Culture and Impact of Socio-Cultural Environment on Business

Culture is an intangible and wide-ranging concept whose theoretical basis is based in several traditional fields of research including anthropology, management, psychology and other social sciences is culture.

Culture has many views; however, a very common understanding of culture is that it is related to concepts such as behaviour, values, and norms of a certain group. Culture hides more than it reveals; it is often a deeper and unconscious part of the group culture and is therefore less tangible and visible outwards.

Firms are interested in the study of culture as several business strategies require good understanding of culture (consumer culture, organization culture).

Culture differs in different markets. For example, social class and income have a significant effect on purchases of consumer goods and services. For example, Food is a basic need but what we eat depends on culture and income. Socio-Cultural Environment (Domestic or Foreign Socio-Cultural Factors) needs to be taken into account when planning a global marketing strategy.

Importance of Culture

What are these countries best known for?
Spain and Portugal – Fish, Switzerland – Coffee, Germany – Beer, France – Water, Scandinavio – Bread.

Businesses are increasingly more international and the need for effective cross-cultural communication has become essential. The importance of culture to international marketers is profound and is a key differentiator between international markets. Marketers must study and understand the cultures of the countries in which they will be doing business, they must incorporate this understanding into the marketing planning process. Being aware of foreign culture is the key to successful business expansion globally.

In business, major problems of cultural collision are likely to occur if: a firm implements practices that do not reflect local customs and values and/or employees are unable to accept or adjust to foreign customs.

Managers are expected to understand the major causes of cultural differences and change, to grasp behavioral factors influencing countries’ business practices, to become familiar with cultural guidelines (for companies that operate internationally), and to learn more about cultural environments.

• Sensitivity to cultural differences
• Cultural empathy, or the ability to understand the inner logic and coherence of other ways of life, plus the restraint to not judge them as wrong because they are different from one’s own ways
• Ability to withstand the initial cultural shock
• Ability to cope with and to adapt to new environments

Issues of standardization and adaption come into play. In some instances strategies and marketing programmes need to be adapted. However marketers should also take advantage of shared cultural characteristics and avoid unneeded and costly adaptation of the marketing mix.

In the book Management Across Cultures: Challenges and Strategies, the author uses a grasshopper to explain how it is seen in different cultures: In United States it is considered a plague and a useless insect, in China it is considered as a pet, and in Thailand it´s a great snack to be used in sandwiches. The point that the author is trying to drive is that if a grasshopper can create so many view points, there are so many other aspects which could mean different things to people from different cultures.

Here are some more examples of business protocol in different countries:

• In South America it is common to do business face to face.
• In Russia, decisions have to be approved by several committees, which can make business agreements take much longer.
• In Japan, they have learnt the art of silence in negotiations and many times Americans are not used to it and desperately think that something has gone wrong and feel pressure to close the negotiation when it is not needed.

So, every business must learn about the culture of a country in case it intends to do business in that country, and, even more important is to take care of things that is considered offensive (useful when promoting or naming the products).

Related: Examples of Gaffes in International Business (things that went wrong in different countries) :

What is Culture? Definitions of Culture

Culture is defined as the specific learned norms of a society that reflect attitudes, values, and beliefs.

Ancient definition of culture was provided by Tylor (1871), “the complex whole which includes knowledge, belief, art, morals, custom and any other capabilities and habit acquired by man as a member of society”.

Culture is the “collective programming of the mind that distinguishes the members of one category of people from those of another…Culture in this sense, includes systems of values; and values are among the building blocks of culture” (Hofstede 1980).

Culture is shared and develops through recurrent social relationships which form patterns that are eventually internalized by members of the entire group. In other words, a culture does not stand still but changes slowly over time (Hollensen, 2017).

Trompenaars and Hampden Turner explain culture through a series of layers. The outer layer shows artifacts and products such as language, food, fashion, and art. The middle layer shows norms and values, and the core shows the assumptions about the existence and implicit showing the core of human existence.

Culture is a way of life of a group of people, the configuration of all the more or less stereotyped patterns of learned behaviour which are passed down from one generation to the next through means of language and imitations (Adler and Gundersen, 2007).

Hofstede et al (2010) say that the demographics of a person signify the cultural level in the person’s. Every human being belongs to a nation and every nation has its own history. Strong forces are demonstrated by the nations that are in existence for a longer period that promotes further integration. These forces can be a national language, political system, government agencies, and representation in sports with a very strong emotional appeal. However, the new nations cannot enjoy the same level of homogeneity as compared to traditional nations due to the significant amount of cultural elements. Modifying culture is often challenging as it is considered a stabilising force.

