Reread the Management Focus on “China and Its Guanxi”, available in your e-book (page no.110) and answer the follow questions:

1. Why do you think it is so important to cultivate guanxi and guanxiwang in China? 

2. What does the experience of DMG tell us about the way things work in China? What would likely happen to a business that obeyed all the rules and regulations, rather than trying to find a way around them as Dan Mintz does?

 

3- What ethical issues might arise when drawing on 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? 

Mam, m u

>

Chapter

4

Imroductlon

Introduction

Whlt l: Culture?

Whnt I: Culture?

What I: Culture?

What la culture?

Whlt l: Culture?
Whnt I: Culture?
What I: Culture?
What la culture?
Whlt l: Culture?
Whnt I: Culture?
What I: Culture?
What la culture?
Whlt l: Culture?
Whnt I: Culture?
What I: Culture?
What la culture?
Whlt l: Culture?
Whnt I: Culture?
What I: Culture?
What la culture?
Whlt l: Culture?
Whnt I: Culture?
What I: Culture?
What la culture?
Whlt l: Culture?
Whnt I: Culture?
What I: Culture?
What la culture?
Whlt l: Culture?
Whnt I: Culture?
What I: Culture?
What la culture?
Whlt l: Culture?
Whnt I: Culture?
What I: Culture?
What la culture?

Social Structure

“‘anmu
“05″”

Practice

mt Hml mm Bu w rHl Hm l2xDlHt‘t’H1\llell,nl”

Page

Wch W ,,,,, W Wrrr , ., WWWW WW W WrWW W o”’r7 ,

person works. In general, Western societies tend to emphasize the importance of the individual, whereas groups tend to figure much larger in

many other societies. The second dimension is the degree to which a society is stratified into classes or castes. Some societies are

characterized by a relatively high degree of social stratification and relatively low mobility between strata (e.g., India); other

societies are characterized by a low degree of social stratification and high mobility between strata (e.g., the United States).

Individuals and Groups

. For example, consumers are significant

likely to buy from the brands they follow on Instagram, Twitter, Facebook, or LinkedInl, or that they get exposed to Via Snapchat, due to

group influences. However, while groups are found in all societies, some societies differ according to the degree to which the group is

Viewed as the primary means of social organization.18 In some societies, individual attributes and achievements are Viewed as being more

important than group membership; in others, the reverse is true.

The Individual

The emphasis on individual performance has both beneficial and harmful aspects. In the United States, the emphasis on individual

performance finds expression in an admiration of rugged individualism, entrepreneurship, and innovation. One benefit of this is the high

level of entrepreneurial activity in the United States, in Europe, and throughout many of the so-oalled developed nations. Over time,

entrepreneurial individuals in the United States have created lots of new products and new ways of doing business (e.g., personal computers,

photocopiers, computer software, biotechnology, supermarkets, and discount retail stores). One can argue that the dynamism of the Us.

economy owes much to the philosophy of individualism]. Highly individualistic societies are often synonymous with people who are capable

and have the capacity to constantly innovate by their creative ideas for products and services.

Individualism also finds expression in a high degree of managerial mobility between companies, as our “personal brand” example illustrated

earlier, and this is not always a good thing. Although moving from company to company may be good for individual managers who are

trying to build impressive resumes and increase their salaries, it is not necessarily a good thing for companies. The lack of loyalty and

commitment to a company and the tendency to move on for a better offer can result in managers who have good general skills but lack the

knowledge, experience, and network of contacts that come from years of working for the same company. An effective manager

draws on company-specific experience, knowledge, and a network of contacts to find solutions to current problems, and companies

may suffer if their managers lack these attributes. One positive aspect of high managerial mobility is that executives are exposed to different

ways of doing business. The ability to compare business practices helps executives identify how good practices and techniques developed in

one firm might be profitably applied to other firms.

The Group

In contrast to the Western emphasis on the individual, the group is the primary unit of social organization in many other societies. For

example, in Japan, the social status of an individual has traditionally been determined as much by the standing of the group to which he or

she belongs as by his or her individual performance.20 In traditional Japanese society, the group was the family or village to which an

individual belonged. Today, the group has frequently come to be associated with the work team or business organization. In a now-classic

study of Japanese society, Nakane noted how this expresses itself in everyday life:

When a Japanese faces the outside (confronts another person) and affixes some position to himself socially he is inclined to give

precedence to institution over kind of occupation. Rather than saying, “I am a typesetter” or “I am a filing clerk,” he is likely to

say, “I am from B Publishing Group” or “I belong to S company.”21

Nakane goes on to observe that the primacy of the group often evolves into a deeply emotional attachment in which identification with the

group becomes very important in a person’s life. For example, as a student, you will often identify yourself as going to XYZ University or,

soon enough, as a graduate of XZY UniversityWand the latter identification as an alumnus of a university is something:y that you carry with

you for life. In many cases, we also extend that group thinking beyond a company, organization, or university. For example, we talk about

being a part of a university-related conferencveor example, “I’m going to Michigan State University, and we are part of the Big Ten

Conference.”

