5

Cultural Environment

INTRODUCTION

The opening vignette in this chapter is a pointer towards the emergence of a borderless world in which economic globalization is leading to cultural globalization.¹ Also referred to as cultural homogenization, cultural globalization refers to the power of large TNCs to create a global consumer who demands global products, such as the McDonald's burger, the Nike shoe and the Apple iPod, wherever they are. Alternate perspectives point towards the local impacting the global as large corporations such as Coca-Cola and Sony use the term global localization to describe the process through which their products are embedded and then promoted within the local culture. This is the process of cultural hybridization; a process of re-contextualization and meaning re-attribution in which foreign cultural symbols acquire fresh meanings within the local receiving culture.²

Today, business takes place all over the world in diverse societies and widely varying cultures. The business environment has become more complex, with expanding and deepening ties between societies and between the many organizations within these societies. With the growth of international business, many large organizations now see themselves as global in orientation, not rooted in any one society. The business environment for such a business may be visualized in terms of layers, beginning with the immediate internal environment within the organization and moving outwards to the external environment surrounding the business and influencing its organization and operations. The external environment includes an array of dimensions, including economic, legal, political, and technological factors. While these factors influenced only the internal environment of the home country a few decades ago, today, the environmental horizon of business has widened and business is forced to interact with international forces and simultaneously deal with national and local factors. This chapter focuses on the cultural dimensions of the complex business environment in which an international business operates.

This chapter has two basic aims. The first is to provide an understanding of the different dimensions of culture and its importance in how business is transacted in different parts of the globe. The second aim is to examine the impact of globalization in the dynamic cultural environment of today. There is abundant evidence that points to the emergence of a global culture and equally strong evidence that local cultural influences are equally strong and are adapting and persisting in the new global environment, as is obvious from the opening vignette. Therefore, the chapter examines the interaction of the global and the local in the newly emerging glocal business environment.

Culture and its Relevance for International Business

The term culture may be variously defined. Culture may be explained as the acquired knowledge that people use to interpret experience and to generate social behaviour. Members of a group, organization or society share it and as a result, it becomes the basis of individual and group behaviour. Culture is learnt through both education and experience. It is passed from one generation to another and is therefore enduring. It also constantly goes through changes as people adapt to new environments. The word culture is derived from the Latin word cultus, meaning cult or worship, and has several different connotations such as the artistic, the elitist and the biological.

 

In general, we may say that culture refers to learned patterns of behaviour or guidelines for behaviour which are primarily passed on from parents to their children but also by social organizations, special interest groups, the government, schools, and churches. Common ways of thinking and behaving that are developed are then reinforced through social pressure. This learning and adjusting is called acculturation. This leads to a learned, shared, compelling, interrelated set of symbols whose meanings provide a set of orientations for members of a society.³ Hence, we can say that there are five important characteristics of culture:

1. Culture is learned behaviour: The individual learns through the experience of the group.
2. Culture is shared: The group transcends the individual and defines one's membership in society.
3. Culture is compelling: Sometimes individuals are not aware that their behaviour is determined by culture.
4. Culture is interrelated: Each facet of culture can not be understood in isolation. Culture must be studied as a complete entity.
5. Culture provides orientation: Groups react in the same way to a given stimulus. Therefore, understanding culture can help to determine how individuals might react in different situations.

Cultural Environment

The world of international business today consists of people from different countries and cultures coexisting in real and virtual workplaces. To be successful in international businesses, managers must understand the cultures of different countries and how to adapt to them. Most of the time, managers have an ethnocentric approach and are used to doing things the way they are done in their home markets. This approach is inflexible as the managers relate to the world only in terms of their own culture. The attitude of “the German way” or “the Japanese way” may, therefore, result in them having to face stubborn resistance. The challenge for them is to fight against ethnocentrism, adapt themselves to the different cultures in which they are working and broaden their perspective, that is, they need to develop a polycentric attitude. Successful international business relationships depend in large measure on developing a polycentric approach in situations where cross-cultural issues arise and are of significance in managerial decision making. This translates into undergoing a cross-cultural training for managers as they move into the international arena.

 

Culture is also synonymous with forms of dress and clothing. For example, the Arabs wear loose flowing gowns and headdresses and Mexicans wear the somberero to protect themselves from the harsh heat that is typical of the equatorial region. Similarly, work habits also depend to a large extent on the weather. In countries of Latin America, including Mexico, the siesta or afternoon nap provides an escape from the debilitating heat of the day.

 

ELEMENTS OF CULTURE

Culture is a complex, multidimensional subject and in order to understand its basic nature, we need to examine some of its critical elements.

 

Language

Language is the key to culture as it is the primary means of transmission of ideas and information, which facilitates social interaction and fosters a system of shared values and norms. Language is more than the vocabulary and grammar that make up written and spoken expression. Edward T. Hall distinguishes between low-context and high-context cultures.⁴ In a low-context culture, communication is clear and direct; speakers come straight to the point and say exactly what they mean. America is a good example of a low-context culture. In a high-context culture, much goes unsaid; depending on the relationship between the speakers, each is able to read between the lines and interpret body language. Asian cultures fall into this category. For Americans, meeting people from high-context cultures can seem frustrating, as they are unsure of where they stand, while their Asian counterparts are unsettled by their directness of approach, which may come across as insincerity.

