Part 2: National Differences
Chapter 4: Differences in Culture
Source: ©Alex Woo/Getty Images
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• Learning Objectives
4-1 Explain what is meant by the culture of a society.
4-2 Identify the forces that lead to differences in social
culture.
4-3 Identify the business and economic implications of
differences in culture.
4-4 Recognize how differences in social culture influence
values in business.
4-5 Demonstrate an appreciation for the economic and
business implications of cultural change.
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• Opening Case:
China, Hong Kong, Macau, and Taiwan
The BRIC countries, especially China, are seen as the business
engines of tomorrow, but cultural differences hinder business
interactions
China wants the “one country, two systems” approach
Hong Kong, a former British colony, wants to maintain its identity
and is at odds with mainland China
Macau, a former Portuguese colony, is a key player in China’s
relationship with Portuguese-speaking countries
China claims sovereignty over Taiwan, a semi-independent state
with Confucianist Han Chinese and Taiwanese aboriginal roots
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• Introduction
Cross-cultural literacy: an understanding of how
cultural differences across and within nations can affect
the way business is practiced
There can be relationships between culture and the
costs of doing business in a country or region
Culture is not static—it evolves
Multinational enterprises can be engines of cultural
change
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• Did You Know?
Did you know arriving
late is expected in some
cultures?
Click to play video
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• What Is Culture? 1
Scholars have not agreed on a simple definition
• Culture: a system of values and norms shared among a
group of people and, when taken together, constitute a
design for living
• Society: a group of people sharing a common set of values
and norms
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• What Is Culture? 2
Values and Norms
• Values: provide the context within which a society’s
norms are established and justified
• Norms: the social rules that govern the actions of people
toward one another
• Folkways: routine conventions of everyday life
• Mores: norms that are central to the functioning of a society and
its social life
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• Planning on Doing Business Internationally?
If a company is planning to export a product, two basic questions
need to be asked. Is the product ready to be exported? And, is
the company ready to export the product (i.e., does the
company have the infrastructure, knowledge, and skills to export
the product)? Culturally, the product is either ready for a global
market or not (and, if not, the company can modify it if the
market is important enough). Company readiness is much more
culturally sensitive. Having the appropriate cultural knowledge
and skills are important. If you have the basic information about
a company, you can use globalEDGE’s diagnostic tool called CORE
(Company Readiness to Export) to assess both product and
company readiness to export. Which do you think is the most
important: product readiness or company readiness?
Sources: globalEDGE’s CORE diagnostic tool, http://globalEDGE.msu.edu; Badenhausen, K., “America’s Best Small Companies,” Forbes, October 9, 2013.
©McGraw-Hill Education
• What Is Culture? 3
Culture, Society, and the Nation-State
• Society reflects people who are bound together by a
common culture
• Nation-states are political creations that can contain a single
culture or several cultures
• Some cultures embrace several nations
• Also possible to talk about culture at different levels within
societies
©McGraw-Hill Education
• What Is Culture? 4
Determinants of Culture
• Values and norms of a culture evolve based on:
• Prevailing political and economic philosophies
• Society’s social structure
• Dominant religion, language, and education
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• Figure 4.1 Determinants of Culture
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• Social Structure 1
A society’s social structure is its basic social
organization
• Two dimensions to consider:
• Degree to which the basic unit of social organization is the
individual, as opposed to the group
• Degree to which a society is stratified into classes or castes
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• Social Structure 2
Individuals and Groups
• Group: association of two or more individuals who have a
shared sense of identity and who interact with each other
in structured ways on the basis of a common set of
expectations about each other’s behavior
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• Social Structure 3
Individuals and Groups continued
The Individual
• Emphasized in Western societies
• Encourages individual achievement and entrepreneurship
• Fosters managerial mobility
• Encourages job switching and lack of loyalty to the firm
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• Social Structure 4
Individuals and Groups continued
The Group
• Emphasized in non-Westernized societies, such as Japan
• Cooperation and team work are encouraged and lifetime
employment is common
• Individual initiative and creativity may be suppressed
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• Social Structure 5
Social Stratification
• All societies are stratified on a hierarchical basis into social
categories, or social strata
• Often defined by family background, occupation, and income
• Societies differ in terms of:
• Degree of mobility between social strata
• Significance attached to social strata in a business context
©McGraw-Hill Education
• Social Structure 6
Social Stratification continued
• Four basic principles of social stratification
- It is a trait of society, not a reflection of individual differences
- It carries over from one generation to the next
- It is generally universal but variable
- It involves not just inequality but also beliefs
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• Social Structure 7
Social Stratification continued
• Social mobility: the extent to which individuals can move
out of the strata they are born into
• Caste system: social position is determined by the family into
which a person is born, and change in that position is unlikely
• Class system: position a person has by birth, but can be changed
through achievement or luck
• Social mobility in class system varies from society to society
©McGraw-Hill Education
• Social Structure 8
Social Stratification continued
• Significance
• Class consciousness: people perceive themselves in terms of class
background
• Shapes relationships with members of other classes
• Evident in the United Kingdom and India
• Antagonism between labor and management can raise the costs of
doing business
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• Religious and Ethical Systems 1
Religion: system of shared beliefs and rituals that are
concerned with the realm of the sacred
Ethical system: set of moral principles, or values, that
are used to guide and shape behavior
Religions with the greatest following are:
• Christianity (2.20 billion adherents)
• Islam (1.60 billion adherents)
• Hinduism (1.10 million adherents)
• Buddhism (535 million adherents)
• Confucianism shapes culture in many parts of Asia
©McGraw-Hill Education
• Map 4.1 World Religions
Source: “Map 14,” in Allen, John L., and Sutton, Christopher J., Student Atlas of World Politics, 10th ed. New York, NY: McGraw-Hill Companies, Inc., 2013.
