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Cultural Influences on Global Business
3-1 Culture Around the World
3-2 Culture and Social Organizations
3-3 Communication Across Cultures
3-4 Values Around the World
CHAPTER 3
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Cultural Influences in International Business
A culture is a system of learned, shared, unifying, and interrelated beliefs, values, and assumptions.
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Cultural Influences in International Business
6 Determinants of CultureSocial StructureLanguageEducationEconomic PhilosophyPolitical PhilosophyReligion
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Social Structure
Hierarchical social categoriesCaste System
Developed in IndiaBased on birthChanges in position unlikely
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Social Structure
Hierarchical social categoriesClass System
Based on achievement or luckCan change your position
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Language
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Top 5 Major World LanguagesMandarin Chinese 935M
Spanish 390M
English 365M
Hindi 295M
Arabic 280M
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Language Differences
English is widely considered the language of international businessMore people use English to conduct business than
any other languageAdvantages of using English
Understood by manyIdeas can be expressed in many waysLarge number of business-related wordsConcise and precise
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Education
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Increased Literacy Stronger WorkforceStronger Workforce Greater InnovationGreater Innovation Competitive
AdvantageCompetitive Advantage More Goods &
ServicesMore Goods & Services Stronger
Economy
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Education
Rank CountryGraduation
Rate Rank CountryGraduation
Rate1 Portugal 96 14 Denmark 852 Slovenia 96 15 Poland 853 Finland 95 16 Czech Republic 844 Japan 95 17 Germany 845 United Kingdom 92 18 Italy 816 Ireland 91 19 Slovakia 817 Norway 91 20 Canada 798 New Zealand 90 21 United States 769 Switzerland 90 22 Spain 74
10 Iceland 89 23 Sweden 7411 Israel 89 24 Luxembourg 6912 Korea, South 89 25 Chile 6813 Hungary 87
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Organization for Economic Cooperation & Development
How does the US compare to the rest of the world?
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Economic Philosophy
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Command EconomyQuantity and price of goods & services produced
determined by governmentPros: everyone has a job and benefits; can make a dramatic
change in a short time on production of goodsCons: consumer goods rank low on priority list, few consumer wants
are met; lack of incentive to work hard
Also known as CommunismExamples: North Korea, China, Cuba
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Economic Philosophy
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Market EconomyGoods & services produced determined by supply and
demandPros: produce goods & services people want and need; freedom of
choice; income: input ratio; competition keeps prices lowerCons: wealth of economy not equally distributed
Also known as CapitalismExamples: US, Japan, Canada, Great Britain
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Economic Philosophy
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Mixed EconomyPart Command / Part Market Economy
Government owns major industries; allows for private ownership of other businesses
Pros: gov’t and private business work together; insurance/social security benefits provided
Cons: high tax rates; smaller spendable income; discourages private business
Also known as SocialismExamples: Sweden, France
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Political Philosophy
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Collectivism Philosophy that gives a group priority over each
individual in itAsks what’s best for society
Individualism Philosophy that favors the freedom of action for
individuals over collective or state controlAsks what’s best for individual
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Political Philosophy
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Totalitarianism Philosophy that does things the way they have always
been doneAsks what’s best for the single ruler
Democracy Philosophy that governs an entire population, typically
through elected representativesAsks what’s best for the country
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Religion
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Christianity2.1 B followersEurope, the AmericasEconomic Implications
Protestant work ethicFocus on hard work, wealth creation, and frugality
Driving force of Capitalism
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Religion
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Islam 1.5 B followers Middle East Economic Implications
People do not own property, but only act as stewards for GodSupportive of business, but the way business is practiced is
prescribedBusinesses that are perceived to be making a profit through the
exploitation of others are unwelcome (Islamic Fundamentalists – World Trade Center
Islamic practices that could effect business interactions: Prayers taken 5 times a day Women dress in a certain manner Port and alcohol are forbidden
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Religion
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Hinduism900 M followersIndian sub-continentEconomic Implications
Valued by their spiritual rather than material achievementsPromotion and adding new responsibilities may not be the
goal of an employee, or may be infeasible due to the employee’s caste
Hindu practices that could effect business interactions:Consider the cow to be sacred
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Religion
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Buddhism376 M followersCentral & Southeast AsiaEconomic Implications
Lack of emphasis on entrepreneurial behaviorHowever, does not support caste system, so is room for
mobility and increased innovation
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Religion
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ConfucianismChina3 key teachings:
LoyaltyReciprocal obligationsHonesty
May all lead to a lowering of the cost of doing business in Confucian societies
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Family Relationships
Family unitsNuclear family
Parents and unmarried children living together Traditional English family In US, due primarily to
Suburban exodus Social Security/Medicare making older adults financially
independent Partly responsible for the birth of industrialization, free-market
capitalism, and liberalism
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Family Relationships
Family units Extended family
Nuclear family plus other relatives Also known as Multigenerational families Married children, grandchildren, aunts, uncles, etc. Basic family unit in many cultures
More common in Asia, Middle East, Africa, Eastern/Southern Europe, Latin America
On rise in other countries due to Delayed marriage Greater longevity More grown children (Baby Boomers) Medicare cuts Recession/Job Dissatisfaction
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Family Relationships
Family-Work RelationshipsNepotism
Favoritism granted in politics or business to relatives regardless of merit
Strong in the Arab world, Asia, and Latin America “If I cannot hire and trust my own family, just who can I trust?”