Spoken languages can act both as a common thread and as a barrier between nations and regions. Africa, for instance, has over a hundred languages for communication but French is the lingua franca or “link language” of several former French colonies, acting as an effective communication device for managers of international business. Likewise, in India, the principal official language is Hindi and English is the secondary official language, with several regional languages being used in different parts of the country. The opening up of the economy since 1991 has seen a huge influx of TNCs whose executives use English as their main mode of communication.

Communication difficulties for international business managers arise when:

• The manager does not speak or understand the local language.
• The manager speaks and understands the language a little, but not sufficiently to understand the nuances of meaning which are present in all languages.
• The manager has to rely on the services of a translator who may not be equally fluent in both languages and either misses a point or mistranslates it.

Knowing the local language is a good idea for a manager and helps them to communicate better with the local workforce because:

• Direct knowledge of a language helps in a clear and explicit understanding of the situation. The manager does not have to rely on someone else to interpret or explain things.
• Language provides direct access to local people, who are often more at ease and comfortable in communicating with someone who speaks their language.
• An understanding of the local language allows the usage of implied meanings, nuances and other information that is not stated outright.
• Knowledge of the local language is also important because direct translation may be inadequate or misleading.

The ability to speak the language well may nevertheless make translation necessary. This is particularly important for written communication, where a double translation is a foolproof method of avoiding mistakes. In this method, the original document is first translated into the second language and then it is translated back to check whether the original document and the retranslated material are the same. Name evaluation, where natives examine the proposed product or service name, is also a good way to avoid mistakes. The use of technical manuals, catalogues, and advertising material may need the services of a translator. Translation can be difficult if certain technical terms do not exist in a particular language. For example, the Portuguese language has several fishing and marine terms but is limited in its vocabulary for newer industries. This has led to the increasing use of English words mixed with original Portuguese.

Translations, however, not only increase costs, but can also be embarrassing. For instance, Clairol's launching of a hair-curling iron by the name of “Mist Stick” in Germany, where mist is slang for manure, was not just humorous, but the consequences for the manufacturer were also quite serious.⁵ Coca-Cola was originally translated into Chinese as “bite the wax tadpole”, only to be outdone by Pepsi, whose jingle, “(Pepsi) comes alive”, was translated into “brings your ancestors from their burial place”.

Communication is not only about speaking in the same language but also about being on the same wavelength and having an idea of the perception and sensibilities of a culture. A native manager from the Middle East was of the opinion that there were very few Japanese or Koreans who were fluent in Arabic, but their communication skills were better than others as they were more sensitive to Middle Eastern sensibility. This is an example of high-context culture in Asian countries.

There are times when we may understand the language but not the slang. For example, although Australians speak English, there is also the local lingo that may result in misinterpretations and confusion during communication. An instance of Australian slang would be: “‘That was boogah’, said the bevan as he washed down a snot-block with some kirup sauce before jumping on his treddly to go back to his guvvie.” Literally translated, it means: “‘That was great’, said the rough young man as he washed down a vanilla slice before jumping on his bike to go back to his government-built Canberra house.”

The same language can often mean completely different things to different cultures. Consider the use of business jargon. In the Indian context, cutting costs can mean anything from cutting down on coffee and biscuits at staff meetings to looking for cheaper sources of raw materials, but in a European or American TNC, it may mean that they are firing some members of the staff. Another instance of different meanings being attributed to the same word is when the Indian country manager of a British TNC was overheard saying that he had fired a subordinate, implying that he had bawled out a junior; however, his British counterpart thought that he had sacked the employee.

Non-verbal Communication

Non-verbal communication or the unspoken language often says more than the spoken word. Unfortunately, the differences in customs among cultures often cause misinterpretations in such communication.

Gestures are a common form of cross-cultural communication but vary from one region to another. Emotional gestures such as hugging, kissing on the cheek, and gesturing with your hands are commonly accepted practices in Hispanic and Latino cultures. The most commonly used gesture of saying yes is a forward shaking of the head in countries like the United States and parts of Europe, but the Greeks, Turks and Bulgarians move their head sideways to indicate the same.

Religion

Religion is a system of shared beliefs and rituals that are concerned with the realm of the sacred.⁶ Religion shapes and influences lifestyles, beliefs, values and attitudes and has a significant bearing on the behaviour of people with each other and with society. There are approximately 15,000 distinct religions and religious movements in the world today. They range from simple folk religions to highly refined systems of beliefs with set rituals, organized worship, sacred texts, and a hierarchy of religious leaders. The leading religions of the world include Christianity, Hinduism, Islam, Buddhism, and Confucianism and each one has its own particular beliefs and customs.

 

Religions of Asian countries, such as Hinduism, Buddhism, Jainism, and Sikhism (India); Confucianism and Taoism (China); and Shintoism (Japan), differ significantly from the Judeo-Christian belief of a real and significant world which was created by God. The Judeo-Christian considers human beings to be as significant as time because it believes that the world began with God's creation and will end when His will has been fulfilled. Each human being has only one lifetime to follow God's word and achieve everlasting life.

