Introduction to International Business

David J. Boggs, Ph.D.Cultural Environment

International Business and Globalization

IB has grown rapidly and continues to grow rapidly

Activities are diverse and taken for many purposes

Different environment and activities than domestic-only competition

More difficult, complex, and risky than domestic business

In many industries it is no longer possible to be just a domestic competitor

Culture Culture is the “set of values, beliefs,

rules, and institutions held by a specific group of people”

It is learned and shared, its elements are interrelated, and it defines group boundaries

Subcultures exist within larger cultural contexts

One can acquire cultural literacy Ethnocentricity is a belief that one’s own

culture is universally superior to others

Elements of Culture Aesthetics – sense of beauty and

good taste Art, color, symbols, music, folklore

Attitudes and beliefs Time, directness, achievement, work,

change Manners (appropriate behavior) and

customs (traditional behaviors)

Elements of Culture Education

Literacy, science, math, trades, management

Legal and political system Secular versus religious Free or not free Planned versus laissez-faire

Elements of Culture Societal organization

Family structure, in-laws, extended family, divorce

Class mobility Associations by age, gender, common

interests, or otherwise

Elements of Culture Language and communication

Verbal and non-verbal Gestures and body language Office size and closed versus open

doors Conversational distance Touching Protecting traditional languages

Elements of Culture Religious beliefs

Christianity (Protestant, Catholic, Orthodox)

Hinduism and Sikhism in India Sunni and Shia Islam Judaism Animism Atheism Confucianism, Taoism, Buddhism, and

Shintoism in Asia

Less Obvious Elements of Culture Observed by Hofstede Individualism versus collectivism High/low power distance High/low uncertainty avoidance Desire for achievement/affiliation Long/short time horizon

Kluckhohn-Strodtbeck Framework Environment: control, controlled by,

or part of Time focus: past, present, or future People: control/don’t trust or

free/trust Purpose focus: accomplishment,

leisure, or spiritual Individual or group responsibility Public or private work and lives

Other Elements of Culture Trust Fatalism and locus of control High context/low context Idealism versus pragmatism Monochronic versus Polychronic Attitudes toward change

Culture Shock When placed in a foreign culture

people tend to experience culture shock, the frustration from having to learn to cope with new cultural cues and expectations

Months Living in New Culture

Acc

epta

nce

of N

ew C

ultu

re

High

Low

Frustration

Understanding

Elation

Stages of Culture Shock

Cultural Clusters Should cultures be defined by

national borders?

Group Activity Describe American culture What elements of American culture

might some foreigners find strange? Describe one foreign culture Describe ways that cultural

differences can affect business activities in particular industries

Acquiring and Using Cultural Understanding Cultural awareness can be improved Company’s need for cultural knowledge

increases as it Moves from one to multiple foreign

functions Increases the number of countries in which

it operates Moves from similar to dissimilar foreign

environments Converts from external to internal handling

of international operations

How does culture affect business? Work ethic Attitudes toward:

Time Supervisors and superiors Quality and reliability Rewards and promotions

Attitudes and Hiring Practices Ethnocentrism is the belief that all

elements of one’s own culture are superior than the corresponding elements of others cultures

Polycentric staffing involves hiring locals to manage subsidiaries in each country and special attention to each culture

Geocentric staffing involves hiring without regard to cultural heritage or nationality

Need Hierarchy Lower-order needs must be fulfilled

prior to higher-order needs Workers in poor countries

motivated by lower-order needs People from different countries or

cultures may rank needs differently

Attitudes Toward Change The more a change upsets important values,

the more resistance it will engender; attend to attitudes and needs of culture

Consider the expected cost-benefit relationship of any adjustments

Resistance to change may be lower if the number of changes is not too great at any one time

Discussing proposed change with stakeholders in advance may reduce resistance

Attitudes Toward Change Employees are more apt to support

change when they see its benefits and they expect personal or group rewards

Change should be timed to occur when resistance is likely to be low

International companies should learn things abroad that they can apply at home