Jump to long description in appendix
©McGraw-Hill Education
• Religious and Ethical Systems 2
Christianity
• Most widely practiced religion
• In 1904, Max Weber suggested that the Protestant work
ethic was the driving force of capitalism
• Focus on hard work, wealth creation, and frugality
• Protestantism gave individuals more freedom to develop
own relationship with God, which may have paved way to
economic freedom
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• Religious and Ethical Systems 3
Islam
• Adherents of Islam are referred to as Muslims
• One true omnipotent God, Allah
• Those who forgo worldly ambitions to seek the favor of
Allah may gain the greater treasure—entry into paradise
• In Western media, Islamic fundamentalism is associated
with militants, terrorists, and violent upheavals
• Fundamentalists have gained political power in many
Muslim countries and tried to make Islamic law the law of
the land
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• Religious and Ethical Systems 4
Islam continued
• Economic Implications of Islam
• Koran establishes explicit economic principles many of which are
pro-free enterprise
• Under Islam, people do not own property but only act as trustees
for God and thus must take care of what they are entrusted with
• Stresses living up to contractual obligations, keeping one’s word,
and abstaining from deception
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• Religious and Ethical Systems 5
Economic Implications of Islam continued
• Prohibits payment or receipt of interest
• Mudarabah is similar to profit sharing
• Murabaha includes a markup price for the bank
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• Religious and Ethical Systems 6
Hinduism
• World’s oldest religion
• Moral force in society requires acceptance of certain
responsibilities called dharma
• Believe in reincarnation and karma
• Individuals can eventually achieve nirvana
• Economic Implications of Hindisusm
• Max Weber: Hinduism does not foster entrepreneurism
• Modern India is a dynamic entrepreneurial society
• Mahatma Gandhi embodied Hindu asceticism
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• Religious and Ethical Systems 7
Buddhism
• Suffering originates in people’s desire for pleasure
• Stresses spiritual growth and afterlife, rather than
achievement while in this world
• The Noble Eightfold Path
• Does not support caste system
• Recent trend of “Zen” orientation into Western businesses
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• Religious and Ethical Systems 8
Confucianism
• Until 1949, official ethical system of China
• Not a religion
• High moral and ethical conduct and loyalty to others
• Attain personal salvation through right action
• Three key teachings of Confucianism: loyalty, reciprocal
obligations, and honesty
• May lead to a lowering of the cost of doing business in Confucian
societies
©McGraw-Hill Education
• Language 1
Spoken Language
• Countries with more than one spoken language often have
more than one culture
• Chinese is the mother tongue of the largest number of people in
the world
• English is the most widely spoken language in the world and is
becoming the language of international business
©McGraw-Hill Education
• Can You Speak the Most Important
LMaanstgeurinagg yeousr? own native language is important to doing
business in your home country. Mastering the language of a
foreign country is also an added value in any cross-cultural
relationship. English leads the way in terms of business
languages, but which languages are important after English?
Spanish? No, not necessarily. The three languages that are
important for business after English are Mandarin Chinese,
French, and Arabic. Spanish is fifth, so it is clearly important, but
not as useful as English, Mandarin, French, and Arabic because
of the number of people who speak these languages. Do you
agree with the rank order of these languages? Why or why not?
Source: S. Kim, “Top 3 Useful Foreign Languages for Business Excludes Spanish,” ABC News, September 1, 2011,
http://abcnews.go.com/business/t/blogEntry?id=14427844.
©McGraw-Hill Education
• Language 2
Unspoken Language
• Nonverbal cues
• Examples include facial expressions and hand gestures
• Personal space is the customary distance between two people
• Many nonverbal cues are culturally bound and may be
interpreted differently, resulting in misunderstandings
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• Education
Formal education teaches the language, conceptual, and
technical skills that are indispensable in modern society
Educational opportunities can provide a competitive advantage
and make a country more or less attractive for expanding
businesses
• Porter points to Japan’s excellent education system in explaining its
postwar economic success
The general education level of a country is a good indicator of
the types of products that might sell or the types of promotional
materials that might be successful
©McGraw-Hill Education
• Culture and Business 1
Geert Hofstede isolated five dimensions that
summarized different cultures - Power distance
- Individualism versus collectivism
- Uncertainty avoidance
- Masculinity versus femininity
- Long-term versus short-term orientation
• A move to add a sixth dimension: indulgence versus
restraint
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• Culture and Business 2
Hofstede’s work has been criticized
• Assumes a one-to-one relationship between culture and
nation-state
• Research may be culturally bound
• Informants only worked within a single industry and
within one company
• Example: computers within IBM
• Certain social classes excluded from research
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