Asian religions such as Hinduism, Jainism and Buddhism, on the other hand, believe that this world is an illusion because nothing is permanent. The two basic tenets of nirvana and karma are the basis of these Asian religious beliefs. Their teachings emphasize that time is cyclical, and all living things, including humans, are in a constant process of birth, death, and reincarnation. The basic goal of all living beings is to escape from this cycle and attain the state of eternal bliss called nirvana, but they may be constrained by their own deeds or karma. The belief that evil committed in one lifetime is punished in the next acts as the impetus to living creatures to do good deeds (karma) and attain a higher spiritual status in their next birth. The Asian sub-continent has been the birth place of seven religions. Four of them originated in India (Hinduism, Buddhism, Jainism, and Sikhism), two in China (Confucianism and Taoism), and one in Japan (Shintoism).

 

Hinduism

Hinduism is practised by more than 80 per cent of India's population and also in parts of Nepal, Bangladesh, and Bali. It does not have a single founder or a central authority, nor does it have any one sacred scripture. It is characterized by the fact that its followers worship several different gods through different sets of rituals. Most Hindus believe that everything in the world is subject to an eternal process of death and rebirth (samsara) and that individual souls (atmans) migrate from one body to another. They believe that one can be liberated from the samsara cycle and achieve eternal bliss (nirvana) through yoga (purification of mind and body), devout worship of the gods, or good works and obedience to the laws and customs (dharmas) of one's caste.

An important aspect of Hinduism is the caste system which has been the basis of social division in India since ancient times. The highest caste, the Brahmins or the priesthood, was followed by the warriors or Kshatriyas and then the merchant class or the Vaishyas, and finally the lowest cast or the “untouchables”, the Shudras. An individual's position in the social caste hierarchy was inherited and determined the work they were permitted to do. Although the Government of India has outlawed discrimination based on the caste system, it occupies an important place in India's social strata even today with both economic and political implications.

The Japanese society follows a similar social order, a legacy handed down from the Tokugawa regime of the seventeenth century. The social strata finds the warrior–administrator samurai at the top, followed by the farmers and artisans, then the merchant class, and finally the slaughterers, butchers and tanners who occupy the lowest rung of the social ladder. This social system exists even in the present day, with descendants of the lowest Japanese class known as the Burakumin or the “ghetto people” continuing to work in small family units producing knitted garments, bamboo wares, fur and leather goods, and shoes and sandals.

Buddhism

Buddhism began in India as a reform movement against the tyrannies of Hinduism. Its origin may be traced to the enlightenment of Prince Gautama as the Buddha at the age of 29. It is said that he rejected the pleasures of a royal life to follow the path of nirvana. He rejected both the austere self-discipline of the Hindus and the extremes of self-indulgence, believing that they were responsible for the cycle of rebirth. The Buddha's teachings are based on following an eight-fold path in which an individual goes through different cycles of rebirth to attain nirvana. Although he rejected the caste system and welcomed everyone into the fold, with the passage of time, two distinct schools appeared in Buddhism—the Hinayana school which emphasized a more austere way of life to be followed by the Monks and the Mahayana school which was more liberal and could be easily followed by the common man.

Jainism

The Jain religion was founded by Mahavira, a contemporary of Buddha. It believes that the universe is self-regulated and every soul has the potential to achieve divine consciousness (siddha) through its own efforts. Any soul that has conquered its own inner enemies and achieved the state of Supreme Being is called Jina. The basic tenets of Jainism preach that every living being has a soul which is potentially divine, with innate qualities of infinite knowledge, perception, power, and bliss (masked by its karmas). The path to salvation can be attained by following the path of Right Faith (right vision), Right Knowledge and Right Conduct. In the modern context, it is a small but influential religious minority with as many as 4.2 million followers in India.⁷ There are also successful, growing immigrant communities in North America, Western Europe, the Far East, and Australia.

Confucianism

Confucianism was founded by Chinese philosopher Confucius in the fifth century B.C. and is considered more a set of moral precepts than a religion. The basic philosophy underlying Confucianism is the family and loyalty towards the family. The Asian nations of China, Korea and Japan are followers of the faith and, hence, have strong family-based social organizations. The name of Confucius is inseparable from Chinese culture and civilization, which was already well developed when he set out to transform ancient traditions into a system capable of guiding personal and social behaviour. Confucianism may be considered a religion, since Confucius built his philosophy on the notion that all reality is subject to an eternal mandate from heaven. Confucius taught that each person bears within himself or herself the principle of unselfish love for others, jen, the cultivation of which is its own reward. A second principle, li, prescribes a gentle decorum in all actions and may account for the Chinese emphasis on politeness and deference to elders.

Taoism

Taoism is a philosophy propounded by Lao-Tzu, a contemporary of Confucius. Its essence holds that all beings are an embodiment of both male and female energies—yin and yang—that govern the cosmos. It is focused on meditation and rituals designed to free the self from distractions and become empty and, thus, allow cosmic forces to act upon it.

Shintoism

Shintoism, which is Japan's indigenous religion, believes that the founding of the Japanese empire was a cosmic act and, thus, accords divine status to the emperor, even though the emperor was forced to renounce his claim as a part of the World War II settlement. It has no elaborate rituals of worship. However, a small Shinto shrine adorns many Japanese homes.

