LESSON 1 United Nations (UN)

Is Globalization? Promotes peace through international cooperation and

The Globalization of Production Sourcing goods to take collective security.
advantage of differences in cost and quality of factors of 193 member countries.
production. UN Charter has four basic purposes:
• Factors of production include labor, energy, land, • Maintain international peace and security.
capital. Early outsourcing was confined to • Develop friendly relations among nations.
manufacturing. • Cooperate in solving international problems and in
• Modern communications technology has promoting respect for human rights.
advanced outsourcing today for service activities. • Be a center for harmonizing the actions of nations.

What Is Globalization? Group of Twenty (G20)

The Globalization of Production continued Robert Reich • Comprises finance ministers and central bank governors
suggests “global products.” Impediments prevent optimal of the 19 largest economies in the world, plus
dispersion of activities: representatives from the European Union and the
• Formal and informal barriers to trade. European Central Bank.
• Barriers to foreign direct investment. • Represents 90 percent of global GDP and 80 percent of
• Transportation costs. international global trade.
• Political and economic risk. DRIVERS OF GLOBALIZATION
• Challenge of coordinating globally dispersed supply Declining Trade and Investment Barriers
chain. 1920s to 1930s: Many barriers to international trade and
THE EMERGENCE OF GLOBAL INSTITUTIONS foreign direct investment.
Institutions needed to help manage, regulate, and police • International trade: when a firm exports goods or
global marketplace. services to consumers in another country.
• Foreign direct investment (FDI): when a firm invests
• General Agreement on Tariffs and Trade (GATT).
resources in business activities outside its home country.
• World Trade Organization (WTO).
GATT lowered barriers.
• International Monetary Fund (IMF).
• Uruguay Round extended GATT and established WTO.
• World Bank.
• United Nations (UN). Declining Trade and Investment Barriers continued
Between 1960 and 2020, the value of the world economy
World Trade Organization (WTO)
increased 9 times, while the value of international goods
• Polices the world trading system.
increased 19.7 times.
• Ensures nation-states adhere to the rules.
• Trade in goods and services and the value of foreign
• Facilitates multinational agreements among members.
direct investment have all been growing faster than world
• As of 2021,164 nations that account for 98 percent of
output.
world trade were WTO members
• More firms dispersing production process to different
International Monetary Fund (IMF) locations around the globe.
• Established to maintain order in the international • Economies of the world’s nation-states are becoming
monetary system. more intertwined.
• Often seen as the lender of last resort. • World has become significantly wealthier in the past
• In return for loans, requires nation-states to adopt two decades.
specific economic policies aimed at returning their
Role of Technological Change Communications.
economies to stability and growth.
• Development of the microprocessor single most
World Bank important innovation since World War II.
• Promotes economic development. • Moore’s law predicts that the power of microprocessor
• Focused on making low-interest loans to cash-strapped technology doubles and its cost of production falls in half
governments in poor nations that wish to undertake every 18 months. The internet.
significant infrastructure investments. • More than half of the world’s population uses the
internet.
• Global e-commerce sales close to $4 trillion.
Role of Technological Change continued • Globalization, Labor Policies, and the
Transportation technology. Environment
• Commercial jets, superfreighters, and • Globalization and National Sovereignty
containerization have all “shrunk the globe.” • Globalization and the World’s Poor
Implications for the globalization of production:
MANAGING IN THE GLOBAL MARKETPLACE
• Locating production in geographically separate
Managing International Business
locations has become more economical.
Any firm that engages in international trade or investment
Implications for the globalization of markets:
is international.
• Cultural distance has been reduced and has
Managing international business differs from managing
brought some convergence of consumer tastes and
purely domestic business.
preferences.
• Countries are different.
THE CHANGING DEMOGRAPHICS OF THE GLOBAL • Range of problems is wider and problems more complex.
ECONOMY • Must find ways to work within limits imposed by
The Changing World Output and World Trade Picture government.
