CHAPTER 5 The Cultural

Environment
Learning Objectives:
1. The challenges of crossing cultural boundaries.
2. The meaning of culture: foundation and concepts.
3. Why culture matters in International Business?
4. Hofstede Model of Cultural Dimensions.
4. Interpretations of Culture.
5. Components of Culture.
6. Managerial guidelines for cross-cultural success.
 What is Culture?
When travelling in other countries, we often
perceive differences in the way people lived and
work. In the United States dinner is commonly eaten
around 6 p.m.; in Spain it’s not served until 8:00 or
9:00 p.m. In the United States most people shop in
large supermarkets once or twice a week; Italians
tend to shop in smaller local grocery stores nearly
everyday.
Essentially, we are experiencing differences in
culture – the set of values, beliefs, rules, and
institutions held on specific group of people. Culture
is a highly complex portrait of people.
 What is Culture?
It includes everything from high tea in England to the
tropical climate in Barbados, to Mardi Gras in Brazil,
to segregation of the taxes in Saudi Arabian schools.
 Set of values,
beliefs, rules, and
institutions held by
a specific group of
people.
 Why
CULTURE
matter
s ???
Why CULTURE matters in International
Business ?

- Developing products and services.

- Communicating and interacting with foreign
business partners.
- Screening and selecting foreign distributors and
other partners.
- Negotiating and structuring international
business ventures
Why CULTURE matters in International
Business ?

- Interacting with current and potential customers

from abroad.
- Preparing for the overseas trade fairs and
exhibitions.
- Preparing advertising and promotional materials.
 Cultural Concepts
Avoiding Ethnocentricity
Ethnocentricity is the belief that one’s own
ethnic group or culture is superior than others.
Ethnocentricity can seriously undermine international
business projects. It causes people to view other
cultures in terms of their own and, therefore,
disregard the beneficial characteristics of other
cultures.
Ethnocentricity played a role in many stories of
some companies that failed when they tried to
implement a new business practice in a subsidiary
abroad. The failure occurred because managers
 Cultural Concepts

ignored the fundamental aspect of local culture,

which provoked a backlash from the local population,
their government, or nongovernmental groups.
As suppliers and buyers increasingly treat the
world as a single, interconnected market place,
managers should eliminate the biases inherent in
ethnocentric thinking.
 Cultural Concepts
Developing Cultural Literacy –
As globalization continues, people directly
involved in international business increasingly benefit
from a certain degree of cultural literacy -detailed
knowledge about a culture that enables a person to
function effectively within it.
Cultural literacy improves people’s ability to
manage employees, market products, and conduct
negotiations in other countries. Global brands such as
Procter and Gamble and Apple provide a competitive
advantage because consumers know and respect
 Cultural Concepts

these highly recognizable names. Yet cultural

differences often indicate alterations in some aspect
of a business to suit to the local taste and preferences.
The culturally literate manager who compensates for
local needs and desires brings his or her company
c l o s e r to c u sto m e rs a n d i m p ro ve s t h e f i r m ’s
competitiveness.
 Creating a Global Mindset

Cultural Adaptability
Managers need the ability to alter their
behaviour when working with people from
other cultures. The first step in doing this is to
develop one’s knowledge of unfamiliar cultures.
The second step is to act on that knowledge
to alter behavior to suit cultural expectations.
The manager with a global mindset can
evaluate others in a culturally unbiased way
and can motivate and lead multicultural terms.
 Creating a Global Mindset

Bridging the Gap

A large gap can emerge between theory and
practice when Western management ideas are
applied in Eastern cultures.
Whereas U.S. Management principles are
often accepted at face value in business
throughout the world, U.S. Business customs
are not. In Asia, for example, Western managers
may try implementing “collective leadership”
practices more in the line with Asian
management styles.
 Creating a Global Mindset

Building Global Mentality

Companies can apply personality-testing
techniques to measure the global aptitude of
managers.
A global mindset test evaluates an
i n d i v i d u a l ’s o p e n n e s s a n d f l e x i b i l i t y,
understanding of global principles, and
strategic implementation abilities. It can also
identify areas in which training is needed and
generate a list of recommended programs.
 Creating a Global Mindset

