Transcript c3.3-global business env

Global Business Environment
Cultural Environment
• Meaning of culture, values and norms
• Determinants of culture: social structure, religion,
education, language, aesthetics, history and
geography
• Impact of differences in culture on international
business
Culture
• The word ‘culture’ stems from the Latin “colere”,
translatable as to build on, to cultivate, to foster
Some definitions
• The complex whole that includes knowledge,
belief, art, law, morals, customs, and any other
capabilities and habits acquired by humans as
members of society
• The collective programming of the mind which
distinguishes the members of one group or
category from those of another
Culture
• A learned, shared, compelling, interrelated set of
symbols whose meanings provide a set of
orientations for members of society
• Culture includes systems of values, and values are
among the building blocks of culture
• Culture as a system of values and norms that are
shared among a group of people & that when taken
together constitute a design for living
• Culture is not transmitted genealogically, but
learned ; it is a common behavior of the society
Values
• Values means abstract ideas about what a group
believes to be good, right & desirable
• Values form a bedrock of culture and provides
context within which a society`s norms are
established and justified
• Includes society`s attitude towards such concepts as
individual freedom, democracy, truth, justice,
honesty, loyalty, social obligation, collective
responsibility
• Values are ideals that guide or qualify your personal
conduct, interaction with others and involvements
Values: classification
• Personal values: defines you as individual
Honesty, reliability, trust
• Cultural values: sustains connection with your
cultural roots : help you feel related to a larger
community
• Social values: indicates how you relate to others
in social situations, incl. family, friends, coworkers
• Work values: guides your behavior in
professional context : define how you work, and
how you relate to co-workers, bosses, clients, as
well as your career advancement
Values: classification
Personal
Caring
Courage
Cultural
Celebration of
diversity
Ethnic roots
Social
Welfare for
others
Equality
Creativity
Honesty
Faith
National ties
Fairness
Family
closeness
Lovingness
Competitiveness
Dedication
Professional
ethics
Punctuality
Reliability
Team player
Independe- Tradition
nce
Regional ties
Work
Autonomy
Cross-cultural values
Americans
Freedom
Independence
Self-reliance
Equality
Competition
Efficiency
Time
Directness
Japanese
Belonging
Group harmony
Collectiveness
Age-sensitive/
seniority
Cooperation
Quality
Patience
Indirectness
Norms
• Unwritten social laws, rules, and guidelines that
prescribe appropriate behavior in particular
situations
• Norms are more specific and determine how to
behave
• Various cultures do not accept the names of
their Gods to be pronounced (the almighty,
lord…)
• A Hindu woman does (should) not pronounce
her husband’s name (she calls him swami, nath,
raja…..)
• A Hindu woman should eat only after her
husband has eaten
Norms
• Having a set of norms that a group follows
encourages behaviors that help groups do
their works and discourages those that
interfere with its effectiveness
• Norms can be classified as Folkways and
Mores
• Folkways: social conventions concerning
things such as appropriate dress codes,
social etiquettes, concept of time
Violations of these is not a serious matter
Norms
• Mores: are norms that are seen as central
functioning of a society and to its social life
- Violating can bring serious retribution
- Indictments against theft, adultery,
cannibalism
- It varies from country to country varying
upon cultures e.g. drinking alcohol is
common in USA while in Saudi Arabia it is
serious violations of social more and might
lead to imprisonment
Determinants of Culture: Social Structure
Individual
• Basic building block of social organization
• Reflection of political, economic organizations of
society
• Value system of different societies have different
degree on individual achievement
• In Western countries emphasis is on individual
performance benefit is high level of entrepreneurial
activity e.g. in USA due to high level of
entrepreneurial activity new products & new
methods of doing business are created
Determinants of Culture: Social Structure
Individual
• Individualism leads to high degree of managerial
mobility between companies that have
• positive impact of exposure to different ways of
doing business
• negative is lack of knowledge, experience,
network that person gains after working for long
time in same organization
• Emphasis on individual might have difficulty in
forming team
Determinants of Culture: Social Structure
The Group
• It is primary unit of social organization in many
other societies in contrast to individual in Western
• Identification of group creates pressure for mutual
self help & collective action
• Value of group identification discourages managers
and workers from moving from company to
company
• Primacy of group is not always beneficial
•Group Affiliations by birth: ascribed group
memberships (gender, family, age, caste, ethnical,
racial, national, etc)
Determinants of Culture: Social Structure
The Group
• Group Affiliations not by birth: acquired group
memberships (religion, political/ professional
affiliations, etc)
• Social stratification: Societies are stratified on
hierarchical basis into social categories that is social
strata
• Social mobility: extent to which individuals can
move out of the strata into which they are born
• Caste system closed system of stratification in
which social position is determined by the family
into which a person is born
Determinants of Culture: Social Structure
• Class system: is less rigid form of social
stratification into which social mobility is
possible (Upper, Middle, Lower class)
• Such stratifications are used in marketing
(using characters from popular groups in ads)
• In American society the high degree of social
mobility and emphasis on individualism limits