The origin of one’s culture is from their social environment, it is something that one learns and is not born with. It is about correct behaviour and education. Learning of a person is influenced by the culture and furthermore by a person’s personal experiences.

Cultural Dynamics

Cultures consist of societies, i.e., relatively homogeneous groups of people, who share attitudes, values, beliefs, and customs.

Cultures are dynamic and they evolve over time. Cultural value systems are set early in life, but may change because of choice or imposition and due to contact with other cultures. Societal values and customs constantly evolve in response to changing realities.

The basic similarity amongst people within countries is both a cause and an effect of national boundaries. National identity is perpetuated through the rites and symbols of a country and a common perception of history.

Cultural imperialism is brought about by the imposition of one culture upon that of another. Certain elements introduced from outside a culture may be known as creolization, indigenization, or cultural diffusion.

Subcultures, on the other hand, may link groups from different nations more closely than certain groups within nations.

Elements of Culture

The various elements of culture include: Attitudes, Beliefs, and Values; Manners and Customs; Social Institutions; Religion; Aesthetics; Language and Communication.

Attitudes, Beliefs, and Values

• An attitude is a learned tendency to respond in a consistent way to a given object or entity. Attitudes are clusters of interrelated beliefs.
• A belief is an organized pattern of knowledge that an individual holds to be true about the world.
• A value can be defined as an enduring belief or feeling that a specific mode of conduct is personally or socially preferable.

Attitudes, beliefs and values help determine what we think is right, appropriate, important, desirable and what is wrong, inappropriate, unimportant and undesirable.

In different cultural context attitudes, beliefs, values differ. Global Marketers have to understand and address these differences.

Example: Attitudes towards change are positive in industrial countries whereas in more traditional societies, change is viewed with great suspicion, especially when it comes from a foreign country.

The more rooted values and attitudes are in central beliefs (such as religion) the more cautiously the global marketer has to move.

Manners and Customs

Understanding manners and customs is especially important in negotiations.

Certain basic customs should be recognized by the foreign (visiting) businessperson.

Example: Gifts before the completion of contracts are seen as signs of respect in one country and as bribery in others.

George Bush gave Chinese Premier Li Peng a gift of cowboy boots embroidered with the American and Chinese flags in it. This act was criticized widely by many diplomats on account of a significant miss on the part of administration protocol experts. This incident highlights the importance of culture in international business.

Social Institutions

Social institutions (can be business-, political-, family- or class-related) influence the behaviour of people and the ways in which people relate to each other. Family relationships can, for example, influence business practices and consumer behaviour.

Business Practice:

In some regions such as Latin America or the Arab world, the family is the most important social group. In these regions, hiring family members is ok. A manager who would give special treatment to a relative is considered to be fulfilling an obligation. It makes sense to hire someone who you trust. In other region such as North America or Europe this business practice would be illegitimate. It is considered favouritism and nepotism.

Consumer Behaviour:

Social institutors are very important from a consumer perspective. Consider reference groups of consumers such as family and friends. These groups provide values and attitudes that become influential in shaping buying and consumer behaviour.

Religion in Culture

Religion is a major source of both cultural imperatives and cultural taboos. Major religions include: Buddhism, Christianity, Hinduism, Islam, Judaism, Confucianism.

Religion can affect the global marketing strategy in the following way:

• Religious holidays vary greatly among countries, have an affect on food patterns, buying behaviour, and work efficiency
• Religious requirements or taboos may affect consumption patterns. Fish on Fridays for Catholics. No beef for Hindus. No pork for Muslims
• Religious rituals may have an effect on work routines. Islamic worshipping pray facing the holy city of mecca five times each day (guests should be aware of these rituals)
• Religious Boycotts or contested consumption may affect the consumption of certain products or brand.
  After 9/11 and the subsequent military actions in the middle east and Afghanistan, some Muslims boycotted American brands. The Mecca Cola was launched, an alternative cola, for Muslims living in France and in the UK. In 2006, protestors, across the Muslim world demonstrated against the publication of cartoon images of Mohammed in a Danish newspaper. Some supermarkets in Cairo removed Danish products from their shelves.

Aesthetics

Aesthetic elements can be related to Art, Music, Folklore, Drama.

Aesthetics – colours

• Blue is positively perceived in most countries. It is associated with royalty and divinity, eternity.
• Red is associated with blood, love and winemaking. It is positively perceived in most countries, but negatively perceived in some African countries.
• White is associated with purity and cleanness in the West. But it is associated with death in some parts of Asia.
• Purple is associated with death in some parts of the Middle East. In the West it is associated with magic.
• Grey is associated with inexpensiveness and low quality in China and Japan. It is associated with high quality and high cost in the US.