Flexibility is the Key

“the more behavioural are the issues, the
greater is the influence of local cultures.”
Japanese and Korean managers are more likely
than U.S. Managers to wait for direction and
consult peers on decisions.
Western managers posted in Middle East
must learn to work within a rigid hierarchy to
be successful. And although showing respect
for others is universally valued, respect is
defined differently from country to country.
Components of CULTURE
 Aesthetics
What culture considers “good taste” in the arts
(including music, painting, dance, drama, and
architecture), the imagery evoked by certain
expressions, and the symbolism of certain colors is
called Aesthetics.
Aesthetics are important when a company does
business in another culture. The selection of
appropriate colors for advertising, product packaging,
and even work uniforms can improve the odds of
success.
 Aesthetics
For example, green is favorable color in Islam and
adorns the national flags of most Islamic nations
including Jordan, Pakistan, and Saudi Arabia.
Companies take advantage of the emotional
attachment to the color green in these countries by
incorporating it into a product, its packaging, or its
promotion.
Across much of Asia, on the other hand, green is
associated with sickness. In Europe, Mexico, and the
United States, the color of death and mourning is
black; in Japan and most of Asia, its white.
 Values and Attitudes
Ideas, beliefs, and customs to which people are
emotionally attached are called values. Values
i n c l u d e c o n c e p t s s u c h a s h o n e s t y, m a r i t a l
faithfulness, freedom and responsibility. Values are
important to business because they affect a person’s
work ethics and desire for material possessions.
For example, whereas people in Singapore value
hardwork and material success, people in Greece
value leisure and a modest lifestyle. The United
Kingdom and the United States value individual
freedom; Japan and South Korea value group
consensus.
 Values and Attitudes
Attitudes are positive or negative evaluations,
feelings and tendencies that individuals harbor
toward objects and concepts. Attitudes reflect
underlying values.
For example, a Westerner would be expressing
an attitude if he or she were to say, “I do not like
Japanese purification ritual because it involves being
naked in a communal bath.” The Westerner quoted
here might hold conservative beliefs regarding
exposure of the body. Similar to values, attitudes are
learned from role models, including parents,
teachers and religious leaders.
 Values and Attitudes
Attitudes toward time – People in many Latin
American and Mediterranean cultures are casual
about their time. They maintain flexible schedules
and would rather enjoy their time than sacrifice it to
unbending efficiency.
Attitudes toward work – Whereas some cultures
display a strong work ethic, other stress a more
balanced pace in juggling work and leisure. People in
France like to say they work to live while people in
the United States live to work. Not surprisingly, the
lifestyle in southern France is slower-paced. People
tend to concentrate on earning enough money to
enjoy a relaxed, quality lifestyle.
 Values and Attitudes
Attitudes toward cultural change – A cultural trait is
anything that represents a culture’s way of life,
including gestures, material objects, traditions and
concepts. Such traits include bowing to show respect
in Japan (gesture), a Buddhist temple in Thailand
(material object), relaxing tearoom in Kuwait
(tradition) and practicing democracy in United States
(concept).
Cultural diffusion is the process whereby cultural
traits spread from one culture to another. As new
traits are accepted and absorbed into a culture,
cultural change occurs naturally and, as a rule,
gradually.
 Manners and Customs
Manners – Appropriate ways of behaving, speaking,
and dressing. In Arab cultures, for example, one does
not extend a hand to greet an older person unless
the elder first offers in greeting.
Customs – Habits or ways of behaving in specific
circumstance are passed down through generations,
they become customs.
Customs differ from manners in that they define
appropriate habits or behaviors in specific situations.
 Social Structure
Social structure embodies a culture’s fundamental
organization, including its groups and institutions, its
systems of social positions and their relationships,
a n d t h e p ro c e s s b y w h i c h i t s re s o u rc e s a re
