The Cultural Environment

of International Business

1
 Learning Objectives

3.1 Understand culture and cross-cultural risk.

3.2 Learn the dimensions of culture.
3.3 Appreciate the role of language and religion in
culture.
3.4 Appreciate culture’s effect in international
business.
3.5 Learn models and explanations of culture.
3.6 Understand managerial implications of culture.
3-2
The Four Risks of International Business

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 Key Concepts
• Culture: The values, beliefs, customs, arts, and other
products of human thought and work that characterize
the people of a given society.
• Cross-cultural risk: A situation or event where a
cultural miscommunication puts some human value at
stake. It arises in environments comprised of unfamiliar
languages, and unique values, beliefs, and behaviors
• Socialization: The process of learning the rules and
behavioral patterns appropriate to one's society.
• Acculturation: The process of adjusting and adapting
to a culture other than one's own; commonly
experienced by expatriate workers.
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 Culture Is…

• Not right or wrong – It is relative. There is no

cultural absolute. Different nationalities simply
perceive the world differently.

• Not about individual behavior – It is about groups.

It is a collective phenomenon of shared values and
meanings.

• Not inherited – It derives from the social

environment. We are not born with a shared set of
values and beliefs; we acquire them as we grow up.
3-5
Essential Elements of Culture

3-6
 Key Dimensions of Culture
• Values represent a person’s judgments about what
is good or bad, acceptable or unacceptable,
important or unimportant, and normal or abnormal.
• Attitudes and preferences are developed based on
values, and are similar to opinions, except that
attitudes are often unconsciously held and may not
have a rational basis.
Examples
Values common to Japan, North America, and
Northern Europe include hard work, punctuality, and
wealth acquisition.
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Culture
as an
Iceberg

3-8
 Manners, Customs, Perceptions of Space

• Manners and customs refer to ways of behaving

and conducting oneself in public and business
situations. They are present in eating habits,
mealtimes, work hours and holidays, drinking and
toasting, appropriate behavior at social gatherings
(kissing, handshaking, bowing), gift-giving
(complex), the role of women, and much more.

• Perceptions of space reflects each culture’s

orientation about personal space and
conversational distance.
3-9
 Perceptions of Time
• Time dictates expectations about planning,
scheduling, profit streams, and what constitutes
tardiness in arriving for work and meetings.
• Monochronic - A rigid orientation to time in which the
individual is focused on schedules, punctuality, time as a
resource, time is linear, “time is money”. For example,
people in the U.S. are hurried and impatient.
• Polychronic - A flexible, non-linear orientation to time in
which the individual takes a long-term perspective; time
is elastic, long delays are tolerated before taking action.
Punctuality is relatively unimportant. Relationships are
valued. Examples: Africa, Latin America, Asia.
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 Symbolic and Material Productions

• A symbol can be letters, figures, colors, or other

characters that communicate a meaning. Examples
include flags, anthems, seals, monuments, and
even historical myths.

• Material productions are artifacts, objects, and

technological systems that people construct to
function within their environments.

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 Social Structure

Social structure is the pattern of social

arrangements and organized relationships that
characterize a society. Society is organized as:
•Individuals
•Family
•Reference groups
•Social stratification
•Social mobility
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 Literacy Rates in Selected Countries
(% of those who can read)

Source: Central Intelligence Agency, The World Factbook 2015 (Washington DC Central Intelligence Agency, 2015)
3-13
 Language as a Key Dimension of Culture

• The “mirror” or expression of culture; essential for

communications; provides insights into culture.

• Linguistic proficiency is a great asset in

international business.

• Language has both verbal and nonverbal

(unspoken, facial expressions and gestures).

