International Business Management

Unit 4

Unit 4

Culture and International Business

Structure:
4.1 Introduction
Objectives
4.2 Meaning of Culture
Need to understand cultural differences
Hofstedes cultural dimensions
4.3 Country Culture
Significance of country culture
Comparative study on cultures of Japan, China, Brazil, France,
and USA
4.4 Culture in an International Business Organisation
Cross cultural management
Comparative study on corporate cultures of Japan, China, Brazil,
France, and USA
4.5 Summary
4.6 Glossary
4.7 Terminal Questions
4.8 Answers
4.9 Case-let

4.1 Introduction
In the previous unit, you have learnt about various factors like economic,
political, demographic, technological, social and legal environments in which
an international business operates. The unit gave an insight on the effects of
environment on companies while dealing with international business.
Many developments took place in late twentieth century. All these
developments paved way for the people of different countries coming
together. Relations between people from different nations grew. This mainly
included the globalisation of business.
Culture is an important factor for practising international business. Culture
affects all the business functions ranging from accounting to finance and
from production to service. This shows a close relation between culture and
international business.
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Objectives:
After studying this unit, you should be able to:
explain culture in an international scenario.
analyse national cultures of different countries.
describe the importance of managing cultures internationally.
evaluate corporate cultures from different countries.

4.2 Meaning of Culture

In this section, you will learn about the meaning of culture and the need to
understand various cultural differences.
Culture is defined as the sum total of knowledge, arts, beliefs, laws, morals,
customs, and other abilities and habits gained by people as part of society.
The art and other signs or demonstrations of human customs, civilisation,
and the way of life of a specific society or group is all included in culture.
Culture determines every aspect that is from birth to death and everything in
between it. It is the duty of people to respect other cultures too.
Research shows that national cultures generally characterise the dominant
groups values and practices in society, and not of the marginalised groups,
even though the marginalised groups represent a majority or a minority in
the society.
Culture is very important to understand international business. Culture is a
part of the environment which man has created.
4.2.1 Need to understand cultural differences
Cultural differences affect the success or failure of multinational firms in
many ways. The company will have to modify the product to meet the
demand of the customers in a specific location and use different marketing
strategies to advertise their product to the customers. Adaptations must be
made to the product where there is demand or the message must be
advertised by the company. The following are the factors which a company
must consider while dealing with international business:

The consumers across the world do not use similar products. This is due
to varied preferences and tastes. Before manufacturing any product, the
organisation has to be aware of the customer choice or preferences in
that geography.

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The organisation must manage and motivate people with different

cultural values and attitudes. Hence the management style, practices,
and systems must be modified accordingly.

The organisation must identify candidates and train them to work in

other countries because the cultural and corporate environment differs in
each country. The training may include language training, corporate
training, and training on technology and so on, which will help the
candidate to work in a foreign environment.

The organisation must consider the concept of international business

and must construct guidelines that help them take business decisions,
and perform activities. The following are the two main tasks that a
company must perform:

Product differentiation and marketing As there are differences in

consumer tastes and preferences across nations, product
differentiation has become a business strategy all over the world.
The kinds of products and services that consumers can afford are
determined by the level of per capita income. For example, in
underdeveloped countries, the demand for luxury products is limited.

Manage employees It is said that employees in Japan were

normally not satisfied with their work as compared with employees of
North America and European countries; however the production
levels stayed high. To motivate employees in North America, a study
was conducted on this issue. This study showed that there is a
relationship between job satisfaction and production. This study also
showed the fact that it is tough for Japanese workers to change jobs.
While this trend is changing, the fact that job turnover among
Japanese workers is lower than the American workers is true. This is
because even if Japanese workers were not satisfied with specific
aspects of their work, they know that the management style and
practices may not change considerably at another place. Thus,
discontent might not impact their level of production.

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Exhibit 1: Understanding foreign cultures: Areas of general

precautions
1. Gift giving and cultural distaste
2. Entertainment at home and
local customs

8. Eye contact, hand gestures

and etiquette
9. Protocol and etiquette

3. Table manners and etiquette

10. Business cards

4. Punctuality

11. No smoking

5. Lunch and dinner time

12. Dress code

6. Topics in conversation

13. Prohibited materials

7. Business entertainment,
customs and strategies

14. Interpretation or translation

15. No littering

Adapted from Business Class: Etiquette Essentials for Success at Work by

Jacqueline Whitmore, St. Martin's Press (2005),
The following are the necessary implications in international business:

Do not use self reference criterion (SRC) for judging others. There could
be many perspectives to a single observation or phenomenon. Our own
values and upbringing should not be a hindrance while listening to the
points of view of others.

