Chapter 5

The Cultural
Environment of
Global Markets

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Learning Objectives

5-1 The necessity for adapting to cultural

differences
5-2 How and why management styles vary
around the world
5-3 The extent and implications of gender bias
in other countries
5-4 The importance of cultural differences in
business ethics
5-5 The differences between relationship-
oriented and information-oriented cultures
Cultural Differences Matter

Perhaps nothing causes more

problems for Americans
negotiating in other
countries than their
impatience. Everyone
around the world knows that
delaying tactics work well
against time-conscious U.S.
bargainers.

©John Graham
Culture and Business Systems

Culture profoundly impacts business

• Management style
• Business culture, management values, business methods and
behavior

• Establishes criteria for day-to-day business behavior

• Forms general patterns of values and motivations

• Important for marketers to analyze to be successful

• Cultural analysis and understanding gives competitive edge

• Business etiquette a crucial component

Required Adaptation 1 of 3

10 Basic Criteria to Do Business in a Foreign Country

1. Open tolerance
2. Flexibility
3. Humility
4. Justice/fairness
5. Ability to adjust to varying tempos
6. Curiosity/interest
7. Knowledge of the country
8. Liking for others
9. Ability to command respect
10. Ability to integrate oneself into the environment
Required Adaptation 2 of 3

Degree of Adaptation
• Know local customs and accommodate differences
• Evaluate which foreign customs should be adhered to
• Be aware of self-reference criterion (SRC)

• Own cultural background impacts understanding of other

culture

• Importance of customs varies by country

Required Adaptation 3 of 3

Cultural Business customs and expectations

Imperatives that must be met and conformed to or
avoided

Cultural Behavior or customs that cultural

Electives aliens may wish to conform to or
participate in, but not required

Cultural Customs or behaviors that foreigners

Exclusives are barred from and must not
participate in
Cultural Adaptation in Action

German Chancellor Angela Merkel

and Chinese Prime Minister Wen
Jiabao toast after the EU–China
Business Summit at the Great Hall
of the People in Beijing. The
summit was boosted by the
settlement of a trade row that had
left 80 million Chinese-made
garments piled up in European
seaports, unable to be delivered to
shops under a quota pact agreed to
at the time. Drinking half a bottle
is a cultural elective, but taking a
sip is more of an imperative in this
case.

©Rainer Jensen/Epa/REX/Shutterstock
The Impact of American Culture on
Management Style 1 of 2

Why focus on American Culture?

1. Important for Americans to be aware of the
elements of culture influencing decisions and
behaviors.
2. For those new to American culture, it is useful to
better understand business associates from the
U.S., as the U.S. market is the biggest export
market in the world.
3. Since the late 1990s, American business culture
has been exported around the world.
The Impact of American Culture on
Management Style 2 of 2

Impact of U.S. culture on management style

• “Master of destiny” viewpoint
• Independent enterprise as instrument of social
action
• Personnel selection and reward based on merit
• Decisions based on objective analysis
• Wide sharing in decision making
• Never-ending quest for improvement
• Competition produces efficiency
 Greed is Good?

What’s different about Adam Smith’s “By pursuing

his own interests he frequently promotes that of
society more effectually than when he really
intended to promote it” and Gordon Gekko’s
“Greed is good” statements? It’s the adverb. Smith
didn’t say “always,” “most of the time,” or even
“often.” He said “frequently.” Today many on Wall
left: Source: Prints and Photographs Division, Library of Street ignore this crucial difference.
Congress, LC-USZ62-101759; right: ©SNAP/REX/Shutterstock
Management Styles around the World 1 of 8

Authority and Decision Making

• Prominence of status and position (Power
Distance Index, or PDI) influences approach to
authority
• High-PDI countries: subordinates less likely to
contradict bosses

• Low-PDI countries: subordinates often challenge bosses

Management Styles around the World 2 of 8

Authority and Decision Making continued

• Three typical authority patterns in decision-

making
1. Top-level management decisions

2. Decentralized decisions

3. Committee or group decisions

Management Styles around the World 3 of 8

Management Objectives and Aspirations

• Personal security and job mobility
• Cultures higher in individualism (Individualism vs.
Collectivism, or IDV) make risker R&D investments