Global marketers must understand the importance of aesthetics embodied in the colour or shape of a product, label or package.

Aesthetic elements that are perceived as attractive and appealing in one country can be perceived the opposite in another country.

Because aesthetic perceptions can differ among countries, adaptation to local preferences in terms of packaging and communications may be required.

Language and Communication

Syntax, Semantics, Phonology, Morphology

In global marketing, language (verbal and non-verbal) is crucial for communicating with customers, suppliers, and others.

Language provides access to society.

Deep cultural understanding of the local language can be an important source of competitive advantage for a global company.

Importance of Language in Culture

Isolation from other groups, especially because of language, tends to stabilize cultures. Some countries see language as being so important that they regulate the inclusion of foreign words and/or mandate the use of the country’s official language for business purposes.

Factors Affecting Culture

Factors Affecting Work Ethics

• The desire for material wealth vs. the desire for leisure (Protestant Ethic)
• The expectation of success and reward
• Assertiveness (Hofstede’s masculinity vs. femininity index)
• Needs satisfaction (Maslow’s Hierarchy)

Motivated employees are normally more productive, and higher productivity leads to lower costs.

Factors Affecting Relationship Preferences

• Power distance, i.e., the psychological and social distance between superiors and subordinates
• Individualism vs. collectivism: Individualism represents a desire for personal freedom, time, and challenge. Collectivism represents a dependence on the organization as well as a need for a safe environment.

Factors Affecting Risk-taking Behavior

• Uncertainty avoidance, i.e., one’s tolerance of risk
• Trust, i.e., one’s belief in the reliability and honesty of another
• Future orientation, i.e., the need for immediate vs. delayed gratification
• Fatalism, i.e., the belief that life is pre-destined, that events are “the will of God”

Factors Affecting Information and Task Processing

Communication context: Is the culture low-context culture [explicit] or high-context culture [implicit]. Then there could be selective perception of cues.

Information processing: Some are monochronic [work sequentially], some are polychronic [multi-task]. While idealistic cultures are principle driven, pragmatic cultures are detail driven.

Factors that affect the communication process

Spoken language, Written language, Silent language: color associations, conversational distance, perception of time, kinesics [body language and gestures]. Problems in communication may arise, even when nations share the same basic language (e.g., British, Canadian, and American English).

Managerial issues associated with cultural differences

Managers may face issues working with subordinates depending on: Accommodation of foreigners, Cultural distance [degree of similarity], Culture shock and reverse culture shock, Managerial orientations (polycentric, ethnocentric, geocentric).

Factors affecting strategies for instituting cultural change

Companies that wish to initiate a change in culture need to taking into account the following factors: Value systems, Cost/benefits of change, Resistance to change, Participation in decision-making, Reward sharing, Role of opinion leaders, Timing, Opportunities to learn from abroad.

Theories / Models / Approaches to Study Culture

Different Analytical Approaches

Maslow’s (1970) hierarchy of needs

The model hypothesizes that people’s need can be arranged into a hierarchy of five levels, from basic psychological needs to the highest order of needs – self-esteem.

Lee’s (1966) concept of self-reference criterion

This concept shows how self-reference can get in the way of cultural empathy.

Hall’s (1976) concept of high and low culture

Low-context culture places an emphasis on writing (e.g. USA), while high-context culture emphasised the verbal and contextual (e.g. China).

Hofstede’s (1983) cultural typology

Different cultures differ on five dimensions: power distance, individualism, masculinity, uncertainty avoidance, and time perspective.

(Carter and Lee, 2009)

Maslow’s Hierarchy for Global Marketing

The complexity of the global sociocultural environment is manifested in a number of ways.

Lets have a look at food culture, specifically, breakfast. Consider what would be a typical breakfast in different countries and what type of consumption goods and rituals would be at play.

• “I need to eat” vs “I want to/can eat”
• Importance of & connotations around breakfast
• Content & duration of breakfast

These differences are to a large extent due to “culture”.

High- and Low-Context Culture

Edward T. Hall has suggested the concept of high and low context as a way of understanding different cultural orientations.

Low context cultures: Low degree of complexity in communication.

• Rely on spoken and written language for meaning.
• Senders of messages encode their message, expecting that the receiver will accurately decode it.
• Messages are explicit and specific
• Words carry most of the communication power

Example: Western, Northern Europe (Switzerland, Germany), United States

High context cultures: High degree of complexity in communication.

