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The Cultural

Environment
International Business Context

Delivered By M. Azam
Culture
Culture-–a society's personality–is defined
as a continuously changing totality of
learned and shared meanings, rituals,
norms, and traditions among the members
of an organisation or society.
The pivotal constituents of culture

 Ideology–The manner in which individuals relate


to the environment and to others; this includes
attitudes toward time, space, possessions, and
referent others (peers).
 Ecology-The manner in which society adapts to
its habitat, i.e., the distribution of resources
within an industrialized country versus a
developing country; the desire for efficiency,
space-saving devices, or green products.
 Social Structure-–The organization of society.
National Culture & International
Business
 Working in international business requires
a deep understanding of why people from
different background behave the way they
do. It is therefore critical for the
international manager to have an
understanding of national cultures, their
distinguishing characteristics and how
national culture impact behaviours
Languages
 Languages has a prominent role as an
element of culture: The language one
learns in the community where one is born
and raised shapes and structures one's
world view
Spoken/written Languages
Poses a number of concerns to International Business
Managers.
 First, in terms of translation,
 the diversity of languages creates numerous difficulties
for marketers operating internationally. Even if the same
language is shared by different countries, marketers
should be aware of differences in meaning:
Example: Procter & Gamble sells "nappies" in the U.K.,
as opposed to "diapers"; the "boot" of the Ford
automobile is actually its "trunk"; and housewives or
househusbands who are "hoovering" in the U.K. may
actually be "vacuuming" using an Electrolux vacuum
cleaner.
Lost in Translation-India
 Translation is expensive, especially in markets
where multiple languages are spoken. For
example, in India, there are more than 300 minor
languages and 3,000 dialects. Only 15 distinct
languages are widely spoken, however; Hindi,
the official language, is spoken by 30 percent of
the population, and English is widely used in
administrative, commercial, and political life. To
effectively communicate with this very promising
multicultural market of approximately one
billion, a firm's decisions on which language to
use are crucial
Nonverbal Communication
 Nonverbal Communication includes body
language, gestures, grimaces, eye contact, and
even silence. Silent communications, especially
gestures, have different meanings across cultures,
and marketing managers must be aware of them
in order to avoid embarrassing or costly mistakes.
Among the more important nonverbal
communication venues are the following:
Postures, Orientation, and
Oculesics
 Postures, Orientation, and Oculesics refer
to individuals' positioning relative to their
counterpart and the use or avoidance of eye
contact during communication.
Examples-Handshake
 In US/UK, Handshake with an eye contact this
perceives as forthright, take-charge attitude.
Handshake has to be firm and brief.
 This same handshake, however, would be
perceived as arrogant and aggressive by an Asian
counterpart. In Asia, a soft handshake, a humble
posture, and avoidance of eye contact convey an
attitude of respect
Greeting
 In Eastern Europe, a woman expects to
have her hand kissed (this also conveys
respect for her as a representative of her
gender), and men typically kiss each other
on the cheeks
Chronemics

 Chronemics refers to the timing of verbal


exchanges. Americans expect prompt responses
and are uncomfortable with a slow response or
silence. They attempt to fill in the silence and to
further probe into the issue at hand to ensure that
their counterparts understand them. Other
nationalities–the Japanese, for instance–prefer to
use this "quiet time" as contemplation time,
where they evaluate the message.
Haptics
 Haptics refers to the use of touch while
conversing. UK/US Culture is unusual, In
Latinate cultures tend to make extensive
use of touch in order to convey their
messages. A woman could expect to have
not just her shoulders, arms, and hands
touched, but also her hair and face, all with
good intentions.
Kinesics
 Kinesics refers to the movement of part of
the body in order to communicate.
 The French and Italians, however, use hand
gestures frequently to express themselves.
It is important to understand the meanings
of these gestures to function efficiently in
these cultures. At the same time, it is wise
not to assume that the gestures used in
one's home country are identical with those
used in other countries.
Paralinguistics
 Paralinguistics refers to nonverbal aspects of
speech that include emotional intonation, accents,
and quality of voice. Again, a louder, more
aggressive intonation denoting self-assurance and
strength in some cultures, such as that of the
United States, may be perceived as threatening or
insulting by other cultures, where softness is
equated with politeness and respect. In the
cultures of West Africa, laughter indicates
embarrassment, discomfort, or surprise, whereas
in some other cultures, laughter is discouraged
altogether
Appearances
 Appearances refer to one's physical attire and
overall grooming. Each culture has its own
expectations and norms with regard to what is
appropriate in different circumstances. For
example, Western business attire for men consists
of a well-tailored dark suit, complemented by a
conservative shirt and tie and elegant shoes;
Western business attire for women may also
consist of a well-tailored suit or a conservative
dress and high heels (European dress codes allow
for a more casual look or a more personal style
than North American dress codes).
Olfactions
 Olfactions refer to the use of odors to convey
messages. Typically, such messages have a
religious meaning: Incense is frequently used to
purify the air of evil presence in both temples and
churches, as well as in private homes. Finally,
odors are evaluated differently in different
cultures. For example, U.S. culture finds body
odors and garlic breath as offensive, whereas
East Asian cultures avoid consumption of dairy
products believed to cause intolerably bad breath.
The Nonverbal Language
High- Versus Low-Context Cultures