• There are nearly 7,000 active languages, including

over 2,000 in each of Africa and Asia.
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Most Common Primary Languages in the World

Sources: Based on M. Paul Lewis et al. (ed.), Ethnologue: Languages of the World, 18th ed. (Dallas, TX: SIL
International, 2015) at http://www.ethnologue.com; and CIA World Factbook, 2015, at http://www.cia.gov
3-15
 Idioms
• An expression whose symbolic meaning differs from
its literal meaning; You can’t understand it simply by
knowing what the individual words mean. Examples:
-Australia: “The tall poppy gets cut down”
(importance of not being showy
or pretentious)
-Thailand: “If you follow older
people, dogs won’t bite
you” (wisdom)
-Japan: “The nail that sticks
out gets hammered down”
(group conformity) 3-16
Idioms that Symbolize Cultural Values

3-17
 Blunders in International Advertising
Firm and Location Intended Slogan Literal Translation

Parker Pen in Latin “Use Parker Pen, “Use Parker Pen, avoid
America avoid pregnancy!”
embarrassment”
Pepsi in Germany “Come Alive with “Come out of the grave
Pepsi” with Pepsi”
Pepsi in Taiwan “Come Alive with “Pepsi brings your
Pepsi” ancestors back from
the dead”
Fisher Body in “Body by Fisher” “Corpse by Fisher”
Belgium (car
exteriors)
Salem cigarettes in “Salem-feeling Free” “Smoking Salem
Japan makes your mind feel
free and empty”
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 Meaning Differences
between U.S. and British English
Word Meaning in U.S. English Meaning in British
English

Redundant repetitive fired or laid off

Scheme a somewhat devious plan a plan

Sharp smart, clever conniving, unethical

Windscreen a screen that protects automobile windshield
against the wind

To table to put an issue on hold to take up an issue

To bomb to fail miserably to succeed grandly

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Nonverbal Communications

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 Religion
• A system of common beliefs or attitudes regarding
a being or system of thought that people consider
sacred, divine, or the highest truth; and the
associated moral values, traditions, and rituals.

• Influences culture, and therefore business and

consumer behavior.

• Example: The “protestant work ethic” emphasizes

hard work, individual achievement, and a sense that
people can control their environment - the
underpinnings for the development of capitalism.
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 World Religions

Sources: Based on http://www.godweb.org/religionsofworld.htm and http://www.mapsofworld.com/religion-map.htm

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World Religions

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 Role of Religion in Islamic Societies
• Islam is the basis for government, legal and social
systems. As Muslims view God’s will as the source of
all outcomes, they are relatively fatalistic and reactive.

• Islam’s holy book, the Qur’an, prohibits drinking

alcohol, gambling, usury, and “immodest” exposure.
The prohibitions affect firms dealing in various goods.
Examples
•Nokia launched a mobile phone that
shows Muslims the direction towards
Mecca, Islam’s holiest site.
•Heineken rolled out the non-alcoholic
malt drink Fayrouz.

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 In business, culture affects:

• Managing employees.
• Communicating and dealing with distributors and
other business partners.
• Negotiating and structuring business ventures.
• Developing products and services.
• Preparing advertising and promotional materials.
• Preparing for international
trade fairs.
• Interacting with current and
potential customers.
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Perceived Cultural Attributes of Mexico and the USA

SOURCES: Based on Geert Hofstede, Culture’s Consequences (Beverly Hills, CA: Sage, 1980); Boye De Mente, The
Mexican Mind (Beverly Hills, CA: Phoenix Books, 2011); Lucila Ortiz, A Primer for Spanish Language, Culture and
Economics (Bloomington, IN: Xlibris, 2011)
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Mexico and the United States (cont’d)

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 Interpretations of Culture
• Cultural Metaphors refer to a distinctive tradition or
institution strongly associated with a society; a guide to
deciphering attitudes, values, and behaviors.
• American football represents systematic planning,
strategy, leadership, and struggling against rivals.
• The Swedish stuga (a sum
cottage) represents the love
of nature and desire for
individualism, in Sweden.

