CULTURAL IMPACT ON INTERNATIONAL BUSINESS

Culture is the way that we do things around here. Culture could relate to a country (national
culture), a distinct section of the community (sub-culture), or an organization (corporate
culture). It is widely accepted that we are not born with a culture, and that it is learned. So,
culture includes all that we have learned in relation to values and norms, customs and
traditions, beliefs and religions, rituals and artefacts.

The Terpstra and Sarathy Cultural Framework helps marketing managers to assess the
cultural nature of an international market. It is very straight-forward, and uses eight
categories in its analysis. The Eight categories are Language, Religion, Values and Attitudes,
Education, Social Organizations, Technology and Material Culture, Law and Politics and
Aesthetics.

LANGUAGE

With language one should consider whether or not the national culture is predominantly a
high context culture or a low context culture (Hall and Hall 1986). The concept relates to the
balance between the verbal and the non-verbal communication.

In a low context culture spoken language carries the emphasis of the communication i.e. what
is said is what is meant. Examples include Australia and the Netherlands.

In a high context culture verbal communications tend not to carry a direct message i.e. what
is said may not be what is meant. So with a high context culture hidden cultural meaning
needs to be considered, as does body language. Examples of a high context cultures include
Japan and some Arabic nations.

RELIGION

The nature and complexity of the different religions an international marketer could
encounter is pretty diverse. The organization needs to make sure that their products and
services are not offensive, unlawful or distasteful to the local nation. This includes marketing
promotion and branding.

In China in 2007 (which was the year of the pig) all advertising which included pictures of
pigs was banned. This was to maintain harmony with the country's Muslim population of
around 2%. The ban included pictures of sausages that contained pork, and even advertising
that included an animated (cartoon) pig.

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In 2005 France's Catholic Church won a court injunction to ban a clothing advertisement (by
clothing designers Marithe and Francois Girbaud) based upon Leonardo da Vinci's Christ's
Last Supper.

VALUES AND ATTITUDES

Values and attitudes vary between nations, and even vary within nations. So if you are
planning to take a product or service overseas make sure that you have a good grasp the
locality before you enter the market. This could mean altering promotional material or subtle
branding messages. There may also be an issue when managing local employees. For
example, in France workers tend to take vacations for the whole of August, whilst in the
United States employees may only take a couple of week's vacation in an entire year.

In 2004, China banned a Nike television commercial showing U.S. basketball star LeBron
James in a battle with animated cartoon kung fu masters and two dragons, because it was
argued that the ad insults Chinese national dignity.

In 2006, Tourism Australian launched its ad campaign entitled "So where the bloody hell are
you?" in Britain. The $130 million (US) campaign was banned by the British Advertising
Standards Authority from the United Kingdom. The campaign featured all the standard icons
of Australia such as beaches, deserts, and coral reefs, as well as traditional symbols like the
Opera House and the Sydney Harbour Bridge. The commentary ran:

"We've poured you a beer and we've had the camels shampooed, we've saved you a spot on
the beach. We've even got the sharks out of the pool,".

Then, from a bikini-clad blonde, come the tag line:

"So where the bloody hell are you?"

EDUCATION

The level and nature of education in each international market will vary. This may impact the
type of message or even the medium that you employ. For example, in countries with low
literacy levels, advertisers would avoid communications which depended upon written copy,
and would favors radio advertising with an audio message or visual media such as billboards.
The labeling of products may also be an issue.

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In the People's Republic of China a nationwide system of public education is in place, which
includes primary schools, middle schools (lower and upper), and universities. Nine years of
education is compulsory for all Chinese students.

In Finland school attendance is compulsory between the ages of 7 and 16, the first nine years
of education (primary and secondary school) are compulsory, and the pupils go to their local
school. The education after primary school is divided to the vocational and academic
systems, according to the old German model.

In Uganda schooling includes 7 years of primary education, 6 years of secondary education

(divided into 4 years of lower secondary and 2 years of upper secondary school), and 3 to 5
years of post-secondary education.

SOCIAL ORGANIZATIONS

This aspect of Terpstra and Sarathy's Cultural Framework relates to how a national society is
organized. For example, what is the role of women in a society? How is the country governed
- centralized or devolved? The level influence of class or casts upon a society needs to be
considered. For example, India has an established caste system - and many Western countries
still have an embedded class system. So social mobility could be restricted where caste and
class systems are in place. Whether or not there are strong trade unions will impact upon
management decisions if you employ local workers.

