Chapter 2

C H A P T E R

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Culture in Business
Learning Objectives

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Describe culture, and explain the his chapter explains the significance of culture to significance of both national culture international business. Culture is one of the most and subcultures. challenging elements that managers face in international business. Managers must have Identify the components of culture, cultural literacydetailed knowledge about a and describe their impact on business culture that enables people to live and work within activities around the world. it. The main components of culture are aesthetics, values and attitudes, manners and customs, social Describe cultural change, and structure, religion, personal communication, explain how companies and culture education, and physical and material environments. affect one another. A cultures aesthetics is important to formulating strategies, as are peoples values because they influence attitudes toward time, work, Explain how the physical achievement, and cultural change. Knowledge of environment and technology manners and customs is necessary for avoiding influence culture. offensive behavior. Knowing the basics of other Describe the two main frameworks religions helps managers understand behavior. The used to classify cultures and explain ability to speak the language and understand unspoken language allows managers to understand their practical use. a people. A cultures educational aspects are important to a company, as is its material culture. Several tools developed to help analyze and classify cultures include the Hofstede framework and the Kluckhohn-Strodtbeck framework.

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Chapter 2

Many PowerPoint Slides, including both the original text art and newly created images, have been developed and are available for you to coordinate with Chapter 2 materials presentation. ANNOTATED OUTLINE 1. INTRODUCTION This chapter describes culture in the context of international business. Social institutions, religion, language, and other elements of culture affect international business. Each nations culture can affect business practices and international competitiveness. WHAT IS CULTURE? Culture is the set of values, beliefs, rules, and institutions held by a specific group of people. The main components of culture include: aesthetics, values and attitudes, manners and customs, social structure, religion, personal communication, education, and physical and material environments. Accommodating Culture: Avoiding Ethnocentricity 1. Managers must strive to overcome ethnocentricitythe belief that ones own ethnic group or culture is superior to that of others. Ethnocentricity causes people to view other cultures in terms of their own, causing them to overlook important human and environmental differences among cultures. 2. International business projects can be undermined by ethnocentricity when a firms employees are insensitive to cultural nuances. Many international projects failed because companies changed something fundamental to a culture and resisted by a local government, labor, or the general public. Understanding Culture: Developing Cultural Literacy 1. Managers working directly in international business should develop cultural literacydetailed knowledge about a culture that enables a person to function effectively within it. Cultural literacy improves the ability to manage employees, market products, and conduct negotiations in other countries. 2. Because culture dictates that many products incorporate local tastes and preferences, cultural literacy brings a company closer to customer needs and desires and improves competitiveness. Educational Materials to Use

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A.

National Culture and Subcultures We tend to invoke the concept of the nation-state when speaking of culture, referring to British and Indonesian cultures as if all Britons and all Indonesians were culturally identical. The concept of national culture is a generalizationBritish culture includes English, Scottish, and Welsh. 1. National Culture a. Nation states support and promote the concept of a national culture by building museums and monuments to preserve the legacies of important events and people.

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Chapter 2 b. Nation-states intervene in business to help preserve their national cultures (e.g., French government trying to stem the invasion of the English language). c. Companies get involved in supporting culture, in part, for the public relations benefit. Subcultures a. A subculture is a group of people who share a unique way of life within a larger, dominant culture. Subcultures can differ from the dominant culture in language, race, lifestyle, values, attitudes, or other characteristics. b. Companies must be mindful of subcultures when formulating business strategies (e.g., China is comprised of over 50 distinct ethnic groups). c. Decisions regarding product design, packaging, and advertising must consider distinct cultures. d. Subcultures also can extend beyond national borders (e.g., Arab, Jewish, and Chinese cultures).

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COMPONENTS OF CULTURE A peoples culture includes what they consider beautiful and tasteful, their underlying beliefs, their traditional habits, and the ways in which they relate to one another and their surroundings. The main components of culture include: aesthetics, values and attitudes, manners and customs, social structure, religion, personal communication, education, and physical and material environments. A. Aesthetics 1. Aesthetics include what is in good taste in the arts (including music, painting, dance, drama, and architecture), the imagery evoked by certain expressions, and the symbolism of certain colors. 2. Aesthetics are important for doing business in another culture. Appropriate colors for advertising, product packaging, and even work uniforms can enhance success (e.g., Green is favored in Islam, so packaging is often green in Islamic countries). 3. Music is also deeply embedded in culture and should be considered when developing promotions. 4. Blunders can result from selecting inappropriate colors and symbols for advertising, product packaging, and architecture (e.g., Nike Air resembled Allah). Educational Materials to Use

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B.

Values and Attitudes Values are ideas, beliefs, and customs to which people are emotionally attached such as honesty, marital faithfulness, freedom, and responsibility. Values are
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Chapter 2 important to business as they affect the work ethic and desire for material possessions. Some cultures value leisure and others value hard work. They also can be the reason why a culture resists certain products (e.g., Because Muslims believe drugs, alcohol, and some music and literature undermine their values, Islamic-law nations exact severe penalties for the possession of drugs and alcohol). Attitudes are positive or negative evaluations, feelings, and tendencies that individuals harbor toward objects or concepts. Attitudes are learned from role models, including parents, teachers, and religious leaders. They differ from one country to another because they are formed within a cultural context. Whereas values are rigid over time, attitudes are more flexible. Attitudes Toward Time a. Latin American and Mediterranean cultures are casual about time whereas in Japan and the United States people arrive promptly for meetings, keep tight schedules, and work long hours. b. Americans strive toward workplace efficiency but may leave work early if their work is done because they value individual results. Meanwhile, the Japanese look busy even when business is slow to demonstrate dedicationan attitude grounded in cohesion, loyalty, and harmony. Attitudes Toward Work a. Whereas some cultures display a strong work ethic, others stress a more balanced pace in work and leisure (e.g., People in southern France say, We work to live, while people in the U.S. live to work. For the French, work is a means to an end, not an end in itself. b. Many European nations are trying to foster an entrepreneurial spirit to achieve the job growth realized in the United States.

