CHAPTER 2
CROSS-CULTURAL BUSINESS
LEARNING OBJECTIVES:
2.1 Explain culture and the need for cultural knowledge.
2.2 Summarize the cultural importance of values and behavior.
2.3 Describe the roles of social structure and education in culture.
2.4 Outline how the major world religions can influence business.
2.5 Explain the importance of personal communication to international business.
2.6 Describe how firms and culture interact in the global workplace.
CHAPTER OUTLINE:
Introduction
What Is Culture?
National Culture
Subcultures
Physical Environment
Need for Cultural Knowledge
Avoiding Ethnocentricity
Developing Cultural Literacy
Values and Behavior
Values
Attitudes
Aesthetics
Appropriate Behavior
Manners
Customs
Folk or Popular Customs
The Business Customs of Gift Giving
Social Structure and Education
Social Group Associations
Family
Gender
Social Status
Social Mobility
Caste System
Class System
Education
The “Brain Drain” Phenomenon
Religion
Christianity
Islam
Hinduism
Copyright © 2016 Pearson Education, Inc.
Buddhism
Confucianism
Judaism
Shinto
Personal Communication
Spoken and Written Language
Implications for Managers
Language Blunders
Lingua Franca
Body Language
Culture in the Global Workplace
Perception of Time
View of Work
Material Culture
Cultural Change
When Companies Change Cultures
When Culture Changes Companies
Studying Culture in the Workplace
Kluckhohn-Strodtbeck Framework
Case: Dimensions of Japanese Culture
Hofstede Framework
Bottom Line for Business
A comprehensive set of specially designed PowerPoint slides is available for use with Chapter 2.
These slides and the lecture outline below form a completely integrated package that simplifies the
teaching of this chapter’s material.
Lecture Outline
I. INTRODUCTION
This chapter describes culture in the context of international business, explains how culture
affects international business practices and competitiveness, and presents two methods of
classifying cultures.
II. WHAT IS CULTURE?
Culture is the set of values, beliefs, rules, and institutions held by a specific group of people.
Main components include: aesthetics, values and attitudes, manners and customs, social
structure, religion, personal communication, education, and physical and material
environments.
A. National culture
1. Nation-states support and promote the concept of a national culture by building
museums and monuments to preserve the legacies of important events and
people.
2. Nation-states intervene to help preserve their national cultures.
3. Companies get involved in supporting culture, in part, for the public relations
benefit.
B. Subcultures
1. A subculture is a group of people who share a unique way of life within a larger,
dominant culture. It can differ from the dominant culture in language, race,
lifestyle, values, attitudes, and so on.
2. Companies must be mindful of subcultures when formulating business strategies
(e.g., China has 50 ethnic groups).
3. Decisions regarding product design, packaging, and advertising must consider
distinct cultures.
4. Subcultures also can extend beyond national borders.
C. Physical Environment—These heavily influence a culture’s development and pace of
change.
1. Topography: all physical features that characterize the surface of a geographic
region. Cultures isolated by impassable mountains or large bodies of water are
less exposed to the cultural traits of others and change slowly. Topography
impacts product needs.
2. Topography impacts personal communication (e.g., mountains and the Gobi
Desert consume two-thirds of China).
3. Climate affects where people settle and directs systems of distribution (e.g.,
Australian desert, jungles, and coastal areas).
4. Climate plays a large role in lifestyle, clothing, and work habits, such as
organizing production schedules for idled machines.
D. Need for Cultural Knowledge
1. Avoiding Ethnocentricity
a. Ethnocentricity is the belief that one’s own ethnic group or culture is
superior to that of others. It causes people to view other culture in terms
of their own and overlook beneficial aspects of other cultures.
b. Ethnocentricity can undermine business can undermine business projects
when employees are insensitive to cultural nuances.
2. Developing Cultural Literacy
a. Managers working directly in international business should develop
cultural literacy—detailed knowledge about a culture that enables a
person to function effectively within it.
b. Cultural literacy brings a company closer to customer needs and
improves competitiveness.
III. VALUES AND BEHAVIOR
A. Values are ideas, beliefs and customs to which people are emotionally attached. They
affect work ethic and desire for material possession. Some cultures value leisure while
others value hard work.
B. Attitudes
1. Attitudes are positive or negative evaluations, feelings, and tendencies that
individuals harbor toward objects or concepts. Learned from role models and
formed within a cultural context. More flexible than values.
C. Aesthetics
1. Aesthetics is what a culture considers to be in “good taste” in the arts, the
imagery evoked by certain expressions, and the symbolism of colors.
2. Appropriate colors for advertising, product packaging, and even work uniforms
can enhance success (e.g., Green in Islam).
3. Blunders can result from selecting inappropriate colors and symbols for
advertising, product packaging, and architecture.
