Global Dimensions of Business

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• Global Dimensions of Business
• Mark McKenna
• BUS 187(5), Fall 2008
• Charles H. Hill, International Business
  Competing in the Global Marketplace, 7th ed. (New
  York McGraw-Hill/Irwin, 2009)
• Adapted from PowerPoint slides prepared for the
  text by Veronica Horton

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• WEEK 3 (Sept. 8)
• Differences in CULTURE
• Hill, Chapter 3

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The Case of Wal-Mart

• Initial move into Mexico
• Preference for fresh products
• Purchases made in small quantities
• Investments in Germany and South Korea
• Well positioned local competitors
• Consumers association of low cost with poor
  quality
• Expansion in China
• Bargain hunting and an emphasis on fresh meat
• Working with labor unions as an arm of the state
• Implications
• Importance of cross-cultural literacy
• Impact of culture on the costs of doing business

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What is Culture?

• That complex whole which includes knowledge,
  belief, art, morals, law, custom, and other
  capabilities acquired by man as a member of
  society.
• Edward Tylor
• (19th century anthropologist)

• A system of values and norms that are shared
  among a group of people and that when taken
  together constitute a design for living.
• - Charles Hill
• (adapted from Hofstede, Namenwirth, and Weber)

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Components of Culture

• Values
• abstract ideas about what a group believes to be
  good, right, and desirable
• the context within which a societys norms are
  established and justified the bedrock of a
  culture
• Norms
• social rules and guidelines that prescribe
  appropriate behavior in particular situations.
  Norms include,
• folkways - routine conventions of everyday life,
• mores rules (and laws) prescribing certain
  forms of behavior

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Culture, Society, and the Nation State

• Distinctions
• Culture A system of values shared by a group
• Society (ethnie) A group bound by a common
  culture
• Nation A self-defined cultural and social
  community (an imagined community, Benedict
  Anderson)
• State A political association with effective
  sovereignty over a geographic area
• Issues
• Societies, nations and states do not always
  correspond
• Many states contain subcultures (often hidden)
• Cultural groups may extend across national borders

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Determinants and Manifestations
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Social Structure

• Social structure refers to a societys basic
  social organization
• Two dimensions to consider
• the degree to which the basic unit of social
  organization is the individual, as opposed to the
  group
• the degree to which a society is stratified into
  classes or castes

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Individual vs. Group Orientation

• Individualistic societies tend to view a persons
  attributes and achievements as more important
  than the groups to which they belong
• Emphasis on individual performance can be both
  beneficial and harmful
• Encourages entrepreneurship
• Can lead to high degree of managerial mobility

• Collectivistic societies see groups as the
  primary unit of social organization, with group
  membership as all important
• Emphasis on the group can be both beneficial and
  harmful
• Encourages mutual self-help and collective action
• Discourages individual action and initiative

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Social Stratification

• All societies are stratified on a hierarchical
  basis into social categories, or social strata
• Social strata may typically be defined based on
  family background, occupation, or income
• Societies differ with regard to
• the degree of mobility between social strata,
  i.e. the extent to which individuals can move out
  of the social category into which they were born,
  and
• the significance attached to social strata in
  business contacts, i.e. the extent to which the
  stratification of society impacts on business
  operations

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Social Mobility

• Variations in the extent of social mobility
• Societies with well-defined and relatively rigid
  social strata generally allow for little social
  mobility
• Individuals in societies with less well-defined
  categories may more easily move up or down the
  social hierarchy
• Social structures and social mobility
• Caste systems determine the individuals social
  identity and position based on that of their
  family or group
• Class systems determine the individuals social
  identity and position based on their individual
  characteristics, which may include family
  background but, also, education, income, and
  relationships

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Impact on Business Operations

• Social stratification can significantly affect
  the operation of business organizations
• Class and caste consciousness refer to
• the extent to which people perceive themselves in
  terms of their class or caste background, and
• how this shapes their relationships with others
• Where class or caste consciousness is high
• Work relationships between individuals from
  different classes or castes may be very
  prescribed and strained
• Class or caste identification may impact on
  partnering or hiring decisions

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The American Middle-Class

• 53 of adults say they are middle class
• On key measures of well-being (income, wealth,
  health, optimism about the future), most are,
  indeed, in the middle
• There are, however, notable economic and
  demographic differences
• 40 have incomes below 20,000
• 33 have incomes above 150,000
• While similar percentages of blacks (50),
  Hispanics (54) and whites (53) identify as
  middle class, middle class members of minority
  groups have far less income and wealth than
  whites

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Religious and Ethical Systems

• Religion is a system of shared beliefs and
  rituals that are concerned with the realm of the
  sacred
• Ethical systems are a set of moral principles, or
  values, that are used to guide and shape behavior
• Religious fall into four main groups
• Christianity with 1.7 billion adherents
• Islam with 1 billion adherents
• Hinduism with 750 million adherents
• Buddhism with 350 million adherents
• Confucianism is also important in influencing
  behavior and culture in many parts of Asia
• Religion and ethics are often closely intertwined

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Global Distribution of World Religions
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Economic Implications of Religion

• Christianity
• In 1804, Max Weber suggested that the Protestant
  work ethic and its focus on hard work, wealth
  creation, and frugality, that was the driving
  force of capitalism
• Islam
• The Quran protects private property and
  legitimizes free-enterprise but prohibits riba
  (usury/interest) and emphasizes responsible
  stewardship
• Hinduism and Buddhism
• Hindu asceticism is said to undermine
  entrepreneurial activity Buddhism is also seen
  as a religion whose focus on spiritual
  achievement undermines wealth creation

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Confucianism

• Confucianism can be viewed as either an ideology,
  an ethical code, or a religion
• It is practiced mainly in China, Korea, and
  Japan, and among Chinese diaspora communities
• Confucius taught that salvation is attained
  through right action based on three key teachings
• Loyalty to ones superiors
• Reciprocal obligations of superiors to
  subordinates (guanxi)
• Honesty
• These teachings may lower the cost of doing
  business in Confucian societies

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Language

• Language is a defining characteristic of culture
• Spoken language
• Verbal cues
• Language structures our perceptions of the world
• Unspoken language
• Facial expressions, hand gestures, and body
  posture
• Defining ones personal space
• Language difference is often a source of conflict
• Failing to understand the nonverbal cues of
  another culture can lead to communication failure

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Languages Spoken around the World

• English is the most widely spoken language, but
  Chinese is the mother tongue of the most of people

Source http//www2.ignatius.edu/faculty/turner/w
orldlang.htm
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Hofstedes Four Dimensions of Culture

• Power distance
• how a society perceives power differences
• Individualism versus collectivism
• prioritization of individual or group needs and
  interests
• Uncertainty avoidance
• how societies approach risk and the extent to
  which groups or individuals tolerate ambiguity
  and uncertainty
• Masculinity versus femininity
• The extent to which a society prioritizes success
  and material accomplishment (masculine values) or
  nurturing and caring for others (feminine values)

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Cultural Change

• Culture is not a constant it evolves over time
• Since 1960s American values toward the role of
  women have changed
• Japan moved toward greater individualism in the
  workplace
• Globalization will continue to have impacts on
  cultures around the world
• Is the world moving toward greater cultural
  convergence or divergence?
• Are the values of collectivistic culture
  incompatible with economic progress and
  development

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Managerial Implications

• Cross-cultural literacy
• The danger of ethnocentrism
• Culture and competitive advantage
• Value systems and norms influence the cost of
  doing business in a country (transaction costs)
• How determinative is culture for economic
  success?
• How important is culture in shaping the foreign
  investment decisions of MNCs?
• Culture and business ethics