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Attitudes Toward Cultural Change A cultural trait is anything that represents a cultures way of life including gestures, material objects, traditions, and concepts (e.g., bowing to show respect in Japan [a gesture]). a. Cultural diffusion is the process whereby cultural traits spread from one culture to another. Advances in telecommunications are increasing the cultural diffusion process. As new traits are absorbed into a culture, cultural change occurs; globalization and technological advances are increasing the pace of cultural diffusion and cultural change. b. Cultural imperialism is the replacement of one cultures traditions, folk heroes, and artifacts with substitutes from another. (e.g., During the Miss World Pageant in India, groups criticized Western sponsors for spreading consumerism and portraying women as sex objects). Companies must consider how their activities affect traditional ways. c. Culture can force companies to adjust business policies and practices. Managers can use situational management, walking an employee through an assignment and monitoring the results. Other changes need to
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Chapter 2 suit local culture (e.g., In Vietnam, companies modify employee evaluation systems because criticism must be delivered privately.) Is a global culture emerging? Rapid cultural diffusion and increased human interaction across borders cause cultures to converge. Although cultural convergence is taking place in some market segments for some products (e.g., pop music), any broader global culture is very far off. Yet, values and attitudes are under greater pressure as globalization continues.

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Manners and Customs When doing business in another culture, it is important to understand manners and customs to avoid embarrassing mistakes. In-depth knowledge improves the ability to negotiate, market products effectively, and manage international operations. 1. Manners Manners are appropriate ways of behaving, speaking, and dressing in a culture (e.g., Conducting business during meals is common practice in the United States, but in Mexico, it is poor manners.) 2. Customs Customs are habits or ways of behaving in specific circumstances that are passed down through generations; customs define appropriate habits or behaviors in specific situations (e.g., Sharing food gifts during the Islamic holy month of Ramadan is a custom). a. Folk customs are behaviors, dating back several generations practiced within a homogeneous group of people (e.g., Wearing of turbans by Muslims in southern Asia and belly dancing in Turkey). b. A popular custom is a behavior shared by one or more groups (e.g., The widespread acceptance in many Asian countries of the Western burgers n fries and fish n chips among young people). c. Although giving token gifts to business and government associates is customary, the proper type of gift varies (e.g., A knife should not be offered in Russia, France, or Germany where it signals the severing of a relationship). d. Large gifts to business associates raise suspicion. Cultures differ in their legal and ethical rules against giving or accepting bribes. The U.S. Foreign Corrupt Practices Act, which prohibits companies from giving large gifts to win business favors, applies to U.S. firms operating at home and abroad. In many cultures, bribery is woven into the social fabric (e.g., In Germany, bribery may qualify for tax deductions). Educational Materials to Use

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Social Structure
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Chapter 2 Social structure embodies fundamental organization, including groups and institutions, social positions and relationships, and resource distribution. It affects decisions, production site-selection, advertising methods, and the costs of doing business. Three important elements of social structure that differ across cultures are social group associations, social status, and social mobility. 1. Social Group Associations A social group is a collection of two or more people who identify and interact with one another. Social groups contribute to identity and self-image. Two groups that affect business activity are family and gender. a. Family i. A nuclear family consists of immediate relatives, including parents, brothers, and sisters. It prevails in Australia, Canada, USA, and in Europe. ii. An extended family includes grandparents, aunts and uncles, cousins, and relatives through marriage. It is a more important social group in Asia, the Middle East, North Africa, and Latin America. Extended families can present interesting situations for businesspeople unfamiliar with the concept (e.g., In some cultures, owners and managers obtain supplies from companies where family members work.) b. Gender i. Gender refers to socially learned behaviors and attitudes such as styles of dress and activity preferences. Sociologists regard gender as a categorypeople who share some status. ii. Although many countries have gender equality in the workplace, others have not (e.g., Countries under Islamic law segregate women and men in schools, universities, and social activities, and may restrict women to certain professions). iii. In Japan, men traditionally hold nearly all positions responsibility, but the role of women in business community is expanding. 2. Social Status a. Social Stratification is the process of ranking people into social layers or classes according to family heritage, income, and occupation. b. Royalty, government officials, and top business leaders occupy the highest social layer. Scientists, medical doctors, and others with a university education occupy the middle rung. Below are those with vocational training or a secondary-school education, who dominate the manual and clerical occupations. c. Rankings can change over time (e.g., Because Confucianism stresses a life of learning, Chinese culture frowns on businesspeople, but in modern China, businesspeople are considered role models). 3. Social Mobility a. Social Mobility is the ease with which individuals can move up or down a cultures social ladder. For much of the worlds population today, one of two systems regulates social mobility: a caste system or a class system. b. A caste system is a system of social stratification in which people are born into a social ranking, with no opportunity for social mobility (e.g., India has a caste culture with little social interaction between castes). The
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Chapter 2 caste system forces Western companies to decide whether to adapt to local human resource policies or import their own. A class system is a system of social stratification in which personal ability and actions decide social status and mobility. Highly classconscious cultures offer less mobility and can experience more class conflict (e.g., In Europe, wealthy families retain power by restricting social mobility, and class conflict surfaces in labormanagement disputes that increase costs). Lower levels of class-consciousness encourage mobility and lessen conflict (e.g., U.S. citizens believe that hard work can improve ones living standards and social status).

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Religion Human values often derive from religious beliefs. Different religions take different views of work, savings, and material goods. Cultural views influence the competitiveness of companies, the pace of economic development, and the need to adapt strategies and methods. Knowing how religion affects business practices is especially important in countries with religious governments. 1. Christianity a. Christianity was born in Palestine 2,000 years ago among Jews who believed that Jesus of Nazareth was the messiah. Today there are over 1.7 billion followers and is the worlds single largest religion. b. There are more than 300 denominations within Christianity, but most belong to the Roman Catholic, Protestant, and Eastern Orthodox Churches. c. The Roman Catholic faith asks its followers to refrain from placing material possessions above God and others. Protestants believe that salvation comes from faith in God and that hard work gives glory to God. d. Christian organizations sometimes get involved in social causes that affect business policy (e.g., The French Bishops Conference sued Volkswagen-France because a billboard parodied Leonardo Da Vincis The Last Supper). 2. Islam a. Islam was founded by the prophet Muhammad around the year 600 A.D. in Mecca, the holy city of Islam, in Saudi Arabia. Islam is the worlds second largest religion with 925 million adherents. The word Islam means submission to Allah and Muslim means one who submits to Allah. b. Religion strongly affects the kinds of goods and services acceptable to Muslim consumers (e.g., Because Islam prohibits alcohol and pork, coffee and tea are popular alternatives and Haribo came up with a gummi bear free of pork gelatin). c. Because usury (charging interest for money lent) violates the laws of Islam, credit card companies collect management fees, and each cardholders credit line is limited to an amount held on deposit.

