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Differences in Culture: Understanding the Impact on Business Transactions

Explore the cultural differences between the US and China in terms of business transactions, such as the importance of contract law, reciprocal networks, and the perception of gifts. Learn about the components of culture, determinants of culture, and the impact on the workplace. Understand the four dimensions of culture according to Hofstede and the implications for business. Gain cross-cultural literacy and understanding for competitive advantage.

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Differences in Culture: Understanding the Impact on Business Transactions

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  1. 3 Chapter Differences in Culture

  2. U.S. Business transactions are conducted within the framework of contract law and mechanisms for dispute resolution are in place Reciprocal networks are becoming more important but have to operate within the confines of the law Gifts may be frowned upon as bribery (Foreign Corrupt Practices Act) China Personal power and relationships or connections rather than rule of law are important in China Reciprocal relationship networks can often mean doing favors or offering bribes Establish relationships with gifts Guanxi-strength of relationship

  3. “A system of values and norms that are shared among a group of people and that when taken together constitute a design for living.” Hofstede, Namenwirth and Weber What is culture?

  4. Different components of culture • Values and Norms • Folkways and mores

  5. Values: Abstract ideas/assumptions about what a group believes to be good, right and desirable Norms: social rules and guidelines that prescribe appropriate behavior in particular situations Values and norms

  6. Folkways: Routine conventions of everyday life. Little moral significance Generally, social conventions such as dress codes, social manners, and neighborly behavior Mores: Norms central to the functioning of society and its social life Greater significance than folkways Violation can bring serious retribution Theft, adultery, incest and cannibalism Folkways and mores

  7. Society is a group of people who share a common culture No one to one correspondence between society and a nation state Nation states are political creations Many cultures can co-exist within a nation state Culture, society and nation states

  8. Determinants of culture Fig: 3.1 • Social structure • Religion • Language • Education • Economic philosophy • Political philosophy

  9. Two dimensions The extent to which society is group or individually oriented Degree of stratification into castes or classes Social mobility Significance to business Other influences Political philosophy Economic philosophy Social structure

  10. Religious and ethical systems • Christianity • Economic implications • Hinduism • Economic implications • Islam • Economic implications • Buddhism • Economic implications • Confucianism • Economic implications

  11. World religions Map 3.1

  12. Language Fig: 3.2 • Spoken • Verbal cues • Language structures perception of world • Unspoken • Body language • Personal space

  13. Education can be a source of competitive advantage Example India Malaysia Singapore Education

  14. Percentage of GNP spent on education Map 3.2

  15. Adult literacy rates Map 3.3

  16. Culture and the workplace • Study on the relationship between culture and the workplace by Geert Hofstede 1967-73 • 40 countries • 100,000 individuals

  17. Four dimensions of culture Power distance Individualism versus collectivism Uncertainty avoidance Masculinity versus femininity Hofstede’s cultural dimensions

  18. Cultures are ranked high or low on this dimensions based on the particular society’s ability to deal with inequalities Power distance

  19. This dimension focuses on the relationship between the individual and his/her fellows within a culture Individualistic societies: loose ties individual achievement and freedom highly valued Collectivist societies- tight ties tend to be more relationship oriented Individualism versus collectivism

  20. This dimension measures the extent to which a culture socializes its members into accepting ambiguous situations and tolerating uncertainty Uncertainty avoidance

  21. This dimension looks at the relationship between gender and work roles Masculinity versus femininity

  22. Work related values for twenty countries

  23. Assumes one-to-one relationship between culture and the nation-state His research may have been culturally bound. Survey respondents were from a single industry (computer) and a single company (IBM) Problems with Hofstede’s findings

  24. Cultural change • Culture is not a constant; it evolves over time • Since 1960s American values toward the role of women are changing. • Japan moves toward greater individualism in the workplace • Effects of globalization

  25. Changing values Fig: 3.3

  26. Cross cultural literacy Culture and competitive advantage Culture and business ethics Managerial implications

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