Chapter 4 and 5 Compiled together

Chapter Four
Differences in Culture

Chapter Five
Ethics in International Business
 1. What is Culture?

“Culture is that complex whole which includes knowledge, belief, art,

morals, law, custom, and other capabilities acquired by man as a
member of society.”
- Edward Tylor
“Culture is the collective programming of mind which distinguishes
the member of one human group from another, so in this sense
culture includes systems of value and values are among the
building blocks of culture ”
- Hofstede
“A system of values and norms that are shared among a group of
people and that when taken together constitute a design for
living.”
- Hofstede, Namenwirth, and Weber
 Components of Culture

• Values

• Norms
– Folkways

– Mores

• Society
 Values
• Values for the bedrock of a culture
• They provide the context within which a
society’s norms are established and justified
• They include attitudes toward
– Individual freedom, Democracy, Truth,
Justice, Honesty, Loyalty, Social obligations
• Values are also reflected in the political and
economic systems
 Norms
 Norms are the social rules that govern people’s actions toward one
another. Norms can be classified as Folkways and Mores.

Folkways: Routine statute of Mores: Norms central to the

everyday life. functioning of society and its
 Little moral significance social life.
 Generally, social  Greater significance than
conventions such as dress folkways
codes, social manners,  Violation can bring serious
and neighborly behavior retribution
Theft, adultery, murder and
cannibalism
 Society
• Society refers to a group of people who share a
common set of values and norms
Culture, Society, and the Nation State:
• A society is a group of people bound together by a common
culture

• There is not a strict one-to-one correspondence between a

society and a nation state

• Nation State:
– Is a political creation
– May contain a single culture or several cultures
2. The Determinants of Culture
 A. 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 oriented
– Degree of stratification into castes or classes
 Social Structure
• 1.Individual Vs. Group or Collectivism: association of two or
more individuals who have a shared sense of identity and
who interacted with each other in structured ways on the
basis of common set of expectations about each other
behavior.

• 2.Social Stratification: All societies are stratified on a

hierarchical basis into social categories, i.e. into strata.
• 3. Social Mobility: refers to the extent to which individuals
can move out of the strata into which they re born.
 Individual vs. Group Orientation
• Individual societies tend • Group societies see groups as the primary
to view individual unit of social organization
attributes and • Group members
achievements as being – Often form deep emotional attachments
more important than
– See group membership as all important
group membership
• Emphasis on the group can be both
• Emphasis on individual
beneficial and harmful
performance can be both
beneficial and harmful – Strong group identification creates
pressure for mutual self-help and
– Encourages
collective action
entrepreneurship
– Discourages managers and workers from
– Can lead to high moving from company to company
degree of managerial
– Discourages entrepreneurship
mobility
 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
 B. 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
 C. Language
• Language is the key to culture
• Spoken
– Verbal cues
– Language structures perception of world
• Unspoken
– Body language
– Personal space
• Spoken languages determine cultures
 If two/more languages are spoken in a country, there will be two/more
separate cultures.
 Switzerland: four separate cultures
 Canada: English Vs French creating cultural tension
• Many languages can exist in a single country, but one usually serves as
communication vehicle
 Hindi is the official language in India
 English primary language of business
 Spoken Language (example)

