07/09/2022 Lecture 2

Topics: Culture and Ethics (Chapter 4-5)

Culture

Culture evolves over time because people’s behaviours change (Needs to be a large amount
of the population) and it becomes ingrained and coded into their values and norms

Cross-cultural literacy:

Understanding how cultural differences across and within countries can have an effect on
the way business is practiced – distinct value systems

 Companies need to be careful to not be “ill-informed” about cultures and their

values: Employing local citizen can help with cultural differences and understanding
 Otherwise: Ethnocentric behaviour (Disregard of other cultures: Putting own culture
over others)

Geert Hofstede’s Definition:

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”

Culture is the collective programming of the mind which distinguishes the members of one
human group from another

Values = ideas about what a group thinks to be good, right, or desirable

Norms = Social rules that prescribe appropriate behaviour
Society = Group of people sharing a common set of values and norms
- Common culture

Values are deeper and ingrained in people – they remain across situations. Norms are
beliefs about acceptability of behaviour whereas values are beliefs about the desirability of
behaviour.
 Values can be justification for norms
Determinants of culture

Social Structure:

Basic social organization of a society

2 Dimensions explain the differences among cultures:

1. Degree to which the basic unit of social organization is the individual, as opposed to
the group
2. Degree to which a society is stratified into classes or castes (f.e. family background,
occupation, and income)

 Individual societies are better at innovation and creating ideas whereas collectivist
societies are better at implementation of those ideas

Religion:

System of shared beliefs and rituals concerned with the realm of the sacred

Most ethical systems are the product of religions

(Nowadays most dominant religions are Christianity, Islam, Hinduism, Buddhism)

  Extend to which different religions shape people’s attitude towards work and
entrepreneurship affects business decisions in cultures
 Ethics also affect the cost of doing business (The more ethical, more likely to spend
more money on wages or safety regulations)
 Higher religious beliefs -> Economic growth because it helps sustain aspects of
individual behaviour => Higher productivity
 Modernisation can threaten traditional values in religion

Language

Spoken Language:

Language structures the way we see the world -> Helps define a culture

Countries with more than one language usually have more than one culture

 Mandarin – mother tongue of largest number from population

 English – most common and widely spread, especially in business

Unspoken Language:

Nonverbal communication – culturally bound -> Misinterpretation due to cultural

differences can lead to a communication failure

Education

Medium through which individuals learn languages and skills -> Makes the young familiar
with values and norms of society -> They are taught directly and indirectly

 Creates a pool of skilled and knowledgeable workers

 National competitive advantage

 General education level is also a good index of the kind of products that might sell in
that country

Political System

Individualism vs. Collectivism

Democracy vs. Totalitarianism

Economic System

Market economy vs. Mixed economy vs. Command economy

Hofstedes dimensions:

Power distance:

People are unequal in physical and intellectual capabilities

Individualism versus collectivism

Relationship between the individual and his fellows

Uncertainty avoidance

Extend to which different cultures socialised their members into accepting ambiguous
situations and tolerating uncertainty

Masculinity versus femininity

Relationship between gender and work roles

Masculine cultures: masculine values like achievement and power
Feminine cultures: more equal and have more feminine values like a caring culture

Long term versus short term orientation

Extent to which a culture programs its citizens to accept a gratification of their material
social and emotional needs

6. dimension is not really included:

Indulgence / Restraint: How serious does a culture take life? More focus on fun or more
serious?
 Hofstede has been criticized in following aspects:
1. Only considers one-one correspondence between culture and the nation-state
2. Countries can have more than one culture
3. Employees’ values influenced analysis

 Economic, political, and legal systems still have more influence on economic
growth than culture
Ethics

Definition:
Ethics are the accepted principles of right and wrong that govern:
- The conduct of a person
- The members of a profession
- The actions of an organization

Business ethics:
Accepted principles of right or wrong governing the conduct of business people

Ethical strategy:
Strategy, or course of action, that does not violate these accepted principles

Ethical Issues are relevant in International Business: There are country-level differences in
Ethics:

Common ethical issues:

1. Employment practices:
When working conditions in another country interfere with own standards of home
country, which standards should the company apply?