Get a niche segment globally as countries have diverse markets with

movement of products, people, capital, and culture.

Improve the total market share by designing affordable products and

services, and making them accessible.

Organise global enterprises around global centres of excellence.

4.2.2 Hofstedes cultural dimensions

According to Dr. Geert Hofstede, Culture is more often a source of conflict
than of synergy. Cultural differences are a trouble and always a disaster.
Professor Hofstede carried out a detailed study of how values in the
workplace are influenced by culture. He worked as a psychologist in IBM
from 1967 to 1973. At that time he gathered and analysed data from many
people in several countries. Professor Hofstede established a model using
the results of the study which identifies four dimensions to differentiate
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cultures. Later, a fifth dimension called long-term outlook was added. The
following are the five cultural dimensions:

Power Distance Index (PDI) This focuses on the level of equality or

inequality between individuals in a nations society. A country with high
power distance ranking depicts that inequality of power and wealth has
been allowed to grow within the society. These societies follow caste
system that does not allow upward mobility of its people. A country with
low power distance ranking depicts a society which de-emphasises the
differences between its peoples power and wealth. In these societies
equality and opportunity is stressed for everyone. Countries with high
PDI index are Arab countries, Russia, India and China. Those with low
score are Australia and Japan.

Individualism This dimension focuses on the extent to which the

society reinforces individual or collective achievement and interpersonal
relationships. A high individualism ranking (western countries, Canada,
Hungary) depicts that individuality and individual rights are dominant
within the society. Individuals in these societies form a larger number of
looser relationships. A low individualism ranking (Asian and African
countries like Indonesia and Colombia) characterises societies of a more
collective nature with close links between individuals. These cultures
support extended families and collectives where everyone takes
responsibility for fellow members of their group.

Masculinity This focuses on the extent to which the society supports

or discourages the traditional masculine-work role model of male
achievement, power, and control. A country with high masculinity
ranking (like Japan, Venezuela, Hungary) shows the country
experiences high level of gender differentiation. In these cultures, men
dominate the society and power structure, with women being controlled
and dominated by men. A country with low masculinity ranking (like
Norway and Sweden) shows a low level of differentiation and
discrimination between genders women are treated equal to men in all
aspects of the society.

Uncertainty Avoidance Index (UAI) This focuses on the degree of

tolerance for uncertainty and ambiguity within the society. A country with
high uncertainty avoidance ranking shows that the country has low

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tolerance for uncertainty and ambiguity. A rule-oriented society that

incorporates rules, regulations, laws, and controls is created to minimise
the amount of uncertainty. A country with low uncertainty avoidance
ranking shows that the country has fewer concerns about ambiguity and
uncertainty and has high tolerance for a variety of opinions. A society
which is less rule-oriented, readily agrees to changes, and takes greater
risks. Latin American countries, Germany, Belgium, Japan and Eastern
Europe score high on this. Countries with low UAI score are Sweden,
Denmark and China.

Long-Term Orientation (LTO) It describes the range at which a

society illustrates a pragmatic future oriented perspective instead of a
conventional historic or short term point of view. The Asian countries
(China, Japan, Honk Kong) score high on this dimension. These
countries have a long term orientation, believe in many truths, accept
changes easily, and have thrift for investment. Cultures recording little
on this dimension, trust in absolute truth, are conventional and
traditional. They have a small term orientation and a concern for
stability. Many western cultures score considerably low on this
dimension.

In India, PDI is the highest Hofstede dimension for culture with a rank of 77,
LTO dimension rank is 61, and masculinity dimension rank is 62.
Self Assessment Questions 1
1. _______ is defined as the art and other signs or demonstrations of
human customs, civilisation, and the way of life of a specific society or
group.
2. The consumer tastes and preferences across countries are similar.
(True/False)
3. Match the following:
a) PDI
1) tolerance for uncertainty and ambiguity.
b) Individualism
2) pragmatic future oriented perspective.
c) Masculinity
3) equality or inequality between individuals.
d) UAI
4) individual or collective achievement.
e) LTO
5) support or does not support male
dominance

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Activity 1
Visit a nearby bank and observe the cultural diversities. Apply the
cultural dimensions of Hofstede and document your study.
Hint: Hofstedes five cultural dimensions.

