International Business The New Realities (presentation):

Chapter 4 The cultural environment of international business:

The four risks of international business:

 Cross-cultural
 Commercial
 Currency (financial)
 Country

Essentials of understanding culture:

 Cross-cultural risk
 Characteristics of culture
 Managerial implications
 International business context
 Cultural change
 Language
 Models and explanations
 Religion

Key concepts:
1) Culture: learned, shared, and enduring orientation patterns in a society. Values, ideas,
attitudes, behaviours, symbols.
2) Cross-cultural risk: situation or event where a cultural miscommunication puts some
human value at stake. Environments: unfamiliar language and unique value systems,
beliefs, and behaviours.

Managerial orientations:
 Ethnocentric orientation: using your own culture as the standard for judging other
cultures.
 Polycentric orientation: manager develops an affinity: country where they work >
home country.
 Geocentric orientation: global mindset, manager understands a business or market
without a regard to national business. The best one.

Culture is…:
 Not right or wrong – relative, no cultural absolute, different nationality = perceiving
the world differently.
 Not about individual behaviour – groups, collective phenomenon of shared values and
meanings.
 Not inherited – derives from social environment, we acquire values and beliefs as we
grow up.
Culture is learned:
 1. Socialization – process of learning the rules and behavioural patterns appropriate to
one’s society.
2. Acculturation – process of adjusting and adapting to a cultural other than one’s own.
(expatriate workers)

Culture like an iceberg – above the surface: certain characteristics are visible
below the surface: a massive base of assumptions, attitudes, and values that strongly influence
decision-making, relationships, and other dimensions of business

Culture is linked with particular groups based on various factors, including:

 Geography: different levels (the world, the nation, the region, cities) elicit unique
cultural perspectives.
 Ethnicity: it changes how you perceive reality.
 Gender: men and women experience the world differently.
 Age: seniors, baby boomers, teenagers, and children see their worlds differently.
 Language: it reflects and is reflected by cultural differences.
 Occupation: blue collar workers, professionals, or artists, perspectives differ.

In Japan and some other Asian countries:

o Regular group meetings (build harmony and team spirit)
o Morning group calisthenics
o Collective training and evaluation
o Mentors
o Close attention to product quality and courtesy in customer interactions
o Lifetime relations with customers
o Culture affects many managerial tasks, including:
o Developing products and services
o Preparing advertising and promotional materials
o Preparing overseas trade fairs and exhibitions
o Screening and selecting foreign distributors
o Communicating and interacting with foreign partners
o Negotiating and structuring ventures
o Interacting with current and potential customers from abroad
Perceived cultural attributes of Mexico and the USA

HR practices vary across cultures:

 Developing products and services
 Organizational structure (centralized vs decentralized; bureaucratic vs entrepreneurial)
 Teamwork (MNEs require intercultural cooperation)
 Pay (for performance vs merit)
 Length of employment (temporary or lifetime)
 Union-management relationships
 Attitude toward ambiguity (e.g. at times, employees receive vague or contradictory
instructions)
Cultural differences in entrepreneurship:
It is said that when someone starts a new business…
 …in Hong Kong, the whole family works ceaselessly to make it a success.
 …in the US, friends put up their money for the entrepreneur.
 …in Turkey, friends will ask the entrepreneur to hire their sons and nephews.
 …in India, the administrative system will impose monumental red tape.

National culture:
o Nationality
o Ethnicity
o Gender
o Religion
o Social institutions
o Social class
o Educational systems
Professional culture:
o Academe
o Business
o Banking
o Engineering
o Computer programming
o Legal
o Medical
o Military

Strong organizational culture = hard to determine where the corporate influence begins and
the national influence ends.

Interpretations of culture:
Cultural metaphors refer to a distinctive tradition or institution strongly associated with a
society; a guide to deciphering attituded, values, and behaviours.
American football represents systematic planning, strategy, leadership, and struggling against
rivals.
The Swedish stuga (a sum cottage) represents the love of nature and desire for individualism
in Sweden.
The Spanish bullfight reflects the importance of ritual, style, courage, and pride in Spain.

