Business Explain: Differences in Culture

What are the economic and business implications of cultural change?

Three important implications for international business can be drawn from differences in social structure, religion, language, education, economic philosophy, and political philosophy.

Cross-Cultural Literacy

Companies must embrace the differences that occur when working globally, making efforts to appreciate and make use of them. This can be done by hiring local citizens to inform, educate managers from the home country in the new culture and be aware of ethnocentric behaviour(=belief in superiority of one's own ethnic group).

Cultural and competitive advantage

The value systems and norms of a country influence the cost of conducting business in that country. Social structure and religion can impact on how well cooperation between management and labor can vary, the general working culture, and how payment of interest is handled. Individualism fosters entrepreneurial activity and innovation, while collectivism motivates cooperation and hard work as an entity.

Although very important, cultural differences might still not be as influential as political, economic and legal differences when it comes to explaining economic growth.

How do differences in social culture influence values in business?

Certain aspects can fluence values in business enormously.

Power distance

How society deals with inequality in physical and intellectual capabilities. High power distance is therefore found in countries that let gaps grow between rich and poor, and do not seem to believe all humans are equal.

Individualism vs collectivism

Whether colleagues are closely connected with tight relationships, creating a tight collective entity or if they do not have tight relationships, with separated individuals.

Uncertainty avoidance

The extent to which different cultures socialize their members into accepting ambiguous situations and tolerating uncertainty. In developed countries with good employment securities, the uncertainty avoidance is normally much higher than in developing countries.

Masculinity vs Femininity

The differences of roles between men and women. Masculine cultures have larger differences in roles, give better positions to men and pay them higher wages than women.

Long-term vs Short-term Orientation

Related to trust, if high trust in incorporated in a business arrangement, payments can be delayed with much less fuss than if done in a short-term orientated culture.

What are the business and economic implications of differences in culture?

Cultural change is dynamic, meaning it is constantly changing. Economic advancement and globalization could therefore contribute to societal change → moving us towards a world with more equal cultural values, known as the Convergence hypothesis.
Collectivism → Individualism.
Masculinity → Femininity.
Short-term → Long-term.
Traditional values → Well-being values.

What are the forces that lead to differences in social culture?

Social structure and religion are the main factors that influence social culture. Also languages and education.

Social structure

Emphasis on the individual → encourages entrepreneurial activity, but also a high mobility between companies which is not too good for them.

Emphasis on the group → encourages strong identification with the group, or firm, but can result in lack of innovation.

Social stratification/class systems → divides people into categories.

Social mobility → how much a person can move around between the classes or groups.

Religion

Islam, Christianity, Hinduism, Buddhism and Confucianism → emphasize different things, some capitalistic thoughts, some discourages entrepreneurial activity and others on the group spirit and relationship between people.

Languages
Education

What is meant by the culture of a society?

Values, norms, folkways and mores shared by a group of people(the society). Together they constitute a design of living.