Transcript Chapter 06 - Jacksonville State University

Section Three
International Environmental Forces
International Business
by Ball, McCulloch, Frantz,
Geringer, and Minor
This chapter covers:
6
•The significance of
culture for business
•The sociocultural
components
•The significance of
religion
Sociocultural Forces
•Cultural aspects of
technology
•Trends of formal
education
•The importance of
language
•Classes of society
and cultural
dimensions
International Business
by Ball, McCulloch, Frantz,
Geringer, and Minor
McGraw-Hill/Irwin
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Chapter Objectives
 Understand the significance of culture for international business
 Understand the sociocultural components of culture
 Appreciate the significance of religion to businesspeople
 Comprehend the cultural aspects of technology
 Grasp the pervasiveness of the Information Technology Era
 Understand why businesspeople must follow the trends of formal
education
 Appreciate the importance of the ability to speak the local language
 Recognize the importance of unspoken language in international
business
 Discuss the two classes of relationships within a society
 Discuss Hofstede’s four cultural value dimensions
6-2
Rules of Thumb for Cross Culture
Business
Be prepared
 Slow down
 Establish trust
 Understand the
importance of language
 Respect the culture
 Understand the
components of culture
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6-3
What is Culture?
 Culture
 The sum total of beliefs, rules, techniques,
institutions, and artifacts that characterize human
populations.
 Consists of learned patterns of behavior common
to the members of a given society.
 The unique lifestyle of a particular group of
people.
 Ethnocentricity
 Considering your culture superior to all others
6-4
Living with Other Cultures
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First, realize that there are
many different cultures.
Then, learn the
characteristics of those
cultures.
 Spend a lifetime in a
country.
 Undergo an extensive,
highly sophisticated
training program that
covers the main
characteristics of a
culture.
6-5
Culture Affects All Business Functions

Marketing
 Variation in attitudes
and values requires
firms to use different
marketing mixes
 P&G Japanese
Camay
commercials
 Disneyland Paris
6-6
Human Resource
Management
 Evaluation of
managers
 Production and Finance
 Attitudes toward
authority
 Attitudes toward
change

Sociocultural Components
 Components of Culture
 Aesthetics
 Attitudes and beliefs
 Religion
 Material Culture
 Education
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6-7
Language
Societal organization
Legal characteristics
Political structures
Aesthetics
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Art
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Colors, symbols, numbers
convey meaning
 Nike air symbol
Architectural styles different
 Feng shui
Music and Folklore
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6-8
Musical tastes vary
Folklore discloses way of
life
 Cowboys in Chile or
Argentina
 Mexican singing cricket
Attitudes and Beliefs

Attitude Toward Time
 Problem for Americans
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Perceived to be rudeness
Deadlines
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6-9
Attitudes toward
Achievement and Work
Directness and drive

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Americans always
prompt
Mañana attitude
Siestas

Liability in Asian
cultures

“American live to work,
Germans and Mexicans
work to live.”
Demonstration effect
 Result of having seen
others with desirable
goods.
Job prestige
 Disdain for physical
labor
Attitudes and Beliefs

Attitude Toward Change
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The American firm is accustomed to the rapid
acceptance by Americans of something new.
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Europeans are fond of reminding Americans that
they are a young nation lacking traditions.
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The more consistent a new idea is with a
society’s attitudes and experiences, the more
quickly it will be adopted.
Religion
 Responsible for many of the attitudes and beliefs
affecting human behavior.
 Work Ethic
 Protestant work ethic
 Europeans and Americans generally view
work as a moral virtue and look unfavorably
on the idle.
 Confucian work ethic
 In Asian countries, this is the same as
Protestant ethic.
6-11
Asian Religions
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Hinduism
 Caste system is basis of
the social division of
labor.
Buddhism
Jainism
Sikhism (Indian)
Confucianism
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6-12
Inseparable from Chinese
culture
Taoism
Shintoism (Japan)
Islam
 About 1.3 billion followers
 This youngest faith is the
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second largest after Christianity
(2 billion adherents).
Founder of Islam is Muhammad
 Muhammad was not only
the prophet of God but also
the head of state.
 In Muslim nations, there is
no separation of church and
state.
Holy Book Koran
6-13
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Five Pillars of Faith
 Confession of faith
 Five daily prayers
 Giving charity
 Ramadan fast
 Pilgrimage to Mecca
Jihad – holy war
Two divisions
 Sunni and Shiites
 Conflict gives rise to violent
clashes
Religious Population of the World
Insert Figure 6.1
Material Culture
 Refers to all human-made