• Even though more and more businesspeople are speaking English, when they
buy, they insist on doing business in their own language. The seller who speaks
it has a competitive edge. Moreover, knowing the language of the area
indicates respect for its culture and people.
• A German, engineer, in Columbia to work on a pipeline, arrived at a hotel,
where he tried to explain to the desk that he had a suitcase full of cash that he
wanted the hotel to keep. Because he knew no Spanish, he was having
difficulty making himself understood. During the conversation, the desk clerk
opened the suitcase in front of everyone in the lobby. A week later, the engr.
Was kidnapped by a guerilla group and held for a month.
 Translation (example)
• The ability to speak the language well does not eliminate the need for
translators. The smallest market requires technical manuals, catalogs, and good
advertising ideas in local language. Allowing the headquarter to translate can
be extremely risky because words from the same language frequently vary in
meaning from one country to another or even from one region to another.
• Example: the American headquarter of a deodorant manufacturer sent a
Spanish translation of the manufacturer’s international theme, ‘If you use our
deodorant, you wont be embarrassed in public’. Unfortunately, the translator
used the word ‘embarazada’ for ‘embarrassed’, which in Mexican Spanish
means ‘Pregnant’.
 Unspoken Language (example)
• There is reluctance in many regions of the world to say anything disagreeable
directly to the listener.
• Japanese hardly uses ‘no’ when they disagree.
• An American executive pleased that her Japanese counterpart is nodding and saying
‘yes’ to all of her proposals. But later she realized that all time the listener was
saying ‘yes’ (I hear you) and not ‘yes’ (I agree).
• Gift giving has specific etiquette in each culture
 Acceptable Gifts:
▫ In Japan one never gives an unwrapped gift or visit a Japanese home empty-
handed.
▫ In Japan, white and yellow flowers are not good choices for gifts because in many
areas they connote death.
▫ In China, one never gives clock/watch to others, as it means ‘your time is over’.
▫ Cutlery is a friendship cutter for Russians, French and Germany. If they give
cutlery, they always ask for a coin payment so that the gift will not cut the
friendship.
 Body Language and Personal Space (example)
• Non verbal communication, can often tell businesspeople something that the
spoken language does not - if they understand it.
• Gestures vary tremendously from one region to another
– Americans and most Europeans understand the ‘thumbs up’ gesture to mean ‘all
right’, but in Southern Italy and Greece, it transmits a very bad meaning.
– Making a circle with the thumb and the forefinger is friendly in US, but it means
‘you're worth nothing’ in France and Belgium, and is a vulgar sexual invitation in
Greece and Turkey.
• Personal space is the comfortable amount of distance between you and
someone you are conversing with.
‒ In America, the usual distance they maintain is 5 – 8 feet while in Latin America,
this distance is 3 – 5 feet.
 D. Education
• Formal education plays a key role in a society
– Formal education: the medium through which individuals
learn many of the language, conceptual, and mathematical
skills that are indispensable in a modern society
– Also supplements the family’s role in socializing the young into
the values and norms of a society
– Schools teach basic facts about the social and political nature
of a society, as well as focusing on the fundamental
obligations of citizenship
– Cultural norms are also taught indirectly at school
• Examples include: respect for others, obedience to
authority, honesty, neatness, being on time
• Part of the “hidden curriculum”
– The use of a grading system also teaches children the value of
personal achievement and competition
E. Political Philosophy:

• By political system, we mean the system of government in a nation.

• Political systems can be assessed by degree to which they emphasize
collectivism as opposed to individualism.
• Political systems can also be assessed by degree to which they are
democratic or totalitarianism.

F. Economic Philosophy:
• The accepted process by which labor, capital and natural resources are
organized to produce and distribute goods and services in a society.

• There are three basic types of Economies:

1. Planned Economies
2. Free Market Economies
3. Mixed Economies
 E. Economic Philosophy
1. Planned Economics
Economic system in which the government largely decides what goods
and services will be produced, who will get then and how that
economy will grow.
The government owns the productive resources, financial enterprises,
retail stores and banks.
Example: Soviet Union, Cuba, North Korea
2. Free Market Economics
Economic system in which decision about what to produce and in what
quantities are decided by the market. That is by buyers and sellers
negotiating prices for goods and services.
Example: USA
3. Mixed Economics
Economic system in which some allocation of resources are made by the
market and some are made by the government.
This contains elements of both market and planned economic system.
There are private enterprises and also is the government intervention.
Both the government and the business enterprises produce and
distribute goods and services. Example: Bangladesh, UK, India, etc.
 3. Hofstede’s Dimensions of Culture/
Culture in the Workplace/ How differences in
Social culture influence values in the workplace
The most famous study of how culture relates to values in the workplace was
undertaken by Geert Hofstede.
• Five dimensions of culture:
– Power distance - cultures are ranked high or low on this dimension based
on the particular society’s ability to deal with inequalities
– Individualism versus collectivism - this dimension focuses on the
relationship between the individual and his/her fellows within a culture
– Uncertainty avoidance - this dimension measures the extent to which a
culture socializes its members into accepting ambiguous situations and
tolerating uncertainty
– Masculinity versus femininity - this dimension looks at the relationship
between gender and work roles
– Time orientation - future-oriented perspective (high LTO) v. Short term
point of view (STO)
 Hofstede’s Dimensions of Culture
Power Distance
 This dimension expresses the degree to which the less powerful members of a society accept
and expect that power is distributed unequally.
 The fundamental issue here is how a society handles inequalities among people.
 People in societies exhibiting a large degree of power distance accept a hierarchical order in
which everybody has a place and which needs no further justification.
 In societies with low power distance, people strive to equalise the distribution of power and
demand justification for inequalities of power.
 In large power distant societies, employees believe their superiors are right even when they
are wrong, and thus employees do not take any initiative in making non routine decisions.
 Malaysia, Slovakia, Guatemala, Iraq, Panama and Saudi Arabia has more power distance
compared to Austria, Israel and Denmark (Hofstede, 2013).
 Hofstede’s Dimensions of Culture
Individualism vs. Collectivism
 Individualism, can be defined as a preference for a loosely-knit social framework in which
individuals are expected to take care of themselves and their immediate families only.
 Collectivism, represents a preference for a tightly-knit framework in society in which
individuals can expect their relatives or members of a particular in-group to look after
them in exchange for unquestioning loyalty.
 A society's position on this dimension is reflected in whether people’s self-image is
defined in terms of “I” or “we.”
 Thus operating in collective cultures must follow participative decision making process.
 USA, Australia, UK ranks high as individualist society while Guatemala, Ecuador and
Panama ranks high in collectivist list.
 Hofstede’s Dimensions of Culture
Masculinity vs. Femininity
 The masculinity side of this dimension represents a preference in society for heroism,

assertiveness, acquisition of money & status, achievement of visible & symbolic

organizational rewards and material reward for success. Society at large is more

competitive.

