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PART 2
THE ENVIRONMENT OF INTERNATIONAL BUSINESS
CHAPTER 3
THE CULTURAL ENVIRONMENT OF INTERNATIONAL BUSINESS
Instructor’s Manual by Marta Szabo White, Ph.D.
I. LECTURE STARTER/LAUNCHER
■ Many will be familiar with Richard D. Lewis’ When Cultures Collide and more recently, The
Cultural Imperative. Grounded in experience, interviews and observations, the LMR
(Linear-active, Multi-active, and Reactive) model, in many ways, transcends other frameworks,
in that the unit of analysis is the individual, rather than the nation.
■ CultureActive (http://cultureactive.com) is the only online resource for the LMR model of
culture, with tools for establishing one’s personal cultural profile and additional tools for trainers
to analyze individual and team results.
■ For licensing information, please see the standard price list:
http://cultureactive.com/info/CA-Price-List-GBP.pdf
■ For additional information or for details of the academic discount scheme,
contact:
http://cultureactive.com/contact
■ CultureActive is a fun and creative way to hook students into learning about cultures, cultural
classification schemas (use it as a springboard for a discussion of other frameworks), the
importance of culture in international business, and perhaps most poignantly, students’
discovery of the world, and of themselves as they learn how little they know of other cultures
and countries. In the same vein as the iceberg analogy in this chapter, we are often unaware of
our own culture until we come in contact with another.
■ QUESTION- What percentage of the world population do Americans (or Canadians or
Australians or British, or others) comprise?
ANSWER-
Americans are but 5% of world population
British are 1%
Australia and New Zealand are 1/2 %
Canadians are 1/2 %
61% from Asia
21% from China
17% from India
13% from Africa
12% from Europe
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International business is conducted outside of the home country. Nations represent cultural
diversity, with unique values, metaphors, idioms and language. How will you deal with people
from another country? How will you function effectively when visiting countries with distinctive
cultures, such as Mexico, China, Russia, Japan, or Switzerland?
■ National Metaphors:
Explore the national metaphor as a method for understanding the cultural mindsets of individual
nations, as discussed in Martin J. Gannon and Rajnandini Pillai’s (2012) Understanding Global
Cultures: Metaphorical Journeys Through 31 Nations, Clusters of Nations, Continents, and
Diversity. [5th Ed.] SAGE Publications.
II. LEARNING OBJECTIVES AND THE OPENING VIGNETTE
LEARNING OBJECTIVES
After studying this chapter, students should be able to:
3.1 Understand culture and cross-cultural risk
3.2 Learn the dimensions of culture
3.3 Appreciate the role of language and religion in culture
3.4 Appreciate culture’s effect in international business
3.5 Learn models and explanations of culture
3.6 Understand managerial implications of culture
Key Themes
■ In this chapter, there are six themes:
[1] Culture and Cross-Cultural Risk
[2] Dimensions of Culture
[3] Role of Language and Religion in Culture
[4] Culture’s Affect in International Business
[5] Models and Explanations of Culture
[6] Managerial Implications of Culture
■ In international business today, developing an appreciation of and sensitivity for cultural
differences is an imperative.
■ Why culture matters in international business- National cultures influence consumer
behavior, managerial effectiveness, and value-chain operations, e.g. product and service
design, marketing, and sales. Managers need to develop skills in dealing with other cultures.
■ Employees are socialized into three overlapping cultures; national, professional, and
corporate cultures.
■ Interpretations of culture- metaphors and idioms.
■ Low-context cultures rely on elaborated verbal explanations, putting much emphasis on
spoken words.
■ High-context cultures emphasize nonverbal communications and a more holistic approach
to communication that promotes harmonious relationships.
■ Hofstede’s typology of cultural dimensions consists of individualism versus collectivism,
power distance, uncertainty avoidance, masculinity versus femininity, long-term versus
short-term orientation, and indulgence versus restraint.
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■ Monochronic cultures tend to exhibit a rigid orientation to time in which the individual is
focused on schedules, punctuality, and time as a resource.