TECHNOLOGY AND MATERIAL CULTURE

Technology is a term that includes many other elements. It includes questions such as is there
energy to power our products? Is there a transport infrastructure to distribute our goods to
consumers? Does the local port have large enough cranes to offload containers from ships?
How quickly does innovation diffuse? Also of key importance, do consumers actually buy
material goods i.e. are they materialistic?

Trevor Baylis launched the clockwork radio upon the African market. Since batteries were
expensive in Africa and power supplies in rural areas are non-existent. The clockwork radio
innovation was a huge success.

China's car market grew 25% in 2006 and it has overtaken Japan to be the second-largest car
market in the world with sales of 8 million vehicles. With just six car owners per 100 people
(6%), compared with 90% car ownership in the US and 80% in the UK, the potential for
growth in the Chinese market is immense.

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LAW AND POLITICS

As with many aspects of Terpstra and Sarathy's Cultural Framework, the underpinning social
culture will drive the political and legal landscape. The political ideology on which the
society is based will impact upon your decision to market there. For example, the United
Kingdom has a largely market-driven, democratic society with laws based upon precedent
and legislation, whilst Iran has a political and legal system based upon the teachings and
principles Islam and a Sharia tradition.

AESTHETICS

Aesthetics relate to your senses, and the appreciation of the artistic nature of something,
including its smell, taste or ambience. For example, is something beautiful? Does it have a
fashionable design? Was an advert delivered in good taste? Do you find the color, music or
architecture relating to an experience pleasing? Is everything relating to branding
aesthetically pleasing?

CROSS CULTURE CLASSIFICATION

Major types of cross cultural classifications

1. HOFSTEDE’S CULTURAL CLASSIFICATION

" Culture is more often a source of conflict than of synergy. Cultural differences are a
nuisance at best and often a disaster." Prof. Geert Hofstede, Emeritus Professor,
Maastricht University.

Prof. Geert Hofstede

Prof. Geert Hofstede conducted perhaps the most comprehensive study of how values in the
workplace are influenced by culture.

Geert Hofstede analyzed a large data base of employee values scores collected by IBM
between 1967 and 1973 covering more than 70 countries, from which he first used the 40
largest only and afterwards extended the analysis to 50 countries and 3 regions. In the

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editions of GH's work since 2001, scores are listed for 74 countries and regions, partly based
on replications and extensions of the IBM study on different international populations.

Subsequent studies validating the earlier results have included commercial airline pilots and
students in 23 countries, civil service managers in 14 counties, 'up-market' consumers in 15
countries and 'elites' in 19 countries.

From the initial results, and later additions, Hofstede developed a model that identifies four
primary Dimensions to assist in differentiating cultures: Power Distance - PDI, Individualism
- IDV, Masculinity - MAS, and Uncertainty Avoidance - UAI.

Geert Hofstede added a fifth Dimension after conducting an additional international study
with a survey instrument developed with Chinese employees and managers.

That Dimension, based on Confucian dynamism, is Long-Term Orientation - LTO and was
applied to 23 countries.

These five Hofstede Dimensions can also be found to correlate with other country, cultural,
and religious paradigms

Geert Hofstede's research gives us insights into other cultures so that we can be more
effective when interacting with people in other countries. If understood and applied properly,
this information should reduce your level of frustration, anxiety, and concern. But most
important, Geert Hofstede will give you the 'edge of understanding' which translates to more
successful results.

Geert Hofstede™ Cultural Dimensions

Geert Hofstede gathered extensive data on the world's cultures and we have generated our
impressions of that data into charts and graphs that help to better understand the many sublet
implications contained in his raw data. See the links to each country on the left hand side.

Here below you will find a collection of publications related to Hofstede’s research. This is
not a complete overview, but that would be almost impossible as Hofstede’s work belongs to
one of the most quoted among European Social Scientists.

This is five classification model defined in indexes which is comparable with word’s average

Words Average for Hofstede’s Dimensions

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POWER DISTANCE INDEX (PDI) that is the extent to which the less powerful members
of organizations and institutions (like the family) accept and expect that power is distributed
unequally. This represents inequality (more versus less), but defined from below, not from
above. It suggests that a society's level of inequality is endorsed by the followers as much as
by the leaders. Power and inequality, of course, are extremely fundamental facts of any
society and anybody with some international experience will be aware that 'all societies are
unequal, but some are more unequal than others'.