• Personal life
• To Japanese, personal life is company life

• Affiliation and social acceptance

• Power and achievement
Figure 5.1 Annual Hours Worked

Country 2000 2010 2016

United Kingdom 1700 1647 1676
Canada 1775 1702 1703
Germany 1473 1419 1363
Netherlands 1435 1377 1430
Japan 1821 1733 1713
Norway 1455 1414 1424
United States 1814 1778 1783
S. Korea 2512 2193 2069
Mexico 1888 1866 2255
Italy 1861 1778 1730

Source: OECD, Hours worked (indicator), 2018. https://data.oecd.org/emp/hours-worked.htm

Management Styles around the World 4 of 8

Communication Styles
• Communication involves much more than just
words
• Edward T. Hall’s silent languages
• Time, space, things, friendships, agreements
The Use of Space in Office Settings

Notice the individualism reflected in the American cubicles and the

collectivism demonstrated by the Japanese office organization.

left: ©Exactostock/SuperStock; right: ©Andy Rain/Bloomberg News/Getty Images

Management Styles around the World 5 of 8

Communication Styles continued

Face-to-Face • Meanings of words differ widely among languages

communication • Edward T. Hall’s high-context/low-context
continuum
• High-context: heavy dependence on nonverbal
communication
• Low-context: heavy dependence on explicit,
verbal communication
Internet • Once message is posted, can be read anywhere at
communications any time
• High opportunity for miscommunication
• Loss of contextual information
 Figure 5.2 Context, Communication, and
Cultures: Edward Hall’s Scale

Note: Patterned after E.T. Hall

Jump to long description.
Management Styles around the World 6 of 8

Formality and Tempo

• Common mistakes North Americans make in business
• Too relaxed in formality; addressing clients and co-workers
by first name
• Too hasty and impatient in “getting down to business”
• Tempo impacted by cultural view of time
• Monochromatic: linear view, time is important, promptness
• Polychronic: multi-tasking, involvement with individuals
Management Styles around the World 7 of 8

Negotiations Emphasis
• Business negotiation is a fundamental commercial
ritual
• Process is complicated, high possibility of misunderstanding

• Attitudes brought to negotiation table are impacted by

culture

• Need to avoid SRC when assessing a situation

Management Styles around the World 8 of 8

Market Orientation
• Relates positively to profits
• Increasingly embraced by American companies

• Other countries still prefer traditional orientations

• Production, product, and selling

Gender Bias in International Business

Women in Managerial Roles

• Some countries are biased against female managers
• Asia, Middle East, and Latin America
• Poses significant challenge in cross-cultural
negotiations
• Should female managers in U.S. do business in these
countries?
• If her organization is supportive of her, resistance either
does not materialize or is less troublesome than expected
• International experience needed to break glass ceiling
Figure 5.4 Few and Far Between

Female directors on
corporate boards as a
percentage of total

Source: MSCI, Women on boards, 2015. https://www.msci.com/documents/10199/04b6f646-d638-4878-9c61-4eb91748a82

Two ways to prevent the harassment
of women

left: ©Kyodo News/Newscom; right: ©Felix Larher/PYMCA/REX/Shutterstock

 Exhibit 5.5 Women on Company
Boards

Source: “Ten years on from Norway’s quota for women on corporate boards,” The Economist. The Economist Newspaper Limited, London,
February 17, 2018.
Business Ethics 1 of 7

Corruption Defined
• Meaning of ‘corruption’ differs around world
• Profits seen as corrupt in formerly communist countries
• Individualism seen as corrupt in collectivist cultures
• Missionaries and religious movements seen as corrupt in
China
• Intellectual property seen as exploitive in sub-Saharan Africa
International Reception of American
Movies

Pope Benedict XVI wrote that the Harry Potter books and movies can “deeply
distort Christianity in the soul, before it can grow properly.” Meanwhile,
Antonio Banderas perhaps helped improve European acceptability for Shrek 2
when he showed up for the Madrid premiere. In any case, products and
services directed at kids get special attention from parents and regulators
around the world. © John Graham
Home-Grown Business?

