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THE ROLE OF CULTURE IN INTERNATIONAL BUSINESS

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The overall impact of culture on international business, however goes right through an ... Culture: the essential core of culture ... extensive local research in ... – PowerPoint PPT presentation

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Title: THE ROLE OF CULTURE IN INTERNATIONAL BUSINESS


1
CHAPTER 4
  • THE ROLE OF CULTURE IN INTERNATIONAL BUSINESS

2
Introduction
  • The need to avoid cultural misunderstanding is
    vital to successful international business
    expansion,
  • But it must be recognized that culture can affect
    many aspects of corporate activity.
  • Comparative management which looks specifically
    at how management styles vary across national
    cultures.
  • The overall impact of culture on international
    business, however goes right through an
    international companies because,
  • It affects the core functions of HRM, marketing
    and finance (also corporate strategies and
    organization culture)

3
What is Culture?
  • Culture the essential core of culture consists
    of traditional ideas and specially their attached
    values.
  • Culture affects beliefs, values and behavior and
    the culture is shared and passes through the
    generations.
  • Beliefs Most obviously expressed in religion,
    but vary across cultures EXAMPLES
  • Middle East Islam is a very important influence
    within society, Western societies which are
    predominantly Christian, the influence of
    religion is declining rapidly.

4
What is Culture?
  • Values the relative value attached to the
    individual versus the group varies from across
    national cultures,
  • And affects the process of social interaction.
    EXAMPLE
  • Middle Eastern and Japanese societies place a
    strong emphasis on the collective view.
  • By contrast, in the US and UK, individual
    prospective takes precedence over the collective
    view.
  • Behavior beliefs and values influence behavior,
    even in small ways such as daily habits.

5
Comparing Cultures
  • In comparing cultures, care must be taken on a
    number of accounts, including
  • 1- Cultures are not monolithic but there are
    numerous subcultures.
  • 2- The separation of cultural issues from
    economic and political is complex, as all three
    factors interact to influence views and beliefs.
  • 3- Defining the degree of difference between
    cultures is not straightforward because
    recognition of difference is a subjective issue.

6
Comparing Cultures
  • 4- As the level of international trade and
    travel increases, cultures become increasingly
    intermingled and this cultural diffusion may
    dilute the significance of national cultures.

7
Alternative Classifications of National Cultural
Characteristics
  • Hofstede developed four dimensions which can be
    used as a basis for comparison of national
    cultures
  • 1- Individualism versus Collectivism.
  • 2- Power distance.
  • 3- Uncertainty avoidance.
  • Masculinity versus femininity.
  • EXPLAINED IN DETAIL ON THE NEXT SLIDES

8
Classifications of National Cultural
Characteristics - Hofstede
  • 1- Individualism versus Collectivism
  • Members of an individualist society enjoy the
    challenge of hard work but demand alongside this
    the right to a private life. (North America
    Western Europe)
  • The collective societies emphasize the right of
    everybody to share access to good training and
    remuneration. (Latin America Africa)

9
Classifications of National Cultural
Characteristics - Hofstede
  • 2- Power distance
  • Measures the degree of tolerance for differences
    in power in given national cultures.
  • In the cultures which score highly on power
    distance , managers tend to have greater over
    their subordinates,
  • And exercise of this power is accepted.
  • Examples
  • Poorer nations are characterized by high power
    distance combined with collectivism.
  • While richer Western countries which are
    individualist and low on power distance.

10
Classifications of National Cultural
Characteristics - Hofstede
  • 3- Uncertainty avoidance
  • Measures the extent to which people are nervous
    of the future and what may / may not happen.
  • Cultures which score highly on uncertainty
    avoidance have a preference for trying to predict
    the future, and
  • A general dislike of uncertainty and ambiguity in
    managerial and social situations.

11
Classifications of National Cultural
Characteristics - Hofstede
  • 4- Masculinity versus femininity
  • Here there is a stereotype.
  • Masculine being used to describe a society which
    promotes a macho norms and values of ability
    and earning power.
  • Feminine cultures place a high value on
    interpersonal relationship, caring and the
    overall of quality of life.
  • Japan was found to be the most masculine and
    Sweden the most feminine.

