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CHAPTER 4
The Role of Culture
Chapter Objectives
After studying this chapter, students should be able to:
1. Discuss the primary characteristics of culture.
2. Describe the various elements of culture and provide examples of how
they influence international business.
4. Discuss how religious and other values affect the domestic
environments in which international businesses operate.
6. Explain Hofstede’s primary findings about differences in cultural
values.
7. Explain how cultural conflicts may arise in international business.
LECTURE OUTLINE
OPENING CASE: Bollywood, Hollywood and Nollywood
The opening case discusses the movie industry in Hollywood, India and Nigeria and the
cultural context in which movies are made.
Key Points
• Sometimes American-made movies are more popular with audiences abroad than
they are with the U.S. movie-going public.
• The India movie industry is referred to as Bollywood and applies to films produced
in Mumbai.
• The third and newest source of movies in Nollywood, which represents Nigeria’s
movie industry centered in Lagos.
• The Nollywood movies are popular because they stress the triumph of good over
bad and the everyday man, and they are in English so as to provide a broader
appeal to the other African markets.
CHAPTER SUMMARY
Chapter Four explores the issue of culture. It begins with a discussion of what
comprises culture, then moves on to consider how culture affects international
business. The chapter provides many specific examples of cultural differences.
Teaching Note:
Instructors may want to begin their lecture on culture with a discussion
CHARACTERISTICS OF CULTURE
• Culture is the collection of values, beliefs, behaviors, customs, and attitudes that
distinguish a society. Culture is important to companies because it determines the
rules within which businesses operate.
• Culture is a learned behavior that may be transmitted intergenerationally or
intragenerationally. Culture’s elements are interrelated, and may change to adapt
to external forces. Culture is shared by members of a society.
E-WORLD
The Internet, National Competitiveness, and Culture
ELEMENTS OF CULTURE
The basic elements of culture are social structure, language, communication, religion,
and values and attitudes. The way in which the elements interact affects the local
environment in which international businesses operate. See Figure 4.1 (which depicts
the basic elements of culture)
Social Structure
The overall framework that determines the roles of individuals within a society, the
stratification of a society, and individuals’ mobility within a society is its social structure.
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• Individuals, Families, and Groups. Societies differ in terms of how family is defined.
In the United States, the term is usually used to describe the nuclear family (father,
mother, and offspring), while in other societies the term refers to an extended
BRINGING THE WORLD INTO FOCUS
The Impact of Japanese Culture on Business
This feature examines how Japan’s culture impacts its business practices. In
particular, it explores how four elements of Japanese culture, hierarchical structure,
groupism, wa, and obligation, affect the way business is conducted in Japan. The
section also raises the question of whether Western firms should adopt Japanese
business techniques. It fits in well with a discussion of social structure.
• Social Stratification. The importance of social stratification (the categorizing of
people on the basis of their birth, occupation, educational achievements, and/or
other attributes) differs by society. MNCs must be aware of the level of social
Language
• Language is a primary means by which members of a society communicate with
each other. It filters observations and perceptions and thus affects the messages
that are sent. In fact, it has been shown by researchers that language itself alters
the nature of the information that is being conveyed.
• Language also provides information about the cultural values of a society and helps
in the acculturation process. In countries such as India where more than one
• Countries that share a language may not share a culture. For example, the text
notes that while the United States and the U.K. share a language, there are actually
many differences between the two countries. However, because cultural similarities
facilitate the task of doing business internationally, many domestic firms will initially
seek countries that speak the firm’s home language when expanding abroad.
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Teaching Note:
Some students may have encountered differences in the English
language in their travels. Instructors may wish to ask for some
examples of such differences. Some of the more common responses
include the British use of bonnet and boot to refer to a car’s engine compartment
and trunk, and loo or W.C. to refer to a toilet. Even students who have not traveled
to Britain may be aware of differences in some terms that exist within the United
States such as the use of poor boy, hoagie, or sub to refer to a long sandwich, or
the use of soda, pop, or cold drink to refer to a carbonated beverage.
• Although the existence of English as a lingua franca may seem to be advantageous
to native English international businesspersons, it can actually put them at a
disadvantage when negotiating or operating on foreign turf. Failure by English
helpful in international business.
• Translation. Translation is one means of overcoming linguistic differences;
however, the translation process requires more than simply substituting the words
of one language for those of a second. Translators must be sensitive to subtleties
in the connotations of words and focus on the translation of ideas, not words
themselves. The text provides some examples of companies who have ignored this
• Saying No. International businesspeople also may face a situation whereby words
may have different meanings to persons with diverse cultural backgrounds. For
example, the word yes is used by the Japanese in a different way than it is used by
Americans. In fact, the Japanese avoid the use of the word no because it is
considered impolite. It may be necessary, when negotiating with Japanese
businesspeople, to repeat points of agreement in order to avoid misunderstandings.
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Communication
• Communication, whether verbal or nonverbal, can go awry between people who
share a culture. The chance for miscommunication increases substantially,
however, when people are from different cultural backgrounds.