At the country level, one central value of Japanese culture, for example, is the importance attached to group membership. This may have

beneficial implications for business firms. Strong identification with the group is argued to create pressures for mutual self—help and

collective action. If the worth of an individual is closely linked to the achievements of the group, as Nakane maintains is the case in Japan,

this creates a strong incentive for individual members of the group to work together for the common good. Some argue that the success of

some Japanese companies in the global economy has been based partly on their ability to achieve close cooperation between individuals

within a company and between companies. This has found expression in the widespread diffusion of self—managing work teams within

Japanese organizations; the close cooperation among different functions within Japanese companies (e.g., among manufacturing, marketing,

and R&D); and the cooperation between a company and its suppliers on issues such as design, quality control, and inventory reduction.22 In

all these cases, cooperation is driven by the need to improve the performance of the group.

The primacy of the value of group identification also discourages managers and other workers, in many cases, to move from company to

company. Lifetime employment in a particular company was long the norm in certain sectors of the Japanese economy (estimates suggest

that between 20 and 40 percent of all Japanese employees have formal or informal lifetime employment guarantees), albeit those norms have

changed significantly in the recent decade, with much more movement being seen between companies today. Over the years, managers and

workers build up knowledge, experience, and a network of interpersonal business contacts. All these things can help managers perform their

jobs more effectively and achieve cooperation with others.

Howeverl, the primacy of the group is not always beneficial. Just as US. society is characterized by a great deal of dynamism and

entrepreneurship, reflecting the primacy of values associated with individualism, some argue that Japanese society is characterized by a

corresponding lack of dynamism and entrepreneurship. Although the long-run consequences are unclear, one implication is that the

United States could continue to create more new industries than Japan and continue to be more successful at pioneering radically

new products and new ways of doing business. By most estimates, the United States has led the world in innovation for some time,

especially radically new products and services, and the country’s individualism is a strong contributor to this innovative mindset. At the

same time, some group-oriented countries such as Japan do very well in innovation, especially non-radical “normal” innovations, according

to the GE Global Innovation Barometer.23 This is an indication that multiple paths to being innovative exists in both individualistic and

group-oriented cultures, drawing from the uniqueness of the particular culture and what core competencies are reflected in the culture.24 In

fact, some argue that individualistic societies are great at creating innovative ideas while oollectiVist, or group-oriented, societies are better

at the implementation of those ideas (i.e., taking the idea to the market).

Social Stratification

l
|

Lu
.N

.J‘
e

U: 0 Q 9.’ Z 0 2′

5

<3

The most rigid system of stratification is a caste system.

—@—

{T
l < m :1 E? o c (m : r 3' rt; 0 p m _, n: m k< m _ , Q S n w o 3? Q. E. ‘2 ‘

abolished in 1949, two years after India became independent, it is still a force in rural Indian society where occupation and marital

opportunities are still partly related to caste (for more details, see the accompanying Country Focus on the caste system in India

today).26

COUNTRY

While many societies have class systems, social mobility within a class system varies from society to society. For example, some

sociologists have argued that the United Kingdom has a more rigid class structure than certain other Western societies, such as the

United States.27 Historically, British society was divided into three main classes: the upper class, which was made up of

individuals whose families for generations had wealthl, prestige, and occasionally power; the middle class, whose members were involved in

professional, managerial, and clerical occupations; and the working class, whose members earned their living from manual occupations. The

middle class was further subdivided into the upper-middle class, whose members were involved in important managerial occupations and

the prestigious professions (e.g., lawyers, accountants, doctors), and the lower-middle class, whose members were involved in clerical work

(e.g., bank tellers) and the less prestigious professions (e.gu, schoolteachers).

The British class system exhibited significant divergence between the life chances of members of different classes. The upper and

upper-middle classes typically sent their children to a select group of private schools, where they wouldn’t mix with lower—class

children and where they picked up many of the speech accents and social norms that marked them as being from the higher strata of society.

These same private schools also had close ties with the most prestigious universities, such as Oxford and Cambridge. Until fairly recently.

Oxford and Cambridge guaranteed a certain number of places for the graduates of these private schools. Having been to a prestigious

university, the offspring of the upper and upper—middle classes then had an excellent chance of being offered a prestigious job in companies,

banks, brokerage firms, and law firms run by members of the upper and upper—middle classes.

Significance

From a business perspective, the stratification of a society is significant if it affects the

operation of business organizations. In American society, the high degree of social

mobility and the extreme emphasis on individualism limit the impact of class background

on business operations. The same is true in Japan, where most of the population perceives

itself to be middle class. In a country such as the United Kingdom or Indial, however, the

relative lack of class mobility and the differences between classes have resulted in the

of class —a—

,1 PreviousHighngm < PreviousSection NextSection ) NextHighligh! L '7

4
>

97 / 667

D
J

M:
an
Nill
mum

Mn mgr m u

Chapter 4
Imroductlan

Introduction

Whlt la culture?

Whnt la culture?

What I: Culture?
What la culture?
Whlt la culture?
Whnt la culture?
What I: Culture?
What la culture?
Whlt la culture?
Whnt la culture?
What I: Culture?
What la culture?
Whlt la culture?
Whnt la culture?
What I: Culture?
What la culture?
Whlt la culture?
Whnt la culture?
What I: Culture?
What la culture?
Whlt la culture?
Whnt la culture?
What I: Culture?
What la culture?
Whlt la culture?
Whnt la culture?
What I: Culture?
What la culture?
Whlt la culture?
Whnt la culture?
What I: Culture?
What la culture?
Whlt la culture?
Whnt la culture?
What I: Culture?
What la culture?
What la culture?

Whlt Is Culture?

