Cross-cultural management in
IB
Week 2
Lecture
17/10/2023
16 October International Business Strategy-Lecture 3
1 2023
Objectives of Lecture 3
To identify the major
To understand the To understand the
risks of
concept of culture and impact of cultural issues
internationalization
Hofstede’ study of on international
(including cultural
culture business.
risks).
To analyze the role of
To explain the
To identify cross- effective cross-cultural
significance of cross-
cultural management management in
cultural awareness in
challenges. international business
international business.
success.
16 October International Business Strategy-Lecture 3
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Risks of Political (Agarwal & Feils, 2007; Bekaert,
Internationalisation Harvey, Lundblad, & Siegel, 2014; Wyk,
I 2010),
In general, "risk" refer to
Country (Brown, Cavusgil, & Lord, 2015; Di
uncertain events or conditions
Gregorio, 2005),
related to conducting business in
foreign markets, which may have
adverse consequences for the
company (Miller, 1992).
Foreign exchange (Batten, Mellor, & Wan,
1993; Jacque, 1981) and
Cultural risks (Hain, 2011).
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Major Risks of Internationalisation
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Cross-cultural management in IB
16 October International Business Strategy-Lecture 2
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What do you see?
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What is Culture
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What is culture?
“The collective programming of the mind which
distinguishes the members of one human
group from another”
(Geert Hofstede, Culture's Consequences, 1984, p. 21)
International Business Strategy-Lecture 3
What is culture?
Culture is the attitudes, norms, and values that collectively shape our way of thinking.
It is this complex cognitive framework that we acquire within a particular social
environment.
Norms play a pivotal role in influencing how we perceive both ourselves and the world
around us.
Values, on the other hand, are the compass by which we judge what is virtuous or
wrong, acceptable or unacceptable, significant or insignificant, and ordinary or
extraordinary. These values act as guiding principles, guiding the formation of our
attitudes and preferences.
16 October International Business Strategy-Lecture 3
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Culture – Key Characteristics
A group phenomenon
• It is about shared values and meanings which dictate how groups of
people perceive the world, how they experience the self and how they
organise their life
Relative
• Cultures are not absolute – each national culture is relative to other
cultures’ ways of perceiving the world
Learned
• The learned human activities (derived from social environments) and
not the inherited animal characteristics (from your genetic makeup)
16 October International Business Strategy-Lecture 3
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Cultural differences
❖ Cultural differences can be at different levels
(e.g., national, organisational, ethnic,
occupational, family, etc).
❖ Cultural differences refer to the variations,
distinctions, and disparities that exist between
different cultures or cultural groups:
1.Language
2.Religion
3.Social Norms
4.Family Structure
5.Food and Cuisine
6.Time Perception
7.Gender Roles
8.Workplace Etiquette
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Corporate culture
Organisations provide managers with a set of rules, procedures
and norms of behaviour to guide action in the form of standard
operational procedures and organisational cultural norms.
Corporate culture reflects the norms, values, and approved (and
prescribed) behaviours of companies, divisions, or departments
within organisations.
It represents the perceived organisational realities as they affect
individuals and groups of employees.
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Cultural Convergence
There is increasing similarity between national cultures and a growing
similarity of attitudes, beliefs, and values (e.g., individualism) which is
believed to be driven by the West and international organisations.
1. Language Influence: The dominance of certain languages, such as
English
2. Media and Entertainment: The spread of international media and
entertainment, like music, films, and television shows,
3. Global Consumer Products: The availability of global brands and
products, such as fast-food chains, fashion brands, and technology, can
lead to a convergence of consumer culture.
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Cultural Divergence
Cultural divergence is the process by which different cultures become more distinct and
separate from one another. It is a process that helps maintain the distinct identities and
traditions of various cultural groups, even in an increasingly interconnected world.
1. Isolation: Geographical isolation, political barriers, or limited interaction with other
cultures can lead to the preservation of a culture's unique traits and practices.
2. Cultural Protectionism: Some societies and governments implement policies and
practices to protect and promote their cultural heritage, language, and traditions.
3. Resistance to External Influences: When a culture actively resists external influences
and maintains strict boundaries to protect its customs and traditions, it can experience
cultural divergence.
4. Religious or Ideological Differences: Differences in religious beliefs, political ideologies,
or worldviews can create boundaries between cultures.
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In which direction is the world going?
Do cultures become more
alike over time as a result
of globalisation
(convergence) or do they
maintain their uniqueness
or even grow more
different from each other
(divergence)?
16 October International Business Strategy-Lecture 3
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Cultural Convergence or Divergence?
❖ In some respects, we seem to be culturally converging (at
a superficial level), in others diverging (at a deeper level
of understanding).