High PDI: there should be a well-defined order. Everyone knows his/her position in society.
Well-defined hierarchy; centralized decision making, and authoritarian leadership.

Low PDI: everyone should have equal rights and opportunity. Flatter organizations with
fewer levels of management, fewer supervisors, and democratic leadership.

INDIVIDUALISM (IDV) on the one side versus its opposite, collectivism, that is the degree
to which individuals are inte-grated into groups. 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, cohesive in-groups, often extended families (with
uncles, aunts and grandparents) which continue protecting them in exchange for
unquestioning loyalty. The word 'collectivism' in this sense has no political meaning: it refers
to the group, not to the state. Again, the issue addressed by this dimension is an extremely
fundamental one, regarding all societies in the world.

High IDV: everyone is expected to look after him/herself and his/her immediate family.
Individualism is the basis for creativity and achievement.

Low IDV: individualism is disruptive. Group decisions, group action, and group work are
preferred.

MASCULINITY (MAS) versus its opposite, femininity, refers to the distribution of roles
between the genders which is another fundamental issue for any society to which a range of
solutions are found. The IBM studies revealed that (a) women's values differ less among
societies than men's values; (b) men's values from one country to another contain a dimension

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from very assertive and competitive and maximally different from women's values on the one
side, to modest and caring and similar to women's values on the other. The assertive pole has
been called 'masculine' and the modest, caring pole 'feminine'. The women in feminine
countries have the same modest, caring values as the men; in the masculine countries they are
somewhat assertive and competitive, but not as much as the men, so that these countries show
a gap between men's values and women's values.

High MAS: clearly differentiated sex roles; men are dominant. Differentiated work roles,
focus on achievement, and money rewards for high performers.

Low MAS: predominantly feminine values: quality of life, the environment and nature, Men
and women are equal contributors.

UNCERTAINTY AVOIDANCE INDEX (UAI) deals with a society's tolerance for

uncertainty and ambiguity; it ultimately refers to man's search for Truth. It indicates to what
extent a culture programs its members to feel either uncomfortable or comfortable in
unstructured situations. Unstructured situations are novel, unknown, surprising, different
from usual. Uncertainty avoiding cultures try to minimize the possibility of such situations by
strict laws and rules, safety and security measures, and on the philosophical and religious
level by a belief in absolute Truth; 'there can only be one Truth and we have it'. People in
uncertainty avoiding countries are also more emotional, and motivated by inner nervous
energy. The opposite type, uncertainty accepting cultures, are more tolerant of opinions
different from what they are used to; they try to have as few rules as possible, and on the
philosophical and religious level they are relativist and allow many currents to flow side by
side. People within these cultures are more phlegmatic and contemplative, and not expected
by their environment to express emotions.

High UAI: certainty and security; high job security; well-defined work roles.

Low UAI: society is open to the unknown; uncertainty provides excitement and opportunities
for innovation and change. Risk taking is encouraged; decisions are made quickly and with
relatively little information.

LONG-TERM ORIENTATION (LTO) versus short-term orientation: this fifth dimension

was found in a study among students in 23 countries around the world, using a questionnaire

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designed by Chinese scholars It can be said to deal with Virtue regardless of Truth. Values
associated with Long Term Orientation are thrift and perseverance; values associated with
Short Term Orientation are respect for tradition, fulfilling social obligations, and protecting
one's 'face'. Both the positively and the negatively rated values of this dimension are found in
the teachings of Confucius, the most influential Chinese philosopher who lived around 500
B.C.; however, the dimension also applies to countries without a Confucian heritage.

High LTO: value associated with long term orientation are thrift and perseverance,

Low LTO: short term orientation are respect for tradition; fulfillment social obligations.

