Section Three International Environmental Forces

International Business by Ball, McCulloch, Frantz, Geringer, and Minor

This chapter covers:

6
Sociocultural Forces

The significance of culture for business The sociocultural components The significance of religion Cultural aspects of technology Trends of formal education The importance of language Classes of society and cultural dimensions

International Business by Ball, McCulloch, Frantz, Geringer, and Minor

McGraw-Hill/Irwin Copyright 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Chapter Objectives
 Understand the significance of culture for international business  Understand the sociocultural components of culture  Appreciate the significance of religion to businesspeople  Comprehend the cultural aspects of technology  Grasp the pervasiveness of the Information Technology Era  Understand why businesspeople must follow the trends of formal

education  Appreciate the importance of the ability to speak the local language  Recognize the importance of unspoken language in international business  Discuss the two classes of relationships within a society  Discuss Hofstedes four cultural value dimensions 6-2

Rules of Thumb for Cross Culture Business

Be prepared  Slow down  Establish trust  Understand the importance of language  Respect the culture  Understand the components of culture


6-3

What is Culture?
 Culture  The sum total of beliefs, rules, techniques,

institutions, and artifacts that characterize human populations.  Consists of learned patterns of behavior common to the members of a given society.  The unique lifestyle of a particular group of people.  Ethnocentricity  Considering your culture superior to all others
6-4

Living with Other Cultures

 

First, realize that there are many different cultures. Then, learn the characteristics of those cultures.  Spend a lifetime in a country.  Undergo an extensive, highly sophisticated training program that covers the main characteristics of a culture.

6-5

Culture Affects All Business Functions



Marketing  Variation in attitudes and values requires firms to use different marketing mixes  P&G Japanese Camay commercials  Disneyland Paris

Human Resource Management  Evaluation of managers  Production and Finance  Attitudes toward authority  Attitudes toward change


6-6

Sociocultural Components

 Components of Culture
 Aesthetics  Attitudes and beliefs  Religion  Material Culture  Education
   

Language Societal organization Legal characteristics Political structures

6-7

Aesthetics


Art


Colors, symbols, numbers convey meaning  Nike air symbol Architectural styles different  Feng shui Musical tastes vary Folklore discloses way of life  Cowboys in Chile or Argentina  Mexican singing cricket

Music and Folklore

 

6-8

Attitudes and Beliefs



Attitude Toward Time  Problem for Americans



Attitudes toward Achievement and Work



 

Americans always prompt Maana attitude Siestas Perceived to be rudeness

Directness and drive



Deadlines


Liability in Asian cultures

American live to work, Germans and Mexicans work to live. Demonstration effect  Result of having seen others with desirable goods. Job prestige  Disdain for physical labor

6-9

Attitudes and Beliefs



Attitude Toward Change



The American firm is accustomed to the rapid acceptance by Americans of something new. Europeans are fond of reminding Americans that they are a young nation lacking traditions.


The more consistent a new idea is with a societys attitudes and experiences, the more quickly it will be adopted.

6-10

Religion
 Responsible for many of the attitudes and beliefs
affecting human behavior.  Work Ethic  Protestant work ethic  Europeans and Americans generally view work as a moral virtue and look unfavorably on the idle.  Confucian work ethic  In Asian countries, this is the same as Protestant ethic.

6-11

Asian Religions


   

Hinduism  Caste system is basis of the social division of labor. Buddhism Jainism Sikhism (Indian) Confucianism


Inseparable from Chinese culture

 

Taoism Shintoism (Japan)

6-12

Islam
 About 1.3 billion followers  This youngest faith is the 


second largest after Christianity (2 billion adherents). Founder of Islam is Muhammad  Muhammad was not only the prophet of God but also the head of state.  In Muslim nations, there is no separation of church and state. Holy Book Koran

 

Five Pillars of Faith  Confession of faith  Five daily prayers  Giving charity  Ramadan fast  Pilgrimage to Mecca Jihad holy war Two divisions  Sunni and Shiites  Conflict gives rise to violent clashes

6-13

Religious Population of the World

Insert Figure 6.1

Material Culture
 Refers to all human-made
objects  Concerned with how people make things and who makes what and why. Technology  Mix of usable knowledge that society applies and directs toward attainment of cultural and economic objectives

6-15

Material Culture - Technology

 Importance to International
Companies  Enables a firm to be competitive in world markets.  Can be sold, or be embodied in the companys products.  Can give a firm confidence to enter a foreign market.

 Enables the firm to obtain



 

better than usual conditions for a foreign market investment. Enables a company with only a minority equity position to control a joint venture. Can change the international division of labor. Is causing major firms to form competitive alliances.

6-16

Material Culture - Technology



Cultural Aspects of Technology



Appropriate Technology


Includes skills in marketing, finance, and management People not always ready to adapt to changes technology brings The side-by-side presence of technologically advanced and technologically primitive production systems.


