Chapter 2.pptx

Chapter Two: National Environmental Differences Culture Dr. Hadeel Abdellatif Opening Case: SAUDI ARABIA’S DYNAMIC CULTURE: THE JAVA LOUNGE— ADJUSTING TO SAUDI CULTURE This case provides a striking example of the challenges presented to foreign firms by a pervasive, theocratic, national culture. It...

Chapter Two: National Environmental Differences Culture Dr. Hadeel Abdellatif Opening Case: SAUDI ARABIA’S DYNAMIC CULTURE: THE JAVA LOUNGE— ADJUSTING TO SAUDI CULTURE This case provides a striking example of the challenges presented to foreign firms by a pervasive, theocratic, national culture. It shows why companies have had mixed success in Saudi Arabia, a modern yet ancient society grounded in Islamic law, religious convictions, and behavioral traditions. In particular, the case highlights the example of the Java Lounge, a new, up-scale Jeddah restaurant that serves an affluent niche of Saudi consumers. Further, it describes ways in which a variety of foreign firms have adjusted their products, facilities, and operating strategies in order to meet government requirements and yet satisfy the Saudi consumer. It points out numerous paradoxes one may encounter regarding Saudi legal sanctions, purchasing patterns, and attitudes toward work. A key point to make when discussing the case is that even in this very rigid culture, things are changing. For example, a 2008 royal decree allows men and women to mix in the workplace. Although this has not had a dramatic impact in practices, it is the beginning of a potentially more open environment. The case concludes by noting some of the opportunities that exist in Saudi Arabia—either because of or in spite of the contrasts and contradictions found there. Questions - Assume you are a manager in a multinational company that needs to send a team of three to five people to Saudi Arabia for about two weeks to investigate the feasibility of selling your products there. What advice would you give them to help assure that cultural problems do not impede their success in this task? - Assume your company is from North America or Europe and considering the establishment of an office in Saudi Arabia. What additional operating costs might it have to assume because of the Saudi culture? Culture’s Importance in IB Culture refers to the shared values, attitudes, and beliefs of a group of individuals. Every business function is subject to cultural influences. Cultural diversity means bringing together people of different backgrounds, perspectives, and experience. Major problems of cultural collision are likely to occur if a firm implements practices that are less effective than intended and/or employees are unable to accept or adjust to foreign customs. It is vital that firms determine which business practices vary in a foreign country and what adjustments, if any, are necessary. Cultural diversity can be a source of competitive advantage for global firms. Culture is an elusive topic to study, partly because people belong to multiple cultures based on their nationality, ethnicity, religion, gender, work organization, profession, age, and income level. Companies’ need to understand and be sensitive to the culture where they operate. It is vital that managers develop an acute awareness of all those cultures in which they operate. Cultural variables include daily routines and rules, codes of social relations, language, emotive expression, and concepts of luck. Influences in Cultural Formation and Change Sources of Change Culture is transmitted in a variety of ways, but psychologists believe that children have their basic value systems firmly in place. Individual and societal values and customs constantly evolve in response to changing economic and social realities. Cultural change can be brought about by choice or imposition; change that is brought about by imposition is known as cultural imperialism. The introduction of certain elements of an outside culture may be referred to as creolization, or cultural diffusion. Language as Both a Diffuser and Stabilizer of Culture While a common language within a country serves as a unifying force, language diversity may undermine a firm’s ability to conduct business, to integrate workforces, and to market products on a national level. Isolation from other groups, especially because of language, tends to stabilize cultures. Because some countries see language as such an integral part of their cultures, they may regulate the inclusion of foreign words and/or mandate the use of the country’s official language for business purposes. Religion as a Cultural Stabilizer Religion can be a strong shaper of values and beliefs and is a major source of both cultural imperatives and taboos. Islam, Christianity, Buddhism, Hinduism, and Judaism represent just some of the religions whose specific beliefs may affect business practices. Still in all, not all nations that practice the same basic religion place identical constraints on business. Violence among religious groups can damage property and disrupt business activities for both home and host country firms Behavioral Practices affecting Business Cultural attitudes and values affect business practices – everything from decisions about what products to sell to decisions about organizing, financing, managing, and controlling operations. Some of the more important aspects of culture are: A. Issues in Social Stratification Every culture ranks people. Such social stratification creates hierarchies and influences a person’s class, status, and financial rewards within that culture. There are many ways to classify people’s group memberships: 1. Ascribed and Acquired Membership Those usually determined by birth are ascribed group memberships, including gender, family, age, ethnic or national origin. Acquired group memberships include those based on religion, political affiliation, educational place and achievement, and profession. 