CHAPTER 3 : Culture Environment

Learning Objectives:

• Understand how culture impacts international business

• Concept and elements of culture• Cross-culture comparisons

• Bribery and ethics in international business• Social responsibility of MNCs• Cross cultural training in preparing for international assignment

• Understand the principles of business negotiations abroad

• Business practices in host country

There are more than 160 definitions of culture

“Communicable knowledge, learned behavior passed on from

generation to generation”

“ An Integrated system of learned behavior patterns that are

distinguishing characteristic of the members of a given

society

“ The collective programming of the mind which distinguishes

the members of one group or category from those of another

Element of Culture

A. Language

• Spoken Language• Written Language• Official Language• Body Language• International Language

B. Religion

• Beliefs and Norms• Sacred Objects• Philosophical Systems• Prayer/ Rituals• Leading Religious of the World

C. Values and Attitudes

Toward

• Time (Monochronic (V.S) Polychronic)• Achievement• Work• Change• Risk Taking

D. Education

• Literacy Level• Formal Education• Vocational Training• Human Resource Planning• Primary / Secondary / High education

E. Social Organization

• Social Institutions• Authority Structure• Interest Groups• Status Systems• Social Mobility

F. Technology and Material Culture

• Science• Invention• Energy Systems• Communications• Tools and Objects• Urbanization

G. Politics

• Nationalism• National Interests• Power• Ideologies• Political Risks• Sovereignty

H. Law

• Common Law• Code Law• Foreign law• Home / Host Country Law• Regulation / Antitrust Policy• International Law

Cross-Culture Comparisons

A. Edward Hall’s High-Context (V.S) Low-Context Cultures

B. Hofstede’s Classification Scheme

• Individualism (V.S) Collectivism• Power Distance• Uncertainty Avoidance• Masculinity• Long-Termism

C. Deal-Oriented (V.S) Relationship – Oriented Cultures

• Deal – Oriented Cultures• Relationship – Oriented Cultures

Cultural Factors

• Never touch the head of a Thai or pass an object over it. The head is considered sacred in Thailand• Avoid using triangular shapes in Hong Kong, Korea and Taiwan. It is considered a negative shape.

• The number 7 is considered bad luck in Kenya, good luck in Czech Republic and has magical connotation in Benin, Africa

• The number 10 is bad luck in Korea• The number 4 is means Death in Japan

• Red represents witchcraft and death in many African countries

Cultural Difference between Japanese and American Individuallifestyles

American

A Culture of self-expression

Japanese

A Culture of Self restrain

Cultural

Background

Clear expression of Joy

and sorrow

Ambiguous of joy and sorrow

Reticence

Unequivocal expression

of “Yes/No”.

Equivocal expression

of “Yes/No”.

Modesty

Strong self-assertion Weak self-assertion ReserveStrong Personality Weak Personality Punctiliousness

Excellent Negotiating skill Poor Negotiating skill Politeness

Priority of self-interest Priority of harmonywith others Obligation

Cultural Difference between Japanese and American Social Life

American Society Japanese Society Dignity of Individuals “In the same boat” concept

Dignity of individuals Human relation orientedIndividuals work ethic Dependence on the groupGreat individuals freedom Lack of individuals freedomRespect for rules Low regard for rulesA open and transparentsociety

A close society, lacking intransparency

Multi-cultural society Mono-cultural societyA society excelling in creativityand versatility

An orderly and uniformsociety

Individual decisions over consensus Dependence on consensus

A society which pursue that ideal A society which pursue harmonywith reality

Cultural Differences between Japanese and American Business

American Business

Game concept: Business is a game in pursuit of profits under the rules of laws and contracts

Efficiency-oriented and approximate accuracy simplicity, clarity, and quickness

Quantity-oriented

Short-term performance evaluation

Easy layoffs, dismissals of employees, and selling of businesses

Japanese Business

Mutual trust-oriented business: business is based on trusting relationship among people rather than the rules of gameHighly precision-oriented and perfectionism-high dependency on human awareness

Quality-oriented

Mid-to-long term evaluations

Job security

SOURCE : Norihiko Shimizu, “Today’s Taboos may be gone tomorrow,’ Tokyo Business, February 1995, p.51.

Cultural Differences between Japanese and American Business

American Business Japanese Business

Top down management

Low mutual dependence between employers and employees

Control of business by stockholders and the management

Management by “force”

Heavy dependence on machinery and technology, vs. Light dependence on human resources

Excellent software-based technology development

Heavy dependence on human resources bottom-up management and teamwork

High mutual dependence between employers and employees

Joint management of business by Employees and Employees

Management by “motivation”

Heavy dependence on human resources

Inadequate software development ability

Strong loyalty and fewer incentivesLimited loyalty and incentive-oriented work ethics

SOURCE : Norihiko Shimizu, “Today’s Taboos may be gone tomorrow,’ Tokyo Business, February 1995, p.51.

Corruption Perception Index* (Selected Countries 1997&1996)

Country CPI 1997 CPI 1998 Country CPI 1997 CPI 1998Denmark (1) 9.94 9.33 Italy (30) 5.03 3.42Finland ((2) 9.48 9.05 S. Korea (34) 4.29 2.96Norway (7) 8.92 8.87 Brazil (36) 3.56 2.96Singapore (9) 8.66 8.8 China (41) 2.88 2.43Switzerland (11) 8.61 8.76 India (45) 2.75 2.63USA (16) 7.61 7.66 Mexico (47) 2.66 5.5France (20) 6.66 6.96 Russia (49) 2.27 2.58Czech Rep. (27) 5.2 5.37 Nigeria (52) 1.76 0.69

The ranking is based on 52 countries studied

The maximum 10 would be corrupt free country

Bribery

Extortion

Subornation

Lubrication

Three Ethical Principles

Principle Question

Utilitarian Ethics Does the action optimize the “common good” or beneficial of all constituencies?

Rights of parties Does the action respect the rights of the individuals involved?

Justice of fairness Does the action respect the canons of justice or fairness to all parties involved?

Ethical and social responsibility issues in multinational business decisions

Does the decision efficiently optimize the common good and benefits of :

• The business firm (Stockholders, Profit, Growth, etc)• Society (“The good of life”, Culture, Order, Justice, etc)• The economy (Economic growth, Production and Distribution of goods/services) • The individual (Freedom, Health and Welfare, Opportunity, Human dignity

Cross-Culture Training Methods (Ascending Order)

• Area Briefing• Books• Sensitivity Training• Field Trips• Experiential• Field Experience

Impact of Globalization

• Globally competent employees • Ability to work with diverse cultures• Overcoming the self-reference criterion (SRC)

Cross- Cultural Negotiations

• Non-Task sounding

• Task-Related Information Exchange

• Persuasion

• Concessions and agreement• Try to access 3 videos produced by Big world UW-W library

Cross-cultural communicating Cross-cultural understanding Cross-cultural negotiating

Selected Reference on Culture and Business Practices Around the World• Video series from Big world : Cross-cultural understanding* Cross-cultural communicating*

Cross-cultural negotiating*• Do’s and taboos around the world by Roger Axtell , Wiley**• Culturgrams Vol. I & II, Brigham Young University Press, 1999**

• International Business Etiquette by Ann Marie Sabath, Career Press Latin America **

Europe ** Asia **

• World Trade Press Doing Business in Series*

• Cross-Cultural business behavior by R.R. Gesteland , Copenhagen Business School Press** • Richard Hill : We Europeans. Europublications **

: Euromanagers and Matians. Europublications **

* Available at UW-W Library ** Available at GBRC (C2018)