■ Polychronic cultures refer to a flexible, non-linear orientation to time in which the individual
takes a long-term perspective and multi-tasking is typical.
■ Language is a key dimension of culture- a “mirror” of culture
■ Culture and contemporary issues- culture impacts and is impacted by contemporary
issues- globalization, transnational media, technological advances, and government regulations.
■ Cultural Homogenization- Globalization promotes cultural convergence and the
consumption of similar products and services worldwide.
◘ Critics charge that globalization is harmful to local cultures, their artistic expressions
and sensibilities, replacing them with a homogeneous, often “Americanized”, culture.
◘ Others argue that increased global communications is positive because it permits the
flow of cultural ideas, beliefs, and values.
■ Ethnocentric orientation refers to a home-country mind-set.
■ Polycentric orientation refers to a host-country mindset.
■ Geocentric orientation refers to a global mindset where a manager is able to understand a
business without regard to country boundaries.
■ Managerial guidelines for cross-cultural success:
[1] Acquire factual and interpretive knowledge about the other culture; and try to speak their
language;
[2] Avoid cultural bias;
Self-reference criterion- interpreting other cultures through the lens of one's own culture, i.e.
ethnocentric tendency.
Critical incident analysis- requires being culturally aware, not making value judgments,
developing empathy for other points of view, and selecting the most likely interpretation of
foreign behaviors.
[3] Develop cross-cultural skills.
Teaching Tips
■ VIDEO SUGGESTIONS
[1] TED TALK
What's So Different About Cultures Anyway?
Dato Gogichaishvili
Published on May 14, 2013
Television personality Dato Gogichaishvili provides a humorous analysis of cultural differences
and discusses the difficulties in working across various cultural backgrounds. He teaches Media
Management in Georgia and is a lecturer of Cross-Cultural Management and Global Business
Negotiations at Webster University in Leiden, the Netherlands.
https://www.youtube.com/watch?v=cVqDQ7mA2nM
19.12 Minutes
[2] TED TALK
Cultural difference in business | Valerie Hoeks
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Published on Jul 22, 2014
This talk was given at a local TEDx event, produced independently of the TED Conferences.
One of the elements of the cultural difference between Europe and China is the importance that
is given to relationships. In the West you would assume the importance to be the same, but
there is a significant distinction. In China connections with the right people help you to get
things done, to survive and to succeed.
https://www.youtube.com/watch?v=VMwjscSCcf0
12.17 Minutes
[3] TED TALK
International Business - Cross-Cultural Communication
Published on Oct 11, 2012
International business and cross-cultural communication. Cross-cultural communication -
International business culture (how to work with different cultures)
http://www.integrationtraining.co.uk/ Working cross-culturally (how to work with different cultures
in business) with Mark Walsh from Integration Training talking about the work of Geert Hofstede
https://www.youtube.com/watch?v=at7srdUiRfM
6.21 Minutes
[4] TED TALK
Cross cultural communication | Pellegrino Riccardi
Published on Oct 21, 2014
This talk was given at a local TEDx event, produced independently of the TED Conferences.
Pellegrino, being a cross cultural expert, he is sharing with us his personal and professional
experience about how do very different cultures can successfully coexist next to each other. Is it
difficult to live in Norway, being an expat? Do you know how to establish the mutual
understanding between Italian and Norwegian?
https://www.youtube.com/watch?v=YMyofREc5Jk
19.57 Minutes
[5] TED TALK
How Globalized are we? And why does that matter?
Pankaj Ghemawat, Globalization researcher
Our world is not flat, says economist Pankaj Ghemawat — it's at best semi-globalized, with
limited interactions between countries and economies
Published on Dec 3, 2012
http://thepracticalinterculturalist.com/2012/12/how-globalized-are-we-and-why-does-that-matter/
17.01 Minutes
[6] TED TALK
Derek Sivers: Weird, or just different?
November 2009
http://www.ted.com/talks/derek_sivers_weird_or_just_different?language=en
2.42 Minutes
[7] TED TALK
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How language changes over time.
