International Business and the Role of Culture Lecture 21, 11 th March 2010 Dr Michael Wynn-Williams [email protected] 1.

INTERNATIONAL BUSINESS

MANAGEMENT (BUSI 1346)

International Business and the Role of Culture

Lecture 21, 11th March 2010Dr Michael Wynn-Williams [email protected]

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ENVIRONMENT AND GLOBAL OPERATIONS Types of Multinational Corporations

Ethnocentric exert strict control over foreign operations

Polycentric give foreign operations more freedom to operate

as separate entitiesGeocentric

seek total integration of global operations

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INTERNATIONAL BUSINESS CHALLENGES Problems of Laws : vary between countries

common legal problems incorporation practices negotiating contracts protecting patents, trademarks and copyrights

Human resource concernsabsence of appropriate skillsshortage of labor supplies

Good Practices and Fair WagesThe ILO’s concept of “Decent Work”

Cultural differences

Social culture

Business culture

Organizational culture

Occupational culture

Multinational Management

WHAT IS CULTURE? Culture is relative – Different nationalities simply

perceive the world differently

Culture is about groups – It refers to collective values and meanings

Nurture not nature – culture is derived from the social environment

Socialization – The process of learning the rules and behavioral patterns appropriate to one's given society

Acculturation – The process of adjusting and adapting to a culture other than one's own, commonly experienced by expatriate workers.

Culture as Iceberg

Culture has been likened to an iceberg - above the surface, certain characteristics are visible.

Below the surface is a massive base of assumptions, attitudes, and values

These strongly influence decision-making, relationships, conflict, and other dimensions of international business

CULTURE, SOCIETY, AND THE NATION STATEA society is a group of people bound

together by a common cultureThere is not a strict one-to-one

correspondence between a society and a nation state

Nation State:Is a political creation May contain a single culture or several

cultures (Japan vs. USA)A country may have multiple nations

THE DETERMINANTS OF CULTURE

SOCIAL STRUCTURE Social structure refers to its basic social

organization Group or individually oriented Degree of stratification into castes or classes

Language Spoken Unspoken

Education Teaches technical skills Introduces sense of competition Reinforces social norms

Economic philosophy Political philosophy Religion

CLASS TASK I: CULTURAL GUIDES

Arrange yourself into national or regional groups

You will be asked to provide guides for business men travelling to your country

The guides should contain 1 cultural rule to observe, and 1 cultural taboo to avoid

Present your findings to the class

HOFSTEDE’S DIMENSIONS OF CULTURE

Individualism versus collectivism – whether a person primarily functions as an individual or within a group

Power distance – how a society deals with inequalities in power

Uncertainty avoidance – the extent to which people can tolerate risk and uncertainty in their lives.

Masculinity versus femininity – refers to a society’s orientation based on traditional male and female values.

Short-term versus long-term orientation – immediate gains or long range planning

INDIVIDUALISTIC VS. COLLECTIVE SOCIETIES

Individualistic societiesTies among people are relatively looseFocus on self-interestThose who compete best are rewarded financiallyDecisions are made by hierarchy

Collectivist societies: Ties among individuals community basedBusiness is conducted in the context of a group Decisions are made by compromise

HIGH VS. LOW POWER DISTANCE High power distance societies

Substantial gaps between the powerful and the weak Indifference to inequalities and allow them to grow

Low-power distance societies Minimal gaps between the powerful and weak

Social stratification affects power distance In Japan almost everybody belongs to the middle

class In India the upper stratum controls decision-

making and buying power

In high-distance firms, autocratic management styles focus power at the top and grant little autonomy to lower-level employees.