4. Music is deeply cultural and must be considered in promotions.
5. It is also an important consideration in marketing over the Internet.
D. Appropriate Behavior—it is important to understand manners and customs to avoid
mistakes abroad. In depth knowledge improves the abilities of managers.
1. Manners are appropriate ways of behaving, speaking, and dressing in a
culture (e.g., conducting business during meals in the United States). Another
current example: Jack Ma founded Alibaba (www.alibaba.com) as a way for
suppliers and buyers to increase efficiency by cutting through layers of
intermediaries and trading companies. But he realized early that his Chinese
clients needed training in business etiquette to cross the cultural divide and do
business with people from Western cultures. Therefore, Alibaba offers seminars
on business manners that instruct clients to spend more time chitchatting with
clients and conversing more casually.
2. Customs are habits or ways of behaving in specific circumstances that are passed
down through generations in a culture. Customs define appropriate habits or
behaviors in specific situations.
a. Folk customs are behaviors, dating back generations, practiced within a
homogeneous group of people (e.g., dragon boat festival in China).
b. A popular custom is behavior practiced by a heterogeneous group or by
several groups (e.g., blue jeans, “burgers ’n fries”).
c. The business custom of gift giving – slthough giving token gifts to
business and government associates is customary, the proper type of gift
varies. Cultures differ in their legal and ethical rules regarding bribery.
The U.S. Foreign Corrupt Practices Act prohibits companies from giving
large gifts to win business favors, applies to U.S. firms operating at home
and abroad.
IV. SOCIAL STRUCTURE AND EDUCATION
Social structure embodies a culture’s fundamental organization, including groups and
institutions, social positions and relationships, and resource distribution.
A. Social Group Associations
A social group is a collection of two or more people who identify and interact with one
another. Contribute to identity and self-image.
1. Family
a. Nuclear family consists of immediate relatives, including parents,
brothers, and sisters. Prevails in Australia, Canada, United States, and in
Europe.
b. Extended family includes grandparents, aunts and uncles, cousins, and
relatives through marriage. More important in Asia, Middle East, North
Africa, and Latin America.
2. Gender
a. Gender refers to socially learned traits associated with, and
expected of, men or women. Sociologists regard gender as a category—
people who share some status.
b. Countries vary regarding gender equality at work.
B. Social Status
1. Social stratification is the process of ranking people into social layers according
to family heritage, income, and occupation.
2. Top layer: royalty, government officials, and business leaders. Middle layer:
scientists, medical doctors, and others with a university education. Bottom layer:
manual and clerical workers with vocational training or secondary-school
educations.
3. Rankings can and do change over time.
C. Social Mobility
1. Social mobility is the ease with which individuals can move up or down a
culture’s “social ladder.”
2. Caste system: people are born into a social ranking, with no opportunity for
social mobility.
3. Class system: personal ability and actions decide status and mobility. Highly
class-conscious cultures can offer less mobility but experience more class
conflict.
D. Education
Education passes on traditions, customs, and values. Cultures educate young people
through schooling, parenting, religious teachings, and group memberships. Families and
other groups provide informal instruction about customs and how to socialize with
others.
1. Education Level
a. Excellent basic education attracts high-wage industries that invest in
training and increase productivity. Skilled, well-educated workforce
attracts high-paying jobs; a poorly educated one attracts low-paying jobs.
(See: Table 2.1 Illiteracy Rates of Selected Countries)
b. Newly industrialized economies in Asia owe much of their economic
development to solid education systems.
2. The “Brain Drain” Phenomenon
a. Brain drain: departure of highly educated people from one profession,
geographic region, or nation to another.
b. Reverse brain drain: professionals return to their homelands.
V. RELIGION
Human values often derive from religious beliefs. Different religions take different views of
work, savings, and material goods. Beliefs influence competitiveness, economic development,
and business strategies.
A. Christianity
1. Founded in Palestine 2,000 years ago among Jews who believed that Jesus of
Nazareth was the messiah. With 2 billion followers, it is the world’s single
largest religion.
2. More than 300 denominations but most are Roman Catholic, Protestant, or
Eastern Orthodox.
3. Roman Catholics are to refrain from placing materialism above God and people.
Protestants believe that salvation comes from faith in God and that hard work
gives glory to God.
4. Christian organizations sometimes get involved in social causes that affect
business policy (e.g., Walt Disney Company, Ryanair, Hyundai).
B. Islam
1. Founded by Muhammad in 600 A.D. in Mecca, Saudi Arabia—the holy
city of Islam. World’s second largest religion with 1.3 billion adherents. Word
Islam means “submission to Allah” and Muslim means “one who submits to
Allah.”
2. Religion strongly affects the goods and services acceptable to Muslim
consumers (e.g., alcohol, pork, interest on loans).
