Chapter 5: The Cultural Environment

Introduction

Cultural understanding plays a major role in global business success. It is true that a company selling its products or services in
foreign countries must contend with various aspects of the external environment in addition to culture. These include the
business market, competition, technology, economy, and the legal and political climate.

Defining Culture and Its Characteristics

Culture is a concept that can be challenging to define. Perhaps one reason is that there are so many and different components
of culture, such as manners, power, face saving, names and titles, language, religion, gift giving, and risk taking. Culture
involves how a group of people behave, what the people value and appreciate, what the people believe is right and fair, and
many other aspects of life. Perhaps the best definition of culture is “learned behavior; a way of life for one group of people
living in a single, related, and independent community.”

There are four characteristics of culture that are important for global companies to recognize. First, culture is not inherited;
rather it is learned, usually through one’s parents, friends, schools, and other influences. Second, it is nearly impossible to
change an entire country’s culture; culture is relatively static and not easily modified—especially by external forces. Third, it is
the responsibility of the global firm to ascertain the level of importance of various aspects of culture in the foreign markets it
serves and recognize these aspects when doing business overseas.

Fourth, companies’ operations, chiefly marketing and management, need to recognize and adjust to the cultural environment
existing in the countries the global company serves. The ability to do so often means success in international markets.
Acculturation is the term used to describe the ability of a firm to adjust to a culture different from its own.

Elements of Culture

Language

Verbal and nonverbal communication are the two primary types of language. Verbal communication refers to the message’s
actual content (what it says), whereas nonverbal communication involves tone of voice as well as the gestures, body position,
facial expressions, eye contact, and any other body language that accompanies verbal communication.

One way to eliminate such gaffes is to use backward translation. In this technique, a message is translated from English into
another language, then someone skilled in that foreign language translates it back into English; this second translation can then
be compared to the original English version

Religion

Religion is a powerful cultural aspect that must be recognized as companies manage their overseas operations and market their
products in foreign cultures. In Muslim countries, for example, American companies cannot anticipate employing women
because they are not encouraged to work outside the home. Also, different religions observe different holidays that must be
recognized.

Values and Attitudes

Values are basic beliefs or philosophies that are pervasive in a society. In some countries, such as the United States, a high
value is placed upon foreigners and foreign items, as they are associated with sophistication—French wines, for example, or
Swedish automobiles. In other countries, such as Japan and Korea, there is a subtle resistance to foreigners and things foreign.
This is reflected in an aversion to purchasing foreign products and their resistance to accepting employment with foreign firms
operating in these countries.

Attitudes are feelings or opinions. Attitudes toward change must be considered by international businesses. In many societies,
proposed change is viewed with suspicion— especially if it is suggested by foreigners.

Manners and Customs

International companies must understand the manners and customs, the way a society does things that prevail in foreign
countries. Manners and customs affect both the management and marketing operations of a company.

Gift-giving is one aspect that describes manners and customs. In general, small gifts are appropriate, whereas large gifts may
be viewed as a bribe that contravenes international law. In Muslim countries, for example, it would be inappropriate to bring a
gift for another man’s wife. Types of wrapping paper, ribbons, and colors are other elements of gift-giving that are important, as
is knowing when to give a gift.
Material Elements

Material culture in a society is often a direct result of technology. It is perhaps best demonstrated by a country’s infrastructures;
that is, the basic economic, social, financial, and marketing frameworks that enable the society to function.

Without the availability of these forms of infrastructure, international businesses will not be able to obtain funds to finance their
operations, transport their products to market, or draw upon the expertise of local marketing research and advertising firms.

In Africa, and some parts of Asia, there is a growing movement toward “leapfrog” technology—technological advances that
bypass intermediate stages industrialized nations experience. For example, people who have always written with a pencil on
paper and never had access to a typewriter, are now leapfrogging over typewriter technology to use a laptop computer.

Aesthetics

Color, form, and music are the major components of aesthetics (i.e., taste and beauty as perceived by a society).