4.3 Country Culture

In the previous section, we analysed the need to understand cultural
dimensions and also studied Hofstedes cultural dimensions. In this section,
we will discuss country culture and its significance.
4.3.1 Significance of country culture
Every society has a unique culture. A countrys culture should not be
imposed on individuals coming from a different cultural background. For
example, the Cadbury Kraft acquisition, 2009 was a landmark international
deal, in which the US based company Kraft acquired the British chocolate
giant, Cadbury. These companies were from two countries which were
complete extremes in terms of culture. Let us discuss the major cultural
elements that are related to business.
Cultural elements that relate business
The most important cultural components of a country which relate business
transactions are:
Language.
Religion.
Conflicting attitudes.
Language
Language is something more than just spoken and written words. Gestures,
non-verbal communication, facial expressions, and body language all
communicate a message. An interpreter is used when two people do not
speak a common language. Failure in understanding the cultural context
when non-verbal communication is used or failure in reading the person
across the table results in sending a wrong signal.
Religion
The dominant religious beliefs within a culture have a great impact on a
persons approach to business than most people expect, even if that person
is not a follower of a specific culture.
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Exhibit 2 : Culture and international business: Significance of

colour in different countries
i. Black is believed to have a negative impact on the customers in
markets like Singapore, Malaysia, Libya, Japan, Middle East,
Greece, Argentina and some countries in Latin America. Hence, that
colour should be avoided in packing/labelling the product for sales in
these markets.
ii. Yellow is associated with illness in South Korea, and certain shades
of yellow are reserved for the royal families to wear in Malaysia.
iii. In Italy, purple is believed to have negative impact on the minds of
customers/people while Italians prefer colours with soft tones as it
channelizes positive energy.
iv. Red is a positive colour in Denmark, but represents witchcraft and
death in many African countries.
v. Green is preferred and welcomed among Muslims and countries
populated by Muslims except Malaysia which has over 90% Muslim
population but a cultural distaste with green.
vi. Japanese prefer a combination of red and white and gold and silver.
vii. People in Peru, Surinam, Hong Kong, Korea, Taiwan, Greece and
Malaysia have positive opinions about bright colours.
viii. The colour saffron is preferred among Hindus and Sikhs as it is
associated with their religion.
ix. White is not preferred by people in China, Taiwan, South Korea and
North Korea but white and blue are preferred in the Czech Republic
and Denmark.
Adapted from Managing Images in Different Cultures: A Cross-National
Study of Color Meanings and Preferences by Hewett, Kelly, Madden,
Thomas J., Roth, Martin S. (2000)
Conflicting attitudes
Cultural values have a massive effect on the way business is carried out.
The cultural values that are evident in everyday life are not only shown in
business but are exaggerated. If the cultural basics are not understood,
there is a possibility that a deal ends even before the negotiations start.

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Some of the additional cultural elements which must be known are the
customs and manners, art, education, humour, and social organisation of a
society.
4.3.2 Comparative study on cultures of Japan, China, Brazil, France,
and USA
Companies with prospects of business in other countries should be sensitive
to that particular countrys culture and business environment. Every country
has its own style of communication, the way they treat women in business
and dressing style. Let us now discuss the business culture followed by
different nations with respect to communication styles, women in business,
and dress code. The table 3.1 shows how the business cultures differ from
one nation to another nation.
Table 4.1: Comparison of cultures in different nations
Country

Communication style

Women in
business

Business dress
code

Japan

It is difficult if Japanese
language is not known.
The combination of
vagueness and lack of
understanding of the
language results in
problems which make
decision-making very
difficult. Body language is
very minimal and hence
difficult to read for an
untrained observer. The
Japanese sit in a formal
upright posture and look
still. Visibility of reaction or
emotion is rare.

Discrimination towards
women in the
workplace still exists.
Women are assigned
to perform lower grade
tasks. Women from
western countries
working in Japan
probably face
difficulties working
with Japanese male
co-workers.

The Japanese
mainstream
business follows
a conventional
business dress
code of dark
suit, shirt and tie.
Business dress
must be
restrained and
formal for
women. In
business,
women do not
wear trousers.

