Chapter 5 Culture, Management Style, and Business Systems

1. International Marketing 16th edition Chapter 5 Culture, Management Style, and Business Systems Philip R. Cateora, Mary C. Gilly, and John L. Graham

2. Introduction (1 of 2) • Culture, including all of its elements, profoundly affects management style and overall business systems • Culture not only establishes the criteria for day-to-day business behavior but also forms general patterns of values and motivations • Various studies have identified North Americans as “individualists,” Japanese as “consensus oriented,” and Europeans as “elitists and rank conscious” Roy Philip

3. Introduction (2 of 2) • A lack of empathy for and knowledge of foreign business practices can create insurmountable barriers to successful business relations • Knowledge of the management style – the business culture, management values, and business methods and behaviors existing in a country and a willingness to accommodate the differences are important to success in an international market • Culture has an important influence on strategic thinking Roy Philip

4. Overview • The necessity for adapting to cultural differences with imperatives, electives, and exclusives • Different management styles vary around the world • The extent and implications of gender bias in other countries • The importance of cultural differences in business ethics • The differences between relationship-oriented and information-oriented cultures Roy Philip

5. Global PerspectiveDo Blondes Have More Fun in Japan? • Very odd in Japan to see a woman, who is blonde, young, and very tall by Japanese standards, leading business negotiations • The Japanese would not even look at the lead negotiator because she was a woman • Mattell Inc. research showed that the original Barbie, with her yellow hair and blue eyes, played as well in Hong Kong as it did in Hollywood • But this standardized approach taken by Mattell caused sales to plummet Roy Philip

6. Videos • Chinese Ideas of Contracts • Touching in India? • Special Holiday in India - Diwali? Roy Philip

7. International Marketing 16th edition 1. What are the ten basic criteria for adaptation? McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

8. Required Adaptation • Adaptation is a key concept in international marketing • Ten basic criteria for adaptation 1) Open tolerance 2) Flexibility 3) Humility 4) Justice/fairness 5) Ability to adjust to varying tempos 6) Curiosity/interest 7) Knowledge of the country 8) Liking for others 9) Ability to command respect 10) Ability to integrate oneself into the environment Roy Philip

9. Degree of Adaptation • Essential to effective adaptation • Awareness of one’s own culture and the • Recognition that differences in others can cause anxiety, frustration, and misunderstanding of the host’s intentions • The self-reference criterion (SRC) is especially operative in business customs • The key to adaptation is to remain American but to develop an understanding of and willingness to accommodate the differences that exist Roy Philip

10. International Marketing 16th edition 2. What are the components for the degree of adaptation? McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

11. Imperatives, Electives, and Exclusives • Cultural imperatives - Business customs and expectations that must be met and conformed to or avoided if relationships are to be successful • In some cultures a person’s demeanor is more critical than in others • Imperatives vary from culture to culture • Cultural electives - Relate to areas of behavior or to customs that cultural aliens may wish to conform to or participate in but that are not required • A cultural elective in one county may be an imperative in another • Cultural exclusives - Customs or behavior patterns reserved exclusively for the locals Roy Philip

12. BEIJING, CHINA: German Chancellor Angela Merkel and Chinese Prime Minister Wen Jiabao toast after the EU–China Business Summit at the Great Hall of the People in Beijing. The summit was boosted by the settlement of a trade row that had left 80 million Chinese-made garments piled up in European seaports, unable to be delivered to shops under a quota pact agreed to at the time. Drinking half a bottle is a cultural elective, but taking a sip is more of an imperative in this case. 5-12

14. International Marketing 16th edition 3. What are the American Culture on Management Style? McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

15. The Impact of American Culture on Management Style • “Master of destiny” viewpoint • Independent enterprise as the instrument of social action • Personnel selection and reward based on merit • Decisions based on objective analysis • Wide sharing in decision making • Never-ending quest for improvement • Competition producing efficiency Roy Philip

16. International Marketing 16th edition 4. What are the Management Styles around the World? McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

