978-1305500891 Chapter 3 Lecture Note

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CHAPTER 3

EMPHASIZING INFORMAL INSTITUTIONS:

CULTURES, ETHICS, AND NORMS

LEARNING OBJECTIVES

After studying this chapter, you should be able to:

1. define culture and articulate its four main manifestations: language, religion, social

structure, and education.

2. discuss how cultures systematically differ from each other.

3. understand the importance of ethics and ways to combat corruption.

4. identify norms associated with strategic responses when firms deal with ethical

challenges.

5. participate in three leading debates concerning cultures, ethics, and norms.

6. draw implications for action.

GENERAL TEACHING SUGGESTIONS

One way to help students appreciate the importance of others’ cultures and their ethics and norms

is to ask them if they have ever observed any violation of acceptable behavior in the U.S. by

someone from a different country. If they have not, identify a common practice such as standing

in line at a bank and ask them how they would feel if someone went ahead of everyone else. If it

was okay to do that in their country, should they be aware of practices in the U.S.? If others

should be aware of how things are done here, should we be aware of how things are done

elsewhere?

OPENING CASE DISCUSSION GUIDE

Cut Salaries or Cut Jobs?

Ask students to identify the factors that should be considered in this decision. For example,

students should consider the current economy, the difficulty that top-performing employees

might have in finding another employer, the difficulty of replacing top performers, the number of

employees to be cut, and the percentage that salaries could be cut. Ask students to choose layoffs

or salary reductions and support their decisions.

CHAPTER OUTLINE: KEY CONCEPTS AND TERMS

Sections I through VII of Chapter 3

I. WHERE DO INFORMAL INSTITUTIONS COME FROM?

1. Key Concept

Informal institutions are related to cultures, ethics, and norms.

2. Key Term

Ethnocentrism is a self-centered mentality by a group of people who perceive their

own culture, ethics, and norms as natural, rational, and morally right.

II. CULTURE

1. Key Concept

Culture is the collective programming of the mind that distinguishes one group or

category of people from another. Four major components are language, religion, social

structure, and education.

2. Key Terms

Culture is the collective programming of the mind that distinguishes the members of

one group or category of people from another.

Lingua franca is a global business language.

Social mobility is the degree to which members from a lower social category can

rise to a higher status.

Social stratification is the hierarchal arrangement of individuals into social

categories (strata) such as classes, castes, and divisions within a society.

Social structure is the way a society broadly organizes its members.

III. CULTURAL DIFFERENCES

1. Key Concept

Cultural differences can be understood by using three approaches: context, cluster, and

dimension. The context approach differentiates cultures based on the underlying

background upon which social interaction takes place. The cluster approach groups

similar cultures together as clusters and civilizations. Five cultural dimensions have been

identified: (1) power distance, (2) individualism/ collectivism, (3)

masculinity/femininity, (4) uncertainty avoidance, and (5) long-term orientation.

2. Key Terms

Civilization is the highest cultural grouping of people and the broadest level of

cultural identity people have.

Cluster is countries that share similar cultures.

Collectivism is the idea that an individual’s identity is fundamentally tied to the

identity of his or her collective group.

Context is the underlying background upon which social interaction takes place.

Femininity is a relatively weak form of societal-level sex role differentiation

whereby more women occupy positions that reward assertiveness and more men

work in caring professions.

High-context culture is a culture in which communication relies a lot on the

underlying unspoken context, which is as important as the words used.

Individualism is the idea that an individual’s identity is fundamentally his or her

own.

Long-term orientation is a dimension of how much emphasis is placed on

perseverance and savings for future betterment.

Low-context culture is a culture in which communication is usually taken at face value

without much reliance on unspoken context.

Masculinity is a relatively strong form of societal-level sex role differentiation

whereby men tend to have occupations that reward assertiveness and women tend to

work in caring professions.



Power distance is the extent to which less powerful members within a country expect

and accept that power is distributed unequally.

Uncertainty avoidance is the extent to which members in a culture accept or avoid

ambiguous situations and uncertainty.

IV. ETHICS

1. Key Concepts

Ethics is not only an important part of informal institutions, but is also deeply reflected

in formal laws and regulations. When managing ethics overseas, what is ethical in one

country may be unethical in another country. Ethics fights corruption around the world.

Three “middle-of-the-road” principles guide managers to make ethical decisions.

2. Key Terms

Code of conduct is a set of guidelines for making ethical decisions.

Corruption is the abuse of public power for private benefits, usually in the form of

bribery.

Ethics is the principles, standards, and norms of conduct that govern individual and

firm behavior.

Ethical relativism is a perspective that suggests that all ethical standards are

relative.

Ethical imperialism is a perspective that suggests that ‘there is one set of Ethics

(with the capital E), and we have it.”

Foreign Corrupt Practices Act (FCPA) is a US law enacted in 1977 that bans

bribery of foreign officials.

V. NORMS AND ETHICAL CHALLENGES

1. Key Concept

When confronting ethical challenges, individual firms have four strategic choices: (1)

reactive, (2) defensive, (3) accommodative, and (4) proactive strategies.

2. Key Term

None

VI. DEBATES AND EXTENSIONS

1. Key Concept

Three debates are examined: (1) Western values versus Eastern values, (2) cultural

convergence versus divergence, and (3) opportunism versus individualism/collectivism.

2. Key Terms

In-group is individuals and firms regarded as a part of “us.”

Out-group is individuals and firms not regarded as part of “us.”

VII. MANAGEMENT SAVVY

1. Key Concept

It is important to enhance cultural intelligence. It is crucial to understand and adapt to

changing norms globally.

2. Key Term

Cultural intelligence is an individual’s ability to understand and adjust to new

cultures.