International Business

PGDM

Dr. Pallavi Mody

Email: pallavimody@spjimr.org

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 The four major risks in International Business

Commercial
Risk

Risk in
Cross Currency
Cultural Risk International Risk
Business

Country Risk

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 What is Cross Cultural Risk?
Risk arising out of doing business with different cultural groups

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 LEVELS OF CULTURE

Usual visible behavior patterns; food, festivals, fashion

OVERT / SURFACE Expressing through dresses, language, music, dances and
performances , games, literature, art & craft, architecture

Communication styles and rules; styles of

greetings, touching, gestures, facial expressions, body language

Notion of courtesy, manners, friendship, cleanliness, beauty

Concept of self, time, fairness, justice

DEEP CULTURE
HIDDEN Rules related to
age, sex, family, class, religion, marriage, raising children

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 What is Culture?

“The collective mental “Culture is ‘software of the mind’ or

programming of a group of ‘Culture is human-made how we think and
people" part of environment’ reason, differentiates us from other
groups”
Geert Hofstede Herskovits
Geert Hofstede

Culture is to an organization what

‘Culture is interplay of sameness and differences; all cultures are
simultaneously very same and very different. While as human
beings, we share many commonalities, as groups of people or
societies we exhibit many differences’.
Harry Trianadis
personality is to the individual
Culture is the shared
philosophies, ideologies, values, assumpti
ons, beliefs, expectations, attitudes and
norms that knit a community together

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 Role of Organizations in Establishing Culture

• What is the role of organization in

establishing collective culture?
• Symbolic rites
• Recruitment guidelines
• Public punishment/ reward
• Setting examples by leaders

• Is culture a corporate or a business

specific concept
• Tata and Reliance

6
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 Core values in International Business

• Respect for human dignity

• Respect for basic rights
• Good citizenship
• these core values establish a moral compass for business practices

.. “Do unto others as you would have others do unto you”

• Confucius, Bible, Gandhi, Kant, …

• Prime Directive of the Federation(Star Trek) : Do not judge or interfere in other cultures

7
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 Understanding and Coping with
the Cultural Differences in IB

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 Edward T. Hall’s Framework
(1914-2009)
American Anthropologist
Books
• The hidden dimension
• The silent language

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 Country Mapping
High and Low Context Cultures

High Context Cultures Chinese

• Personal relations and goodwill are valued Indian
• Sensitive to non-verbal cues & ‘body language’ and rituals Korean
• Establish social trust first Japanese
• Negotiations Slow and ritualistic Arab
• Find difficult to say ‘no’ Spanish
• Indirect and polite ‘face-saving’ style Italian
Low Context Cultures English
• Get down to business first North America
• Expertise and performance is valued Scandinavian
• Use specific, legalistic contracts to conclude agreements Swiss
• Negotiations are efficient, logical and convincing German

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 Managing Cultural Differences
Erin Meyers
Story
JV between Nestle and
Packaged Chinese Snacks

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 Story: Chinese and Swiss
Karl Morel, an acquisitions expert from Nestlé, found himself in a challenging situation when he
was negotiating a joint venture in China.

Morel led a team to Shanghai to explore a venture with a company that made packaged Chinese
delicacies.

The initial meetings with eight Chinese executives had him baffled. Morel and his team were in
formal business mode- polite and transparent, providing all of the details the Chinese wanted.
They even hinted at signing a legal contract.

“But they were impenetrable and unwilling to budge on any of their demands,” Morel said. They
went on discussing without coming to any conclusion.

By the end of the week, Morel and his colleagues were frustrated as they had not made any
headway.

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 Analysis: High and Low Context Cultures

Chinese culture is High Context Cultures that relies on

• Non-verbal communication that builds guanxi (relationship) first
• Sensitive to non-verbal cues and body language and rituals

European culture is Low Context Culture that relies on

• Elaborate verbal explanation
• Express ideas clearly, logically and convincingly
• Use specific, legalistic contracts to conclude agreements

Chinese were frustrated as they could not trust and Europeans were frustrated
as besides being so transparent and logical there were no results

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 Solution: Chinese and Swiss
Morel consulted expert, who advised to invite the Chinese counterparts out for dinner and
build relationship.

• Guanxi is a Chinese term used to describe relationships. It is important to open up personally

first, build trust, the deal may follow.
• There was live music and plenty of food from the Tianjin area of China, where the owner of
the Chinese company was from.
• It was an excellent dinner, and there was plenty of socializing. The two groups toasted each
other several times in a sign of mutual respect and emphasized their happiness at the
prospect of a long-term relationship.
• After restarting the meetings the following Monday, the Chinese were much more willing to
cooperate and the teams made excellent progress during their second week together.

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 Hofstede’s Cultural
Dimension (1928)
Dutch Social Psychologist
Books
• Culture's Consequences: International Differences in Work-Related Values
• Culture and Organization: Software of the mind (3rd edition 2010)

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 Hofstede's Culture Dimensions

Power Distance

Indulgence Individualism

Long Term
Masculinity
Orientation

Uncertainty
Avoidance

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 Hofstede's Culture Dimensions
India and US
India in comparison with United States

Power Distance

77

91
Indulgence 40 Individualism
68
48 India
26

26
56 United States
51
40 62

Long Term
46 Masculinity
Orientation

Uncertainty
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 Hofstede's Culture Dimensions
India and Japan
India in comparison with Japan

Power Distance

77

54
Indulgence Individualism
48 India
42
26 46

Japan

51 56
95
Long Term
88 40 Masculinity
Orientation

92

Uncertainty
Avoidance
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 Hofstede's Culture Dimensions
India and Germany

India in comparison with Germany

Power Distance
77

Indulgence 35
67
Individualism
40 48
India
26

Germany
51
56
Long Term 66
40 Masculinity
Orientation 83

65

Uncertainty
Avoidance
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 Hofstede's Culture Dimensions
India and China

India in comparison with China

Power Distance
80
77

India
Indulgence Individualism
48
26 24 20
China

30 56
51 66
Long Term
87 40 Masculinity
Orientation

Uncertainty
Avoidance

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 Managing cultural
differences
A Few Rules

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 Task-based Culture working with
relationship-based culture
• Put more time and effort into organizing meals or social events to be shared.

• During those engagements, drop talks about work. Laugh together, and make friends.

• Beyond meals, make all efforts to find time to let your guard down with those you’d like to
build trust with, and to build up personal bonds.

• There is a very clear, practical benefit to investing in affective relationship-building, especially

in emerging markets. Very often the relationship is, in itself, the business contract, so it is
important to join the crowd and show your true self to feel a personal bond.

• In these cultures, trust is like an insurance policy: – it’s an investment you need to make up
front, before the need arises.

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 Relationship-based culture working
with Task-based Culture

• Don’t throw out socializing altogether. Go ahead and organize a lunch but if it is likely to
stretch to ninety minutes or longer, prepare your colleagues in advance.

• Feel free to set up evening dinner or drinks, but if your counterparts leave early to rest or
catch up on work, don’t take offence.

• Recognize that a personal bond might help, but the business is more likely to come with
cognitive proof of a high-quality product.

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 How To Say “This Is Crap” In Different
Cultures

Giving Feedback

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 Managers in different parts of the world are
conditioned to give feedback in different ways.

• The Americans are trained to wrap positive messages around negative ones

• The Germans typically use strong words when complaining or criticizing in order
to make sure the message registers clearly and honestly.

• The Dutch manager learns always to be honest and to give the message straight.

• The French are trained to criticize passionately and provide positive feedback
sparingly.

• The Chinese manager learns never to criticize a colleague openly or in front of

others

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 Takeaway?

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