1960s: U.S. accounted for 38.3 percent of world output. • Transactions involve converting money into different
2020: U.S. accounted for 24.7 percent of world output. currencies.
This reflects the faster economic growth of several other LESSON 2
economies, particularly China. NATIONAL DIFFERENCES IN POLITICAL, ECONOMIC,
• China and BRIC countries growing more rapidly. AND LEGAL SYSTEMS
• Developing nations may account for more than 60
POLITICAL ECONOMY
percent of world economic activity by 2030.
• Political, economic, and legal systems of a country.
The Changing Foreign Direct Investment Picture • These systems are interdependent.
As barriers to the free flow of goods and services fell, non- • They influence each other.
U.S. firms increasingly invested across national borders.
POLITICAL SYSTEMS
The Changing Nature of the Multinational Enterprise The system of government in a nation is called the political
Multinational enterprise (MNE) is any business that has system.
productive activities in two or more countries. Non-U.S. Assessed according to two dimensions:
multinationals. • Emphasis on collectivism or individualism.
The Changing Nature of the Multinational Enterprise • Degree to which they are democratic or totalitarian.
continued Collectivism and Individualism
The rise of mini-multinationals. Collectivism:
• Growth in the number of medium- and small-sized • Emphasizes collective goals over individual goals.
businesses. Socialism:
• Internet is lowering barriers that smaller firms faced in • Public ownership of the means of production for the
international trade. common good.
The Changing World Order • Karl Marx: the few benefit at the expense of the many
Former communist countries present export and in a capitalist society where individual freedoms are
investment opportunities. not restricted.
• Communists versus social democrats.
Global Economy of the Twenty-First Century • Privatization.
Barriers to the free flow of goods, services, and capital
have been coming down. Collectivism and Individualism continued
Strengthened by the widespread adoption of liberal Individualism:
economic policies by countries that had opposed them. • An individual should have freedom in economic and
political pursuits.
THE GLOBALIZATION DEBATE • The interests of the individual should take precedence
over the interests of the state.
• Antiglobalization Protests
• Globalization, Jobs, and Income
• Globalization, Jobs, and Income continued
Democracy and Totalitarianism Command Economy
• Democracy: government is by the people, exercised • Government plans the goods and services, quantity and
either directly or through elected representatives. price, then allocates them for “the good of society.”
• Totalitarianism: one person or political party exercises • All businesses are state owned.
absolute control over all spheres of human life and • Historically found in communist countries.
prohibits opposing political parties. • No incentive for individuals to look for better ways to
• Democracy and individualism go hand in hand, as do the serve needs.
communist version of collectivism and totalitarianism. Mixed Economy
Some sectors are privately owned, some are government
Democracy and Totalitarianism continued
owned.
Democracy:
Once common in developed world, less so now.
• Representative democracy: citizens periodically elect
Government may aid troubled firms whose operations are
individuals to represent them.
vital to national interests.
• Includes a multitude of safeguards that are typically
• U.S. helped Citigroup, General Motors in 2008 recession.
based in constitutional law, including:
o Freedom of expression. LEGAL SYSTEMS
o Free media. Refer to:
o Universal adult suffrage. • Rules or laws that regulate behavior.
o Fair court system. • Process through which laws are enforced.
• Process through which redress for grievances is obtained.
Democracy and Totalitarianism continued
Are influenced by the prevailing political system.
Totalitarianism:
• Communist totalitarianism: socialism can be achieved Different Legal Systems
only through a totalitarian dictatorship. 1. Common law:
• Theocratic totalitarianism: monopolized by a party, • Evolved in England over hundreds of years.
group, or individual that governs according to religious • Based on tradition, precedent, custom.
principles. • More flexible than other systems.
• Tribal totalitarianism: a party, group, or individual that 2. Civil law:
represents the interests of a particular tribe monopolizes • Based on detailed laws organized into codes.
political power. • Less adversarial than a common law system.
o Right-wing totalitarianism: generally permits 3. Theocratic law:
individual economic freedom but restricts • Based on religious teachings.
individual political freedom, including free speech, • Most common is Islamic law.
on the ground that it would lead to the rise of
Differences in Contract Law
communism.
