive training).
Dolce & Gabbana controversy in China (cultural sensitivity in advertising).
Hashigo: social invitation in Japan (pub crawl) as a factor in deal closure.
GLOBE Research Project (Robert House): leadership across cultures.
General concepts of ethnocentricity and cultural adaptation in international business.