John McWhorter
Does texting mean the death of good writing skills? John McWhorter posits that there’s much
more to texting — linguistically, culturally — than it seems, and it’s all good news.
https://www.ted.com/playlists/228/how_language_changes_over_time
13.48 Minutes
[8] TED TALK
Pico Iyer: Where is home?
More and more people worldwide are living in countries not considered their own. Writer Pico
Iyer — who himself has three or four “origins” — meditates on the meaning of home, the joy of
traveling and the serenity of standing still.
June 2013
https://www.ted.com/talks/pico_iyer_where_is_home
14:01 Minutes
[9] TED TALK
New ways to think about beauty.
Cameron Russell: Looks aren't everything. Believe me, I'm a model.
https://www.ted.com/playlists/256/new_ways_to_think_about_beauty
9.34 Minutes
[10] TED TALK
Jimmy Nelson: Gorgeous portraits of the world's vanishing people
When Jimmy Nelson traveled to Siberia to photograph the Chukchi people, elders told him:
"You cannot photograph us. You have to wait, you have to wait until you get to know us, you
have to wait until you understand us." In this gorgeously photo-filled talk, join Nelson's quest to
understand — the world, other people, himself — by making astonishing portraits of the world's
vanishing tribes and cultures.
Oct 2014
https://www.ted.com/talks/jimmy_nelson_gorgeous_portraits_of_the_world_s_vanishing_people
17.18 Minutes
[11] Understanding the Complex Relationship between China and Japan
Often when teaching culture we rely on Hofstede’s measures that often lead students to
confuse value similarity with cultural closeness. It is important to understand that simply
because cultural values are close country relations may not be optimal. Two of the greatest Asia
economies Japan and China are one such case. Through the use of the following 2006
21-minute video, the historical struggle between Japan and China can be better understood.
http://www.pbs.org/frontlineworld/rough/2006/04/japan_and_china.html
Potential discussion questions could include:
1. How has the Chinese government worked to facilitate the separation of China and Japan?
2. How does the saying “the winners get to write history” apply to this case?
3. What are the primary issues that separate China and Japan?
a. How might these issues hinder business between Japanese and Chinese firms?
b. How could Chinese and Japanese firms work to overcome these issues?
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21.41 Minutes
■ Articles
[1] Top 10 Most Common Idioms in English
https://voxy.com/blog/index.php/2012/02/top-10-most-common-idioms-in-english/
[2] What It’s Like To Grow Old In Different Parts Of The World
6/24/2015
HTTP://IDEAS.TED.COM/WHAT-ITS-LIKE-TO-GROW-OLD-IN-DIFFERENT-PARTS-OF-THE-
WORLD/
[3] How Eight Pixels Cost Microsoft Millions
So what color should Kashmir be? In Microsoft’s coloring of 800,000 pixels on a map of India, it
colored eight of them a different shade of green to represent the disputed Kashmiri territory. The
difference in greens meant Kashmir was shown as non-Indian. This small issue resulted in the
product being banned in India, costing Microsoft millions of dollars. This article addresses
Microsoft’s India mishap, as well as Microsoft’s cultural blunders in Saudi Arabia and Latin
markets.
CNET News, By Jo Best, 19 August 2006
http://www.news.com/How-eight-pixels-cost-Microsoft-millions/2100-1014_3-5316664.html
[4] Cultural Differences in Gameland
All Gamers are not the same. Success in the multi-billion dollar video game industry
necessitates adapting to cultural differences. In this article, Aleks Krotoski notes the cultural
difference in game design and content between Japanese and U.S. video game releases.
Guardian Unlimited, by Aleks Krotoski, July 27, 2006
http://www.theguardian.com/technology/gamesblog/2006/jul/27/culturaldiffer
In this article, Prof Richard Nisbett’s work is cited as concluding that a Westerner focuses on
prominent details of an image, while someone from Asia focuses on the overall image,
emphasizing the relationships among the entities.
http://www.theguardian.com/technology/gamesblog/2006/jul/27/culturaldiffer
This underscores the monochronic, linear dimension vs. the polychronic non-linear perspective
discussed later in this chapter.
