INTERNATIONAL BUSINESS

10E
By Charles W.L. Hill
CHAPTER 4

Differences in Culture
 HOW DO CULTURAL DIFFERENCES AFFECT
INTERNATIONAL BUSINESS?
• Understanding and adapting to the local cultural is important international
companies
• cross-cultural literacy - an understanding of how cultural differences across and
within nations can affect the way in which business is practiced
• A relationship may exist between culture and the costs of doing business
in a country or region
• MNEs can be agents of cultural change
 WHAT IS CULTURE?
• 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
where
• values are abstract ideas about what a group believes to be good, right, and
desirable
• norms are the social rules and guidelines that prescribe appropriate behavior in
particular situations
• Society - a group of people who share a common set of values and norms
 HOW ARE CULTURE, SOCIETY,
AND THE NATION-STATE RELATED?
• The relationship between a society and a nation state is not
strictly one-to-one
• Nation-states are political creations
• can contain one or more cultures
• Canada has at least three cultures – an Anglo culture, a French speaking “Quebecois” culture, and a
Native American Culture
• India

• A culture can embrace several nations

• the values and norms of a culture evolve over time
• American Culture with several societies – African American Culture, Cajun culture, Chinese
American culture, Indian culture, Irish American Culture, Hispanic Culture etc.
WHAT DETERMINES CULTURE?
 WHAT IS A SOCIAL STRUCTURE?
• Social structure - a society’s basic social organization
•A group is an association of two or more people 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
• individuals are involved in families, work groups, social groups, recreational
groups, etc.
 WHAT IS SOCIAL STRATIFICATION?
• All societies are stratified on a ranked basis into social
categories, or social strata
1. Social mobility - the extent to which individuals can
move out of the strata into which they are born
• caste system
• class system

2. The significance attached to social strata in business

contacts
• class consciousness
HOW DO RELIGIOUS AND ETHICAL SYSTEMS
DIFFER?
• Religion - shared beliefs and rituals that are concerned with the realm of the sacred
1. Christianity (Most widely practiced in the world. Catholic and Orthodox)

2. Islam (1.6 billion believers, 2nd largest in the world)

* Murabaha contract- Referred to as cost-plus financing.
*Mudarabaha contract- Special kind of partnership ( Profit sharing).

3. Hinduism (750 million believers, begins Indus Valley India more than 4000 years ago)
4. Buddhism (Sixth century B.C by Siddhartha Gautama)

5. Confucianism influences behavior and culture (Guanxi- relationship network supported by

reciprocal obligation, based on loyalty factor)
• Ethical systems - a set of moral principles, or values, that are used to guide and shape behavior
HOW DO RELIGIOUS AND ETHICAL SYSTEMS
DIFFER?
 WHAT IS THE ROLE OF LANGUAGE IN
CULTURE?
• Language - the spoken and unspoken (nonverbal communication such as
facial expressions, personal space, and hand gestures) means of
communication
• Chinese is the mother tongue of the largest number of people
• English is the most widely spoken language in the world and is also becoming the
language of international business
• but, knowledge of the local language is still beneficial, and in some cases, critical
for business success
• failing to understand the nonverbal cues of another culture can lead to
communication failure
 WHAT IS THE ROLE OF EDUCATION IN
CULTURE?
• Formal education is the medium through which individuals learn many of
the language, conceptual, and mathematical skills that are indispensable
in a modern society
• important in determining a nation’s competitive advantage
• Japan’s postwar success can be linked to its excellent education system
• general education levels can be a good index for the kinds of products that
might sell in a country
• E.g. impact of literacy rates
 HOW DOES CULTURE IMPACT THE
WORKPLACE?
• Hofstede’s dimensions of culture:
1. Power distance - how a society deals with the fact that people are
unequal in physical and intellectual capabilities
2. Uncertainty avoidance - the degree to which a nation avoids
uncertainty and risky actions
3. Individualism versus collectivism - the extent to which different cultures
socialize their members into accepting ambiguous situations and
tolerating ambiguity
4. Masculinity versus femininity -the relationship between gender and
work roles
HOW DOES CULTURE IMPACT THE
WORKPLACE?
Work-Related Values for 20 Countries
 HOW DOES CULTURE IMPACT THE
WORKPLACE?
• Hofstede
later expanded added a fifth dimension called
Confucian dynamism or long-term orientation
• captures attitudes toward time, persistence, ordering by status, respect
for tradition

• Japan, Hong Kong, and Thailand scored high on this dimension

• the U.S. and Canada scored low
 DOES CULTURE CHANGE?
• Culture evolves over time
• changes in value systems can be slow and painful for a society

• Social turmoil - an inevitable outcome of cultural change

• as countries become economically stronger, cultural change is particularly
common
• economic progress encourages a shift from collectivism to individualism
• globalization also brings cultural change