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Hinduism a. Hinduism was formed around 4,000 years ago in present-day India, where over 90 percent of its nearly 690 million adherents live. b. Some consider it to be a way of life rather than a religion. Integral to the Hindu faith is the caste system. Hindus believe in reincarnationthe rebirth of the human soul at the time of death. Hindus do not eat or willfully harm any living creature because it may be a reincarnated human soul. c. Because Hindus consider cows sacred animals they do not eat beef (e.g., firms like McDonalds work to respect Hindu beliefs by replacing beef with lamb). Buddhism a. Buddhism was founded about 2,600 years ago in India by a Hindu prince named Siddhartha Gautama. Buddhism has approximately 311 million followers, mostly in Asian nations such as China, Tibet, Korea, Japan, Vietnam, and Thailand. b. Buddhism promotes a life centered on spiritual rather than worldly matters. Buddhists seek nirvana (escape from reincarnation) through charity, modesty, compassion for others, restraint from violence, and general self-control.

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Confucianism a. Confucianism was founded in China nearly 2,500 years ago. Its founder was an exiled politician and philosopher named Confucius. China is home to most of Confucianisms 150 million followers. b. Confucian thought is ingrained in the cultures of Japan, South Korea, and nations with large numbers of ethnic Chinese, including Singapore. c. South Korean business practice reflects Confucian thought in its rigid organizational structure and reverence for authority (e.g., Efforts to apply Korean-style management in overseas subsidiaries have caused disputes and even physical confrontations). d. For centuries, as people despised merchants because earning money violated Confucian beliefs, many Chinese moved to Indonesia, Malaysia, Singapore, and Thailand to launch successful businesses. Judaism a. Judaism was the first religion to believe in one God and is more than 3,000 years old. Judaism has roughly 18 million followers worldwide. In Israel, Orthodox (or fully observant) Jews make up 12 percent of the population and constitute an increasingly important economic segment.
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Chapter 2 b. c. d. Several important observances are Rosh Hashanah (the Jewish New Year), Yom Kippur (the Day of Atonement), Passover (the Exodus from Egypt), and Hanukkah (a victory over the Syrians). Employers must be aware of those Jewish holidays. Also, because the Sabbath lasts from sundown on Friday to sundown on Saturday, work schedules might need adjustment. Marketers must take into account foods that are banned among observant Jews (e.g., Pork and shellfish are prohibited. Meat is stored and served separately from milk). Meals prepared according to Jewish dietary traditions are called kosher.

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Shinto a. Shinto means way of the gods, arose as the native religion of the Japanese, and teaches sincere and ethical behavior, loyalty and respect toward others, and enjoyment of life. Today Shinto claims about 3.5 million strict adherents in Japan. b. Shinto beliefs are reflected in the workplace through lifetime employment (although this is waning today) and the traditional trust extended between firms and customers. c. Japanese competitiveness in world markets has benefited from loyal workforces, low employee turnover, and good labormanagement cooperation.

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Personal Communication Every culture has a communication system to convey thoughts, feelings, knowledge, and information through speech, actions, and writing. Understanding a cultures spoken language provides insight into why people think and behave in a certain way. Understanding a cultures body language avoids unintended or embarrassing messages. 1. Spoken Language a. Spoken Language is the part of a cultures communication system embodied in its spoken and written vocabulary. b. Linguistically different segments of a population are often culturally, socially, and politically distinct (e.g., Malaysias population is comprised of Malay [60 percent], Chinese [30 percent], and Indian [10 percent]). c. Software providers assist companies from English-speaking countries in adapting their Web sites for global e-business. The company that provides customers in Mexico City, Paris, or Tokyo with a quality buying experience in his or her native language will have a competitive edge. d. Companies have made language blunders in their international business dealings (e.g., When Chevrolet launched its Chevrolet Nova in Spanishspeaking markets, it did not realize that No va means No go in Spanish). e. The use of machine translationsoftware that translates languagesis booming along with the explosion in nonnative English speakers using
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Chapter 2 the Internet (e.g., the French version of I dont care (Je men fou) into I myself in crazy). f. A lingua franca is a third or link language that is understood by two parties who speak different languages (e.g., Sony and Matsushita use English in official company communicationseven in non-Englishspeaking countries). Body Language a. Body Language is that which is communicated through unspoken cues, including hand gestures, facial expressions, physical greetings, eye contact, and the manipulation of personal space. b. Body language communicates information and feelings and differs among cultures (e.g., Italians, French, Arabs, and Venezuelans animate conversations with hand gestures). Most body language is subtle and takes time to interpret. c. Proximity is an element of body language; standing too close may invade personal space and appear aggressive (e.g., Middle Eastern cultures stand about 8 to 12 inches apart).

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Education Education is crucial for passing on traditions, customs, and values. Cultures educate young people through schooling, parenting, religious teachings, and group memberships. Families and other groups provide informal instruction about customs and how to socialize with others. 1. Education Level a. Nations with excellent basic education attract high-wage industries that invest in training and increases productivity. Nations with skilled, welleducated workforces attract high-paying jobs whereas those with poorly educated populations attract low-paying manufacturing jobs. b. Newly industrialized economies in Asia owe much of their economic development to solid education systems (e.g., Hong Kong, South Korea, Singapore, and Taiwan focus on mathematical training). 2. The Brain Drain Phenomenon a. Brain drain is the departure of highly educated people from one profession, geographic region, or nation to another. b. The brain drain in Indonesia is among those that are Western-educated professionals in finance and technology). Eastern Europe experienced high levels of brain drain during the transition to a market economy. c. Some countries lure professionals back to their homelandsa process known as reverse brain drain. Educational Materials to Use

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Physical and Material Environments The physical environment and material surroundings of a culture heavily influence its development and pace of change. 1. Physical Environment a. Topography refers to all the physical features that characterize the surface of a geographic region. Cultures isolated by impassable mountains or large bodies of water are less exposed to the cultural traits of other peoples and thus change more slowly. Topography impacts product needs (e.g., there is little market for Honda scooters in mountainous regions because of their small engines). b. Topography impacts personal communication (e.g., mountains and the Gobi Desert consume two thirds of China; in the valleys of these mountain ranges people speak their own languages although Mandarin is the national language). c. Climate refers to the weather conditions of a geographic region. Climate affects where people settle and directs systems of distribution (e.g., In Australia, hot and dry conditions combined with jungles pushed settlement to coastal areas). d. Climate plays a large role in lifestyle and work habits (e.g., Because of the intense heat of the summer sun in the early afternoon hours in southern Europe, northern Africa, and the Middle East, people take afternoon breaks of 1 or 2 hours). Production schedules must be adjusted to allow for hours during which machines stand idle. e. Climate affects customs such as clothing and food (e.g., In the desert areas of the Middle East and North Africa, people wear long robes as protection from intense sun and blowing sand). 2. Material Culture Material Culture includes the technology employed in a culture to manufacture goods and provide services. Material culture can be used to measure a cultures technological advancement. a. A firm enters a market under one of two conditions: (1) demand for its products has developed, or (2) the market is capable of supporting its production operations (e.g., Myanmar (Burma) does not fulfill either condition, and few companies enter). b. Changes in material culture often cause changes in other aspects of culture (e.g., Eastern Europe lags behind industrialized nations in Internet access due to underdeveloped telecommunications systems. But as their economies advance and people get on the Web other aspects of popular culture are likely to change as well). c. Uneven Material Culture Material culture displays uneven development across geography, markets, and industries (e.g., Bangkok, Thailand, houses 10 percent of the population but accounts for about 40 percent of its economic output). Educational Materials to Use

