International Business and Culture

What is Culture?
Behaviour patterns that members of a society learns through different forms of symbolic interaction; e.g. Customs, habits, beliefs, values

Group based cultures ?

Nationality, religion, ethnicity, etc reflects in working environment

Cultural Diversity ?
Cultural Collision; interacting with different Cultures

Topics
Cultural

Awareness
of Cultures

Dynamics How

Cultural behaviour effect businesses to encounter Cultural differences

How

Cultural Awareness
Understanding cultures could be a complex task Experts could advise only to an extent, e.g. Books, Articles, Social Media But what about variable factors, such as; Economical and political Moreover, People develop their own norms within a given social Culture Investors only interested in understanding those cultural norms and set of behaviours that could effect their employees and customers.
Could attitudes of people be changed ? Yes, For good; developing a niche market for a product that was unknown before, changing work culture to some extent Example: Why Irish like cold cereals more than Spanish people ? Simply because Kelloggs marketed their product better in Ireland (Nothing to do with Culture)

The Idea of Nation

Since International business includes transactions among different nations, So understanding the concept of Nation and role of Culture in it is imperative.

National Values and National Identity

Existence of National values and identity within a country doesnt means that all people share the same culture (Norms, Beliefs, Work ethics)

The Nation as a Culture Mediator Concept of National Culture (Foreign investors to learn the National Culture) National Culture of Saudi Arabia and Pakistan (Similarities and Differences)

Culture formation and changes

Cultural value systems are set early in life but are always subject to minor or radical changes through

Choice: In reaction to changing social and economic situations, ALTERNATIVES Example : Farming and factory work by choice for rural people Imposition: Forced introduction of certain elements of an alien culture. Also called Imperialism. Example: ? Creolization: When different cultures interact with each other Example: UK Culture diffusion, changing social and work cultures

Role of Language in Culture

There are about 6000 (Approximately) languages spoken worldwide, including tribal languages. Most common are English, French, Spanish and Chinese.

Culture homogeneity among similar language speaking nations How it helps International Businesses? 40% people speak English worldwide (As a second language if not Native). Reasons ? (Media, Education, Technology, amalgamation of English words into foreign languages, Life style)

E.g. Philips and Nokia has adopted English as their operating Language.

Although, English is an International Language but with rising economy of China, the scenario might change.

Religion in Culture
Religion brings common norms that reflects in society practices

Most common religions; Islam, Christianity, Hindu, Buddhism

Major shift in west towards atheism, Thats why some times referred to as Post Christian nations. How religion facilitates International business across the globe with common NORMS (religion)?

What about nations with similar religions but different social Norms? Example: Saudi Arabia and Turkey
Where Religion brings harmony, it can also ignite the emotional anger where International businesses suffer. Example: Boycott of Jewish products in Britain by strict Muslims

Behavioural Practices and IB

Cultural Attitudes and values affect/influence greatly International business from identifying Niche markets and targeting product to organisational structure, finance and operations

Social Satisfaction Issues

Priority of individuals based on cultural values. A persons social status dictate its organisational value. The factors determining the these rankings are referred to as Social Satisfaction.

Ascribed and Acquired:

Social ranking determined by as an individual. E.g. Gender, family Age, Caste. (Ascribed) Social Ranking determined by affiliation with certain group. E.g. Religion, Political affiliation, professional. (Acquired)

Behavioural Practices and IB

Performance Orientation: Performance based employment or promotion, by creating competition at the work place. More effective in US but could be a second or third on priority list in some countries where cooperation and team work is stressed over competition. E.g. Japan

Open and Closed Societies: More open a society, less ascribed group membership determining work culture. E.g. Malaysia Quota system. Mix of open and closed societies, e.g. Brazil Dubai Kafeel system, Quota System

Gender based: Different attitude towards hiring and compensation based on gender. E.g. Women in Saudi Arabia account for only 7% of the whole work force and are not allowed in certain professions. Age based: Again Different countries treat age-groups in different ways. How it effects on IB ? (Age restrictions on purchase of Alcohol, Cigarettes, controlled drugs, bank accounts) Britain enforcing strict laws on Age discrimination, A set age for retirement.