• The Spanish bullfight reflects

the importance of ritual, style,
courage, and pride in Spain. 3-28
 E. T. Hall’s High- and Low-Context Cultures

• Low-context cultures rely on explicit explanations,

with emphasis on spoken words. Such cultures
emphasize clear, efficient, logical delivery of verbal
messages. Communication is direct. Agreements
are concluded with specific, legal contracts.
• High-context cultures emphasize nonverbal or
indirect language. Communication aims to promote
smooth, harmonious relationships. Such cultures
prefer a polite, “face-saving” style that emphasizes a
mutual sense of care and respect for others. Care is
taken not to embarrass or offend others.
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Hall’s High- and Low-Context Typology of Culture

Source: Based on Beyond Culture by Edward T. Hall, copyright © 1976, 1981 by Edward T. Hall. Used by permission of
Doubleday, a division of Random House, Inc. For online information about other Random House, Inc. books and authors, see
the Internet Web Site at http://www.randomhouse.com Mark Cleveland, Michel Laroche, and Nicolas Papadopoulos, “You are
what you speak? Globalization, multilingualism, consumer dispositions and consumption,” Journal of Business Research, 68
No. 3 (2015), pp. 542–552.
Donghoon Kim, Yigang Pan, and Heung Soo Park,“High- Versus Low-Context Culture: A Comparison of Chinese, Korean and
American Cultures,” Psychology & Marketin, 15 No. 6 (1998), pp. 507–521.

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 Ethical Connections
• Ethical values vary by culture. Consider two scenarios
given to students.
• In scenario one, a car salesman failed to inform his
superiors about a serious engine problem of a car he had
received as trade-in on a new car sale.
• In scenario two, a dealership neglected to fully repair a
car transmission under warranty in the hope of securing
lucrative repair work after the warranty expired.
• Students from China and Russia felt relatively little harm
had been done in these scenarios. Students from Finland
and South Korea judged the scenarios to be unethical.
Source: M. Ahmed, Y. Kung; J. Eichenseher, “Business Students’ Perception of Ethics and Moral Judgment,” Journal of
Business Ethics, 33 (2003): 89–102.
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 Hofstede’s Typology of National Culture

• Individualism versus collectivism refers to

whether a person primarily functions as an
individual or within a group.
• In individualistic societies, each person emphasizes his
or her own self-interest; competition for resources is the
norm; individuals who compete best are rewarded.
Examples: Australia, Britain, Canada, and the U.S.
• In collectivist societies, ties among individuals are
important; business is conducted in a group context; life
is a fundamentally cooperative experience; conformity
and compromise help maintain harmony. Examples:
China, Panama, Japan, South Korea.
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 Hofstede’s Typology (cont’d)
• Power distance describes how a society deals
with inequalities in power that exist among people.
• High power distance societies exhibit big gaps between
the weak and powerful; in firms, top management tends
to be autocratic, giving little autonomy to lower-level
employees. Examples: Guatemala, Malaysia,
Philippines, and several Middle East countries.
• Low-power distance societies have small gaps between
the weak and powerful. Firms tend toward flat
organizational structures, with relatively equal relations
between managers and workers. For example,
Scandinavian countries instituted various systems to
ensure socioeconomic equality.
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 Hofstede’s Typology (cont’d)

• Uncertainty avoidance refers to the extent to which

people can tolerate risk and uncertainty in their lives.

• High uncertainty avoidance societies create
institutions to minimize risk and ensure security.
Firms emphasize stable careers and regulate worker
actions. Decisions are made slowly. Examples:
Belgium, France, Japan
• In low uncertainty avoidance societies, managers are
relatively entrepreneurial and comfortable with risk.
Firms make decisions quickly. People are
comfortable changing jobs. Examples: Ireland,
Jamaica, U.S. 3-34
 Hofstede’s Typology (cont’d)

• Masculinity versus femininity refers to a society’s

orientation based on traditional male and female
values.
• Masculine cultures value competitiveness, ambition,
assertiveness, and the accumulation of wealth. Both men
and women are assertive, focused on career and earning
money. Examples: Australia, Japan.
• Feminine cultures emphasize nurturing roles,
interdependence among people, and caring for less
fortunate people – for both men and women. Examples:
Scandinavian countries, where welfare systems are
highly developed, and education is subsidized.
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 Hofstede’s Typology (cont’d)

