International Business Environments & Operations

1. International BusinessEnvironments & Operations Chapter 2 The Cultural Environments Facing Business 2-1

2. Introduction • Culture refers to the learned norms based on values, attitudes, and beliefs of a group of people • Group of people have different cultures. E.g., youth culture, national culture, organizational culture • People from different cultures differ on values, attitudes, and beliefs • Culture is an integral part of a nation’s operating environment • It is important for companies to understand and adjust to ever-changing operating environments. • every business function is subject to potential cultural differences

3. Introduction Cultural Factors Affecting International Business Operations

4. Knowing Culture • Business involves people: Every business employs, sells to, buys from, and is owned and regulated by people. • Every business function (managing, marketing, transporting, purchasing, dealing, security funds) is subject to cultural differences • International Business involves people from different cultures

5. Advantages of knowing and sensitivity to Culture • Companies need to decide when to make cultural adjustments • Fostering cultural diversity can allow a company to gain a global competitive advantage • (Cultural diversity: bringing together people of diverse backgrounds and experience) • Cultural collision occur when divergent cultures come into contact TWO conditions • when a company implements practices that are less effective • when employees encounter distress because of difficulty in accepting or adjusting to foreign behaviors

6. Cultural Awareness • Learning the cultural differences • Discuss the cause of cultural differences, rigidities, and changes • Consult with knowledgeable people at home and abroad • Go there directly and interact with people • Problem areas that can hinder managers’ cultural awareness: • Subconscious reactions to circumstances • The assumption that all societal subgroups are similar (ethnocentrism) • Comparisons may be incorrect if responses were corrected for social desirability • Specific variations are overlooked when averages are observed • Cultures evolve and change over time

7. Culture and the Nation-State • Nation as a point of reference • Similarity among people is a cause and an effect of national boundaries • People share attributes such as values, language, race • National identity represented through rites and symbols like flags, parades, rallies, and preservation of national sites, documents, monuments, and museums (promote a common perception of history) • laws apply primarily along national lines • Country-by-country analysis can be difficult because subcultures, ethnic groups, races, and classes exist within nations • similarities link groups from different countries

8. How cultures Form and Change • Transformed from parent to child, teacher to pupil, social leader to follower, and peer to peer • By age 10, most children have their basic value systems • Both individual and collective values may evolve over time • Sources of Change • Change by choice: as a reaction to social and economic situations that present people with new alternatives • Change by imposition (cultural imperialism): imposed introduction of certain elements into a culture from an alien culture, such as, forced change in law by an occupying country, overtime become part of the subject culture.

9. How cultures Form and Change • Contact among countries brings change (people travel and access foreign information through a variety of sources) • The process is known as cultural diffusion • When cultural diffusion results in mixing cultural elements, the process is known as creolization

10. Language: Cultural Diffuser and Stabilizer • A common language within a country is a unifying force. Language is an integral part of a culture • Therefore, linguistic changes are regulated • A shared language between nations facilitates international business • Native English speaking countries account for a third of the world’s production • English is the main international language of business; functional and operating language • English media is very influential in promoting US lifestyle • Hybrid tongue: intrusion of English into another language: Spanglish and Chinglish

11. Religion: Cultural Stabilizer • Religion impacts almost every business function • Centuries of profound religious influence continue to play a major role in shaping cultural values and behavior (Buddhism, Hinduism, Islam, Christianity, etc.) • many strong values are the result of a dominant religion • Religion may lead to much disagreement and violence • Religion inhibits production and/or sale of certain products or work activities at certain time or day

12. 1- Social Stratification Behavioral Practices Affecting Business • Attitudes and values constitute cultural variables • Decisions about what products to sell AND decisions about organizing, managing, and controlling operations are influenced by attitudes and behaviors within cultures • Social ranking (social class or status within a culture) is determined by • an individual’s achievements and qualifications • an individual’s affiliation with, or membership in, certain groups

13. Social Stratification • Group affiliations can be • Ascribed group memberships (affiliation determined by birth) • Gender, family, age, caste, and ethnic, racial, or national origin • Acquired group memberships (by choice) • based on religion, political affiliation, professional association • Two other factors that are important • education (how much and from where) and social connections (who do you know and in what places)