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Chapter 2 4. CLASSIFYING CULTURES People living in different cultures respond differently in similar business situations. There are two ways to classify cultures based on differences in characteristics such as values, attitudes, and social structure: the Kluckhohn-Strodtbeck and Hofstede frameworks. I. Kluckhohn-Strodtbeck Framework The Kluckhohn-Strodtbeck Framework compares cultures along six dimensions, asking the following questions: Do people believe that their environment controls them, that they control the environment, or that they are part of nature? Do people focus on past events, on the present, or on the future implications of their actions? Are people easily controlled and not to be trusted, or can they be trusted to act freely and responsibly? Do people desire accomplishments in life, carefree lives, or spiritual and contemplative lives? Do people believe that individuals or groups are responsible for each persons welfare? Do people prefer to conduct most activities in private or in public? 1. Case Example: Dimensions of Japanese Culture By answering these questions, the framework can be applied to Japanese culture: Japanese believe in a delicate balance between people and environment that must be maintained. Japanese culture emphasizes the future. Japanese culture treats people as quite trustworthy. Japanese are accomplishment-orientednot necessarily for themselves, but for their employers and work units. Japanese culture emphasizes individual responsibility to the group and group responsibility to the individual. The culture of Japan tends to be public. Educational Materials to Use

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Hofstede Framework The Hofstede Framework grew from a study of more than 110,000 people working in IBM subsidiaries by Dutch psychologist Geert Hofstede. He developed four dimensions for examining cultures. 1. Individualism versus Collectivism This dimension identifies the extent to which a culture emphasizes the individual versus the group. a. Individualist cultures value hard work, entrepreneurial risk-taking, and freedom to focus on personal goals. b. Collectivist cultures feel a strong association to groups, including family and work units. The goal is to maintain group harmony and work toward collective rather than personal goals. 2. Power Distance
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Chapter 2 This dimension identifies the degree to which a culture accepts social inequality among its people. a. A culture with large power distance is characterized by inequality between superiors and subordinates. Organizations are hierarchical, with power derived from prestige, force, and inheritance. b. Cultures with small power distance display equality, with prestige and rewards equally shared between superiors and subordinates. Power in these cultures derives from hard work and is considered more legitimate. c. Refer to Figure 2.4. There is a tight grouping of nations within the five clusters (plus Costa Rica): African, Asian, Central and South American, and Middle Eastern nations in Quadrant 1 (cultures with large power distance and lower individualism). Quadrants 2 and 3 include Australia and the nations of North America and Western Europe (cultures high in individualism and smaller power distance scores). Uncertainty Avoidance This dimension identifies the extent to which a culture avoids uncertainty and ambiguity. a. Cultures with large uncertainty avoidance value security and place faith in strong systems of rules and procedures in society. They tend to have lower employee turnover, formal rules for employee behavior, and more difficulty implementing change. b. Cultures, low on uncertainty avoidance, are more open to change and new ideas. c. Refer to Figure 2.5. Quadrant 4 contains nations characterized by small uncertainty avoidance and small power distance, including Australia, Canada, Jamaica, the United States, and many Western European nations. Quadrant 2 contains many Asian, Central American, South American, and Middle Eastern nationsnations having large power distance and large uncertainty avoidance indexes. Achievement versus Nurturing This dimension identifies the extent to which a culture emphasizes personal achievement and materialism versus relationships and quality of life. a. Cultures scoring high are characterized by assertiveness and the accumulation of wealth, and entrepreneurial drive. b. Cultures scoring low have relaxed lifestyles, with more of a concern for others than material gain.

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Companion Web site

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We invite you to visit the Wild, Wild & Han homepage on the Prentice Hall Web site for the best online business support available. This site provides professors with a customized course Web site, including new communication tools, one-click navigation of chapter content, and great resources such as Current Events, Internet Exercises and more. For more information, contact your local sales representative.

Ideas to Enhance Your Lecture

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It is often the case that students from a variety of cultures are enrolled in the international business course. Invite international students and one student from the home country to give 10minute presentations on their countries cultures. Also, ask the international students to describe those aspects of their host culture that they find most peculiar or to which they have had difficulty adapting. If there are no international students in your class, you could contact campus organizations (for example, the Chinese, Greek, or Latin American student associations) to find potential speakers. Invite a professor from your own or a nearby college who is from another country to give a guest lecture on his or her culture. Other options for guest speakers are professors who are U.S. citizens that have traveled and/or lived abroad for an extensive period of time. Invite a current (or retired) manager with extensive international business experience to give a guest lecture on how the firm for which they work (or worked) has dealt with cultural elements in other markets. If possible, invite official representatives of other countries to present an overview of their cultures to the class. Possible organizations to contact include embassies of other nations or agencies of the United Nations, World Bank, International Monetary Fund, and so on. Most countries have cultural attaches in their embassies. Invite members of several religious groups to form a panele.g., Jewish, Christian, Muslim, Hindu members. Ask each panel member to give a brief overview of his/her religion. Students can then ask each panel member specific questions about their religions beliefs, practices, etc.