China

Translators are required if

Chinese language is not
known. The body
language of people from
Chinese is very restricted.

Women have equal

rights in the
workplace. But,
traditional Confucian
thinking does not
agree to gender
equality.
Businesswomen from
foreign countries are
treated with great
respect and courtesy.

Men wear suits

and ties and
women wear
skirts and
blouses. It is
sensible to have
smart business
clothing.

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Brazil

Ability to speak Brazilian is

an advantage, even
though English is spoken
and understood by people
in Brazil. The body
language plays a vital role
in normal communication.
Eye contact is also very
important while speaking
to people.

Businesswomen from
foreign countries are
treated fairly and with
respect.

Men are advised

to wear
conservative
dark suits.
Women are less
conservative in
their dressing
when compared
with women from
other countries.

France

The French have great

love and respect for the
use of language. The
logical exposition of welldefined ideas is admired
by the French. The
comment given by them
clearly states their mind. It
is important that anything
sent in writing is
thoroughly checked.

Women are gaining

high position in French
business life,
particularly with strong
representation in retail
and service industries.
The requirement for
success is to have a
suitable level of
education for women.

With position,
dress codes
differ within the
company,
industrial sector,
and region in
France. People
in higher
positions within
a larger
organisation
follow a very
formal dress
code. In
southern region
the business
dress code is
informal.

Self Assessment Questions 2

4. The most important cultural components of a country which relate
business transactions are _______, _______, and _______.
5. The combination of Japanese vagueness and lack of understanding
results in problems which make decision-making very twisted.
(True/False)
6. Coded speech and verbosity is considered a waste of time and in time
pressured corporate _______, it is a crime.
a) Brazil.
b) China.
c) USA.
d) France.

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4.4 Culture in an International Business Organisation

In the previous section, we studied how culture varies from country to
country and its significance. In this section, we will discuss the culture in an
international business organisation.
4.4.1 Cross cultural management
In international management, where people are from different cultures, you
have to develop and apply your knowledge about cultures and not use a
standard process for everyone. This is called cross cultural management.
In a global market even if you do not have a diverse workgroup you may
have to deal with clients abroad or vendors or service providers of different
countries. So knowledge about different cultures is a must.
The factors to be considered in cross cultural management are:
Cross cultural management skills.
Handling cultural diversity.
Factors controlling group creativity.
Ignoring diversity.
Cross cultural management skills
The ability to demonstrate a series of behaviour is called a skill. It is
functionally linked to achieving a performance goal.
The most important aspect to qualify as a manager for positions of
international responsibility is communication skills. The managers must
adapt to other cultures and have the ability to lead its members.
The managers cannot expect to force members of other culture to fit into
their cultural customs. This is the main assumption of cross cultural skills
learning. Any organisation that tries to enforce its behavioural customs on
unwilling workers from another culture faces conflict. The manager has to
possess the skills linked with the following:
Providing inspiration and appraisal systems.
Establishing and applying formal structures.
Identifying the importance of informal structures.
Formulating and applying plans for modification.
Identifying and solving disagreements.

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Handling cultural diversity

Cultural diversity in a work group offers opportunities and difficulties.
Economy is benefited when the work groups are managed successfully. The
organisations capability to draw, save, and inspire people from diverse
cultures can give the organisation spirited advantages in structures of cost,
creativity, problem solving, and adjusting to change.
Cultural diversity offers key chances for joint work and co-operative action.
Group work is a joint venture where, the production of two or more
individuals or groups working in cooperation is larger than the combined
production of their individual work.
Exhibit 3: Doing Business with UAE: Business Etiquettes & Protocol
United Arab Emirates in recent years has emerged as the largest
destination for Indian goods. Indias exports to UAE are 25.41 billion
dollar in 2009 and 27.41 billion dollar in 2010. Indias exports are growing
at a Compound Annual Growth Rate (CAGR) of 26% during 20062010.
It constitutes around 12.4% share in Indias total exports. Being an
Islamic country, UAE has a different culture for doing business. In order
to make a business relationships and communication with UAE, one has
to have a local sponsor or wakeel to enter the country. This wakeel
plays an important role as sponsor and helps in arranging the
appointments with appropriate individuals; otherwise it is tough to get in
touch with sheikhs. These sheikhs do not require much personal space
during business negotiations and they can stand close to you while
discussing/negotiating business. Indians and westerners are used to
maintain space and usually feel that their personal space has been
invaded. Sheikhs of UAE respect people whom they know and trust.
Sheikhs especially in first few meetings will spend a great deal of time on
the getting-to-know-you part of relationship building. Indians are advised
to be patient in business negotiations with Sheikhs as they at time may
stare at your appearances, dress etc. to make a judgement.
It is important to fix business meetings including appointments with
concerned persons/UAE counterparts several weeks or months in
advance. However, while meeting very important sheikhs/government
officials a date will not be confirmed until one has reached UAE. Sheikhs
prefer meetings in the morning. One should reach on time; however, a
sheikh may keep you waiting for hours only to check how serious you are
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about business. It is not uncommon if a sheikh/emirate may cancel a