❖ A foreign culture may penetrate the space of our own
culture at one level (e.g., adopting practices from another
culture), but it might trigger a counter reaction of our
embedded culture at a different level
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Cultural Hybridization
Cultural hybridization, also known as cultural mixing, is a phenomenon where
different cultural elements, practices, or traditions from diverse sources come
together to create new, blended, and often unique cultural expressions.
1. Fusion of Cultural Elements: involves the blending of elements from
multiple cultures, such as combining music styles, culinary traditions,
clothing, art forms, and languages.
2. Creation of New Identities: It can lead to the development of new cultural
identities that incorporate aspects from various cultural backgrounds.
3. Globalization: increased international travel, trade, and digital
communication, has accelerated the exchange of cultural elements.
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What are dimensions of culture?
Cultural dimensions are frameworks or models that help to analyse and understand the various aspects of
culture, providing a structured way to examine and compare different cultures based on specific
characteristics.
Examples of dimensional approach to culture:
1. Hofstede’s study of culture
2. Global Leadership and Organizational Behavior Effectiveness Research Program (GLOBE) (House, Hanges,
Javidan, Dorfman, & Gupta)
3. Hall’s study of culture (time, communication and space)
4. World Values Survey (WVS)
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Hofstede’s model
Dimensions of national culture
Cultural dimensions
• Power distance
• Individualism-collectivism
• Masculinity-femininity
• Uncertainty avoidance
• Long-term vs. short-term orientation
• Indulgence-restraint
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How to access information on
cultural dimensions?
For the cultural dimensions https://www.hofstede-
insights.com/country-comparison/
go to:
For Hofstede’s videos https://geerthofstede.com/training-
introducing each of the consulting/online-lectures/
dimensions go to:
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Power Distance
Small Power Distance Large Power Distance
Hierarchy in organisations Hierarchy in organisations
The degree to which less means an inequality of
roles, established for
reflects existential inequality
between higher and lower
powerful members of convenience levels
organizations and institutions
accept the fact that power is not
distributed equally Subordinates expect to
be consulted
Subordinates expect to be
told what to do
Privileges and status Privileges and status
symbols are frowned symbols are normal and
upon popular
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Selected PD Index Scores
Relative positions of countries on scale 1-100
Power distance
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Individualism /Collectivism
Individualism: the tendency of
people to look after themselves and
their immediate family only.
Collectivism: the tendency of people
to belong to groups who look after
each other in exchange for loyalty
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Individualism /Collectivism
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Uncertainty Avoidance
Uncertainty avoidance: measures a culture's comfort with ambiguity
and its willingness to take risks. The way that a society deals with the
fact that the future can never be known.
High uncertainty avoidance cultures may have a strong hierarchical
structure and centralized control. Managers in these cultures may be
more inclined to maintain strict control over their teams and closely
monitor performance.
In contrast, low uncertainty avoidance cultures may favour a more
decentralized and participative management style.
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Uncertainty Avoidance
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Masculinity vs. Femininity
This dimension assesses the degree to which a culture emphasizes traditionally
"masculine" values like assertiveness, competition, and achievement versus
"feminine" values like nurturing, cooperation, and quality of life.
In cultures that prioritize masculinity, managers may exhibit more assertive and
competitive leadership styles.
They might set ambitious goals, encourage competition among employees, and
focus on achieving results.
In contrast, cultures that lean towards femininity may prefer more collaborative,
participative, and nurturing leadership styles.
Managers in such cultures may prioritize employee well-being and work-life
balance.
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Long-Term Orientation vs. Short-Term
Orientation
This dimension deals with a culture's orientation toward time and traditions. Cultures
with long-term orientation emphasize long-range planning and traditional values
while short-term orientation focus on immediate gratification and pragmatism.
Cultures that lean towards long-term orientation often prioritize sustained, gradual
growth and investment in international markets.
Companies from these cultures may be more willing to make substantial long-term
commitments, such as establishing subsidiaries or forming long-term partnerships.
In cultures with short-term orientation, there may be a greater focus on achieving
quick returns and profitability in international ventures.
Companies from these cultures might favour strategies like exporting or joint
ventures with a shorter payback period
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Long-Term Orientation vs. Short-Term Orientation
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Indulgence vs. Restraint
Indulgence vs. Restraint: this dimension relates to a culture's
approach to enjoying life and having fun (indulgence) versus
controlling one's desires and impulses (restraint).
Indulgent cultures may place a stronger emphasis on work-
life balance, and managers may be more accommodating of
employees' personal needs and family time.
In restrained cultures, there may be a greater expectation of
dedication to work.
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Indulgence vs. Restraint
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Criticism of Hofstede’s Cultural Dimensions
Simplification of Complex Cultures: One of the main criticisms of Hofstede's model is that it
simplifies the complexity of cultures by reducing them to a limited set of dimensions.
Static Nature: Hofstede's model assumes that cultures are static and unchanging over time.
In reality, cultures evolve and adapt, influenced by various factors such as globalization,
technology, and social changes. The model doesn't account for cultural shifts and dynamics.
