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International Business: Competing in the Global Marketplace Sixfth Edition Chapter 3 On the positive side, the dynamism of the US economy owes much to people like Sam Walton, Steve Jobs, and Bill Gates - people who took chances, tried new things,

succeeded, and encouraged others to do likewise. On the other hand, individualism can lead to a lack of company loyalty and failure to gain company-specific knowledge,

competition between individuals in a company rather than team building, and limitation of people's ability to develop a strong network of contacts within a firm.

In sharp contrast to the Western emphasis on the individual, in many Asian societies the group is the primary unit of social organization.

While in earlier times the group was usually the family or the village, today the group may be a work team or business organization. In a social setting, Asian employees may often say they work for Sony, while a Western employee may say he/she is an electrical engineer. In Asia, the worth of an individual is more linked to the success of the group rather than individual achievement.

This emphasis on the group may discourage job switching between firms, encourage lifetime employment systems, and lead to cooperation in solving business problems. On the other hand, it tends to suppress individual creativity and initiative.

All societies have some sort of stratification, where individuals in higher strata or castes are likely to have a better education, standard of living, and work opportunities.

Social structure is linked to the ease (or difficulty) with which an individual can move between strata. Additionally, the social structure created by the strata levels and the social significances of each strata level can have implications for the way business is conducted.

The significance of the social strata can have important implications for the management and organization of businesses.

Slides 3-15, 3-16 Religious and ethical systems

Religion can be defined as a system of shared beliefs and rituals that are 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. The ethical practices of individuals within a culture are often closely intertwined with their religion.

Slide 3-17 Language

The language of a society allows it to communicate but also directs the attention of people towards certain features of the world and human interactions. Language helps describe how different people see the world differently.

While English is clearly the language of international business, knowing at least some of the local language can greatly help when working in another country.

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International Business: Competing in the Global Marketplace Sixfth Edition Chapter 3 In some situations knowing even a bit of the local language can be critical for business success. Such knowledge may be understood as a sign that the businessperson is willing to learn from the local firm.

Slide 3-18 Education

Schools are a part of the social structure and are instrumental in shaping many cultural values and norms.

The knowledge base, training, and educational opportunities available to a country's citizens can contribute to a competitive advantage in the marketplace.

Nations that have a ready trained workforce for particular types of jobs, it is easier to start operations than in nations where an investor will also have to undertake time-consuming and costly training.

Slide 3-19, 3-20 Culture in the workplace

Geert Hofstede conducted what is probably the most famous study about the connection between culture and values in the workplace. Hofstede made a study of IBM employees worldwide, and identified four dimensions to describe cultures: power distance,

individualism vs. collectivism, uncertainty avoidance, and masculinity vs. femininity.

Q1: It is the extent to which people believe that power and status are distributed unequally and accept an unequal distribution of power as the proper way for social systems to be organised. According to Hofstede’s (1980) research result, in high power distance countries, such as India, Mexico, people prefer little consultation between superiors and subordinates and high degree of hierarchy and low involvement of participation, whereas in low power countries, such as USA and Denmark employees are expected to communicate with the superiors frequently in order to get their work done.

Assuming that a Denmark based company is to expand its operation into Mexico; the employees who are used to a centralised structure in Mexico will be unlikely to interact between superiors and subordinates, because it is not consistent with Mexico’s national culture, although organisations with more employee involvement were more efficient and faster growing than others (Newman and Nollen, 1996). Participation is an important dimension of work unit management practice, but clearly, if it is not applied to the right personnel, the performance may be not as good as expected.

Therefore, it is not about choosing a better management practice, but a suitable one. Subsidiaries in low power distance countries, the management could create a participative and less informal working environment, while for those in high power distance countries, hierarchical and centralised management style would achieve better performance.

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International Business: Competing in the Global Marketplace Sixfth Edition Chapter 3 Slide 3-21 Hofstede’s Work-Related Values

This slide shows findings of his study and can be used to discuss sets of countries,

outliers, and differences between the primary country of the students and other countries. Hofstede’s findings are good predictors of likelihood, but students should be careful not to use them to create stereotypes. The study describes norms with normal distributions, what we are likely to encounter when doing business in another country.