Whit II culture?

What la culture?
What la culture?
Whlt Is Culture?
Whit II culture?
What la culture?
What la culture?
Whlt Is Culture?
Whit II culture?
What la culture?
What la culture?
Whlt Is Culture?
Whit II culture?
What la culture?
What la culture?
Whlt Is Culture?
Whit II culture?
What la culture?
What la culture?
Whlt Is Culture?
Whit II culture?
What la culture?
What la culture?
Whlt Is Culture?
Whit II culture?
What la culture?
What la culture?
Whlt Is Culture?
Whit II culture?
What la culture?

Whit II Culture?

Social Structure
Practice

lulmtml mm Bu mu-n VH1 Hull 12 ‘_ D1111 u ‘Hrw u Ck 11w:

Page

Religious and Ethical Systems

_fi—
—fi—
—
—
-er, there is a major exception to the principle that ethical systems are grounded in

religion. Confucianism and Confucian ethics influence behavior and shape culture in

parts of Asia, yet it is incorrect to characterize Confucianism as a religion.

The relationship among religion, ethics, and society is subtle and complex. Among the thousands of religions in the world today, four

dominate in terms of numbers of adherents: Christianity with roughly 2.20 billion adherents, Islam with around 1.60 billion adherents,

Hinduism with 1.10 billion adherents (primarily in India), and Buddhism with about 535 million adherents (see Map 4.1 ). Although

many other religions have an important influence in certain parts of the modern world (e.g., Shintoism in Japan, with roughly 40 million

followers, and Judaism, which has 18 million adherents and accounts for 75 percent of the population of Israel), their numbers pale in

comparison with these dominant religions (although as the precursor of both Christianity and Islam, Judaism has an indirect influence that

goes beyond its numbers). We review these four religions, along with Confucianism, focusing on their potential business implications.

ARCTIC

OCEAN

ARCTIC
OCEAN

‘C’Db’
‘ h

Predominant Religions
o. mmsr

men Camom

ATLANTIC

PACIFIC
mm.“

. Mm” nos)

. Eastern Chulches
mum

sum m)
5mm

.m PACIFIC

:7:::;:.“;?: OCEAN INDIAN’ 4
8 1m. OCEAN

01mm w

. 5mm

Imlsm (“man
cmwnmm
[Contuoamsm Taorsm, mmmm,

. Kn…” m.“
[Emamsm Conmmamsm
Christmmty and Chonnogvol

O 1.9mmm
15mmmWW,
Vleuumesecamplex
[Eudnmsm TammiComm“. and Can M

O unpwulaxea rEglons
Cnpmlcumsmdlmmrhlvmsmccot o ‘ m mum lcr1lly1r1pnflinl’fl‘lnamy adherents m
Mwsnsmmm mus

“1.,“ . ,omz.- 2140“) n m. mm mm

E

—.The Orthodox Church. while less
influential, is still of major importance in several countries (e.g., Greece and Russia). In the sixteenth century, the Reformation led to a

further split with Rome; the result was Protestantism. The nonconformist nature of Protestantism has facilitated the emergence of numerous

denominations under the Protestant umbrella (e.g., Baptist, Methodist, Calvinist).

Economic Implications of Christianity

Several sociologists have argued that of the main branches of Christianitinatholic,

Orthodox, and Protestantithe latter has the most important economic implications. In

1904, prominent German sociologist Max Weber made a connection between Protestant

ethics and “the spirit of capitalism” that has since become famous.34 Weber noted that

capitalism emerged in western Europe, where

business leaders and owners of capital, as well as the higher grades of skilled labor, and even more the higher technically and

commercially trained personnel of modern enterprises, are overwhelmingly Protestant.35

Weber theorized that there was a relationship between Protestantisln and the emergence of modern capitalism. He argued that Protestant

ethics emphasizes the importance of hard work and wealth creation (for the glory of God) and frugality (abstinence from worldly pleasures).

According to Weber, this kind of value systeln was needed to facilitate the development of capitalism. Protestants worked hard and

systematically to accumulate wealth. However, their ascetic beliefs suggested that rather than consuming this wealth by indulging in worldly

pleasures, they should invest it in the expansion of capitalist enterprises. Thus, the combination of hard work and the accumulation of

capital, which could be used to finance investment and expansion, paved the way for the development of capitalism in western Europe and

subsequently in the United States. In contrast, Weber argued that the Catholic promise of salvation in the next world, rather than this world,

did not foster the same kind of work ethic.

Protestantism also may have encouraged capitalism’s development in another way. By breaking away from the hierarchical domination of

religious and social life that characterized the Catholic Church for much of its history, Protestantism gave individuals significantly more

freedom to develop their own relationship with God. The right to freedom of form of worship was central to the nonconformist nature of

early Protestantism. This emphasis on individual religious freedom may have paved the way for the subsequent emphasis on individual

economic and political freedoms and the development of individualism as an economic and political philosophy. As we saw in

Chapter 2 g , such a philosophy forms the bedrock on which entrepreneurial free market capitalism is based. Building on this, some

scholars claim there is a connection between individualism, as inspired by Protestantism, and the extent of entrepreneurial activity in a

nation.36 Again, we must be careful not to generalize too much from this historical sociological View. While nations with a strong Protestant

tradition such as Britain, Germany, and the United States were early leaders in the Industrial Revolution, nations with Catholic or Orthodox

majorities show significant and sustained entrepreneurial activity and economic growth in the modern world.

