Chapter 4 Notes: Culture and Business

Opening Case: Russian Culture

• Westerners often have difficulty understanding Russian culture, which differs in important ways from Anglo-Saxon traditions.

• Historical context: Russian values reflect the 882 founding of Kievan Rus; modern Russia dates to the Grand Duchy of Moscow in 1283.

• Key Russian cultural traits relevant to business:

  • Acceptance of unequal distribution of power

  • Conformity and community valued over individualism

  • Avoidance of uncertainty

What Is Culture?

• Definition (scholars differ): Culture is a system of values and norms shared among a group of people and, taken together, constitutes a design for living.

• Society: A group of people sharing a common set of values and norms.

Values and Norms

• Values: Ideas about what a group believes to be good, right, and desirable.

• Norms: Social rules that govern actions toward one another.

  • Folkways: Routine conventions of everyday life.

  • Mores: Norms central to the functioning of a society and its social life.

Culture, Society, and the Nation-State

• Society: People bound together by a common culture.

• Nation-states: Political creations that can contain a single culture or several cultures.

• Some cultures embrace several nations.

• Culture can be discussed at different levels within societies.

Determinants of Culture

• Values and norms evolve based on:

  • Prevailing political and economic philosophies

  • Society’s social structure

  • Dominant religion, language, and education

• Figure 4.1 (Determinants of Culture) summarizes interacting factors:

  • Culture arises from norms and value systems

  • Influenced by Education, Language, Religion, Political Philosophy, Economic Philosophy, and Social Structure

Social Structure

• Social Structure 1: Social Organization

  • Basic social organization characterized by two dimensions:

  • Degree to which the basic unit is the individual vs. the group

  • Degree to which a society is stratified into classes or castes

• Social Structure 2: Individuals and Groups

  • Group: An association of two+ individuals with a shared identity and structured interaction based on expectations

• Social Structure 3: The Individual (Western bias)

  • Emphasized in Western societies

  • Encourages individual achievement and entrepreneurship

  • Fosters managerial mobility

  • Encourages job switching and less loyalty to a single firm

• Social Structure 4: The Group (non-Western emphasis, e.g., Japan)

  • Cooperation and teamwork are encouraged; lifetime employment common

  • Individual initiative and creativity may be suppressed

  • Primacy of the group discourages moving between companies

• Social Structure 5: Social Stratification

  • All societies are stratified into social categories (e.g., by family background, occupation, income)

  • Differences across societies in:

  • Degree of mobility between strata

  • Significance of strata in a business context

• Social Structure 6: Principles of Stratification

  • It is a trait of society, not just individual differences

  • It carries over from one generation to the next

  • It is generally universal but variable

  • It involves inequality and beliefs about it

• Social Structure 7: Social Mobility

  • Extent to which individuals can move out of their birth strata

  • Caste system: position determined by family; change is unlikely

  • Class system: position may be changed by achievement or luck; mobility varies by society

• Social Structure 8: Significance

  • Class consciousness: people perceive themselves by class background

  • Shapes relations with other classes; evident in the UK and India; may be emerging in urban China

  • Labor–management antagonism can raise the costs of doing business

Religious and Ethical Systems

• Religious system: Shared beliefs/rituals concerning the sacred

• Ethical system: Moral principles guiding behavior

• Major religions by followers (overview):

  • Christianity, Islam, Hinduism, Buddhism, Confucianism (influential in Asia)

• Map/Regional notes (world religions context)

Christianity

• Most widely practiced religion

• Max Weber’s Protestant work ethic argument (1904): hard work, wealth creation, frugality

• Protestantism may have contributed to economic freedom and individualism

• Some scholars link Protestant-inspired individualism to entrepreneurial activity

Islam

• Second largest world religion; adherents are Muslims; Allah is the one omnipotent God

• Emphasis on seeking favor of Allah and entailing spiritual over worldly gains for paradise

• Islamic Fundamentalism (last few decades): modernization pressures, political power in Muslim countries, attempts to implement Islamic law

• Economic implications:

  • Koranic economic principles often support free enterprise concepts

  • Property is viewed as entrusted by God to people; contractual obligations and honesty are emphasized

  • Islamic banks use mudarabah and murabaha banking methods

Hinduism

• World’s oldest major religion; dharma (moral duties) as a core concept

• Beliefs in reincarnation and karma; goal of spiritual liberation (nirvana)

• Economic implications:

  • Weberian view: Hinduism may not foster entrepreneurship, yet modern India is highly dynamic economically

  • Caste system historically supported by Hinduism; continues to influence life

• Gandhi as a figure embodying Hindu asceticism

Buddhism

• Suffering arises from desire; emphasis on spiritual growth and afterlife beyond material achievement

• The Noble Eightfold Path

• Economic implications:

  • Generally does not support caste discrimination

  • Western business adoption of Zen orientations; focus on mindfulness and efficiency

Confucianism

• Historically official ethical system of China (not a religion) until 1949

• Emphasizes high moral conduct and loyalty; right action leads to personal salvation

• Economic implications:

  • Core teachings: loyalty, reciprocal obligations, honesty

  • May lower the cost of doing business in Confucian-influenced societies through trust and harmony