14. More on Social Stratification • Performance orientation: competence or seniority (humaneness) • Open vs Closed societies: Open or egalitarian societies give less importance to ascribed group membership • Gender-based: gender equality and discriminations or choices of profession • Age-based: age of vote, marry, license to drive, buy alcohol, retire, serve the nation • Family-based: stay with family run business • Prestige of jobs: some jobs win more social respect and are better paid

15. 2- Work Motivation • The motivation to work and Work ethics differ across cultures • Materialism: The desire for material wealth is a prime motivation to work • promotes economic development– allows higher productivity and low production costs • Rewards offered and rewards expectation: People are motivated to work when the rewards for success are high • masculinity-femininity index • high masculinity score prefers “to live to work” than “to work to live”. They are more assertive, aggressive, and confronting. • Low masculinity scorers prefer smooth and friendly social relationships, consider welfare

16. Work Motivation • Hierarchy of needs theory • Individuals will fill lower-level needs before moving to higher level needs • Once a need is satisfied, it is no more motivating • Different cultures place different degree of importance to different needs • That is, there are Different reward preferences

17. Relationship Preferences • Relationship preferences interacting with superiors/subordinates • Power distance • high power distanceimplies little superior-subordinate interaction or little consultation • autocratic (ruling with unlimited authority) or paternalistic (regulating conduct by supplying needs) management style • low power distance implies consultative/participative style • Individualism versus collectivism • high individualism – welcome challenges • high collectivism – prefer safe work environment

18. Risk Taking Behavior • Risk taking behavior differs across cultures • Uncertainty avoidance (preference for ‘known’)andhandling uncertainty • prefer to stay with the same employer; with clear job instructions • Trust (degree of trust among people) • High trust leads to investments and innovations • Future orientation • delaying gratification (e.g., retirement plans) • Fatalism • attitudes of self-determination versus belief in pre-destined fate or will of God

19. Information and Task Processing • Cultures handle information in different ways • Perception of cues • Obtaining information • low context cultures: prefer first hand and directed to the point information • high context cultures: seek peripheral and indirect information • Obtaining and processing information • Ordering and classifying (e.g., First name and surname)

20. Information and Task Processing Types of Cultures in how they prcoess information and tasks • Monochronic (work sequentially) polychronic (work simultaneously on various tasks) • Idealism(focus on whole and then parts/issues/details Pragmatism (focus on parts first and then whole)

21. Selective Perceptions • Selective in perceiving cues • Color (e.g., colors of joy and sadness) • Depth (attention to details; vocabular) • Shape (decent or bold)

22. Communications • Cross border communications do not always translate as intended • Spoken and written language • Silent language(other than spoken or written) • Color (hue and intensity) • Distance (proximity) • Time and punctuality (time as an event) • Body language (kinesics): how people walk, touch, or move their bodies • Prestige (perform services by oneself or otherwise)

23. Communications Body Language Is Not A Universal Language

24. Dealing with Cultural Differences • Do managers have to alter their customary practices to succeed in countries with different cultures? • Must consider • Host society acceptance/willingness to accommodate • Degree of cultural differences (language, religion, geography, economic development) • cultural distance • GLOBE: Global Leadership Organizational Behavior Effectiveness- clusters countries based on values, attitudes of middle managers towards leadership characteristics

25. Cultural Differences • Ability to adjust • culture shock (exposure to foreign practices and having to absorb new cues and expectations may be traumatic • Stages of adjusting abroad: Delight, depression and confusion, settlement and job satisfaction • reverse culture shock (after spending some time in another culture, things at home country appear confusing upon return) • Company and management orientation • Adaptation depends on the host and home country culture

26. Dealing with Cultural Differences • Three company and management orientations • Polycentrism • business units abroad should act like local companies • Ethnocentism • home culture is superior to local culture • overlook national differences • Geocentrism • integrate home and host practices

27. Strategies for Instituting Change • Value Systems • Cost-Benefit Analysis of change • Resistance to too much change • Participation • Reward Sharing • Opinion Leadership • Timing • Learning Abroad