Chapter 04 – Differences in Culture
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Differences in Culture
Learning objectives
• Know what is meant by the culture of
a society.
• Identify the sources that lead to
differences in social culture.
• Identify the business and economic
implications of differences in culture.
• Understand how differences in social
culture influence values in the work
place.
• Develop an appreciation for the
economic and business implications of
cultural change.
This chapter explores the role of culture in
international business: how differences in
culture across and within countries can affect
the practice of business.
The discussion then addresses the major
questions of the chapter: What is culture? How
does it play itself out in social structures,
religious and ethical systems, language, and
education? The need for cross-cultural literacy
and an appreciation of the impact of culture on
competitive advantage are all addressed.
The opening case explores the influence of
Saudi Arabia’s culture on business and the
implications of the culture for companies
operating within or with the country. The
closing case explores the changes at Matsushita.
The company’s new CEO eliminated many
traditional Japanese practices including lifetime
employment in an effort to increase the firm’s
competitiveness.
4
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OUTLINE OF CHAPTER 4: DIFFERENCES IN CULTURE
Opening Case: Culture and Business in Saudi Arabia
Introduction
What Is Culture?
Values and Norms
Culture, Society, and the Nation-State
The Determinants of Culture
Social Structure
Individuals and Groups
Social Stratification
Country Focus: Breaking India’s Caste System
Religious and Ethical Systems
Christianity
Islam
Hinduism
Buddhism
Confucianism
Country Focus: Islamic Capitalism in Turkey
Management Focus: DMG-Shanghai
Language
Spoken Language
Unspoken Language
Education
Culture and the Workplace
Cultural Change
Implications for Managers
Cross-Cultural Literacy
Culture and Competitive Advantage
Chapter Summary
Critical Thinking and Discussion Questions
Closing Case: Matsushita (Panasonic) and Japan’s Changing Culture
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CLASSROOM DISCUSSION POINT
Ask students about what they might expect in the way of cultural differences if they were to go
to Saudi Arabia. What might they expect if they were to go to France, Brazil, or South Korea?
Next, ask students what they think students from Saudi Arabia, France, South Korea, or Brazil
might expect from American culture. As students respond, jot their ideas on the board and try to
develop categories similar to the elements of culture discussed in the text.
Then, discuss why these elements of culture exist, and why they differ between countries.
Finally, ask students to consider what they mean for international companies.
If there are foreign students in the class, draw on their special expertise by asking what
differences they experienced when they first came to the United States.
OPENING CASE: Culture and Business in Saudi Arabia
Summary
The opening case explores Saudi Arabia’s culture and its influence on how business is conducted
in the country. Saudi Arabia’s culture reflects the strong traditions of both Islam and Bedouin
beliefs. Prayer times are strictly observed, women have little freedom, and Western expatriates
are frequently the targets of terrorist attacks. In addition, the concept of time is viewed quite
differently and values including loyalty and status are important as are strong interpersonal
relationships. Companies doing business with the country must be aware of these cultural
differences and adapt accordingly. Discussion of the case can revolve around the following
questions:
1. Reflect on the long standing cultural traditions in Saudi Arabia and how they shape the
country’s business environment. How should Westerners approach a business meeting in Saudi
Arabia? How might your response change if you are a Western woman?
2. Saudi Arabia has a long held aversion to manual labor and indeed any behavior that might be
considered menial or servile. Discuss the implications of this value system. How does it impact
companies doing business in the country? How is this basic cultural tradition beginning to
change? What are the long term implications of this?
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3. Consider the restrictions put on Saudi Arabian women. How do these restrictions change the
way products are marketed toward women?
LECTURE OUTLINE
This lecture outline follows the Power Point Presentation (PPT) provided along with this
instructor’s manual. The PPT slides include additional notes that can be viewed by clicking on
“view”, then on “notes”. The following provides a brief overview of each Power Point slide
along with teaching tips, and additional perspectives.
Slide 4-3 Cultural Differences and International Business
Business success requires cross-cultural literacy. Managers need an understanding of the
culture, or cultures, that prevail in the countries where they do business.
Slide 4-4 What is Culture?
Culture is a system of values and norms that are shared among a group of people and that when
taken together constitute a design for living.
Values are abstract ideas about what a society believes to be good, right, and desirable. Norms
are social rules and guidelines that prescribe the appropriate behavior in particular situations.