[5] Walmart’s Cultural Mistakes in Germany
Walmart entered the German market in 1998 expecting to successfully transform its American
approach into European success. However, Walmart found that overcoming cultural differences
was a barrier to exporting its approach into this key European market. After close to an
estimated $1 billion in losses, Walmart has packed up and sold off its stores to
Düsseldorf-based Metro (a firm with an understanding of the German culture. This article details
key cultural differences hindering Walmart’s operations.
Deutsche Welle, by Louisa Schaefer, July 28, 2006
http://www.dw.com/en/worlds-biggest-retailer-wal-mart-closes-up-shop-in-germany/a-2112746
[6] Why there are no Indian Walmarts
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India’s retail sector is booming. However, local politics have forced big foreign companies to
watch from the sidelines. This article addresses the legal side of culture and its influence on
global business.
Fortune, by John Elliott, May 15, 2006
http://archive.fortune.com/magazines/fortune/fortune_archive/2006/05/15/8376903/index.htm
Commentary on the Opening Vignette:
BAIDU: CULTURE and SOCIAL MEDIA in CHINA
Key message
■ This vignette illustrates the intersection of technology, government and culture.
■ There are few things that exemplify Chinese culture better than its collectivistic society
(Hofstede), and emphasis on family, relationships, and social harmony- values derived from the
ancient Chinese philosopher, Confucius.
■ The premium placed upon group membership, emphasizing tradition, interdependence,
harmony coupled with a long-term orientation, and high-context, relationship-oriented culture
(Hall) underscores the marked differences between Chinese and American national cultures,
which also permeate organizational cultures.
■ The divisions between the U.S. and China are even more pronounced when considering the
importance of individual property rights vs. collectivist values which advocate sharing new ideas
and information, even when they are owned by private firms.
■ With a collectivist mindset, “public interest” trumps intellectual property rights, such as patents
and copyrights. Copying others’ know-how and technology is acceptable, and considered
justified as long as the end product/service is somehow better or cheaper.
■ This is why Baidu and Renren closely resembled their Western counterparts, Amazon and
Facebook, upon their initial launchings.
■ This vignette illustrates the importance of culture in international business as demonstrated
through Baidu’s experiences in China.
Uniqueness of the situation described
■ Cultural differences are not only underscored in this vignette, they serve as beacons for
political/legal frameworks, management decisions and individual behavior. The expectation of
privacy and censorship varies from country to country, as a function of cultural values.
■ The following table summarizes some of the pivotal differences between the U.S. and China:
U.S. CHINA
Monitoring ●Government monitoring
linked to terrorism
threats rather than
freedom of speech
issues, as in China.
●Government bans Western social
media sites that may be critical of the
Chinese government; and closely
monitors businesses, especially firms
from abroad.
Censoring ●Censorship related to
national security threats,
rather than criticism of
the government.
●Government censors anything related
to criticism of the Chinese government.
●Example- As a condition for entering
China, Google had to agree to censor
certain types of search results,
especially those that criticize the
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Chinese government. Google pushed
the limits by complying as little as
possible with government orders to
block search engine content.
●Facebook and YouTube are banned
in China.
Autonomy ●Independence is
encouraged and
rewarded.
●Independence is discouraged.
●Example- Google’s Chinese
employees experienced difficulties
adjusting to the firm’s freewheeling
style.
●Many were uncomfortable with
company policy that required
employees to devote 20% of their work
time to developing independent
projects.
Private Property ●Respected, valued,
legally protected.
●To benefit society, Chinese culture
and communistic values advocate
sharing new ideas and information,
even those produced by private firms.
●Example- Google had blocked its
Chinese engineers from accessing the
firm’s software code. This policy
emerged in response to China’s loose
approach to private property rights,
which encourages access to foreign
technology and know-how.
Individualism/
Collectivism
●According to
Hofestede’s research,
the U.S. scores the
highest on individualism
index.
●China embraces a collectivist
mindset, which emphasizes conformity,
duty, prescribed roles, and sacrifice for
the greater good. Family-style
management emphasizes personal
relations and leaders concerned with
employee happiness.