 Femininity, stands for a preference for relationships, cooperation, modesty, concern for

others, caring for the weak and quality of life. Society at large is more consensus-oriented.

 Slovakia, Japan and Hungary are more Masculine society than Sweden, Norway and

Netherlands.
 Hofstede’s Dimensions of Culture
Uncertainty Avoidance
 The uncertainty avoidance dimension expresses the degree to which the members of a
society feel uncomfortable with uncertainty and ambiguity.
 The fundamental issue here is how a society deals with the fact that the future can
never be known: should we try to control the future or just let it happen?
 Employees in high uncertainty avoidance cultures tend to stay with their organization
for long time and organizational change likely to receive strong resistance from
employees, which makes the implementation of change more difficult to administer.
 Countries exhibiting strong UAI maintain rigid codes of belief and behavior and are
intolerant of unorthodox behavior and ideas. Weak UAI societies maintain a more
relaxed attitude in which practice counts more than principles.
 Greece, Portugal and Guatemala are classified as high UA countries while Singapore,
Jamaica and Denmark are marked as low UA countries.
 Problems with Hofstede

• Assumes one-to-one relationship between

culture and the nation state
• Research may have been culturally bound
• Survey respondents were from a single
industry (computer) and a single company
(IBM)
 4. Implications of Cultural Change
Culture is not 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
 Cultural Affects on Business
• Marketing
In Japan P&G used an advertisement for Camay soap in which a man meeting a women
for the first time compared her skin to that of a fine porcelain doll. This ad worked well in
South America and Europe, but it insulted the Japanese. In Japan saying something like
that to a women means the man is either unsophisticated or rude.

• Human Resource Management

All MNCs has to adopt local culture in managing people in their company.
• Production and Finance
A production manager who had been sent to Peru from USA was convinced that he could
motivate the workers to achieve higher productivity by instituting a more democratic
decision making style. Shortly after the new management style was introduced, the
workers began quitting their jobs. When asked why, they replied that the new production
manager and his supervisors apparently didn’t know what to do and were therefore
asking the workers for advice. The workers thought the company wouldn’t last long with
that kind of management, and they wanted to quit the job before it collapse, because
then everyone would be hunting for a job at the same time.
 Cultural Affects on Business
• Attitudes toward Time
 An American who has worked in the Middle East for 20 years explains the Middle
Eastern concept of time in this way “at worst, there is no concept of time in the
Middle East.”

 In Bangladesh we hardly follow the time of an appointment.

• Attitudes toward Achievement and Work
 Germans put leisure first and work second and in USA it’s the other way round.
 Sometimes raising employees’ salaries might result into working less.
• Attitudes toward Change
 American people rapidly accept anything new in the market. But the tolerance level
for new things is low for Europeans.
5. Different Philosophical Approaches to Ethics/ Ethical
Considerations by Managers in Decision Making
• Business ethics are the accepted principles of right or wrong governing the
conduct of business people
• An ethical strategy is a strategy or course of action that does not violate these
accepted principles
• In the international business setting, the most common ethical issues involve
– Employment practices
– Human rights [such as freedom of association, freedom of speech, freedom
of assembly, freedom of movement, and freedom from political repression]
– Environmental regulations [Developing nations often lack environmental
regulations, and according to critics, the result can be higher levels of
pollution from the operations of multinationals than would be allowed at
home]
– Corruption [The debate about the impact of corruption, positive or
negative, establishes the stand for never engaging in corruption, no matter
how compelling the benefits might seem.
- Moral obligation of multinational corporations

[Power itself is morally neutral. It is how power is used that matters.

• Power can be used in a positive way to increase social welfare, which is
ethical, or it can be used in a manner that is ethically and morally suspect.
• Social responsibility refers to the idea that businesspeople should
consider the social consequences of economic actions when making
business decisions]
The Roots of Unethical Behavior
 Different Philosophical Approaches to Ethics

• Philosophical Approaches to Ethics: Straw Men

• Utilitarian and Kantian Ethics
• Rights Theories
• Justice Theories
 Ethical Considerations by Managers in Decision Making
• Five things that an international business and its managers can do to make sure
ethical issues are considered
– Favor hiring and promoting people with a well-grounded sense of personal
ethics
– Build an organizational culture that places a high value on ethical behavior
– Make sure that leaders within the business not only articulate the
rhetoric/expressive of ethical behavior, but also act in a manner that is
consistent with that rhetoric
– Implement decision-making processes that require people to consider the
ethical dimension of business decisions
– Develop moral courage

End of the Chapter