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International Businessby

Daniels and Radebaugh

Chapter 2Cultural EnvironmentsFacing Business

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ObjectivesTo relate the problems and methods of learning about

cultural environmentsTo explain the major causes of cultural difference and

changeTo examine behavioral factors influencing countries’

business practicesTo examine cultural guidelines for companies that operate

internationally

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IntroductionCulture

• The specific learned norms based on attitudes, values, and beliefs that exist in every nation

• An integral part of external environmentsProblems of cultural collision occur when

• Company practices work less well than intended• Employees’ are unable to accept or adjust to

foreign environmentEvery business function subject to cultural problems

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Cultural Influences on International Business

EXTERNAL INFLUENCES

COMPETITIVE ENVIRONMENT

PHYSICAL AND SOCIETAL FACTORS• Political policies and legal practices• Cultural factors• Economic forces• Geographical influences

OPERATIONS

OBJECTIVES

MEANS

STRATEGY• Cultural awareness• Identification and dynamics of cultures• Behavioral practices affecting business• Strategies for dealing with cultural differences

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Cultural AwarenessProblems that hinder cultural awareness

• Subconscious reactions to circumstances• Assumption that all societal subgroups are similar

Cultural awareness can be improved• Research descriptions of specific cultures• Observe behavior or respected foreign nationals• Study foreign market directly

Company’s need for cultural knowledge increases as it• Moves from one to multiple foreign functions• Increases the number of countries in which it operates• Moves from similar to dissimilar foreign environments• Converts from external to internal handling of

international operations

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Identification and Dynamics of CulturesThe nation as a point of reference

• Each nation has certain human, demographic, and behavioral Characteristics that give it a national identity

– people share values, language, and race• Laws governing business apply along national lines• Problems using a country-by-country approach

– individual differences within a country– similarities link groups from different countries

Cultural formation and dynamics• Value systems set early in life, but may change• Values may change due to choice or imposition

– cultural imperialism • IB increases change in cultures and governments

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Identification and Dynamics of Cultures (cont.)Language as a cultural stabilizer

• Culture spreads rapidly when people from different areas speak the same language

• Stronger adherence to a culture if it does not share its language with other peoples

• English, French, and Spanish are widespread– most of IB conducted in English

Religion as a cultural stabilizer• Religion has a strong influence on values• Specific beliefs may affect business

– not all nations that practice the same religion have the same constraints on business

– where rival religions vie for political control, resulting strife may disrupt business

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Behavioral Practices Affecting BusinessSocial stratification systems

• Every culture values some people more than others, thereby dictating social class or status

• Ascribed group membership based on:– gender, family, age, and caste– ethnic, racial, or national origin

• Acquired group membership based on – religion, political affiliation, and professional and

other associations• Characteristics that affect status differently from country

to country include– Competence—competition versus cooperation– gender-based groups– age-based groups– family-based groups– occupation

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Behavioral Practices Affecting Business (cont.)Motivation—countries differ in how much people are motivated

to work and why• Materialism and leisure

– countries differ in emphasis on materialism– Protestant ethic—work a means to salvation– most people consider economic achievement to be

commendable, regardless of culture• Expectation of success and reward— people are more

eager to work if:– rewards for success are high

» same tasks performed in different countries may have different rewards for success and consequences of failure

– there is some uncertainty of success» same task performed in different countries may

have different probabilities of success

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Behavioral Practices Affecting Business (cont.)Masculinity index—degree of admiration for success, sympathy

for unfortunate, preference for being better than others• High masculinity cultures

– roles differentiated by gender– men should dominate

• Low masculinity culture– need for smooth social relationships– employee and social welfare has higher priority than

growth and efficiencyNeed hierarchy—lower-order needs must be fulfilled prior to

higher-order needs• Workers in poor countries motivated by lower-order

needs• People from different countries may rank needs

differently

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Relationship PreferencesPower distance—describes relationship between superiors and

subordinates• High—people prefer little consultation

– autocratic or paternalistic management• Low—consultative styles preferred

– easier to implement worker participationIndividualism versus collectivism

• Individualism—low dependence on organization and desire for personal time, freedom, and challenge

– self-actualization a prime motivator• Collectivism—dependence on organization

– value secure physical and social environments• Influences how employees interact with their colleagues• Influences marketing strategies

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Risk-Taking BehaviorUncertainty avoidance

• High—prefer set rules and lifetime employment– supervisors need to be precise when issuing

directives– customers less willing to try new products

Trust• Leads to lower cost of doing business

Fatalism—belief in inevitability of events rather than self-determination

• High fatalism—people plan less for contingencies

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Information and Task ProcessingPerception of cues

• Cues perceived selectively• Each culture is able to perceive some subjects more

precisely than other cultures perceive themObtaining information

• Low-context culture—focuses on firsthand information that bears directly on issues to be decided

• High-context culture—focuses on information peripheral to the issue to be decided

Information processing• All cultures have ordering and classifying systems

– Monochronic—preference for sequential work– Polychronic—comfortable working on several tasks

simultaneously• Idealism versus pragmatism

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Strategies for Dealing with Cultural DifferencesMaking little or no adjustment

• Host cultures do not always expect foreigners to adjust to them

• Less adjustment necessary when moving to a country with a similar culture

CommunicationsSpoken and written language

• Difficult to directly translate one language into anotherSilent language

• Color associations, sense of appropriate distance, time and status cues, and body language (kinesics)

Culture Shock Frustration from having to learn to cope with new cultural cues

and expectations

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Months Living in New Culture1 2 3 4 5 6

Acc

epta

nce

of N

ew C

ultu

re

High

Low

Frustration

Understanding

Elation

Stages of Culture Shock

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Company and Management OrientationsPolycentrism

• Overly cautious response to cultural variety– imitation of local practices

• Decentralized structure– home office may lose control over local operations

Ethnocentrism• Belief that home-country practices and objectives should

prevail• Ignores important local factors• Believes that change is not difficult

Geocentrism• Between polycentrism and ethnocentrism• Based on informed knowledge of home- and host-country

needs, capabilities, and constraints• Preferred approach to IB

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Strategies for Instituting ChangeValue system

• The more a change upsets important values, the more resistance it will engender

Cost benefit of change• Company must consider the expected cost-benefit

relationship of any adjustments it makes abroadResistance to too much change

• Resistance to change may be lower if the number of changes is not great

• Make fewer demands at one time and phase in other policies more slowly

Participation• Discussing proposed change with stakeholders in

advance may reduce resistance• Participation must not violate prevailing value system

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Strategies for Instituting Change (cont.)Reward sharing

• Employees are more apt to support change when they expect personal or group rewards

Opinion leaders• Should be convinced first about benefits of change• Can help speed up the acceptance of change

Timing• Change should be timed to occur when resistance is likely

to be low• Must attend to attitudes and needs of culture

Learning abroad• International companies should learn things abroad that

they can apply at home