Malaysia
CRITICISM OF THE FRAMEWORK
Mexico
Hofstede's conceptualization of culture as static and essential has attracted some criticism. In
Netherlands
a recent article in the Academy of Management's flagship journal, The Academy of
New Zealand
Management Review, Galit Ailon deconstructs Hofstede's book Culture's Consequences by
Norway
mirroring it against its own assumptions and logic[3]. Ailon finds several inconsistencies at
Pakistan
the level of both theory and methodology and cautions against an uncritical reading of
Panama
Hofstede's cultural dimensions.
Peru
Hofstede's work has also been criticized by researchers who think that he identifies cultures
Philippines
with nations based on the supposition that within each nation there is a uniform national
Poland
culture, a suggestion explicitly denied by Hofstede himself in chapter 1 of 'Cultures and
Portugal
Organizations'. According to Hofstede, the point about culture is precisely its resilience to
Singapore
change in spite of all this flux. South Africa
South Korea
Spain
Sweden
Switzerland
Taiwan
Thailand
SCORES AVAILABLE FOR OTHER COUNTRIES

Arab World Turkey

Argentina United Kingdom

Australia United States

Austria Uruguay

Belgium Venezuela
West Africa
pg. 8

Indexed Data in available on: http://www.geert-

 Brazil
Canada
Chile
China
Colombia
Costa Rica
Czech Republic
Denmark
East Africa
Ecuador
El Salvador
Finland
France
Germany
Greece
Guatemala
Hong Kong
Hungary
India
Indonesia
Iran
Ireland
Israel
Italy
Jamaica
Japan

2. TROMPENAARS’ CULTURAL CLASSIFICATION

Fons Trompenaars is a Dutch author in the field of cross-cultural communication. His

books include: Riding the Waves of Culture, Seven Cultures of Capitalism, Building Cross-
Cultural Competence, 21 Leaders for the 21st Century and Innovating in a Global Crisis .

Trompenaars studied Economics at the VU University Amsterdam and later earned a Ph.D.
from Wharton School, University of Pennsylvania, with a dissertation on differences in

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conceptions of organizational structure in various cultures. He experienced cultural
differences firsthand at home, where he grew up speaking both French and Dutch, and then
later at work with Shell in nine countries.

Trompenaars and Charles Hampden-Turner have developed a model of culture with seven
dimensions. There are five orientations covering the ways in which human beings deal with
each other.:

The Dutch researcher, Fons Trompenaars, conducted research over a ten-year period,
administering questionnaires to over 15,000 managers from 28 countries and published the
findings in 1994. Each of the cultural dimensions of Trompenaar’s research is difined on the
basis of the usable responses received from at least 500 managers in each country. The
abbreviated terms for 23 countries, included in his report, are shown as:

ARG Argentine JPN Japan

AUS Austria MEX Mexico

BEL Belgium NL Netherlands

BRZ Brazil SIN Singapore

CHI China SPA Spain

CIS Soviet Union SWE Sweden

CZH Czechoslovakia SWI Switzerland

FRA France THA Thailand

UNIVERSALISM VS PARTICULARISM
GER Germany UK United Kingdom
Universalism is belief that ideas and practices can be defined and applied everywhere without
HK Honk Kong USA United States
modification.
IDO Indonesia VEN Venezuela
High Universalism: where focus is on more formal rules than relationships
ITA Italy
High Particularism: focus on relationship than formal rules, legal contracts may readily be
modified.

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INDIVIDUALISM VS COMMUNITARIANISM

Individualism refers to people regarding themselves as individuals whereas

communitarianism refers to people regarding themselves as part of a group

Individualism: use of ‘I’ and ‘me’ , decisions are made on the spot, achievements and
responsibilities are also personal

Connunitarianism: use of ‘we’ than ‘I’ achievement is considered to be a group

achievement and joint responsibility.

NEUTRAL VS AFFECTIVE

All human beings have emotions and this dimension deals with ways in which emotions are
expressed.

Neutral: people tend to hold in check their emotions and try not to explicitly exhibit their
feelings. Often consider anger, delight, or intensity in workplace as unprofessional

Affective: emotions are expressed openly and are more natural, people often smile, talk
loudly and exhibit a great deal of enthusiasm in greeting each other.

SPECIFIC VS DIFFUSE

The degree of involvement, how comfortable individuals are in dealing with each other.

Specific: people have large public space and a smaller private space, personal life kept
separate, shared only with close friends and associates. Here work and life are separate.

Diffuse: public and private space are more or less similar and public space is guarded more
carefully. Work and life is closely linked.

ACHIEVEMENT VS ASCRIPTION

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Culture differ in the way status and power in a society are determined. Social status can be
attributed either to a person's own efforts and achievements or as a birthright

Achievement culture: people are evaluated and accorded social status based on how well
they perform.