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Geography Exercises

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Appendix B titled Country Facts in this manual consists of 70 countries, each containing the following informationpopulation, main religion, main language(s), capital city, currency, main rivers/mountains, main export products, form of government, and major trading partner. The table is only a partial listing of all the countries in the world. Students could be asked to select a country not included and to fill out a similar chart for that country. They could expand on the type of data supplied in the table and determine, for example, the countrys climate, main agricultural products, main minerals, and other natural resources. Highlight the geography (and other) data supplied in Appendix B for two or three countries when you give examples involving those countries. You could call on students to come up in front of class and locate them on a world map or globe and share with fellow students any general information they might know about each country. Students are often surprised by how little information they can convey about other nations.
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Religions of the world. Using the maps on pp. 54 and 55, name the countries that correspond to the major world religions. For example, France is Roman Catholic, Iraq is Muslim. This activity can be done in small groups, assigning a religion to each group. Employing Figures 2.4 and 2.5, ask individual students (or small groups) to select a country, locate it geographically, and explain the culture in terms of each of the dimensions listed in these two figures of Hofstedes framework. Give your students the following quiz. It can be used at the start of class as a short icebreaker that gets students thinking about geography and culture in international business. Students could be called on after raising their hand if they feel they know the answer. In this way, a few students will not dominate the class by simply calling out the answers (Correct answers are in boldface type). 1. You are sent to Japan to represent your company in negotiations. You are introduced to your Japanese counterpart, Yonemitsu Yasushi. How do you address him or her? a. Yonemitsu b. Yasushi c. Mr. Yonemitsu d. Mrs. Yasushi e. Sensai Yonemitsu 2. Which one of the following countries has a work ethic most similar to that of Germany? a. Mexico b. United Kingdom c. India d. Russia e. Vietnam 3. Arriving late for a business meeting is most unacceptable in: a. United Arab Emirates b. Chile c. Japan d. Italy e. Argentina 4. In the United States people typically point to their chest when referring to themselves while in Japan they typically point to their: a. chin b. temple c. stomach d. nose e. big toe 5. In exploring markets to expand sales of your Islamic credit card you might decide to rule out: a. Indonesia b. Bahrain c. Peru
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Chapter 2 d. e. Malaysia Turkey

Additional Projects

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Select a country and describe its characteristics based on the eight components of culture (aesthetics, values and attitudes, manners and customs, and so on) covered in this chapter. Select a company that is engaged in international business and describe and critique the steps the company has taken in training its employees on the culture of a country it entered. What were the challenges/difficulties the company faced? How did they overcome them? Perform a cultural analysis on a selected country. Then propose a training program for employees of an international company that are being relocated there. Students should focus on those cultural elements in which the two countries are most different from one another. Students will view a film entitled The Cup, a 1999 movie, critically acclaimed at the Cannes Film Festival (available on video cassette at Blockbuster Video). Based on a true story, the film shows how technology has invaded a Buddhist monastery in a remote area of India. The young monks want to watch the World Cup soccer match even though they have no television. The film should provide a very interesting, thought-provoking class discussion about religion and cultural change. Food is an important aspect of culture. Ask students to bring food items from different countries and cultures to class for tasting. Encourage them to bring something exotic. Many communities have Asian grocery stores or large specialty stores that specialize in foods from around the world. Alternatively, students might prepare ethnic recipes themselves. A German female executive would find it difficult to undertake business negotiations in Saudi Arabia. Ask students to research the cultures of Germany and Saudi Arabia and explain why they agree or disagree with this statement. Their task is to critically evaluate this statement and support it or refute it with data and facts that buttress their stance. Unification of European nations into the European Union will begin the homogenization of their cultures. Research cultures in Europe and explain why you agree or disagree with this statement. Locate articles on the progress of the European Union in the business press. Your task is to critically evaluate this statement and support it or refute it with data and facts that buttress your stance. Ask students to respond to the following scenario: Jean-Louis Dubois, a manager for Air France, was transferred to Riyadh, Saudi Arabia, to open a new office for the company. Although Jean-Louis had been on other extended overseas assignments in Mexico City and New York, he was not well prepared for working in the Arab world. At the end of his first several weeks, Jean-Louis came home in a state of near-total frustration. As he sat at the dinner table that night he told his wife how exasperating it was to work with local employees who he claimed seemed to take no responsibility for anything. Whenever plans were being made or performance targets set they would simply say inshallah (translated as if God wills it). Coming from a culture that sees no problem as unsolvable, JeanLouis could not understand how the local employees could be so passive. If I hear one more inshallah, he told his wife, I will go crazy.

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Chapter 2 Question: What would you tell Jean-Louis to help him understand the culture of Saudi Arabia? Possible Response: This scenario can best be understood by first appreciating the very different views in French culture and Saudi culture concerning locus of control. In France it is believed that people are ultimately responsible for their own destinies. If something goes wrong, it is believed that an individual can do something (to change certain behaviors) to bring about desired outcomes. In Saudi Arabia (indeed throughout the Arab world), people believe that all things are subject to the direct will of Allah. All plans for the future (including business plans) are viewed with a sense of inevitability and will be realized only if God wills it. This is not to say that people in the Arab world would not work hard to help bring about the desired results. Rather, they believe that despite their efforts, the desired ends will not happen unless God allows it. Perhaps Jean-Louis would have been less frustrated if he had not just given a knee-jerk response and accused people of absolving themselves of all responsibility.


Answers to Questions for Review

1.

What is culture? Explain how ethnocentricity distorts ones view of other cultures. Culture is the set of values, beliefs, rules, and institutions held by a specific group of people. Ethnocentricity is the belief that one's own ethnic group or culture is superior to that of others. Ethnocentricity distorts peoples views of other cultures because it views other cultures in terms of their own culture. In doing so, it causes one to overlook important human and environmental differences among cultures.

2.

What is cultural literacy? What factors are forcing businesspeople to understand more about other cultures? Cultural literacy is detailed knowledge about a culture that enables people to live and work within it. Globalization is one force creating the need for cultural literacy because it is knitting business activities in various countries more closely together than ever before. Cultural literacy improves the ability of managers to manage employees, market products, and conduct negotiations in other countries. Cultural literacy helps managers to modify products and management techniques to suit local markets.

3.

How do nation-states and subcultures affect a nations cultural image? We are conditioned to think of culture in terms of national culture. Nation-states promote the concept of national culture by building museums and monuments to preserve the legacies of important events and people in their histories. This reaffirms the importance of national culture to citizens and organizations. Nation-states also intervene in business to help preserve their national cultures. A subculture is a group of people who share a unique way of life within a larger, dominant culture. Although we often overlook important subcultures in forming our impressions of other national cultures, they are extremely important to conducting business abroad.

4.

