DIFFERENCES IN CULTURE

INTRODUCTION
International business is different from domestic business because countries are different. It is necessary to customize their offering to the
tastes and preference of the culture of the country.
Business success requires cross-cultural literacy. By cross-cultural literacy we mean an understanding of how cultural differences across and
within nations can affect the way business is practiced. It is important to gain an understanding of the culture that prevails in those
countries where they do business and that success requires a foreign enterprise to adapt to the culture of its host country.
CULTURE
Culture is a complex whole that includes knowledge, beliefs, arts, morals, law, customs and other capabilities people acquire as members of
society. Values and norms are influenced by political and economic philosophy, social structure, religion, language and education. Values
and norms are the central components of a culture:
- Values are abstract ideals about what a society believes to be good, right and desirable. They provide the context within which a society’s
norms are established and justified. They may include a society’s attitude toward such concepts as individual freedom, democracy, truth,
justice, honesty, loyalty, social obligations, collective responsibility, the role of women, love, sex, marriage and so on. They are invested with
considerable emotional significance. Values are often reflected in the political and economic system of a society.
- Norms are social rules and guidelines that prescribe appropriate behavior in particular situations. They are divided into:
o Folkways:
 The routine conventions of everyday life
 The way people are expected to behave.
 Actions of little moral significance (appropriate dress code, good social manners, eating with correct utensils).
o Mores:
 Norms that are seen as central to the functioning of a society and its social life
 They have greater significance than folkways
 Violating mores can bring serious retribution
CULTURE, SOCIETY AND THE NATION-STATE
A society is a group of people that share a common set of values and norms. A nation-state is the result of political creations. The
relationship between culture and country is often ambiguous. For example:
- Canada (Nation-state) has the Anglo culture, the French speaking culture and the Native American culture
- African nations have important cultural differences between tribal groups
- India is composed of many distinct cultural groups
- Arab societies:
o Shiites in the South
o Sunnis in the middle (ruled Iraq under the regime of Saddam Hussein)
The determinants of a culture are social structure, Language, Education, Religion, Political and Economic philosophy. The chain of causation
runs both ways. While factors such as social structure and religion can clearly influence the values and norms of a society, the values and
norms can influence social structure and religion.
SOCIAL STRUCTURE
The social structure of a society refers to its basic social organization. The two main dimensions along which social structures differ are:
- The individual-group dimension: reflects the way people perceive themselves and relate to each other in social and business settings.
INDIVIDUAL GROUP
Main points Emphasizes individual achievement The group is the primary unit of social organization
High level of entrepreneurial activity and competence These societies emphasize group membership and
group achievements above all else.
A deeply emotional attachment in which identification
with the group becomes all-important in one’s life

Example United States Japan

Advantages Creation of new products and new ways of doing business Strong identification with the group creates collective
(personal computer, software, biotechnology) actions. This creates a strong incentive for individual
High degree of managerial mobility between companies makes members of the group to work together for the
the executives be exposed to different ways of doing businesses common good
Ability to achieve close cooperation between
individuals in the company and between companies
 Disadvantages A tendency to move on for a better offer can result in managers Life employment (the primacy of the value of the
who have food general skills but the lack of knowledge, group identification discourages managers and
experience and network of contacts to find solutions to current workers from moving from company to company)
problems Lack of dynamism and entrepreneurship
Lack of loyalty and commitment to an individual company

- The stratification dimension: Social mobility refers to the extent to which individuals can move out of the strata in which they are born. All
societies are stratified into different classes. The systems are:
o Caste system: It is the most rigid system. It is a closed system in which social position is determined by the family into which a person is born
and change in that position is usually not possible during an individual’s lifetime. It often carries with a specific occupation. For example:
India. Even it was officially abolished in 1949, it is still a force in rural Indian society where occupation and marital opportunities are related
to caste.
o Class system: It is a less rigid form of social stratification in which social mobility is possible.