Contract: specifies conditions under which an exchange is
Democracy and Totalitarianism continued to occur, and details rights of parties involved.
Pseudo-democracies: Contract law: body of law that governs contract
• Lie between pure democracies and complete enforcement.
totalitarianism systems. • Under common law:
• Authoritarian elements have captured some or much of o Contracts are very detailed with all contingencies
the machinery of state and use this to deny basic political spelled out.
and civil liberties. o More expensive and can be adversarial.
• Under civil law:
ECONOMIC SYSTEMS
o Contracts tend to be much shorter and less
Market Economy specific.
• All productive activities are privately owned. Differences in Contract Law continued
• Production is determined by supply and demand. United Nations Convention on Contracts for the
• To work, supply must not be restricted. International Sale of Goods (CISG):
• Role of government is to encourage vigorous free and fair • Establishes a uniform set of rules governing certain
competition. aspects of the making and performance of everyday
commercial contracts between sellers and buyers who Product Safety and Product Liability
have their places of business in different nations. Product safety laws set certain safety standards to which a
product must adhere.
Property Rights and Corruption
Product liability involves holding a firm and its officers
Property: a resource that an individual or business owns.
responsible when a product causes injury, death, or
o Land, buildings, equipment, capital, mineral rights,
damage.
businesses, intellectual property.
Property rights: legal rights over the use to which a Lesson 3
resource is put and over the use made of any income that ECONOMIC DEVELOPMENT
may be derived from that resource. Differences among nations affect how attractive it is for
doing business.
Property Rights and Corruption continued
Trends that foster greater economic development:
Private action:
• Democratic forms of government.
• Theft, piracy, blackmail by private individuals or groups.
• Market-based economic reforms.
Public action and corruption: • Legal systems that better enforce property rights.
• Public officials extort income, resources, or property.
DIFFERENCES IN ECONOMIC DEVELOPMENT
o Can be done legally by levying excessive taxation,
•Gross Domestic Product (GDP)
requiring licenses or permits from property
Measures the total monetary or market value of all the
holders, taking assets into state ownership without
finished goods and services produced within a country's
compensating owners, redistributing assets
borders in a specific time period.
without compensating prior owners.
Japan, Sweden, Switzerland, Australia and the United
o Can be done illegally through corruption,
States have high GDP.
demanding bribes.
• The “official” figures can be misleading. Do not account
Property Rights and Corruption continued for black economy transactions, such as unrecorded cash
Foreign Corrupt Practices Act (FCPA): transactions or barter agreements.
• Illegal to bribe a foreign government official to obtain or GDP and PPP data are static and do not consider economic
maintain business over which that foreign official has growth rates.
authority. • China and India are currently relatively poor, but their
• Requires all publicly traded companies to keep detailed economies are growing more rapidly than many advanced
records that would reveal whether a violation of the act nations.
has occurred. • China may become the world’s largest economy within
Convention on Combating Bribery of Foreign Public the next decade.
Officials in International Business Transactions (1997): • India will be among the largest economies in the world.
o Makes bribery of a foreign public official a criminal
offense. •Broader Conceptions of Development: Amartya Sen
o Allows for facilitating or expediting payments. Economic development should be assessed by the
The Protection of Intellectual Property capabilities and opportunities people enjoy.
Intellectual property: property that is the product of • Development requires removing major impediments to
intellectual activity, such as computer software, a freedom: poverty, tyranny, poor economic opportunities,
screenplay, a music score. systematic social deprivation, neglect of public facilities.
• Patent: inventor’s exclusive rights for a defined period. Economic progress requires the democratization of
• Copyrights: exclusive legal rights of authors, composers, political communities to give citizens a voice.
playwrights, artists, and publishers. The United Nations used Sen’s ideas to develop the Human
• Trademarks: officially registered designs and names used Development Index (HDI) to measure quality of human life
to differentiate products. in different nations.
