CHAPTER 4: DIFFERENCES

IN CULTURE
 1. Explain what is meant by the
culture of a society.
2. Identify the forces that lead to
differences in social culture.
3. Identify the business and economic
implications of differences in culture.

LEARNING OBJECTIVES
 4. Understand how differences in
social culture influence values in the
workplace.
5. Demonstrate an appreciation for the
economic and business implications of
cultural change.

LEARNING OBJECTIVES
 4.5 Language
4.6 Education
4.7 Culture and the
4.1 Introduction Workplace
4.2 What Is Culture? 4.8 Cultural Change
4.3 Social Structure 4.9 Focus on
4.4 Religious and Managerial
Ethical Systems Implications

OUTLINE
OPENING CASE: Why Did Walmart
Fail in Germany?

4.1 INTRODUCTION

1
 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
 cross-cultural literacy is important for business success
 A relationship may exist between culture and the costs of
doing business in a country or region
 MNEs can be agents of cultural change
 McDonald’s
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 4.2 What Is Culture?
 Culture - a system of values and norms that are shared
among a group of people and that when taken together
constitute a design for living
 where
 values are abstract ideas about what a group believes to
be good, right, and desirable
 norms are the social rules and guidelines that prescribe
appropriate behavior in particular situations
 Society - a group of people who share a common set of
values and norms
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 What Are Values And Norms?

 Values provide the context within which a

society’s norms are established and justified
and form the bedrock of a culture
 Norms include
 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
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 How Are Culture, Society,
And The Nation-State Related?

 The relationship between a society and a

nation state is not strictly one-to-one
 Nation-states are political creations
 can contain one or more cultures
 A culture can embrace several nations

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 What Determines Culture?

 The values and norms of a culture evolve over

time
 Determinants include
 religion
 political and economic philosophies
 education
 language
 social structure
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 What Determines Culture?

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 4.3 What Is A Social Structure?

 Social structure - a society’s basic social

organization
 Consider
 the degree to which the basic unit of social
organization is the individual, as opposed to the group
 the degree to which a society is stratified into classes
or castes
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 How Are Individuals
And Groups Different?
 A group is an association of two or more
people 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
 individuals are involved in families, work groups,
social groups, recreational groups, etc.
 Societies place different values on groups
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 How Are Individuals
And Groups Different?
 In Western societies, there is a focus on the
individual
 individual achievement is common
 dynamism of the U.S. economy
 high level of entrepreneurship
 But, creates a lack of company loyalty and failure
to gain company specific knowledge
 competition between individuals in a company instead of
than team building
 less ability to develop a strong network of contacts within
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a firm
 How Are Individuals
And Groups Different?
 In many Asian societies, the group is the
primary unit of social organization
 discourages job switching between firms
 encourages lifetime employment systems
 leads to cooperation in solving business problems
 But, might also suppress individual creativity
and initiative
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 What Is Social Stratification?

 All societies are stratified on a hierarchical

basis into social categories, or social strata
 individuals are born into a particular stratum
 Must consider
1. mobility between strata
2. the significance placed on social strata in
business contexts
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 What Is Social Stratification?
1. Social mobility - the extent to which individuals can
move out of the strata into which they are born
 caste system - closed system of stratification in which
social position is determined by the family into which a
person is born
 change is usually not possible during an individual's
lifetime
 class system - form of open social stratification
 position a person has by birth can be changed
through achievement or luck
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International Business 13
 What Is Social Stratification?

2. The significance attached to social strata in

business contacts
 class consciousness - a condition where people tend
to perceive themselves in terms of their class
background, and this shapes their relationships with
others
 an antagonistic relationship between management and
labor raises the cost of production in countries with
significant class differences
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 4.4 How Do Religious And
Ethical Systems Differ?
 Religion - a system of shared beliefs and rituals that
are concerned with the realm of the sacred
 Four religions dominate society
1. Christianity
2. Islam
3. Hinduism
4. Buddhism
5. Confucianism is also important in influencing behavior
and culture in many parts of Asia
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 How Do Religious And
Ethical Systems Differ?

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 How Do Religious And
Ethical Systems Differ?

 Ethical systems - a set of moral principles,

or values, that are used to guide and
shape behavior
 Religion and ethics are often closely
intertwined
 Example: Christian or Islamic ethics

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 What Is Christianity?

 Christianity
 the world’s largest religion
 found throughout Europe, the Americas, and
other countries settled by Europeans
 the Protestant work ethic (Max Weber, 1804)
 hard work, wealth creation, and frugality is the
driving force of capitalism
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 What Is Islam?