meeting at the last minute.
During meeting, they will first enquire about your family and health in
general. The sheikhs may feel offended if you enquire about his wife or
daughter. It is common for a Sheikh to leave a meeting in between, go for
prayer, and come back. This should not stop you from continuing the
discussion. The Sheikhs speak less and like to watch/observe. Usually
they appoint deputies who negotiate for them.
During business negotiations, UAE counterparts make sure not to use
any kind of pressure techniques as they believe in process driven talks
which may be very slow at times. One is advised not to rush through the
negotiations process. UAE society is highly bureaucratic; it is not
uncommon if you come across several layers of approvals for a normal
business decision. Sheikh regards trust, thus it may take several visits
even for simple tasks before a contract or order is given. UAE
counterparts are slow but steady and tough negotiators. One has to keep
immense patience as business decisions are hierarchical and are made
by the highest-ranking person. Being tough negotiators, it is not
uncommon if a Sheikh makes the initial offer at a very low price but may
subsequently agree to buy at a much higher price. Gaining their trust and
confidence is very important to business decisions. Sheikhs are very
conscious of their dignity and will not compromise at it. Avoid gifting the
following to the UAE counterparts: wine, idols or photos of god/goddess.
UAE is governed by Sharia law, and one should be careful enough to
dress modestly. One should preferably wear robes and if the next option
could be a suit. One can make a good impression by dressing well. Being
a male-dominated society, business women are strictly advised to keep
their collarbones and knees fully covered. Business women should avoid
wearing revealing or tight-fitting clothes. Make sure that business cards
are shared with each delegate of the opposite side. The cards should
have one side in English with Arabic translation on the other side of the
card.
Source: Adapted from International Management: Cross-Cultural
Dimensions by Richard Mead Blackwell Publishers; 3rd edition & Nancy
J. Adler, International Dimensions of Organization Behaviour, 2nd ed.
Boston PWS-Kent,1991
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Factors controlling group creativity

On complicated problem solving jobs, diverse groups do better than
identical groups. Diverse groups require time to solve issues of working
together. The work experience helps to overcome gender, racial,
organisational and functional discriminations. But the impact cannot be
evaluated and there is always a risk in creating a diverse group. A
successful group is profitable with respect to quick results and the creation
of concern for the future. Negative stereotypes are emphasised if it fails.
Factors related with the industry and company culture are also important.
Diverse groups do well when the members:
Assist to make group decisions.
Value the exchange of different points of view.
Respect each others skills and share their own.
Value the chance for cross-cultural learning.
Tolerate uncertainty and try to triumph over the inefficiencies that occur
when members of diverse cultures work together.
A diverse group is known to be more creative, where the members are
tolerant to differences. The top management level provides moral and
administrative support, and gives time for the group to overcome the usual
process difficulties. They also provide diversity training, and the group
members are rewarded for their commitment.
Ignore diversity
It may be difficult to manage diversity. It is better to ignore, which is also an
alternative. The management must:
Ignore cultural diversity within the employees.
Down-play the importance of cultural diversity.
This denial to identify diversity happens when management:
Fails to have sufficient awareness and skills to identify diversity.
Identifies diversity but does not have the skill to manage the diversity.
Recognises that the negative consequences of identifying diversity will
cause greater issues than ignoring it.
Thinks the likely benefits of identifying and managing diversity do not
validate the expected expenses.

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Identifies that the job provides no chances for drawing advantages from
diversity.