Stereotypes are generalizations that may or may not be factual and often overlook real,
deeper differences.

People from the US are said to be

 Argumentative and aggressive, compared to Japanese who tend to be reserved and
humble.
  Individualistic lovers of personal freedom, compared to Chinese who tend to be group
oriented.
 Entrepreneurial, compared to Saudi Arabians who use time-honoured methods to get
things done.
 Direct and interested in immediate returns, compared to Mexicans who invest time in
building relationships.

Idiom is an expression whose symbolic meaning differs from its literal meaning; you can’t
understand in simply by knowing what the individual words mean.
 Australia: “The tall poppy gets cut down” (importance of not being showy or
pretentious)
 Thailand: “If you follow older people, dogs won’t bite you” (wisdom)
 Japan: “The nail that sticks out gets hammered down” (group conformity)

E.T. Hall’s High- and Low-Context Cultures:

1) Low-context cultures rely on explicit explanations with an emphasis on spoken words.
Clear, efficient, logical delivery of verbal messages. Direct communication. Specific,
legal contracts as agreements. (European, North American)
2) High-context cultures emphasize nonverbal or indirect language. Communication aims
to promote smooth, harmonious relationships. Polite, “face-saving” style that
emphasize a mutual sense of care and respect for others. Care is taken not to
embarrass or offend others. (Asian)

Ethical values vary by culture.

Hofstede’s typology
o Individualism vs collectivism (whether a person primarily functions as an individual
or within a group)
o Power distance (how a society deals with inequalities in power that exist among
people)
o Uncertainty avoidance (the extent to which people can tolerate risk and uncertainty in
their lives)
o Masculinity vs femininity (society’s orientation based on traditional male and female
values)
o Long-term vs short-term orientation (the degree to which people and organizations
defer gratification to achieve long-term success)

Key dimensions of culture

1. Values represent a person’s judgements about what is good or bad, acceptable or
unacceptable, important or unimportant, and normal or abnormal.
2. Attitudes and preferences are developed based on values and are similar to opinions,
except that, attitudes are often unconsciously held and may not have a rational basis.

Deal vs Relationship orientation

  Deal-oriented cultures – managers focus on the task at hand, are impersonal, typically
use contracts, and want to just “get down to business” (Europe, Australia, north
America)
 Relationship-oriented cultures – managers value affiliations with people, rapport, and
getting to know the other party in business interactions. Relationships are more
important than individual deals; trust is much valued in business agreements. (Asia,
Latin America)

Guanxi: Important in Business in China

 Refers to social connections and relationships based on mutual benefits.
 Emphasizes a reciprocal exchange of favours as well as mutual obligations.
 Rooted in ancient Confucian philosophy, which values social hierarchy and
reciprocity.
 Engenders trust, thereby serving as a form of insurance in a potentially risky business
environment.

Manners and customs – ways of behaving and conducting oneself in public and business
situations. (eating habits, mealtimes, work hours and holidays, drinking and toasting,
appropriate behaviour at social gatherings, gift-giving, the role of women, and much more)

Perceptions of time
1) Monochronic – a rigid orientation to time in which the individual is focused on
schedules, punctuality, time as a resource, time is linear, “time is money”. (people in
US are hurried and impatient)
2) Polychronic – a flexible, non-linear orientation to time in which the individual takes a
long-term perspective; time is elastic, long delays are tolerated before taking action.
Punctuality is relatively unimportant. Relationships are valued. (Africa, Latin
America, Asia)

Religion – a system of common beliefs or attitudes regarding a being or system of thought

that people consider sacred, divine, or the highest truth; and the associated moral values,
traditions, and rituals. Influences culture, and therefore business and consumer behaviour.

Language as a key dimension of culture

o The “mirror” or expression of culture; essential for communications; provides insights
into culture.
o Linguistic proficiency is a great asset in international business.
o Language is both verbal and nonverbal (unspoken, facial expressions and gestures).
o There are nearly 7000 active languages, including over 2000 in each of Africa and
Asia.

