Cultural

Environment
Prepared by: Ms. Ismaela M. Bawica
 Intended Learning Outcomes
Students should be able to meet the following intended learning
outcomes:

1. Classify culture and cross-cultural risk;

2. Explain the importance of culture in international
business;
3. Realize in what ways cultural differences influence
international business;
4. Understand how cultural elements such as language, religion, social structure
and interaction, aesthetics and cultural values influence international business; and

5. Discuss how to overcome cultural challenges.

 Targets/Objectives:
At the end of the lesson, students should be able to:

1. Define culture and cross-cultural risk;

2. Explain the importance of culture in international
business;
3. Determine in what ways cultural differences influence
international business;
4. Determine how cultural elements such as language, religion, social
structure and interaction, aesthetics and cultural values influence
international business; and

5. Discuss how to overcome cultural challenges.

 WHAT CONSTITUTE CULTURAL
ELEMENTS INTO CULTURE?
Culture has been defined in many ways. In modern management,
Hofstede viewed culture as the cultural programming of the human
mind, (Cavusgil et al., 2008) whereas in business-oriented terms,
Terpstra and David (1991) defined culture as a learned, shared,
compelling, interrelated set of symbols whose meanings provide a set of
orientations for members of a society. The working definition of culture
used throughout this topic is by Whitely and England (1977) who
described culture as the knowledge, beliefs, art, law, morals, customs
and other capabilities of one group distinguishing it from the other
groups. Despite the different definitions, culture has four common
features, as shown in Figure 3.1.
 WHAT CONSTITUTE CULTURAL
ELEMENTS INTO CULTURE?
Now let us have a look at the explanation of each feature
in Table 3.1. Culture matters in international business.
Culture is a key ingredient in the management of
international business. Often multinational corporations
(MNCs) operate in different cultural environments
characterized by foreign languages, beliefs, values and
lifestyles. Culture can be a liability of foreignness and
could pose as a risk to the MNCÊ s success abroad.
 Cross Cultural Risk
It refers to a situation or event where a cultural
miscommunication puts some human value at
stake. Cavusgil et al., 2008. The impact of culture
at the business level ranges from strategy
formulation and communication to foreign
investment operations and organizational
structure. Effective cross-cultural management of
the firm’s resources and operations is a critical
source of competitive advantage.
 Culture can impact managerial
tasks in various ways such as:
Marketing strategies that involve
development of products and
services and advertising; International management
FDI strategies such as communicating and of human resources;
interacting with foreign business partners,
screening and selecting foreign distributors and
other partners, negotiating and structuring
international business ventures;
Organizational design and
behavior such as motivation,
Business practices such as leadership and perception.
interacting with current and
potential customers from abroad;
 CULTURAL ELEMENTS
Culture has many components that are correlated with many variables, for
example, language and religion. Some cultural elements are visible
attributes that have objective dimensions (such as symbols, color, art and
music) while some have invisible attributes (such as values, attitudes,
norms and religion). International business managers need to have
knowledge and deep understanding of the different components of
culture. The basic elements of culture that are important in international
business are language, religion, education, social structure and
interaction, aesthetics and cultural values. Let us continue our discussion
by looking at the first cultural element which is language. Language is one
of the key dimensions of culture.
 Language
Language is construed as the mirror of culture and provides
insights into culture. It is essential for communication and basic
socialization in which values and norms are expressed and
communicated. Language is both a unifying and dividing force.
There exists diversity in language across and within national
boundaries. At present, the world has nearly 7,000 active
languages. India alone has more than 200 spoken languages. Table
3.2 highlights the major languages of the world. Because of
differences between language structure and in the use of slang and
dialects, language blunders are common in business settings.
Translation, meaning and expressions differ across the language
spectrum.
The concept and meaning of a word are not universal,
even though the word can be translated into another
language. Language mistakes and blunders are
embarrassing and often unnecessary, for example,
careless translation in advertising slogans or products
labels. The following examples of language mistakes
in cross-cultural marketing illustrate how crucial
language is in international business:
(a) Marketing executives were disappointed to learn that the brand name
of the cooking oil they were promoting in a Latin American country
translated into Spanish as Jackass Oil.

