International Business: The New Realities

by

Cavusgil, Knight and Riesenberger

Copyright 2012 Pearson Education, Inc. publishing as Prentice Hall
Learning Objectives
1. Culture and cross-cultural risk
2. Key concepts of culture
3. The role of culture in international business
4. Cultural metaphors, stereotypes, and idioms
5. Interpretations of culture
6. Subjective versus objective dimensions of culture
7. Language as a key dimension of culture
8. Contemporary issues in culture
9. Overcoming cross-cultural risk: managerial
guidelines

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The Four Risks of International Business
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Key Concepts
Culture: The learned, shared, and enduring
orientation patterns in a society. People
demonstrate their culture through values, ideas,
attitudes, behaviors, and symbols.
Cross-cultural risk: A situation or event
where a cultural miscommunication puts some
human value at stake. It arises in environments
characterized by unfamiliar languages and unique
value systems, beliefs, and behaviors.
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Managerial Orientations
Ethnocentric orientation: Using ones 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
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.

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Culture is Learned
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
Culture is like an icebergabove the surface,
certain characteristics are visible; below the surface
is a massive base of assumptions, attitudes, and
values that strongly influence decision-making,
relationships, and other dimensions of business.


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Culture as an Iceberg
In Japan and Some Other Asian Cultures:
Regular group meetings build harmony and team
spirit.
Morning group calisthenics are common in Japan.
Collective training and evaluation are the norm.
Employees look to mentors for guidance. Mentors are
expected to closely support subordinates.
Close attention is paid to product quality and to
courtesy in customer interactions (e.g., in Japan, taxi
drivers and McDonalds workers wear white gloves).
Developing and maintaining lifetime relations with
customers is the norm in many industries.
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Human Resource Practices Vary Across Cultures
Developing products and services
Organizational structure (centralized versus
decentralized; bureaucratic versus entrepreneurial)
Teamwork (MNEs require intercultural cooperation)
Pay for performance versus merit
Length of employment (temporary or lifetime)
Union-management relationships
Attitude toward ambiguity (e.g., at times,
employees receive vague or contradictory
instructions)
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Cultural Differences in Entrepreneurship
It is said that when someone starts a new business
in Hong Kong, the whole family works ceaselessly
to make it a success.
in the United States, friends put up their money for
the entrepreneur.
in Turkey, friends will ask the entrepreneur to hire
their sons and nephews.
in India, the administrative system will impose a
staggering amount of red tape.
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National Culture
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National, Professional, and Corporate Culture
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Can All Differences be
Attributed to National Culture?

Example
LOreal is staffed by global managers, whose
influence, combined with managements receptiveness
to world culture, has shaped LOreal into a unique
organization that is distinctive within French culture.

In firms with a strong organizational culture, it is
hard to determine where the corporate influence
begins and the national influence ends.
The tendency to attribute all differences to
national culture is simplistic.
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Cultural Metaphors refer to distinctive traditions or
institutions 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 (summer
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.
Interpretations of Culture
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Interpretations of Culture (cont.)
Stereotypes are generalizations that may or may
not be factual, often overlooking real, deeper
differences.
People from the United States are said to be:
Argumentative and aggressive when compared to Japanese
people, who tend to be reserved and humble.
Individualistic lovers of personal freedom when compared to
Chinese people, who tend to be group oriented.
Entrepreneurial when compared to Saudi Arabian people,
who use time-honored methods to get things done.
Direct and interested in immediate returns when compared
to Mexican people, who invest time in building relationships.
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Interpretations of Culture (cont.)
Idiom: An expression whose symbolic meaning
differs from its literal meaning; you cant 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 wont bite you
(wisdom)
Japan: The nail that sticks
out gets hammered down
(group conformity)

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Idioms that Symbolize Cultural Values
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E. T. Halls 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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Halls High- and Low-Context Typology of Culture
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Hofstedes Typology of National Culture
Individualism versus collectivism refers to
whether a persons primarily function is as an
individual or as a member of a group.
In individualistic societies, each person emphasizes his
or her own self-interest; competition for resources is the
norm; and 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; and
conformity and compromise help maintain harmony.
Examples: China, Panama, Japan, and South Korea.
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Hofstedes Typology (cont.)
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 Eastern countries.
Low-power distance societies have small gaps between
the weak and the powerful. Firms tend toward flat
organizational structures, with relatively equal relations
between managers and workers. For example,
Scandinavian countries have instituted various systems
to ensure socioeconomic equality.
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Hofstedes Typology (cont.)
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 are Belgium,
France, and Japan.
In low uncertainty avoidance societies, managers are
relatively entrepreneurial and comfortable with risk.
Firms make decisions quickly. People are comfortable
changing jobs. Examples are Ireland, Jamaica, and the
U.S.
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Hofstedes Typology (cont.)
Masculinity versus femininity refers to a societys
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 are Australia and Japan.
Feminine cultures emphasize nurturing roles,
interdependence among people, and caring for less
fortunate peoplefor both men and women. Examples
are Scandinavian countries, where welfare systems are
highly developed and education is subsidized.
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Hofstedes Typology (cont.)
Long-term versus 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 are
traditional Asian cultures, such as China, Japan, and
Singapore, which base these values on the teachings of the
Chinese philosopher Confucius (500 BCE), 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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Key Dimensions of Culture
Values represent a persons 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. They 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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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 are
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, and trust is
valued highly in business agreements. Examples are
China, Japan, and Latin American countries. It took
nine years for Volkswagen to negotiate a car factory in
China.

