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  • Classroom Performance System Answer: c
  • Country Focus: Breaking India’s Caste System
    This feature explores India’s caste system and the implications of the system. While many urban middle class citizens are not affected in a significant way by the caste system, for India’s rural population, the influence of the system is readily apparent. The government is strongly encouraging private companies to hire more lower caste individuals.
    Suggested Discussion Questions
    1. India’s castes system has been around for many years. Explain why its influence has diminished among educated urban middle class Indians.
    Discussion Points: The caste system in India was officially abolished in 1949. However, it seems that urban citizens have benefited the most from its abolishment. For many rural Indians, the system is still very much in effect. Educated, urban middle class Indians make up the majority of employees in India’s high tech economy. They may work for large multinationals like Infosys and Wipro. Many students will probably attribute the relative freedom of these individuals to the presence of these large companies, and their need to hire the best people regardless of caste. In rural areas though, the caste system still has significant influence in daily life. One female engineer working for Infosys notes for example that as a member of a lower caste, she was not able to enter the homes of higher caste individuals. Yet the same engineer, a beneficiary of an Infosys training programs, now works for Infosys in a “higher caste” position.
    2. Why are many private companies in India resisting the hiring quotas suggested by the government? Why might it be necessary to hire lower caste individuals?
    Discussion Points: The Indian government has suggested that private companies make an effort to employ lower caste individuals. However, many companies are resisting the request using the argument that they want to hire qualified people who want to work hard, and not people who are available simply because of a quota system. Some companies however, recognize that there may be a place for lower caste individuals, especially has business grows. Infosys for example, offers special training to low caste members.
    Lecture Note: For more on India’s caste system, go to {}.
  • Classroom Performance System Answer: c
  • Country Focus: Islamic Capitalism in Turkey
    This feature examines the debate surrounding Turkey’s membership in the European Community. Turkey has indicated that it would like to be a part of the regional bloc, but many are concerned that because the country’s dominant religion is Islam, it would not be a good fit. Others however, argue that these fears are unfounded. Supporters of Turkey’s membership in the European Union note that the country’s central region is home to many thriving entrepreneurial ventures.
    Suggested Discussion Questions
    1. Are the concerns of those opposing Turkey’s admittance to the European Union well-founded? Can Islam, capitalism, and globalization co-exist?
    Discussion Points: Many students will probably suggest that if the country’s religious preferences are the only issue preventing Turkey’s membership in the European Union, then indeed these fears are unfounded. Students taking this perspective are likely to point out that Central Turkey, a region where Islamic values are particularly strong, is also referred to as the Anatolian Tiger because it is home to so many thriving Muslim companies, many of which are large exporters. Other students however, may note that traditionally Islam is critical of those who earn a profit through the exploitation of others. Depending on just how this view is defined could influence how Turkey views the economic activities of other European Union countries.
    2. Explain the concept of Islamic Calvinism? How has Islamic Calvinism helped the Kayseri region of Turkey?
    Discussion Points: Islamic Calvinism is a fusion of traditional Islamic values and the Protestant work ethic. In the Kayseri region of Turkey, Islamic Calvinism is evident. The region is home to many thriving businesses in a wide variety of industries that have successfully meshed traditional Islamic values with the entrepreneurial values associated with the Protestant work ethic. Many companies set aside time for daily prayers and trips to Mecca, most restaurants in the region do not serve alcohol and require women to cover their heads. At the same time, businesses in the region have made it priority to make money.
    Lecture Note: To get an update of Turkey’s current situation go to {}.
  • Management Focus: DMG-Shanghai
    This feature explores guanxi, or the relationships and connections that are so important in the Chinese business world. The notion of guanxi comes from the Confucian philosophy of valuing social hierarchy and reciprocal obligations. Dan Mintz, founder of DMG, one of China’s fastest growing advertising agencies, credits guanxi for his success. Mintz established connections with two Chinese individuals with access to high ranking government officials. Through these guanxiwang, or connections, Mintz has been able to get permission to shoot advertisements in locations that are usually closed to foreigners.
    Suggested Discussion Questions
    1. Explain the concept of guanxi. How did Mintz’s guanxiwang help his company becomes so successful?
    Discussion Points: Guanxi literally means relationships, although in business settings in can better be understood as “connections.” The concept of guanxi is deeply rooted in Chinese culture and Confucianism. The Chinese will often cultivate a guanxiwang, or “relationship network,” for help. In China, there is a tacit acknowledgement that if you have the right guanxi, legal rules can be broken or bent. Mintz made connections with two Chinese men who had access to high ranking government officials. Through these men, Mintz was able to secure permission to film commercials in locations that are normally closed to outsiders.