2. Ethnic Groups Country-by-country attitudes vary also toward race and ethnicity. Malaysia, for example, defines political parties and employment quotas explicitly by three ethnic groups–Malays, Chinese, and Indians. The employment quotas are primarily to upgrade the economic position of Malays because the Chinese and Indian minorities long dominated business ownership and the professions, respectively. 3. Gender-Based Groups Strong country-specific differences exist in attitudes toward the roles of males and females in society and the workplace, as well as the types of jobs regarded as “male” or “female.” However, in some parts of the world, barriers to employment based on gender are easing. As jobs becomes less physical and more creative and/or technical, the relative demand for female employees is also increasing. 4. Age-Based Groups Many cultures assume that age and wisdom are correlated; thus, they often have a seniority-based system of advancement. In others, there is an emphasis on youth, particularly in the realm of marketing. Often there is a mandatory retirement age in business, but not in politics. Clearly, firms must consider reference groups when deciding whom to hire and how best to promote their products. 5. Family-Based Groups In some societies, family membership is more important than individual achievement. Where there is low trust outside the family, such as in China and southern Italy, small family-run companies are generally quite successful, but they often have difficulty expanding beyond the family. Problems in Communicating across Cultures A. Translation of Spoken and Written Language. Translating one language into another can be very difficult because (a) some words do not have a precise translation, (b) the common meaning of words is constantly evolving, (c) words may mean different things in different contexts, (d) a slight misuse of vocabulary or word placement may change meanings substantially. Further, while jokes and laughter have universal appeal, much humor does not. Therefore, words must be chosen very carefully, because poor translations may have tragic consequences. B. Silent Language. Silent language incorporates the wide variety of nonverbal cues through which messages are sent—intentionally or unintentionally. Color associations, the distance between people during conversations, the perception of time and punctuality, a person’s perceived prestige, and kinesics or body language are all very significant. Misunderstandings in any of these areas can be serious. Guidelines for Cultural Adjustment Once a company identifies cultural differences in the foreign countries in which it operates, must it alter its customary practices? Can individuals overcome adjustment problems when working abroad? A. Host Society Acceptance If products and operations do not run counter to deep-seated attitudes, or if the host country is willing to accept foreign customs as a trade-off for other advantages, significant adjustments may not be required. B. Degree of Cultural Differences Cultural distance represents the degree of similarity between two societies. Countries may be relatively similar to one another because they share the same language, religion, geographical location, ethnicity, and/or level of economic development. Generally, a firm should have to make fewer adjustments when moving within a culturally similar cluster than when it moves from one distinct cultural cluster to another. Ability to Adjust: Culture Shock Culture shock represents the trauma one experiences in a new and different culture because of having to learn to cope with a vast array of new cues and expectations. Reverse culture shock occurs when people return home, having accepted the culture encountered abroad and discovering that things at home have changed during their absence Strategies for Instituting Change Companies may need to transfer new products and/or operating methods from one country to another in order to gain a competitive advantage. To maximize the potential benefits of their foreign presence, they need to treat learning as a two-way process and transfer knowledge from home countries abroad and from host countries back home. 1. Value systems. The more that change upsets important values, the more resistance it will encounter. Accommodation is much more likely when changes do not interfere with deep-seated customs. 2. Resistance to Too Much Change. Resistance to change may be reduced if only a few demands are made at one time; others may be phased in incrementally. 3. Participation. A proposed change should be discussed with stakeholders in advance in order to ease their fears of adverse consequences—and perhaps gain their support. 4. Reward Sharing. A company may choose to provide benefits for all the stakeholders affected by a proposed change in order to gain support for it. 5. Opinion Leadership. Characteristics of opinion leaders often vary by country. By discovering the local channels of influence, an international firm may seek the support of opinion leaders to help speed the acceptance of change. 6. Timing. Many good business changes fail because they are ill-timed. Attitudes and needs change slowly, but a crisis may stimulate the acceptance of change. Discussion Choose two to five countries that are culturally diverse. Compare the cultures of those countries and discuss the ways in which cultural differences will affect the cost of doing business in each. In many countries religion has a dramatic effect on people’s attitudes, customs, and behavior. Discuss the potential effects of the basic beliefs of the world’s major religions upon international business opportunities and operations. Pop culture can influence the development of global preferences in a number of ways. Discuss the ways in which movies can affect the cultural dimensions of a society. (Select particular movies, examine various values embedded in them, and discuss the nature of their impact upon the lifestyles of people around the world.)