What is meant by a cultures aesthetics? Give several examples from several different cultures.
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Chapter 2 Aesthetics are what a culture considers to be good taste in the arts, the imagery evoked by certain expressions, and the symbolism of certain colors. An example of aesthetics with respect to good taste in music is the playing of polka music in many central European nations including the Czech Republic, Poland, Slovakia, and others. An example with respect to the arts in the Czech Republic is the production of fine glassware through the art of glass blowing. An example of good taste with respect to dance is the ritualistic dancing of the native Australian Aborigines. 5. How do values and attitudes differ? Explain how cultures differ in their attitudes toward time, work, and cultural change. Values are ideas, beliefs, and customs to which people are emotionally attached. Attitudes are positive or negative evaluations, feelings, and tendencies that individuals harbor toward objects or concepts. People hold as values only those ideas, beliefs, and customs extremely important to them. Conversely, people harbor attitudes toward things that are important and unimportant to them. Attitudes toward time in certain cultures are more relaxed while attitudes toward time in others are more rigid. For example, Latin American and Mediterranean cultures tend to be relaxed toward the use of time whereas Northern Europe and the United States tend to keep far tighter schedules. Attitudes toward work also vary across cultures. Some cultures see work strictly as a means to an end whereas others see work as an end in itself. Attitudes toward work influence peoples attitudes toward time. For example, in France where people tend to take a relaxed attitude toward work, attitudes toward time are quite flexible. The opposite is true in Japan. Attitudes toward cultural change also vary from one culture to another. Some cultures readily accept the cultural traits of other nations, whereas others are far more wary. However, globalization and technological advancements are increasing the pace of cultural change for many cultures around the world. 6. Describe the process of cultural diffusion. Why should international businesses be sensitive to accusations of cultural imperialism? A cultural trait is anything that represents a cultures way of life, including gestures, material objects, traditions, and concepts. The process whereby cultural traits spread from one culture to another is called cultural diffusion. This process is natural, yet gradual. Cultures not open to the cultural traits of other nations typically fear that those traits will harm their own values. Cultural imperialism is the replacement of one cultures traditions, folk heroes, and artifacts with substitutes from another. Companies must be sensitive to charges of cultural imperialism because they can result in laws designed to protect the local culture. Such laws can render a market opportunity infeasible. 7. How do manners and customs differ? Give examples of each from several different cultures. Manners are appropriate ways of behaving, speaking, and dressing in a culture. Customs are habits or ways of behaving in specific circumstances that are passed down through generations in a culture. The two differ from each other in that manners apply generally in a culture whereas
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Chapter 2 customs apply to specific situations. An example of good manners is behaving in a modest manner and dressing conservatively in Japan. An example of a custom is the practice of arranging marriages on the behalf of children in Indiajust as it was a widespread custom across Europe several or more generations ago. Another custom is the playing of cricket in Britain and its former colonies including India and Australia. 8. What are folk and popular customs? Describe how a folk custom can become a popular custom. A folk custom is behavior often dating back several generations that is practiced within a homogeneous group of people. A popular custom is behavior shared by a heterogeneous group or by several groups. Folk customs often become popular customs through the process of cultural diffusion. 9. To what does social structure refer? How do social rank and mobility affect business activities? Social structure is a cultures fundamental organization, including its groups and institutions, its system of social positions and their relationships, and the process by which its resources are distributed. Social status (or rank) refers to the social layers or classes into which people are classified. Social rank affects business in that the type of occupation a person has often determines or heavily influences their social standing. Social mobility is the ease with which individuals can move up or down a cultures social ladder. Social mobility is severely restrained in a caste system but quite free in most class systems. Social mobility can influence business activities in caste cultures because certain occupations can be offlimits for certain groups of people. Also, in strict caste systems, someone from a lower class generally cannot supervise a member from a higher class because personal conflict will likely occur. Systems that do not allow a great deal of social mobility tend to be characterized by greater labor-management conflict because workers often consider them unfair. Also, people can be hesitant to work hard in systems that do not reward hard-working individuals with social mobility. On the other hand, increased productivity and economic development often characterize systems that do reward hard work with social mobility. 10. a. b. c. d. Identify the dominant religion in each of the following countries. India e. China Ireland f. Brazil Mexico g. Thailand Russia a) Hindu; b) Roman Catholic; c) Roman Catholic; d) Eastern Orthodox; e) Buddhist, Taoist, and Confucian; f) Roman Catholic; g) Southern Buddhist. 11. What specific advantages do companies gain when they learn how to communicate in another culture? The reason why people think and act the ways they do in a culture are important determinants of how a company negotiates with locals, markets it products, and supervises employees. Understanding a cultures language helps managers to fully understand a culture. In addition,
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Chapter 2 understanding a cultures unspoken language helps managers avoid sending unintended or embarrassing messages. 12. Why is the education of a countrys people important to both native and nonnative companies operating there? What is meant by brain drain and reverse brain drain? Companies (both domestic and international) often rely on education statistics to determine whether a culture represents a good market for their products or a good location for production or assembly facilities. They also help companies determine how to promote products to potential customers after the decision is made to enter a market. A highly educated workforce typically attracts high-paying jobs in many high-tech industries. Brain drain is the departure of highly educated people from one profession, geographic region, or nation to another. When a profession, region, or nation lures back these highly educated professionals it is called reverse brain drain. 13. How are a peoples culture and physical environment related? How does technology affect culture? Two aspects of the physical environment (topography and climate) influence a peoples culture. Topography is all the physical features that characterize the surface of a geographic region. Topography such as treacherous mountain ranges, large bodies of water, and deserts can increase cultural dissimilarity and hinder cultural diffusion. Climate is the weather conditions of a geographic region. Climate can influence a peoples work patterns, such as when people in hot climates take breaks of one or two hours in the middle of the day to rest and then return to work in the cooler hours of late afternoon. Climate also impacts the type of clothing a culture prefers. People in cultures with hot, but humid and tropical climates wear little clothing to stay as cool as possible. People in cultures with hot, but dry and sunny climates often wear long, loose-fitting clothing to protect them from intense sunshine and blowing sand. Climate also affects the types of vegetation and animals living in a specific region and therefore influences a peoples diet. All the technology employed in a culture to manufacture goods and provide services is called material culture. Changes in material culture often cause changes in other aspects of a peoples culture. An increasingly sophisticated material culture dictates rising incomes and a greater emphasis on material goods and, even, the development of a consumer culture. Material culture is often uneven across a culture and can result in different regions developing at far different paces. 14. Describe the dimensions of the KluckhohnStrodtbeck and Hofstede frameworks. Contrast two cultures by applying one of these frameworks to them. There are six dimensions to the Kluckhohn-Strodtbeck framework. According to the framework, the essence of any culture can be captured by the following questions: Do people believe that their environment controls them, that they control the environment, or that they are part of nature? Do people focus on past events, on the present, or on the future implications of their actions? Are people easily controlled and not to be trusted, or can they be trusted to act
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Chapter 2 freely and responsibly? Do people desire accomplishments in life, carefree lives, or spiritual and contemplative lives? Do people believe that individuals or groups are responsible for each persons welfare? Do people prefer to conduct most activities in private or in public? The Hofstede framework analyzes cultures by applying the following four dimensions: Individualism versus collectivism: Identifies whether a culture holds individuals or the group responsible for each members welfare. Power distance: Describes the degree of inequality between a cultures people in different occupations. Uncertainty avoidance: Identifies a cultures willingness to accept uncertainty about the future. Quantity versus quality of life: Cultures focused on quantity of life emphasize accomplishments such as power, wealth, and status. Cultures that stress quality of life generally have more relaxed lifestyles and people are more concerned with cultivating relationships and the general welfare of others. An individualist culture is one in which each individual tends to be responsible for his or her own well-being. People are given freedom to focus on personal goals but are held responsible for their actions. A child is taught to be self-reliant and self-confident at a young age. Such cultures value hard work and risk taking. Developing a cooperative spirit in the workplace may be difficult to achieve and cooperative ventures may become somewhat more troublesome. A collectivist culture is one in which the group shares responsibility for the well-being of each member. People work toward collective rather than personal goals and are responsible to the group for their actions. All, social, political, economic, and legal institutions reflect the groups critical role. Managers in these cultures often seek the input of their colleagues and subordinates before making decisions. Employee-manager trust tends to be high because workers know that managers consider their welfare when making decisions. Each of the business-related factors mentioned can work to increase or decrease competitiveness depending on the actual circumstances involved.