Islam

Islam is the second largest religion in the world after Christianity, with about 1.57 billion followers comprising about 23 per cent of the world's population.⁸ The teachings of Islam are based on the Koran, a collection of Allah's (God's) revelations to Muhammad, who is viewed by Muslims as the messenger of God. Muhammad was not only the prophet of God, but also led the first Islamic state.

For the Muslim, religious ritual is a part of everyday life. Islam's code of conduct contains formal prescriptive rules for all aspects of life including social relations, social behaviour, rules for the consumption of food and drink, and the role and acceptance of women in society. The basic spiritual duties of all Muslims consist of the five pillars of faith: (1) accepting the confession of faith (“There is no God but God, and Muhammad is the Messenger of God”), (2) making the five daily prayers while facing Mecca (Muhammad's birthplace), (3) giving charity, (4) fasting during the daylight hours of Ramadan, a 29- or 30-day month in Islam's lunar calendar, and (5) making a pilgrimage to Mecca at least once in a person's lifetime. Some Muslims claim that there is another duty, jihad, which refers to the various forms of striving for the faith, such as the inner struggle for purification. However, this term is often translated as “holy war”.

Islam has an approving attitude toward free enterprise and the earning of legitimate profits through trade and commerce, although it forbids the payment or receipt of interest, which is considered usury. Similarly, the Islamic legal system, which traditionally permitted only religious courts, now has several state courts as well, which are based on both religious law and Western commercial law. Islamic culture is, thus, receptive to international business as long as it conforms to and respects accepted tenets of their religion.

Religion and International Business

Religion influences international business in many ways. Religious holidays and rituals can affect employee performance and work scheduling. When members of different religious groups work together, there may even be strife within the workforce. Managers must respect the religious beliefs of others and adapt business practices to the religious constraints present in other cultures. Of course, to be able to do this, they must first know what the constraints of those beliefs are.

National institutions (in particular) and business firms try to adopt practices that will satisfy religious decrees without undermining modern business practice. For instance, banks in Islamic countries issue shares to depositors and charge borrowers' fees and commissions to maintain profitability without charging interest, since bank interest is prohibited under Islamic law. In Islamic countries, from Saudi Arabia to Indonesia, believers do not eat during daylight hours during the month of Ramadan, curtailing lunch business at restaurants but creating opportunities for traditional buffet dinners after dark.

Religion also affects work and social customs from the days of the week on which people work to their dietary habits and religious celebrations. For example, in most parts of the world, the working week is from Monday to Friday, with Saturday and Sunday being holidays, but in Islamic countries of the Middle East such as Qatar and Saudi Arabia, Friday and Saturday are the weekly holidays and the working week begins on Sunday. Similarly, Christmas is the major festival of the Christians but Diwali is the major festival of the Hindus. In countries like India, which subscribe to a secular way of thinking and have a population comprising different faiths and religions, the Muslim festival of Eid or the Sikh festival of Gurupurab is as important as the Hindu festival of Diwali.

Religion has a strong influence on work ethics. For example, the Protestant work ethic believes it is one's duty to glorify God by hard work. It assigns a lot of importance to saving and the reinvestment of capital. This belief led to the practice of thrift, which was responsible for the development of capitalism in the United States.⁹ In comparison, the traditional Hindu belief in a non-materialistic way of life was responsible for a weak entrepreneurial attitude and a lower growth of business.

It is believed that in China, Korea and Japan, Confucian ideology is responsible for lowering the costs of business, helping in their economic success. This is on account of the ethical tenets of loyalty, reciprocal obligations, and honesty in dealing with others propagated by Confucianism.¹⁰ The feeling of loyalty that workers have towards their employers has been instrumental in the lack of friction between the two classes, that is, the workers and the employers. This loyalty in turn is reciprocated by the blessings which the management bestows on its workers. The concept of honesty is the harbinger of trust in honouring contractual obligations. The benefits of these trust-based relationship networks are responsible for the emergence of the Asian giants. In the present-day context, Japanese employers feel that factors such as a growing feeling of prosperity and a shift to a five-day workweek has somewhat eroded the loyalty of the younger workers and that they may not have the same dedication to their jobs as their predecessors had. Workers rarely show up early before work starts, and some management trainees actually use all their vacation time.

Values and Attitudes

Values are basic convictions that people have regarding right and wrong, good and bad, important and unimportant. An attitude is a persistent tendency to feel and behave in a particular way towards something or someone. Values influence the culture of business organizations, for example, there is an increasing tendency for international business firms to call themselves equal opportunity employers, implying thereby an attitude of no racial or gender discrimination. Every culture has a set of attitudes and beliefs that influence nearly all aspects of human behaviour and help to bring order to a society and its individuals. The more managers can learn about certain key attitudes, the better prepared they will be to understand why people behave as they do, especially when their reactions differ from those that the managers have learned to expect in dealing with their own people.

 

Among the wide variety of cultural attitudes and beliefs, some are of prime importance to the business person, especially attitudes towards time, towards achievement and work, and towards change.