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Society’s Institutions
EducationGender rolesMobility
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Primary Worker Majority of Chileans believe that women should limit themselves
to the roles of mother and wife 5.2 Million stay-at-home Moms in US # of women working per 100 men throughout world
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3Gender Roles
Country Name 2013 Country Name 2013Mozambique 103 Hungary 75Rwanda 101 Brazil 74Tanzania 98 Japan 69Madagascar 96 Italy 67Norway 89 Cuba 62Canada 87 Mexico 56Kenya 86 United Arab Emirates 51Israel 84 Turkey 42Switzerland 83 India 34United States 82 Pakistan 30China 82 Saudi Arabia 26United Kingdom 81 Iran, Islamic Rep. 23Spain 80 Iraq 21Russian Federation 80 Afghanistan 20
CHAPTER
Child Care In Sweden, all working parents are entitled to 16 months paid
leave per child To encourage greater paternal involvement in childrearing, a
minimum of 2 of those months is required to be used by the "minority" parent, usually the father.
Roles in International Business
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3Gender Roles
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Willingness to moveUS statistics (outdated information, but still relevant)
Assume population of 282B people (318B 2014)40B moved, 14.19% annually
23.4B moved within the same county 7.7B moved to a different county within the same state 7.6B moved to a different state 1.3B moved to a different country
Ties to birthplace or region31% of Generation X workers said they were not
willing to move for the right job
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3Mobility
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Direct and Indirect Communication
Contexting refers to how direct or indirect communication isA low-context culture is one that
communicates very directlyA high-context culture is one that
communicates indirectly
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Nonverbal Communication
Body languageAppearanceEye contactTouchingPersonal space
ColorNumbersEmblemsSmells
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Eye Contact Western Europe
Proper to maintain eye contact during a business exchange More direct/flirtatious in a social exchange
Middle East Between men and women
Brief contact, if any Between men and men
Shows sign of interest/truthfulness
Asia, Latin America and AfricaExtended eye contact can be taken as challenging
authoritySporadic or brief contact best
Especially between people of different social registers
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Touching/Personal Space
Intimate distance for embracing, touching or whispering Close phase – less than 6 inches Far phase – 6 to 18 inches
Personal distance for interactions among good friends or family members Close phase – 1.5 to 2.5 feet Far phase – 2.5 to 4 feet
Social distance for interactions among acquaintances Close phase – 4 to 7 feet Far phase – 7 to 12 feet
Public distance used for public speaking Close phase – 12 to 25 feet Far phase – 25 feet or more
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ColorCultural Meanings of Color
Red Yellow GreenWestern Energy, excitement, action
DangerLove, passion
Happiness, joyHopeCowardiceCaution
Lucky colorSpring, new birthNatureJealousyGreedMoney
Eastern ProsperityGood fortuneWorn by bridesSymbol of joy
SacredImperial
New life, regeneration, hopeFertility
China Good luck & celebrationVitality, happiness, long lifeWedding colorFestive occasions
SacredImperial, royaltyHonorMasculine color
New life, regeneration, hopeFertilityDisgraceExorcismNot good for packaging
India Purity, fertility, love, beautyWealthWedding ceremoniesMarried womanFear & fire
Sacred & auspiciousSymbol of a merchant
Color of IslamHopeNew beginningsHarvestVirtue
Japan LifeAnger & danger
CourageBeauty & refinementAristocracyCheerfulness
Eternal lifeYouthfulnessFreshness
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Adjusting to Cultural Differences
EthnocentrismJudging another culture solely by the values
and standards of one’s own cultureThe belief that one’s culture is better than
other cultures
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Adjusting to Cultural Differences
Reactions to cultural differencesCulture shock
A feeling of uncertainty, confusion or anxiety that people experience when visiting, doing business in or living in a society that is different from their own
Can arise from a person’s unfamiliarity with local customs, language and acceptable behavior, since norms can vary significantly across cultures
Reverse culture shockThe shock suffered by some people when they return home
after a number of years overseas
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