HIGH VS. LOW UNCERTAINTY AVOIDANCE SOCIETIES

High uncertainty avoidance societies create institutions that minimize risk and ensure

financial securitycompanies emphasize stable careers and produce

many rules to regulate worker actions decisions are made slowly and alternatives explored

exhaustivelyLow tolerance of eccentric behaviour

Low uncertainty avoidance societies socialize their members to accept and become

accustomed to uncertaintymanagers are entrepreneurial and comfortable with

taking risksdecisions are made quickly; people accept each day as

it comes and take their jobs in strideHigh tolerance of eccentric behaviour

MASCULINE VS. FEMININE CULTURES

Masculine cultures Value competitiveness, assertiveness, ambitionThe accumulation of wealth is a priorityBoth men and women are assertive and career

focused In business, there is self-confidence, proactiveness

and leadership

Feminine cultures Emphasize nurturing roles Interdependence among peoplePriority on welfare

LONG-TERM VS. SHORT-TERM ORIENTATION

Hofstede’s fifth dimension was a later addition to the theory

Long-term orientation tends to take the long view to planning and living, focusing on years and decades

Short-term orientation – immediate gain, boom-and-bust

CLASS TASK II: ASSIGNING COUNTRIES Mexico

Germany

Russia

China

Japan

United StatesNigeria

UK

Australia

Sweden

High Power

Low Power

Individualistic

Collective

Masculine

Feminine

Tolerate High UncertaintyAvoid High UncertaintyLong-term Orientation

Short-term Orientation

PROBLEMS WITH HOFSTEDE Assumes one nation, one culture Research may have been culturally bound Survey respondents were from a single

industry (computer) and a single company (IBM)

Are there more dimensions?

TROMPENAARS – 7 DIMENSIONS Social Dimensions

1. Universalism vs. Particularism – (rules or relationships?)

2. Individualism vs. Collectivism – (as a group or as individuals?)

3. Neutral vs. emotional - (display of emotions?)4. Specific vs. Diffuse – (responsibility assigned or

diffused?)5. Achievement vs. ascription (prove ourselves or is

status given to us?)

Temporal Dimension6. Sequential vs. synchronic - (change things in turn or

at once)

Environment Dimension7. Internal vs. external control - (Do we control our

environment or are we controlled by it?)

RELIGIOUS AND ETHICAL SYSTEMS Religion: a system of shared beliefs and

rituals that considered sacred, with strong geographical roots

Ethical systems: a set of moral principles, or values, that are used to guide and shape behavior Most of the world’s ethical systems are

derived from religions Four religions dominate in terms of numbers of

adherents: Christianity with 1.7 billion adherents Islam with 1 billion adherents Hinduism with 750 million adherents Buddhism with 350 million adherents

CULTURE AND BUSINESS The greater the cultural distance between

the service producer and its customers, the more likely there will be cognitive and communication gaps.

Differences in language and national character have the same effect as trade barriers, and FDI is particularly vulnerable

However, many differences are imagined – eg. Japanese production methods in transplant operations

CONVERGENCE OF CULTURES Cultural homogeneity and heterogeneity are

not mutually exclusive – they may exist simultaneously

Cross-cultural exchange promotes innovation and creativity

Cultural flows originate in many places

McDonald’s hamburgers are popular in JapanVietnamese food in the USJapanese sushi in Europe

Globalization is also liberating people culturally by undermining the ideological conformity of nationalism.

USEFUL SOURCES Hofstede G (2005) Culture's Consequences:

comparing values, behaviors, institutions, and organizations across nations (2nd ed.). Thousand Oaks, CA: SAGE Publications

Ailon G (2008) Mirror, Mirror on the Wall: Culture's Consequences in A Value test of Its Own Design in The Academy of Management Review Vol. 33, No 4 / 2008   pp.885 - 904

McSweeney, Brendan (January 2002). Hofstede's Model Of National Cultural Differences And Their Consequences: A Triumph Of Faith - A Failure Of Analysis in Human Relations 55 (1): pp.89–118.

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SEMINAR FOR NEXT WEEK

In groups of two… Identify two cultural peculiarities of any

country in the world that has an important bearing on international business

Prepare a transparency and come prepared to present and discuss.