(b) In Chinese, the Kentucky Fried Chicken slogan

“finger-licking good” came out as eat your fingers off.

(c) In Taiwan, the translation of the Pepsi slogan “Come alive with the
Pepsi Generation” came out as Pepsi will bring your ancestors back from
the dead.

(d) In Italy, a campaign for Schweppes Tonic Water

translated the name into Schweppes Toilet Water.
As a communication medium, language has two parts: verbal (spoken)
and nonverbal (silent language such as space, facial expressions and
gestures). Linguistic proficiency is a great asset in international
business because it facilitates cross cultural understanding especially
in business negotiation. For example, it is important for investors to be
proficient in Mandarin Chinese and it will be of great advantage to
know the native Chinese language while doing business in China. For
non-verbal language, facial expressions and hand gestures can have
different interpretations in different cultures and often complicate
international communication. Not only may the person you are dealing
with be unintentionally sending non-verbal signals that you do not
comprehend or you misunderstand, you may be unconsciously sending
your own signals. Some examples of silent language blunders and lack
of cultural awareness are as below:
(a) One company printed the „OK finger sign on
each page of its catalogue. In many parts of Latin
America this is considered an obscene gesture. The
entire catalogue had to be re-printed.

(b) An American executive refused an offer of

a cup of coffee from a Saudi businessman.
Such a rejection is considered very rude and
the business negotiations were terminated.
It is important to remember that for language
to be truly useful for business people, they
must understand the uses, distances, gestures
and interpretations that accompany verbal
communication. Global business managers
must be familiar with the foreign cultures
hidden language. Marketers of MNC's should
decide which language to use in product
labels and advertisement copy.
 Religion
It can be defined as a system of common beliefs, attitudes and rituals
that people consider to be sacred. Religion directly influences culture,
and therefore business and consumer behavior. While there are
thousands of religions worldwide, four dominant religions around the
world are Christianity, Islam, Hinduism and Buddhism. Table 3.3 shows
the major religions of the world and the percentage of each religion.
The impact of religion is evident in international business. Religion
influences attitudes towards consumption, business practices and
social organization. Global managers must be sensitive towards
religious differences and beliefs not only among the major religions but
also within the subgroups. Examples of how religion can influence
international business are:
(a) McDonald’s in India faced religious challenges. The cow is
considered sacred in India’s Hindu culture prompting
McDonald’s to alter its menu to offer mutton, chicken and
vegetarian alternatives to its traditional beef burgers.

(b) The case of Nike Air brings back another classic example of cultural
blunder. In 1998, Nike Air Bakin made national headlines when
ArabAmerican groups thought that the way „Air was written on the shoe
looked too similar to „Allah‰ written in Arabic. Nike recalled thousands
of shoes, covered the logos with patches and the shoes made their way to
the outlets. Unfortunately for Nike, there were hundreds of thousands of
shoes fresh out of the factories that had the same logo (Nice kicks, 2012).
(c) In the Islamic market, Nokia launched a mobile phone that
shows Muslims the direction towards Mecca, Islam’s holiest site.
Heineken, the Dutch brewing giant, rolled out the non-alcoholic
malt drink, Fayrouz.
(d) Major holidays in many countries are tied to religion. Almost 90 percent of
Brazilians are Catholic, making Brazil the largest Catholic population in the
world. Catholic holidays, consequently, affect Brazilian work schedules and are
widely celebrated. MNCs operating there must keep this in mind when planning
marketing events, scheduling meetings or operating in local offices.

(e) In Islamic countries, which prohibit the consumption of alcohol,

gambling, usury and „immodest exposure, firms that deal in alcoholic
beverages, resorts, entertainment, and women’s clothing, as well as ad
agencies, and banks and other institutions that lend money are affected.
 Social Structure
It refers to a society’s basic social organization.
Social structure affects business decisions ranging
from production site selection, negotiation and
marketing to the costs of doing business in a country.
One important dimension of social structure that
differs across cultures is social group interaction.
 Social Interaction
It refers to how people of different
cultures associate themselves and
interact with one another. Two important
social group interactions affecting
business activities everywhere are family
unit and gender.
(a) Role of Family Unit Family unit varies dramatically across societies.
The two different types of family units are:

(i) Nuclear family which comprises parents and

children and is found mainly in Western countries;
and
(ii) Extended family which comprises a wider group of family
members that includes relatives and is prevalent in
developing countries. The way in which families are
structured present interesting situations for business people
who are unfamiliar with the culture.
For example, in extended family cultures, managers
and other employees often try to find jobs for relatives
inside their own companies. This can pose a challenge
for human resource management. In some cultures,
business is owned with family and relatives. Owners and
managers buy supplies and materials only from
companies owned by relatives or in which someone from
the extended family works. In cultures where extended
families are the norm, major purchase decisions are
influenced by members of an extended family.
 Gender
in the cultural context refers to socially learned
behaviors and attitudes associated with the role of men
or women. This includes behaviors and attitudes such
as style of dress, activity preferences and decision-
making authority. Each culture handles gender roles
more or less differently and this has a great impact on
international business. The economic role of women
varies from culture to culture. For example, business in
global marketing in Islamic countries should find out
what is the role of women.
Marketing to women is driven by local religions and beliefs. In
Asia’s management style, women in general have less
opportunity than men in the workplace and hence are less
involved in decision-making. For example, women in China are
still mainly responsible for caring for the family and home. Women
in China work hard but they do not get positions which would be
adequate for their knowledge and level of education. There is an
obvious problem when working in a Chinese company where men
do not report to women about business matters. It is unacceptable
in China for women to take managerial positions or have a higher
status in jobs than their male colleagues. Today, women in China
are playing an increasingly important role but they are still far
from having achieved equal rights (Hofman, 2009).
 Aesthetics
It refers to sense and perception of beauty and good taste
of a culture. Aesthetic is the objective dimensions in
culture that includes symbolic and material productions,
meaning of tools, architecture, art forms, music and use of
brand names. Cultures differ sharply in terms of their
aesthetic preferences. Color and form (design and shape)
are used as symbols with specific meanings. Color and
symbols have different meanings – religious, symbolic,
patriotic reasons and aesthetic appeal and its significance
vary from culture to culture.
Color as a brand identity has become a big legal issue
recently as trademark law protected distinctive colors that
had become strongly associated with a particular product
or manufacturer. Color and symbols would be of interest
in international business due to trademark infringement
lawsuits that allow companies to appropriate a single
color, color combination or symbol. Global marketers need
to know the significance of color psychology and the
symbolic meanings of colors in planning products,
packaging, branding and advertising. Table 3.5 highlights
some pitfalls when creating universal symbols.
 Hofstede’s Cultural Value
Dimensions
By far the most widely used work on national
culture is from Geert Hofstede, who surveyed the
values of attitudes of more than 100,000 IBM
employees worldwide. Hofstede’s survey revealed
four underlying dimensions of national culture:
power distance, individualism/collectivism,
uncertainty avoidance and masculinity/femininity.
(a) Power Distance (PD) is the extent to which society deals
with differences in power that exists among people.