World Intellectual Property Organization: international • Life expectancy at birth.
organization whose members sign treaties to protect • Educational attainment.
intellectual property. • Whether average incomes are sufficient to meet
o Paris Convention for the Protection of Industrial the basic needs of life
Property.
POLITICAL ECONOMY AND ECONOMIC PROGRESS In terms of demographics, countries with a young and
Innovation and Entrepreneurship Are the Engines of growing population have greater growth potential.
Growth • Growing population increases supply of labor.
Innovation • Younger workers tend to consumer more than older
• New products along with new processes, new workers.
organizations, new management practices, and new • Aging population implies a stress on government
strategies. finances.
Entrepreneurs
STATES IN TRANSITION
• First to commercialize innovative products and
• Political economy of nation-states is marked by three
processes.
trends:
• Provides much of the dynamism in an economy.
1. Democratic revolutions during late 1980s and early 19
Innovation and Entrepreneurship Require a Market 90s led to greater commitment to free market capitalism.
Economy 2. Moving away from centrally planned and mixed
• In market economies, any individual is free to try out an economies toward a more free market approach.
innovative idea by starting a business, and existing 3. Since 2005, a shift back to greater authoritarianism in
businesses are free to improve their operations through some nations has resulted in a retreat from the free market
innovation. model
• The Spread of Democracy
Innovation and Entrepreneurship Require Strong Property
In 2021, Freedom House ranked countries into three broad
Rights
categories:
Without strong property rights, individuals and businesses
• 82 countries classified as free: 42 percent of nations.
risk having innovations and potential profits stolen.
• 59 countries classified as partly free: 30 percent of
The Required Political System nations.
Democratic regimes are probably more conducive to long- • 54 countries classified as not free: 28 percent of nations.
term economic growth.
Three reasons for the spread of democracy:
• China, South Korea, Taiwan, Singapore, and Hong Kong all
1. Many totalitarian regimes failed to deliver economic
had undemocratic governments but experienced rapid
progress to the bulk of their populations.
economic growth.
2. New information and communication technologies.
• Property rights are only secure in well-functioning,
• Reduced state’s ability to control access to uncensored
mature democracies
information.
Totalitarian states are detrimental to progress.
• Created new conduits for the spread of democratic
• They limit freedom and suppress human development.
ideals.
Economic Progress Begets Democracy 3. Economic advances have led to a prosperous middle
Economic growth often leads to establishment of class that has pushed for democratic reforms.
democratic regimes.
• The Spread of Democracy
• South Korea and Taiwan.
Since 2005, there has been a drift back toward more
Problem of human rights violations in China.
authoritarian modes of government in many nations.
• Once China has a free market system, belief is that the
o Elections have been compromised; civil liberties
country will have greater individual freedoms and
restricted; independent press has been attacked;
democracy.
opposition parties have been restricted.
GEOGRAPHY, EDUCATION, DEMOGRAPHICS AND o Examples: Turkey, Russia, Ukraine, Indonesia,
ECONOMIC DEVELOPMENT Ecuador, Venezuela.
Economist Jeffrey Sachs argues that countries with
• The New World Order and Global Terrorism
favorable geography are more likely to engage in trade and
Author Francis Fukuyama argues the new world order will
are open to market-based systems.
be characterized by democratic regimes and free market
•Promotes faster economic growth.
capitalism.
Countries that invest in education have higher growth rates
because the workforce is more productive. Huntington: global terrorism is a product of tensions
• Countries in Southeast Asia have offset their geographical between civilizations and a clash of value systems and
disadvantage by investing in education. ideology.
• ISIS and al-Qaeda. IMPLICATIONS OF CHANGING POLITICAL ECONOMY
•Ideological conflict between collectivism and
• Former U.S. Secretary of State Colin Powell maintained
individualism is less prevalent today.
that terrorism is one of the major threats to world peace
Western ideology more widespread. Markets formerly off-
and economic progress.
limits to Western business are now open, presenting a
huge potential for business. Potential risks are large:
The Spread of Market-Based Systems
• Will democracy thrive during difficult times?
