Culture, Institutions, and Global Business

1. Culture, Institutions, and Global Business

2. “Culture” • Something difficult to understand • From ancient times, travelers have noticed that when you go from one place to the next, things you take for granted at home aren’t true any more

3. Central to life in America is the desire to be a free individual who gets what he or she wants • “I know my rights” • In Japan, people took for granted they would do what their group (their company, their family, their school) wanted • “The nail that sticks up gets hammered down”

4. What is culture? • “The collective programming of the mind which distinguishes one human group from another” - Geert Hofstede • Systems of ideas that constitute a “design for living” - Zvi Namenwirth & Robert Weber

5. Why do cultures differ? • Cultures are an ‘evolutionary product’ • For thousands of years, human groups evolved with a good deal of isolation • They’ve struggled with different problems • People can do European-style farming individually • Rice farming calls for great cooperation • There are probably many, many other reasons for differences among cultures

6. Components of Culture:One standard (incomplete!) approach • Values – basic attitudes about what is important • Norms – social rules • A Society – a group of people who share common values & norms & ways of doing things • that is, a common culture

7. Values – assumptions about how things ought to be • Values may form the bedrock of a culture • They provide a context within which a society’s norms are established and justified • They include attitudes toward • Individual freedom • Democracy • Truth • Justice • Honesty • Loyalty • Social obligations • Values are also reflected in the political and economic systems

8. Norms • Norms are the social rules that govern people’s actions toward one another • Folkways – little moral significance • Americans expect you to come on time to appointments • In Italy, people weren’t usually on time • Mores • Norms seen as central to functioning of society • Marriage • Honesty

9. Examples of Mores – Norms felt as central to society • U.S. – The winner in an election gets to rule • African nations – an individual is loyal first to his/her tribe • Scandinavia – differences in wealth must not be too great • Japan – elite organizations try to give the people they hire a position for life

10. Culture vs. ‘a culture’ • If “culture” means the “collective programming that distinguishes a human group”… • the phrase, “a culture” refers to a group that shares the same programming

11. “A society” or “a culture” • Definition: a group that shares the same values and norms (that is, shares same “collective programming”) • We often assume that a society corresponds to a nation • We talk of ‘American society,’‘Russian society’ • But there is no strict one-to-one correspondence • Nation State: • Is a political creation • May contain a single culture or several cultures • Canada • India • Multi-tribal African nations

12. Societies contain subcultures • ethnic cultures • business or professional cultures • Often (usually?) a company will be known for a particular culture • At Ford and Toyota, manufacturing is most important • At General Motors, marketing is most important • youth cultures • How do youth cultures vary in the South Bay?

14. Social Structure • ‘Social structure’ is a society’s basic systems of social organization • Two dimensions are particularly important: • The extent to which society is group or individuallyoriented (‘collectivist’ vs. ‘individualist’) • Degree of stratification into castes or classes • ‘stratification’ = the separation of the members of a society into hierarchical social categories (‘strata’) based on family background, occupation, or income

15. How is social structure changing with globalization? • Are technology geeks a new upper class?

16. Religious and Ethical Systems • Religion: a system of shared beliefs and rituals that are concerned with the realm of the sacred (i.e., things regarded with special respect) • Ethical systems: a set of moral principles, or values, that are used to guide and shape behavior • Most of the world’s ethical systems are the product of religions • Among the thousands of religions in the world today, four dominate in terms of numbers of adherents: • Christianity with 1.7 billion adherents • Islam with 1 billion adherents • Hinduism with 750 million adherents • Buddhism with 350 million adherents

18. Language • Spoken • Language structures our perception of world • English tries to be precise • Japanese • doesn’t discourage vagueness • allows more direct expression of emotion • Unspoken • Body language • Personal space

19. Be alert for unexpected meanings of ‘silent language’ • Colors • Blacksymbolizes death in U.S. • White indicates death in parts of Asia • Purple indicates death in (some situations in)Latin America • Gestures • Sideways head movement that means ‘yes’ in Greece and parts of India looks like negative ‘no’ head shake in U.S.