The environment influences language

Language is a function of the environment. Concepts and meaning of words are not universal,
even when they can be translated into their languages.
Culture and contemporary issues:
The services sector
Although trade in services is less than trade in products, the services sector is
internationalizing rapidly. FDI is the most typical entry strategy.
The most rapidly internationalizing services are lodging, retailing, construction, banking,
insurance, publishing, IT, transport, travel, and entertainment.
Because of close interaction between providers and consumers, culture strongly affects
services, especially when the cultural distance is substantial.

Technology and the internet

Technological advances strongly influence culture. The internet, multimedia, and other
communications systems encourage convergence in global culture.
The “death of distance” is the demise of boundaries that once separated people due to
integrating effects of information, communications, and transportation technologies. Culture
is becoming more homogenous around the world. But the Internet promotes local culture, by
increasing the availability of high culture and folk culture.

Are cultures converging?

Critics argue globalization promotes the replacement of indigenous cultures with
homogeneous, often “americanized”, culture. Worldwide, consumption patterns are
converging. People exhibit uniformity in preferences for food, soft drinks, clothing, cars,
hotels, websites, movies, TV shows, music, and other goods.
Others argue globalization encourages the worldwide free flow of ideas, beliefs, values, and
products. Today, from around the world, people are exposed to a diversity of beliefs, values,
approaches, and products, and adopt the best of what the world has to offer.

Culture: converging or diversifying?

Cultural homogeneity and heterogeneity are not mutually exclusive; they generally occur
together. Cultural flows are diverse. While globalization will eclipse some past ways of life,
the process can also “liberate” people by providing new ideas and challenging conformity and
nationalism.

Managerial guidelines for cross-cultural success

 Acquire factual and interpretive knowledge about the other culture; try to speak their
language.
 Avoid cultural bias.
 Develop cross-cultural skills, such as perceptiveness, interpersonal skills, and
adaptability.
Self-reference criterion – the tendency to view other cultures through the lens of one’s own
culture – understanding this is the first step.

Critical incident analysis – a method for analysing awkward situations in cross cultural
interactions by developing empathy for other points of view.
 1. Identify situations where you need to be culturally aware to interact effectively with
people from another culture.
2. When confronted with “strange” or awkward behaviour, discipline yourself to not
make judgements.
3. Develop your best interpretation of the foreigner’s behaviour, and formulate your
response.
4. Learn from this process and continuously improve.

Personality traits for cross-cultural proficiency

 Tolerance for ambiguity: ability to tolerate uncertainty and lack of clarity in the
thinking and actions of others.
 Perceptiveness: ability to closely observe and comprehend subtle information in the
speech and behaviour of others.
 Valuing personal relationships: ability to appreciate personal relationships, which are
often more important than achieving one-time goals “winning” arguments.
 Flexibility and adaptability: ability to be creative in devising innovative solutions, be
open-minded about outcomes, and show “grace under pressure”.

The cultural environment of international business

Cultureactive – Richard Lewis developed a cross-cultural assessment tool called
CultureActive, which is available through the Center for International Business Education and
Research (CIBER) at Duke University in the US, or through any ICE Teaching Consortium
Advisor, such as Martha White at Georgia State University.

ICE – the next phase – InterCultural Edge (ICE) emerged from CultureActive when validity,
reliability, and scientific research issues became paramount for academicians. ICE is a
collaborative initiative between the Fuqua School of Business, Duke CIBER, Richard Lewis
Communications, and Culturactive.com. CultureActive and ICE are web-based products that
teach cross-cultural awareness in business settings.

The Cultural Environment of International Business

American Football – a symbol of nationality, extravaganza, excitement, national pride, flags,
players charging up and down the field like an army in a violent conflict. They wanted to
popularise it in Europe, I worked in Germany but failed in Spain.
Bullfights in Spain – a ritual and an art, demonstration of style and courage by the matador
(hero, individual). It symbolises Spanish culture by combining a passionate celebration of life
with an elaborate system of rituals, a grandiose and artistic spectacle with blood, violence, and
danger.
Why did it work for Germany? It emphasizes German traits of rules and order. Germans
can also be very time conscious. Popular metaphor for German culture is the symphony.
Besides it didn’t work well in Europe because European countries are based on ancient
cultures. Europe is more about soccer (called football in most of the world).