National vs. Individual Differences: Hofstede's model is based on national cultural
dimensions, but it doesn't address individual variations within a culture. People within the
same culture can have diverse values and behaviours, which the model doesn't capture.
Sample Bias: Some critics argue that Hofstede's data was collected from IBM employees,
which may not be representative of the general population. This sample bias can affect the
generalizability of the model's findings.
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Cross-cultural business contexts
Rugman and Collinson (2009), p. 133
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Communicating across cultures
Communication is the essence of good management. It lies at the
heart of effective organisations.
it is surprising how difficult it can be to communicate with others,
especially across cultures. E.g. We may unintentionally come
across as impatient, condescending, and sometimes just rude.
From a managerial standpoint, such behaviour only serves to
create barriers to organizational success.
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The challenge
A possibility of misreading each
other’s messages due to differences
in cultural logic between the
presenter and the audience.
Cultural logic: The process by which people
attribute meaning to the words and actions
of others based on the local meanings
embedded within their own culture.
How does culture influence negotiations? Relationship building
Building relationships between the negotiating parties is an important
element of the negotiation process and a prerequisite of the formal
start of business discussions.
The expectations for relationship-building reflect the way societies
conduct their day-to-day and business activities.
- E.g., In collectivist cultures and where the formal institutions environment is
underdeveloped, business networks are highly valued and the relations between
individuals act as a way of developing trust between the negotiating parties.
- Relationship building in highly collectivists societies allows organisations to not
only develop a working relationship with the other party or parties but to also have
access to their social capital and networks, including relationships that the
company would like to use to strengthen and expand its business activities
How does culture influence negotiations?
Treatment of time
The time orientations and culture of the negotiating counterparts:
Time and relationship-building in a culture (Hall’s study):
Monochronic (e.g., Germany, Switzerland and the US) task
completion is prioritised over relationships, people tend to do
one thing at a time, and deadlines are strictly adhered to).
Polychronic (e.g., Middle East, South Asia and South America)
relationships are valued more than task completion people tend
to do many things simultaneously, and deadlines are seen to be
flexible
16 October
37 POWERPOINT PRESENTATION TEMPLATE BLUE
2023
Cross-cultural negotiation in international
business
Negotiation is a crucial aspect in all inter-organisational
relationships: strategic alliances, joint ventures, mergers and
acquisitions, licensing, sales of products and services, etc.
Global managers spend more than 50% of their time in formal
or informal negotiations (Perlmutter, 1983; Fayerweather &
Kapoor, 1972).
Effective cross-cultural negotiation is one of the most
important global business skills a manager can possess.
16 October
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Cross-cultural negotiation in international
business
Overcoming these challenges in cross-cultural negotiation requires cultural competence, open-
mindedness, and a willingness to adapt and learn.
Preparation: In-depth preparation is crucial for cross-cultural negotiations, including understanding
the cultural context, norms, and the specific challenges associated with the negotiation.
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Cross-cultural negotiation challenges
Communication Barriers: Language differences, accents, and communication styles can lead to misunderstandings
and misinterpretations, making effective communication difficult.
Different Cultural Norms: What is considered appropriate behaviour or communication in one culture may be
inappropriate or offensive in another.
Non-Verbal Communication: Non-verbal cues, such as gestures, facial expressions, and body language, can vary
greatly across cultures and may be easily misunderstood.
Negotiation Styles: Some cultures prefer a direct, assertive approach, while others favour an indirect, harmonious
approach. Understanding and adapting to these styles is crucial.
Time Orientation: Different cultures have varying views on time and punctuality. Some cultures prioritize punctuality
and efficiency, while others may have a more relaxed attitude towards time.
Decision-Making Processes: Decision-making processes can vary from hierarchical and centralized to decentralized
and consensus based. Understanding these processes is crucial for reaching agreements.
Cultural Bias and Prejudice: Negotiators may hold biases or stereotypes about other cultures, which can impact their
behaviour and decisions during negotiations.
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Further readings
Hofstede, G. (1994). The business of international business is culture. International Business
Review, 3(1), 1-14.
Fang, T. (2003). A Critique of Hofstede’s Fifth National Culture Dimension. International Journal
of Cross Cultural Management, 3(3), 347-368.
Eduardsen, J. and Marinova, S., 2020. Internationalisation and risk: Literature review, integrative
framework and research agenda. International Business Review, 29(3), p.101688.
Hofstede, G., Hofstede, G.J. and Minkov, M. 2010, Cultures and Organizations: Software of the
Mind. Intercultural Cooperation and Its Importance for Survival (3rd edition), McGraw-Hill: New
York.
Tung, R. L. and Stahl, G. K. 2018, The tortuous evolution of the role of culture in IB research:
What we know, what we don’t know, and where we are headed, Journal of International Business
Studies 49, 1167–1189.
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Next week
Career Booster Week – No
Classes
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