THE ROLE OF CULTURE IN
INTERNATIONAL BUSINESS
Introduction:
 The need to avoid cultural misunderstanding is vital to
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successful international business expansion,
But it must be recognized that culture can affect many
aspects of corporate activity.
Comparative management – which looks specifically at
how management styles vary across national cultures.
The overall impact of culture on international business,
however goes right through an international companies
because,
It affects the core functions of HRM, marketing and
finance (also corporate strategies and organization culture)
What is Culture?
 Culture: the essential core of culture consists of
traditional ideas and specially their attached values.
 Culture affects beliefs, values and behavior and the
culture is shared and passes through the generations.
 Beliefs: Most obviously expressed in religion, but vary
across cultures: EXAMPLES
 Middle East: Islam is a very important influence
within society, Western societies which are
predominantly Christian, the influence of religion is
declining rapidly.
What is Culture?
 Values: the relative value attached to the individual
versus the group varies from across national cultures,
 And affects the process of social interaction.
EXAMPLE:
 Middle Eastern and Japanese societies place a strong
emphasis on the collective view.
 By contrast, in the US and UK, individual prospective
takes precedence over the collective view.
 Behavior: beliefs and values influence behavior, even
in small ways such as daily habits.
Comparing Cultures
 In comparing cultures, care must be taken on a
number of accounts, including:
 1- Cultures are not monolithic; but there are numerous
subcultures.
 2- The separation of cultural issues from economic and
political is complex, as all three factors interact to
influence views and beliefs.
 3- Defining the degree of difference between cultures
is not straightforward because recognition of
difference is a subjective issue.
Comparing Cultures
 4- As the level of international trade and travel
increases, cultures become increasingly intermingled
and this cultural diffusion may dilute the significance
of national cultures.
Alternative Classifications of
National Cultural Characteristics
 Hofstede: developed four dimensions which can be
used as a basis for comparison of national cultures:
 1- Individualism versus Collectivism.
 2- Power distance.
 3- Uncertainty avoidance.
 Masculinity versus femininity.
 EXPLAINED IN DETAIL ON THE NEXT SLIDES
Classifications of National Cultural
Characteristics - Hofstede
 1- Individualism versus Collectivism:
 Members of an individualist society enjoy the
challenge of hard work but demand alongside this the
right to a private life. (North America & Western
Europe)
 The collective societies emphasize the right of
everybody to share access to good training and
remuneration. (Latin America & Africa)
Classifications of National Cultural
Characteristics - Hofstede
 2- Power distance:
 Measures the degree of tolerance for differences in power in
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given national cultures.
In the cultures which score highly on power distance ,
managers tend to have greater over their subordinates,
And exercise of this power is accepted.
Examples:
Poorer nations are characterized by high power distance
combined with collectivism.
While richer Western countries which are individualist and
low on power distance.
Classifications of National Cultural
Characteristics - Hofstede
 3- Uncertainty avoidance:
 Measures the extent to which people are nervous of
the future and what may / may not happen.
 Cultures which score highly on uncertainty avoidance
have a preference for trying to predict the future, and
 A general dislike of uncertainty and ambiguity in
managerial and social situations.
Classifications of National Cultural
Characteristics - Hofstede
 4- Masculinity versus femininity:
 Here there is a stereotype.
 Masculine being used to describe a society which
promotes a ‘macho’ norms and values of ability and
earning power.
 Feminine cultures place a high value on interpersonal
relationship, caring and the overall of quality of life.
 Japan was found to be the most masculine and Sweden
the most feminine.
Classifications of National Cultural
Characteristics
 The works of the following:
 Hall and Hall.
 Trompenaars.
 Lewis.
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Implications For Management
 If one accepts the view that national cultural
characteristics influence people’s behavior and beliefs,
then
 It is reasonable to expect that this will also mean that
management styles are not common throughout the
world.
 The differences of cultures can be narrowed down by
the creation of clusters of countries which
demonstrate similar characteristics.
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Se Figure 4.1 (Page 80) Displayed on next slide
Implications For Management
 Figure 4.1 demonstrates that there is a level of cultural
affinity between groups of nations, and
 So a general understanding of management practices
is made easier if one realizes that it is only necessary to
grasp the key characteristics of the seven groups.
 This is not, of course, to say that the Russians are
exactly like the Latvians.
The Impact of Culture on
International Marketing
 One of the major issues for international marketing
managers is the extent to which it is possible for an
international company to
 Sell identical products / services across the world.
 Maintaining a standard product design helps to keep
costs down,
 But it also fails to recognize that customer tastes
/needs may vary from one country to another.
The Impact of Culture on
International Marketing
 In practice, culture might affect all of the following
aspects of marketing:
 1- Product.
 2- Price.
 3- Promotion.
 4- Place
The Impact of Culture on
International Marketing:
 1- Product:
 It is very important if you are a company such as
Uniliver, marketing washing powder across the world.
 If you try and sell a powder that is ineffective at the
normal local temperature,
 You will not find many customers. Consequently,
 The way in which products are linked into culture may
actually be quite subtle and require extensive local
research in order to ensure marketing success.
The Impact of Culture on
International Marketing:
 2- Price:
 Price is a cultural issue because it needs to be matched to
the level of economic development in a country.
 3- Promotion:
 In practice, the most effective form of promotion will be
culturally influenced.
 In the less developed world, billboard and radio advertising
are likely to be more effective media.
 In contrast, in rich countries such as the USA, the use of
the internet as a prime choice for advertisements is now
commonplace.
The Impact of Culture on
International Marketing:
 4- Place:
 As the internationalization of business increases, place
may become less important.
 Nonetheless, sometimes, especially food products,
tend to be purchased in different places according to
national culture.
Human Resource Management
 In a company that operates across international
boundaries, it is likely that the staff will be of mixed
nationalities and so
 This
creates
the
possibility
for
cultural
misunderstandings.
 In recruitment, some cultures will operate a very
formalized recruitment process,
 Based on the specification of particular qualifications
for each job and interviews and tests to assess the
relative ability of applicants.
Human Resource Management
 In other cultures, the method of recruitment may be
more informal,
 Based on employee network, educational background
or personal recommendation.
 Familial societies such as those of Africa, Asia and
Arabia view it as a personal duty to use one’s position
to help other family members obtain work.
 Although such an approach would be deemed wholly
inappropriate and unfair in the west.
Operations Management
 The richer and more developed societies are likely to
have access to more sophisticated production
technologies than
 Those which are poorer and with a population that is
less well educated.
 In addition to the technology of production itself,
there is also the question of how sophisticated is the
information system that supports it.
Finance
 The sources that may be used by companies to expand
their business tend to vary from country to country,
 As they reflect the political economy of the nation as
well as its state of economic development.
 In some countries the usual form of business finance is
bank borrowing, with the loans often underwritten by
the state – Japan and Germany.
 In contrast, businesses in the USA and UK are much
more reliant of raising money via the sale equity shares
in the stock market.