 In low-context cultures, what is said is


precisely what is meant. For example, in the
United States, Canada, Germany, and
Switzerland, a verbal message carries the full
meaning of the sentence.
 In high-context cultures, such as those of East
Asia, the Middle East, and North Africa, the
context of the message–the message source, his
or her standing in society or in the negotiating
group, level of expertise, tone of voice, and body
language–are all meaningful.
Religion
 Religion defines a society's relationship to the
supernatural and, as a result, determines
dominant values and attitudes. Religious beliefs
are important determinants of consumer
behavior: Purchase motivation; consumption
preferences and patterns; customs and business
practices; attitudes toward authority, family,
peers, and foreigners; as well as attitudes toward
material possessions, cultural values, and norms,
among others, can all be traced to religion.
Religious Orientation &
International Business
 The Protestant religion stresses hard work and frugality and is
linked to the development of capitalism and economic
emancipation.
 Judaism, with its disdain for ignorance and sloth, stresses
education and has led to industrial development
 Islam dictates social etiquette and consumption and bans the
use of interest rates, affecting, respectively, the relationship
between men and women in society and in the workplace;
discouraging the consumption of pork products and alcohol;
and requiring procedures to reconcile Islamic banking laws
with Western banking practices–by, for example, charging
periodic fees, rather than interest.
 The Hindu religion encourages a family orientation and
dictates a nine-tier class structure and strict dietary constraints,
affecting the workplace hierarchy and discouraging the
consumption of animal products–beef, in particular
Religion and Business Days
 Christianity predominates, it is customary
to work full days Monday through Friday
and a half day on Saturday. In Islamic
countries, businesses are closed on Friday,
the holy day of Islam. And, in Israel, the
Shabbat (Saturday) is the day of worship
when all businesses close.
Religion and Gender Role
 In the most traditional Islamic countries,
women's business activities are channeled
toward interaction in a women-only
environment. As such, a salesman cannot
engage in door-to-door selling in Saudi
Arabia, for instance, in an effort to appeal
to the woman of the house.
Values
 Values are enduring beliefs about a specific
mode of conduct or desirable end-state; they
guide the selection or evaluation of behavior, and
are ordered by importance in relation to one
another to form a system of value priorities.
Values guide individuals' actions, attitudes, and
judgments, which are derived from and
continuously modified through personal, social,
and cultural learning, ultimately affecting their
product preferences and their perception of
products.
Norms
 Norms are derived from values and are defined as rules
that dictate what is right or wrong, acceptable or
unacceptable. To be successful in the markets where the
firm is currently operating or where it is planning a
presence, marketers need to be capable of discerning
between the following:
 What an outsider must or must not do (cultural
imperative)
 What locals may do but an outsider cannot (cultural
exclusive)
 What an outsider may or may not do (cultural adiaphora)
Imperative
 refer to what one must or must not do in a
certain culture. Respecting rank and
position, especially in more formal
societies, is crucial in developing a lasting
relationship. In Germany, for example,
individuals in a close business relationship
would address each other formally, by their
last names, for decades.
Exclusive
 refer to activities that are appropriate only for
locals and from which an individual from a
foreign country is excluded. For example,
whereas a citizen of Kenya is likely to show
allegiance to the government of Daniel arap Moi
by wearing a pin in his party's colors bearing his
picture, a foreigner wearing such a pin would not
only raise eyebrows, but he or she also may be
perceived as attempting to interfere in the
country's internal affairs.
Adiaphoras
 refer to customs that a foreign
representative may engage in, but
conformity in this respect is not required.
Eating with chopsticks in East Asia,
drinking banana beer in East Africa,
greeting a woman by kissing her hand in
Hungary or Romania are all examples of
adiaphoras.
National & Geographical
Characteristics
 Each country is thought to have a distinct
set of behavior and personality
characteristics, characteristics that may be
shared by a number of countries in a
certain geographical region.
Time Orientation:
 time relevant to marketers is related to the manner in
which tasks are approached. Monochronic time (m-time)
is attributed to individuals who usually do one thing at a
time, and in sequence. individuals tend to be prompt and
to adhere strictly to agendas; countries where individuals
typically operate on monochronic time are Germany,
Switzerland, Austria, the Scandinavian countries and the
countries of Benelux, the UK/US and Canada.
Polychronic time (p-time) is attributed to individuals
who tend to perform multiple tasks at once; for these
individuals, time is not linear but, rather, fluid. They are
less likely to adhere to schedules, and they consider
business as an opportunity for socializing.
Business Hours & Business Days