In addition to cars and real estate, toys can help jump-start the
economy, and no toy does so better than Barbie. In this photo, a
splashy, larger-than-life Barbie “doll house” display attracts Chinese
buyers to perhaps the world’s most recognizable spokeswoman for toy
consumer culture.

©Robert Burch/Alamy Stock Photoes

Business Ethics 2 of 7

The Western Focus on Bribery

• Many countries don’t restrict bribery
• “If you don’t pay bribes, you don’t do business”
• Conflict between ethics and profitability

• United States views bribery as a serious form of corruption

• Democracy depends on public’s trust in integrity of government

• Transparency International (TI)

• Encourages governments to curb corruption
Business Ethics 3 of 7

Bribery: Variations on a Theme

Bribery Legal issue with cultural context
Extortion Payments extracted under
duress
Lubrication Small sums, not prohibited by
law
Subornation Large sums for an illegal act
Agent’s fees Legal as long as not a conduit for
illegal payments
Foreign Corrupt Practices Act
Business Ethics 4 of 7

Ethical and Socially Responsible Decisions

• Difficulties often arise in five broad areas
1. Employment practices and policies

2. Consumer protection

3. Environmental protection

4. Political payments and involvement in political affairs

of the country

5. Basic human rights and fundamental freedoms

Business Ethics 5 of 7

Ethical Principles
Utilitarian ethics Does the action optimize the
“common good” or benefits of all
constituencies? Who are the
pertinent constituencies?
Rights of the parties Does the action respect the
rights of the individuals involved?
Justice or fairness Does the action respect the
canons of justice or fairness to
all parties involved?
Business Ethics 6 of 7

Initiatives
• Strategic philanthropy
• Providing expertise or products to sponsorship
projects
• Targeted at local communities or specific
segments of population
• Brazil – Operation Carwash is organized to target
rampant government corruption
• Norway invests in ethical companies
Business Ethics 7 of 7

Culture’s Influence on Strategic Thinking

• Impacts manager’s thinking about business strategy
• Thurow’s “Individualistic capitalism”
• British-American strategy

• Competition between labor, management, and government

• “Communitarian capitalism”
• German-Japanese strategy

• Cooperation between labor, management, and government

Work Wanted

Chinese migrant workers advertise their skills while waiting for employers in the
Sichuan city of Chengdu. The government expects the total number of migrants
looking for jobs this year to reach at least 25 million. Maintaining steady growth
is the country’s foremost priority and also its most challenging task.
©Andrii Zhezhera/Shutterstock
Japanese Jobless

After more than two decades of stagnation in Japan, the social contract of
lifetime employment is softening. This change is reflected in more
frequent corporate layoffs, frustrating job searches, and “tent villages” in
public places such as Ueno Park in Tokyo. But even at their worst point in
history, Japanese jobless are just a trickle compared with the torrent of
pink slips and homeless folks when the American economy heads south.

©John Graham
Synthesis: Relationship-Oriented vs.
Information-Oriented Cultures

Correlation between Hall’s high/low context and

Hofstede’s Individualism/Collective and Power
Distance indices
• Relationship orientation
• Information orientation
• General pattern international marketers can use
• Not every culture fits every dimension precisely
• Still important to learn about culture individually
Figure 5.8 Dimensions of Culture:
A Synthesis
Information-Oriented Relationship-Oriented
(IO) (RO)
• Low context • High context
• Individualism • Collectivism
• Low power distance • High power distance (including
gender)
• Bribery less common
• Bribery more common*
• Low distance from English
• High distance from English
• Linguistic directness
• Linguistic indirectness
• Monochronic time
• Polychronic time
• Internet
• Face-to-face
• Focus on the foreground
• Background
• Competition
• Reduce transaction costs
*We note that Singapore, Hong Kong, Japan, and Chile do not fit all the rules here. Most would agree that all four are relationship-oriented cultures