Class-conscious refers to a condition where people tend to perceive themselves in terms of their class background, and this shapes their
relationships with members of other classes. Class-conscious societies are characterized by low social mobility and a high degree of
stratification. Less class-conscious societies are characterized by high social mobility and a low degree of stratification. Examples:
o Great Britain: It has a more rigid social class. A good school means a good University, a good University means a good job and merit has only
a limited chance of elbowing its way into a tight little circle. There is a traditional hostility between upper-middle-class managers and their
working-class employers, which leads to a high level of industrial disputes.
o United States: the class system is less pronounced than in Great Britain and mobility is greater. An individual can, by his or her own economic
achievement, move smoothly from the working class to the upper class in a lifetime. The high degree of social mobility and the extreme
emphasis on individualism
o China: there is a difference between the life chances of the rural and urban citizens. This division was strengthened during the high point of
Communist rule because a rigid system of household registration that restricted most Chinese to the place of their birth for their lifetime. So
rural citizens were cut off from many urban privileges such as quality schools and health care. Nowadays, a new class system is emerging in
China based less on the rural-urban divide and more on urban occupation.
An antagonist relationship between management and labor classes and the resulting lack of cooperation and high level of industrial
disruption tend to raise the cost of production in countries characterized by significant class divisions. In turn, high costs can make it more
difficult for companies based in such countries to establish a competitive advantage in the global economy.

RELIGION
Religion may be defined as a system of shared beliefs and rituals that is concerned with the realm of the sacred. Ethical systems refer to a set
of moral principles, or values, that are used to guide and shape behavior:
- CHRISTIANITY:
o Most widely practiced religion in the world (1.7 billion, Europe and Americas)
o Grew out of Judaism
o Monotheistic religion
o Divisions: Roman Catholic Church (50%, Europe and Latin America), Orthodox Church and Protestantism
o There is a distinction between religion and state. The political and religion system were not born together, there has been a secular history
before.
- ISLAM:
o 616 AD : Muhammad
o 1 billion people from the northwest of Africa, through the Middle East to China and Malaysia in the Far East
o Monotheistic religion, One true omnipotent God (Roots in Judaism and Christianity)
o Life objective: fulfill the dictates of God’s will in the hope of admission to paradise
o Religion rules all areas in life. The Muslim lives in a social structure that is shaped by Islamic values and norms of moral conducts (examples:
pray 5 times a day, dress code for women, no consumption of pork and alcohol)
o Islam makes no distinction between church and state. It is not just a religion, it is the source of law and arbiter of social behavior
o Fundamentalists: demand commitment to traditional religious beliefs and rituals and the use of symbolic gestures. They are often associated
with terrorists by the Western media. The rise of fundamentalist is the response to the social pressures created in traditional Islamic
societies by the move toward modernization and by the influence of Western ideas. In some countries (Iran, Algeria and Afghanistan) they
gained political power and tried to make Islam the law of the land
- HINDUISM
o 750 million adherents (Indian subcontinent)
o World’s oldest major religion
o Hindus believe in:
 a moral force in society requires the acceptance of certain responsibilities, called “dharma”
 “karma”: the spiritual progression of each person’s soul. It affects the way the person lives and the challenges he or she will face in the next
life.
 An individual can eventually achieve “nirvana”, a state of complete spiritual perfection that made reincarnation no longer necessary. The
way to achieve nirvana is devoting life to a spiritual rather than a material quest
 The cow as a sacred animal.
- BUDDHISM:
o Created in India 6th Century BC by Siddharta Gautama (“Budda”), an Indian prince who renounced his wealth to pursue an ascetic lifestyle
and spiritual perfection. He achieved nirvana but decided to remain on earth to teach his followers
o 350 million followers (Central and Southeast Asia, China, Korea and Japan)
o Suffering originates in people’s desire for pleasure.
o Importance of right seeing, thinking, speech, action, living, effort, mindfulness and meditation
o Hinduism comparison:
 Differences: they don’t support the cast system and they don’t advocate the kind of extreme ascetic behavior that Hinduism encourages
 Similarities: they stress the afterlife and spiritual achievement rather than involvement in this world.