 The hours of doing business differ from


country to country.
 9-5 in UK/US
In countries where the climate is too hot to
permit work at mid-day, businesses open
early, at seven, and close for two to three
hours at noon, to re-open again at two in
the afternoon
Gift Giving
 In the US bringing a bottle of wine to one's host is
perfectly appropriate; not appropriate for a similar
occasion in the Middle East, where Islamic religion
prohibits alcohol.
 In Middle East, bringing food or drink to the home of
one's host could represent an insult, implying that the
host's food is inadequate.
 cutlery in Latin America, signifying cutting off a
relationship or handkerchiefs in Latin America and in
Southern and Eastern Europe, signifying a final, imposed
separation, usually death; handkerchiefs and small hand
towels are typically given as gifts at funerals of the
Eastern Orthodox faith
Socializing
 If a International Business Manager is
planning on a working breakfast or a
working lunch, or on discussing business
over dinner, as is often done in the United
States. No appropriate In the countries of
South America and in many countries in
Europe, a meal is widely seen as an
important occasion to personally get to
know one's business counterpart;
Hofstede Theory
 According to Geert Hofstede, there is no such thing as a
universal management method or management theory
across the globe. Even the word 'management' has
different origins and meanings in countries throughout
the world. Management is not a phenomenon that can be
isolated from other processes taking place in society. It
interacts with what happens in the family, at school, in
politics, and government. It is obviously also related to
religion and to beliefs about science.
Hofstede Dimensions:
 Power Distance
 Uncertainty Avoidance & Risk Taking
 Masculinity versus Femininity
 Individualism vs Collectivism
 Time Orientation
Power Distance
 power distance (the degree of inequality
among people which the population of a
country considers as normal)
Power distance

This refers to the manner in which interpersonal


relationships are formed when differences in power are
perceived. In some cultures, a vertical relationship is
typical, whereas, in others, relationships are based on
equality and informality.
In UK/US/Australia, for instance, individuals customarily
address each other on a first-name basis, regardless of
rank. Latin America, Eastern Europe, the Middle East, for
example), it is a flagrant mistake to address a superior
informally or for a superior to mingle with underlings
Uncertainty avoidance
 uncertainty avoidance (the degree to
which people in a country prefer structured
over unstructured situations)
Uncertainty Avoidance & Risk
Taking:
Uncertainty avoidance refers to the extent to which
individuals feel threatened by uncertainty, risk, and
ambiguous situations and thus adopt beliefs, behaviors,
and institutions that help them to avoid the uncertainty.

