Course Note 4: Differences in Culture

What Is 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 and Norms
- Value:
 Provide the context within which a society’s norms are established and justified
 Invested with emotional significance
 Often reflected in the economic systems of a society
- Norms:
Social rules that govern people’s actions
 Folkways
o Violations not a serious matter
o Include rituals and symbolic behavior

 Mores
o More widely observed
o Have greater moral significance than other norms
Culture, Society, and the Nation-State
- The relationship between a society and a nation state is not strictly one-to-one

- Nation-states are political creations

- A nation can have several cultures, and a culture can embrace several nations

- Different levels of culture

Determinants of Culture

Social Structure
Individuals and Groups
 The individual The group
• In many Western societies, the • The primary unit of social organization in
individual is the basic building block of many non-Western societies
social organization. • Importance of group
• Emphasis on individual achievement membership/identification

Social Stratification
- All societies are stratified on a hierarchical basis into social categories, or social strata
 Individuals are born into a particular stratum, which affects life chances
- Four basic principles
 Trait of society
 Carries over into next generation
 Generally universal but variable
 Involves not just inequality but also beliefs
- Social mobility
 Varies among societies
Caste system Class system
 Social position determined by family  Form of open social stratification
 India has four main castes  Position can be changed through
achievement or luck

- Significance
 Affects business operations
 Class consciousness
 Makes it difficult to establish a competitive advantage in a global economy
Country Focus: India and Its Caste System
Modern India is a company of dramatic contrast. The country’s information technology (IT)
sector is among the most vibrant in the world, with companies such as Tata Consultancy Services,
Cognizant Technology Solutions, Infosys, and Wipro as powerful global players. Traditionally,
India has had one of the strongest caste systems in the world. Somewhat sadly, as a British author,
this caste system still exists today even though it was officially abolished in 1949, and many
Indians actually prefer it this way! At the core, the caste system has no legality in India, and
discrimination against lower castes is illegal. Prior to 1949, India’s caste system was definitely an
impediment to social mobility, and some say it remains difficult to move across castes. It’s
currently getting better in the urban areas but not for the rural, where some 64 percent of the
nation’s population still resides. The government has told private companies to hire more dalits
and members of tribal communities and have been warned that “strong measures” will be taken if
companies do not comply. Some companies realized they need to do something to correct the
inequalities by provide some training to bright low-caste children and engineering graduates to
better prepare for huge high-tech human resources in the future.
Religious and Ethical Systems
Management Focus: China and Its Guanxi
Guanxi means relationships or business connections. The concept has its roots in the
Confucian philosophy of valuing social hierarchy and reciprocal obligations. Confucian ideology
also teaches that people are not created equal. In Confucian thought, loyalty and obligations to
one’s superiors (or to family) are regarded as a sacred duty, but at the same time, this loyalty has
its price. Social superiors are obligated to reward the loyalty of their social inferiors by bestowing

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 “blessings” upon them; thus, the obligations are reciprocal. Chinese will often cultivate a
guanxiwang, or “relationship network,” for help. There is a tacit acknowledgment that if you have
the right guanxi, legal rules can be broken, or at least bent
DMG Entertainment – with a strong connection with Chinese government which is guanxi,
can easily expand their effect in the industry with several big projects.
Language
Spoken Language
- Language structures the way we see the world

- Countries with more than one language often have more than one culture

- Chinese is the mother tongue of the largest number of people

- English is becoming the language of international business

Unspoken Language
- Nonverbal communication
 Often culturally bound. A failure to understand the nonverbal cues of another culture can lead
to a communication failure.
 Personal space
Focus on Managerial Implications
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.
- To combat the danger of being ill-informed, international businesses should consider employing local
citizens to help them do business in a particular culture. They must also ensure that home-country
executives are well-versed enough to understand how differences in culture affect the practice of
business.
- An international business must also be constantly on guard against the dangers of ethnocentric
behavior. Ethnocentrism is a belief in the superiority of one’s own ethnic group or culture.
Culture and Competitive Advantage
-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.
CRITICAL THINKING AND DISCUSSION QUESTIONS
QUESTION 1: Outline why the culture of a country might influence the cost of doing business in that
country. Illustrate your answer with examples.
- Communication and Language:
 Impact: Language barriers can increase the cost of doing business as it may necessitate the use of
translators or multilingual staff.
 Example: In Japan, where the business culture places a strong emphasis on the Japanese language,
foreign companies may need to hire local staff proficient in the language or rely on translation
services, which can be costly.
- Business Etiquette and Norms:
 Impact: Failing to understand and adhere to local business etiquette and norms can lead to
misunderstandings and lost opportunities.

