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Go Global !Global Economic Environment :Global Economic Environment :Differences in CultureDifferences in Culture

By

Stephen OngStephen OngEdinburgh Napier University Business School

chong@mail.tarc.edu.myVisiting Professor, College of Management, Shenzhen

University25 August 2012

AgendaAgenda

1.1. CultureCulture2.2. Hofstede’s Hofstede’s

DimensionsDimensions3.3. Managing Managing

diversitydiversity

Learning Objectives To analyse the factors

which contribute to the culture of a nation or region.

To assess research findings on culture and their relevance to international business management.

To discuss appropriate methods of preparing international managers to handle the cultural differences that they may encounter in the course of their work.

Society, Culture and Global Consumer Culture

• Culture–ways of living, built up by a group of human beings, that are transmitted from one generation to another

• Culture has both conscious and unconscious values, ideas, attitudes, and symbols

• Culture is acted out in social institutions

• Culture is both physical (clothing and tools) and nonphysical (religion, attitudes, beliefs, and values)

Social Institutions

• Family• Education• Religion• Government• Business

These institutions function to reinforce cultural norms

Material and Nonmaterial Culture

Physical Culture

– Clothing – Tools– Decorative

art– Body

adornment– Homes

Abstract Culture

– Religion– Perceptio

ns– Attitudes– Beliefs– Values

Society, Culture, and Global Consumer Culture

“Culture is the collective programming of the mind that distinguishes the members of one category of people from those of another.”

Geert Hofstede

A nation, an ethic group, a gender group, an organization, or a family may be considered as a category.

Society, Culture, and Global Consumer Culture

• Global consumer cultures are emerging– Persons who share meaningful sets of consumption-related symbols– Pub culture, coffee culture, fast-food culture, credit card culture

• Primarily the product of a technologically interconnected world– Internet– Satellite TV– Cell phones

Attitudes, Beliefs, and Values

• Attitude–learned tendency to respond in a consistent way to a given object or entity

• Belief–an organized pattern of knowledge that an individual holds to be true about the world

• Value–enduring belief or feeling that a specific mode of conduct is personally or socially preferable to another mode of conduct

Religion

• The world’s major religions include Buddhism, Christianity, Hinduism, Islam, and Judaism and are an important source of beliefs, attitudes, and values.

• Religious tenets, practices, holidays, and history impact global marketing activities.

Aesthetics

• The sense of what is beautiful and what is not beautiful

• What represents good taste as opposed to tastelessness or even obscenity

• Visual–embodied in the color or shape of a product, label, or package

• Styles–various degrees of complexity, for example, are perceived differently around the world

Aesthetics and Color

• Red–associated with blood, wine-making, activity, heat, and vibrancy in many countries but is poorly received in some African countries.

• White–identified with purity and cleanliness in the West, with death in parts of Asia.

• Gray–means inexpensive in Japan and China, but high quality and expensive in the U.S.

The Meaning of Colour

Red signifies good luck and celebration in China

Yellow indicates a merchant in India

In England and the U.S., “Something Blue” on a bride’s garter symbolizes fidelity

Dietary Preferences

Domino’s Pizza pulled out of Italy because its products were seen as“too American” with bold tomato sauce and heavy toppings.

Subway had to educate Indians about the benefits of sandwiches because they do not normally eat bread.

Language and Communication

Linguistic Category Language ExampleSyntax-rules of sentence formation

English has relatively fixed word order; Russian has relatively free word order.

Semantics-system of meaning

Japanese words convey nuances of feeling for which other languages lack exact correlations; ‘yes’ and ‘no’ can be interpreted differently than in other languages.

Phonology-system of sound patterns

Japanese does not distinguish between the sounds ‘l’ and ‘r’; English and Russian both have ‘l’ and ‘r’ sounds.

Morphology-word formation

Russian is a highly inflected language, with six different case endings for nouns and adjectives; English has fewer inflections.

Language and Communication

Pronounced “shu”Sounds like “I hope you have bad luck”.

Sounds like “break into pieces or fall apart”.

Sounds like “death” or “the end”.

In China, it is bad luck to give these three items.