Ascription cultures: it is independent of task

3. OTHER CROSS-CULTURAL CLASSIFICATION

• High-context vs low-context cultures

• Homophilous vs heterophilous cultures

• Relationship-focussed vs deal-focussed

• Formal vs informal cultures

• Polychronic vs monochronic cultures

• Expressive vs reserved cutures

HIGH-CONTEXT VS LOW-CONTEXT CULTURES

In high-context cultures, implicit communications such as non-verbal and subtle situational

cues are extremely important.

On the other hand in low- context cultures, communications is more explicit and relies
heavily on words to convey the meanings.

HOMOPHILOUS VS HETEROPHILOUS CULTURES

Homophilous culture: where people share same belief and speak same language and
practise the same religion. Japan, Korea

Heterophilous culture: fair amount of differentiation in language, beliefs and religions can
be found. India, China

RELATIONSHIP-FOCUSSED VS DEAL-FOCUSSED

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Relationship focused: People have strong orientation towards building relationships and
developing mutual trust. India, Bangladesh, Indonesia, Malaysia, Japan, China etc

• Reluctance to approach strangers for business; use of intermediaries, use of trade

shows and exhibitions to meet prospects

• High emphasis on building relationship and establishing rapport

• Indirect, polite, and high-context communication

• Face-to-face negotiations and meeting

• Importance given to ‘saving face’, dignity, and respect

• Lawyers kept in the background during negotiations

Deal focused: Managers are open to discuss business prospects with strangers, here making
appointment is easy. UK, US, Germany, Denmark, Canada, Australia etc

• Openness to talking business with strangers

• Directly approaching prospective clients

• Clarity of understanding given more importance than harmony

• Direct, frank, low-context communication

• Communication via telephone, e-mail, and faxes

• Little or no concept of ‘saving face’

• Lawyers forming part of negotiations

• Reliance on written agreements and contracts

FORMAL VS INFORMAL CULTURES

Formal: formality is used to show respect, counterparts are addressed by title or sir name.
India, Bangladesh, Indonesia, Malaysia, Vietnam, Saudi Arab UAE, Brazil Russia etc.

• Formality is used to show respect

• Status differences are large and valued

• Counterparts are addressed by title or family name

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 • Protocol rituals are numerous and elaborate

Informal: status differences are not valued, counterparts are addressed by first name. US.
Canada and Australia

• Informal behavior is not considered disrespectful

• Status differences are not valued

• Counterparts are addressed by first name

• Protocol rituals are few and simple

POLYCHRONIC VS MONOCHRONIC CULTURES

Polychronic culture: people have relaxed approach to time schedules, punctuality,

• India, Bangladesh, Indonesia, Malaysia, Vietnam

• People and relationships are more important than punctuality and precise scheduling

• Schedules and deadlines are flexible

• Meetings are frequently interrupted

For instance the Arabian term ‘Insha’ Allah’ means things will happen if the almightily
wishes so.

Monochronic culture: rigid schedules and deadlines US, Canada, Australia, Germany,
Finland etc.

• Primacy of punctuality and schedules

• Rigid schedules and deadlines

• Seldom interrupted meetings

EXPRESSIVE VS RESERVED CUTURES

Expressive culture: Saudi Arabia, UAE, Egypt, Greece, Brazil, Mexico, France, US,
Australia, Canada etc.

• People speak louder, interrupt frequently, and are uncomfortable with silence.

• Interpersonal space is half-an-arm length and direct eye contact.

• There is considerable physical contact.

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 • There is direct eye contact.

• There are lively facial expressions and gesturing

Reserved Culture: India, Bangladesh, Indonesia, Malaysia, Japan, China, South Korea,
Singapore, Britain, etc.

• People speak softly, interrupt less, and are comfortable with silence

• Interpersonal space is arm’s length. No eye contact.

• There is little physical contact

• Eye contact is indirect

• Facial expressions and gesturing are restrainde

REFERENCES

Books:

• Rakesh Mohan Joshi (2009), INTERNATIONAL BUSINESS, OXFORD Publication

• Terpstra, v. and Sarathy, R. (2000) INTERNATIONAL MARKETING, 8th Edition,

Dryden Press.

• Hall, E.T. and Hall, M.R. (1986) HIDDEN DIFFERENCES: DOING BUSINESS

WITH THE JAPANESE, Anchor Press.

Web References:

• http://en.wikipedia.org/wiki/Fons_Trompenaars

• http://www.geert-hofstede.com/

• http://en.wikipedia.org/wiki/Geert_Hofstede

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