INTERNATIONAL BUSINESS Professor H. Michael Boyd, Ph.D.

2. Chapter 3Differences in Culture International Business 3-2 H. Michael Boyd, Ph.D.

3. Culture “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 International Business 3-3 H. Michael Boyd, Ph.D.

4. Different Components of Culture Values and Norms Folkways and Mores 3-4

5. Values Form the bedrock of a culture Provide the context for establishing and justifying a society’s norms and attitudes toward: individual freedom democracy truth and justice honesty loyalty social obligations role of women love and sex marriage International Business 3-5 H. Michael Boyd, Ph.D.

6. Norms Social rules that govern people’s actions toward one and another Folkways routine conventions of everyday life actions of little moral significance dress code, eating habits, time orientation, rituals, etc. violating folkways will not be considered evil or bad Mores norms seen as central to the functioning of a society have much greater significance than folkways violating mores can bring serious retribution theft, adultery, incest, cannibalism International Business 3-6 H. Michael Boyd, Ph.D.

7. Characteristics of Culture Learned behavior through: observation sharing and transferring Accumulation of solutions to common problems by: accident learning borrowing (Cultural Diffusion) All elements are interrelated Composed of explicit and implicit layers Dynamic and evolutionary International Business 3-7 H. Michael Boyd, Ph.D.

8. Cultural Diffusion Up to 90% of all cultures have their major origins from elsewhere When two different cultures interact: selective process two-way process borrowed items will be reinterpreted International Business 3-8 H. Michael Boyd, Ph.D.

9. Culture, Society and Nation States Society is a group of people who share a common culture No one-to-one correspondence between society and a nation nation states are political creations many cultures can co-exist within a nation state similarity among people is both a cause and effect of national boundaries Nations composed of several cultures with no super-ordinate and uniting values are likely to split apart Nations break up and yield smaller units allowing national cultures to emerge and solidify International Business 3-9 H. Michael Boyd, Ph.D.

10. Determinants of Culture International Business 3-10 H. Michael Boyd, Ph.D.

11. Determinants of Culture International Business 3-11 H. Michael Boyd, Ph.D.

12. Social Structure A society’s basic social organization Two Dimensions Degree to which basic social unit is the individual vs. the group Degree to which society is stratified into classes or castes International Business 3-12 H. Michael Boyd, Ph.D.

13. Individualism Often prevalent in Western societies Not only reflected in the political and economic organizations How people perceive themselves and relate to each other in social and business settings Social status of an individual is not a function of where they work but their individual performance Often expressed in a high degree of entrepreneurship and managerial mobility Makes team building more difficult International Business 3-13 H. Michael Boyd, Ph.D.

14. The Group Often prevalent outside Western societies Social status of an individual is determined by the standing of the group to which they belong to as much by their individual performance Often expressed in a high degree of group affiliation and the lack of managerial mobility International Business 3-14 H. Michael Boyd, Ph.D.

15. Social Stratification All societies are stratified on a hierarchical basis into social categories (social strata) Typically defined on the basis of: family background occupation Income Culture differ from each other with regard to the: degree of social mobility between social strata significance attached to social strata in business International Business 3-15 H. Michael Boyd, Ph.D.

16. Social Mobility The extent to which individuals can move out of the social strata into which they are born Two Major Types Caste System Class System International Business 3-16 H. Michael Boyd, Ph.D.

17. Caste System Most rigid form of stratification Closed system in which social position is determined by the person’s family Change is usually not possible for entire life Caste position carries with is a specific occupation International Business 3-17 H. Michael Boyd, Ph.D.

18. Class System Less rigid form of social stratification Open system where social mobility is possible both upward or downward Person’s social position by birth can be changed through their achievements or luck Degree of social mobility varies by society International Business 3-18 H. Michael Boyd, Ph.D.

19. Class Consciousness When people tend to perceive themselves in terms of their class background which shapes their relationships with members of other classes Where class consciousness is high, the way individuals from different classes work together may be very prescribed and strained International Business 3-19 H. Michael Boyd, Ph.D.

20. Determinants of Culture International Business 3-20 H. Michael Boyd, Ph.D.

21. Religion System of shared beliefs and rituals concerned with the realm of the sacred Shapes attitudes toward work and entrepreneurship Relationship between religion, ethics and society is subtle and complex Hazardous to make sweeping generalizations! International Business 3-21 H. Michael Boyd, Ph.D.