Attitudes Towards Time

Concepts of time vary widely between cultures. In some countries, “time is money”; in other countries this attitude is considered vulgar and even offensive. In Europe and North America, punctuality is respected and to arrive late for an appointment is considered disrespectful. In the Middle East and parts of Africa and South America, being late for a meeting may be acceptable. In contrast, time is important in the United States and being made to wait past the appointed hour to see an individual may lead to the assumption that this person is not giving a meeting the importance it deserves. Yet the wait could mean just the opposite elsewhere. In Latin America or the Middle East, there is a more casual attitude towards time. It is said that an appointment for noon with a British executive will find them there five minutes before the appointed hour, but their Indian counterpart will probably arrive fifteen minutes late, and the Brazilian executive, anytime between noon and 2 p.m.

Is it better to follow the local custom or be prompt? It depends. In Spain, a general rule is to never be punctual. If you are, you will be considered early. However, in the Middle East, although the American penchant for punctuality is well known and lateness by Americans is considered impolite, the Arabian executives, nonetheless, usually will not arrive at the appointed hour.

An important principle of economics, known as the backward bending labour supply curve, postulates that increases in income lead to an increase in the number of hours the labour force is willing to work only till a point, after which they prefer leisure and the sacrifice of extra wages. In developing countries, especially those which are on the transition path, the demonstration effect makes people feel that there is prestige and status in owning certain goods, for which they are willing to work longer hours. The demonstration effect was originally coined by J. S. Duensberry¹¹ and explains the general propensity of the less developed or poorer nations to spend more on the consumption of certain goods, reducing the savings available to the economy and adversely affecting capital formation.

Attitudes Towards the Future

The cultural view of the future is closely related to the concept of time. In the Western parts of the world, it is believed that people have the power to control, or at least influence, future events. This is completely opposite to the Asian belief of fate or destiny which controls everything, and finds people stoically submitting to it.

Attitudes Towards Material Culture

It is a commonly held belief in Asian countries that a positive orientation towards wealth and material possessions are symbolic of the West and its capitalist society. While this is considered desirable in the West and is responsible for the growth of their economies, it is seen that in some cultures, such as the case of the Pacific Islanders, individuals work long enough to only earn a little money and then cease work until those funds have been exhausted. In other, generally more affluent cultures, people live to work and are interested in job security, participation in management, and self-actualization rather than only straight monetary rewards. Hence, managers in international business must identify the types of rewards that are considered important by employees in a particular culture.

Customs and Manners

Customs are common established practices. Manners constitute behaviour that is regarded as appropriate in a particular social setting. Customs dictate how things are to be done; manners are used in carrying them out.

 

Customs and manners also dictate social dos and don'ts or social behaviour. Social behaviour may, of course, be considered the result of history or the effects of geography. The Atlantic and Pacific oceans, which separate the United States from Europe and Asia, also separate it from European and Asian conflicts and their cultural influences. The fact that the US land mass is physically isolated from all but two other countries (Canada and Mexico) has contributed to a tendency towards isolationism, a distrust of alliances and a lack of concern for events outside the United States unless they are perceived to directly threaten it in some way. By contrast, people in the Netherlands and Switzerland are more attuned to the activities of their neighbours and are much more internationally oriented than the United States. For the Netherlands, an international orientation has been unavoidable. For centuries, armies have marched across Dutch borders on their way to or from the battles that shaped modern Western Europe. Switzerland, on the other hand, has been able to avoid war by allying itself with nobody and using this neutrality to play the role of friendly broker between nations.

In countries which subscribe to Western culture, food is eaten on the table using individual plates with knives and forks. In Islamic countries, however, food is served on a common platter and eaten by all members of the family sitting on the ground using their hands. Similarly, the Chinese eat with chopsticks while the Indians usually use their fingers to eat. Another example of difference in custom are Arabian countries where it is considered bad manners to shake hands with a person of higher authority unless they make the first move while, in the United States, people offer to shake hands regardless of a person's social status or rank.

Hugging, kissing on the cheek, gesticulating with one's hands, and using proper respectful titles to address adults and the elderly are fairly common practices in Hispanic and Latino cultures. Negotiations with Russians and East Europeans typically consist of initial large demands followed by large concessions in contrast to the German style of making early concessions and trying to get the other party to make counter concessions.

In countries such as Mexico and Spain, a three-hour siesta in the afternoon was an undisputed rule. This has almost disappeared today in both countries for different reasons but with similar results. In Mexico, the federal government ordered most public employees, from clerks to cabinet ministers, to work from 9 a.m. to 6 p.m., with just one hour for lunch. As a result of this, much more work is being done before noon, a rarity under the old schedule. It has also hastened decision making, since people are no longer drowsy in the afternoon as a result of a heavy lunch and sleep and they now make decisions in the afternoon instead of waiting until the evening. Spain's growing economy has witnessed a movement of the young working class into the suburbs. This has consequently created longer commutes, making it difficult for them to dash home to sleep, making it a ritual of the past.

Aesthetics

Aesthetics refers to the artistic tastes of a culture. For example, opera, which is a popular form of music in the United States, has very recently made its presence felt in India, where traditional Indian art forms have been more popular. In India, there has been a sudden surge in the contribution of creative industries in the economic growth of the country. Nowadays, Indian films and television programmes are as popular as Indian cuisine all over the world.

 

CULTURAL DIMENSIONS IN INTERNATIONAL BUSINESS

The different elements of culture outlined in the preceding section explain behavioural differences among people and societies with different orientations. There are various classifications which have been developed to construct a composite picture of the interaction between culture and business. This section examines some of these classifications.

