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[Dr.

Sheelan Misra]
[New Horizon College of Engineering]
[IBM]

INTERNATIONAL
BUSINESS
ENVIRONMENT
International Business
is different
Because
Countries are different
Countries ar e d iff erent ……
……

•Culture
•Political system
•Economic System
•Legal system
International Business Success
Depends upon
Cross cultural literacy
Let’s understand culture!!

• What is culture?
• Social Structure
• Religious and Ethical Systems
• Language
• Education
• Cultural Change
Culture is not static!
Culture evolves over the
time!
Culture-Definition 1

“That complex whole which
includes knowledge, belief, art,
morals, law, custom, and other
capabilities acquired by man as a
member of society.”
- Edward Tylor
(19th century anthropologist)
Culture-Definition 2

“A system of values and norms
that are shared among a group
of people and that when taken
together constitute a design for
living.”
- Hill
(adapted from Hofstede,
Namenwirth, and Weber)
Components of Culture
• Values
• cultural bedrock
• Norms
• social rules that
govern
interactions
• Society
• a group that
shares common
values and norms
Folkways and Mores
Mores
Folkways
• Norms that are central
• Routine conventions of
to the functioning of
everyday life.
society and its social
• Social conventions
life
such as dress codes,
• Greater significance
social manners, and
than folkways
neighborly behavior
• Actions may be
• Demonstrate social
either illegal (theft,
(or cross-cultural)
adultery) or taboo
competence
(incest,
• Violations generally
cannibalism)
do not invite moral
• Violators are
judgment (i.e. of
considered evil;
good and evil)
Culture, Society and the Nation
state
• Society is a group of people who share
common set of values and norms, people
who are bound together by a common
culture

• Nation states are political creations. They
may contain a single culture of several
cultures.
Culture, Society, and the
Nation State
• Distinctions
• Culture: A system of values shared by a group
• Society (ethnie): A group bound by a common
culture
• Nation: A self-defined cultural and social community
(an “imagined” community, Benedict Anderson)
• State: A political association with effective
sovereignty over a geographic area
• Issues
• Societies, nations and states do not always
correspond
• Subcultures (often hidden) are found in many
nation-states
The Determinants and
Manifestations of Culture
Social Structure

•Social structure refers to its basic
social organization
•Two dimensions that are particularly
important include:
• The extent to which society is group or individually orie
• Degree of stratification into castes or classes
Individual vs. Group
Orientation
• Individualistic • Collectivistic
societies tend to societies see groups
view a person’s as the primary unit
attributes and of social
achievements as organization, with
more important group membership
than the group’s to as all important
which they belong • Emphasis on the
• Emphasis on group can be both
individual beneficial and
performance can be harmful
both beneficial and • Encourages mutual self-
harmful help and collective action
• Encourages • Discourages individual
entrepreneurship action and initiative
Social Stratification

• Social stratification refers to the fact that all
societies are stratified on a hierarchical basis of
social categories
• Strata are typically defined on the basis of
characteristics such as family background,
occupation, and income
• Societies are all stratified to come degree but they
differ in two related ways
• Social mobility refers to the extent to which individuals
can move out of the strata into which they are born
• The extent to which the stratification of a society affects
the operation of business organizations, this is known as
significance
Religious and Ethical Systems

• Religion: a system of shared beliefs and
rituals that are concerned with the realm of
the sacred

• Ethical systems: a set of moral principles,
or values, that are used to guide and shape
behavior
• Most of the world’s ethical systems are the
product of religions
• Among the thousands
of religions in the
world today, four
dominate in terms of
numbers of adherents:
• Christianity with 1.7
billion adherents
• Islam with 1 billion
adherents
• Hinduism with 750
million adherents
• Buddhism with 350
million adherents
Religious and Ethical Systems
Christianity
• Most widely practiced religion in the world
• At least 20% of the world’s population
• Monotheistic religion
• 11th century – the roman catholic church &
the orthodox church
• The orthodox church’s reformation in 16th
century lead to Protestantism
• Under the umbrella of Protestantism-
Baptist, Methodist & Calvinist
• In all the branches of Christianity :
• Catholics
• Orthodox
• Protestantism
• Protestantism has the most economic
implications
Economic Implications
of Christianity

• Weber argued that the “Protestant Work Ethic” was
central to their success. Protestant ethics
emphasizes
• the individuals direct relation to God, and
• the importance of hard work and wealth creation
(to achieve salvation and for the glory of God)
and frugality (abstinence from worldly
pleasures).
• The Protestant Work Ethic (Max Weber)

• Weber observed that in 19th century Europe the
economic “winners” (owners of capital, the
professions and skilled labor) were overwhelmingly
Protestant