12
Classifications of National Cultural
Characteristics
  • The works of the following
  • Hall and Hall.
  • Trompenaars.
  • Lewis.

13
Implications For Management
  • If one accepts the view that national cultural
    characteristics influence peoples behavior and
    beliefs, then
  • It is reasonable to expect that this will also
    mean that management styles are not common
    throughout the world.
  • The differences of cultures can be narrowed down
    by the creation of clusters of countries which
    demonstrate similar characteristics.
  • Se Figure 4.1 (Page 80) Displayed on next
    slide

14
(No Transcript)
15
Implications For Management
  • Figure 4.1 demonstrates that there is a level of
    cultural affinity between groups of nations, and
  • So a general understanding of management
    practices is made easier if one realizes that it
    is only necessary to grasp the key
    characteristics of the seven groups.
  • This is not, of course, to say that the Russians
    are exactly like the Latvians.

16
The Impact of Culture on International Marketing
  • One of the major issues for international
    marketing managers is the extent to which it is
    possible for an international company to
  • Sell identical products / services across the
    world.
  • Maintaining a standard product design helps to
    keep costs down,
  • But it also fails to recognize that customer
    tastes /needs may vary from one country to
    another.

17
The Impact of Culture on International Marketing
  • In practice, culture might affect all of the
    following aspects of marketing
  • 1- Product.
  • 2- Price.
  • 3- Promotion.
  • 4- Place

18
The Impact of Culture on International Marketing
  • 1- Product
  • It is very important if you are a company such as
    Uniliver, marketing washing powder across the
    world.
  • If you try and sell a powder that is ineffective
    at the normal local temperature,
  • You will not find many customers. Consequently,
  • The way in which products are linked into culture
    may actually be quite subtle and require
    extensive local research in order to ensure
    marketing success.

19
The Impact of Culture on International Marketing
  • 2- Price
  • Price is a cultural issue because it needs to be
    matched to the level of economic development in a
    country.
  • 3- Promotion
  • In practice, the most effective form of promotion
    will be culturally influenced.
  • In the less developed world, billboard and radio
    advertising are likely to be more effective
    media.
  • In contrast, in rich countries such as the USA,
    the use of the internet as a prime choice for
    advertisements is now commonplace.

20
The Impact of Culture on International Marketing
  • 4- Place
  • As the internationalization of business
    increases, place may become less important.
  • Nonetheless, sometimes, especially food products,
    tend to be purchased in different places
    according to national culture.

21
Human Resource Management
  • In a company that operates across international
    boundaries, it is likely that the staff will be
    of mixed nationalities and so
  • This creates the possibility for cultural
    misunderstandings.
  • In recruitment, some cultures will operate a very
    formalized recruitment process,
  • Based on the specification of particular
    qualifications for each job and interviews and
    tests to assess the relative ability of
    applicants.

22
Human Resource Management
  • In other cultures, the method of recruitment may
    be more informal,
  • Based on employee network, educational background
    or personal recommendation.
  • Familial societies such as those of Africa, Asia
    and Arabia view it as a personal duty to use
    ones position to help other family members
    obtain work.
  • Although such an approach would be deemed wholly
    inappropriate and unfair in the west.

23
Operations Management
  • The richer and more developed societies are
    likely to have access to more sophisticated
    production technologies than
  • Those which are poorer and with a population
    that is less well educated.
  • In addition to the technology of production
    itself, there is also the question of how
    sophisticated is the information system that
    supports it.

24
Finance
  • The sources that may be used by companies to
    expand their business tend to vary from country
    to country,
  • As they reflect the political economy of the
    nation as well as its state of economic
    development.
  • In some countries the usual form of business
    finance is bank borrowing, with the loans often
    underwritten by the state Japan and Germany.
  • In contrast, businesses in the USA and UK are
    much more reliant of raising money via the sale
    equity shares in the stock market.
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