Hofstede's Dimensions of Culture

Geert Hofstede, a Dutch researcher, has defined four cultural dimensions to explain how behavioural differences can be attributed to culture.¹² He studied more than 100,000 IBM employees from 70 different countries from 1967 to 1973 through 116,000 questionnaires. Considered the largest ever organization-based study of culture, it identified four major dimensions of culture, which are power distance, uncertainty avoidance, individualism/collectivism, and masculinity/femininity.

Power Distance

Power distance (PD) focuses on inequalities in the distribution of power among different members of organizations and institutions. People in societies where authority is obeyed without question live in a high power distance culture wherein inequality is accepted and a paternalistic leadership style is predominant. TNCs from high power distance cultures keep a close control over their subsidiaries and do not delegate much authority. Managerial decision making is autocratic and the subordinates do as they are told. In contrast to this, in countries with low power distance, there is greater equality of status reflected in a more consultative style of management. Organization structures also tend to be larger and managers have relatively few subordinates reporting to them. Countries in Asia, Latin America and Africa have a higher power distance compared to countries of Northern Europe, the United States and Canada.

Uncertainty Avoidance

Uncertainty avoidance (UA) refers to the extent to which organizations and individuals tolerate uncertainty and ambiguity. For example, Japan has very high uncertainty avoidance, which is reflected in its attempts to standardize behaviour and rules. Countries with high uncertainty avoidance try to reduce risk by formalizing organizational activity and developing systems and methods for dealing with ambiguity. The study found strong uncertainty avoidance in Greece, Uruguay, Portugal, Japan, and Korea. Weak uncertainty avoidance was found in Singapore, Sweden, Great Britain, the United States and Canada. Low uncertainty avoidance societies have less structured activities and managers are encouraged to take more risks. There is less stress among people in such organizations, dissent and disagreement is more acceptable, and initiative and ingenuity is the path used for getting things done.

Hofstede believes that uncertainty avoidance is probably the most critical dimension for foreign investment because of its implication for risk taking and investment. TNCs from cultures with high uncertainty avoidance are likely to take a more incremental approach to internationalization. Their internationalization approach is likely to follow the traditional “step by step” path of exports followed by contractual entry and investment mode of entry. Japanese car manufacturers such as Nissan lagged behind their European and US counterparts in establishing production facilities in China because of this approach.

Individualism/Collectivism

Individualism/Collectivism (I/C) refers to the extent to which individuals see themselves as independent (individualism) or whether the group is the central point of identification for the individual, where the tendency of the individual is to belong to a group that looks after each person in exchange for loyalty (collectivism). For some scholars, this is the most important dimension of a culture. High collectivism does not mean that individuals do not seek self-interest. Rather, it means that the pursuit is conducted within acceptable group frameworks with group norms guiding individual behaviour and with group harmony being an important endeavour. Hofstede found that economically advanced countries tended to be more individualistic than less advanced countries. High individualism also generated expectations of self-sufficiency among individuals with a strong emphasis on individual initiative and achievement, autonomy, and personal financial security. In contrast, countries with low individualism stressed the importance of group decision making and affiliation. Success was considered to be a collective effort and all group members were considered equal.

Masculinity/Femininity (M/F)

Masculinity/Femininity (M/F) is a measure of aggression and materialism as the dominant values of a society and is based on stereotyped gender roles. Thus, masculinity is associated with assertiveness and an emphasis on money and material values while femininity is associated with sensitivity, caring, and the quality of life. Some of the countries with high masculinity are Japan, Austria, Venezuela and Mexico. Some of the countries with low masculinity are Norway, Sweden, Denmark and the Netherlands.

Countries with high masculinity scores place a great deal of importance on earnings, recognition, advancement, and challenge. Achievement is defined in terms of wealth and recognition. These cultures often tend to favour large-scale enterprises and economic growth is considered very important. Children are encouraged to be high performers and a great deal of emphasis is placed on career planning. Countries with low masculinity scores emphasize a friendly work environment, cooperation, and employment security. Achievement is defined in terms of human contacts and the living environment. The work environment has low stress and workers have a great deal of job freedom. TNCs from feminist cultures, for example, car makers Volvo and Saab, tend to emphasize social rewards and benefits in the workplace, which are sometimes viewed as excessive by their parent firms.

Hofstede's classification created an index score for each of the four dimensions ranging from zero to hundred in which countries such as the United States, Canada and the United Kingdom had high scores on the individualism scale and low scores on the power distance scale (see Table 5.1). At the other end of the spectrum, countries from Latin America and Asia which emphasize collectivism over individualism scored high on the power distance scale. Countries such as Japan have strong uncertainty avoidance and high masculinity manifested in a male-dominated society with lifetime employment. All findings of his study essentially conformed to established stereotypes in the West.

 

Table 5.1 Hofstede's Scores

 

 

In a later study, Hofstede introduced the dimension of Confucian dynamism or long-term orientation.¹³ It attempts to capture attitudes towards time, persistence, ordering by status, respect for tradition, and the practice of reciprocating gifts and favours. It found countries with Asian cultural values such as Japan, Hong Kong and Thailand with a high score while Western nations like the United States and Canada had a low score. Based on this, he predicted that Confucian dynamism leads to high growth—a contention that was subsequently disproved with the United States exhibiting high growth and Japan showing a period of stagnation.

