978-0134324838 Chapter 3 Lecture Notes

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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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