• Use and interpret more of the elements surrounding the message to develop their understanding of the message.
• The social importance of the person and the social setting add extra information
• Less information is contained in verbal communication

Example: Japan, China, Saudi Arabia

High and Low Context Culture (Hall, 1976)

Characteristics	Low-Context	High-Context
Communication and Language	Explicit and Direct	Implicit and Indirect
Dress and Appearance	Dress for Individual Success. Wide Variety.	Indication of Position in Society. Religious Rules
Food and Eating Habits	Eating is a Necessity. Fast Food.	Eating is a Social Event.
Time Consciousness	Linear, Exact, Promptness is valued. Time is money.	Elastic, Relative. Time is a Relationship.
Family and Friends	Nuclear Family, Self-Oriented, Value Youth.	Extended Family, Other-Oriented Loyalty, Respect for Old Age.
Values and Norms	Independence, Confrontation, Conflict.	Group Conformity. Harmony.
Business and work Habits	Deal-Oriented (Quickly get the business), Rewards based on Achievement.	Relationship-Oriented (First make a friend, then make a deal), Rewards based on Seniority.

(Adapted from Hollensen, 2001)

Hofstede’s Cultural Typology

Developed by Geert Hofstede, Hofstede’s cultural dimensions theory is a framework for cross-cultural communication. It explains how cultures differ across various dimensions.

Related: Hofstede’s Cultural Dimensions Theory

The GLOBE model

GLOBE is a long term research effort designed to explore the complex effects of culture on leadership, organizational effectiveness, and economic competitiveness of societies (House et al. 2004)

It was designed to replicate and expand on Hofstede’ original work, designed to test various hypothesis that had developed in particular on leadership topics. It measured cultural practices and values at the level of industry, organization, and society: their research produced nine cultural dimensions.

Uncertainty avoidance , Power distance, Institutional collectivism, In group collectivism, Gender egalitarism, Assertiveness, Future orientation, Performance orientation, Human orientation.

Globeproject.com

Self-Reference Criterion

In attempting to understand anther culture, we inevitably, interpret our new cultural surrounding on the basis of existing knowledge of our own culture. There is a human tendency towards ethnocentricity.

These ‘biased’ interpretations are often happening unconsciously. They prevent cultural empathy. Lee (1966) introduced the self-reference criterion (SRC) to characterize our unconscious reference to our own cultural values, it teaches us unbiased perception.

Trompenaar’s Dimensions of Culture

Trompenaars and Hampden-Turners’ Seven Cultural Dimensions theory is a well-known model to understand cultural differences. It consists of seven dimensions of culture.

Read more on Trompenaars cultural dimensions model here.

Schwartz’s Values Frameworks

Schwartz (1994; 2001). School teachers sampled in 74 countries because they convey societal values across generations.

Theory driven 7 dimensions that differentiate societies:

• Embeddedness (maintenance of status quo)
• Intellectual autonomy (promotion and protection of individual pursuit of intellectual directions)
• Affective autonomy
• Hierarchy
• Egalitarianism (voluntary cooperation and concern for the welfare of others),
• Mastery (active efforts to modify the social and natural environment)
• Harmony (being in tune with the natural and social world

To sum it up, culture of any place is dynamic and evolves over time with economic development and globalization being the two engines of cultural change. In addition to being part of a national culture, people are simultaneously part of other cultures, such as social and professional associations and business and government organizations.

Host cultures do not always expect firms and individuals to conform to their norms; in some instances they may choose to accommodate differences in traditions. International firms, on their part, should make a concerted effort to identify ideas and behaviors in host countries and foreign cultures that can be usefully applied across the whole of their organizations.

Useful Read

Global Marketing: Various Factors to Consider

Strategic Management: Factors to Consider

Readings / References

Resolving International Conflict: Culture and Business Strategy. By: Trompenaars, Fons. Business Strategy Review, Autumn96, Vol. 7 Issue 3, p51, 18p

The Rotter Locus of Control Scale in 43 Countries: A Test Of Cultural Realitivity. By: Smith, Peter B.; Trompenaars, Fons; Dugan, Shaun. International Journal of Psychology, Jun95, Vol. 30 Issue 3, p377, 24p;

National culture and human resource management: assumptions and evidence. By: Gerhart, Barry; Fang, Meiyu. International Journal of Human Resource Management, Jun2005, Vol. 16 Issue 6, p971-986, 16p,

From “Onion” to “Ocean”: Paradox and Change in National Cultures. By: Fang, Tony. International Studies of Management & Organization, Winter2005/2006, Vol. 35 Issue 4, p71-90, 20p;