17‐12‐2018

Cultural  Differences & International 
Business

Why Did Walmart Fail in Germany?

1.Reflect on the cultural traditions in Germany and how they

shape the country’s business environment. What should the
Walmart executives have done differently when it came to
acknowledging (and embracing) the German shopping culture?

2. How did Walmart’s inability to recognize typical German

business practices contribute to managers leaving the company?

3. After almost 10 years out of the German retail market,

suppose Walmart decided to give it another go and open retail
operations in Germany. What advice would you give the
company on setting up a retail organization in Germany?

1
 17‐12‐2018

What Is Culture?
• Culture - a system of values and norms that are
shared among a group of people and that when
taken together constitute a design for living
where
– values are abstract ideas about what a group believes to
be good, right, and desirable
– norms are the social rules and guidelines that prescribe
appropriate behavior in particular situations
• Society - a group of people who share a common
set of values and norms

What Determines Culture?

• The values and norms of a culture evolve
over time

• Determinants include
1. religion
2. political and economic philosophies
3. education
4. language
5. social structure

2
 17‐12‐2018

What Determines Culture?

Determinants of Culture

How Do Cultural Differences

Affect International Business?
• Understanding and adapting to the local cultural is
important international companies
– cross-cultural literacy - an understanding of how
cultural differences across and within nations can affect
the way in which business is practiced
• cross-cultural literacy is important for business success
• Link between culture and the costs of doing business
in a country or region
• MNEs can also be agents of cultural change
e.g. McDonald’s

3
 17‐12‐2018

How Are Individuals

And Groups Different?
• In Western societies, there is a focus on the individual
– individual achievement is common
– dynamism of the U.S. economy
– high level of entrepreneurship

• But, creates a lack of company loyalty and failure

to gain company specific knowledge
– competition between individuals in a company instead of
than team building
– less ability to develop a strong network of contacts within
a firm

How Are Individuals

And Groups Different?
• In many Asian societies, the group is the
primary unit of social organization
– discourages job switching between firms
– encourages lifetime employment systems
– leads to cooperation in solving business problems

• But, might also suppress individual creativity

and initiative

4
 17‐12‐2018

How Do Religious And

Ethical Systems Differ?
• Religion - a system of shared beliefs and rituals
that are concerned with the realm of the sacred
• Four religions dominate society
1. Christianity
2. Islam
3. Hinduism
4. Buddhism
5. Confucianism is also important in influencing behavior
and culture in many parts of Asia

What Is The Role

Of Language In Culture?
• Language - the spoken and unspoken
(nonverbal communication such as facial
expressions, personal space, and hand
gestures) means of communication
– countries with more than one language often
have more than one culture
• Canada, Belgium, Spain

5
 17‐12‐2018

How Does Culture

Impact The Workplace?
• Management processes and practices must
be adapted to culturally determined work-
related values
• Geert Hofstede studied culture using data
collected from 1967 to 1973 for 100,000
employees of IBM
– Hofstede identified four dimensions that
summarized different cultures

How Does Culture

Impact The Workplace?
• Hofstede’s dimensions of culture:
1. Power distance - how a society deals with the fact
that people are unequal in physical and intellectual
capabilities
2. Uncertainty avoidance - the relationship between
the individual and his fellows
3. Individualism versus collectivism - the extent to
which different cultures socialize their members into
accepting ambiguous situations and tolerating
ambiguity
4. Masculinity versus femininity -the relationship
between gender and work roles

6
 17‐12‐2018

How Does Culture

Impact The Workplace?
Work-Related Values for 20 Countries

How Does Culture

Impact The Workplace?
• Hofstede later expanded added a fifth
dimension called Confucian dynamism or
long-term orientation
– captures attitudes toward time, persistence,
ordering by status, protection of face, respect for
tradition, and reciprocation of gifts and favors
• Japan, Hong Kong, and Thailand scored high on this
dimension
• the U.S. and Canada scored low

7
 17‐12‐2018

Was Hofstede Right?

• Hofstede’s work has been criticized for several
reasons
– made the assumption there is a one-to-one relationship
between culture and the nation-state
– study may have been culturally bound
– used IBM as sole source of information
– culture is not static – it evolves
• But, it is a starting point for understanding how
cultures differ, and the implications of those
differences for managers

Does Culture Change?

• Culture evolves over time
– changes in value systems can be slow and painful
for a society
• Social turmoil - an inevitable outcome of
cultural change
– as countries become economically stronger,
cultural change is particularly common
• economic progress encourages a shift from collectivism
to individualism
– globalization also brings cultural change

8
 17‐12‐2018

What Do Cultural Differences

Mean For Managers?
1. It is important to develop cross-cultural literacy
– companies that are ill informed about the practices
of another culture are unlikely to succeed in that
culture
• To avoid being ill-informed
– consider hiring local citizens
– transfer executives to foreign locations on a regular
basis
• Managers must also guard against
ethnocentrism
– a belief in the superiority of one's own culture

What Do Cultural Differences

Mean For Managers?
2. There is a connection between culture and
national competitive advantage
– suggests which countries are likely to produce
the most viable competitors
– has implications for the choice of countries in
which to locate production facilities and do
business

9
 17‐12‐2018

Management Focus on DMG-Shanghai.

Answer the following questions:

a. Why do you think it is so important to cultivate guanxi

and guanxiwang in China?
b. What does the experience of DMG tell us about the way
things work in China? What would likely happen to a
business that obeyed all of the rules and regulations rather
than trying to find a way around them as Dan Mintz
apparently does?
c. What are the ethical issues that might arise when drawing
upon guanxiwang to get things done in China? What does
this suggest about the limits of using guanxiwang for a
Western business committed to high ethical standards?

10