A shift from centrally planned economies to market based
• Will totalitarian regimes return?
economies.
• Is the risk associated with investment worth it?
• More than 30 countries in the former Soviet Union and
• Is China’s financial system stable?
eastern European communist bloc have changed economic
systems.
360° VIEW: MANAGERIAL IMPLICATIONS
• Change also occurring in Asian and African states.
• Command and mixed economies failed to deliver the Benefits, Costs, Risks, and Overall Attractiveness of Doing
sustained economic growth achieved in marketbased Business Internationally
countries Countries are more likely to have higher sustained rates of
economic growth with:
THE NATURE OF ECONOMIC TRANSFORMATION
• Democratic regimes.
• The shift toward a market-based system involves:
• Market-based economic policies.
o Deregulation.
• Strong property rights protection.
o Privatization.
• These markets are more attractive to international
o A legal system to safeguard property rights
businesses.
Deregulation
Benefits:
•Removing legal restrictions to the free play of markets,
• Based on size of the market, as well as current and future
the establishment of private enterprises, and the manner
purchasing power of its consumers.
in which private enterprises operate.
• First-mover advantages enjoyed by early entrants.
•In command economies and mixed economies, the state
• Late-mover disadvantages suffered by late entrants.
sets prices, owns businesses, limits private enterprise,
• A country’s economic system, property rights regime, and
restricts investment by foreigners, and restricts
education systems are good predictors of economic
international trade.
prospects.
Privatization
Costs:
Transfers ownership of state property to private
• Political system: is it necessary to pay bribes to get market
individuals.
access?
• Movement started in Great Britain in early 1980s.
• Economic level: are the necessary supporting businesses
In many nations, economic activity is still dominated by
and infrastructures in place?
state-owned enterprises.
• Legal system: how do local laws and regulations affect
Selling state-owned enterprises not enough to guarantee
business decisions? Are there well-established contract
economic growth.
laws?
For privatization to work, it must be paired with a general
deregulation and opening of the economy. Risks:
• Political risk: likelihood that political forces will cause
Legal Systems
drastic changes in a country’s business environment that
A well-functioning market economy requires laws.
will adversely affect a business’s profit and other goals.
• Need to protect property rights.
• Economic risk: likelihood that economic mismanagement
• Mechanisms for contract enforcement.
will cause drastic changes in a country’s business
Adoption of a legal system requires time to function well.
environment that adversely affect a business’s profit and
Institutional weaknesses undermine contract enforcement
other goals.
in most countries. Progress being made regarding laws on
• Legal risk: likelihood that a trading partner will
property rights.
opportunistically break a contract or expropriate property
rights.
 Mores are norms seen as central to functioning of society.
• Example: laws against theft.
Overall Attractiveness:
• Have greater moral significance than other norm
• Based on balancing the benefits, costs, and risks
associated with doing business in that country. Culture, Society, and the Nation-State
• Other things being equal, the benefit-cost-risk trade-off • The relationship between a society and a nation-state is
is likely to be most favorable in politically stable developed not strictly one-to-one.
and developing nations that have free market systems and • Nation-states are political creations.
no dramatic upsurge in either inflation rates or private • A nation can have several cultures, and a culture can
sector debt embrace several nations. • Can be different levels of
culture within a country.
Lesson 4
Determinants of Culture
Understanding and adapting to the local cultural is
The values and norms of a culture evolve over time.
important in international companies.
• Religion.
Cross-cultural literacy refers to understanding how cultural
• Political philosophy.
differences across and within countries can affect how
• Economic philosophy.
business is practiced.
• Education.
• Cultural differences create a common bond
• Language.
among people.
• Social structure
• Numerous values and norms exist in these
cultural systems that might affect international SOCIAL STRUCTURE
business. Social Structure
• Culture can and does evolve. Refers to the basic social organization of a society.