impact of class on business
Importance of different group memberships
Gender-based groups
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Most Asian countries show strong preference for
males than females
Despite governmental regulations, societies still
practice preventing girl child birth
Extreme Muslim countries have separate
environment setup for women (schools, parties)
Even in places having women workers, the
nature of jobs is different for them from men
Women are assigned more administrative works
and men professional works
Importance of different group memberships
Age-based groups
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Many cultures assume age and wisdom are
correlated
Some countries favor young fresh professionals
while others favor older and more experienced
Family-based groups
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Some societies accept professionals based on
family background more than individuals’
achievements
Some countries have family-run businesses more
successful than others (trust in own family than
others)
Religion
• Organized system of beliefs, ceremonies,
practices, and worship that center on one supreme
God or the Deity
• Almost all people follow religion because they
believe a divine power that created the world
influences their lives
• Religion is one of the primary ways that explains
why why people behave as the way they do
• Some of the dominant religions of the world:
Hinduism, Buddhism, Islam,Confucianism,
Christianity
Religion
Economic implications of Christianity
• Protestant ethics emphasizes the importance of
hard work and wealth creation (for glory of God)
and frugality (abstinence from worldly pleasure)
and such value system facilitate development of
capitalism
• Catholic promise of salvation in the next world,
rather than this world, did not foster the same kind
of work ethic
Economic implications of Islam
• The Koran establishes some explicit economic
principles many of which are pro-free enterprise
Religion
Economic implications of Islam
• The Koran speaks approvingly of free enterprise and of earning
legitimate profit through trade and commerce
• Protection of right to private property embedded with Islam,
although Islam asserts that all property is a favour of Allah
(God)
• Islam is critical of those who earn profit through exploitation of
others
Economic implications of Hinduism
• Traditional Hindu values emphasizes that individual should not
be judged by the material achievement, but by their spiritual
achievements
• Historically Hinduism is supported by caste system
• Modern India is very dynamic entrepreneurial society and
millions of hardworking entrepreneurs
Religion
Economic implications of Buddhism
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Emphasis on wealth creation is not found in Buddhism
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Lack of support for caste system and extreme ascetic behaviour
Buddhist society may represent more fertile ground for entrepreneurial
activity than Hindu culture
Economic implications of Confucianism
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Confucianism teaches importance of attaining personal salvation through
right action and ideology has been deeply embedded in culture of
countries mainly China, Korea and Japan
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Loyalty to one`s superior is regarded as sacred duty and absolute
obligation
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Superiors are obliged to reward the loyalty of their subordinates by
bestowing blessings on them
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Confucian thinkers emphasize that although dishonest behaviour may
yield short-term benefits, dishonesty does not pay in long run
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Close ties between automobile companies and their component suppliers
in Japan is facilitated by combination of trust and reciprocal obligations
Religion
Religion and Economy
• Holidays: festivals and ceremonies are the time
for spending and opportunities for marketers
• Consumption pattern is determined by religion
eg. Muslims’ prohibition for alcohol and pork
leading to marketing of non-alcoholic
beverages by alcohol producers in the region,
new attires and sacrificing of cattle on dasain
for Hindus
• Economic role of women: can be restricted in
their capacity as consumers and workers in
several religions
Religion
• Purchasing pattern changes from economy to
economy due to family structure: chief decision
maker is usually the eldest in religions having
joint family culture
• Religious divisions can give rise to different
economies and patterns within one geographical
segment. Eg.
Hindu Muslim division, catholic protestant clashes
etc can lead to adopting different strategies for
these segments
• International business people must be sensitive to
the religious differences and should be willing to
make adaptations
Language
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Defining characteristics of culture and it means both the
spoken an unspoken language
In countries where there are more than one language, one
also finds more than one culture
Language is the most distinct difference between cultures
Languages pose problems and create a block for
international business in more than one way
If management is not speaking the same language as its
various audiences, it is not going to enjoy much success
but can be overcomed with
 merge with local establishments, operating through
local distributors, using local advertising agencies &
research firms
Nonspoken Language
Nonverbal cues
 eyebrows
 fingers/thumbs
 hand gestures
 feet
 personal space
 body gestures
Making a circle with thumb and forefinger is
its fine in USA, you lunatic in Germany, an obscene
in Greece, zero or worthless in France, money,
especially change in Japan
Aesthetics
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The branch of philosophy dealing with beauty and
taste, expressed in the form of music, art, drama,
dance, color, style, etc.
