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INTERNATIONAL BUSINESS

INTERNATIONAL BUSINESS. LECTURE 7 : The role of culture in international business Gregor Pfajfar, MSc Faculty of Economics University of Ljubljana E-mail: gregor.pfajfar @ef.uni-lj.si December 16th 200 9. What is culture?. Culture and its impact on business. Competitive environment.

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INTERNATIONAL BUSINESS

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  1. INTERNATIONAL BUSINESS LECTURE 7: The role of culture in international business Gregor Pfajfar, MSc Faculty of Economics University of Ljubljana E-mail: gregor.pfajfar@ef.uni-lj.si December 16th 2009

  2. What is culture?

  3. Culture and its impact on business Competitive environment Competitive environment Culture is the context in which a company (people) operates! STRATEGY coordination STRUCTURE & SYSTEMS ORG. CULTURE NATIONAL CULTURE

  4. Culture is contextually based! The common grasshopper (Acrididae) Culture is an important part of international business and marketing!!! USA: Pest! CHINA: House pet! Thailand: A snack!

  5. Culture is… • “ Collective programming of the mind which distinguishes the members of one human group from another... Includes system of values; and values are among the building blocks of culture...” (Hofstede, 1980) • Glue that binds groups together. Without cultural patterns, organized system of significant symbols, people would have difficulty living together (De Mooij, 2004) • Set of control mechanisms – plans, recipes, rules, instructions – for governing behavior (Geertz, 1973) • Includes shared believs, attitudes, norms, roles and values found among speakers of a particular language who live during the same period in a specific geographic region (Triandis, 1995). • And soo much more…

  6. Hofstede: culture= software person=hardware personality & culture =software

  7. Characteristics of culture • Culture is learned • Common to members of a certain group • Determines the behavior of group members • Culture (customs, values, habits) makes life more effective AN INDIVIDUAL DOESN’T HAVE CULTURE! AN INDIVIDUAL HAS A PERSONALITY!

  8. Layers of culture Physical objects, heroes, symbols & artifacts Habits, routines & procedures “a man should have only 1 wife” Values & norms Core believes & expectations “Slovene values: work, family, security” implicit “walking other ladders” explicit

  9. Culture ‘ingredients’ / elements • Institutions • Norms • Values • Believes • Religion • Language • Education system • Art and aesthetics • Material culture and life-style…

  10. Culture as a normal distribution Culture A Culture B Stereotypes Stereotypes Norms & values

  11. Levels of culture TRANSNATIONAL CULTURE NATIONAL CULTURE INDUSTRY CULTURE PROFESSIONAL CULTURE ORGANIZATIONAL CULTURE SUBCULTURES INDIVIDUAL

  12. Defining boundaries Conveying identity Promoting commitment Controlling behavior Increasing effectiveness of communication and behavior Impeding change Inhibiting diversity Promotes groupthink Blocking acquisitions Effects of organizational culture Positive Negative

  13. Organizational culture: example • HP Diversity Value Chain • At HP we have recognized that creating a diverse, inclusive work environment is a journey of continuous renewal

  14. Impact of culture on business • Differences in consumer behavior: • Segmentation • Positioning • Marketing mix • Buying habits • Business customs and etiquette: • Negotiation styles • Communication • Business protocol • Level of formality of arrangements • Payment • etc.

  15. Culture and the marketing mix Why doesn’t this work in India?

  16. Culture and the marketing mix “the plague” Ford Kuga

  17. Some useful categorizations for cross-cultural communication • Cultures can be described according to specific characteristics or dimensions. • Two relevant categorizations for cross-cultural communications are: • High vs. low context cultures (Hall) • Dimensions of national cultures (Hofstede)

  18. Context and communication 1/3 • The context explains the degree of directness of communication. • In high context communication message most of the info is either part of the context or internalized in the person. Very little is made explicit. Use of symbolism or indirect verbal expressions. • In low context communication message is direct and unambiguous.

  19. Context and communication 2/3 http://www.youtube.com/watch?v=8tIUilYX56E

  20. Context and communication 3/3

  21. Context culture results + Japanese Arabians LatinAmericans Spanish Context Italians French English North America Scandinavians Germans Swiss - message explicit implicit

  22. Hofstede’s cultural dimensions • Power Distance Index (PDI) measures the extent to which the less powerful members of a society accept that power is distributed unequally. • Individualism (IDV) measures how the individuals define themselves in relationships with close others. On the individualist side we find societies in which the ties between individuals are loose: everyone is expected to look after him/herself and his/her immediate family. On the collectivist side, we find societies in which people from birth onwards are integrated into strong groups (extended families)

  23. Hofstede’s cultural dimensions • Masculinity (MAS) versus its opposite, femininity, refers to the endorsement of women’s (security, family, quality of life etc.) vs. men’s (success, competitiveness, social status etc.) values.   • Uncertainty Avoidance Index (UAI) deals with a society's tolerance for uncertainty and ambiguity; It indicates to what extent a culture programs its members to feel either uncomfortable or comfortable in novel, unknown, surprising situations. • Long-Term Orientation (LTO) versus short-term orientation distinguishes between long-term and short-term thinking, e.g. Chinese Confucianism

  24. Hofstede’s cultural dimensions – scores by countries http://www.geert-hofstede.com/marketing.shtml

  25. Advertising styles Source: De Mooij, 2004

  26. Advertising: Europe vs Saudi Arabia

  27. Culture focus: China 1/2 http://www.youtube.com/watch?v=ijpbhile6aY&feature=related

  28. Culture focus: China 2/2 Source: Hofstede, 2001, pp. 500-2.

  29. OC Typologies: Competing values framework

  30. Guided missile Incubator Egalitarian People oriented Task oriented Hierarchical Family Eiffel tower Source: Trompenaars & Wooliams, 2004 Organizational culture typology by Trompenaars • Individualization • Creativity • Passion • Loose organizational structure • Tasks • Goals • Performance • Authority of a manager • People • Loyalty • Paternalism • Leadership • Structure • Stability • Processes

  31. Organizational cultures – young managers between countries GUIDED MISSILE • Tasks, goals, efficiency, authority of manager EIFFEL TOWER • Structure, stability, processes INCUBATOR • Individualization, creativity, passion, flat organizational structure FAMILY • People, loyalty, paternalism, leadership Source: Zagoršek, 2005. Source: Zagoršek, 2005.

  32. Organizational cultures – observed and ideal – young managers in Slovenia Source: Zagoršek, 2005.

  33. GLOBE typology

  34. The GLOBE dimensions of organizational culture

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