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 environmentevery business function is subject to

potential cultural differences

Introduction

Cultural Factors Affecting International Business Operations

Introduction

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

Introduction

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

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

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

Culture and the Nation-State

Country-by-country analysis can be difficult because subcultures exist within nations

similarities link groups from different countries

Need to focus on relevant groups

Characteristics of Culture

Primary Characteristics

Learned Interrelated

SharedAdaptive

How Cultures Form and Change

Cultural value systems are established early in life but may change through

choice or imposition

cultural imperialism

contact with other cultures

cultural diffusion

creolization

Elements of Culture

Social Structure

The Roles The Roles of of

Individuals Individuals in Societyin Society

Social Social StratificatioStratificatio

n and n and MobilityMobility

Behavioural Practices Affecting Business : Social Stratification

Social ranking is determined by

an individual’s achievements and qualifications

an individual’s affiliation with, or membership in, certain groups

Family StructureFamily StructureIndividualismIndividualismGroup Service Group Service

Individuals, Families, and Groups

Social StratificationSocial Stratification Group affiliations can be

Ascribed group memberships

based on gender, family, age, caste, and ethnic, racial, or national origin

Acquired group memberships

based on religion, political affiliation, professional association

Two other factors that are important education and social connections

Language: Cultural Diffuser and Stabilizer

A common language within a country is a unifying force

A shared language between nations facilitates international businessNative English speaking countries account

for a third of the world’s production

English is the international language of business

Language: Cultural Diffuser Language: Cultural Diffuser and Stabilizerand Stabilizer

Distribution Of The World’s Major LanguagesDistribution Of The World’s Major Languages

Language: Cultural Diffuser and Stabilizer

Major Language Groups: Population and Output

Functions of LanguageFunctions of Language

Delineates Cultural Groups

Thought Patterns

Cultural Values

Acculturation

Diversity

Cultural Aspects of Language

CompetitiveAdvantage

Lingua Franca

Saying “Yes” or “No”

Translation

Effects of Religion and Values on International Businesses

Religion

Impact of Religion on International Business

Legal SystemHomogeneityTolerance

Copyright © 2013 Pearson Education, Inc. publishing as

Prentice HallChapter 4 - 41

TimeTime

StatusStatusEducationEducation

AgeAge

Values and Attitudes

Religion: Cultural StabilizerReligion: Cultural Stabilizer

Religion impacts almost every business function

Centuries of profound religious influence continue to play a major role in shaping cultural values and behaviourmany strong values are the result of a

dominant religion

Religion: Cultural Stabilizer

Distribution Of The World’s Major ReligionsDistribution Of The World’s Major Religions

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”

Work Motivation

Hierarchy of needs theoryfill lower-level needs before moving to higher level needs

The ranking of needs differs among cultures

Work Motivation

The Hierarchy of Needs and Need-Hierarchy ComparisonsThe Hierarchy of Needs and Need-Hierarchy Comparisons

Relationship Preferences

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 collectivismhigh individualism – welcome challenges

high collectivism – prefer safe work environment

Risk Taking Behaviour

Risk taking behavior differs across cultures Uncertainty avoidance

handling uncertainty Trust

degree of trust among peopleFuture orientation

delaying gratificationFatalism

attitudes of self-determination

Information and Task Processing

Cultures handle information in different waysPerception of cues

Obtaining information

low context versus high context cultures

Information processing

Monochronic versus polychronic cultures

Idealism versus pragmatism

Communication

ExpressionsExpressionsGesturesGesturesIntonationIntonationEye ContactEye ContactBody Body

LanguageLanguage

Nonverbal Forms

Gifts and Hospitality

EtiquetteEtiquette CustomsCustoms

CommunicationsCommunicationsCross border communications do not

always translate as intended

Spoken and written language

Silent languageColour

Distance

Time and punctuality

Body language

Prestige

Communications

Body Language Is Not A Universal Language

Cultural Clusters and International Management

Marketing’s Impact on Culture

• Universal aspects of the cultural environment represent opportunities to standardize elements of a marketing program

• Increasing travel and improved communications have contributed to a convergence of tastes and preferences in a number of product categories

Hall’s Cultural Context Approach

HighHighContextContext

LowLowContextContext

High- and Low-Context Cultures

• High Context– Information resides in

context– Emphasis on

background, basic values, societal status

– Less emphasis on legal paperwork

– Focus on personal reputation

Saudi Arabia, Japan

• Low Context– Messages are explicit

and specific– Words carry all

information– Reliance on legal

paperwork– Focus on non-personal

documentation of credibility

Switzerland, U.S., Germany

High- and Low-Context Cultures

Cultural ClustersCultural Clusters

Similarities and Business Practices

Internationalization Strategies

Foreign Market Entry Methods

Hofstede’s Findings on Differences in Cultural Values

Hofstede’s Cultural Typology

• Power Distance

• Individualism/Collectivism

• Masculinity

• Uncertainty Avoidance

• Long-term Orientation

Self-Reference Criterion and Perception

• Unconscious reference to one’s own cultural values; creates cultural myopia

• How to Reduce Cultural Myopia:– Define the problem or goal in terms of home country cultural traits– Define the problem in terms of host-country cultural traits; make no