C. Hinduism
1. Founded 4,000 years ago in present-day India, where more than 90 percent of its
nearly 900 million adherents live.
2. Some say it is a way of life rather than a religion. Caste system is integral to the
Hindu faith. Believe in reincarnation—rebirth of the human soul at the time of
death. Do not eat or willfully harm living creatures as they may be reincarnated
human souls.
3. Cows considered sacred animals so eating beef is not allowed (e.g., McDonald’s
replaces beef with lamb).
D. Buddhism
1. Founded 2,600 years ago in India by a Hindu prince named Siddhartha Gautama.
About 380 million followers, mostly in Asia: China, Tibet, Korea, Japan,
Vietnam, and Thailand.
2. Promotes a life centered on spiritual rather than worldly matters. Buddhists seek
nirvana (escape from reincarnation) through charity, modesty, compassion for
others, restraint from violence, and general self-control.
E. Confucianism
1. Founded 2,500 years ago by exiled politician and philosopher Confucius. China
is home to most of the 225 million followers.
2. Confucian thought ingrained in the cultures of Japan, South Korea, and nations
with large numbers of ethnic Chinese, including Singapore.
3. South Korean business practice reflects Confucian thought in its rigid
organizational structure and reverence for authority (e.g., Korean-style
management in overseas subsidiaries).
4. For centuries, people despised merchants because earning money violated
Confucian beliefs. Many Chinese moved to Indonesia, Malaysia, Singapore, and
Thailand to do business.
F. Judaism
1. Founded more than 3,000 years ago and 18 million followers. Was the first
religion to teach belief in one God. Orthodox (“fully observant”) Jews make up
12 percent of Israel and constitute an increasingly important economic segment.
2. Important observances are Rosh Hashanah (the Jewish New Year), Yom Kippur
(the Day of Atonement), Passover (the Exodus from Egypt), and Hanukkah (a
victory over the Syrians).
3. Employers must be aware of Jewish holidays. Because Sabbath lasts from
sundown on Friday to sundown on Saturday, work schedules might need
adjustment.
4. Marketers must take into account foods banned among observant Jews (e.g.,
pork and shellfish prohibited, meat stored and served separately from milk) and
“kosher” foods.
G. Shinto
1. Means “way of the gods” and arose as the native religion of the Japanese.
Teaches sincere and ethical behavior, loyalty and respect toward others, and
enjoyment of life. Shinto claims about 4 million strict adherents in Japan.
2. Shinto beliefs are reflected in the workplace through lifetime employment
(although this is waning today) and the traditional trust extended between firms
and customers.
3. Japanese competitiveness in world markets has benefited from loyal workforces,
low employee turnover, and good labor–management cooperation.
VII. PERSONAL COMMUNICATION
Every culture has a communication system to convey thoughts, feelings, knowledge, and
information through speech, writing, and actions. A culture’s spoken and body language can
help explain people’s thoughts and behaviors.
A. Spoken and Written Language
1. Linguistically different segments of a population are often culturally,
socially, and politically distinct. The importance of understanding local
languages is becoming increasingly apparent on the Internet. Roughly one-half
to two-thirds of all web pages are in English, but around three-fourths of all
Internet users are nonnative English speakers. Language proficiency is also
crucial in production facilities where non-native managers are supervising local
employees. Finally, it is important to marketers because they prize insights into
the interests, values, attitudes, and habits of teenagers to better target their
promotions.
2. Companies have made language blunders in their international business
dealings.
3. A lingua franca is a third or “link” language that is understood by two parties
who speak different languages.
4. Some languages are dying out, whereas some languages are growing,
including Mandarin, Spanish, and English.
B. Body Language
1. Communicated through unspoken cues, including hand gestures, facial
expressions, physical greetings, eye contact, and the manipulation of personal
space.
2. Communicates information and feelings and differs among cultures. Most is
subtle and takes time to interpret.
3. Proximity is an element of body language; standing too close may invade
personal space and appear aggressive.
VIII. CULTURE IN THE GLOBAL WORKPLACE
A. Perceptions of Time
1. Latin American,Indian and Mediterranean cultures are casual about time; people
in Japan and the United States arrive promptly for meeting and keep tight
schedules.
2. Americans strive toward workplace efficiency and may leave work early if their
work is done because they value individual results. Japanese look busy even
when business is slow to demonstrate dedication—an attitude grounded in
cohesion, loyalty and harmony
B. View of Work
1. Some cultures have a strong work ethic, others stress a balanced pace in work
and leisure (e.g., “Work to live, or live to work”)
2. Many European nations are trying to foster an entrepreneurial spirit to achieve
the job growth realized in the United States.
C. Material Culture—includes all technology a culture uses to manufacture goods and
provide services, and can measure a culture’s technological advancement.
1. A firm enters a market under one of two conditions: (1) demand for its products
has developed, or (2) the market is capable of supporting its production
operations.