Slide 4-5 Values and Norms
Values and norms are the basic components of culture. Norms can be further divided into
folkways and mores.
Slide 4-6 Culture, Society and Nation State
While it is possible for a nation-state to have a uniform culture, this is not always the case.
Within a nation-state multiple cultures can exist, and cultures can also cut across national
borders.
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Slides 4-7-4-8 The Determinants of Culture
Culture is an evolutionary product of a number of factors.
Slide 4-9 Social Structure
The social structure of a country can be described along two major dimensions: individualism
vs. group, and degree of stratification into classes or castes.
Slides 4-10-4-12 Individuals and Groups
A focus on the individual and individual achievement is common in many Western societies. An
emphasis on individual achievement has positive and negative implications.
On the positive side, the dynamism of the United States’ economy owes much to people like
Sam Walton, Steve Jobs, and Bill Gates – people who took chances, tried new things, succeeded,
and encouraged others to do likewise. On the other hand, individualism can lead to a lack of
company loyalty and failure to gain company-specific knowledge, competition between
Slides 4-13-4-15 Social Stratification
All societies have some sort of stratification, where individuals in higher strata or castes are
likely to have a better education, standard of living, and work opportunities.
Social structure is linked to the ease with which an individual can move between strata.
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Slides 4-16-4-18 Religious and Ethical Systems
Religion can be defined as a system of shared beliefs and rituals that are concerned with the
realm of the sacred.
Ethical systems refer to a set of moral principles, or values, that are used to guide and shape
behavior. The ethical practices of individuals within a culture are often closely intertwined with
their religion.
Slide 4-19 Christianity
Christianity, the largest religion, is common throughout Europe, the Americas, and other
countries settled by Europeans and has three major branches: Protestant, Roman Catholic, and
Eastern Orthodox.
Slide 4-20 Islam
Islam has the same underlying roots of Christianity (Christ is viewed as a prophet), and suggests
many of the same underlying societal mores. Islam, however, extends this to more of an all-
embracing way of life that governs one’s being. Islam also prescribes many more rules by which
people should act and live.
In Islam people do not own property, but only act as stewards for God and thus must take care of
that with which they have been entrusted. They must use property in a righteous, socially
Slide 4-21 Hinduism
Hinduism, practiced primarily on the Indian sub-continent, focuses on the importance of
achieving spiritual growth and development, which may require material and physical self-
denial.
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Since Hindus are valued by their spiritual rather than material achievements, there is not the
same work ethic or focus on entrepreneurship found in some other religions. Likewise,
promotion and adding new responsibilities may not be the goal of an employee,
Slide 4-22 Buddhism
Buddhists also stress spiritual growth and the afterlife, rather than achievement while in this
world. Buddhism, practiced mainly in Southeast Asia, does not support the caste system,
Slide 4-23 Confucianism
Confucianism, practiced mainly in China, teaches the importance of attaining personal salvation
through right action. Unlike religions, Confucianism is not concerned with the supernatural and
has little to say about the concept of a supreme being or an afterlife. The needs for high moral
Slides 4-24-4-25 Language
Language refers to the spoken and unspoken means of communication, and is one of the defining
characteristics of culture.
While English is clearly the language of international business, knowing at least some of the
local language can greatly help when working in another country.
In some situations knowing even a bit of the local language can be critical for business success.
Slide 4-26 Education
Formal education is the medium through which individuals learn many of the language,
conceptual, and mathematical skills that are indispensable in a modern society.
Education is part of the social structure of a country, and is instrumental in shaping many
cultural values and norms. The knowledge base, training, and educational opportunities
available to a country’s citizens can contribute to a competitive advantage in the marketplace.
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Slides 4-27-4-31 Culture in the Workplace
Geert Hofstede conducted what is probably the most famous study about the connection between
culture and values in the workplace. Hofstede made a study of IBM employees worldwide, and
identified four dimensions to describe cultures: power distance, individualism vs. collectivism,
uncertainty avoidance, and masculinity vs. femininity.
Power distance focuses on how a society deals with the fact that people are unequal in physical
and intellectual capabilities. Individualism versus collectivism focuses on the relationship
Slide 4-32 Cultural Change
Culture is not a constant, but evolves over time. As countries become economically stronger,
cultural change is particularly common.
Slide 4-33-4-34 Implications for Managers
Managers need to be aware that societies differ because their cultures vary, and cultures vary
because of profound differences in social structure, religion, language, education, economic
philosophy, and political philosophy.
