DIFFERENCES

IN CULTURE
INTERNATIONAL BUSINESS AND
TRADE
INTRODUCTION

 CROSS-CULTURAL LITERACY- an understanding of how cultural

differences across and within nations can affect the way in which business
is practiced.

 Important to success in international business.

 There may be a relationship between culture and the costs of doing

business in a country or region.

 Culture is not static

What is culture?

 Culture is a system of values (abstract ideas about what

a group believes to be good, right, and desirable) and
norms (the social rules and guidelines that prescribe
appropriate behavior in particular situations) that are
shared among a group of people and that when taken
together constitute a design for living.
VALUES AND NORMS

 VALUES - provide the context within which a society’s

norms are established and justifi ed.
VALUES AND NORMS

 NORMS - the social rules that govern the actions of

people toward one another and can be further
subdivided into:

>FOLKWAYS- The routine conventions of everyday

life.

>MORES- norms that are seen as central to the

functioning of a society and to its social life
CULTURE, SOCIETY & NATION STATE

• SOCIETY - a group of people who share a common set of

values and norms.

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

a society and a nation-state

>nation- states are political creations that can

contain a single culture or several cultures.

>some cultures embrace several nations

 DETERMINANTS OF CULTURE
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The Determinants of Culture

• The values and norms of a culture are the evolutionary

product of a number of factors at work in a society
including:

*prevailing political and economic philosophies

*a society’s social structure
*the dominant religion, language, and education
SOCIAL STRUCTURE

• A society’s social structure is its basic social

organization.

Two Dimensions to consider:

1. The degree to which the basic unit of a social
organization is the individual, as opposed to the group.
2. The degree to which a society is stratified into
classes.
Individuals and Groups

• Group - an association of two or more individuals who

have a shared sense of identity and who interact with
each other in structured ways on the basis of a common
set of expectations about each other’s behavior.

• Groups are common in many Asian societies.

• Many Western countries emphasize the individual.

Individuals and Groups

• In societies where the individual is emphasized

*individual achievement and entrepreneurship are
promoted but, this can encourage job switching,
competition between individuals in a company rather than
team building, and a lack of loyalty to the firm.
Individuals and Groups

• In societies where the group is emphasized

* cooperation and team work are encouraged and

life time employment is common but, individual initiative
and creativity may be suppressed
SOCIAL STRATIFICATION

• All societies are stratified on a hierarchical basis into

social categories or social strata

*usually defined by characteristics such as family

background, occupation and income

• Societies differ in terms of

*the degree of mobility between social strata

*the significance attached to social strata in business
context
SOCIAL STRATIFICATION

• Social mobility- the extent to which individuals can move

out of the strata into which they are born.

>The most rigid system is the caste system - a closed

system of stratification in which social position is
determined by the family into which a person is born, and
change in that position are unlikely.

>A less rigid system is the class system - a form of

open social stratification in which the position a person
has by birth can be changed through achievement or luck
SOCIAL STRATIFICATION

 SIGNIFICANCE

In cultures where class consciousness (where people

tend to perceive themselves in terms of their class
background) is high, the way individuals from different
classes work together may be prescribed.

Evident in British Society

Antagonism between labor and management can

raise the costs of doing business.
 RELIGIOUS AND ETHICAL SYSTEMS

 R ELIG ION- a sy s te m of sh ar ed bel ie fs a nd rit ua ls t ha t a r e c onc er ne d wi th the r ea lm of t he

sa cr ed.

 ETH ICA L SY ST EM- a se t of m ora l pri nc ipl es , or va l ues , th at a re us e d to g ui de a nd s h ape

beh av i or.

 Re li gion s wi th th e g re at es t foll owi ng :

1 . C hr ist ia ni ty

2 . Isl am

3 . Hi ndu is m

4 . B uddh is m

5 . C on fu ci an is m
 RELIGIOUS AND ETHICAL SYSTEMS

 R E L IG IO N - a s y s t e m o f s h a r e d b e l i e f s a n d r i t u a l s t h a t a r e co n c e r n e d w i t h t h e r e a l m o f t h e
sacred.

 ET H IC A L SY ST EM - a s e t o f m o ra l p r i n c i p l e s , o r va l u e s , t h a t a r e u s e d t o g u i d e a n d s h ap e
b e h avi o r.

 Re l i g i o n s w i t h t h e g r e a t e s t f o l l o w i n g :

1 . Ch r i s t i a n i ty

2 . Is l a m

3. Hinduism

4 . Bu d d h i s m

5 . Co n f u c i a n i s m
 RELIGIOUS AND ETHICAL SYSTEMS

 1. CHRISTIANITY

 Most widely practiced religion

 In 1904, Max Weber suggest that it was the Protestants work ethic (focus on
hard work, wealth creation, and frugality) that was the driving force of
capitalism

 Protestantism gave individuals more freedom to develop their own relationship

with God which may have paved way to economic freedom
 RELIGIOUS AND ETHICAL SYSTEMS

2. ISLAM

 Adherents of Islam are referred to us Muslims

 One true omnipotent God

 In the Western media, Islamic fundamentalism is associated with

militants, terrorists, and violent upheavals

 Fundamentalists have gained political power in many Muslim countries,

and have tried to make Islamic law the law of the land
 RELIGIOUS AND ETHICAL SYSTEMS

 2. ISLAM

 Economi c Implications of Islam

>Koran establishes explicit economic principles many of which are pro-free

enterprise

> Under Isl am, people do not own property, but only act as stewards for God and
thus must take care of that which they have been entrusted with

> Islam is suppor tive of business, but the way business is practiced is prescribed\

> Businesses that are perceived to be making a profi t through the exploitation of
others, by deception, or by breaking contractual obli gati ons are unwelcome
 RELIGIOUS AND ETHICAL SYSTEMS

 Islamic Banks

Islamic banks function diff erently than conventional banks in the world as
the Islamic banks cannot pay or charge interest.
 RELIGIOUS AND ETHICAL SYSTEMS

 2. ISLAM

 Economic Implications of Islam

>Prohibits paym ent or receipt of interes

> Mudarabah

-Similar to profi t sharing instead of receiving predetermined rate of interest

on bank deposits, the depositor receives a share of profi ts earned from bank investment.

> Murabah

-Most wdely used- if I need machiner y, the bank buys it for me now at the
current market price, and turns it over to me. I repay the bank later by buying the
equipment from the bank at a higher price, rather than paying interest.
 RELIGIOUS AND ETHICAL SYSTEMS

3. HINDUISM

 World’s oldest religion

 Moral force in society requires the acceptance of certain responsibilities

called dharma

 Believes in reincarnation and karma

 Individuals should be judged by their spiritual achievements

 Promotion and adding new responsibilities may not be the goal of an

employee, or may be infeasible due to the employee’s caste
 RELIGIOUS AND ETHICAL SYSTEMS

4. BUDDHISM

 Suff ering originates in people’s desire for pleasure

 Stresses spiritual growth and the afterlife, rather than achievement

while in this world

Buddhism does not support the caste system, so individuals do have

some mobility and can work with individuals from diff erent classes

Entrepreneurial activity is acceptable

 RELIGIOUS AND ETHICAL SYSTEMS

5. CONFUCIANISM

 Until 1949, offi cial ethical system of China

 Not a religion

 High moral and ethical conduct and loyalty to others

 Attain personal salvation through right action

 Three key teachings of Confucianism- loyalty, reciprocal obligations and

honesty- may all lead to a lowering of the cost of doing business in
Confucian countries