objects
 Concerned with how
people make things and
who makes what and
why.
Technology
 Mix of usable knowledge
that society applies and
directs toward attainment
of cultural and economic
objectives
6-15
Material Culture - Technology
 Importance to International
Companies
 Enables a firm to be
competitive in world
markets.
 Can be sold, or be
embodied in the
company’s products.
 Can give a firm
confidence to enter a
foreign market.
6-16
 Enables the firm to obtain
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better than usual conditions
for a foreign market
investment.
Enables a company with
only a minority equity
position to control a joint
venture.
Can change the international
division of labor.
Is causing major firms to
form competitive alliances.
Material Culture - Technology
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Cultural Aspects of
Technology
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Includes skills in marketing,
finance, and management
People not always ready to
adapt to changes technology
brings
Technological Dualism
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6-17
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The side-by-side presence of
technologically advanced
and technologically
primitive production
systems.
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Appropriate Technology
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Choose the technology that
most closely fits the society
using it
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Can be labor-intensive,
intermediate or capitalintensive
Bommerang Effect
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Technology sold to copanies
in another nation used to
produce competing goods
Material Culture - Technology
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Information Technology Era
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By the year 2000 the Internet economy
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Already reached $850 billion.
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Exceeded the size of the automobile and truck
and life insurance industries.
Consumption
 Japanese wide use of automation
6-18
Education
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6-19
Equips a person to take his or
her place in adult society
Yardsticks
 Literacy rate
 Must verify definition
used
 Kinds, quality and
enrollment of schools
 Amount per capita spent on
education
 Vocationally trained groups
 Study trends
Educational Mix
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European business schools patterned on American
model because of
Increased competition in the EU
 Return to Europe of American business school
graduates
 Establishment of American-type schools with
American faculties
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Trend in less developed countries to emphasize
humanities, law and medicine
6-20
Education
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Brain Drain
 The emigration of highly
educated professionals to
industrialized nations
Reverse Brain Drain
 The return of highly
educated professionals to
their home countries.
 Korea and Taiwan are
luring home engineers
and scientists
6-21

Women’s Education
 Fall in illiteracy rate
 Most governments now
provide education for
both genders
 Educated women have
fewer, healthier, and
better educated children
 Educated women achieve
higher labor force
participation and wages
Spoken Language
Language is the key to culture, and without it,
people find themselves locked out of all but a
culture’s perimeter
 Spoken languages demarcate cultures
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Switzerland four separate cultures
Many languages can exist in a single country, but
one usually serves as communication vehicle
Lingua franca or link language
 English primary language of business
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6-22
Language
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Must speak the local
language
 Still need translators
 Use back translations to
avoid errors
 Technical words do not
exist in all languages
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6-23
Usually resort to English
Many cultures avoid
saying anything
disagreeable
Unspoken Language

Nonverbal communication, such as gestures and
body language.
 Gestures vary tremendously from one region to
another
 Closed doors convey different meanings
 Office size different in various cultures
 Conversational distance small in East
 Gift giving has specific etiquette in each culture
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6-24
Gift or bribe?
Questionable Payments
Necessary in some
countries to obtain
action from the
government
 Foreign Corrupt
Practices Act prohibits
American firms from
making questionable
payments
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6-25
Societal Organization
 Kinship
 Extended family
 Includes blood relatives
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6-26
and relatives by
marriage.
 This is a source of
employees and business
connections.
Member’s responsibility
 Although the extended
family is large, each
member’s feeling of
responsibility to it is
strong.
 Associations
 Social units based on

age, gender, or common
interest, not on kinship.
Age
 Manufacturers of
consumer goods are well
aware of the importance
of segmenting a market
by age groups.
 This segmentation
often cuts across
cultures.
Societal Organization
 Associations
 Gender
 As nations
industrialize, more
women enter the job
market and assume
greater importance in
the economy
 Free association
 people joined together
by a common bond:
political, occupational,
religious or
recreational
6-27
Understanding National Culture
 Hofstede’s Dimensions of Culture
 Individualism versus Collectivism
 Large versus Small Power Distance
 Strong versus Weak Uncertainty Avoidance
 Masculinity versus Femininity
6-28
World Bank Anti-Corruption Program
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We believe that an effective anticorruption strategy
builds on five key elements:
1. Increasing Political Accountability
2. Strengthening Civil Society Participation
3. Creating a Competitive Private Sector
4. Institutional Restraints on Power
5. Improving Public Sector Management
Source: www.worldbank.org
Business Culture in Brazil
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Brazilians conduct business
only through personal
connections. There must also be
an implicit understanding that
the business relationship will
be long-term.
In Brazil, people quickly move
to a first-name basis. Do not,
however, use first names until
you are invited to do so.
Maintain steady eye contact at
all times; it is considered
impolite to break eye contact.
Source: www.executiveplanet.com
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Do not give anything that is
obviously expensive. Your
generosity will only cause
embarrassment or be
misinterpreted as a bribe.
Avoid giving items in black or
purple, since these are the
colors of mourning. Moreover,
handkerchiefs are also
associated with funerals.
Brazilians also consider
themselves Americans.
Consequently, don't use the
phrase 'in America' when
referring to the United States.
USAID
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Source: www.usaid.gov
The ability to read and write —
or literacy — is a basic skill for
people to live and work in
today’s world. Yet more than
900 million adults are not
literate, primarily in developing
countries. More than 125
million children who should be
in school are not. For this
reason, USAID emphasizes
programs of support for basic
education and places a special
emphasis on improving
opportunities for girls, women
and other underserved and
disadvantaged populations.
FCPA

The FCPA covers
 all entities and individuals engaging in acts within the
territory of the United States in furtherance of the
prohibited conduct, and it covers
 U. S. citizens, resident aliens, entities established under
U. S. law, and
 publicly held corporations, including their officers,
directors, employees, shareholders and agents, whether
foreign or domestic, that are registered with the SEC as an
issuer that participates in corrupt practices in any fashion
outside the United States.
Source: www.abanet.org
Buddhism

As of June 2001, Buddhists in
Taiwan had registered 4,037
temples, 39 seminaries, five
universities, three colleges, four
high schools, 45 kindergartens,
30 nurseries, five orphanages,
five retirement homes, one
center for the mentally retarded,
64 institutions for proselytizing,
three hospitals, four clinics, 118
libraries, and 28 publishing
houses with 26 publications.
There were also around 9,866
Buddhist clergy serving the 5.48
million Buddhists of Taiwan.
Source: www.gio.gov.tw
World Illiteracy Rates
Source: www.uis.unesco.org