Guide to Questions for Discussion

1.

Two students are discussing the various reasons why they are not studying international business. International business doesnt affect me, declares the first student. Im going to stay here, not work in some foreign country. Yeah, me neither, agrees the second. Besides, some cultures are real strange. The sooner other countries start doing business our way, the better. What counterarguments can you present to these students perceptions? First of all, students should present a counter-argument to the statement that international business does not affect them if they do not work in another country. Today, international business reaches deep into nearly every domestic economy. It affects the food we eat and drink, the movies we watch, the cars we drive, the computers we use, the clothing we wear, and so on. Chapter 1 explained how every national business environment is affected by events occurring in
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Chapter 2 other nations. Students should also recognize the emphasis on the words foreign and strange. This betrays an ethnocentric bias in which anyone or anything from other countries is considered foreign and different ways of thinking or acting is considered strange. Success in international business today requires people to cast aside this outdated way of thinking about other cultures. 2. In this exercise, two groups of four students each will debate the benefits and drawbacks of individualist versus collectivist cultures. After the first student from each side has spoken, the second student questions the opponents arguments, looking for holes and inconsistencies. A third student attempts to reply to these counterarguments. Then a fourth student summarizes each sides arguments. Finally, the class votes on which team presented the more compelling case. First, students should question who developed these terms. If a northern European nation conducted the study, its use as a reference point could bias the results. Also, the culture of Greece is very different from many of those found in Northern and Western Europe, such as Germany. They differ in their attitudes toward the use of time and the pace of work. This is at least somewhat affected by the fact that Greece is extremely warm for nearly one-half the year. German culture places an emphasis on punctuality and hard work whereas Greek culture places greater emphasis on enjoying as much free time as possible. These differences reflect different underlying values in the two cultures. German culture tends to emphasize quantity of life accomplishments whereas Greek culture focuses on quality of life measures. German culture is also more open to risk-taking (small uncertainty avoidance) than Greece and is characterized by greater individualism that tends to promote entrepreneurial drive. Students should recognize that these results do not imply one culture is better than the other culture. Chapter 2 details the main characteristics of individualist and collectivist cultures. Throughout the debate, students should be sure to give concrete examples of specific countries to support their general statements regarding each type of culture. The instructor may wish to point out inaccuracies in students statements prior to the vote by their classmates.


Answers to In Practice Exercise

1.

In this chapter and in Chapter 1 you learned how globalization is affecting peoples lives. In your opinion, what role is globalization playing in the disappearance of languages? Be specific regarding the forces or trends you believe threaten the worlds linguistic diversity. Information and communication technologies are facilitating the process of globalization in many ways. Through email and videoconferencing, companies are better able than ever before to keep in touch with far-flung subsidiaries, suppliers, and customers. Much of the Internet activity worldwide is conducted in English. The language of business is English generally, which makes other languages seem less important. The concept of a global village is both an economic village and a true village that entails a certain degree of cultural homogenization. The need to speak English in order to communicate globally is a force that threatens linguistic diversity.

2.

Do you think a nation should try to preserve endangered languages as part of its cultural heritage? If so, give several examples of how it could do this. What do you think companies could be doing to help such languages survive? Be specific.
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Chapter 2

A nation or group should definitely preserve endangered languages. One example is Yiddish, the language of European Jews. Following the Holocaust and the development of modern Hebrew, the Yiddish language became endangered. Now, to preserve the language and literature, there is a revival of Yiddish theater. Yiddish language courses are taught at universities and community colleges. The rich body of literature in Yiddish is being reread. Yiddish music is being played and rerecorded. Companies can sponsor cultural events to encourage local languages and dialects to be preserved. For example, oil companies drilling in Alaska can encourage the Klinket Indians to have events that showcase their language and other cultural traits. A recent example of something similar was the 2002 Winter Olympics in Salt Lake City that honored the Native Americans of Utah, calling attention to their language and customs. 3. Select a language that you never knew existed. A good place to begin searching is Eurolang (www.eurolang.net), a European Union organization, and The Linguistic Society of America (www.lsadc.org). Find out all you can about the language by asking such questions as: Where is it spoken and what are its origins? Which languages are closely related to it? How many people speak it and is it in danger of dying out? What is unique regarding its syntax, grammar, etc.? Write a brief report on your findings and present it to the class. Students might select a language based on their own family heritage or from their region in the United States. For example, a student from Louisiana might research Cajun French.


Guide to Projects

1.

Select a recent business periodical or news source in print or onlinesay, the Far Eastern Economic Review (www.feer.com) or the Financial Times (www.ft.com) and find an article discussing the role of culture in international business. Write a short summary detailing the cultural elements identified by the author, being sure to explain how they pertain to actual business activities in the country being discussed. Students should include in their summary a full account of the cultural elements that the articles author identifies. It can be very interesting to have students analyze an article that describes the cultural nuances of the students home country. This helps the student understand how their own culture can be confusing to people from other cultures.