 Islam
 the world’s second largest religion dating to AD
610
 there is only one true omnipotent God
 an all-embracing way of life that governs one's
being
 associated in the Western media with militants,
terrorists, and violent upheavals
 but, in fact teaches peace, justice, and
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 What Is Islam?

 fundamentalists have gained political power

and blame the West for many social problems
 people do not own property, but only act as
stewards for God
 supportive of business, but the way business
is practiced is prescribed

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 What Is Hinduism?

 Hinduism
 practiced primarily on the Indian subcontinent
 focuses on the importance of achieving spiritual growth
and development, which may require material and
physical self-denial
 Hindus are valued by their spiritual rather than material
achievements
 Promotion and adding new responsibilities may not be
important, or may be infeasible due to the employee's
caste
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 What Is Buddhism?
 Buddhism
 has about 350 millions followers
 stresses spiritual growth and the afterlife, rather than
achievement while in this world
 does not emphasize wealth creation
 entrepreneurial behavior is not stressed
 does not support the caste system, individuals do
have some mobility and can work with individuals
from different classes
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 What Is Confucianism?
 Confucianism
 ideology practiced mainly in China
 teaches the importance of attaining personal salvation
through right action
 high morals, ethical conduct, and loyalty to others are
stressed
 three key teachings of Confucianism - loyalty,
reciprocal obligations, and honesty - may all lead to a
lowering of the cost of doing business in Confucian
societies
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 4.5 What Is The Role
Of Language In Culture?
 Language - the spoken and unspoken
(nonverbal communication such as facial
expressions, personal space, and hand
gestures) means of communication
 countries with more than one language often
have more than one culture
 Canada, Belgium, Spain
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 What Is The Role
Of Language In Culture?
 Language is one of the defining characteristics of
culture
 Chinese is the mother tongue of the largest number of
people
 English is the most widely spoken language in the world
 English is also becoming the language of international
business
 but, knowledge of the local language is still beneficial,
and in some cases, critical for business success
 failing to understand the nonverbal cues of another
culture can lead to communication failure
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 4.6 What Is The Role
Of Education In Culture?
 Formal education is the medium through which individuals
learn many of the language, conceptual, and mathematical
skills that are indispensable in a modern society
 important in determining a nation’s competitive
advantage
 Japan’s postwar success can be linked to its
excellent education system
 general education levels can be a good index for the
kinds of products that might sell in a country
 Example: impact of literacy rates
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 4.7 How Does Culture
Impact The Workplace?
 Management processes and practices
must be adapted to culturally determined
work-related values
 Geert Hofstede studied culture using data
collected from 1967 to 1973 for 100,000
employees of IBM
 Hofstede identified four dimensions that
summarized different cultures
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 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 extent to which different
cultures socialize their members into accepting
ambiguous situations and tolerating ambiguity
3. Individualism versus collectivism - the relationship
between the individual and his fellows
4. Masculinity versus femininity -the relationship
between gender and work roles
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 How Does Culture
Impact The Workplace?

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 How Does Culture
Impact The Workplace?
 Hofstede later expanded added a fifth dimension called
Confucian dynamism or long-term orientation
 captures attitudes toward time, persistence, ordering by
status, protection of face, respect for tradition, and
reciprocation of gifts and favors
 Japan, Hong Kong, and Thailand scored high on this
dimension
 the U.S. and Canada scored low

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 Was Hofstede Right?
 Hofstede’s work has been criticized for several reasons
 made the assumption there is a one-to-one relationship
between culture and the nation-state
 study may have been culturally bound
 used IBM as sole source of information
 culture is not static – it evolves
 But, it is a starting point for understanding how cultures
differ, and the implications of those differences for
managers
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 4.8 Does Culture Change?
 Culture evolves over time
 changes in value systems can be slow and painful for a
society
 Social turmoil - an inevitable outcome of cultural change
 as countries become economically stronger, cultural
change is particularly common
 economic progress encourages a shift from
collectivism to individualism
 globalization also brings cultural change

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 4.9 What Do Cultural Differences
Mean For Managers?
1. It is important to develop cross-cultural literacy
 companies that are ill informed about the practices of
another culture are unlikely to succeed in that culture
 To avoid being ill-informed
 consider hiring local citizens
 transfer executives to foreign locations on a regular
basis
 Managers must also guard against ethnocentrism
 a belief in the superiority of one's own culture

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 What Do Cultural Differences Mean
For Managers?
2. There is a connection between culture and
national competitive advantage
 suggests which countries are likely to produce
the most viable competitors
 has implications for the choice of countries in
which to locate production facilities and do
business

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