Chapter 4
Differences in Culture
MGT 372 Lecture
By: Ms. Adina Malik (ALK)
Introduction
 Cross-cultural literacy (an understanding of how cultural differences
across and within nations can affect the way in which business is
practiced) is important to success in international business.
 Example: Case-McDonalds found that to succeed in India, they have to
play by the Indian rules.
 There may be a relationship between culture and the costs of doing
business in a country or region.
 Example: Class divisions (management and labor) in Great Britain led to
industrial disputes, thereby increased the cost of doing business during the
1960s and 1970s.
 Culture is not static, and the actions of MNEs can contribute to
cultural change.
 Example: McDonalds in India helped to change the dining culture there,
drawing people away from traditional restaurants to fast-food outlets.
What is 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.
 Values are the abstract ideas about what a group believe to be good,
right and desirable.
 Norms are the social rules and guidelines that prescribe appropriate
behavior in particular situations and can be further subdivided into
 Folkways (the routine conventions of everyday life/ rituals and symbolic
behavior): good social manner, appropriate dress code in a particular
situation, eating with correct utensils, neighborly behavior, etc.
 Mores (norms that are seen as central to the functioning of a society and to
its social life): they have much greater significance than folkways and violation
can bring serious justice such as theft, cannibalism, etc.
 A society is a group of people who share a common set of values and
norms.
What is Culture
 Example:
 Passage of time (United States and Northern European culture such as
Germany and Britain Vs. Arab, Latin and Mediterranean culture).
(folkways)
 Japanese business executive bow and present his/her business card with
the expectation of acknowledgement. (folkways)
 Drinking alcohol in in Saudi vs. USA (mores)
The Determinants of Culture
Social Structure
 A society's social structure is its basic social organization
Two dimensions to consider:
 the degree to which the basic unit of social organization is the
individual, as opposed to the group
 the degree to which a society is stratified (layered) into classes or
castes
Individuals and Groups
Individuals and Groups
Social Stratification
 All societies are stratified on a hierarchical basis into social
categories, or social strata (usually defined by characteristics such
as family background, occupation, and income)
 Societies differ in terms of :
 the degree of mobility between social strata
 the significance attached to social strata in a business context
Social Mobility
This refers to the extent to which individuals can move out of the strata into
which they are born.
 Caste system: A caste system is a closed system of stratification in which
social position is determined by the family into which a person is born.
Change of strata is not usually possible within lifetime. Some caste
system depends on occupation such as shoemakers, butchers, etc. There
were four main castes and several thousand sub-castes in India. The
system was banned in 1949.
 Refer to the Case Study: ‘Breaking India’s Caste System’
Social Mobility
 Class system: This is less rigid form of social stratification in which
social mobility is possible. Class system is open stratification in
which the position a person has by birth can be changed through
his or her own achievements and/or luck.
Example: British society has three different classes; upper class
(wealth, prestige and power accumulated through generations),
middle class (Upper middle class-Lawyers, accountants, doctors;
Lower middle class-bank tellers, school teachers, etc.) and working
class.
Significance
 From business perspective, the stratification of a society is significant if it
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affects the operation of business organization.
Class consciousness refers to a condition where people tend to perceive
themselves in terms of class background and this shapes their
relationship with members of other classes.
If social mobility is high, then people are less class conscious. Example:
USA has high mobility, so people are less class conscious and have limited
implication on business.
Contrarily, UK society is class conscious as social mobility is low.
Antagonism between labor and management can raise the costs of doing
business.
Religious and Ethical System
 Religion: A system of shared beliefs and rituals that are concerned with
the realm of the sacred
Ethical system: A set of moral principles or values that guide and shape
behavior.
Most of the world’s ethical systems are the product of religion. Different
religions have their own ethical system.
Example:
 Islam prohibits payment of interest. So banks operating in Islamic nations
should consider this.