Hofstede's study is a good starting point to understand the implications of cultural differences in managerial practice. However, the results of his study need to be applied with caution for the following reasons:

• The study was based on the findings of one company viz. IBM from the computer industry in the 1960s and 1970s. As a consequence, his findings are unique to a particular industry and firm, and it is somewhat difficult to assess whether the various offices of IBM were truly representative of their respective national cultures.
• The research team comprised American and European nationals and it is, therefore, somewhat restricted in its view and confirms established Western stereotypes.
• The findings of the study are also static and dated and, hence, limited in application, especially in the current phase of cross-cultural movement across the globe.
• The study essentially assumes a direct association between nation states and culture, although it is clear that a single nation could have more than one culture, especially in the present era of rapid globalization.

Schwartz's Classification

Schwartz's classification is a later study carried out in the 1980s and 1990s on a fairly large number of countries.¹⁴ It has its origins in psychology, but the framework has had a limited use in business literature. Schwartz arrived at his classification by a conceptualization of values prior to their sampling and measurement. The study identifies three dimensions of culture:

1. Embeddedness versus autonomy: Embeddedness (conservatism) refers to emphasis on social relationships and tradition whereas autonomy refers to giving importance to one's own uniqueness and feeling a sense of pride in one's own attributes. There are two kinds of autonomy—intellectual autonomy that emphasizes self-direction and creativity and affective autonomy that lays stress on the pursuit of stimulation and hedonism.
2. Hierarchy versus egalitarianism: Hierarchy is granting legitimacy to hierarchical roles and resource allocation. Egalitarianism is the promotion of the welfare of others over the pursuit of self-interest.
3. Mastery versus harmony: Mastery refers to control over the social environment via self-assertion and an emphasis on factors like success and ambition. Harmony implies being “at peace” with nature and society and treating organizations as a part of the broader social system.

There is a partial overlap between Schwartz's and Hofstede's models. For instance, autonomy in Schwartz's model is close to Hofstede's individualism/collectivism, whereas hierarchy is similar to Hofstede's power distance. Mastery is close to masculinity since they both emphasize goal achievement. Harmony is relatively similar to uncertainty avoidance; Schwartz found a positive correlation between them. Egalitarian commitment overlaps with femininity and a positive correlation was also found between these two.

Trompenaars' and Hampden-Turner's Classification

Trompenaars and Charles Hampden-Turner developed a model of culture with seven dimensions, which found followers among management practitioners.¹⁵ They identified seven orientations about the different ways in which human beings deal with each other.

1. Universalism versus particularism: This dimension examines the relative importance of rules versus relationships. Countries with universal cultures give importance to rules which are equally applicable in all situations. These include countries such as the United States, Canada, the United Kingdom, the Netherlands, Germany and the Scandinavian countries. On the other hand, cultures which are high on particularism, such as the Arab countries, favour employees who display commitment over those who don't.
2. Individualism versus communitarianism: This dimension focuses on the group versus the individual and its role in an organization. Countries high on individualism are Israel, Canada, Nigeria, Romania, the United States, the Czech Republic, and Denmark. Countries high on communitarianism are Egypt, Nepal, Mexico, India, and Japan.
3. Neutral versus emotional: This dimension examines the role of display of emotions on corporate culture. In neutral cultures, interactions are impersonal and objective; in emotional cultures, they are laden with emotions. Countries high on neutral expression include Ethiopia, Japan, Poland, and New Zealand; they prefer indirect, non-confrontational responses and emphasize control. Countries high on emotional expression include Kuwait, Egypt, Oman, and Spain; they prefer direct, emotional responses and avoid social distance.
4. Specific versus diffuse: This dimension is a measure of the ability to keep one's private and working lives separate. In specific cultures, interaction is confined to the work space and the private space is sacrosanct and separate from work. Countries high on specific involvement such as the United States and Germany allow more outspoken expression and encourage transparency. Countries high on diffused involvement include Japan, Mexico, and France and they have no clear boundaries between the different spaces in an individual's life.
5. Achievement versus ascription: This dimension examines whether status is a function of birth or individual effort and merit. In high-achievement cultures such as the United States and Canada, a great deal of importance is given to individual merit and performance. In ascriptive cultures, status is defined by birth, kinship, and age. Countries with high ascriptive cultures such as Kuwait and Saudi Arabia make ample use of titles and show respect for superiors.
6. Sequential versus synchronic attitudes to time: Countries with a sequential time perception, such as the United States, are sticklers for planning since they look at work from a short-term perspective. Work is rigorously and meticulously planned to the smallest detail. In contrast to this, countries such as Italy and Spain have a synchronic culture and a long-term perspective towards work, which is reflected in a more casual, laid-back attitude with blurred time boundaries.
7. Internal versus external control of the environment: This dimension comprises the attitude of a culture to the environment. In other words, do we control our environment or are we controlled by it? Countries which have a tendency towards controlling the environment—the United States, Israel, and Spain—appreciate control and dominance, whereas countries which do not have such an orientation, such as Venezuela, Nepal, and Russia, accept that many life events cannot be controlled.