• This culture of hard work and savings generated
capital which was reinvested in further enterprise,
paving the way for the development of capitalism
in the West
Islam
• Nearly 1 billion adherents
• Monotheistic religion

• Central principles of Islam:
• One god
• Unconditional acceptance of the
uniqueness, power & authority of god
• Objective of life is to fulfill the dictates of
his will in the hope of admission to paradise
Economic Implications
of Islam

• The Koran establishes some explicit economic
principles, many of which are consistent with a
free market economy and entrepreneurship

• The Koran speaks approvingly of enterprise and
the earning of legitimate profit through trade
and commerce
• The protection of the right to private property is
also embedded within Islam
• Islam is critical of those who earn profit through
the exploitation of others
• Islam stresses the importance of living up
to contractual obligations of keeping one’s
word and of abstaining from deception
• Muslim countries are generally receptive to
international business so long as local values and
norms are followed
• Over the past 100 years Islam has been going
through a process of reform as it adapts to
modernization and globalization
• In Islamic countries where fundamentalism is on
the rise, hostility towards western owned
business is likely to increase
Hinduism
• 1 billion adherents
• Mostly on Indian sub-continent
• Founding not linked to one single god
• henotheistic
• They believe in dharma, karma & nirvana
Economic Implications of
Hinduism
• It do not encourage the entrepreneurial
activity in pursuit of wealth
• Traditional Hindu values emphasize upon
spiritual achievements not on
materialistic.
• Historically, Hinduism has also supported
the caste systems
• Economic implications of caste system
were quite negative
• There might be hurdles in the way of
promoting the individuals belonging to low
caste even if they are able individuals
Buddhism
• Founded in India
• Sixth century by Siddhartha Gautam
• 350 million followers
• Gautam Buddha offered a noble eightfold
path as a route for transformation
• This emphasizes right seeing, thinking,
speech, action, living, effort, mindfulness
and meditation

Economic implications of
Buddhism
• It does not support caste system
• Nor they advocate kind of ascetic
behaviour as encouraged by Hinduism.
• But it represents more fertile ground for
entrepreneurial activity as the caste
system is not prevalent
Confucianism
• Founded in the fifth century by kung-fu-tzu
• Followed mainly in China, Japan & Korea
• Teaches the attainment of personal
salvation through right action
• The need for high moral and ethical
conduct and loyalty to others are central
to Confucianism
• Confucianism is not concerned with the
supernatural and has little to say about
the concept a supreme being or an
afterlife
Economic Implications of
Confucianism

• Three values are central to business
organizations:
• Loyalty, reciprocal obligations & honesty in
dealing with others
• Loyalty to one’s superior is regarded as a sacred
duty – an absolute obligation.
• This value of Confucianism reduces the level of
conflicts between the management & the labor
• Cooperation between management & labor can
be achieved at lower cost
• In China, this Confucian ethic is central to the
concept of gunaxi, which refers to the relationship
networks supported by reciprocal obligations

• In Japan, this ethic finds it way through lifetime
employment
• The Japanese employees are loyal to their leaders
and organization in turn provide them with
lifetime employment
• Over the years the managers and workers build
up the knowledge, experience and a network of
interpersonal business contacts
• All these leads to effective performance &
cooperation
• All this leads to company’s improved
economic performance
• Another important concept is Honesty
Language

• Primary means to transmit and interpret
information and ideas
• 4000 to10000 languages in the world
• The African continent has the largest
number of languages spoken
• India has numerous dialects
Language
•Spoken
• Verbal cues
• Language structures perception of world
•Unspoken
• Body language
• Personal space
Education
• Formal education plays a key role in modern
society
• medium through which individuals learn
indispensable language, conceptual, and
mathematical skills
• supplements the family’s role in socializing the
young into the values and norms of a society
• teaches basic facts about the social and
political nature of a society and the
fundamental obligations of citizenship
• Cultural norms are also taught indirectly at school
• Part of a “hidden curriculum”
• Examples of cultural norms include: respect for
others, obedience to authority, honesty,
neatness, being on time
• The grading system socializes children to value
Cultural Change
•Culture is not a constant; it evolves
over time
• Since 1960s American values toward the role of
women have changed
• Japan moved toward greater individualism in the
workplace
•Globalization will continue to have
impacts on cultures around the world
• Is the world moving toward greater cultural
convergence or divergence?
• Are the values of collectivistic culture incompatible
Cultural Change
Managerial Implications
•Cross-cultural literacy
•The danger of ethnocentrism
•Culture and competitive advantage
•Value systems and norms influence
the cost of doing business in a
country (transaction costs)
• How determinative is culture for
economic success?
• How important is culture in shaping
the foreign investment decisions of
Conclusion
• Provide a brief summary of your
presentation