Choose the technology that most closely fits the society using it Can be labor-intensive, intermediate or capitalintensive

Technological Dualism


Bommerang Effect


Technology sold to copanies in another nation used to produce competing goods

6-17

Material Culture - Technology



Information Technology Era



By the year 2000 the Internet economy

 

Already reached $850 billion. Exceeded the size of the automobile and truck and life insurance industries.

Consumption  Japanese wide use of automation

6-18

Education
 

Equips a person to take his or her place in adult society Yardsticks  Literacy rate  Must verify definition used  Kinds, quality and enrollment of schools  Amount per capita spent on education  Vocationally trained groups  Study trends

6-19

Educational Mix


European business schools patterned on American model because of

Increased competition in the EU  Return to Europe of American business school graduates  Establishment of American-type schools with American faculties


Trend in less developed countries to emphasize humanities, law and medicine

6-20

Education


Brain Drain  The emigration of highly educated professionals to industrialized nations Reverse Brain Drain  The return of highly educated professionals to their home countries.  Korea and Taiwan are luring home engineers and scientists

Womens Education  Fall in illiteracy rate  Most governments now provide education for both genders  Educated women have fewer, healthier, and better educated children  Educated women achieve higher labor force participation and wages

6-21

Spoken Language
Language is the key to culture, and without it, people find themselves locked out of all but a cultures perimeter  Spoken languages demarcate cultures



Switzerland four separate cultures

Many languages can exist in a single country, but one usually serves as communication vehicle
Lingua franca or link language  English primary language of business


6-22

Language


Must speak the local language  Still need translators  Use back translations to avoid errors  Technical words do not exist in all languages


Usually resort to English

Many cultures avoid saying anything disagreeable

6-23

Unspoken Language


Nonverbal communication, such as gestures and body language.  Gestures vary tremendously from one region to another  Closed doors convey different meanings  Office size different in various cultures  Conversational distance small in East  Gift giving has specific etiquette in each culture


Gift or bribe?

6-24

Questionable Payments
Necessary in some countries to obtain action from the government  Foreign Corrupt Practices Act prohibits American firms from making questionable payments


6-25

Societal Organization
 Kinship  Extended family  Includes blood relatives  Associations  Social units based on 
age, gender, or common interest, not on kinship. Age  Manufacturers of consumer goods are well aware of the importance of segmenting a market by age groups.  This segmentation often cuts across cultures.

and relatives by marriage.  This is a source of employees and business connections. Members responsibility  Although the extended family is large, each members feeling of responsibility to it is strong.

6-26

Societal Organization
 Associations  Gender  As nations

industrialize, more women enter the job market and assume greater importance in the economy  Free association  people joined together by a common bond: political, occupational, religious or recreational

6-27

Understanding National Culture

 Hofstedes Dimensions of Culture  Individualism versus Collectivism  Large versus Small Power Distance  Strong versus Weak Uncertainty Avoidance  Masculinity versus Femininity

6-28

World Bank Anti-Corruption Program Anti

We believe that an effective anticorruption strategy builds on five key elements: 1. Increasing Political Accountability 2. Strengthening Civil Society Participation 3. Creating a Competitive Private Sector 4. Institutional Restraints on Power 5. Improving Public Sector Management

Source: www.worldbank.org

Business Culture in Brazil



Brazilians conduct business only through personal connections. There must also be an implicit understanding that the business relationship will be long-term. In Brazil, people quickly move to a first-name basis. Do not, however, use first names until you are invited to do so. Maintain steady eye contact at all times; it is considered impolite to break eye contact.

Do not give anything that is obviously expensive. Your generosity will only cause embarrassment or be misinterpreted as a bribe. Avoid giving items in black or purple, since these are the colors of mourning. Moreover, handkerchiefs are also associated with funerals. Brazilians also consider themselves Americans. Consequently, don't use the phrase 'in America' when referring to the United States.

Source: www.executiveplanet.com

USAID


Source: www.usaid.gov

The ability to read and write or literacy is a basic skill for people to live and work in todays world. Yet more than 900 million adults are not literate, primarily in developing countries. More than 125 million children who should be in school are not. For this reason, USAID emphasizes programs of support for basic education and places a special emphasis on improving opportunities for girls, women and other underserved and disadvantaged populations.

FCPA


The FCPA covers  all entities and individuals engaging in acts within the territory of the United States in furtherance of the prohibited conduct, and it covers  U. S. citizens, resident aliens, entities established under U. S. law, and  publicly held corporations, including their officers, directors, employees, shareholders and agents, whether foreign or domestic, that are registered with the SEC as an issuer that participates in corrupt practices in any fashion outside the United States.

Source: www.abanet.org

Buddhism


As of June 2001, Buddhists in Taiwan had registered 4,037 temples, 39 seminaries, five universities, three colleges, four high schools, 45 kindergartens, 30 nurseries, five orphanages, five retirement homes, one center for the mentally retarded, 64 institutions for proselytizing, three hospitals, four clinics, 118 libraries, and 28 publishing houses with 26 publications. There were also around 9,866 Buddhist clergy serving the 5.48 million Buddhists of Taiwan. Source: www.gio.gov.tw

World Illiteracy Rates

Source: www.uis.unesco.org