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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
Guanxi: Important in Business in China
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Manners and Customs
Manners and customs 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.
Ways of behaving and conducting
oneself in public and business situations.
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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, and time as
a resource. Time is linear, and 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, and long delays are tolerated before taking action.
Punctuality is relatively unimportant. Relationships are
valued. Examples are Africa, Latin America, and Asia.
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Role of Religion in Islamic Societies
Islam is the basis for governmental, legal, and social
systems. As Muslims view Gods will as the source of all
outcomes, they are relatively fatalistic and reactive.
Islams holy book, the Quran, 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,
Islams holiest site.
Heineken created the non-
alcoholic malt drink Fayrouz.
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Language as a Key Dimension of Culture
Language is the mirror or expression of culture;
it is essential for communications and provides
insights into culture.
Linguistic proficiency is a great asset in
international business.
Language has both verbal and nonverbal
components (i.e., facial expressions and
gestures).
There are nearly 7,000 active languages,
including over 2,000 in both Africa and Asia.
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Most Common Primary Languages in the World
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Most Common Primary Languages in the World
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Most Common Primary Languages in the World
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Most Common Primary Languages in the World
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Most Common Primary Languages in the World
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Most Common Primary Languages in the World
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Source: Ethnologue, at www.ethnologue.com
The Environment Influences Language
Language is a function of the environment.
Concepts and meanings of words are not universal,
even when they can be translated into other
languages.
Examples
The language of Inuits (an indigenous people of Canada) has
several different words for snow, English has just one, and
the Aztecs of South America used the same word stem for
snow, ice, and cold.
The Japanese word muzukashii can be translated as
difficult, delicate, or I dont want to discuss it. In business
negotiations it usually means its out of the question.
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Blunders in International Advertising
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Blunders in International Advertising
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Blunders in International Advertising
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Blunders in International Advertising
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Blunders in International Advertising
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Examples of Differences in Meaning
Between British and U.S. English
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Examples of Differences in Meaning
Between British and U.S. English
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Examples of Differences in Meaning
Between British and U.S. English
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Examples of Differences in Meaning
Between British and U.S. English
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Examples of Differences in Meaning
Between British and U.S. English
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Examples of Differences in Meaning
Between British and U.S. English
Culture and Contemporary
Issues: The Services Sector
Although trade in services is less than trade in
products, the services sector is internationalizing
rapidly. FDI is the most typical entry strategy.
The most rapidly internationalizing services are
lodging, retailing, construction, banking, insurance,
publishing, IT, transport, travel, and entertainment.
Because of close interaction between providers and
consumers, culture strongly affects services,
especially when the cultural distance is substantial.

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Contemporary Issues:
Technology and the Internet
Technological advances strongly influence culture.
The Internet, multimedia, and other communications
systems encourage convergence in global culture.
The death of distance is the demise of boundaries
that once separated people, due to the integrating
effects of information, communications, and
transportation technologies. Culture is becoming
more homogenous around the world.
The Internet also promotes local culture by
increasing the availability of high culture and folk
culture.
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Contemporary Issues:
Are Cultures Converging?
Critics argue globalization promotes the replacement
of indigenous cultures with homogeneous, often
Americanized, culture. Worldwide, consumption
patterns are converging. People exhibit uniformity in
preferences for food, soft drinks, clothing, cars, hotels,
websites, movies, TV shows, music, and other goods.
Others argue globalization encourages the worldwide
free flow of ideas, beliefs, values, and products. Today,
people around the world are exposed to a diversity of
beliefs, values, approaches, and products, and adopt
the best of what the world has to offer.
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Culture: Converging or Diversifying?
Cultural homogeneity and heterogeneity are not
mutually exclusive; they generally occur together.
But cultural flows are diversejust as McDonalds
is popular in Japan, so too is Vietnamese food in
the United States and Japanese sushi in Europe.
While globalization will
eclipse some past ways
of life, the process can
also liberate people by
providing new ideas and
challenging conformity and nationalism.
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Managerial Guidelines for
Cross-Cultural Success
Acquire factual and interpretive knowledge
about the other culture; try
to speak its language.
Avoid cultural bias.
Develop cross-
cultural skills, such
as perceptiveness,
interpersonal
skills, and adaptability

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Managerial Guidelines (cont.)
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 foreigners behavior
and formulate your response.
4. Learn from this process and continuously improve.
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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, 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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