Color is an important packaging variable. Companies plying international markets must carefully choose colors, as colors often
represent different things in different countries.

Education

The level of education held by people in foreign countries is a major factor in explaining economic growth. Education must be
considered when expatriate managers hire host country personnel to work on complicated production machinery, place them in
training programs, staff office positions, and so on. The level of education must be such that high tech products can be
accepted because the market knows how to use them. The content of advertisements must recognize a nation’s level of
education.

Some countries emphasize different educational specialties. South Korea and Japan stress education in the sciences and
engineering. Russia is strong in mathematics and computer programming; India emphasizes engineering and software
development.

France, Japan, and India, and, to some extent, Great Britain, have a tiered system of higher education that features prestigious
colleges and universities. Foreign companies operating in these nations may be tempted to recruit only from these universities
but should, instead, hire the best-qualified individuals regardless of academic pedigree.

Social Institutions

Social institutions refer to the way people relate to one another within group settings in a society. Families, churches,
workplaces, and friends are primary examples. Sociologists refer to groups that are important to individuals as reference groups.
Reference groups can be those of which people are already a member or those to which people aspire to belong.

Some counties have a high level of social stratification, meaning that groups at the top of the social pyramid exert a great deal
of control over others at lower levels of the pyramid. India is usually cited as having a high degree of social stratification,
whereas the Scandinavian countries are considered to be very egalitarian or “middle class.”

Clustering Countries and Regions by Culture

There have been several attempts to group countries and regions of the world together according to their cultural dimensions
and similarities. The purpose is to provide international managers with cultural clusters that would allow for similar marketing
and management strategies.

Hofstede’s Research

Hofstede’s findings led him to identify clusters of countries and regions according to five cultural levels, or dimensions.

Individualism vs. collectivism involves the worth of an individual versus the worth of the groups of which that person is a
member (“me versus the group”). Japan and Mexico, for example, are societies that are highly collectivistic, or group oriented,
whereas the United States and Great Britain are highly individualistic.

Power distance refers to egalitarianism (equality) versus authority. High power distance countries are those where superiors
and elders are treated with deference and respect, in contrast to low power distance countries, where relationships are more
egalitarian.

Masculine vs. feminine is another of Hofstede’s dimensions. It is important to note that this dimension does not refer to the
position or role of women in society. Instead, it is the extent to which a society values traditionally masculine attributes
(assertiveness, competition) or traditionally feminine ones (modesty, caring for others).

Uncertainty avoidance examines the extent to which societies tolerate risk or are risk averse.
Time orientation is the final cultural variable Hofstede examined. It is the extent to which a society emphasizes short-run or
long-run time horizons.

When Japanese firms enter a foreign market, they are willing to wait four or five years to make a profit; U.S. firms expect to
generate profits in new overseas markets in a year or less.

Trompenaars’s Cultural Dimensions

Universalism vs. particularism refers to the importance of rules versus relationships in a society. It has been illustrated by
the story of a person riding in the passenger seat of a car with a best friend, who is driving. The driver has a “fender bender”
while driving ten miles over the speed limit. Should the passenger admit to police that the friend was speeding (rules) or say
that the driver was not (relationship)?

The neutral vs. emotional variable involves the extent to which persons within a society emotionally express themselves.
South American countries, like Brazil and Argentina, are considered to be more emotional than the United States.

The specific vs. diffuse variable refers to the compartmentalization of roles. For example, are men in a society depicted in
multiple roles (diffuse), such as business executive, father, husband, or president of a social club? Or are men generally
depicted on only one dimension, such as businessman (specific)? Are women who work and have children depicted in both
roles, mother and manager, or in one, mother

Achievement vs. ascription refers to how “rewards” in a society are handed out. Are they based on performance
(achievement), as is typical in mainstream U.S. culture? Or are they based on ascription, such as one’s place in society because
of birthright or what university one attended?