    2. Compare the difference between doing business in the West and doing business in China.
    Discussion Points: A basic difference between doing business in the West and doing business in China involves how legal agreements are handled. In the advanced economies of the West, business transactions are conducted and regulated by the centuries-old framework of contract law, which specifies the rights and obligations of parties to a business contract and provides mechanisms for seeking to redress grievances should one party in the exchange fail to live up to the legal agreement. China does not have the same infrastructure. Personal power and relationships or connections (guanxi), rather than the rule of law, have always been the key to getting things done in China.
  • Classroom Performance System Answer: a
  • Classroom Performance System Answer: b
  • Internet Extra: To learn more about international business etiquette, go to {}.
    Choose a country, then find three fun facts about your country. Compare these to those in other countries. What are some areas where cultural misunderstandings could occur?
    How does Hofstede assess your country? Based on what you’ve read, do you agree?
  • Answer: Since in a sense the entire chapter is about this question, there can be numerous reasons and examples of how culture influences the costs of doing business. Several are highlighted in the following sentences, but there could be numerous others. When there are simply different norms between how individuals from different countries interact, the costs of doing business rise as people grapple with unfamiliar ways of doing business. For example, while in the US we may get down to business first, and then get to know each other socially later, in many South American countries it is important develop a good social relationship before trying to discuss business issues. Different class structures and social mobility also raise the costs of doing business, If there are inhibitions against working with people from different classes, then the efficiency with which information can flow may be limited and the cost of running a business increased. A country's religion can also affect the costs of business, as religious values can affect attitudes towards work, entrepreneurship, honesty, fairness, and social responsibility. In Hindu societies where the pursuit of material well-being can be viewed as making spiritual well being less likely, worker productivity may be lower than in nations with other religious beliefs. Finally, a country's education system can have important implications for the costs of business. In countries where workers receive excellent training and are highly literate, the need for specific worker training programs are decreased and the hiring of additional employees is facilitated.
  • Answer: There are various cultural differences between an Islamic country and the United States that could impact business practices. The role of women, for example, or appropriate etiquette (including simple things like not passing papers with the left hand), holidays, and wining and dining can all differ. But beyond these types of example is the fact that the underlying philosophy and role of business can be very different. Since Muslims are stewards of property for God, rather than owners, they are more likely to use their resources carefully and may be less likely to give up or sell something to a person who may not practice the same stewardship. The importance of fairness to all parties in relations means that over-aggressiveness in self-interest may not be well received, and breaking an agreement, even if technically/legally permissible may be viewed as very inappropriate. Finally, the prohibitions on interest payments in some Islamic countries means that the wording of the terms of an agreement must be done carefully so that "fair profits" are not construed as being "interest payments."
  • Answer: Differences in the dominant religion of a country and/or its ethics can affect relationships, attitudes toward business, and overall economic development. Differences in religion require inter-cultural sensitivity. This sensitivity requires things like simply knowing the religious holidays, accepting that some unexpected things may happen "because of Allah's will," or understanding how interpersonal relationships may be different between "believers" and "non-believers." (Hence non-believers may be treated differently.) Religious beliefs can significantly affect a country’s attitude toward business, work, and entrepreneurship. In one country successfully beating a competitor may be considered a great achievement while in another it may be thought of as showing a lack of compassion and could be disruptive to the society and persons involved. Likewise, hard work may be either rewarded positively or viewed as something of secondary importance to spiritual peace and harmony. Different dominant religions and ethical values can also affect the overall competitiveness and potential for economic growth of a nation, and hence attractiveness of a country for international business. Students might suggest for example, that Venezuela’s high level of corruption make it a less attractive destination for foreign companies.
  • Answer: Responses to this question will obviously vary based on the countries chosen by the students and their knowledge of the countries. Hopefully students can present some information on the dimensions of culture including values, norms, social structure, religion, language, and education of the countries and also describe the key differences and similarities of the countries along these dimensions. Relating the differences between the countries along these dimensions to differences in the costs of doing business, the potential for economic development, and business practices would fully answer the question. (While it may be more difficult for students to come up with really good examples relative to business practices, the costs and prospects for economic development should be quite feasible.)