Aesthetics is generally regional than national (like
eastern food, western music, etc)
Design: people prefer architectural designs to be
local than international, local aesthetic
preferences should be considered before
designing the factories, offices, and the like
Color: interpretation of colors can be different in
different countries/ regions
Aesthetics
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Black signifies mourning in west and white in
east
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International business people need to be aware
of such differences in significance while using
colors in products, packages, and advertising
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Music: using music in marketing activities calls
for understanding the local taste of music
Education
Education refers to ways in which people learn skills
and gain knowledge and understanding about the
world’
• Education can be formal, informal
• Education is one of the major determinants of
economic development
• Education is a part of the culture while cultural
changes can also be a result of education
• Education can be a source of competitive
advantage : e.g. India, Malaysia, Japan after WWII
Education
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Education is a key determinant of the nature of
consumers as well as kinds of workers, employees
available in any host country
Education level/ standard affects business in the more
than one way
• Differences in promoting a product-illiterate and
literate consumers
• Some cultures prohibit women and girls from formal
education resulting in different strategy for such
segments
• Less educated societies can result in difficulties in
carrying out market research activitiescommunicating with target respondents as well as
getting qualified researchers
Education
• Complex products need to have well
explained instructions for product usage
• Distribution channel cooperation can differ
with respect to their level of education
History & Geography
History:
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Culture partly results from history also
Ancient Aryan civilization spread over the South Asia &
Persia and eventually gave birth to Hindu culture
Many countries have common history of British , French,
Dutch, Spanish, Portuguese colonies
Even when they left they left behind some culture back
Geography
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Geographic features, people in highland settlement & cold
climate have common culture of consuming high energy
alcoholic drink e.g. Vodka in Russia, Tibetan tea in Tibet &
highlands of Nepal
Coconut water is a culture in South India and Sri Lanka cause
of hot temperature
Importance of Culture
International managers need to know about
cultural differences among nations in order to
be able to
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to communicate effectively with customers,
suppliers, business associates & partners in
other countries, and with foreign employees
to conduct negotiations & understand the
nuances of the bargaining postures of the other
parties to a negotiation
to predict trends in social behaviour likely to
affect the firms foreign operations
Importance of Culture
to understand ethical standards and concepts of
social responsibility in various countries
• to predict how cultural differences will affect
consumer reactions to advertisements and other
promotional forms
Example: HSBC ‘the World`s local bank’
HSBC believes in diversity and its diversity strategy is
to understand local needs and preferences of people &
has developed skill of understanding local needs from
its 166 years of operations
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Influence of Culture
A. Business Environment
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Relationships between trade union
confederations and employers association
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Role of government in business affairs
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Extent of employee participation in
management decisions
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How meetings are conducted, degree of
formality of personal relationships
Influence of Culture
B. Marketing
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What people buy (e.g. local tastes, taboos etc.) ?
When they buy ? ( e.g. high sales during
Christmas)
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Overall consumer buying behavior
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Which family member made what decisions?
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Attitudes towards foreign supplied products
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Level of ethical/social standards acceptable in a
society (acceptability of what parts of human
body may be shown in advertisement)
Influence of Culture
B. Marketing
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Nature of national media that carry
advertisements e.g. country has tabloid press,
magazines, newspapers, attitudes expressed by
media towards national issues
C. Social Attitudes
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Attitudes towards work & material possessions,
entrepreneurship, politics, religion, role of women
in society, wealth accumulation, social class,
respect for law & social institutions etc.
Influence of Culture
C. Social Attitudes
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Firms need to become progressively aware of
foreign culture as the nature and extent of its
foreign operations alter
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Exporters, for example need to consider those
cultural factors to affect foreign marketing of
their products
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Firms with foreign subsidiaries have to manage
local labour & require knowledge of local norms
concerning employee relations, attitudes towards
work & so on
Influence of Culture
C. Social Attitudes
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Managers need to develop cross cultural literacy
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International Business should guard against dangers
of ethnocentric behaviour (belief in superiority in
one`s culture to another)
D. Connection between culture and National
Competitive Advantage
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Example – Japan (Ease of doing business) mainly
due their culture emphasized by group affiliation,
loyalty, reciprocal obligations, honesty and education
Influence of Culture
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But it has also been said that Japanese culture is less
supportive of entrepreneurial activity than American
So culture helps to determine: 1) Which countries are likely
to produce the most viable competitors
2) Choice of location for production facility
Scenario Country A & B both have low labour cost, good
access to world market, same size population, similar stage of
economic development But
Country A: undeveloped education system, social
stratification of upper and lower class, six linguistics groups
Influence of Culture
Country B: well developed education system, lacking social
stratification, group identification valued by culture, one
linguistic groups
Which country would you choose for production location?
E. Connection between culture and business ethics
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Many ethical principles are universal, others are
culturally bound