Islam

Islam is an all-embracing way of life governing the totality of a Muslim’s being.” As God‘s surrogate in this world, a Musliln is not a totally

free agent but is circumscribed by religious principlesiby a code of conduct for interpersonal relationsiin social and economic activities.

Religion is paramount in all areas of life. The Muslim lives in a social structure that is shaped by Islamic values and norms of moral

conduct. The ritual nature of everyday life in a Muslim country is striking to a Western Visitor. Among other things, orthodox Musliln ritual

requires prayer five times a day (business meetings may be put on hold while the Muslim participants engage in their daily prayer ritual),

demands that women should be dressed in a certain manner, and forbids the consumption of pork and alcohol.

Islamic Fundamentalism

The past three decades have witnessed the growth of a social movement often referred to as Islamic fundamentalism.39 In the West, Islamic

fundamentalism is associated in the media with militants, terrorists, and violent upheavals, such as the bloody conflict occurring in Algeria,

the killing of foreign tourists in Egypt, and the September 1 1, 2001, attacks on the World Trade Center and Pentagon in the United States.

For most, this characterization is misleading. Just as Christian fundamentalists are motivated by deeply held religious values that are firmly

rooted in their faith, so are Islamic fundamentalists.

The rise of Islamic fundamentalism has no one cause. In part, it is a response to the social pressures created in traditional Islamic societies

by the move toward modernization and by the influence of Western ideas, such as liberal democracy; materialism; equal rights for women;

and attitudes toward sex, marriage, and alcohol. In many Muslim countries, modernization has been accompanied by a growing gap between

a rich urban minority and an impoverished urban and rural majority. For the impoverished majority, modernization has offered little in the

way of tangible economic progress, while threatening the traditional value system. Thus, for a Muslim who cherishes his or her traditions

and feels that his or her identity is jeopardized by the encroachment of alien Western values, Islamic fundamentalism has become a cultural

anchor.

Fundamentalists demand commitment to traditional religious beliefs and rituals. The result has been a marked increase in the use of

symbolic gestures that confirm Islamic values. In areas where fundamentalism is strong, women have resumed wearing floor—length, long-

sleeved dresses and covering their hair; religious studies have increased in universities; the publication of religious tracts has increased; and

public religious orations have risen.40 Also, the sentiments of some fundamentalist groups are often anti-Western. Rightly or wrongly,

Western influence is blamed for a range of social ills, and many fundamentalists‘ actions are directed against Western governments, cultural

symbols, businesses, and even individuals.

Economic Implications of Islam

The Koran establishes some explicit economic principles, many of which are proifree

enterprise.“—

COUNTRY

Given the Islamic proclivity to favor market-based systems, Musliln countries are likely to be receptive to international businesses as long as

those businesses behave in a manner that is consistent with Islamic ethics, customs, and business practices. Businesses that are perceived as

making an unjust profit through the exploitation of others, by deception, or by breaking contractual obligations are unlikely to be welcomed

in an Islamic country. In addition, in Islamic countries where fundamentalism is on the rise, hostility toward Western-owned businesses is

likely to increase.

A nmdnmba/z contract is similar to a profit-sharing scheme. Under nmdnmba/z, when an Islamic bank lends money to a business, rather than

charging that business interest on the loan, it takes a share in the profits that are derived from the investment. Similarly, when a business (or

individual) deposits money at an Islamic bank in a savings account, the deposit is treated as an equity investment in whatever activity the

bank uses the capital for. Thus, the depositor receives a share in the profit from the bank’s investment (as opposed to interest payments)

according to an agreed-upon ratio. Some Muslims claim this is a more efficient system than the Western banking system because it

encourages both long-term savings and long-term investment. However, there is no hard evidence of this, and many believe that a

mudamba/z system is less efficient than a conventional Western banking system.

i} global EDG E

Ii

Hinduism

Economic Implications of Hinduism

Max Weber, famous for expounding on the Protestant work ethic, also argued that the

ascetic principles embedded in Hinduism do not encourage the kind of entrepreneurial

activity in pursuit of wealth creation that we find in Protestantism.45 According to Weber,

traditional Hindu values emphasize that individuals should be judged not by their

material achievements but by their spiritual achievements. Hindus perceive the pursuit of

material well-being as making the attainment of nirvana more difficult. Given the

emphasis on an ascetic lifestyle, Weber thought that devout Hindus would be less likely to

engage in entrepreneurial activity than devout Protestants.

Mahatma Gandhi, the famous Indian nationalist and spiritual leader, was certainly the embodiment of Hindu asceticism. It has been argued

that the values of Hindu ascetieism and self—relianee that Gandhi advocated had a negative impact on the economic development of

postindependence India.46 But we must be careful not to read too much into Weber’s rather old arguments. Modern India is a very dynamic

entrepreneurial society, and millions of hardworking entrepreneurs form the economic backbone of the country‘s rapidly growing economy,

especially in the information technology sector.47

Historically, Hinduism also supported India‘s caste system. The concept of mobility between castes within an individual’s lifetime makes no

sense to traditional Hindus. Hindus see mobility between castes as something that is achieved through spiritual progression and

reincarnation. An individual can be reborn into a higher caste in his or her next life if he or she achieves spiritual developlnent in this life.