  • Answer: When responding to this question, many students will probably focus on three key areas. First, they may note that Islam is firmly against making a profit by exploiting others. Depending on just how one defines exploitation, this could be a problem. For example, do commercials for sugary cereal that are traditionally shown during children’s television programs count as exploitation? A second area that students may explore is the role of women in business. In Islamic countries, women make up only a very small part of the workforce. This traditional Islamic value could also present a problem. Third, students may note that the Koran condemns interest as exploitative and unjust. This could present a problem for the financial industry, and also for companies needing loans. Despite these concerns, however, many students will probably suggest that Turkey’s central region clearly demonstrates that the country can indeed function successfully in the global economy.
  • Answer: Guanxi and guanxiwang are essential to business in China. Guanxi refers to the business connections that are so important to companies doing business in China. Guanxiwang refers to the relationship network that companies cultivate. Both of these are important to the Confucian ethics – loyalty, reciprocal obligations, and honesty in dealing with others - that drives business in China. Dan Mintz believes that guanxi and guanxiwang are important because they help companies get around restrictions that limit the ability of companies to function. Many students will probably agree with Mintz that these relationships and connection are essential to success. Students taking this perspective are likely to argue that guanxi is part of the Chinese culture, and Western companies simply need to adapt. Companies that fail to adapt will probably find it more difficult to be successful, and companies that do follow all of the rules are likely to be at a competitive disadvantage. At the same time, students will probably note the need to carefully consider the ethical implications of certain relationships. Some students may suggest that managers use their gut instinct – if something seems like it could be unethical, it probably is.
  • Chap003 gbt

    1. 1. Global Business Today 6e by Charles W.L. Hill McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
    2. 2. Chapter 3 Differences in Culture
    3. 3. Introduction  Cross-cultural literacy (an understanding of how cultural differences across and within nations can affect the way in which business is practiced) is important to success in international business  There may be a relationship between culture and the costs of doing business in a country or region  Culture is not static, and the actions of MNEs can contribute to cultural change 3-3
    4. 4. What is Culture? Question: What is culture?  Culture is a system of values (abstract ideas about what a group believes to be good, right, and desirable) and norms (the social rules and guidelines that prescribe appropriate behavior in particular situations) that are shared among a group of people and that when taken together constitute a design for living  A society is a group of people who share a common set of values and norms 3-4
    5. 5. Values and Norms  Values provide the context within which a society’s norms are established and justified  Norms are the social rules that govern the actions of people toward one another and can be further subdivided into  folkways (the routine conventions of everyday life)  mores (norms that are seen as central to the functioning of a society and to its social life) 3-5
    6. 6. Culture, Society, and the Nation-State  A society can be defined as a group of people that share a common set of values and norms  There is not a strict one-to-one correspondence between a society and a nation-state  Nation- states are political creations that can contain a single culture or several cultures  Some cultures embrace several nations 3-6
    7. 7. The Determinants of Culture  The values and norms of a culture are the evolutionary product of a number of factors at work in a society including prevailing political and economic philosophies a society’s social structure the dominant religion, language, and education 3-7
    8. 8. The Determinants of Culture The Determinants of Culture 3-8
    9. 9. Classroom Performance System Abstract ideas about what a society believes to be good right and desirable are called a) Attitudes b) Norms c) Values d) Mores 3-9
    10. 10. Social Structure A society's social structure is its basic social organization Two dimensions to consider: the degree to which the basic unit of social organization is the individual, as opposed to the group the degree to which a society is stratified into classes or castes 3-10
    11. 11. Individuals and Groups  A group is an association of two or more individuals who have a shared sense of identity and who interact with each other in structured ways on the basis of a common set of expectations about each other’s behavior  Groups are common in many Asian societies  Many Western countries emphasize the individual 3-11
    12. 12. Individuals and Groups  In societies where the individual is emphasized  individual achievement and entrepreneurship are promoted  but, this can encourage job switching, competition between individuals in a company rather than team building, and a lack of loyalty to the firm  In societies with a strong identification with the group  cooperation and team work are encouraged and life time employment is common  but, individual initiative and creativity may be suppressed 3-12