distributed.
Social structure plays a role in many business
decisions, including production-site selection,
advertising methods, and the cost of doing business
in a country.
 Religion
Human Values often originate from religious
beliefs. Different religions take different views of
work, savings, and material goods. Identifying why
they do so may help understand business practices in
other cultures. Knowing how religion affects business
is essentially important in countries with religious
governments.
Religion is not confined to national political
boundaries to national political boundaries but can
exist in different regions in the world simultaneously.
It is also common for several or more religions to be
practice within a single nation which include:
C h r i s t i a n i t y, I s l a m , H i n d u i s m , B u d d h i s m ,
Confucianism, Judaism and Shinto.
 Personal Communication
Spoken and Written Language
Spoken and written language is the most obvious
difference we noticed when travelling to another
country. Knowledge of other people’s language is
often essential for achieving success in international
business; understanding its language is the key to
deeply understanding a culture.
Linguistically different segments of a population
are often culturally, socially and politically distinct.
Malaysia’s population is composed of Malay (60
percent), Chinese (30 percent), and Indian (10
percent. Although Malay is the official national
language, each ethnic group speaks its own language
and continues its tradition.
 Personal Communication
Body Language
Body language communicates through unspoken
cues, including hand gestures, facial expressions,
physical greetings, eye contact, and the manipulation
of personal space.
Similar to spoken language, body language
communicates both information and feelings differs
greatly from one culture to another. Italians, French,
Arabs and Venezuelans, for example, animate
conversations with lively hand gestures and other
body motions.
 Education
Education is crucial for passing on traditions,
customs, and values. Each culture educates its young
people through schooling, parenting and religious
teachings, and group memberships. Families and
other groups provide informal instruction about
customs and how to socialize with others. In most
cultures, intellectual skills such as reading and
mathematics are taught in formal education settings.
Countries with poorly educated populations
attract the lowest-paying manufacturing jobs.
Nations with excellent programs for basic education
tend to attract relatively good-paying industries.
Those that invest in worker training are usually re -
 Education
paid in productivity increases and rising incomes.
Meanwhile, countries with skilled, highly educated
workforces attract all sorts of high-paying jobs, often
called “brainpower industries”.
The quality of a nation’s education system is
related to its level of economic development. Brain
drain Phenomenon is the departure of highly
educated people from one profession, geographic
region, or nation to another. Over the years, political
unrest and economic hardships forced Indonesians to
flee their homeland for other nations, particularly
Hong Kong, Singapore and United States.
Physical and Material Environments
Physical Environment: Topography
All the physical features that characterize the
surface of a geographic region constitute its
topography. Some surface features such as navigable
rivers and flat plains facilitate travel and contact with
each other. By contrast, treacherous mountain
ranges and large bodies of water can discourage
contact.
Topography can affect consumer’s product needs.
For example, there is little market for Honda Scooters
in most mountainous regions because their engines
are too small.
Physical and Material Environments
Physical Environment: Climate
Climate affects the where people settle and helps
direct systems of distribution. In Australia for
example, intensely hot and dry conditions in two
large deserts and jungle conditions in the northeast
pushed settlement in coastal areas.
Climate plays a large role in lifestyle and work
habits. The heat of the summer sun grows intense in
the early afternoon hours in the countries of
southern Europe, northern Africa, and the Middle
East. For this reason, people often take afternoon
breaks of one or two hours in July and August.
Physical and Material Environments