2. Changes in material culture can change other aspects of culture.
3. Many nations display uneven levels of material culture across geography,
markets, and industries.
D. Cultural Change
1. Cultural trait is anything that represents a culture’s way of life including
gestures, material objects, traditions, and concepts.
2. Cultural diffusion is the process whereby cultural traits spread from one culture
to another. Globalization and technology are increasing the pace of cultural
diffusion and change.
3. Culture can force companies to adjust business policies and practices, such as
using situational management.
4. Rapid cultural diffusion and increased human interaction across borders cause
cultures to converge. Convergence is taking place in some market segments for
some products.
E. When Companies Change Culture
1. Cultural Imperialism is the replacement of one culture’s traditions, folk heroes,
and artifacts with substitutes from another.
IX. STUDYING CULTURE IN THE WORKPLACE
People in different cultures respond differently in similar business situations. Two ways to
classify cultures based on characteristics such as values, attitudes, and social structure.
A. Kluckhohn–Strodtbeck Framework
The Kluckhohn–Strodtbeck Framework compares cultures along six dimensions, asking
the following questions:
1. Do people believe that their environment controls them, that they control
the environment, or that they are part of nature?
2. Do people focus on past events, on the present, or on the future
implications of their actions?
3. Are people easily controlled and not to be trusted, or can they be trusted
to act freely and responsibly?
4. Do people desire accomplishments in life, carefree lives, or spiritual and
contemplative lives?
5. Do people believe that individuals or groups are responsible for each
person’s welfare?
6. Do people prefer to conduct most activities in private or in public?
a. Dimensions of Japanese Culture:
i. Japanese believe in a delicate balance between people and
environment that must be maintained.
ii. Japanese culture emphasizes the future.
iii. Japanese culture treats people as quite trustworthy.
iv. Japanese are accomplishment oriented for employers and work
units.
v. Japanese culture emphasizes individual responsibility to the group
and group responsibility to the individual.
vi. The culture of Japan tends to be public.
B. Hofstede Framework
The Hofstede Framework grew from a study of more than 110,000 people working in
IBM subsidiaries by Dutch psychologist Geert Hofstede. He developed five dimensions
for examining cultures. (See Table 2.2 National Scores on The Hofstede Dimensions)
1. Individualism versus Collectivism: Identifies the extent to which a culture
emphasizes the individual versus the group.
a. Individualist cultures value hard work, entrepreneurial risk taking, and
freedom to focus on personal goals.
b. Collectivist cultures feel a strong association to groups, including family
and work units. The goal is to maintain group harmony and work toward
collective rather than personal goals.
2. Power Distance: Identifies the degree to which a culture accepts social
inequality among its people.
a. Large power distance is characterized by inequality between superiors
and subordinates. Organizations are hierarchical, with power derived
from prestige, force, and inheritance.
b. Small power distance means equality, with prestige and rewards equally
shared between superiors and subordinates. Power derives from hard
work and is considered more legitimate.
3. Uncertainty Avoidance: Identifies the extent to which a culture avoids
uncertainty and ambiguity.
a. Cultures with large uncertainty avoidance value security, place faith in
strong systems of rules and procedures, have lower employee turnover,
formal rules for employee behavior, and more difficulty implementing
change.
b. Low uncertainty avoidance cultures are more open to change and new
ideas.
4. Masculinity versus Femininity: Identifies the extent to which a culture
emphasizes masculinity versus femininity.
a. Cultures scoring high are characterized by personal assertiveness,
accumulation of wealth, and entrepreneurial drive.
b. Cultures scoring low have relaxed lifestyles, with more of a concern for
others than material gain.
5. Long-Term Orientation: Indicates a society’s time perspective and an attitude of
overcoming obstacles with time. It attempts to capture the differences between
Eastern and Western cultures.
a. Cultures scoring high (strong long-term orientation) value respect for
tradition, thrift, perseverance, and a sense of personal shame.
b. Cultures scoring low are characterized by individual stability and
reputation, fulfilling social obligations, and reciprocation of greetings and
gifts.
6. Indulgence versus restraint: This dimension captures the extent to which a
society allows free expression.
a. An indulgent society (one scoring high on this dimension) allows people
to rather freely satisfy human needs related to enjoying life and having
fun.
b. A restrained society uses varying degrees of social norms to suppress the
free satisfaction of such needs. Indulgent societies tend to value
individual happiness, leisure, freedom, and personal control.
X BOTTOM LINE FOR BUSINESS
In this chapter we discussed many of the cultural differences among nations that affect
international business. We saw how problems can erupt from cultural misunderstandings and
learned how companies can improve their performance with cultural literacy. Localizing
business policies and practices can promote success. Understanding a people’s values, beliefs,
rules, and institutions makes managers more effective at their jobs.