In countries where uncertainty avoidance is high, there is


a feeling that what is different is dangerous; consumers
are resistant to change and focused on risk avoidance and
reduction. In cultures low in uncertainty avoidance, there
is a feeling that what is different, such as new products
and services, is interesting and worth exploring.
Masculinity versus Femininity
 masculinity versus femininity (the extent
to which a culture is conducive to
dominance, assertiveness and acquisition
of things versus a culture which is more
conducive to people, feelings and the
quality of life)
Masculinity versus Femininity
 Masculinity is the degree to which a national culture is
characterized by assertiveness, wealth, material success,
ambition, and achievement.
Australia, Canada, Great Britain, and the United
States
 Femininity is the degree to which a national culture is
characterized by nurturing, benevolence, equality, caring
for the weak, and preserving the environment are
emphasized
 Far East Asia, Scandinavian
individualism versus
collectivism
 individualism versus collectivism (the
extent to which people feel they are
supposed to take care for or to be cared for
by themselves, their families or
organizations they belong to)
Individualism vs Collectivism
 Individualism refers to the degree to which
people in a country prefer to act as
individuals, in their self-interest.
UK, USA, Australia
Collectivist cultures refers to require
acting in group interest and stress on
subordination to collectivity
Latin America, Asia, and the Middle East,
Individualism vs Collectivism
 Other inappropriate gifts are cutlery in
Latin America, signifying cutting off a
relationship or handkerchiefs in Latin
America and in Southern and Eastern
Europe, signifying a final, imposed
separation, usually death; handkerchiefs
and small hand towels are typically given
as gifts at funerals of the Eastern Orthodox
faith
long-term versus short-term
orientation
 long-term versus short-term orientation
(long-term: values oriented towards the
future, like saving and persistence - short-
term: values oriented towards the past and
present, like respect for tradition and
fulfilling social obligations)
KWINTESSENTIAL
 http://www.kwintessential.co.uk/map/hofst
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In a high power distance cultures
the following may be observed

 Those in authority openly demonstrate their rank.


 Subordinates are not given important work and
expect clear guidance from above.
 Subordinates are expected to take the blame for
things going wrong.
 The relationship between boss and subordinate is
rarely close/personal.
 Politics is prone to totalitarianism.
 Class divisions within society are accepted.
If you are working with or going to a country
with a higher PDI than yours then
- give clear and explicit directions to those working
with you. Deadlines should be highlighted and
stressed.
- do not expect subordinates to take initiative.
- be more authoritarian in your management style.
Relationships with staff may be more distant than
you are used to.
- show respect and deference to those higher up the
ladder. This is usually reflected through language,
behaviour and protocol.
- expect to encounter more bureaucracy in
organizations and government agencies.
In a low power distance
culture
 Superiors treat subordinates with respect and do not
pull rank.
 Subordinates are entrusted with important
assignments.
 Blame is either shared or very often accepted by the
superior due to it being their responsibility to
manage.
 Managers may often socialise with subordinates.
 Liberal democracies are the norm
 Societies lean more towards egalitarianism
If you are working with or going to a country
with a lower PDI than yours then

- don't expect to be treated with the usual respect or


deference you may be used to.
- people will want to get to know you in an informal
manner with little protocol or etiquette.
- be more inclusive in your management or
leadership style as being directive will be poorly
interpreted.
- involve others in decision making.
- do not base judgements of people on appearance,
demeanor, privileges or status symbols.
In a country that scores highly on the
individualism scale the following
traits are common
. A person's identity revolves around the "I"
. Personal goals and achievement are strived for
. It is acceptable to pursue individual goals at the
expense of others
. 'Individualism' is encouraged whether it be
personality, clothes or music tastes
. The right of the individual reign supreme; thus laws
to protect choices and freedom of speech
If you are working or doing business in a
country with a higher individualism score
than yourself then...
. As an individual you are expected to work on your own and
use your initiative.
. Prepare yourself for a business environment that may be less
reliant on relationships and personal contacts
. Business and personal life may very well be kept separate.
. Employees or subordinates will expect the chance to work on
projects or solve issues independently. Being to intrusive into
their work may be interpreted negatively.
. It is not uncommon for people to try and stand out from the
rest. This may be during meetings, presentations or even
during group work.
. Bear in mind that a certain amount of individual expression is
tolerated, i.e. people's appearance, behaviour, etc.
In a country that scores low on the
individualism scale the following traits are
common...