    13. 13. Social Stratification  All societies are stratified on a hierarchical basis into social categories, or social strata (usually defined by characteristics such as family background, occupation, and income)  Societies differ in terms of the degree of mobility between social strata the significance attached to social strata in a business context 3-13
    14. 14. Social Stratification  Social mobility refers to the extent to which individuals can move out of the strata into which they are born  The most rigid system is the caste system (a closed system of stratification in which social position is determined by the family into which a person is born, and change in that position are unlikely)  A less rigid system is the class system (a form of open social stratification in which the position a person has by birth can be changed through achievement or luck) 3-14
    15. 15. Social Stratification Question: What is the significance of social stratification for business?  In cultures where there is a great deal of class consciousness (a condition where people tend to perceive themselves in terms of their class background, and this shapes their relationships with others), the way individuals from different classes work together (i.e. management and labor) may be prescribed  Antagonism between labor and management can raise the costs of doing business 3-15
    16. 16. Classroom Performance System The extent to which an individual can move out of the social strata into which they are born is called a) Social stratification b) Class mobility c) Social mobility d) Caste system 3-16
    17. 17. Religious and Ethical Systems  Religion is a system of shared beliefs and rituals that are concerned with the realm of the sacred  Religions with the greatest following are  Christianity (1.7 billion adherents)  Islam (1 billion adherents)  Hinduism (750 million adherents)  Buddhism (350 million adherents)  Confucianism also influences behavior and shapes culture in many parts of Asia 3-17
    18. 18. Religious and Ethical Systems Dominant Religions 3-18
    19. 19. Religious and Ethical Systems  Ethical systems are a set of moral principles, or values, that are used to guide and shape behavior  The ethical practices of individuals within a culture are often closely intertwined with their religion 3-19
    20. 20. Christianity  Christianity is the most widely practiced religion and is common throughout Europe, the Americas, and other countries settled by Europeans Question: What are the economic implications of Christianity?  In 1904, Max Weber suggested that it was the Protestant work ethic (focus on hard work, wealth creation, and frugality) that was the driving force of capitalism 3-20
    21. 21. Islam  Adherents of Islam, called Muslims, believe that there is one true omnipotent God  Islam is an all-embracing way of life that governs one's being Question: What is Islamic fundamentalism?  In the West, Islamic fundamentalism is associated in the media with militants, terrorists, and violent upheavals, however, the vast majority of Muslims point out that Islam teaches peace, justice, and tolerance  Perhaps in response to the influence of Western ideas, some Muslims feel threatened, and are promoting a commitment to traditional beliefs and practices  Fundamentalists have gained political power in many Muslim countries, and have tried to make Islamic law the law of the land 3-21
    22. 22. Islam Question: What are the economic implications of Islam?  Under Islam, people do not own property, but only act as stewards for God and thus must take care of that which they have been entrusted with  While Islam is supportive of business, the way business is practiced is prescribed  Businesses that are perceived to be making a profit through the exploitation of others, by deception, or by breaking contractual obligations are unwelcome 3-22
    23. 23. Hinduism  Hinduism, practiced primarily on the Indian subcontinent, focuses on the importance of achieving spiritual growth and development, which may require material and physical selfdenial Question: What are the economic implications of Hinduism?  Hindus are valued by their spiritual rather than material achievements  Promotion and adding new responsibilities may not be the goal of an employee, or may be infeasible due to the employee's caste 3-23
    24. 24. Buddhism  Buddhists, found mainly in Central and Southeast Asia, China, Korea, and Japan, stress spiritual growth and the afterlife, rather than achievement while in this world Question: What are the economic implications of Buddhism?  Buddhism does not support the caste system, so individuals do have some mobility and can work with individuals from different classes  Entrepreneurial activity is acceptable in Buddhist societies 3-24
    25. 25. Confucianism  Confucianism, practiced mainly in China, teaches the importance of attaining personal salvation through right action  The need for high moral and ethical conduct and loyalty to others is central in Confucianism Question: What are the economic implications of Confucianism?  Three key teachings of Confucianism - loyalty, reciprocal obligations, and honesty - may all lead to a lowering of the cost of doing business in Confucian societies 3-25
    26. 26. Classroom Performance System The religion with the largest following in the world is a) Christianity b) Islam c) Hinduism d) Buddhism 3-26
    27. 27. Language  Countries differ in terms of language or means of communication  There are two forms language spoken unspoken  Language is one of the defining characteristics of culture 3-27
    28. 28. Spoken Language  Countries with more than one spoken language often have more than one culture Chinese is the mother tongue of the largest number of people in the world English is the most widely spoken language in the world, and is becoming the language of international business  However, knowledge of the local language is beneficial, and in some cases, critical for business success 3-28