Examples of countries with high PD are Japan, India, Brazil

and Malaysia while United States, Denmark, and Sweden exhibit
low PD. Societies with high PD tend to tolerate and accept
relatively high social inequalities. Status symbols play an
important role. Organizations with high PD are more centralized,
with more layered and hierarchical structure with more
supervisory personnel and larger wage differentials. In societies
with low PD, the gaps between the powerful and weak are
minimal and status symbols are less emphasized. Organizations
with low PD are characterized by flatter structure and less
centralization.
(b) Individualism/Collectivism (I/C) describes the degree
to which people function primarily as an individual or
within a group.
It is also referred to as the I% and we societies. In individualistic societies,
the focus is on people’s own interests while societies high in collectivism
tend to pursue group interest and group harmony. Competition is
important among individualists while group conformity is highly
emphasized in collectivists. The United States, Australia and United
Kingdom are individualist countries. Collectivist countries are South
Korea, Mexico, China and Indonesia. Organizations from highly
collectivistic cultures practice group loyalty, sense of duty and group
participation. The organization is more paternalistic (the organization is
viewed as a family) while individualistic organizations are more
impersonal and encourage individual initiative.
 Uncertainty Avoidance
It refers to the extent to which uncertainty and ambiguity
are tolerated. People from a strong UA culture feel
threatened by uncertainty and attempt to standardize rules
and behavior that structure life. In weak uncertainty
avoidance cultures, people are more risk-taking, easygoing
and entrepreneurial. Countries that score high on UA are
Japan, France and Spain. Malaysia, India, the United
Kingdom and Hong Kong are examples of countries that
exhibit low uncertainty avoidance. UA is one of the most
critical dimensions for foreign investment because of its
implications for risk taking and investment.
Multinational corporations from
cultures high in UA are likely to
take a more incremental approach
to internationalization of their
business expansion.
(d)Masculinity/Femininity (M/F)
This dimension describes the importance of male values
such as competitiveness, assertiveness, status and
success. They are emphasized against female values like
caring, people orientation, quality of life and nurturing.
Typical examples of masculine cultures are Australia,
Japan and Italy while Thailand, Sweden and Finland are
low in the masculinity trait. MNCs from feminine cultures
tend to minimize gender roles with more women in more
qualified jobs. Such organizations tend to value social
rewards and benefits to employees.
Table 3.6 shows country comparison of work-related
values. The index score roughly ranged from 0 to 100.
The higher the score, the more that dimension is
exhibited in society. Western nations like the United
States, Canada and the United Kingdom score high on the
individualism scale and low on the power distance scale.
Asian countries score high on power distance but
emphasize on collectivism. Japan has strong uncertainty
avoidance and high masculinity. Malaysia scores high on
power distance. Sweden and Denmark has both low
uncertainty avoidance and masculinity.
Table 3.7 provides a summary
of the characteristics of
Hofstede’s cultural dimension
and tips to deal with each value
orientation.
Cultural differences between countries have a direct
impact on international business activity. Cultural
blunders and misunderstandings encountered by big
companies in our examples have proven the
importance of local cultural knowledge. As
globalization becomes more prominent in
international business, there is greater need for
companies to understand local culture in order to
enhance their competitive advantage.
 Avoid Cultural Bias
One of the main causes of culture-related blunders made by managers is
ethnocentrism. This is a form of cultural bias based on the belief that one’s
own cultural group is superior to that of others. International business
managers should be sensitive to cultural biases that influence one’s thinking
or avoid ethnocentricity so as to not disregard the positive and beneficial
aspects of other cultures. At the same time, managers should develop
cultural literacy to appreciate cultural diversity and respect for cultural
identities. Cultural literacy is detailed knowledge about a culture which
enables one to function effectively within it (Wild et al., 2008). Companies
operating in local markets and in working environments with employees
from diverse cultures should promote intercultural communication
sensitivity and multiculturalism. This is a critical step to avoid cultural bias
and overcome ethnocentric reactions (Dong & Collaco, 2009).
 Avoid Cultural Stereotypes
A cultural stereotype is an assumption or generalization made about
an individual based on one’s own superficial criteria, for instance,
cultural assumptions of a person’s gender, age, habits and behavior.
Such stereotyping can affect our attitudes and expectations when
communicating with people from other cultures. Hence, managers
involved directly in international business should develop business
literacy through cross-cultural training and pay attention to significant
subcultures within countries. This is particularly important especially in
working environments with colleagues and counterparts from other
cultures and also in international business relationships. Table 3.8
presents various forms of business literacy that managers and
executives must learn in order to do business in the global marketplace.
 Understanding Business Culture and Practices
Apart from having a general understanding of the historical and cultural
background of the foreign country a company is dealing with, it is
important that managers be aware of and are sensitive to significant
features of the business culture. It is imperative for managers to not only
have a general appreciation for other cultures but acquire knowledge on
specific details of how to conduct oneself in various business situations.
Some of the major guidelines necessary for understanding business
practices include appropriate conduct during conversations, business
meetings and social gatherings as well as physical appearance, including
how to dress and facial expressions. Such cultural awareness and
knowledge are vital for the success of business dealings. However, business
practices vary across countries. Companies should offer international
business managers training in cross-cultural communication.
Thanks!
Any questions?
Clarifications?