Individuals and firms must develop cross-cultural literacy. International businesses that are ill
informed about the practices of another culture are unlikely to succeed in that culture. One way
to develop cross-cultural literacy is to regularly rotate and transfer people internationally.
Managers need to be aware of ethnocentric behavior, or a belief in the superiority of their own
culture.
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CRITICAL THINKING AND DISCUSSION QUESTIONS
QUESTION 1: Outline why the culture of a country influences the costs of doing business in that
country. Illustrate your answer with examples.
ANSWER 1: This question has be explored throughout the chapter, and since there can be
numerous reasons and examples of how culture influences the costs of doing business, there is no
single acceptable response to the question. Several are highlighted below, but there could be
numerous others. When there are simply different norms between how individuals from different
countries interact, the costs of doing business rise as people grapple with unfamiliar ways of
QUESTION 2: Do you think that business practices in an Islamic country are likely to differ
from business practices in the United States? If so how?
ANSWER 2: The cultural differences between a Muslim country and the US will cause business
practices to differ dramatically. The public role women can take, appropriate etiquette
(including simple things like not passing objects with the left hand), holidays, and wining and
dining all differ from patterns in the US. But beyond these, the underlying ideal and
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QUESTION 3: What are the implications for international business of differences in the
dominant or ethical system of a country?
ANSWER 3: Differences in the dominant religion of a country affect relationships, attitudes
toward business, and overall economic development. First, differences in religion require inter-
cultural sensitivity. This sensitivity requires things like simply knowing the religious holidays,
accepting that some unexpected things may happen “because of Allah’s will,” or understanding
Basic, unarticulated assumptions about what has value, what is right and wrong, and what
constitutes good are embedded in our religions. Should rules or laws apply to all people all the
time (in the US, the answer here is probably yes); or should they change depending on the
QUESTION 4: Choose two countries that appear to be culturally diverse. Compare the culture
of those countries and then indicate how cultural differences influence (a) the costs of doing
business in each country, (b) the likely future economic development of that country, and (c)
business practices.
ANSWER 4: Responses to this question will obviously vary based on the countries chosen by
students, and their knowledge of the countries. Hopefully, students can present some
information on the dimensions of culture including values, norms, social structure, religion,
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QUESTION 5: Reread the Country Focus on Islamic Capitalism in Turkey. Then answer the
following questions:
a) Can you see anything in the value of Islam that is hostile to business?
b) What does the experience of the region around Kayseri teach us about the relationship
between Islam and business?
c) What are the implications of Islamic values towards business for the participation of a country
like Turkey in the global economy?
ANSWER 5:
a) Many students will probably focus on the comment by the sugar factory manager that “if you
are not a good Muslim, don’t pray five times a day and don’t have a wife who wears a headscarf,
b) The area around Kayseri that has been growing rapidly is strongly influenced by Islam. In
addition to incorporating gestures like prayer rooms, some companies are also adhering to the
c) Some students might focus on the lack of competitiveness that is sometimes associated with
Islam. Others might note though, that at least for Turkey, this doe not seem to be an issue.
QUESTION 6: Reread the Management Focus on DMG-Shanghai. Then, answer the following
questions
a) Why do you that it is so important to cultivate guanxi and guanxiwang in China?
b) What does the experience of DMG tell us about the way things work in China? What would
likely happen to a business that obeyed all of the rules and regulations, rather than trying to find
a way around them as Dan Mintz apparently does?
c) What are the ethical issues that might arise when drawing upon guanxiwang to get things done
in China? What does this suggest about the limits of using guanxiwang for a Western business
committed to high ethical standards?
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ANSWER 6:
a) Guanxi literally means relationships, although in business settings in can better be understood
as “connections.” The concept of guanxi is deeply rooted in Chinese culture and Confucianism.
b) Personal power and relationships or connections (guanxi), rather than the rule of law, have
c) Guanxiwang refers to the relationship network that many Chinese companies rely on.