Although the caste system has been abolished in India, as discussed earlier in the chapter, it still casts a long shadow over Indian life.

Buddhism

Economic Implications of Buddhism

The emphasis on wealth creation that is embedded in Protestantism is historically not

found in Buddhism. Thus, in Buddhist societies, we do not see the same kind of cultural

stress on entrepreneurial behavior that Weber claimed could be found in the Protestant

est. But unlike Hinduism, the lack of support for the caste system and extreme ascetic9

behavior suggests that a Buddhist society may represent a more fertile ground for

entrepreneurial activity than a Hindu culture. In effect, innovative ideas and

entrepreneurial activities may take hold throughout society independent of which caste a

person may belong to, but again, each culture is uniquely oriented toward its own types of

entrepreneurial behavior.

In Buddhism, societies were historically more deeply rooted to their local place in the natural world.48 This means that economies were

more localized, with relations between people and also between culture and nature being relatively unmediated. In the modern economy,

complex technologies and large-scale social institutions have led to a separation between people and also between people and the natural

world. Plus, as the economy grows, it is difficult to understand and appreciate the potential effects people have on the natural world. Both of

these separations are antithetical to the Buddha’s teachings.

Interestingly, recent trends actually bring in the “Zen” orientation from Buddhism into business in the Western world.49 Now there are some

700 trademarks containing the word Zen in the United States alone, according to the US. Patent and Trademark Office. “In business, ‘Zen”

is often a synonym for ordinary nothingness,” blogged Nancy Friedman, a corporate copywriter who consults with businesses on naming

and branding. She said that “Zen can be combined with mail to describe ‘an incoming e-mail message with no message or

attachments.‘ Zen Spin is a verb meaning ‘to tell a story without saying anything at all.” And to :en a computing problem means to

figure it out in an intuitive flashiperhaps while you’re plugged into the earphones of your ZEN MP3 player, available from Creative.”50

Confusianism

Economic Implications of Confucianism

Some scholars maintain that Confucianism may have economic implications as profound

as those Weber argued were to be found in Protestantism, although they are of a different

nature.52 Their basic thesis is that the influence of Confucian ethics on the culture of

China, Japan, South Korea, and Taiwan, by lowering the costs of doing business in those

countries, may help explain their economic success. In this regard, three values central to

the Confucian system of ethics are of particular interest: loyalty, reciprocal obligations,

and honesty in dealings with others.

In Confucian thought, loyalty to one’s superiors is regarded as a sacred dutyian absolute obligation. In modern organizations based in

Confucian cultures, the loyalty that binds employees to the heads of their organization can reduce the conflict between management and

labor that we find in more class-conseious societies. Cooperation between management and labor can be achieved at a lower cost in a culture

where the virtue of loyalty is emphasized in the value systems.

However, in a Confucian culture, loyalty to one’s superiors, such as a worker‘s loyalty to management, is not blind loyalty. The concept of

reciprocal obligations is important. Confucian ethics stresses that superiors are obliged to reward the loyalty of their subordinates by

bestowing blessings on them. If these “blessings“ are not forthcoming, then neither will be the loyalty. This Confucian ethic is central to the

Chinese concept of gumu’i, which refers to relationship networks supported by reciprocal obligations.53 Guam‘i means relationships,

although in business settings it can be better understood as connections. Today, Chinese will often cultivate a guam‘iwang, or “relationship

network,” for help. Reciprocal obligations are the glue that holds such networks together. If those obligations are not metiif favors done are

not paid back or reciprocatedithe reputation of the transgressor is tarnished, and the person will be less able to draw on his or her

gunmiwang for help in the future. Thus, the implicit threat of social sanctions is often sufficient to ensure that favors are repaid, obligations

are met, and relationships are honored. In a society that lacks a rule-based legal tradition, and thus legal ways of redressing wrongs such as

Violations of business agreements, guanxi is an important mechanism for building long-term business relationships and getting business

done in China. For an example of the importance of guanxi, read the Management Focus on China.

MANAGEMENT

,1 FreviousHighngm ( PreviousSection NextSection ) NextHighligm ;, “£

27 >

103 1 / 667

13
3

M:
arm
Nill
luuunon

.- Mmmgemem , In[evimilonnl Business , HIH, HUM, 129, Dirieiences m Cniime

Chapter 4
Introduction Page i 113 J/ 667

What II Culture?

What II Culture?

WM II Culture?

Whit II culture?
What II Culture?
What II Culture?

WW II Culture?

Social Struflure

Practice
5

Because language shapes the way people perceive the world, it also helps define culture. Countries With more than one language often have

more than one culture. Canada has an English-speaking culture and a French-speaking culture. Tensions between the two can run quite high,

With a substantial proportion of the French-speaking minority demanding independence from a Canada “dominated by English speakers.”

The same phenomenon can be observed in many other countries. Belgium] is divided into Flemish and French speakers, and tensions

between the two groups exist; in Spain, a Basque-speaking minority With its own distinctive culture has been agitating for independence

from the Spanish-speaking majority for decades; on the Mediterranean island of Cyprus, the culturally diverse Greek- and Turkish-speaking

populations of the island continuously engage in some level of conflict. The island is now partitioned into two parts as a consequence. While

it does not necessarily follow that language differences create differences in culture and, therefore, separatist pressures (e.g., Witness the

harmony in Switzerland, Where four languages are spoken), there certainly seems to be a tendency in this direction.56

Mandarin (Chinese) is the mother tongue of the largest number of people, followed by English and Hindi, Which is spoken in India.