Strategies to ignore diversity may be possible when culture groups are given
various jobs, and sharing required resources are independent in the
workplace. Groups and group members are equally incorporated and work
together. In such cases, confusion occurs when the diverse value systems
held by different staff groups are not identified.
4.4.2 Comparative study on corporate cultures of Japan, China, Brazil,
France, and USA
The success of any multinational company depends on the techniques and
cultures. Corporate culture is an organisational culture, related to the
management of businesses with respect to organisational structure,
strategy, and control. It states all the elements around which a company
describes and relates to its stakeholders.
Corporate culture also includes the way it organises its workers, lets them
express themselves, and conveys its values. The corporate culture is said to
be positive when the official relationships are reasonably considered,
members have a stake in company profits, and demands for production are
considered sensible. The corporate culture is said to be negative when the
opposite conditions apply and relationship with the management is not
productive.
Table 4.2 displays the different approaches to corporate culture.
Table 4.2: Comparison of Corporate Cultures

Country

Japan

Basis of
approach
to
corporate
culture
Relationship
must come
before
business.

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Business
structure

Management style

Hierarchically
structured,
based on
harmony and
co-operation,
with
individuals
aware of their
position within

Information flows
from the bottom of
the company to the
top.
Implementation of
decisions has been
actively involved in
the modelling of
policy. Individual

Team work

Consensusbuilding process
is used to define
an agreement
before a formal
meeting to avoid
any conflict.
People are
expected be
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a group.

personality is not
modest and selfseen as the
promotion is not
requisite for
encouraged.
effective leadership.

China

Based on
Confucian
values.

Uses
operational
structures,
chains of
command that
are
hierarchical in
a Confucian
society.

Subordinates are
not allowed to
question the
decisions of
superiors.

Consensusoriented despite
being
hierarchical in
approach. The
importance is on
group orientation
with individual
requirements
being directed to
the greater good
of the whole.

Brazil

Offers
business
opportunitie
s to future
international
investors.

Organised
hierarchical
lines with
information
flowing in a
structured
way. All
important
decisions are
made at
senior levels.

A managers
personal style is
considered to be of
importance. The key
importance is
relationship. The
manager and
subordinates work
hard to nurture a
relationship based
on trust and respect
for personal dignity.

Team members
understand their
role and
responsibilities
within the team.
Every team
member expects
to see a chain of
command within
the team.

France

The role of
the
government
and the
significance
of a definite
kind of
education
are
important.

Follows
hierarchy and
functionality
within the
system. The
CEO
determines
future
direction of
the company.
This vision is
then passed
down the line
by junior
management.

Decisions, once
taken at senior
levels, are delivered
down the chain for
implementation at
lower management
levels.

There is no
encouragement
for team work.
People wish to
have definable,
personal sets of
objectives rather
than to work in
more general
team roles.

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USA

Every
aspect of
commercial
life is
studied and
analysed.

The company
is an entity in
its own right
and survives
independently
from its
workers.
Senior
management
is more rooted
in the
personality at
the top.
Americans
like to know
where exactly
they are, what
are their
responsebilities and to
whom they
report.

Unit 4

Management style is
individualistic in
approach; managers
are responsible for
the decisions made
within their regions
of responsibility.
Important decisions
are discussed in
open environment
and the
responsibility for the
concerns of the
decision lies with the
manager.

Groups of
individuals are
brought together
to complete a
given task.
During that
period the group
is together,
everybody is
committed to the
common goals,
and work with
dedication to
assure that the
goals are
accomplished.
Teams are
assumed to be
temporary in
nature.

Self Assessment Questions 3

7. The ability to demonstrate a series of behaviour is called _______.
8. Diverse groups do not require time to solve issues of working together.
(True/False)
9. In international management, where people are from different cultures,
you have to develop and apply your knowledge about cultures and not
use a standard process for everyone. This is called _______________.
Activity 2
Assume that you are the manager of Company manufacturing cellular
phones. You have to design a new model that suits the requirements of
users in the country of the secondary branch Country Q.
There is local sales-force which knows about local needs, market
segments which can buy the product, the amount that the users will pay
and advertising channels which can be used to interact with consumers.
But the local sales-force does not understand modern research methods
and the main branch resources for designing new products. The
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marketers of the headquarters have access to the technology and can

account on research and development carried out elsewhere, but they
are not local experts and have no contacts. The expert team of your
company lays out the specifications for a phone designed to fulfil the
requirements of the budding youth market in Country Q.
How will you handle this case to expand the business in Country Q?
Hint: Cultural diversity.