• Long-term vs. short-term orientation describes the

degree to which people and organizations defer
gratification to achieve long-term success.
• Long-term orientation emphasizes the long view in
planning and living, focusing on years and decades.
Examples: Traditional Asian cultures, such as China,
Japan, and Singapore, which base these values on the
teachings of the Chinese philosopher Confucius (500
B.C.), who espoused long-term orientation, discipline,
hard work, education, and emotional maturity.
• Short-term orientation is typical in the United States and
most other Western countries.
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 Hofstede’s Typology (cont’d)

• Indulgence versus restraint describes the degree to

which people in a society attempt to control their
impulses and desires.
• Members of indulgent societies allow relatively free
gratification of their basic and natural human desires
related to having fun and generally enjoying life.
• Restrained societies believe that such gratification
should be curbed and regulated by strict norms.
• For example, Denmark, Mexico, and the U.S. score
high on indulgence. China, Iraq, and South Korea
score high on restraint.
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 Deal vs. Relationship Orientation

• In deal-oriented cultures, managers focus on the task

at hand, are impersonal, typically use contracts, and
want to just “get down to business.” Examples:
Australia, Northern Europe, and North America.

• In relationship-oriented cultures, managers value

affiliations with people, rapport, and getting to know
the other party in business interactions. Relationships
are more important than individual deals; Trust is much
valued in business agreements. Examples: China,
Japan, Latin American countries. It took nine years for
Volkswagen to negotiate a car factory in China.
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 Guanxi: Important in Business in China

• Refers to social connections and relationships

based on mutual benefits.
• Emphasizes reciprocal exchange of favors as well
as mutual obligations.
• Rooted in ancient Confucian philosophy, which
values social hierarchy and
reciprocity.
• Engenders trust, thereby
serving as a form of
insurance in a potentially
risky business environment.
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National, Professional, and Corporate Culture

Source: Based on V. Terpstra and K. David, Cultural Environment of International Business, 3rd ed. (Cincinnati, OH:
South-Western,1991).
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 Managerial Orientations

• Ethnocentric orientation: Using our own culture

as the standard for judging other cultures.
• Polycentric orientation: A mindset in which the
manager develops a greater affinity for the country
in which he or she works than for the home country.
• Geocentric orientation: A global mindset in which
the manager is able to understand a business or
market without regard to national boundaries.

Managers should strive for a geocentric orientation.

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 Culture is linked with particular
groups based on various factors, including:

• Geography. Different levels – the world, the nation, the

region, cities – elicit unique cultural perspectives.
• Ethnicity. For example, people of African, Indian, and
Latino heritage tend to perceive reality differently.
• Gender. Men and women often experience the world
differently.
• Age. Seniors, baby boomers, teenagers, and children
perceive their worlds differently.
• Language. Language both reflects, and is reflected by,
cultural differences.
• Occupation. Perspectives differ among blue collar
workers, professionals, or artists
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 Managerial Guidelines for
Cross-Cultural Success

• Acquire factual and interpretive knowledge

about the other culture; try
to speak their language.

• Avoid cultural bias.

• Develop cross-
cultural skills, such
as perceptiveness,
interpersonal
skills, adaptability
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 Managerial Guidelines (cont’d)
• Self-reference criterion: The tendency to view other
cultures through the lens of one's own culture-
understanding this is the first step.
• Critical incident analysis: A method for analyzing
awkward situations in cross cultural interactions by
developing empathy for other points of view.
1. Identify situations where you need to be culturally aware
to interact effectively with people from another culture.
2. When confronted with “strange” or awkward behavior,
discipline yourself to not make judgments.
3. Develop your best interpretation of the foreigner’s
behavior, and formulate your response.
4. Learn from this process and continuously improve. 3-44
 Personality Traits for
Cross-Cultural Proficiency
• Tolerance for ambiguity: Ability to tolerate uncertainty
and lack of clarity in the thinking and actions of others.
• Perceptiveness: Ability to closely observe and
comprehend subtle information in the speech and
behavior of others.
• Valuing personal relationships: Ability to appreciate
personal relationships; which are often more important
than achieving one-time goals or “winning” arguments.
• Flexibility and adaptability: Ability to be creative in
devising innovative solutions, be open-minded about
outcomes, and show “grace under pressure”.
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