Behavioural Practices and IB

Family based groups: Individuals position in society is determined by its family association. E.g. China family businesses and strong ties. WORK MOTIVATION

Extensive research suggests that motivated employees contribute towards companys growth resulting in strengthening economy. MNEs particularly interested in this issue when evaluating and selecting a country for operational sites. E.g. Strong motivation and loyalty of some Latin American countries. Brazil

Motivation and Materialism: Personal success, promotion, religious beliefs. Productivity/Leisure Trade: You spend more time on work, earn more and spend less because you have less time for leisure activities. E.g. Japan Masculinity Index: Live to work rather then work to Llive

Behavioural Practices and IB

Relationship References Power Distance: Interacting with Boss, Feedback, How comfortable the relationship is ?

Individualism Vs Collectivism: Low dependence on organisation in terms of benefits, allocating appropriate leisure time, training is referred to as Individualism. Substantial degree of dependence is labelled as Collectivism. E.g. Japan (Team Working)

Behavioural Practices
Risk Taking Behaviour

People tendency or attitude towards unseen and untried phenomenon

Uncertainty Avoidance: In countries where people are less likely to try or adopt something new. E.g. Gillette based on research, they were successful with new products in UK and Denmark. Trust: Another important factor in risk taking behaviours

Consumer Financial matters Workforce Loyalty

Future Orientation: People mind set about future perceptions. Career achievements, bonuses, promotions

Behavioural Practices
Communications

Spoken and Written Language: Translating one language to another is not a straightforward task. e.g. in English speaking countries the term Employees refer to all workforce but in Brazil Empleados refers to white collar workers and Obreros means low skilled workers. Example: IKEA

Silent Language: Message through non verbal cues. Consumer Colour, Black is associated to death and sadness in Western countries but in parts of Asia, the colour is White. E.g. Motorola difficulty in assigning numbers to northern dialect consumers as the numbers in their dialect sounded wrong. 7424 sounded I die, my Wife die Time and punctuality: Important interaction traits that effects IB. E.g. Americans spot on time on meetings and a bit late on Dinners.

Dealing with Cultural Differences

Once The company has done its home work on cultural aspects, its now time to reorganise/restructure itself to succeed. Usually the strategy varies based on 4 major variables

Accommodation: The extent to which culture is willing to accept the introduction of foreign practices and work life. How well the people (Host) can accommodate the new mind-set. E.g. Bahrain selling Pork but on certain conditions Cultural Distance: Whether differences are small or great. E.g. Apart from meat business, any other food business if successful in Pakistan has greater chances to be successful in India and Bangladesh than South Africa. Some times the case is interesting; Take AUDI for instance, Successful in Europe but did not do well at all in US.

Dealing with Cultural Differences

Cultural Shock: The ability of people to adjust to new culture (work culture, life style) e.g. Strict Saudi laws could be a cultural shock for foreign workers and investors. Cultural shock in layman term refers to the absorption of so many traits and norms of one culture in short span of time and trauma caused by it. Management Operations: The management orientation of the company doing business in a new culture. These orientations/attitudes are of mainly 3 different types:

Polycentrism Organisation/Individual believes that the businesses should act local (Host work life style). Mostly work but lacks the perspective of innovation. How ?

Dealing with Cultural Differences

Ethnocentrism Believing on cultural superiority and what works at home will/should work abroad. E.g. British sales Rep forced selling to Saudis. Sometimes work for businesses by serving/creating niche market. Geocentrism The middle way to both Poly & Ethno. Mixing best strategies from both and toping it up with some new ideas.

Strategies for Change When businesses operate in foreign markets, their aim is to gain competitive advantage by introducing distinctive strategies ( innovation, creating/serving niche market, introducing work life culture and making it work). One common issue that companies usually acknowledge is that people dont usually welcome change. Lets look at some factors that that influence change.

Approaches to Change

Value System: The degree to which a host nation will accept a change depends on the value system greatly. E.g. In north east Africa (people consume seafood to a limited extent. Despite efforts from Government and UNWFP, people mix the issue with religion and thus its hard to change the mind-set/value system. Cost-Benefit analysis: Companies need to consider the spending on bringing in change and the outcome. E.g. work life in line with social and cultural values. Resistance to radical change: degree of radical change also influence the performance of a business, e.g. GJ magazine (Mc Calls) publishers.

Participation: get the stakeholders on board, make their mind up for change so that the fears of consequences could be reduced.
Reward Sharing: getting people on board by rewarding. People accept change when an incentive is associated to it.

Opinion Leadership: influencing opinion making institutions/individuals

Timing: Change at the right time, e.g. the gossip of redundancies Prior Learning: Applying prior experiences to similar scenarios in a diff. country