WHAT IS CULTURE? Two dimensions help explain differences among cultures: 1.
Culture The degree to which the basic unit of social organization is
• A system of values and norms shared among a the individual, as opposed to the group.
group of people and that when taken together 2. The degree to which a society is stratified into classes or
constitute a design for living. castes
Values Individuals and Groups
• Ideas about what a group believes to be good, The individual:
right, and desirable. • In many Western societies, the individual is the basic
Norms building block of social organization.
• Social rules and guidelines that prescribe • Emphasis on individual achievement.
appropriate behavior in particular situations.
Society The group:
• A group of people sharing a common set of • A group is an association of two or more individuals who
values and norms. have a shared sense of identity and interact in structured
ways based on common expectations.
VALUES AND NORMS • The primary unit of social organization in many non-
Values: Western societies.
• Provide the context within which a society’s norms are • Importance of group membership/identification.
established and justified.
• They are invested with emotional significance. Social Stratification
• Reflected in the economic systems of a society. Social strata are hierarchical social categories often based
on family background, occupation, and income.
Norms: • Individuals born into a particular stratum, which affects
• Social rules that govern people’s actions toward one life chances.
another. Four basic principles:
• Folkways are routine conventions of everyday life. • Is a trait of society.
o Examples: appropriate dress code, good social • Carries over into next generation.
manners. • Is generally universal but variable.
o Include rituals and symbolic behavior. • Involves not just inequality but also beliefs
Social mobility:
Hinduism
• Extent to which individuals can move out of the strata
Beliefs:
into which they are born.
• A moral force in society requires the acceptance of
• Varies among societies.
certain responsibilities, called dharma.
• Caste system is a closed system where social position is
• Rebirth into a different body, called reincarnation.
determined by family and change is usually not possible.
• The spiritual progression of each person’s soul, called
• India has four main castes.
karma.
• Class system is less rigid, and position can be changed
• Achieving a complete spiritual perfection, called
through achievement and luck.
nirvana.
• United Kingdom has a more rigid class structure
than U.S. Economic implications of Hinduism:
• Max Weber: Hindus are valued by their spiritual rather
Significance:
than material achievements.
• Can affect business operations.
• Caste system abolished in India, but still has an effect.
• Class consciousness is a tendency for individuals to
perceive themselves in terms of their class background. Buddhism
• Makes it difficult to establish a competitive advantage in - Stresses spiritual growth and the afterlife, rather
a global economy. than involvement in this world.
Economic implications of Buddhism:
RELIGIOUS AND ETHICAL SYSTEMS
• Does not emphasize wealth creation.
Religion
• Does not support the caste system—individuals have
• A system of shared beliefs and rituals concerned with the
some mobility and can work with individuals from
realm of the sacred.
different classes.
Ethical System
• Recent trends bring the “Zen” orientation from
• A set of moral principles, or values, that are used to guide
Buddhism into business in the Western world.
and shape behavior.
• Most ethical systems are the product of religions. Confucianism
• Four dominant religions today: • Practiced mainly in China, Korea, and Japan.
1. Christianity. Teaches the importance of attaining personal salvation
2. Islam. through right action.
3. Hinduism. High morals, ethical conduct, and loyalty to others.
4. Buddhism. Economic implications of Confucianism:
Christianity • Three values of Confucianism—loyalty, reciprocal
- Most widely practiced religion; monotheistic. obligations, and honesty—may all lead to lowering the cost
Found throughout Europe, the Americas, and of doing business in Confucian societies.
other countries settled by Europeans. • Guanxi are relationship networks supported by reciprocal
Economic implications of Christianity: obligations.
• Sociologists argue that Protestant branch has the most LANGUAGE
important economic implications. Spoken Language
• Max Weber, Protestant ethics, and the spirit of Language structures the way we see the world. Countries
capitalism. with more than one language often have more than one
Islam culture.
- Second largest religion. • Mandarin (Chinese) is mother tongue of the largest
- Monotheistic, one true omnipotent God (Allah). number of people.