    29. 29. Unspoken Language  Unspoken language refers to nonverbal cues  Unspoken language such as facial expressions and hand gestures can be important for communication  Many nonverbal cues are culturally bound and because they may be interpreted differently, can result in misunderstandings 3-29
    30. 30. Education  Formal education is the medium through which individuals learn many of the language, conceptual, and mathematical skills that are indispensable in a modern society  The knowledge base, training, and educational opportunities available to a country's citizens can also give it a competitive advantage in the market and make it a more or less attractive place for expanding business  The general education level of a country is a good indicator of the types of products that might sell in that location or the type of promotional materials that might be successful 3-30
    31. 31. Culture and the Workplace Question: How does a society's culture impact on the values found in the workplace?  The most famous study undertaken to answer this question was done by Geert Hofstede who isolated four dimensions that he believed summarized different cultures 1. Power distance 2. Individualism versus collectivism 3. Uncertainty avoidance 4. Masculinity versus femininity 3-31
    32. 32. Culture and the Workplace 1. Power distance is focused on how a society deals with the fact that people are unequal in physical and intellectual capabilities 2. Individualism versus collectivism is focused on the relationship between the individual and his or her fellows 3. Uncertainty avoidance measures the extent to which different cultures socialize their members into accepting ambiguous situations and tolerating ambiguity 4. Masculinity versus femininity looks at the relationship between gender and work roles  Hofstede later added a fifth dimension, Confucian dynamism, to capture attitudes towards time, persistence, ordering by status, protection of face, respect for tradition, and reciprocation of gifts and favors 3-32
    33. 33. Culture and the Workplace Hofstede’s Four Dimensions 3-33
    34. 34. Classroom Performance System Which of Hofstede’s dimensions measures the extent to which different cultures socialize their members into accepting ambiguous situations and tolerating uncertainty? a) Individualism versus collectivism b) Uncertainty avoidance c) Masculinity versus femininity d) Power distance 3-34
    35. 35. Cultural Change  Culture evolves over time, although changes in value systems can be slow and painful for a society  Social turmoil is an inevitable outcome of cultural change  As countries become economically stronger, cultural change is particularly common 3-35
    36. 36. Implications for Managers Differences in culture imply that 1. there is a need for managers to develop cross-cultural literacy 2. there is a connection between culture and national competitive advantage 3. there is a connection between culture and ethics in decision making (discussed in the next chapter) 3-36
    37. 37. Cross-Cultural Literacy  Individuals and firms must develop cross-cultural literacy  International businesses that are ill informed about the practices of another culture are unlikely to succeed in that culture  Individuals must also beware of ethnocentric behavior (a belief in the superiority of one's own culture) 3-37
    38. 38. Culture and Competitive Advantage  For international companies, the connection between culture and competitive advantage is important because the connection suggests which countries are likely to produce the most viable competitors the connection has implications for the choice of countries in which to locate production facilities and do business 3-38
    39. 39. Critical Discussion Question 1. Outline why the culture of a country might influence the costs of doing business in that country. Illustrate your answer with examples. 3-39
    40. 40. Critical Discussion Question 2. Do you think business practices in an Islamic country are likely to differ from business practices in the United States? If so, how? 3-40
    41. 41. Critical Discussion Question 3. What are the implications for international business of differences in the dominant religion or ethical system of a country? 3-41
    42. 42. Critical Discussion Question 4. Choose two countries that appear to be culturally diverse. Compare the culture of those countries and then indicate how cultural differences influence (a) the costs of doing business in each country, (b) the likely future economic development of that country, (c) business practices, and (d) business ethics. 3-42
    43. 43. Critical Discussion Question 5. Reread the Country Focus on Islamic Capitalism in Turkey. Then answer the following questions: a) Can you see anything in the value of Islam that is hostile to business? b) What does the experience of the region around Kayseri teach us about the relationship between Islam and business? c) What are the implications of Islamic values towards business for the participation of a country like Turkey in the global economy? 3-43
    44. 44. Critical Discussion Question 6. Reread the Management Focus on DMG-Shanghai and answer the following questions: a) Why do you think it is so important to cultivate guanxi and guanxiwang in China? b) What does the experience of DMG tell us about the way thinks work in China? What would likely happen to a business that obeyed all of the rules and regulations rather than trying to find a way round them as Dan Mintz apparently does? c) What are the ethical issues that might arise when drawing upon guanxiwang to get things done in China? What does this suggest about the limits of using guanxiwang for a Western business committed to high ethical standards? 3-44