4.5 Summary
Let us summarise the salient points covered in this unit on culture and
international business:

Culture is an important factor for practising international business.

Culture affects all the business functions ranging from accounting to
finance and from production to service.

It is important for an individual to have knowledge of the impact of

cultural differences when working in the global commercial environment.

According to Professor Hofstede, the following are five dimensions used

to differentiate culture:
Power distance index (PDI).
Individualism.
Masculinity.
Uncertainty avoidance index (UAI).
Long term orientation (LTO).

The following are the cultural elements which affect business

transactions:
Language.
Religion.
Conflicting attitudes.
Every country in its business environment has its own style of
communication, the way they treat women and their dressing style.
In international management, where people are from different cultures,
you have to develop and apply your knowledge about cultures and not
use a standard process for everyone. This is called cross cultural
management.

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Companies can build international competencies by improving levels of

cultural awareness and help individuals to become globally profound.

4.6 Glossary
Consensus: An opinion or position reached by a group as a whole
Globalisation: Integration of regional economies, cultures, and societies
through a worldwide network
Homogeneous: Part or elements that are all of the same kind; opposite of
heterogeneous
Individualistic: Attribute that has a markedly independent course in action
or thought
Marginalise: To make unimportant in a social standing
Stereotypes: Generalisations about a specific group, such as people that
share common attributes or characteristics

4.7 Terminal Questions

1. What is the need to understand cultural differences?
2. Explain Hofstedes cultural dimensions.
3. Explain the three important cultural elements.
4. Differentiate the communication styles of Japan, China, Brazil, France,
and USA.
5. What is cross cultural management? Explain the cross cultural
management factors.

4.8 Answers
Self Assessment Questions 1
1. Culture
2. False
3. (a) 3, (b) 4, (c) 5, (d) 1, (e) 2

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Self Assessment Questions 2

4. Language, religion, conflicting attitudes
5. True
6. c) USA
Self Assessment Questions 3
7. Skill
8. False
9. Cross cultural management.
Terminal Questions
1. Cultural differences affect the success or failure of multinational firms in
many ways. Refer to sub-section 4.2.1 of this unit for details.
2. The five cultural dimensions of Hofstede. Refer to sub-section 4.2.2 of
this unit for details.
3. The most important cultural components of a country which relate
business transactions are language, religion, and conflicting attitudes.
Refer to sub-section 4.3.1 of this unit for details.
4. Refer to sub-section 4.3.2 of this unit for details.
5. Cross cultural management is defined as the development and
application of knowledge about cultures in the practice of international
management, when people involved have diverse cultural identities.
Refer to sub-section 4.4.1 of this unit for details.

4.9 Case-let
India-Japan software outsourcing
An Indian based software company, PQR has been doing business with
Japan. The company faced many issues. The first and foremost issue
faced by the company was the Japanese language. Japanese language
is considered to be one of the most difficult languages for people of other
countries. The Indian employees found it difficult to adjust to the
Japanese culture. It was difficult to sign the deal because the software
requirements were explained in the Japanese way. The other problem
experienced by the employees was to work in the Japanese style. The
company took some steps to solve the problem. First step is that the
company attempted to train the software developers to speak Japanese
at least at basic level. The second step is that the company tried to make
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the employees adjust to the Japanese culture. The company had to know
the requirements of the people and understand their needs to derive
more data and design the products accordingly. The requirement needs
selection from top management, managers, and users. By focussing on
all the aspects, the software developed could ultimately adjust itself to the
Japanese method of working and accomplishing success.
Discussion Questions
1. What are the issues faced by Company PQR? (Hint: Language)
2. What are the steps taken by Company PQR to overcome the issues?
(Hint: Train employees)
Source: Cross-cultural management: Text and cases
References:

Paul, Justin. (2008). International Business. PHI Learning Private

Limited.

Mitchell, Charles. (2000). A Short Course in International Business

Culture. World Trade Press.

Mead, Richard. (2005). International Management: Cross-Cultural

Dimensions. Blackwell Publishing Ltd.

Nakata, Cheryl. (2009), Beyond Hofstede, Culture Frameworks for

Global Marketing and Management. Palgrave MacMillan.

E-References:

http://www.worldbusinessculture.com/, retrieved on 3rd November, 2010

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