. "We" is more important that "I"


. Conformity is expected and perceived positively.
. Individual's desires and aspirations should be
curbed if necessary for the good of the group.
. The rights of the family (or for the common good)
are more important.
. Rules provide stability, order, obedience.
If you are working or doing business in a
country with a lower individualism score
than yourself then
. Note that individuals will have a strong sense of
responsibility for their family which can mean they
take precedence over business.
. Remember that praise should always be directed to
a team rather than individuals as otherwise this may
cause people embarrassment. Reward teams not
people.
. Understand that promotions depend upon seniority
and experience-not performance and achievement.
. Decision making may be a slow process, as many
individuals across the hierarchy will need to be
consulted
Below are some of the common traits
found in countries that score highly
on the uncertainty avoidance scale
. Usually countries/cultures with a long history.
. The population is not multicultural, i.e.
homogenous.
. Risks, even calculated, are avoided in business.
. New ideas and concepts are more difficult to
introduce.
If you are working or doing business in a
country with a higher uncertainty
avoidance score than yourself then

. Don't expect new ideas, ways or methods to be readily


embraced. You need to allow time to help develop an
understanding of an initiative to help foster confidence.
. Involve local counterparts in projects to allow them a
sense of understanding. This then decreases the element
of the unknown.
. Be prepared for a more fatalistic world view. People
may not feel fully in control and are therefore possibly
less willing to make decisions with some element of the
unknown.
. Remember that due to a need to negate uncertainty
proposals and presentations will be examined in fine
detail. Back up everything with facts and statistics.
Some of the common traits found in
countries that score low on the
uncertainty avoidance scale include
. Usually a country with a young history, i.e.
USA.
. The population is much more diverse due to
waves of immigration.
. Risk is embraced as part of business.
. Innovation and pushing boundaries is
encouraged.
If you are working or doing business
in a country with a lower uncertainty
avoidance score than yourself then
. Try to be more flexible or open in your approach to new
ideas than you may be used to.
. Be prepared to push through agreed plans quickly as
they would be expected to be realised as soon as possible.
. Allow employees the autonomy and space to execute
their tasks on their own; only guidelines and resources
will be expected of you.
. Recognize that nationals in the country may take a
different approach to life and see their destiny in their
own hands.
Below are some of the common traits
found in countries that score low on the
masculinity scale
. In life the main priorities are the family,
relationships and quality of life
. Conflicts should ideally be solved through
negotiation
. Men and women should share equal positions in
society
. Professionals "work to live", meaning longer
vacations and flexible working hours
If you are working or doing business
in a country with a higher
masculinity score than yourself then
. To succeed in this culture you will be expected to make sacrifices in
the form of longer work hours, shorter holidays and possibly more
travel.
. Be aware that people will discuss business anytime, even at social
gatherings.
. Avoid asking personal questions in business situations. Your
colleagues or prospective partners will probably want to get straight
to business.
. People are not always interested in developing closer friendships.
. Communication style that is direct, concise and unemotional will be
most effective in this environment.
. People will use professional identity, rather than family or contacts,
to assess others.
. Self-promotion is an acceptable part of the business culture in this
competitive environment.
Below are some of the common traits
found in countries that score high on
the masculinity scale
. Life's priorities are achievement, wealth and
expansion
. It is acceptable to settle conflicts through
aggressive means
. Women and men have different roles in society
. professionals often "live to work", meaning
longer work hours and short vacations
If you are working or doing business
in a country with a lower masculinity
score than yourself then
. Recognize that people value their personal time.
They prioritise family and take longer holidays.
Working overtime is not the norm.
. Small talk at social (or business) functions will
focus on an individual's life and interests rather than
just business.
. Personal questions are normal rather than intrusive.
. In business dealings trust weighs more than
projected profit margins and the like.
. Nepotism is seen as a positive and people openly
show favouritism to close relations.
Fons Trompennar
 Riding the Waves of Culture, Seven
Cultures of Capitalism, Building Cross-
Cultural
Fons Trompennar-Dimensions of
Culture
 Universalism vs. Particularism: What is
more important, rules or relationships?
 Individualism vs. Collectivism: Do we
function as individuals or in a group?
 Neutral vs. Affective: Do we hide or
display our emotions?
Fons Trompennar-Dimension of
Culture
 Specific vs. Diffuse: Is responsibility specifically
assigned or diffusely accepted?
 Achieved Status vs. Ascribed Status: Do we have
to prove ourselves to receive status or is it given
to us?
 Time Orientation: Do we do things one at a time
or several things at once? - Are we oriented
toward the past, present, or future?
 Internal vs. External Orientation: Do we control
our environment or are we controlled by it?
Fons Trompennar
Riding the Waves of Culture, Seven Cultures of Capitalism,
Building Cross-Cultural
 Universalism vs. particularism (What is
more important, rules or relationships?)
 Individualism vs. collectivism (Do we
function in a group or as individuals?)
 Neutral or affective (Do we display our
emotions?)
Fons Trompennar
Riding the Waves of Culture, Seven Cultures of Capitalism,
Building Cross-Cultural