Islamic fundamentalism: • The most widely spoken language in the world is
• Associated in the West with militants, terrorists. English.
• A response to social pressures to move toward • English is becoming the language of international
modernization and the influence of Western societies. business.
Economic implications of Islam:
Unspoken Language
• Many pro-free enterprise principles, protection of private
Nonverbal communication refers to the use of nonverbal
property, concern with social justice.
cues to communicate meaning.
• Prohibits the payment or receipt of interest.
 • Often culturally bound. Global Leadership and Organizational Behavior
• Personal space is the comfortable distance between a Effectiveness (GLOBE)
speaker and the listener. A leader’s effectiveness is contextual.
• Varies among cultures, which makes it important to • Embedded in the societal and organizational norms,
know in business. values, and beliefs of the people being led. Established
nine cultural dimensions:
EDUCATION • Power distance, uncertainty avoidance, humane
Formal Education orientation, institutional collectivism, in-group
Medium through which individuals learn languages and collectivism, assertiveness, gender egalitarianism, future
other skills. orientation, and performance orientation.
Socializes the young into the values and norms of a society. World Values Survey (WVS)
• The “hidden curriculum” in schools teaches Explores people’s values and norms, how they change over
respect for others, obedience to authority, time, and what impact they have in society and business.
honesty, neatness, timeliness. Dimensions:
Provides a national competitive advantage. • Support for democracy; tolerance of foreigners and
• Creates a pool of skilled and knowledgeable workers. ethnic minorities; support for gender equality; the role of
• Represents a good index of what products might sell in a religion and changing levels of religiosity; the impact of
country globalization; attitudes toward the environment, work,
CULTURE AND BUSINESS family, politics, national identity, culture, diversity, and
Culture and values in the workplace was studied by Geert insecurity; and subjective well-being.
Hofstede.
Hofstede’s dimensions of culture: CULTURAL CHANGE
• Power distance refers to how a society deals with the fact Changing Culture
that people are unequal in physical and intellectual Culture is not a constant; it evolves over time. • In the
capabilities. 1960s, women in management was not accepted, while
• Individualism versus collectivism focuses on the today it is a welcomed reality.
relationship between individuals and their fellows. Economic advancement and globalization may be
• Uncertainty avoidance measures the extent to which important factors.
different cultures socialize their members into accepting Culture may change as a society becomes wealthier.
ambiguous situations and tolerating uncertainty Also evidence of countertrends:
•Masculinity versus femininity looks at the relationship • Shift toward Islamic fundamentalism in some countries.
between gender and work roles. • Separatist movements in Canada, Russia, United
• Long-term versus short-term orientation refers to the Kingdom.
extent to which a culture programs its citizens to accept 360° VIEW: MANAGERIAL IMPLICATIONS
delayed gratification of their material, social, and Cultural Literacy and Competitive Advantage
emotional needs. Cross-cultural literacy:
• Indulgence versus restraint added in 2010. • Companies must be informed about the culture of
• Indulgence refers to a society that allows relatively another nation when conducting international business.
free gratification of basic and natural human drives • Ethnocentrism is the belief in the superiority of one’s own
related to enjoying life and having fun. ethnic group or culture.
•Restraint refers to a society that suppresses • Edward T. Hall notes that cultural differences in attitude
gratification of needs and regulates it by means of to time can cause myriad problems.
strict social norms.
Culture and competitive advantage:
Hofstede’s Results • Values and norms influence costs of doing business and
• Hofstede created an index score for each dimension— the costs of doing business influence ability to establish
from 0 to 100 (100 being a high score). competitive advantage.
• Western nations tend to score high on individualism and • Some say culture of modern Japan lowers the cost of
low on power distance. doing business relative to Western nations.
• Latin American and Asian countries emphasize • Also, Japan less supportive of entrepreneurial activity
collectivism and score high on power distance.
• Japan demonstrates strong uncertainty avoidance and
high masculinity.