Students can experiment with the Hofstede study by accessing the interactive exercises found at www.mhhe.com/hill.

Slide 3-22 Cultural change

Culture is not a constant, but does evolve over time. What was acceptable behavior in the US in the 1960s is now considered ―insensitive‖ or even harassment. sensuality that was not allowed on American TV in the 1960s is now commonplace.

As countries become economically stronger and increase in the globalization of products bought and sold, cultural change is particularly common. The issue of cultural

convergence is a topic hotly debated among researchers, and would be an interesting discussion

Slide 3-23 Managerial implications

Individuals and firms must develop cross-cultural literacy. International businesses that are ill informed about the practices of another culture are unlikely to succeed in that culture. One way to develop cross-cultural literacy is to regularly rotate and transfer people internationally.

Slide 3-24 Looking ahead to Ch 4, Ethics in International Business

ANSWERS TO CRITICAL THINKING AND DISCUSSION QUESTIONS IN CHAPTER 3

QUESTION 1: Outline why the culture of a country influences the costs of doing business in that country. Illustrate your answer with examples.

ANSWER 1: Any cultural attribute can influence the cost of doing business, so this question is wide and open-ended. When basic norms between people of different countries differ, probably the basic assumptions they make differ as well. So business people will grappling with new and unfamiliar patterns, and they will need to figure out how these differences affect doing business. For example, while in the US we may get down to business, not wanting to waste our and our customer’s time. We may get to know each other socially later, or maybe not at all. In many Asian and South American countries developing a good social relationship that can be a cornerstone for trust is

necessary. And the person from one of these cultures will take more time to get to know you than you will need. Different class structures and social mobility also raise the costs of doing business, for if there are inhibitions against working with people from different

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International Business: Competing in the Global Marketplace Sixfth Edition Chapter 3 classes, then the efficiency with which information can flow may be limited and the cost of running a business increased. A country's religion can also affect the costs of business, as religious values affect attitudes towards work, entrepreneurship, honesty, fairness, and social responsibility. In Hindu societies, where the pursuit of material well-being can be viewed as making spiritual well-being less likely, worker productivity may be lower than in nations with other religious beliefs. Finally, a country's education system can have important implications for the costs of business. In countries where workers receive

excellent training and are highly literate, the need for specific worker training programs is decreased and an educated workforce is available for hire.

QUESTION 2: Do you think that business practices in an Islamic country are likely to differ from business practices in the United States, and if so how?

ANSWER 2: The cultural differences between a Muslim country and the US will cause business practices to differ dramatically. The public role women can take, appropriate etiquette (including simple things like not passing objects with the left hand), holidays, and wining and dining all differ from patterns in the US. But beyond these, the

underlying ideal and understanding of the role of business will differ. Since Muslims are stewards of property for God, rather than owners, they are more likely to use their resources carefully and may be less likely to give up or sell something to a person who may not practice the same stewardship. The importance of fairness to all parties in all relations means that over-aggressiveness and self-interest may not be well received, and breaking an agreement, even if technically/legally permissible, may be viewed as

inappropriate and the sign of a huge character flaw. Finally, the prohibitions on interest payments in some Muslim countries means that the wording of the terms of an agreement must be careful so that \

QUESTION 3: Reread the Opening case on doing business in Saudi Arabia. Has religion been the main factor shaping Saudi culture, or are other factors at work here? What are those factors, and how important do you think they are?

ANSWER 3: Religion may be the main factor in shaping Saudi culture, but historical tradition and the nomadic way of life also play significant roles. If religion were the single determinant, we might expect Saudi Arabia and Indonesia and Pakistan, all

majority Muslim countries, to have similar cultures, and they do not. The social factors that result from the locale’s history may be the most critical: a desert climate where cooperation was necessary for survival, where hospitality traditions often were all a traveler had to rely on, and where loyalty was critical.

QUESTION 4: What are the implications for international business of differences in the dominant religion/ethical system of a country?