21. Culture in the Workplace • Geert Hofstede’s four dimensions of culture • Power distance – the extent to which people are comfortable with inequalities of power and wealth • Uncertainty avoidance - the extent to which people accept ambiguous situations and tolerate uncertainty • Individualism versus collectivism - this dimension focuses on the relationship between the individual and his/her fellows within a culture • Masculinity versus femininity - this dimension looks at the relationship between gender and work roles

22. Work-Related Values for20 Selected Countries

23. Problems with Hofstede’s ‘dimensions’ • Assumes one-to-one relationship between culture and the nation state • Research may have been ‘culturally bound’ • Survey was of IBM employees, conducted by Europeans and Americans • Survey respondents were from a single industry (computer) and one company (IBM) • Other scholars have proposed manyother dimensions of culture • but none have been shown more significant than the first three Hofstede developed

25. A few cultures have influenced global business enormously • Technological and economic successes of northern Europe and North America from the 18th Century made international business possible • Why? There are many theories, and no consensus • But while the free trade theory that you’ll read about is clearly important, it’s certainly more than that • Something very importanthappened in northern Europe between the 16th and 18th centuries • It clearly continues to affect global business today

27. Limitations of the concept of ‘culture’ • Clearly, societies differ a lot, and ‘culture’ tells why • But how do we think about where cultures come from? • Why don’t cultures change more? • How do we predict when they will change? • How can people change them deliberately? • Because the concept of ‘culture’ is so massive and complicated (“collective programming of the mind”), it is difficult to use it to think about specific, perhaps small, changes.

28. Thinking about‘institutions’ can be more flexible • Institutions are defined as the “rules of the game” in any human system • Analogous to rules in a sport • Most elements of culture can be thought of as “rules of the game” in the system of a society • Example: One of rule of the game in our class is that we speak English • It’s easier to think about ‘changing the rules’ than about ‘changing the culture’

29. Cultural Change/Institutional Change • Culture evolves over time • Since 1960s American values toward the role of women have changed • Japan has moved toward greater individualism in the workplace • Globalization will continue to impact cultures around the world • And global business, especially, is always changing cultures

32. Material below this slide is not part of the course

33. Some Managerial Implications • Cross-cultural literacy • You need to understand differences between cultures • Culture and competitive advantage • Some cultures make business easier than others • Culture and business ethics • As we’ll see in a few weeks, cultural differences create big ethical issues

35. What is Culture? • “The collective programming of the mind which distinguishes one human group from another” • - Hofstede

36. You’ll always be shocked by new cultures • But we want to learn how to think about them so we can work with diverse cultures • “cross-cultural literacy” – understanding how cultural differences can affect the way business is practiced

38. Religious and Ethical Systems

39. Why did Europe start growing? 3 Theories to consider (of many) • It was Protestantism working out its core principles. Protestant breakaway from the Catholic church starting 1517 created ways of life that promoted ‘progress’(Troeltsch) • More individualistic, decentralized view of religion • Taught everyone to read, write to understand Bible • Promoted universities and secular learning • This theory dominant before 1930

40. It was also the fear Protestantism created. Some theology made believers fear going to hell so much they worked hard in the world while practicing asceticism (renunciation of worldly pleasures). (Weber) • They started accumulating worldly goods. • When people stopped believing so strongly in God, they kept an ascetic approach to life • Secular knowledge and riches accumulated • This theory dominant after 1930

41. It was the success of the rich in throwing people off the land.Owners forced the poor to leave the land so they could use it more efficiently. The poor became available for exploitation in factories. (Grossman and others) • This is a radical theory, but one with real empirical support

42. Something big happened • Whatever the truth, something about north European and North American culture has driven powerful economic growth since the 18th Century. • It still plays a big role today • It’s often hard to understand how people in other countries can deal with the challenge of the West

43. A silly example • When I was growing up, Mother said, “Don’t take your shoes off in the house, that’s uncivilized.” • In Japan, it’s completely uncivilized to have your shoes on inside the house

44. A dramatic example • The English language is designed to be precise • Speaking English, you assume the world is real. You want to describe it precisely • If you see a beautiful flower, you say, ‘That’s beautiful’ • But