Trompenaars' and Hampden-Turner's classification partially resembles Hofstede's model. The dimension of communitarianism versus individualism is similar to Hofstede's collectivism versus individualism. There is no equivalent of the specific versus diffuse dimension in Hofstede's scheme; however, in individualistic cultures, interpersonal relationships tend to be more specific, whereas in collectivist cultures they tend to be more diffuse. Achievement versus ascription has no direct match either in Hofstede's model.

The research of Hofstede and Trompenaars highlighted the importance of diversity among national cultures, disproving the tenet of the “one best way” of managing and organizing people. These theories proved that the universal application of management theories such as pay-by-performance or management-by-objectives were products of Anglo-Saxon culture with different values and norms. Just as standardized products do not suit all markets, organizations cannot be standardized, but must adapt themselves to local, social, and cultural profiles.

Effectively managing a multicultural business requires at least a basic knowledge of the employee's culture and traditions. Familiarity with both is essential because each has a bearing on an employee's day-to-day behaviour. Cultural identities help people feel that they are a part of the society around them. It keeps them from feeling isolated and sometimes it even helps them know how to react. Traditions involving family, religion, education, and nationalism play a large role in everyone's life. Personal appearance, ethics, and etiquette are also factors to be considered. Whether we realize it or not, culture and tradition are powerful principles employees always carry with them. Culture is taken for granted and is always with us even if we are unaware of it.

Hofstede and his colleagues who studied corporate cultures in two countries, the Netherlands and Denmark, found differences in values but more considerable differences in practices amongst the firms they studied. Hence, they proposed that national and corporate cultures are distinctive, if related, constructs.

Various classifications have been developed to construct a composite picture of the interaction between culture and business. Hofstede's study identifies four major dimensions of culture, Trompenaars and Charles Hampden-Turner developed a model of culture with seven dimensions while Schwartz's classification, which has its origins in psychology, again identifies four dimensions of culture.

MANAGERIAL IMPLICATIONS FOR INTERNATIONAL BUSINESS

Is cultural globalization driven more by homogeneity or heterogeneity? This could be a moot point for debate, as we have seen in the beginning with the opening vignette and in our journey through this chapter. A basic complexity in international business as compared to domestic business arises out of differences in countries and societies which are rooted in culture. The changing cultural environment of international business offers unlimited opportunities for developing competitive advantages for a business manager. This requires an understanding of cross-cultural differences and then using them to develop a competitive advantage. An attitude that combines the global with the local, that is, a glocal attitude is certain to bring about a seamless integration of different cultures and harmony in the enterprise.

The spread of global culture and its local adaptation through trade and investment, aided by technological advances, have brought to the forefront the increasingly important issue of cross-cultural solutions to international business. Global organizations with diverse cultures often find that cross-cultural differences manifest themselves in general areas such as behaviour, etiquette, norms, values, expressions, group mechanics, and non-verbal communication. These cross-cultural differences then follow on to a number of areas including recruitment, relocation, international assignments, and staff retention and training programmes and have to be dealt with in different areas of corporate functioning, including management styles, corporate culture, marketing, and human resource (HR).

A critical component of a well-functioning cross-cultural team is communication, which is the building block to promote staff integration, reduce cross-cultural conflicts, and build team spirit. This is essentially done by playing down differences and building on strengths to ensure that they are positively used. The expected synergy from international mergers, acquisitions and joint-ventures depends on organizational harmony created by a workforce comprising people from different cultural backgrounds. Organizations, therefore, need to move towards a polycentric orientation instead of an ethnocentric one.

In conclusion, we can say that while the debate on cultural heterogeneity versus cultural homogeneity remains open, it remains obvious that cultural change is here to stay and will be a major driver of the success or failure of TNCs in the fast-changing global business environment.

Aesthetics

Attitudes

Autonomy

Culture

Customs

Egalitarianism

Embeddedness

Ethnocentric approach

Harmony

Hierarchy

High-context culture

Individualism/Collectivism

Language

Low-context culture

Manners

Masculinity/Femininity

Mastery

Polycentric attitude

Power distance

Religion

Uncertainty avoidance

Values

1. What is meant by culture? Discuss the key elements of culture.

2. What are the key dimensions of culture according to Hofstede's classification?

3. Explain the key features of Schwartz's classification. Distinguish between Hofstede's and Trompenaars' classification of cultural dimensions.

4. Discuss how different elements of culture can affect an international business.

5. Imagine that you are an Indian engineer who has been offered a job as the CEO of a large TNC based in Dubai. What are the important cross-cultural issues you are likely to face and how would you resolve them?

6. Peter John has 20 years of work experience in a large US manufacturing enterprise. He has now been transferred to a new site in Gurgaon, India. John is known for his participative management style in handling workers. Do you anticipate his success or failure in India? Why or why not?

1. Using the Hofstede resource centre, http://www.geert-hofstede.com/geert_hofstede_resources.shtml, compare the cultural compatibility of India with Taiwan, Venezuela, South Africa, Austria, and the United Kingdom. Based on their cultural compatibility, analyse which of the five countries is easiest to do business in and why.

2. You have been employed by a Japanese firm located in Tokyo. Using the information on the Web site, http://www.japan-guide.com/e/e622.html, prepare a report detailing Japanese culture and etiquette.