17. Management Styles around the World • Authority and decision making • Management objectives and aspirations • Communication styles • Formality and tempo • P-time versus M-time • Negotiation emphasis • Marketing orientation Roy Philip

18. Authority and Decision Making • Influencers of the authority structure of business: • High PDI Countries • Mexico, Malaysia • Low PDI Countries • Denmark, Israel • Three typical authority patterns: • Top-level management decisions • Decentralized decisions • Committee or group decisions Roy Philip

19. Management Objectives and Aspirations • Security and mobility • Relate directly to basic human motivation and therefore have widespread economic and social implications • Personal life • Worldwide study of individual aspirations, (David McClelland) • Affiliation and social acceptance • In some countries, acceptance by neighbors and fellow workers appears to be a predominant goal within business • Power and achievement - South American countries Roy Philip

20. Annual Hours Worked Exhibit 5.1 Roy Philip

21. Insert Exhibit 5.1Annual Hours Worked Source: OECD, Labor Market Indicators, 2012. 5-21

22. Communication Styles • Face-to-face communication • Managers often fail to develop even a basic understanding of just one other language • Much business communication depends on nonverbal messages • Internet communications • Nothing about the Web will change the extent to which people identify with their own language and cultures • 78% of today’s Web site content is written in English • An English e-mail message cannot be understood by 35% of all Internet users • Country-specific Web sites • Web site should be examined for any symbols, icons, and other nonverbal impressions that could convey and unwanted message • www.nike.com – a great example of a company with a webpage for many countries Roy Philip

23. American Slangs – Foreign Interpretations • “Let’s do a deal” • “What’s the bottom line?” • “Okay” or “That’s okay” • “That’s a shame” • “I get a kick from that” • “Can we close on this?” • “That is too good to be true” • Arab=“Let’s do something unethical” • Japanese=“What is your starting bid?” • Chinese “Not really good, could be better” • Indian=“You have insulted me” • Japanese= “It hurts” • Chinese= “We should stop, cancel this” • Malaysian= “You must be cheating me” Roy Philip

24. Formality and Tempo • Breezy informality and haste characterize American business relationships • Europeans not necessarily “Americanized” • Higher on Hofstede’s Power Distance Index (PDI) • May lead to business misunderstandings • Haste and impatience most common mistakes made by Americans in the Middle East • For maximum success marketers must deal with foreign executives in acceptable ways Roy Philip

25. Contextual Background of Various Countries Exhibit 5.2 Roy Philip

26. 5-26

27. P-Time versus M-Time • Monochronic time • Tend to concentrate on one thing at a time • Divide time into small units and are concerned with promptness • Most low-context cultures operate on M-Time • Polychronic time • Dominant in high-context cultures • Characterized by the simultaneous occurrence of many things • Allows for relationships to build and context to be absorbed as parts of high-context cultures • Most cultures offer a mix of P-time and M-time behavior • As global markets expand more businesspeople from P-time cultures are adapting to M-time. Roy Philip

28. Speed is Relative Exhibit 5.3 Roy Philip

29. Negotiations Emphasis • Business negotiations are perhaps the most fundamental business rituals • The basic elements of business negotiations are the same in any country • They relate to the product, its price and terms, services associated with the product, and finally, friendship between vendors and customers • One standard rule in negotiating is “know thyself” first, and second, “know your counterpart” Roy Philip

30. Marketing Orientation • The extent of a company’s market orientation has been shown to relate positively to profits • Firms in other countries have not been able to move from the traditional production, product, and sales orientation to the marketing orientation • Research has shown that sometimes in can be difficult to encourage a marketing orientation across diverse business units in global companies Roy Philip

31. Gender Bias in International Business • Women represent less than 20% of the employees who are chosen for international assignments • In many cultures (Asia, Middle East, Latin America) women not typically found in upper levels of management, and are treated very differently from men • Prejudices toward women in foreign countries • Cross-mentoring system instituted by Lufthansa • Executives who have had international experience are • more likely to get promoted, • have higher rewards, and have • greater occupational tenure Roy Philip