However, the most Widely spoken language in the world is English, followed by French, Spanish, and Mandarin (i.e., many people speak

English as a second language). And, importantly, English is increasingly becoming the language of international business throughout the

world, as it has been in much of the developed world for years. When Japanese and German businesspeople get together to do business, it is

almost certain that they will communicate in English. However, although English is Widely used, learning the local language yields

considerable advantages. Most people prefer to converse in their own language, and being able to speak the local language can

build rapport and goodwill, which may be very important for a business deal. International businesses that do not understand the

local language can make major blunders through improper translation.

For example, the Sunbeam Corporation used the English words for its “Mist-Stick” mist-producing hair—curling iron when it entered the

German market, only to discover after an expensive advertising campaign that mist means excrement in German. General Motors was

troubled by the lack of enthusiasm among Puerto Rican dealers for its new Chevrolet Nova. When literally translated into Spanish, now

means star. However, When spoken it sounds like “no va,” Which in Spanish means “it doesn’t go.” General Motors changed the name of the

car to Caribe.57 Ford made a similar and somewhat embarrassing mistake in Brazil. The Ford Pinto may well have been a good car, but the

Brazilians Wanted no part of a car called “pinto,” Which is slang for tiny male genitals in Brazil. Even the world‘s largest furniture

manufacturer, IKEA from Sweden, ran into branding issues When it named a plant pot “J’Littebra” (Which means great or superbly good in

Swedish). Unfortunately, Jiitrebm resembles the Thai slang word for sex! Pepsi’s slogan “come alive With the Pepsi Generation” did not

quite work in China. People in China took it literally to mean “bring your ancestors back from the grave.”

Unspoken Language

,1 FreviousHighIigm < PreviousSection NexiSecxion ) NextHighligh! 1‘ 74 > > Do

Mn‘mr,t m u

Chapter 4
Immductlan

Introduction
Whlt la culture?

Whnt II Culture?

What I: Culture?
What la culture?
Whlt la culture?
Whnt II Culture?
What I: Culture?
What la culture?
Whlt la culture?
Whnt II Culture?
What I: Culture?
What la culture?
Whlt la culture?
Whnt II Culture?
What I: Culture?
What la culture?
Whlt la culture?
Whnt II Culture?
What I: Culture?
What la culture?
Whlt la culture?

Social Structure
Practice

mtmmt mm Bu HVH~A , H M Hm 12m Dlllt u tum u Cmtmu

Page ‘ 115 1/ 667

medium or largeiwith operations in different countries is how a society’s culture affects

the values found in the workplace. Management processes and practices may need to vary

according to culturally deterlnined work—related values. For example, if the cultures of

Brazil and the United Kingdom or the United States and Sweden result in different work-

related values, a company with operations in both countries should vary its management

processes and practices to account for these differences.

63

The fifth dimension was added as a function of the data obtained Via the Chinese Value Survey (CVS), an instrument developed by Michael

Harris Bond based on discussions With Hofstede.64 Bond used input from “Eastern minds,” as Hofstede called it, to develop the Chinese

Value Survey. Bond also references Chinese scholars as helping him create the values that exemplify this new long-term versus short-tenn

orientation. In his original research, Bond called the fifth dimension “Confucian work dynamism,” but Hofstede said that in practical terms,

the dimension refers to a long-term versus short-tenn orientation.

—@—

Work-Related Values 15 Selected Countries

Power Distance Uncertainty Avoidance Individualism Masculinity Long-Term Orientation

However, we should be careful about reading too much into Hofstede’s research. It has been criticized on a number of points.67 First.

Hofstede assumes there is a one-to-one correspondence between culture and the nation-state, but as we discussed earlier, many countries

have more than one culture. Second, Hofstede’s research lnay have been culturally bound. The research team was composed of Europeans

and Americans. The questions they asked of IBM employeesiand their analysis of the answersimay have been shaped by their own

cultural biases and concerns. So it is not surprising that Hofstede’s results confirm Western stereotypes because it was Westerners who

undertook the research. The later addition of the long-term versus short-terln dimension illustrates this point. Third, Hofstede’s informants

worked not only within a single industry, the computer industry, but also within one company, IBM. At the time, IBM was renowned for its

own strong corporate culture and employee selection procedures, making it possible that the employees’ values were different in

important respects from the values of the cultures from Which those employees came, as we also pointed out earlier.

Still, Hofstede’s work is the leading research the world has seen on culture. As such, it represents a great starting point for managers trying

to figure out how cultures differ and what that might mean for management practices. Also, several other scholars have found strong

evidence that differences in culture affect values and practices in the workplace, and Hofstede’s basic results have been replicated using

more diverse samples of individuals in different settings.63 Nevertheless, managers should use the results with caution. One reason for

caution is the plethora of new cultural values surveys and data points that are starting to become important additions to Hofstede‘s work.

Two additional cultural Values frameworks that have been examined and have been related to work-related and/or business-related issues are

the Global Leadership and Organizational Behavior Effectiveness instrument and the World Values Survey.