●Families are at the center of Chinese
culture. In society, family members
"know their place" and maintain the
family name. Younger generations
respect and obey their elders. At one
time, a father could legally kill his
children if they displeased him.
●Such is the cultural context in which
Baidu, Alibaba (similar to
Amazon.com), Renren (similar to
Facebook), and WeChat (similar to
WhatsApp) flourish.
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Gift-Giving ●Giving expensive gifts
to public officials is often
viewed as a form of
bribery in Western
cultures.
●Giving expensive gifts to public
officials is accepted and even expected
in parts of Asia.
Right to Privacy ●Pillar of legal
framework.
●Government trumps any Right to
Privacy
●Example- In some cases, Chinese
government officials hacked the Gmail
accounts of Chinese dissidents and
human rights activists.
●Example- Google management grew
alarmed when Chinese hackers
accessed sensitive information in
Google’s private files.
Professional/
Personal Roles
●Separate ●Blended
●Example-
●2010- Google withdrew from
mainland China. Google's China
personnel were shocked by this
decision, which was reached without
gaining their input or support. Many
had begun to think of themselves as
members of the “Google family”.
●2012- Google re-entered China,
acknowledging it cannot afford to miss
out on the world’s biggest Internet
market.
Relationship vs.
Task-Oriented
●Task-Oriented ●Relationship-Oriented
Guanxi refers to informal personal
relationships that emphasize reciprocal
obligations and the exchange of favors.
In China, guanxi profoundly influences
business, organizational behavior, and
human relations in general.
●An individual or firm that receives
favors from another has a moral
obligation to reciprocate and maintain
the relationship. Chinese firms and
institutions tend to be very hierarchical.
●Confucian philosophy teaches that
people play different roles in society.
Unlike in many Western cultures,
casual or candid exchange between
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colleagues of different ages and ranks
is discouraged.
●In China, social media allows people
to express their views without causing
anyone to lose face, mianzi, which
refers a person's reputation and social
standing.
Time-Orientation ●Short-Term ●Long-Term
The Chinese are long-term oriented
and invest much time in planning
business ventures. They emphasize
patience, respect for tradition, and hard
work. They avoid conflict and favor
societal harmony. The focus on
harmony derives from teachings of the
ancient philosopher Confucius, who
urged a non-assertive approach to
resolving differences.
Hall’s
High-Context vs.
Low-Context
●Low-Context ●High-Context
China is a high-context,
relationship-oriented culture.
Maintaining strong, long-term
relationships is essential to developing
trust. Major decisions are rarely taken
without informing employees first.
Classroom discussion
■ China has the world’s largest number of Internet users.
■ China bans Facebook and YouTube, b/c they facilitate access to material critical of the
Chinese government.
■ Baidu features a search engine and numerous social sites.
■ 2000- Baidu established- has more than 500 million users in China. The word “baidu” refers to
“persistent search for the ideal” and derives from a Chinese poem written more than 800 years
ago.
■ Other popular Chinese portals are Alibaba (similar to Amazon.com), Renren (similar to
Facebook), and WeChat (similar to WhatsApp).
■ Successful MNCs like BMW, Estée Lauder, and Starbucks extensively use social media to
market their products in China b/c Chinese Internet users are twice as likely as the U.S. to post
to online forums, publish blogs, or use social sites to obtain information.
■ One child policy- China’s family-planning policy restricted many Chinese couples to having
just one child. The “little emperors” born into such a system have no siblings and they feel
enormous pressure to perform -- for their parents and the nation. Such pressures have
increased the popularity of social media, where lonely youngsters can express themselves and
find friends.
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■ Collectivism -- first inspired by Confucian values and later a product of communism – where
social media offers a platform for self-expression, and provides opportunities for
nonconformity/free speech that are largely unattainable elsewhere.
■ CLASS EXERCISE- As a potential entrant into the social media industry, compelling
arguments can be made for both competing and not competing in the Chinese market. Split the
class into two groups (more if it is a large class), assigning each group the task of presenting
one of the two sides. Give the groups about 10 minutes to prepare their presentations, with
extra participation points awarded to those group(s) best integrating chapter concepts with their
arguments.
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