value judgments– Isolate the SRC influence and examine it– Redefine the problem without the SRC influence and solve for the host

country situation

The Five Dimensions

Individual Collective

Respect

Accepting

Aggressive

Long-Term

Tolerance

Avoiding

Passive

Short-Term

Power OrientationPower Orientation

Uncertainty OrientationUncertainty Orientation

Social OrientationSocial Orientation

Goal OrientationGoal Orientation

Time OrientationTime Orientation

Social Orientation

•CollectivismCollectivism•IndividualismIndividualism

Power Orientation

•RespectRespect•ToleranceTolerance

Uncertainty Orientation

•AcceptanceAcceptance•AvoidanceAvoidance

Goal Orientation

•PassivePassive•AggressiveAggressive

Time Orientation

Short Short TermTerm

Long Long TermTerm

International Management and Cultural Differences

Diffusion Theory: Diffusion Theory: The Adoption Process

The mental stages through which an individual passes from the time of his or her first knowledge of an innovation to the time of product adoption or purchase

• Awareness• Interest• Evaluation• Trial• Adoption

Diffusion Theory:Characteristics of Innovations

• Innovation is something new; five factors that affect the rate at which innovations are adopted include:– Relative advantage

– Compatibility

– Complexity

– Divisibility

– Communicability

Diffusion Theory:Adopter Categories

Marketing Implications

• Cultural factors must be considered when marketing consumer and industrial products

• Environmental sensitivity reflects the extent to which products must be adapted to the culture-specific needs of different national markets

Environmental Sensitivity

Environmental Sensitivity

• Independent of social class and income, culture is a significant influence on consumption and purchasing

• Food is the most culturally-sensitive category of consumer goods

– Dehydrated Knorr Soups did not gain popularity in the U.S. market that preferred canned soups

– Starbucks overcame cultural barriers in Great Britain and had 466 outlets by 2005

Dealing with Cultural DifferencesDo managers have to alter their customary

practices to succeed in countries with different cultures?

Must considerHost society acceptanceDegree of cultural differences

cultural distanceAbility 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

Strategies for Instituting Change

Value Systems

Cost-Benefit Analysis of change

Resistance to too much change

Participation

Reward Sharing

Opinion Leadership

Timing

Learning Abroad

The Future of National CulturesScenario 1:

New hybrid cultures will develop and personal horizons will broaden

Scenario 2: Outward expressions of national culture will continue

to become homogeneous while distinct values will remain stable

Scenario 3: Nationalism will continue to reinforce cultural

identity

Scenario 4: Existing national borders will shift to accommodate

ethnic differences

ConclusionConclusion

“To eat with feeling in France is to eat with your head, your spirit, your nose, your eyes, and your ears…”

Jacqueline Friedrich

Casestudy : Changan-FORDCasestudy : Changan-FORD

1.1. Read and prepare the Read and prepare the Casestudy on Changan-Casestudy on Changan-FORD (Johnson, Whittington FORD (Johnson, Whittington & Scholes (2011)) for & Scholes (2011)) for discussion and discussion and presentation next week. presentation next week.

2.2. Identify and evaluate the Identify and evaluate the challenges facing the challenges facing the Changan-FORD joint Changan-FORD joint venture by conducting venture by conducting External Environment, External Environment, Industry, Competitor Industry, Competitor analysis, SWOT and analysis, SWOT and Hofstede’s Dimensions.Hofstede’s Dimensions.

Core ReadingCore Reading

Juleff, L, Chalmers, A.. and Harte, P. (2008) Juleff, L, Chalmers, A.. and Harte, P. (2008) Business Economics in a Global Environment, Business Economics in a Global Environment, Napier University EdinburghNapier University Edinburgh

Daniels, J.D., Radebaugh, L.H. and Sullivan, D.P. Daniels, J.D., Radebaugh, L.H. and Sullivan, D.P. (2012) International Business: Environments and (2012) International Business: Environments and Operations. 14Operations. 14thth edition, Pearson edition, Pearson

Griffin, R.W. and Pustay, M.W. (2013) Griffin, R.W. and Pustay, M.W. (2013) International Business, 7International Business, 7thth edition, Pearson edition, Pearson

Keegan, W.J. and Green, M.C. (2013) Global Keegan, W.J. and Green, M.C. (2013) Global Marketing, 7Marketing, 7thth edition, Pearson edition, Pearson