The Global Leadership and Organizational Behavior Effectiveness (GLOBE) instrument is designed to address the notion that a leader’s

effectiveness is contextual.69 It is embedded in the societal and organizational norms, values, and beliefs of the people being led. The initial

GLOBE findings from ()2 societies involving 175300 middle managers from 951 organizations build on findings by Hofstede and other

culture researchers. The GLOBE research established nine cultural dimensions: power distance, uncertainty avoidance, humane orientation,

institutional collectivism, in-gmup collectivisln, assertiveness, gender egalitarianism, future orientation, and performance orientation.

The World Values Survey (WVS) is a research project spanning more than 100 countries that explores people’s values and norms, how they

change over time, and what impact they have in society and business.70 The WVS includes dimensions for support for democracy; tolerance

of foreigners and ethnic minorities; support for gender equality; the role of religion and changing levels of religiosity; the impact of

globalization; attitudes toward the environment, work, family, politics, national identity, culture, diversity, and insecurity; and subjective

well-being.

As a relninderi, culture is just one of many factors that might influence the economic success of a nation. While culture’s importance should

not be ignored, neither should it be overstated. The Hofstede framework is the most significant and studied framework of culture as it relates

to work values and business that we have ever seen. But solne of the newer culture frameworks (e.g., GLOBE, WVS) are also becoming

popular in the literature, and they have potential to complement and perhaps even supplant Hofstede’s work with additional validation and

connection to work-related values, business, and marketplace issues. At the same time, the factors discussed in Chapters 2 and 3

economic, political, and legal systemsiare probably more important than culture in explaining differential economic growth rates over

time.

7
47 > > Do,1 FreviousHighligm ( PreviousSection NextSection ) NextHighligm L

Introduction

Whnt l: Culture?

Whnt I: Culture?
Whnt I: Culture?
What I: Culture?
Whnt l: Culture?
Whnt I: Culture?
Whnt I: Culture?
What I: Culture?
Whnt l: Culture?
Whnt I: Culture?
Whnt I: Culture?
What I: Culture?
Whnt l: Culture?
Whnt I: Culture?
Whnt I: Culture?
What I: Culture?
Whnt l: Culture?
Whnt I: Culture?
Whnt I: Culture?
What I: Culture?
Whnt l: Culture?
Whnt I: Culture?
Whnt I: Culture?
What I: Culture?
Whnt l: Culture?
Social Structure

illill’vilii Rn um rHl Hiill i7 .DiHi w HCLH .l>

Page

Cultural Change

An important point we Want to make in this chapter on culture is that culture is not a

constant: it evovesl mus.“—

RAlMOVDRS ciNEIAL

ERALMDVORS {NERALMOYORS

Several studies have suggested that economic advancement and globalization may be important factors in societal change.74 There is

evidence that economic progress is accompanied by a shift in values away from collectivism and toward individualism.75 As Japan has

become richer, the cultural emphasis on collectiVism has declined and greater individualism is being witnessed. One reason for this shift

may be that richer societies exhibit less need for social and material support built on collectives, whether the collective is the extended

family or the company. People are better able to take care of their own needs. As a result, the importance attached to collectiVism declines,

While greater economic freedoms lead to an increase in opportunities for expressing individualism.

The culture of societies may also change as they become richer because economic progress affects a number of other factors, Which in turn

influence culture. For example, increased urbanization and improvements in the quality and availability of education are both a function of

economic progress, and both can lead to declining emphasis on the traditional values associated With poor rural societies. The World Values

Survey, Which we mentioned earlier, has documented how values change. The study linked these changes in values to changes in a country‘s

level of economic development.“ As countries get richer, a shift occurs away from “traditional values” linked to religion, family, and

country, and toward “secular rational” values. Traditionalists say religion is important in their lives. They have a strong sense of national

pride; they also think that children should be taught to obey and that the first duty of a child is to make his or her parents proud.

The merging or convergence of cultures can also be traced to the world today being more globalized than ever. Advances in transportation

and communication, technology, and international trade have set the tone for global corporations (e.g., Disney, Microsoft, Google) to be part

of bringing diverse cultures together into a form of homogeneity we have not seen before.77 The examples are endlessiMcDonald‘s

hamburgers in China, The Gap in India. iPhones in South Africa. and MTV in Swedeniof global companies helping to foster a ubiquitous

youth culture. Plus, with countries around the world climbing the ladder of economic progress, some argue that the conditions for less

cultural variation have been created. There may be a slow but steady convergence occurring across different cultures toward some

universally accepted values and norms: This is known as the convergence hypothesis.7S

FOCUS ON MANAGERIAL IMPLICATIONS

CULTURAL LITERACY AND COMPETITIVE ADVANTAGE

International business is different from national business because countries and societies are

different. Societies differ because their cultures vary. Their cultures vary because ofclifferehces in

social structure, religion, language, education, economic philosophy, and political philosophy. Three

important implications for international business flow from these differences. The first is the need to

develop cross-cultural literacy. There is a heed not only to appreciate that cultural differences exist

but also to appreciate what such differences mean for international business. A second implication

centers on the connection between culture and national competitive advantage. A third implication

looks at the connection between culture and ethics in decision making. In this section, we explore

the first two of these issues in depth. The connection between culture and ethics is explored in Chapter 5..