CLOSING CASE: Matsushita (Panasonic) and Japan’s Changing Culture
The closing case explores the changes at Japan’s Matsushita after new CEO Kunio Nakamura
began to eliminate many traditional practices at the company. Until 2000, Matsushita, like many
other Japanese companies followed traditional Japanese practices including providing lifetime
employment and benefits to its employees. However, the company was forced to abandon these
practices in order to survive the economic slump that began in the 1990s and the growing
realization that many of Japan’s younger workers were not willing to make the same
commitment to a single company as their parents were. Changes were implemented slowly and a
new focus on individuality, initiative-taking and risk-taking was emphasized. Today, the
company is once again on firmer ground. A discussion of the case can revolve around the
following questions:
QUESTION 1: What were the triggers of cultural change in Japan during the 1990s? how is
cultural change starting to affect traditional values in Japan?
ANSWER 1: A shift in traditional values began to emerge in Japan as the generation born after
1964 started to come of age. This generation resisted many of the values shared by their parents
and instead embraced many Western traditions. Many watched as troubled
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QUESTION 2: How might Japan’s changing culture influence the way Japanese businesses
operate in the future? What are the potential implications of such changes for the Japanese
economy?
ANSWER 2: The generation born after 1964 is changing the way businesses operate in Japan.
This generation, which resisted the lifetime employment concept of their parents, has pushed for
QUESTION 3: How did traditional Japanese culture benefit Matsushita during the 1950s-1980s?
Did traditional values become more of a liability during the 1990s and early 2000s? How so?
ANSWER 3: Japan’s traditional culture helped Matsushita become a major economic power
during the post-war years and through the 1980s. Matsushita agreed to take care of its
QUESTION 4: What is Matsushita trying to achieve with the human resource changes it has
announced? What are the impediments to successfully implementing these changes? What are
the implications for Matsushita if (a) the changes are made quickly or (b) it takes years or even
decades to fully implement the changes?
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ANSWER 4: In 2000, Matsushita began to make changes to its employment policies offering
workers choices between traditional lifetime employment options with lower salaries to higher
QUESTION 5: What does the Matsushita case teach you about the relationship between societal
culture and business success?
ANSWER 5: Most students will probably agree that societal culture and business culture are
strongly intertwined. A society’s culture has a direct impact in a company’s culture. The values
and traditions that are important in societal culture will typically be important in corporate
INTEGRATING iGLOBES
There are several iGLOBE video clips that can be integrated with the material presented in this
chapter. In particular, you might consider the following:
Title: Internet Restrictions Highlight Political, Cultural Divides
Run Time: 8:07
Special Note: This iGLOBE can be used in conjunction with an earlier iGLOBE: Google in
China (April 2006)
Abstract: This video explores the situation leading up to Google’s recent decision to change its
policy in China to allow Internet users unfiltered access to information, and the tensions the
situation has created between the governments of China and the United States.
Key Concepts: ethics, globalization, political economy, global strategy, foreign direct
investment, political risk
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Notes: When Google entered the Chinese market in 2006, it agreed to follow certain filtering
requirements mandated by the Chinese government. At the time, Google was strongly criticized
by many who felt the company was compromising its ideals in its quest for greater profits.
Recently, after a series of attacks on the Google e-mail accounts of several prominent Chinese
human rights activists, Google decided to lift the filters and giver Chinese Internet users access
to all information available. Google’s decision set off a series of verbal attacks from China’s
official media, and the situation quickly reached diplomatic levels, prompting U.S. Secretary of
State Hillary Clinton to take a stand on the refusal of China and other countries like Tunisia,
Vietnam, and Iran to grant their citizens free access to the information provided via the Internet.
Clinton suggested that the limits imposed by China constitute a violation of human rights, and
requested that the Chinese government investigate the attacks on the e-mail accounts. China
responded with claims that the United States is trying to force its own values on the Chinese
people, arguing that Clinton is engaging in “information imperialism.” According to Michael
Posner, assistant secretary of state for democracy, human rights, and labor, the situation revolves
At the moment, it remains unclear what Google will do next. Many Chinese citizens have
indicated that they back the company’s decision to stop filtering information. Some have
actually left notes and other signs of support at Google’s Chinese headquarters. Some analysts
believe that Google will find additional support for its actions from those individuals who felt
that the decision made by Google in 2006 compromised its “don’t be evil” motto. Posner points
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Discussion Questions:
1. Google’s decision to no longer filter information in China has become a lightening rod for
human rights activists and politicians. What is Google’s responsibility to the Chinese people?
Do you agree with the company’s recent decision to make all information available to its users in
China? Is Google being ethical in its decision making?
2. In your opinion, can China truly become a world player in trade if it fails to maintain an open
and democratic society? Is the free flow of information a part of such a society? Why or why
not?
