Culture’s Effect In International Business

Culture can differ sharply, even between neighboring countries. Exhibit 3.12 examines cultural differences
between Mexico and the United States. Effective handling of the cross-cultural interface is a critical source
of firms’ competitive advantage. Managers not only need to develop empathy and tolerance toward cultural
differences but also must acquire a sufficient degree of factual knowledge about the beliefs and values of
foreign counterparts. Cross-cultural proficiency is paramount in many managerial tasks, including:

• Managing employees
• Communicating and interacting with foreign business partners
• Negotiating and structuring international business ventures
• Developing products and services
• Preparing advertising and promotional materials

Exhibit 3.12 Perceived Cultural Attributes of Mexico and the United States

Dimension mexico united states

Role of context High-context culture that values Low-context culture that emphasizes
social trust, personal goodwill, and efficiency, explicit communications,
ritualized business and “getting down to business”

Individualism versus collectivism Relatively group oriented. Extended Relatively individualistic. Emphasis
families, teamwork, and group on personal freedom and working
loyalty are valued. alone. Group loyalty is less valued.

Time orientation Fluid and polychronic. Long-term Rigid and monochronic. Business is
relationships are valued. Mexicans short-term oriented and values profit
emphasize the past and believe they above all else. Americans believe
have little control over the future. they can control the future.

Religion Conversational distance is close. Conversational distance is ample.

Personal space is less valued. Personal space is highly valued.

Language Christianity is very influential in Americans’ religious orientation is

daily life, and often in business. diverse and declining
 Negotiations Spanish dominates, with little While English dominates, there is
linguistic diversity. much linguistic diversity.
Business relations Tend to progress slowly. Decisions Emphasis on efficiency and quick
take time. Legalism is avoided in decision making. Agreements are
agreements. often legalistic.

Business meetings Arriving late is acceptable. Meetings Americans are time-oriented,

are informal and usually don’t follow arriving promptly to meetings, which
a strict agenda. often follow a formal agenda.

Superior–subordinate relation Firms are hierarchical, with much Lower power distance. Firms are
power distance. Senior managers are “flatter,” with less hierarchy.
relatively authoritarian. Relations with superiors are informal
and easy-going
Style of dress in busines Conservative, emphasizing dark Business casual is widely accepted.
suits. High-status personnel are “Dressing the part” is less important.
expected to dress the part.

Sources: Based on Geert Hofstede, Culture’s Consequences (Beverly Hills, CA: Sage, 1980); Boye De
Mente, The Mexican Mind (Beverly Hills, CA: Phoenix Books, 2011); Lucila Ortiz, A Primer for Spanish
Language, Culture and Economics (Bloomington, IN: Xlibris, 2011).

• Preparing for international trade fairs and exhibitions

• Screening and selecting foreign distributors and other partners
• Interacting with current and potential customers from abroad

Let’s consider specific examples of how cross-cultural differences may complicate company activities.

Developing products and services. Cultural differences necessitate adapting marketing activities to suit the
specific needs of target markets. Johnson & Johnson developed d ifferent varieties of its mouthwash,
Listerine, for foreign markets. For instance, it created alcohol-free Listerine Zero for Muslim countries
where spirits are forbidden. For Asian markets, it launched Green Tea Listerine. In Europe, consumers want
their mouthwash to solve more complex problems than just bad breath, so the firm developed an advanced
gum treatment rinse.18 Providing services. Firms that engage in services such as lodging and retailing
substantially interact with customers, implying greater cultural interaction and the potential for cognitive
and communication gaps. Imagine a Western lawyer who tries to establish a law office in China or a
Western restaurant chain operating in Russia. Both firms will encounter substantial cultural challenges.
Differences in language and national character have the same effect as trade barriers.19 Organizational
structure. Some companies prefer to delegate authority to country managers, which results in a
decentralized organizational structure. Other firms have centralized structures, in which power is
concentrated at regional or corporate headquarters. Firms may be bureaucratic or entrepreneurial. How do
you deal with a bureaucratic partner or manage distantly located, decentralized subsidiaries? Teamwork.
Cooperating with partners and host-country nationals to achieve common organizational goals is critical to
business success. But what should managers do if foreign and domestic nationals don’t get along? The
Chinese home appliance manufacturer Haier (www.haier.com) delayed acquiring overseas firms because
management felt it lacked the ability to manage foreign nationals and integrate differing cultural systems.
Pay-for-performance system. In some countries, merit is not the main basis for promoting employees. In
China and Japan, a person’s age is the most important determinant, but how do such workers perform when
Western firms evaluate them using performance-based measures? Lifetime employment. In some Asian
countries, firms are very protective of their employees, who may work for the same company all their lives.
The expectations that arise from such devoted relationships can complicate dealings with outside firms.
Western managers may struggle to motivate employees who expect they will always have the same job.
Union–management relationships. In Germany, union bosses hold the same status as top-level managers
and are allowed to sit on corporate boards. Many European firms have a business culture in which workers
are relatively equal to managers. This approach can reduce the flexibility of company operations because it
makes it harder to lay off workers. Attitudes toward ambiguity. In some countries, people have a hard time
tolerating

ambiguity, which refers to situations in which information can be understood in more than one way. For
example, some bosses give exact and detailed instructions, whereas others give vague and incomplete
instructions. If you’re not comfortable working with minimum guidance or taking independent action, you
may not fit well into some cultures. Negotiations. Negotiations arise in virtually all aspects of business, as
when the firm takes on a partner or a supplier–buyer relationship. Goals, interests, ethics, and cultural
assumptions vary cross-culturally, which can complicate forming and maintaining business relationships.
In most of Northern Europe, negotiations are relatively efficient, impersonal, and unsociable; negotiators
get down to business quickly. Technology. In the past, distinctive cultures developed because regions had
limited contact with each other. Today, various information, communications, and transportation
technologies bring people into close contact. The Internet and other communications technologies imply
greater likelihood of cross-cultural miscommunications and blunder. To help reduce problems, managers
use software that instantly converts messages into any of dozens of languages.