2. Human rights
Basic human rights still violated in a big number of countries (F.e. South Africa)
 Still ethical to practice business there, maybe even to improve working conditions in
these countries?
 Did not work for South Africa as regimes are so repressive and business could
not be justified on an ethical ground

3. Environmental regulations
Corporate social responsibility and sustainability drive companies’ decisions
 Regulations are often less in developing countries
 Results in global tragedy of the commons: Moving productions to developing
countries so companies don’t have to consider pollution regulations: Ethical?

4. Corruption
Corruption through governmental officers: Paying them off through facilitating
payments: Ethical if this creates local income and jobs?

Ethical Dilemmas:

None of the alternatives are ethically acceptable:

Child labour in South-East Asian countries: Is it correct to employ children or should there be
a policy not to, but what do the children do instead of that work to feed themselves?
Determinants of unethical behaviour
Philosophical approaches to ethics:

STRAW MEN APPROACHES

These approaches deny the value of business ethics

1. Friedman doctrine:
“The social responsibility of business is to increase profits” as long as the company
stays in the rules of the law

2. Cultural relativism
Ethics are only reflection of culture, and a firm should adopt these when they are
operating in that country
“When in Rome, do as the Romans do.”

3. Righteous moralist
Follow home-country standards of ethics in foreign countries

4. Naïve Immoralist
If a manager of multinational sees that firms from other nations are not following
ethical norms in host nation, they should not either

OTHER PHILOSOPHICAL APPROACHES

These approaches value business ethics and they form basis on which modern ethical
decision-making is made

1. Utilitarian ethics
Moral worth of actions is judged by their consequences: Best possible balance of
good consequences over bad consequences
 Maximization of good and minimization of harm

2. Kantian ethics
People should be treated as ends and never purely as means to the ends of others
 Focus on people’s dignity

3. Rights theories
Human beings have fundamental rights and privileges that overpower boundaries
and cultures
 Establishment of minimum level of morally accepted behaviour
 Human rights (United Nations: Universal Declaration of Human Rights in 1948)

4. Justice theories
All economic goods and services should be distributed equally except when an
unequal distribution would work to everyone’s advantage
 Just distribution: Considered as fair and equitable
Manager’s Implementations

1. Hiring and Promotion

Hire and promote people based on companies values so they reflect these in their
work (strong sense of personal ethics)

2. Organizational Culture and Leadership

Culture that values ethical behaviour through a code of ethics which employees and
managers need to live by

3. Decision-Making Processes
Business people must think through the ethical implication of decisions in a
systematic way
 Moral compass
Ask yourself these questions:
1. Does my decision fall within the accepted values or standards that typically apply
in the organizational environment (as articulated in a code of ethics or some
other corporate statement)?
2. Am I willing to see the decision communicated to all stakeholders affected by it—
for example, by having it reported in newspapers, on television, or via social
media?
3. Would the people with whom I have a significant personal relationship, such as
family members, friends, or even managers in other businesses, approve of the
decision?

4. Ethics Officers
Either a high-ranking person or people know to respect legal and ethical standards to
make sure code of ethics is followed by company (Can be independent
individual/company)

5. Moral Courage
Managers should walk away from profitable but unethical decisions

6. Corporate Social Responsibility

Businesses should consider social consequences of economic actions – simply make
a decision because it is the right way for a business to behave
 Should have both, good economic and social consequences
 Make corporate social responsibility a cornerstone of business strategy

7. Sustainability
Firms should make decisions not only based on good profits but also without
harming the environment
 Should not have negative impact on the ability of future generations to meet their
economic needs
 Actions should impart long-run economic and social benefits on stakeholders
Definitions:

Social mobility Extent to which individuals can move out of the strata
Into which they were born

Class consciousness Condition by which people tend to perceive

themselves in terms of their class background

Ethical system Set of moral principles, or values, that are used to

Guide and shape behaviour

Organizational culture Values and norms that are shared among employees of
An organization