3. What should Google do next? Can the company remain in China if it fails to meet the
demands of the Chinese government? What might happen if Google decides to pull out? Does
Google have a responsibility to the Chinese people to continue to offer its services in the
country?
4. Michael Posner, assistant secretary for democracy, human rights and labor, has suggested that
other U.S. companies have a responsibility to demand that China allow for a free exchange of
information. Do you agree? Why or why not?
INTEGRATING VIDEOS
There are also several longer video clips that can be integrated with the material presented in this
chapter. In particular, you might consider the following from International Business DVD Volume
6:
Title: Twitter and Haiti
Learning Objectives
The purpose of this video is to help you:
❖ Understand how social media platforms are increasing the pace of globalization.
❖ Examine how new methods of communication are replacing more traditional ones.
❖ Recognize the marketing implications of how people communicate via social media.
❖ Explore how social media platforms may be changing social activism.
Key Words
❖ Globalization
❖ Global economy
❖ Technological change
❖ Cultural change
❖ Levels of economic development
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❖
Synopsis
When the earthquake hit Haiti last year, many people, both within the country and outside,
immediately got on Twitter and Facebook to get information about what was happening, and to
communicate with each other. This crisis was one of the first of its kind in that rather than using
more traditional forms of communication like the telephone or television, large numbers of
After the earthquake, many people posted messages to family members indicating that they had
survived and providing information about other friends and families. Some people also provided
details about what had occurred and what they had seen. Some postings included information
about problems that would probably occur as a result of the earthquake such as shortages of
medical supplies and water. People outside Haiti were able to learn from these accounts of the
extent of the devastation, and get a feel for what was ahead for the Haitian people and the
country as a whole.
Twitter and Facebook were also the first choice for many social activists and global health
organizations involved with the crisis. Social activists were able to leverage the power of the
social media platforms to reach out to people for help. Wyclef Jean, a popular Haitian musician,
asked his 1.3 million Twitter followers to donate money to help for example. Interestingly, the
efforts of activists like Jean were made easier because of the availability of social media
Discussion Questions
1. Discuss how new technologies emerged as a preferred form of communication after the
earthquake in Haiti. What conclusions might a company targeting consumers in a developing
country like Haiti draw from this phenomenon?
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2. What challenges do social network platforms like Twitter and Facebook face in developing
countries? Why might first mover advantages be important in these markets?
3. Reflect on the differences in how people use social networking platforms based on their
geographic location. How can companies capitalize on the growing use of social media
networks in developing countries and emerging markets?
4. Discuss how social media platforms are changing the way social activists raise awareness and
gain support for their causes. How can companies that support social causes leverage these same
opportunities?
INCORPORATING globalEDGE™ EXERCISES
Use the globalEDGE™ site {http://globalEDGE.msu.edu/} to complete the following exercises:
Exercise 1
You are preparing for a business trip to Chile where you will need to interact extensively with
local professionals. Therefore, you should consider collecting information regarding local culture
and business habits prior to your departure. A colleague from Latin America recommends you
Exercise 2
Typically, cultural factors drive the differences in business etiquette encountered during
international business travel. In fact, Middle Eastern cultures exhibit significant differences in
business etiquette when compared to Western cultures. Prior to leaving for your first business
trip to the region, a colleague informed you that a guide to business etiquette around the world
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Answers to Exercise Questions
Exercise 1
The data can be accessed by searching for the term “Centre for Intercultural Learning” at
http://globaledge.msu.edu/ResourceDesk/. The Centre for Intercultural Learning is the only
source in this search. Go to the Country Insights link on the left side of this resource’s webpage.
This resource is found under the globalEDGE category “Reference: Culture”. Be sure to click on
the Resource Desk link to search this area of the globalEDGE website.
Search Phrase: “Centre for Intercultural Learning”
Resource Name: Centre for Intercultural Learning (Foreign Affairs and International Trade
Exercise 2
The data can be accessed by searching for the term “Business Etiquette Around the World” at
http://globaledge.msu.edu/ResourceDesk/. The Guide to Business Etiquette in the Middle East is
a source found near the bottom of this resource’s website. You can also select the region of the
Middle East from the map located at the top of the website. This resource is found under the
globalEDGE category “Reference: Culture”. Be sure to click on the Resource Desk link to search
this area of the globalEDGE website.