22. Ethical Systems  Set of moral principles or values used to guide and shape behavior Can affect the cost of doing business in a country International Business 3-22 H. Michael Boyd, Ph.D.

23. World Religions International Business 3-23 H. Michael Boyd, Ph.D.

24. Religion and Economic Implications Christianity “Protestant Work Ethic & the Spirit of Capitalism” Islam favors legitimate profit and market-based systems important to keep one’s word or contractual obligations no payment or receipt of interest (mudarabah, murabaha) Hinduism ascetic, non-material principles inhibit entrepreneurship caste system plays a role Buddhism little emphasis on entrepreneurial behavior Confucianism loyalty, reciprocal obligations, and honesty in dealings International Business 3-24 H. Michael Boyd, Ph.D.

25. Determinants of Culture International Business 3-25 H. Michael Boyd, Ph.D.

26. Education Can be a source of national competitive advantage provides a pool of skilled and educated workers Key determinant for location of FDI Impacts the kind of products/services that are consumed and the related promotional programs Education can be a source of social classes International Business 3-26 H. Michael Boyd, Ph.D.

27. Adult Literacy Rates International Business 3-27 H. Michael Boyd, Ph.D.

28. Determinants of Culture International Business 3-28 H. Michael Boyd, Ph.D.

29. Language Enables people to communicate with each other and structures the way we perceive the world Spoken verbal cues language structures our perception of world Unspoken body language personal space 3-29

30. Spoken Mother Language International Business 3-30 H. Michael Boyd, Ph.D.

31. Non-Spoken Language 70% of all communication Nonverbal cues: eyebrows fingers/thumbs hand gestures feet personal space body gestures International Business 3-31 H. Michael Boyd, Ph.D.

32. Culture and the Workplace Study on the relationship between culture and the workplace by Geert Hofstede 1967-73 40 countries 100,000 individuals 3-32

33. Hofstede’s Cultural Dimensions Four Dimensions of Culture Power Distance Individualism versus Collectivism Uncertainty Avoidance Masculinity versus Femininity International Business 3-33 H. Michael Boyd, Ph.D.

34. Power Distance Dimension focused on how a society dealt with the fact that people are unequal in physical and intellectual capabilities High Power Cultures societies that let inequalities (power and wealth) grow over time Low Power Cultures societies that tried to play down such inequalities International Business 3-34 H. Michael Boyd, Ph.D.

35. Individualism versus Collectivism Dimension focused on the relationship between the individual and his/her fellows within a culture Individualistic Societies loose ties between individuals individual achievement & freedom highly valued Collectivist Societies tight ties between individuals tend to be more relationship oriented International Business 3-35 H. Michael Boyd, Ph.D.

36. Uncertainty Avoidance Dimension measured the extent to which different cultures socialized their members into accepting ambiguous situations and tolerating uncertainty High Uncertainty Cultures job security, career patterns, retirement benefits are very important need for rules and regulations and clear instructions and tight control from superior are important Low Uncertainty Cultures readiness to take risks and less resistance to change International Business 3-36 H. Michael Boyd, Ph.D.

37. Masculinity versus Femininity Dimension focused on the relationship between gender and work roles Masculine Cultures sex roles were sharply differentiated and traditional ‘masculine values” were cultural ideals Feminine Cultures sex roles were less sharply distinguished and little differentiation was made between gender in the same job International Business 3-37 H. Michael Boyd, Ph.D.

38. Work-Related Values for 20 Countries International Business 3-38 H. Michael Boyd, Ph.D.

39. Problems with Hofstede’s Findings 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) Findings are becoming dated (1967-1973) Revised his initial research and included a fifth dimension “Confucian dynamism” attitudes towards time, persistence, “face”, tradition International Business 3-39 H. Michael Boyd, Ph.D.

40. Cultural Change Culture is not a constant; it evolves over time American values toward the role of women American college students values about work and careers Japan moves toward greater individualism in the workplace and is impacted by aging society Effects of economic advancement and globalization Economic progress is accompanied by a shift in values away from: collectivism towards individualism “traditional values” towards “secular rational values” “survival values” towards “self-expression” and “well-being” values 3-40

41. Changing Values International Business 3-41 H. Michael Boyd, Ph.D.

42. Managerial Implications Culture and competitive advantage Which nations might be competitors Which nations might be a resource (HR, R &D) Which nations might be a market (early adopters) Which nation might be a production site Culture and business ethics Many ethical principles are universal, others are culturally bound Cross cultural literacy Observe and study foreign cultures International Business 3-42 H. Michael Boyd, Ph.D.