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  Example: In many Middle Eastern countries, building relationships (wasta) is crucial for business
success. Failing to respect these cultural norms may lead to higher costs in terms of lost business
opportunities.
- Legal and Regulatory Framework:
 Impact: Cultural attitudes towards regulation and enforcement can affect compliance costs.
 Example: In countries where corruption is deeply entrenched in the culture, companies may be
forced to engage in unethical practices or pay bribes to navigate the regulatory environment, leading
to higher compliance costs.
- Workplace Practices and Labor Relations:
 Impact: Cultural attitudes towards work hours, work-life balance, and employee-employer
relationships can impact labor costs.
 Example: In some European countries, strict labor laws and strong labor unions can lead to higher
labor costs and limited flexibility for businesses.
- Consumer Behavior and Preferences:
 Impact: Understanding the cultural preferences of the target market is essential for marketing and
product development, which can impact costs.
 Example: In India, where vegetarianism is culturally significant, companies like McDonald's had to
develop separate menus and production processes for vegetarian and non-vegetarian items, leading to
increased operational costs.
- Negotiation and Decision-Making Styles:
 Impact: The way negotiations are conducted and decisions are made can impact the cost and time
required for business deals.
 Example: In China, decision-making is often consensus-based and involves building strong
relationships. This can extend the time it takes to finalize business agreements, potentially increasing
negotiation costs.
- Social Values and Expectations:
 Impact: Aligning business practices with social values can be critical for success and may affect
advertising and branding expenses.
 Example: In Norway, emphasizing sustainability and environmental responsibility is vital due to the
culture's strong focus on these values. Companies may incur higher costs in meeting these
expectations.
- Cultural Holidays and Festivals:
 Impact: Cultural holidays and festivals can disrupt business operations and impact costs.
 Example: In China, during the Lunar New Year (Spring Festival), many businesses shut down for an
extended period. Companies may need to plan for production and staffing disruptions, possibly
leading to increased costs.
- Religious and Dietary Practices:
 Impact: Understanding and respecting religious and dietary practices is important, especially in the
food industry.
 Example: In countries with predominantly Muslim populations, businesses must adhere to halal food
preparation practices, which can entail additional certification and operational costs.
- Intellectual Property and Innovation Culture:
 Impact: Cultural attitudes toward intellectual property can affect the cost of protecting and enforcing
patents and trademarks.

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  Example: In some countries, a lax attitude towards intellectual property can lead to higher legal
expenses in defending against infringement.
QUESTION 2: Reread the Management Focus on China and Its Guanxi, then answer the following
questions
a. Why do you think that it is so important to cultivate guanxi and guanxiwang in China?
Chinese and Chinese culture have been affected by Confucius philosophy for more than 2000 years, which
stresses the important of the relationship, both within the family and between master and the servant. In
Confucian thought, loyalty and obligations to one’s superiors (or to family) are regarded as a sacred duty, but at
the same time, this loyalty has its price. Social superiors are obligated to reward the loyalty of their social
inferiors by bestowing “blessings” upon them; thus, the obligations are reciprocal. Chinese will often cultivate a
guanxiwang, or “relationship network,” for help. There is a tacit acknowledgment that if you have the right
guanxi, legal rules can be broken, or at least bent.
b. What does the experience of DMG tell us about the way things work in China? What would likely
happen to a business that obeyed all the rules and regulations rather than trying to find a way around
them as Dan Mintz apparently does?
- Following the experience of DMG, the way things works in China is based on the relationship and connection,
especially the connection with government could be the big advantage for the business in this country.
- The enterprise that obeyed all the rules and regulations could face some difficulties and challenges at the
beginning while setting up the business. However, due to strictly following the law and regulation, they will be
more sustainable with a strong legal foundation and good reputation among customers, partners and investors.