• In cross-cultural communication, the sender encodes a message using his/her
cultural filters and the receiver decodes the same message using his/her cultural
filters. This frequently creates misunderstandings. The text provides an example of
a cross-cultural misunderstanding involving Boeing.
Religion
• Religion affects the ways in which members of a society relate to each other and to
outsiders. Seventy-four percent of the world’s population follows Christianity, Islam,
Hinduism, or Buddhism. PP 4-20
• Religion shapes the attitudes its followers have toward work, consumption,
BRINGING THE WORLD INTO FOCUS
Islamic Finance
Islamic Law (known as Shariah) forbids charging interest. Instead, lenders under
Islamic Law may charge “fees” or “rent” to borrowers. Shariah scholars say there is
no prohibition against using an interest rate as a benchmark to calculate appropriate
fees or rents. Several U.S. lenders are now offering “Islamic home mortgages.”
Such mortgages are described in detail in the textbook. The price of the Islamic
mortgages tends to be very comparable to the price of traditional mortgages.
• Religion may constrain business activities and the types of products consumers
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of the impact of the Muslim faith on business in Saudi Arabia and Catholicism in
South America.
Values and Attitudes
• Values are the principles and standards accepted by members of a society;
attitudes encompass the actions, feelings, and thoughts that result from those
values. Attitudes about time, authority, education, and rewards reflect an
individual’s deep-seated values and shape the behavior of, and opportunities
available to, companies operating in a given culture.
• In low-context cultures, business meetings follow a precise, well-planned agenda,
while in high-context cultures, time is initially spent deciding whether there is trust
between the participants before focusing on the business at hand.
• Age. Attitudes toward age differ by culture. In the United States, youthfulness is
considered a virtue and young “fast–trackers” are nurtured, while in Asian and Arab
cultures, age is respected and reflects a manager’s stature.
• Education. A country’s formal education system transmits and reflects the cultural
values of its society. Individualism is stressed in the U.S. education system, and
SEEING THE FOREST, NOT THE TREES
This section looks at the dimensions and characteristics of culture, instead of looking at
cultures individually.
Hall’s Low-Context / High-Context Approach
• Edmund and Mildred Hall have identified two distinct types of culture. A low-
context culture is one in which the words used by the speaker explicitly convey the
speaker’s message to the listener. Examples of low-context cultures include
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The Cultural Cluster Approach
• International businesspeople must recognize cultural differences as they market
products, manage workforces, and deal with host country governments. While one
may initially conclude that business practices must be customized to meet the
demands of each local culture, in reality there are similarities between cultures.
• Eight country clusters have been identified by researchers. Each cultural cluster
comprises countries that share many cultural similarities, although differences do
remain.
Hofstede’s Five Dimensions
International businesspeople need to understand how personality traits and need
structures differ across cultures. Many studies today focus on this area. One of the
most influential studies was done by Geert Hofstede. His work identified five
dimensions along which people seemed to differ across cultures. The dimensions
include social orientation, power orientation, uncertainty orientation, goal orientation,
and time orientation. Present Figure 4.4 here.
1. Social Orientation
• Social orientation, the first dimension identified by Hofstede, is a person’s
beliefs about the relative importance of the individual and the groups to which
the person belongs. Two extremes of social orientation are individualism (the
cultural belief that the person comes first) and collectivism (the belief that the
salaries.
Power Orientation
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• Power orientation, the second of Hofstede’s dimensions, refers to the beliefs
that people in a culture hold about the appropriateness of power and authority
differences in hierarchies such as business organizations. Introduce Table 4.5
here.
Uncertainty Orientation
• Uncertainty orientation, the third of Hofstede’s dimensions, is the feeling that
people have regarding uncertain and ambiguous situations. Those individuals
characterized by uncertainty acceptance are stimulated by change and new
opportunities, while those individuals characterized by uncertainty avoidance
dislike and avoid ambiguity. Discuss Table 4.7 here.
Goal Orientation
• Goal orientation, Hofstede’s fourth dimension, is the manner in which people
are motivated to work toward different kinds of goals. People exhibiting
Time Orientation
• Time orientation, the fifth dimension in Hofstede’s framework, is the extent to
which members of a culture adopt a long-term versus short-term outlook on life,
INTERNATIONAL MANAGEMENT AND CULTURAL DIFFERENCES
Some experts believe that the world is currently experiencing a cultural convergence,
as cultures grow more similar as a result of improvements in communication and
transportation. MNCs facilitate cultural convergence through their advertising and
through their transfer of new management techniques, technologies, and cultural
values.
Understanding New Cultures
• Individuals who rely on their self-reference criterion (the unconscious use of one’s
own culture to assess new surroundings) may find themselves making numerous
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cross-cultural literacy. Cross-cultural literacy is best achieved through
experiences, although cross-cultural training programs and information about
specific cultures can facilitate the process.
CHAPTER REVIEW
1. What is culture?
Culture consists of the interrelated values, beliefs, behaviors, customs, and attitudes that
distinguish a society. It is a learned behavior that is shared between members of a society
2. What are the primary characteristics of culture?
3. Describe the difference between high-context and low-context cultures.
In low-context cultures, such as the United States and Germany, a speaker’s words
4. What are cultural clusters?
5. What are individualism and collectivism? How do they differ?
6. Discuss the difference in pay systems between U.S. and Japanese firms. To what extent
are these differences culturally determined?