To combat the danger of being iiI-informed, international businesses should consider employing local citizens to help

them do business in a particular culture. They must also ensure that home-country executives are weII-versed enough to

understand how differences in culture affect the practice of business. Transferring executives globally at regular intervals

to expose them to different cultures will help build a cadre of knowledgeable executives.—

—Ei—
—
—
—

Some scholars have argued that the culture of modern Japah lowers the costs of doing business relative to the costs in

most Western nations. Japan’s emphasis on group affiliation, loyalty, reciprocal obligations, honesty, and education ail

boost the competitiveness of Japanese companies—at least that is the argument. The emphasis on group affiliation and

loyalty encourages individuals to identify strongly with the companies in which they work. This tends to foster an ethic of

hard work and cooperation between management and labor “for the good ofthe company.” In addition, the availability of

a pool of highly skilled labor, particularly engineers, has helped Japanese enterprises deveiop cost-reducing process

innovations that have boosted their productivity.82 Thus, cultural factors may help explain the success enjoyed by many

Japanese businesses. Most notably, it has been argued that the rise ofJapah as an economic power during the second

half of the twentieth century may be in part attributed to the economic consequences of its culture.83

It also has been argued that the Japanese culture is less supportive of entrepreneurial activity than, say, American society.

In many ways, entrepreneurial activity is a product of an individualistic mihclset, not a classic characteristic of the

Japanese. This may explain why American enterprises, rather than Japanese corporations, dominate industries where

entrepreneurship and innovation are highly valued, such as computer software and biotechnology. Of course, exceptions

to this generalization exist. Masayoshi 80h recognized the potential of software far faster than any of Japan’s corporate

giahts; set up his company, Softbahk, in 1981; and over the past 30 years has built it into Japan’s top software distributor.

Similarly, dynamic entrepreneurial individuals established major Japanese companies such as Sony and Matsushita.

For international business, the connection between culture and competitive advantage is important for two reasons. First,

the connection suggests which countries are likely to produce the most viable competitors. For example, we might argue

that US. enterprises are likely to see continued growth in aggressive, cost-efficieht competitors from those Pacific Rim

nations where a combination of free market economics, Confucian ideology, group-oriehted social structures, and

advanced education systems can all be found (e.g., South Korea, Taiwan, Japan, and, increasingly, Chiha). Second, the

connection between culture and competitive advantage has important implications for the choice of countries in which to

locate production facilities and do business.

But as important as culture is to people, companies, and society, it is probably less important than economic, political, and

legal systems in explaining differential economic growth between nations. Cultural differences are significant, but we

should not overemphasize their importance in the economic sphere. For example, earlier we noted that Max Weber

argued that the ascetic principles embedded in Hinduism do not encourage entrepreneurial activity. While this is an

interesting academic thesis, recent years have seen an increase in entrepreneurial activity in India, particularly in the

information technology sector, where India is rapidly becoming an important global player. The ascetic principles of

Hinduism and caste-based social stratification have apparently not held back entrepreneurial activity in this sector.

A FreviousHighlight ( PreviousSection NextSection ) NextHighligm 1, L? A

118 / 667

> D
o

Assignment 1

Deadline: 03/03/2020 @ 23:59

Course Name: Intro to International Business

Instructions:

· : Students must mention question number clearly in their answer.

· Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions.

· All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism).

Case study

Reread the Management Focus on “China and Its Guanxi”, available in your e-book (page no.110) and answer the follow questions:

Assignment Question(s):

1. Why do you think it is so important to cultivate guanxi and guanxiwang in China?

2. What does the experience of DMG tell us about the way things work in China? What would likely happen to a business that obeyed all the rules and regulations, rather than trying to find a way around them as Dan Mintz does?

3- What ethical issues might arise when drawing on 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?

– PLEASE READ THEM CAREFULLY

Instructions – PLEASE READ THEM CAREFULLY

Assignment 1

D
ead
line:
0
3
/03/2020

@ 23:59

Course Name:

Intro to International Business

Instructions
:

·

:

Students must

mention question

number
clearly
in
their

answer.

·

Avoid plagiarism
, the work should be in
your own

words
, copying from
students or other resources

without proper referencing

will result in

ZERO
marks.

No exceptions.

·

All answered must
be typed using

Times New Roman
(size 12, double
–
spaced)
font. No pictures containing text will be accepted and will be
considered plagiarism).

Case study

Reread the Management Focus on

“
China and Its Guanxi”
,
available in your e
–
book (page
no.110
)

and answer the follow questions:

Assignment
Question
(s)
:

1.

Why do you think it is so important to cultivate guanxi and guanxiwang in China?

2.

What does the experience of DMG tell us about the way things work in China? What
would likely happen to a business that obeyed all the rules and regulations, rather than
trying to find a way around them as Dan Mintz does?

Assignment 1
Deadline: 03/03/2020 @ 23:59

Course Name: Intro to International Business
Instructions:
 : Students must mention question number clearly in their answer.
 Avoid plagiarism, the work should be in your own words, copying from
students or other resources without proper referencing will result in ZERO
marks. No exceptions.
 All answered must be typed using Times New Roman (size 12, double-
spaced) font. No pictures containing text will be accepted and will be
considered plagiarism).

Case study
Reread the Management Focus on “China and Its Guanxi”, available in your e-book (page
no.110) and answer the follow questions:
Assignment Question(s):
1. Why do you think it is so important to cultivate guanxi and guanxiwang in China?

2. What does the experience of DMG tell us about the way things work in China? What
would likely happen to a business that obeyed all the rules and regulations, rather than
trying to find a way around them as Dan Mintz does?