- CONFUCIANISM:
o It is not a religion, it is a system of belief
o Founded in the 5th century BC by “Confucius”, it was the official ethical system of China until the Communist revolution (1949)
o 200 million followers principally in China, Korea and Japan
o Importance of attaining personal salvation through right action
o Comprehensive ethical code that sets down guidelines for relationship with others: High moral and ethical conduct and loyalty to others,
obey your father, be respectful, work hard.
o It is not concerned with the supernatural and has little to say about the concept of a supreme being or an afterlife
The value systems of different religious and ethical systems gave different implications for business practice:
Religion Economic Implications
CHRISTIANITY Contrary to Catholic promise of salvation in the next world, Protestant ethics emphasize the importance of hard work and
wealth creation. Rather than consuming this wealth, they invest in the expansion of capital enterprises, which contributed to
the development of capitalism in Western Europe.
Protestantism gave individuals significantly more freedom to develop their own relationship with God, this influenced the
development of individualism as an economic and political philosophy.
ISLAM It is fine to earn a profit as long as that profit is justly earned and not based on the exploitation of others. Humans are part of
a collective in which the wealthy and successful have obligations to help the disadvantages. (Importance of social justice,
earning legitimate profit and protection of the right of private property)
Importance of living up to contractual obligations, of keeping one’s word.
They are likely to receive international business as long as they behave in a manner that is consistent with Islamic ethics
The receipt of interest is considered usury by the Koran. There is a different system in Islamic banks that has two possibilities:
- “mudarabah”: Islamic banks lend money to a business and take a share in the profits that are derived from the investments.
This encourages both long-term savings and long-term investments
- “murabaha”: the bank is an intermediate factor in the purchase of something and it takes a markup as a consequences of the
transaction.
HINDUISM They don’t encourage the kind of entrepreneurial activity perused by Protestantism. They emphasize that individuals should
be judged not by their material achievements but their spiritual achievements.
It supports the Inidia’s caste system, which limits the individual’s opportunities to adopt positions of responsibility and
influence in the society. In a business organization, individuals may get promoted to higher positions because of their caste
background instead of his/her ability.
BUDDHISM The lack of support for the caste system and extreme ascetic behavior suggest that a Buddhist society may represent a more
fertile ground for entrepreneurial activity than a Hindu culture.
CONFUCIANISM Economic success in China, Japan, South Korea and Taiwan by lowering the cost of doing business explained by:
- Loyalty considered a sacred duty, an absolute obligation. This reduces the conflict between management and workers.
- “Guanxi”: Based on the concept of reciprocal obligations. Confucian ethics stress that superiors are obliged to reward the
loyalty of their subordinates by bestowing blessings on them. If these “blessings” are not forthcoming, then neither will be the
loyalty. “Guanxi” means relationship or relationship networks. If favors done are not paid back, the reputation of the
transgressor is tarnished and the person will be less able to draw his/her “guanxiwang” for help in the future. (Favors are
repaid, obligations are met, and relationships are honored, so long term business relationships are created)
- Honesty: when companies can trust each other, they don’t break contractual obligation and the costs of doing business are
lowered. They can trust each other not to violate the terms of the cooperative agreements. (For example: automobile
companies and components part suppliers can work together on a range of issues, including inventory reduction, quality
control and designed). The combination of trust and reciprocal obligations is central to the workings and persistence of
“guanxi” networks in China.
LANGUAGE
 Language is one defining characteristic of a culture. It has both spoken and unspoken dimensions. In countries with more than one spoken
language, we tend to find more than one culture. Examples:
- Canada: has the Anglo culture, the French speaking culture and the Native American culture
- Belgium is divided into Flemish and French speakers
- Spain: Cataluña and Basque-speaking regions
- Switzerland: 4 languages are spoken
Chinese is the mother tongue of the largest number of people, followed by English and Hindi. However, the most widely spoken language in
the world is English, it is the language of international business. Although English is widely used, learning the local language brings
considerable advantages, as sometimes we get improper translations. (Chevrolet Nova, became “Chevrolet Caribe”)
Non-verbal communication and personal space are other important aspects to consider.