7. What is power orientation?
Power orientation, the second of Hofstede’s dimensions, refers to the beliefs that people in
a culture hold about the appropriateness of power and authority differences in hierarchies
8. What is uncertainty orientation?
9. What are aggressive and passive goal behaviors? How do they differ?
10. What is the self-reference criterion?
It is the reliance, usually subconscious, on one’s own culture to help assess new
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QUESTIONS FOR DISCUSSION
1. How can international businesspeople avoid relying on the self-reference criterion when
dealing with people from other cultures?
Reliance on the self-reference criterion refers to the unconscious use of one’s own culture
to help assess new surroundings. International businesspeople who rely on their self-
reference criterion when dealing with people from other cultures run the risk of creating ill
Teaching Note:
This concept can be illustrated directly if there are foreign students in a
class. Instructors can ask foreign students in their classes about any cross-
cultural preparation they received prior to moving to this country, and on the basis of that
response, raise the question of what would have made the adjustment process easier.
2. U.S. law protects women from job discrimination, but many countries do not offer women
such protection. Suppose several important job opportunities arise at overseas factories
owned by your firm. These factories, however, are located in countries that severely restrict
the working rights of women. You fear that female managers will be ineffective there.
Should you adopt gender-blind selection policies for these positions? Does it make a
difference if you have good reason to fear for the physical safety of your female managers?
Does it make a difference if the restrictions are cultural rather than legal in nature?
This is a difficult question to answer and instructors may wish to simply raise the issue
rather than suggest a correct or incorrect response. From a U.S. manager’s perspective,
3. Under what circumstances should international businesspeople impose the values of their
culture on foreigners with whom they do business? Does it make a difference if the activity
is conducted in the home or host country?
4. How would you evaluate yourself on each of Hofstede’s dimensions?
5. Assume you have just been transferred by your firm to a new facility in a foreign location.
How would you go about assessing the country’s culture along Hofstede’s dimensions?
How would you incorporate your findings into conducting business there?
Most students will probably suggest that examining the dimensional maps that identify
where different countries lie on each of the dimensions would be a good starting point in
BUILDING GLOBAL SKILLS
Essence of the exercise
This exercise is designed to provide students with insight as to how cultural and social factors
affect international business. Students are asked to determine how a particular set of products
would be received in another country and what changes would need to be made for their sale
to be a success.
Answers to the follow-up questions:
1. What were your primary sources of information about the three countries? How easy or
difficult was it to find information?
2. Can you think of specific products that are in high demand in the United States that would
simply not work in specific other countries because of cultural factors?
3. How do you think foreign firms assess your home culture as they contemplate introducing
products into your market?
Most students will probably suggest that foreign firms assess their culture in much the
Other Applications
An interesting way to illustrate the impact of culture on a company is to identify a real
product that is sold in multiple countries. Students can then identify how the product is
sold in each country, and what, if any, changes had to be made to make the product a
success. McDonald’s is usually a good company to start with.
CLOSING CASE
Quacking up a Storm of Business
The closing case examines AFLAC (an American insurance company that specializes in
supplemental insurance) operations in the United States and Japan. Despite being an
American firm, AFLAC is much larger and more successful in Japan than it has been in the
United States. The case discusses recent moves by AFLAC as it works to maintain its
dominance in Japan despite a more open regulatory environment.
Key Points:
• AFLAC, despite significant growth in the U.S. over the last 5 years, is still relatively
small ($4.4 billion in sales) compared to other insurance companies such as AIG,
Prudential, or MetLife.
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• AFLAC’s assets in Japan are worth more than $54.1 billion. 25 percent of the
Japanese population is estimated to have purchased AFLAC insurance. 72 percent
of all of AFLAC’s business in done in Japan.
Case Questions
1. AFLAC introduced the AFLAC duck in the U.S. market to build brand awareness
there. However, AFLAC’s brand awareness is very high in Japan. Should AFLAC
use the same advertising campaign in Japan as it does in the United States? Is
there any value to having identical advertising in both markets?
Given the increased competition resulting from the regulatory Big Bang in 2001, it
2. How important is it for AFLAC to adapt its business practices to the Japanese way
of doing things? Should AFLAC act more Japanese or more American in doing
business in Japan?
3. AFLAC built its dominant position in the Japanese supplemental insurance market
because Japanese regulators actively discouraged new entrants into this market.
The financial Big Bang policy now encourages new entrants into the supplemental
insurance market. What has AFLAC done to protect its market position? What else
can AFLAC do?
4. AFLAC is a rarity among U.S. companies inasmuch as the Japanese market
accounts for more than 70 percent of its business. Does this reliance on the
Japanese market create any special challenges for AFLAC? Does it present any
unique opportunities for the company?
It can easily be argued that AFLAC suffers from an overreliance on a single market.
Greater geographic diversification is probably in the company’s long-term best