The GLOBE Project

Gannon’s Cultural Metaphors

Martin Gannon believes that it is extremely difficult for executives of companies conducting business overseas to learn much
about the cultures of a number of countries through “do’s” and don’ts.” He suggests that it would be more productive for
international executives to gauge a specific culture by using an image (“metaphor”) that depicts how people in a specific culture
think and behave. Some examples of his metaphors are:

• French wine—Purity; classification; composition; compatibility; maturation

Sources of Cultural Information

Companies considering conducting business overseas and those already doing business abroad, have a number of sources they
can access to learn more about the culture of various foreign countries. Some of the primary sources are talking to employees
who have lived or worked abroad, executives who have traveled to other countries, training programs, and consulting firms.
Persons who may be about to undertake an international assignment can be exposed to cultural idiosyncrasies in which they are
asked how they would handle various cultural traits that might occur in their assigned countries.
Cultural Dimensions of Conducting Business in Individual Countries

Cultural Dimensions of Doing Business in Japan

Cultural Dimensions of Doing Business in Korea

Cultural Dimensions of Doing Business in China

Foreign business representatives who ignore guanxi are less likely to be successful in the Chinese market.

Guanxi refers to the relationship between subordinates and superiors. It denotes friendship among unequals involving
unlimited exchanges of favors; thus, it is not based upon sentiment. It is utilitarian, not emotional. It has an individual
orientation, not a group orientation.

Exchanges are often uneven, working to the advantage of weaker members in the guanxi relationship. Thus, claims of modesty
and inadequacy should be viewed as subtle demands for generosity, reminding the more powerful individual of his or her
obligation to be more magnanimous. This concept also applies to relationships with more powerful and wealthy foreigners who
are expected to cede certain points to Chinese business representatives during business dealings.

Persons of low rank may be powerful and influential due to guanxi relationships with superiors. Therefore, foreigners who want
to conduct business in China may need to seek out these lower-level persons and obtain their favor in order to gain access to
the more powerful superiors who are the decision makers.

Cultural Dimensions of Doing Business in Arab Countries

When doing business in Latin America, it is important to understand that potential customers want to develop a personal
relationship before doing business with foreign executives. Dinner meetings and lunch meetings provide a good time for
executives to get to know one another better. Often, conversations about buying and selling and contracts and terms will be
relegated below discussions about the particular Latin American country’s culture, history, architecture, current economic
conditions, and similar topics. Dinners often occur late in the evening, at 9:00 p.m. or 10:00 p.m. Formal manners and
appropriate business attire are appreciated.

Latin Americans are not as conscious about time as are North Americans. They are not as rushed as workers from the United
States. If something does not get done today, there is always the next day—or the day after that. Companies that want to do
business in Latin America will need to be flexible about meeting times, dates, and deadlines.

Latin Americans are not as immersed in their work as the businesspeople in the United States. Their motto is: “We work to live,”
not “We live to work.

The Importance of Culture for Managing and Marketing in Overseas Markets

When managing people and resources in a foreign country, close attention to host countries’ cultures is critical. Failure to do so
can severely damage a company’s performance in these markets.

A country’s culture affects its attitudes toward work. These attitudes can have an impact on workers from other countries who
come into the country to work as well as expatriate managers who need to recognize the norms surrounding work in their
adopted countries and must be reluctant to arbitrarily change them.

Management Styles

U.S. companies have management styles that frequently conflict with the management styles preferred in other cultures.

Product Development and Management

When developing new products, management styles must be considered along with many other aspects of marketing expertise.
Products that are wildly successful in home-country markets may need to be modified for an international market.

Advertising Campaigns

Like brands, advertising campaigns must be carefully tailored to local cultures. The list of failed campaigns rivals the one for
misnamed brands.

Communication

Communication is a key function in business, and culture has an impact on communication styles whether a firm is small or
large, multinational or domestic. Companies with foreign personnel running their overseas operations must be especially careful
to clearly communicate.

The use of jargon is usually inappropriate, as it greatly increases the risk of misunderstanding. Exhibit 5.4 gives some
examples. Abbreviations like CAD, CAM, COO, CEO, and CFO may not be understood by personnel in foreign countries, nor will
Latin and French phrases.