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INTERNATIONAL BUSINESS
MANAGEMENT (BUSI 1346)
International Business and the Role of Culture
Lecture 21, 11th March 2010Dr Michael Wynn-Williams [email protected]
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ENVIRONMENT AND GLOBAL OPERATIONS Types of Multinational Corporations
Ethnocentric exert strict control over foreign operations
Polycentric give foreign operations more freedom to operate
as separate entitiesGeocentric
seek total integration of global operations
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INTERNATIONAL BUSINESS CHALLENGES Problems of Laws : vary between countries
common legal problems incorporation practices negotiating contracts protecting patents, trademarks and copyrights
Human resource concernsabsence of appropriate skillsshortage of labor supplies
Good Practices and Fair WagesThe ILO’s concept of “Decent Work”
Cultural differences
Social culture
Business culture
Organizational culture
Occupational culture
Multinational Management
WHAT IS CULTURE? Culture is relative – Different nationalities simply
perceive the world differently
Culture is about groups – It refers to collective values and meanings
Nurture not nature – culture is derived from the social environment
Socialization – The process of learning the rules and behavioral patterns appropriate to one's given society
Acculturation – The process of adjusting and adapting to a culture other than one's own, commonly experienced by expatriate workers.
Culture as Iceberg
Culture has been likened to an iceberg - above the surface, certain characteristics are visible.
Below the surface is a massive base of assumptions, attitudes, and values
These strongly influence decision-making, relationships, conflict, and other dimensions of international business
CULTURE, SOCIETY, AND THE NATION STATEA society is a group of people bound
together by a common cultureThere is not a strict one-to-one
correspondence between a society and a nation state
Nation State:Is a political creation May contain a single culture or several
cultures (Japan vs. USA)A country may have multiple nations
THE DETERMINANTS OF CULTURE
SOCIAL STRUCTURE Social structure refers to its basic social
organization Group or individually oriented Degree of stratification into castes or classes
Language Spoken Unspoken
Education Teaches technical skills Introduces sense of competition Reinforces social norms
Economic philosophy Political philosophy Religion
CLASS TASK I: CULTURAL GUIDES
Arrange yourself into national or regional groups
You will be asked to provide guides for business men travelling to your country
The guides should contain 1 cultural rule to observe, and 1 cultural taboo to avoid
Present your findings to the class
HOFSTEDE’S DIMENSIONS OF CULTURE
Individualism versus collectivism – whether a person primarily functions as an individual or within a group
Power distance – how a society deals with inequalities in power
Uncertainty avoidance – the extent to which people can tolerate risk and uncertainty in their lives.
Masculinity versus femininity – refers to a society’s orientation based on traditional male and female values.
Short-term versus long-term orientation – immediate gains or long range planning
INDIVIDUALISTIC VS. COLLECTIVE SOCIETIES
Individualistic societiesTies among people are relatively looseFocus on self-interestThose who compete best are rewarded financiallyDecisions are made by hierarchy
Collectivist societies: Ties among individuals community basedBusiness is conducted in the context of a group Decisions are made by compromise
HIGH VS. LOW POWER DISTANCE High power distance societies
Substantial gaps between the powerful and the weak Indifference to inequalities and allow them to grow
Low-power distance societies Minimal gaps between the powerful and weak
Social stratification affects power distance In Japan almost everybody belongs to the middle
class In India the upper stratum controls decision-
making and buying power
In high-distance firms, autocratic management styles focus power at the top and grant little autonomy to lower-level employees.
HIGH VS. LOW UNCERTAINTY AVOIDANCE SOCIETIES
High uncertainty avoidance societies create institutions that minimize risk and ensure
financial securitycompanies emphasize stable careers and produce
many rules to regulate worker actions decisions are made slowly and alternatives explored
exhaustivelyLow tolerance of eccentric behaviour
Low uncertainty avoidance societies socialize their members to accept and become
accustomed to uncertaintymanagers are entrepreneurial and comfortable with
taking risksdecisions are made quickly; people accept each day as
it comes and take their jobs in strideHigh tolerance of eccentric behaviour
MASCULINE VS. FEMININE CULTURES
Masculine cultures Value competitiveness, assertiveness, ambitionThe accumulation of wealth is a priorityBoth men and women are assertive and career
focused In business, there is self-confidence, proactiveness
and leadership
Feminine cultures Emphasize nurturing roles Interdependence among peoplePriority on welfare
LONG-TERM VS. SHORT-TERM ORIENTATION
Hofstede’s fifth dimension was a later addition to the theory
Long-term orientation tends to take the long view to planning and living, focusing on years and decades
Short-term orientation – immediate gain, boom-and-bust
CLASS TASK II: ASSIGNING COUNTRIES Mexico
Germany
Russia
China
Japan
United StatesNigeria
UK
Australia
Sweden
High Power
Low Power
Individualistic
Collective
Masculine
Feminine
Tolerate High UncertaintyAvoid High UncertaintyLong-term Orientation
Short-term Orientation
PROBLEMS WITH HOFSTEDE Assumes one nation, one culture Research may have been culturally bound Survey respondents were from a single
industry (computer) and a single company (IBM)
Are there more dimensions?
TROMPENAARS – 7 DIMENSIONS Social Dimensions
1. Universalism vs. Particularism – (rules or relationships?)
2. Individualism vs. Collectivism – (as a group or as individuals?)
3. Neutral vs. emotional - (display of emotions?)4. Specific vs. Diffuse – (responsibility assigned or
diffused?)5. Achievement vs. ascription (prove ourselves or is
status given to us?)
Temporal Dimension6. Sequential vs. synchronic - (change things in turn or
at once)
Environment Dimension7. Internal vs. external control - (Do we control our
environment or are we controlled by it?)
RELIGIOUS AND ETHICAL SYSTEMS Religion: a system of shared beliefs and
rituals that considered sacred, with strong geographical roots
Ethical systems: a set of moral principles, or values, that are used to guide and shape behavior Most of the world’s ethical systems are
derived from religions Four religions dominate in terms of numbers of
adherents: Christianity with 1.7 billion adherents Islam with 1 billion adherents Hinduism with 750 million adherents Buddhism with 350 million adherents
CULTURE AND BUSINESS The greater the cultural distance between
the service producer and its customers, the more likely there will be cognitive and communication gaps.
Differences in language and national character have the same effect as trade barriers, and FDI is particularly vulnerable
However, many differences are imagined – eg. Japanese production methods in transplant operations
CONVERGENCE OF CULTURES Cultural homogeneity and heterogeneity are
not mutually exclusive – they may exist simultaneously
Cross-cultural exchange promotes innovation and creativity
Cultural flows originate in many places
McDonald’s hamburgers are popular in JapanVietnamese food in the USJapanese sushi in Europe
Globalization is also liberating people culturally by undermining the ideological conformity of nationalism.
USEFUL SOURCES Hofstede G (2005) Culture's Consequences:
comparing values, behaviors, institutions, and organizations across nations (2nd ed.). Thousand Oaks, CA: SAGE Publications
Ailon G (2008) Mirror, Mirror on the Wall: Culture's Consequences in A Value test of Its Own Design in The Academy of Management Review Vol. 33, No 4 / 2008 pp.885 - 904
McSweeney, Brendan (January 2002). Hofstede's Model Of National Cultural Differences And Their Consequences: A Triumph Of Faith - A Failure Of Analysis in Human Relations 55 (1): pp.89–118.
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SEMINAR FOR NEXT WEEK
In groups of two… Identify two cultural peculiarities of any
country in the world that has an important bearing on international business
Prepare a transparency and come prepared to present and discuss.