Material Culture
All the technology used in a culture to
manufacture goods and provide services is called
material culture. Material culture is often used to
measure the technological advancement of a nation’s
market or industries.
Generally, a firm enters a new market under one
of two conditions: demand for its products has
developed or the infrastructure is capable of
supporting production operations. Many regions and
nations lack the most basic elements of a modern
society’s material culture.
Physical and Material Environments

For example, companies are not flocking to the

Southeast Asian nation of Myanmar because of the
nation lacks both sufficient product demand and
adequate infrastructure. Political and social problems
under repressive military government have stalled
Myanmar’s economic development.
Classifying Culture: Hofstede Model

Hofstede Framework
The Hofstede Framework compares cultures
along five dimension. Dutch psychologist Geert
Hofstede developed the framework from a study
of more than 110, 000 people working in IBM
subsidiaries in 40 countries and a follow-up of
students in 23 countries.
 Individualism Vs. Collectivism

This dimension identifies the extent to which a

culture emphasizes the individuals versus the group.
Individualist (those scoring high on this dimension)
value hardwork and promote entrepreneurial risk
taking, thereby fostering invention and innovation.
On the other hand, people in the collectivists
culture (those scoring low on this dimension) feel a
strong associations to groups, including family and
work units.
 Power Distance
This dimension conveys the degree to which a
culture accepts social inequality among its people. A
culture with large power distance tends to be
characterized by much inequality between superiors
and subordinates. Organizations tend also to be
more hierarchical, with power deriving from prestige,
force and inheritance.
On the other hand, culture with small power
distance display a greater degree of equality, with
prestige and rewards more equally shared between
superiors and subordinates. Power in these cultures
(relative to culture with large power distance) is seen
to derive from hard work and entrepreneurial drive
and is therefore often considered more legitimate.
 Uncertainty Avoidance
This dimension identifies the extent to which a
culture avoids uncertainty and ambiguity. A culture
with large uncertainty avoidance values security and
places its faith in strong systems of rules and
procedures in society. It is perhaps not surprising then
that cultures with large uncertainty avoidance
normally have lower employee turnover, more formal
rules for regulating employee behaviors, and more
difficulty in implementing change.
Cultures scoring low in uncertainty avoidance tend
to be more open to change and new ideas. This helps
explain why individuals in this type of culture tend to
be entrepreneurial and organizations tend to welcome
the best business practices from other cultures.
 Achievement Vs. Nurturing
This dimension captures the extent to which a
culture emphasizes personal achievement and
materialism versus relationships and quality of life.
Culture scoring high on this index tend to be
characterized more by personal assertiveness and
the accumulation of wealth, typically translating
entrepreneurial drive.
Cultures scoring low on this dimension generally
have more relaxed lifestyles, wherein people are
more concerned about caring for others as opposed
to material gain.
 Long-term Orientation
This dimension indicates a society ’s time
perspective and attitude of overcoming obstacles
with time, if not with will and strength. It attempts to
capture the differences between Easter and Western
cultures.
A high-scoring culture (strong long-term
orientation) values respect for tradition, thrift,
perseverance, and a sense of personal shame. These
cultures tend to have a strong work ethic because
people expect long-term rewards from today’s
hardwork.
 Long-term Orientation
A low-scoring culture is characterized by
individual stability and reputation, fulfilling social
obligations, and reciprocations of greetings and gifts.
These culture can change more rapidly because
tradition and commitment are not impediments to
change.
 Kluckhohn-Strodtbeck Framework
The Kluckhohn-Strodtbeck Framework compares
culture along six dimensions. It studies a given
culture by asking each of the following questions:

- Do people believe that their environment

controls them, that they control the environment
or are they part of nature?
- Do people focus on past events, on the present,
or on the future implications of their actions?
- Are the people easily controlled and not to be
trusted, or can they be trusted to act freely and
responsibly?
 Kluckhohn-Strodtbeck Framework
- Do people desire accomplishments in life,
carefree lives, or spiritual and contemplative lives?
- Do people believe that individuals or groups are
responsible for each person’s lives?
- Do people prefer to conduct most activities on
private or public?
Marketing SLOGAN disaster in China
What can you SAY ???
[Link]
 Why Starbucks Failed in Australia ?

[Link]
racial-bias-training-tuesday/650316002/
3 Reasons why Starbucks failed in Australia

Not adapting
Let’s go back to July of 2000, when Starbucks
opened its first Australian shop in Sydney. From there,
it expanded fast into other parts of the country. By
2008 Starbucks had 87 stores across the Australian
continent. One of the problems with Starbucks is
that they thought that their business model could
just roll out to a different environment and that
there was no need for them to adjust. In contrast,
McDonald’s entered India with a menu tailored to
Indian consumers.
[Link]
3 Reasons why Starbucks failed in Australia

Too big too fast

They tried to grow the empire too fast by rapidly
opening up multiple locations instead of slowly
integrating them into the Australian market. This
didn’t give the Australian consumer an opportunity
to really develop an appetite for the Starbucks brand.
So for the Australian consumer, Starbucks became
something that is too easily available for them and
thus there wasn’t this point of difference, or a feeling
of want.

[Link]
3 Reasons why Starbucks failed in Australia
Too many other options for Australians
When Starbucks leave the Australian market, or at
least a large number of shops were shut down, the
Australian consumers didn’t care. It’s partly because
Australians are spoiled for choice when it comes to
coffee. Australia’s coffee market is one of the biggest in
the world. The industry hit more than $6 billion in total
revenue in 2018. They’ve been immersed in nuances of
cafe culture since the mid 1900s when Italian and
Greek immigrants began traveling to the country. The
immigrants introduced Australians to espresso and by
the 1980s, Australians were fully engulfed in the cafe
culture.
[Link]
[Link]