 Specific vs. diffuse (Is responsibility


specifically assigned or diffusely
accepted?)
 Achievement vs. ascription (Do we have to
prove ourselves to receive status or is it
given to us?)
Fons Trompennar
Riding the Waves of Culture, Seven Cultures of
Capitalism, Building Cross-Cultural

 Sequential vs. syncronic (Do we do things


one at a time or several things at once?)
 Internal vs. external control (Do we control
our environment or are we controlled by
it?)
Merger-Culture
 According to a KPMG International study,
83% of mergers and acquisitions fail due to
mismanagement of cultures
 Merging balance sheets it turns out is far
easier than merging cultures. Executives
must therefore analyze the culture of the
two companies before considering a
merger or acquisition
Difficult but not impossible
 Good news! while culture is usually not
changed quickly, processes are available to
understand the “legacy” cultures of both
merged and acquired organizations and to
create a new culture for supporting the new
enterprise strategy.
CLARIFYING CULTURE
 Culture is the pattern of norms, values,
beliefs and attitudes that influence
individual and group behaviour within the
organization. In short, culture is “the way
we do things.” Culture therefore is not an
independent variable in the business
equation; rather it exists or should exist to
support the business strategy.
ASSESSING THE CULTURE
While unquestionably, organizational
culture is the “soft side” of business reality,
we know it can be a real M&A buster. It is
critical to first understand and assess the
current culture of both companies involved
in the M&A process, giving ample weight
to issues of culture during due diligence.
ASSESSING THE CULTURE
 Purpose of cultural due diligence is not to
eliminate culture clash-an unlikely event
even in the best of circumstances, nor is it
to find a perfect fit between two
organization. But while a wide gap is
unhealthy, the best mergers occur when a
fair amount of culture differentiation
prompts debate about what is best for the
combined organization
UNDERSTANDING VALUES

Values are a key element in assessing


culture- values that are both explicitly
stated as well as those that are implicitly
held in an organization. In an M&A
situation, it is key that both types are
examined and intimately understood.
CULTURAL INTEGRATION
After understanding of the current culture,
compared that with the goals of the merged
organisation....Time to think through what
it will take to implement that strategy.
This process requires consideration of a
number of factors, including organization
structure, operating and decision-making
apparatus, reward systems and people-
related issues.
Project Plan for the Integration
- Establish the Strategic Context Early On
This can be formulated by asking and
answering basic questions about the vision,
product and market scope, critical issues,
competitive advantage etc of the
prospecting merger companies.
Project Plan for the Integration
- Communications
An important element for managing a
company’s culture in preparing for M&A
activities. It is even more important in the
period leading up to and following closure
of the deal.

- Identify and Resolve Important Cultural


Differences
CULTURE DOES MATTER
Creating a cohesive culture from two distinct
entities is a challenge. But in today’s business
environment characterized by large numbers of
M&As, it is very essential that companies take
cultural issues seriously as they do financial ones.
Attention to culture has proven to make the key
difference between success and failure.
Otherwise, the urge to merge may prove to be a
costly impulse.
 http://books.google.com/books?id=BT2QP
2Wa_7sC&pg=PA112&dq=merger+and+n
ational+culture&lr=&ei=k7EJS5HcMI2Uy
ASDzMyzDw#v=onepage&q=merger%20
and%20national%20culture&f=false