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International Business: Competing in the Global Marketplace Sixfth Edition Chapter 3 ANSWER 4: Basic, unarticulated assumptions about what has value, what is right and wrong, and what constitutes good are embedded in our religions. Should rules or laws apply to all people all the time (in the US, the answer here is probably yes); or should they change depending on the circumstances of the particular situation (in Asia, the answer would be, of course)? Religion plays a basic, influential role in our most

fundamental values and the norms that arise from them. So if an international business venture faces a different dominant religion in its foreign market, managers there will have to make special efforts to understand what is really underlying practice differences.

QUESTION 5: Choose two countries that appear to be culturally diverse. Compare the culture of those countries and then indicate how cultural differences influence (a) the costs of doing business in each country, (b) the likely future economic development of that country, and (c) business practices.

ANSWER 5: Answers will vary based on the countries students choose. Hofstede’s

dimensions are helpful in getting a sense of a country’s values even if what we may know about the country (other knowledge) is quite limited. The US CIA website also is a good place for introductory-level information (economic, demographic, climate, background). See http://www.cia.gov/cia/publications/factbook

TEACHING SUGGESTIONS FOR THE CLOSING CASE OF CHAPTER 3

This case offers a way to discuss how culture affects human resource management (HRM). A discussion might begin with a quick survey of what students today want as benefits in their work. Then a contrast to pre-war Japan gives an opportunity to link culture and work practices, especially the practice of HRM. While many of our students may think of themselves as John, Inc. or Sally, Inc. (that is, with their primary loyalty to themselves, not to their employer) Japanese, when asked who they work for, still respond, ―I belong to‖ . . . Masushita or Mitsubishi, or Toyota. That is, in this high power distance, collectivist culture, the work relationship reflects the cultural values.

ANSWERS TO CLOSING CASE DISCUSSION QUESTIONS

QUESTION 1: What were the triggers of cultural change in Japan during the 1990s? How is cultural change starting to impact on traditional values in Japan?

ANSWER 1: The triggers of cultural change in Japan included the changing postwar economic boom in Japan, the influence of Western ideas, including individualism, and the profound economic slump Japan entered in the 1990ies.

QUESTION 2: How might Japan’s changing culture affect the way Japanese businesses operate in the future? What are the potential implications of such changes for the Japanese economy?

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International Business: Competing in the Global Marketplace Sixfth Edition Chapter 3

ANSWER 2: Japanese businesses may place more risk on the individual. In the past, Japanese businesses operated in a quite paternalistic way, assuming much of the risk of an individual employee’s economic life. The implications for the Japanese economy suggest a growth in external businesses connected to areas that were formerly company responsibilities: employment agencies (more job switching), individually managed employee retirement account investing, and more employees choosing to pursue

entrepreneurial interests. Over time, this may lead to increased innovation. Increased leisure may also be a result of these changes. Such changes will have a profound effect on family life, since traditionally, the salaryman was not home much.

QUESTION 4: How did traditional Japanese culture benefit Matsushita during the 1950s-1980s? Did traditional values become more of a liability during the 1990s and early 2000s? How so?

ANSWER 4: Traditional culture benefited Masushita because the deal was loyalty and dedicated service for the benefits Masushita provided. The company shouldered much responsibility and the salaryman’s level of ambiguity was greatly reduced. As the

recession progressed, the costs to Masushita of supporting non-productive workers rose, while their business was falling off. They needed a workforce focused on innovation and efficiency. They had a workforce high in loyalty and obedience.

QUESTION 5: What is Matsushita trying to achieve with human resource changes it has announced? What are the impediments to successfully implementing these changes? What are the implications for Matsushita if (a) the changes are made quickly or (b) it takes years or even decades to fully implement the changes?

ANSWER 5: Masushita is looking for efficiencies so it (Panasonic) can compete successfully in the global market. The impediments to implementing these changes include cultural expectations. A quick change might be quite difficult to implement because it would appear outside the norm and negative. A slow change, which gives

some measure of control to the worker, makes much more sense. Culture changes slowly.

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