CHAPTER 4

The Cultural Environment

Facing Business
LEARNING OUTCOMES
• Understand methods for learning about cultural environments
• Grasp the major causes of cultural difference and change
• Discuss behavioral factors influencing countries’ business
practices
• Recognize the complexities of cross-cultural information
differences, especially communications
• Analyze guidelines for cultural adjustment
• Grasp the diverse ways that national cultures may evolve
HOW DO CULTURAL DIFFERENCES
AFFECT INTERNATIONAL BUSINESS?
Understanding and adapting to the local cultural is
important international companies
• cross-cultural literacy - an understanding of how cultural
differences across and within nations can affect the way in
which business is practiced
A relationship may exist between culture and the costs
of doing business in a country or region
• MNEs can be agents of cultural change
INTRODUCTION
 Culture refers to the learned norms based on values, attitudes, and beliefs of a
group of people
 Culture is an integral part of a nation’s operating environment
• every business function is subject to potential cultural differences

 Companies need to decide when to make cultural adjustments

 Fostering
cultural diversity can allow a company to gain a global competitive
advantage by bringing together people of diverse backgrounds and experience
 But,cultural collision can occur when a company implements practices that are
less effective or when employees encounter distress because of difficulty in
accepting or adjusting to foreign behaviors
 COMPONENTS OF CULTURE

Aesthetics
Physical & Values &
Environments Attitudes

Manners &
Education Culture Customs

Personal
Social Structure
Communication
Religion
CULTURAL AWARENESS
Problem areas that can hinder managers’ cultural awareness…
• Subconscious reactions to circumstances
• The assumption that all societal subgroups are similar

Managers that educate themselves about other cultures have a

greater chance of succeeding abroad
So,
1. Culture is learned – acquired through education, training, and experience
2. Culture is shared - transmitted from one generation to another through the medium of
language, verbal or non-verbal through the gestures or signs, orally or in writing.
3. Culture is transmitted - All the culture traits and objects are transmitted among the
members of society continually.
4. Culture is changing - constantly under goes change and adapts itself to the environments.
CULTURE AND THE NATION-STATE
 The nation is a useful definition of society because similarity
among people is a cause and an effect of national boundaries
• laws apply primarily along national lines
• language and values are shared within borders
• rites and symbols are shared along national lines

 Country-by-country analysis can be difficult because

• subcultures exist within nations
• similarities link groups from different countries

 Managers also need to focus on relevant groups

 LANGUAGE:
CULTURAL DIFFUSER AND STABILIZER
 A common language within a country is a unifying force

 A shared language between nations facilitates international business

• Native English speaking countries account for a third of the world’s production
• English is the international language of business
Major Language Groups: Population and Output
 RELIGION: CULTURAL STABILIZER
 Religion impacts almost every business function
 Centuries of profound religious influence continue to play a major role in
shaping cultural values and behavior
• many strong values are the result of a dominant religion
• Islamic Banking, Confucian Ideology, Banning of religious offensive food items because of
strong beliefs.
 SOCIAL STRATIFICATION
 Social ranking is determined by
• an individual’s achievements and qualifications
• an individual’s affiliation with, or membership in, certain groups
 Group affiliations can be
 Ascribed group memberships
 based on gender, family, age, caste, and ethnic, racial, or national origin
 Determined by birth

 Acquired group memberships

 based on religion, political affiliation, professional association
 Not determined by birth
 WORK MOTIVATION
 The motivation to work differs across cultures
 Studies show
 the desire for material wealth is a prime motivation to work
promotes economic development
 people are more eager to work when the rewards for success are high
 masculinity-femininity index
high masculinity score prefers “to live to work” than “to work to
live”
 HOW DOES CULTURE
IMPACT THE WORKPLACE
 Hofstede’s dimensions of culture:
1. Power distance - how a society deals with the fact that people are
unequal in physical and intellectual capabilities
2. Uncertainty avoidance - the relationship between the individual and his
fellows
3. Individualism versus collectivism - the extent to which different
cultures socialize their members into accepting ambiguous situations
and tolerating ambiguity
4. Masculinity versus femininity -the relationship between gender and
work roles
RELATIONSHIP PREFERENCES: HOFSTEDE MODEL

 Relationship preferences differ by culture

 Power distance
 high power distance implies little superior-subordinate interaction
 autocratic or paternalistic management style
 low power distance implies consultative style
 Individualism versus collectivism
 high individualism – welcome challenges
 high collectivism – prefer safe work environment
 RELATIONSHIP PREFERENCES: HOFSTEDE
MODEL – RELATIONSHIP PREFERENCES
 Risk taking behavior differs across cultures
 Uncertainty avoidance
handling uncertainty - describes one’s acceptance of risk.
 Trust
degree of trust among people - Where trust is high, there tends to be a lower cost of doing business. [For
example, Norwegians tend to exhibit a high degree of trust, whereas Brazilians tend to be skeptical.]
 Future orientation
delaying gratification
 Fatalism
attitudes of self-determination - Fatalism represents the belief that events are predestined. Such a belief
may discourage people from working hard to achieve an outcome or accepting responsibility.
 INFORMATION AND
TASK PROCESSING
 Cultures handle information in different ways
 Obtaining information

low context versus high context cultures

 Information processing
 Monochronic versus polychronic cultures
 Idealism versus pragmatism
 COMMUNICATIONS
 Cross border communications do not always translate as
intended
 Spoken and written language
 Silent language
• Color
• Distance
• Time and punctuality
• Body language
• Prestige
COMMUNICATIONS
Body Language Is Not A Universal Language
 DEALING WITH
CULTURAL DIFFERENCES
 Do managers have to alter their customary practices to succeed in countries
with different cultures?

 Must consider
 Host society acceptance
 Degree of cultural differences

cultural distance
 Ability to adjust

culture shock and reverse culture shock

 Company and management orientation
 DEALING WITH
CULTURAL DIFFERENCES
Three company and management orientations
 Polycentrism
business units abroad should act like local companies
 Ethnocentism
home culture is superior to local culture
overlook national differences
 Geocentrism
integrate home and host practices

Which orientation is better?

 KEYS TO SUCCESS

 Organizations must understand cultural differences

Organizations must be culturally literate in order to avoid

misunderstanding
As companies enter into the international market, localizing
business policies and practices can help managers to succeed