2.

Select a company in your city or town that interests you and make an appointment to interview the owner or a manager. Your goal is to learn how international opportunities and competition affect the decisions of this owner/manager and his or her company. Be sure to ask for specific examples. Write a short report of your interview and present a brief talk on your findings to the class. The students should be sure to ask questions related to how culture can make a business decision either easier or more difficult, depending on the specific situation. Students should be certain that the company has some international business dealings before scheduling an interview.

3.

In your library or on the Internet, locate annual reports or similar information issued by companies like IKEA (www.ikea.com), Lands End (www.landsend.com), Nokia (www.nokia.com), or Yahoo! (www.yahoo.com)most libraries have annual reports in either
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Chapter 2 paper or electronic form. Review this information and report on the (1) main products or services the company offers, (2) extent to which the company pursues international business operations (often expressed as percentage of sales or assets), and (3) ways that the company has adapted to local cultures around the world. Although we list some very well known companies as examples for this project, students should be encouraged to dig into the international operations of smaller companies and those less well known. The Web sites of many companies have a section that contains their press releases and other valuable information. Searching the Internet for a companys name and the word culture also is a way of locating articles discussing how the companys activities are influenced by culture.


Answers to Business Case

Business Case 2: ASIAN VALUES UNDER FIRE 1. If your international firm were doing business in Asia, would you feel partly responsible for these social trends? Is there anything that your company could do to ease the tensions being experienced by these cultures? Be specific. This question presents students with what can be called an ethical dilemma. Some students will say that their company is in business to earn a profit and that Asian consumers are not being forced to buy Western goodsthey make a conscious decision when they make a purchase. Other students will feel a sense of responsibility to those societies in which they market their products. These students will want to suggest ways to lessen tensions in those societies. Some possibilities for this include doing charity work to help people suffering economic difficulties, financially supporting and giving employees time off to do volunteer work for cultural fairs and festivals, and making counselors available in the company to help employees with their troubles. 2. In your opinion, is globalization among the causes of the increasing incidence of divorce, crime, and drug abuse in Asia? Why or why not? Many students will agree that the forces of globalization are exposing people in all countries to new ways of thinking and behaving. However, many social ills are not a direct result of globalization, but of other forces causing social change. Drug use is certainly not a new problem in most countriesopium has been used across Asia for centuries. Also, many women in Asian cultures are no longer financially dependent on their spouses because of the growing employment of women in the workforce. Thus when marital problems arise, divorce can be a viable option unlike in the past. This is not a Western phenomenon being spread by globalization, but one tied to economic development and industrialization more generally. 3. Broadly defined, Asia comprises over 60 percent of the worlds populationa population that practices Buddhism, Confucianism, Islam, and numerous other religions. Given the fact that there are considerable cultural differences between countries such as China, India, Indonesia, Japan, and Malaysia, is it possible to carry on a valid discussion of Asian values? Why or why not?

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Chapter 2 Clearly there are important and significant differences between the Asian nations. But some values tend to be Pan-Asian. For instance, the concept of the extended family is strong across Asiain contrast to the Western concept of the nuclear family. Also, respect for community elders is strong throughout Asiaunlike the Western emphasis on youth and vitality (most pronounced in the United States). Thus certain cultural elements can be discussed as Asian just as we identify certain concepts and behaviors as Western. But the validity of generalizing about Asian values depends on the depth of the discussion. The deeper we explore Asian cultures, the more differences we uncover. 4. Consider the following statement: Economic development and capitalism require a certain style of doing business for the twenty-first century. The sooner Asian cultures adapt, the better. Do you agree or disagree? Explain. The statement is clearly biased toward Western management styles and is harsh in its tone. But it is true (for better or worse) that companies around the world are striving to learn Western business management principlesparticularly those practiced by U.S. companies. Companies are trying to instill the unbending drive toward greater efficiency and are showing a greater appetite for trying new management techniques. The shift toward Western management principles in Asia was seen during the Asian economic crisis: Governments passed laws forcing greater transparency among companies and banks, and many U.S. and other Western companies were buying up bankrupt Asian companies and radically altering how they were run. But however rapid the pace of change, Asian companies will always retain practices that make them unique.


Guide to A Question of Ethics

1.

Some businesspeople and other experts argue that bribery helps cut through mounds of red tape. Do you agree? By calling for reforms in nations that condone bribery, are international agencies (strongly backed by U.S. interests) promoting a certain set of values and morals? Are they practicing cultural imperialism? Certainly, bribery can help a company get a deal done that may otherwise be delayed or would go to a competitor. In this sense, it creates certain efficiencies for the company that does the bribing. However, it corrupts the free market in that deals could go to companies that are not the most efficient, but that pay the largest sums to officials. Agencies that are cracking down on bribery around the world are often promoting a Western sense of fair play and proposing a certain set of values and morals. However, these values and morals are not uniquely Western as evidenced by a crackdown by many countries having a great deal of corruption. These agencies can be considered to be practicing cultural imperialism in that they are replacing the local practice of bribery with the fair play principle. But whether this is unethical is not so easy to answer.

2.

When international firms enter the Indian market, they soon learn about the various ways in which a rigid caste system can affect business activities. Should these companies adjust to local management styles and human resource practices? This question poses a real dilemma for international companies operating in India. Local management practices can be very different from the companys practices in its home country. The response by most companies is to implement the home country policies but to adapt them to the local market. This is probably best accomplished by placing as head of the Indian operation
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Chapter 2 an Indian-born employee that has worked for the company in the home country who understands the corporate culture. This manager would know what policies can be or cannot be implemented in the Indian subsidiary. 3. Companies often relocate factories from industrialized nations with high labor costs to low-wage countries such as China, India, Mexico, and the nations of Central America. Is there a reasonable response to charges that, in so doing, they frequently exploit child labor, force women to work 75-hour weeks, and destroy family units? Students should first of all recognize the bias in this statement. True, many companies are relocating labor-intensive operations to low-wage countries. But many of these are involving themselves in the local community to better peoples lives as opposed to exploiting workers at the expense of education and family units. Why are they doing this? Because human rights groups are active in every country and closely monitor the activities of multinational firms. If they are abusing the rights of local workers, they will receive a great deal of bad publicity in the home countryhurting their reputation and, perhaps, sales. Firms also do it because they recognize how important an educated, healthy, and happy workforce is to productivity.

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