32. 5-32

33. Female Directors on Corporate Boards Exhibit 5.4 Roy Philip

34. 5-34

35. Business Ethics • Business ethics is complex in the international marketplace because value judgments differ widely among culturally diverse groups • Corruption varyingly defined from culture to culture

36. Business EthicsCorruption • What is Corruption? • Profits (Marxism) • Individualism (Japan) • Rampant consumerism (India) • Missionaries (China) • Intellectual property laws (Sub-Sahara Africa) • Currency speculation ( Southeast Asia) • Criticisms of Mattel and Barbie • Sales of Barbie declined worldwide after the global standardization • Parents and government did react • Mattel’s strategy boosted sales of its competition Roy Philip

37. The Western Focus on Bribery • In the 1970s, bribery became a national issue with public disclosure of political payoffs to foreign recipients by U.S. firms • The decision to pay a bribe creates a major conflict between what is ethical and proper and what is profitable and sometimes necessary for business • The Organization for Economic Corporation and Development (OECD) and Transparency International (TI) are combating the bribery of foreign public officials in international business transactions Roy Philip

38. Transparency International Corruption Perception Index Exhibit 5.5 Roy Philip

39. Transparency International Transparency International - USA 5-39

40. 5-40

41. Transparency International Bribe Payer’s Index Exhibit 5.6 Roy Philip

42. International Marketing 16th edition 5. What are the components of Bribery? McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

43. Bribery – Variations on a Theme (1 of 2) • Bribery and Extortion • Bribery is voluntary offered payment by someone seeking unlawful advantage is bribery • Extortion takes place only if payments are extracted under duress by someone in authority from a person seeking only what he or she is lawfully entitled to • Subornation and Lubrication • Subornation involves giving large sums of money, frequently not properly accounted for, designed to entice an official to commit an illegal act on behalf of the one offering the bribe • Lubrication involves a relatively small sum of cash, a gift, or a service given to a low-ranking official in a country where such offerings are not prohibited by law • Bribery in India; Bribery in India (part II) Roy Philip

44. Bribery – Variations on a Theme (2 of 2) • Agent’s Fees • When a businessperson is uncertain of a country’s rules and regulations, an agent may be hired to represent the company in that country • The Foreign Corrupt Practices Act (FCPA) • Change will come only from more ethically and socially responsible decisions by both buyers and sellers and by governments willing to take a stand • Since 1994, US businesses have bowed out of 294 major overseas commercial contracts valued at $145 billion rather than paying bribes

45. Ethical and Socially Responsible Decisions • Difficulties arise in making decisions, establishing policies, and engaging in business operations in five broad areas • Employment practices and policies • Consumer protection • Environmental protection • Political payments and involvement in political affairs of the country • Basic human rights and fundamental freedoms • Laws are the markers of past behavior that society has deemed unethical or socially irresponsible • Ethical principles to help the marketer distinguish between right and wrong, determine what ought to be done, and justify actions • Utilitarian Ethics (Does it achieve a common good?) • Rights of the Parties (Does the actions involve the rights of the individual?) • Justice or Fairness (Does the action represent fairness for all?) Roy Philip

46. Culture’s Influence on Strategic Thinking • British-American • Individualistic • Japan & Germany • Communitarian • In the less individualistic cultures labor and management cooperate • A competitive, individualistic approach works well in the context of an economic boom • Fourth kind of capitalism – • Common in Chinese cultures • Predicted by culture Roy Philip

47. A Synthesis – Relationship-Oriented vs. Information-Oriented Cultures • Studies are noting a strong relationship between Hall’s high/low context and Hofstede’s Individualism/Collective and Power Distance indexes • Not every culture fits every dimension of culture in a precise way • Information-oriented culture • United States • Relationship culture • Japan • Synthesis of cultural differences allows us to make predictions about unfamiliar cultures Roy Philip

48. A Framework for Ethical Principles

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50. Dimensions of Culture – A Synthesis Exhibit 5.7 Roy Philip