EDUCATION
Formal education is the medium through which individuals learn skills and are socialized into the values and norms of a society. Education
play an important role in the determination of national competitive advantage. For example, Japan’s excellent education system is an
important factor explaining the country’s postwar economic success.
The general education level of a country is also a good index of the kind of products that might sell in a country and of the type of
promotional material that should be used.
CULTURE AND WORKPLACE
Hofstede studied how culture relates to values in the workplace. He isolated four dimensions that he claimed summarized different cultures:
1- Power distance: how a society deals with the fact that people are unequal in physical and intellectual capabilities. It analyses if inequalities
grow over time into inequalities of power, wealth and social mobility.
2- Uncertainty avoidance: accepting (or not) ambiguous situations and tolerating uncertainty regarding job security, career patterns,
retirement, regulations, etc.
3- Individualism (individual achievement or freedman) versus Collectivism (look after the interest of his/her collective)
4- Masculinity (sex roles sharply differenced and determined cultural ideas) versus Femininity (sex roles less differenced and little
differentiation between men and women in the same job)
5- Long-term orientation: (Also called “Confucian dynamism), captures attitudes toward time, persistence, ordering by status, protection of
face, respect for tradition and reciprocation of gift and favors.
We should be critical of Hofstede’s analysis because:
- The study assumes there is a one-to-one correspondence between culture and nation but many countries have more than one culture
- The research was composed of Europeans and American, so it shows Western stereotypes and view of the world
- It was made with employees of only one company (IBM) in only one industry (computer)
CULTURAL CHANGE
Culture is not a constant, it evolves. The important causes of cultural change are:
- Economic progress:
o As a country gets richer, a shift occurs away from the “traditional values” linked to religion, family, country and toward “secular rational
values” and from “survival values to “well-being values”. Economic progress is accompanied by a shift in the values away from collectivism
and toward individualism. People are better able to take care of their own needs. Greater economic freedoms lead to an increase in
opportunities for expressing individualism. (Example: As Japan became richer, greater individualisms is being witnessed)
- Globalization :
o Advances in transportation and communication technologies and the rise of global corporations (Hitachi, Disney, Microsoft), whose products
can be found around the globe, are creating conditions for the merging of cultures. Some argue that less cultural variation will be available.
(cultural convergence)
IMPLICATIONS FOR MANAGERS
One danger confronting a company that goes abroad for the first time is being ill-informed. Three important implications for international
business:
1- Develop cross-cultural literacy: Doing business in different cultures requires the adaptation to the value systems and norms of that culture
(the way deals are negotiated, the appropriate incentive pay system, the structure of the organization, the name of a product, etc). What
works in one culture might not work in another.
To develop cross-cultural literacy, international businesses need to employ host-country nationals, build a cadre of cosmopolitan executives
and guard against the dangers of ethnocentric behavior. Ethnocentrism is a belief in the superiority of one’s own ethnic group or culture.
2- Connection between culture and national competitive advantage: The value systems and norms of a country influence the cost of doing
business in that country and therefore the ability of firms to establish a competitive advantage in the global marketplace. Examples:
a. The class-based conflict between workers and management in class conscious societies, when it lead to industrial disruption, raises the cost
of doing business
b. The ethics of Hinduism may not be as supportive of capitalism as the ethics embedded in Protestantism and Confucianism
c. Islamic laws banning interest payments
d. Japan’s emphasis on group affiliation, loyalty, reciprocal obligations, honesty and education, cooperation between management and labor,
lower the cost of doing business
e. Individual mind-set of the North American culture and entrepreneurial activities made Americans dominate industries where
entrepreneurship and innovation are highly valuated (computer software and biotechnology).
For the international business, the connection between culture and competitive advantage is important for two reasons:
o The connection suggests which countries are likely to produce the most viable competitors
o Implications for the choice of countries in which to locate production facilities and do business