International
Business
Environments & Operations
Chapter 2
The Cultural Environments
Facing Business
2-1
Introduction
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Culture refers to the learned norms based on
values, attitudes, and beliefs of a group of people
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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
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It is important for companies to understand and
adjust to ever-changing operating environments.
every business function is subject to potential
cultural differences
2-2
Introduction
Cultural Factors Affecting International Business Operations
2-3
Knowing Culture
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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
2-4
Advantages of knowing and sensitivity
to Culture
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Companies need to decide when to make
cultural adjustments
Fostering cultural diversity can allow a company
to gain a global competitive advantage
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(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
2-5
Cultural Awareness

Learning the cultural differences
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Discuss the cause of cultural differences, rigidities, and
changes
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Consult with knowledgeable people at home and abroad
Go there directly and interact with people
Problem areas that can hinder managers’ cultural
awareness:
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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
2-6
Culture and the Nation-State

Nation as a point of reference
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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
2-7
How cultures Form and Change

Transformed from parent to child, teacher to
pupil, social leader to follower, and peer to peer
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By age 10, most children have their basic value systems
Both individual and collective values may evolve over
time
Sources of Change
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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.
2-8
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
2-9
Language:
Cultural Diffuser and Stabilizer

A common language within a country is a
unifying force. Language is an integral part of a
culture
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Therefore, linguistic changes are regulated
A shared language between nations facilitates
international business

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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

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English media is very influential in promoting US lifestyle
Hybrid tongue: intrusion of English into another
2-10
language: Spanglish and Chinglish
Religion: Cultural Stabilizer
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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.)
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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
2-11
Behavioral Practices Affecting Business
1- Social Stratification
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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
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an individual’s achievements and qualifications
an individual’s affiliation with, or membership in,
certain groups
2-12
Social Stratification
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Group affiliations can be
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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)
2-13
More on Social Stratification
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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
2-14
2- Work Motivation
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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
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masculinity-femininity index
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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
2-15
friendly social relationships, consider welfare
Work Motivation
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Hierarchy of needs theory
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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
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2-16
Relationship Preferences
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Relationship preferences interacting with
superiors/subordinates
Power distance
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high power distance implies little superiorsubordinate 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
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high individualism – welcome challenges
high collectivism – prefer safe work environment
2-17
Risk Taking Behavior
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Risk taking behavior differs across
cultures
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Uncertainty avoidance (preference for
‘known’) and handling uncertainty
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Trust (degree of trust among people)
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prefer to stay with the same employer; with clear job
instructions
High trust leads to investments and innovations
Future orientation
 delaying gratification (e.g., retirement plans)
Fatalism
 attitudes of self-determination versus belief
2-18
in pre-destined fate or will of God
Information and Task Processing
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Cultures handle information in different
ways
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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
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Obtaining and processing information
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Ordering and classifying (e.g., First name and surname)
2-19
Information and Task
Processing
Types of Cultures in how they prcoess
information and tasks
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Monochronic (work sequentially)
polychronic (work simultaneously on various tasks)
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Idealism (focus on whole and then
parts/issues/details
Pragmatism (focus on parts first and then
whole)
2-20
Selective Perceptions
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Selective in perceiving cues
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Color (e.g., colors of joy and sadness)
Depth (attention to details; vocabular)
Shape (decent or bold)
2-21
Communications
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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
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Prestige (perform services by oneself or
otherwise)
2-22
Communications
Body Language Is Not A Universal Language
2-23
Dealing with
Cultural Differences
Do managers have to alter their customary
practices to succeed in countries with
different cultures?
 Must consider
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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
2-24
Cultural Differences
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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
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Adaptation depends on the host and home country
culture
2-25
Dealing with
Cultural Differences
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Three company and management
orientations
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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
2-26
Strategies for Instituting Change
Value Systems
 Cost-Benefit Analysis of change
 Resistance to too much change
 Participation
 Reward Sharing
 Opinion Leadership
 Timing
 Learning Abroad
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2-27