Course Code: MGT 4201
Course Title: International Business
Chapter-3
Differences In Culture
Cross-cultural Literacy
By cross-cultural literacy we mean understanding how cultural differences
across and within countries can have an effect on the way business is
practiced. Beneath the veneer of globalization, deep cultural differences
often remain that can have a marked effect on a number of issues in a
company’s value chain. These differences are also what create a common
bond—a value system—among people in a country, in essence a reason for
the country to exist. Culturally based value systems can also reside in
families, companies, and world regions. Sometimes even industries have
distinct value systems.
Definition of Culture
Culture is a system of values and norms that are shared among a group of
people and that when taken together constitute a design for living. Values
are ideas about what a group believes to be good, right, and desirable. Put
differently, values are shared assumptions about how things ought to be.
Norms are the social rules and guidelines that prescribe appropriate
behavior in particular situations. Society refers to a group of people sharing
a common set of values and norms. While a society may be equivalent to a
country, some countries have several societies or subcultures, and some
societies embrace more than one country.
Determinants of Culture
Social Structure
A society’s social structure refers to its basic social
organization. It indicates how a society is organized in terms of
the values, norms, and relationships that are part of its fabric.
How society operates and how people, groups, and companies
treat each other both emerge from, and are determinants of,
the behaviors of individuals in that specific society.
Individuals and Groups
• A group is 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.
17 Human social life is Page 101 group life. Individuals are involved in
families, work groups, social groups, recreational groups, and potentially
myriad other groups .
• Individualism is more than just an abstract political philosophy. In many
societies, the individual is the basic building block of social organization.
This is reflected not just in the political and economic organization of
society but also in the way people perceive themselves and relate to each
other in social and business settings. The value systems of many Western
societies, for example, emphasize individual achievement.
Social Stratification
All societies are stratified on a hierarchical basis into social categories—that is,
into social strata. These strata are typically defined on the basis of
socioeconomic characteristics such as family background, occupation, and
income. Individuals are born into a particular stratum. They become a member
of the social category to which their parents belong. Individuals born into a
stratum toward the top of the social hierarchy tend to have better life chances
than those born into a stratum toward the bottom of the hierarchy. Overall,
social stratification is based on four basic principles:
Social stratification is a trait of society, not a reflection of individual differences.
Social stratification carries over a generation to the next generation.
Social stratification is generally universal but variable.
Social stratification involves not just inequality but also beliefs.
Religious and Ethical Systems
Religion may be defined as a system of shared beliefs and rituals that are
concerned with the realm of the sacred. An ethical system refers to a set of
moral principles, or values, that are used to guide and shape behavior. Most
of the world’s ethical systems are the product of religions. Thus, we can talk
about Christian ethics and Islamic ethics. However, there is a major
exception to the principle that ethical systems are grounded in religion.
Confucianism and Confucian ethics influence behavior and shape culture in
parts of Asia, yet it is incorrect to characterize Confucianism as a religion.
Language
By language, we mean both the spoken and the unspoken means of
communication. Language is also one of the defining characteristics
of a culture. Oftentimes, learning a language entails learning the
culture and vice versa. Some would even argue that a person cannot
get entrenched in a culture without knowing its dominant language.
• Spoken Language
• Unspoken Language
Education
Formal education plays a key role in a society, and it is usually the medium
through which individuals learn many of the languages, knowledge, and skills
that are indispensable in a modern society. Formal education supplements the
family’s role in socializing the young into the values and norms of a society.
Values and norms are taught both directly and indirectly. Schools generally teach
basic facts about the social and political nature of a society. They also focus on
the fundamental obligations of citizenship. In addition, cultural norms are taught
indirectly at school. Respect for others, obedience to authority, honesty,
neatness, being on time, and so on are all part of the “hidden curriculum” of
schools. The use of a grading system teaches children the value of personal
achievement and competition.
Culture and Business
Of considerable importance for a multinational corporation, or any company—small,
medium, or large—with operations in different countries, is how a society’s culture
affects the values found in the workplace. Management processes and practices may
need to vary according to culturally determined work-related values. In his original
research, Bond called the fifth dimension “Confucian work dynamism,” but Hofstede said
that in practical terms, the dimension refers to a long-term versus short-term orientation.
• power distance
• individualism versus collectivism
• uncertainty avoidance
• masculinity versus femininity
• long-term versus short-term orientation
FOCUS ON MANAGERIAL IMPLICATIONS
Cultural Literacy and Competitive Advantage
International business is different from national business because countries and societies
are different. Societies differ because their cultures vary. Their cultures vary because of
differences in social structure, religion, language, education, economic philosophy, and
political philosophy. Three important implications for international business flow from
these differences.
1. The first is the need to develop cross-cultural literacy.
2. A second implication centers on the connection between culture and national
competitive advantage.
3. A third implication looks at the connection between culture and ethics in decision
making. In this section.
Cross-Cultural Literacy
One of the biggest dangers confronting a company that goes abroad
for the first time is the danger of being ill-informed. International
businesses that are ill-informed about another culture are likely to
fail. Doing business in different cultures requires adaptation to
conform to the value systems and norms of that culture. Adaptation
can embrace all aspects of an international firm’s operations in a
foreign country. The way in which deals are negotiated, appropriate
incentive pay systems for salespeople, the structure of the
organization, name of a product, tenor of relations between
management and labor, the manner in which the product is
promoted, and so on, are all sensitive to cultural differences. What
works in one culture might not work in another.
Culture and Competitive Advantage
One theme that surfaces in this chapter is the relationship between
culture and national competitive advantage. Put simply, the value
systems and norms of a country influence the costs of doing business
in that country. The costs of doing business in a country influence
the ability of firms to establish a competitive advantage. We have
seen how attitudes toward cooperation between management and
labor, toward work, and toward the payment of interest are
influenced by social structure and religion. It can be argued that the
class-based conflict between workers and management in class-
conscious societies raises the costs of doing business.