 Religion may affect international business. E.g. McDonalds in India supply
mutton patty (Maharaja Mc) as beef is taboo in Hindu religion.
Women in Middle East cannot be involved in market research openly/
Single women can not work
Language
 Language can be divided into two major
elements; the spoken and unspoken
language.
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Spoken language
Chinese, English, Hindi, Russian & Spanish
are top languages as mother tongue.
English, French, Spanish and Chinese are
most widely spoken languages.
English is becoming the language of
international business. So it is important to
speak the widely spoken language.
However, knowledge of the local language
is beneficial, and in some cases, critical for
business success
Language
Unspoken Language
 Unspoken language refers to non-verbal
communication. Unspoken language,
such as gestures, body languages, facial
expressions, etc. play an important role.
 Failure to understand these non verbal
cues might create communication failure.
 Example smile is a sign of joy;
 thumbs up is a gesture to indicate ‘it’s
all right’ in America and Europe, while
this gesture is obscene in Greece.
 Personal space while talking to
someone
Education
 Education plays a dominant role as a determinant of
national competitive advantage. Availability of
skilled and educated workers seems to be a major
determinant of the likely economic success. E.g.
Japan
 According to Porter good education system is not
only a determinant of national competitive
advantage, but it is also an important factor guiding
the location choices of international business. E.g.
India’s IT industry.
 The general education level is in also the indicator of
the kind of products that might sell in a country and
the type of promotional material that should be
used. E.g. selling and promoting books become
difficult if 70% of the people of a country cannot
read.
 Countries that spend significant percentage of their
GNP on education are likely to prosper.
Culture and Workplace
Different countries have different work related values. Management
process and practices may need to vary according to culturally
determined work-related values.
Hofstede’s Theory of Culture
 He conducted the research during 1967-1973 as an IBM Psychologist
and included 100,000 employees of IBM in 40 countries.
 The purpose of the research was to identify difference of employees’
values and attitudes.
 The theory helped to compare and contrast between the nations. This is
the benchmark for other cultural theories.
 He identified four dimensions: Power Distance, Uncertainty Avoidance,
Individualism versus Collectivism & Masculinity versus Femininity.
Hofstede’s Theory of Culture
 Power Distance:
This dimension focused on how a society deals with the fact that
people are unequal in physical and intellectual capabilities.
High power distance societies let inequalities grow over time into
inequalities of power and wealth. (Hierarchical organizational
structure & bureaucracy)
Low power distance societies try to lower such inequalities as much
as possible.
(Encourage flat organization structure and increased cooperation)
Hofstede’s Theory of Culture
 Uncertainty Avoidance:
This dimension measures the extent to which different cultures
socialize their members into accepting ambiguous situations and
tolerating uncertainty.
High uncertainly avoidance culture values rules & regulation,
commitment, job securities and less entrepreneurial.
Low uncertainly avoidance culture values readiness to take risk and
resistance to accept change.
Hofstede’s Theory of Culture
 Individualism versus Collectivism: This dimension focuses on relationship
between the individual and his or her fellows. Individualism implies that
Individual achievement and freedom is highly valued. In societies where
collectivism is emphasized, ties between individuals are tight, people live
in extended families and everyone look after each other.
 Masculinity versus Femininity: This dimension looks at the relationship
between gender and work roles. In masculine cultures, gender roles are
sharply differentiated (men and Women have specific job), while in
feminine cultures, gender roles are less differentiated (no difference is
made between men and women in the same job).
Implications for Managers
 Culture is not constant; it evolves. Economic progress and
globalization seem to be two important engines of cultural
change.
 One danger confronting a company that goes abroad for the first
time is being ill-informed. Cross-cultural literacy is thus very
important.
 To develop cross-cultural literacy, international business need to
employ host country nationals, build a cadre of cosmopolitan
executives and guard against the danger of ethnocentric
behavior.
 The value system and norms of a country can affect the cost of
doing business in that country.