Language

Language 1: Spoken Language

• Language shapes perception; multiple languages in a country can correlate with multiple cultures

• Chinese is the most spoken mother tongue globally; English is the most widespread language and increasingly the language of international business

• Learning the local language benefits business success

Language 2: Unspoken Language

• Nonverbal cues (facial expressions, hand gestures) are key parts of communication

• Personal space boundaries vary by culture; misinterpretations can occur if not understood

Education

• Formal education teaches language, conceptual, and technical skills essential in modern society

• Educational opportunities influence a country’s attractiveness for business expansion

• Porter (Japan) cited for Japan’s strong education system contributing to postwar economic success

• General education levels influence what products and promotional materials succeed

Culture and Business

1) Hofstede’s Cultural Dimensions (five, plus a sixth)

• Hofstede identified five dimensions that summarize workplace values across cultures:

  • Power Distance (PD): acceptance of inequality in power distribution

  • Individualism vs Collectivism: degree of self-reliance vs group orientation

  • Uncertainty Avoidance (UA): tolerance for ambiguity and uncertainty

  • Masculinity vs Femininity: emphasis on achievement, heroism vs quality of life and caring

  • Long-Term Orientation (LTO): focus on future rewards vs short-term results

• A sixth dimension later added: Indulgence vs Restraint

• Practical takeaway: these dimensions help explain why firms face different workplace norms, leadership expectations, and management practices across countries

2) Table 4.1: Work-Related Values for 15 Selected Countries (sample values)

• Source: Hofstede Insights; data from Hofstede Insights product pages (2019)\

• Note: The table highlights substantial country-to-country variation in values across dimensions, informing differences in management practices, negotiation styles, and workplace expectations.

3) Critiques of Hofstede

• Assumes a one-to-one relationship between culture and nation-state

• Research may be culturally bound and industry/firm-specific

• Examples: IBM and other companies’ limited cross-industry generalizability; some social classes underrepresented in early studies

4) Other Cultural Frameworks

• Global Leadership and Organizational Behavior Effectiveness (GLOBE): identifies nine cultural dimensions (list shows includes power distance, uncertainty avoidance, humane orientation, institutional collectivism, in-group collectivism, assertiveness, gender egalitarianism, future orientation, performance orientation)

• World Values Survey (WVS): explores values and norms, how they change, and their impact on society and business

Cultural Change

• Culture evolves over time; changes in value systems can be slow and painful

• Social turmoil is often an outcome of cultural change

• Cultural change commonly occurs as countries become economically stronger

• As countries get richer, there is a shift from traditional values to secular-rational values

• Globalization leads toward convergence of cultures (convergence hypothesis), though countertrends emphasize uniqueness

360° View: Managerial Implications

1) Cultural Literacy and Competitive Advantage

• Managers need cross-cultural literacy to navigate international business

• Culture influences national competitive advantage and ethics in decision making

2) Cross-Cultural Literacy and Ethnocentrism

• Firms that are unaware of other cultures are unlikely to succeed in those cultures

• Ethnocentric bias (belief in superiority of one’s own culture) is a managerial risk

3) Culture and Competitive Advantage

• The link between culture and the costs of doing business: culture shapes labor relations, negotiations, risk tolerance, and management approaches

• The costs of doing business influence a firm’s ability to establish and sustain competitive advantage

• Practical implications: location strategy, supply chain decisions, human resource practices, and marketing approaches must align with local cultural norms

Summary (Key Takeaways)

• Culture is a shared system of values and norms that shapes behavior and designs for living within a society.

• Social structure, including individual vs. group orientation and social stratification, influences how people work, collaborate, and advance.

• Religion and ethical systems influence business ethics, economic behavior, and institutional frameworks (e.g., banking, property, contracts).

• Language (spoken and unspoken) affects perception, communication, and business success; nonverbal cues are culturally bound.

• Education levels influence a country’s innovative capacity, workforce skills, and market readiness.

• Hofstede’s dimensions (plus Indulgence vs. Restraint) offer a framework to analyze cross-cultural differences in workplace values; country scores vary widely across dimensions.

• Hofstede critiques remind us to avoid overly deterministic conclusions and to consider broader frameworks (GLOBE, WVS) and industry/firm contexts.

• Cultural change is ongoing and interacts with economic development and globalization; convergence occurs alongside countertrends of cultural uniqueness.

• Managerial implications emphasize cross-cultural literacy, ethical awareness, and the strategic alignment of business practices with cultural realities to sustain competitive advantage.

Textual References and Notable Points

• Culture is not static; it evolves with political, economic, educational, and religious forces.

• Social mobility, class consciousness, and the role of ethnicity and religion can markedly affect workplace dynamics and cost structures.

• Language and education shape market opportunities and product/marketing effectiveness.

• The opening case on Russia illustrates how power distance, uncertainty avoidance, and collectivist tendencies can influence business norms and entrepreneurial activity.

• The dual emphasis on individualism in Western contexts and collectivism in many East Asian and other cultures helps explain differences in management practices, teamwork, and career development.

• Religion and ethics not only shape personal beliefs but also influence financial instruments (e.g., Islamic banking) and property norms.