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The task force is doing great. Your team has managed to successfully analyze two complex cases arising from NBD operations and is now ready to move on to the third case file the CEO Yoon provided you, the
Norms and Nations case file
. This case involves an internal dispute among three of NBD’s executive board members—the VP of manufacturing, the VP of marketing, and the VP of product design—arising from a series of mistakes made when distributing a product.
The CEO has asked the task force to write a report with its findings and recommendations for how NBD should handle this situation. Specifically, the report needs to answer the following questions:
To answer these questions, you realize that you will need to gather information about the cultural factors that are in play in this situation, by reading about
managing in a global environment
,
country cultural differences
, and
cross-cultural ethical business decision making
. Although these sources are a great introduction, you realize that you may need to do some additional research on the internet and in the library to fully answer the CEO’s questions. The task force wants to back up its responses with information about relevant differences in cultural expectations in China, South Africa, and the United States and will conduct further research on cultural differences and their impact on global business transactions.
Country Cultural Differences
Print
In workplaces, as in communities and nations, people spending time together are likely to share
certain values, attitudes, and beliefs. Because of this established culture, people at work may
have developed certain preferences or orientations in the following situations:
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interacting and communicating with others
working in teams
making decisions
responding to and evaluating risks and opportunities
managing or attempting to resolve disagreements and conflicts
interacting with those at different levels in the organization
engaging in numerous other workplace activities
Those who have studied and compared societal cultures and their possible implications for the
workplace have identified some differences that can be important for success.
Perhaps the leading expert on cultural differences and their potential implications for business is
Geert Hofstede, a Dutch scholar who worked for IBM in the late 1960s. Hofstede’s early research
(1980) examined, compared, and categorized the culturally derived preferences of IBM
employees in many countries. He, and other scholars who have followed in his path, created a
classification scheme that differentiates country cultures across what were originally four
dimensions, though they have since been expanded to include six.
In what is probably his best-known book, Cultures and Organizations: Software of the
Mind (published first in 1991 and revised and republished in 2010 with his son Gert Jan and
Michael Minkov), Hofstede presents a careful explanation of his work and its implications.
Hofstede reminds his readers that “culture is learned, not innate” (p.6), and introduces the
analogy of culture as “software of the mind.”
Hofstede uses the layers of an onion to help convey the way culture manifests itself. Values are
deep at the core or center of the onion and are very slow to change compared with the other
manifestations of culture. Examples of common core values in US businesses include integrity,
accountability, fairness, and excellence. Other layers of culture include our rituals (e.g., greeting
with a firm handshake and direct eye contact), the heroes we honor (examples include Warren
Buffett and Steve Jobs), and on the outside of the onion, the symbols that have special meaning
for societal members.
Examples of U.S. Business Cultural Manifestations
Created by Christina Hannah
Using an analogy of culture as mental programming, Hofstede explains that we are each
conditioned (or programmed) by multiple societal levels: national, regional, ethnic, religious,
linguistic, gender-oriented, generational, socioeconomic, and professional. Values associated
with these levels may or may not be in harmony. One consequence of these multiple sources of
programming is that it can be difficult to predict what will influence a person’s response or
behavior in particular situations.
Our present interest is not in delving deeply into the causes and consequences of individual
differences in values, attitudes, and beliefs, but rather to learn about those shared at a societal
level. Hofstede explains that his extensive research, and that of others who have studied culture,
make it possible to differentiate between and among national cultures using a set of dimensions.
He originally proposed the first four dimensions in the list below, then added a fifth—long-term
orientation (Moskowitz, 2009)—and later added indulgence as a result of further research by and
insights from collaborators.
Here is a simple explanation of Hofstede’s current six dimensions:
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Power distance (PDI)—In countries with a high power distance
dimension score, we can expect those in lower level positions to respect or
defer to those who outrank them. In other words, power is thought to come
with position. In such cultures, employees may expect managers and
leaders to make decisions and might be surprised or uncomfortable when
asked for input. In countries with a low power distance score, we are likely
to find that employees treat those they report to more as colleagues and
hold the view that respect must be earned. There may, of course, be
exceptions to this model (for example in military and paramilitary
organizations). Not surprisingly, the United States’s score on this
dimension is relatively low at 40. The score for France is is 69. In
comparison, the scores for Malaysia, Slovakia, Guatemala, Panama, the
Philippines, and Russia are all above 93 (Hofstede, Hofstede, & Minkov,
2010, pp. 57-58). This means that, in general, we can expect employees in
the United States to expect a more egalitarian workplace than may be true
in other societies.
Individualism or collectivism (IDV)—In countries with high scores for
individualism (like the United States), you are likely to find a shared belief
in developing strong individuals who are comfortable working and making
decisions on their own. In such workplaces, you will probably find an
emphasis on the importance of developing, recognizing, and rewarding
individual contributions. In countries that score low on the individualism
dimension, you are likely to find an emphasis on the community, team,
group, or department (i.e., the collective). People may be embarrassed if
they are singled out publicly for praise or recognition, because they
strongly believe their success depends upon the support and work of
others. For this dimension, the US score is the highest, at 91. The score for
France is 71. The country with the lowest score is Guatemala, with a score
of 6 (Hofstede, Hofstede, & Minkov, 2010, pp. 95-97).
Masculinity and femininity (MAS)—The label used for this dimension
may not be the best. The basic idea is that some country cultures place a
relatively high value on competitiveness, assertiveness, achievement, etc.
Such countries are given a high score for masculinity because these
preferences and traits were historically associated with men more than
women. Other country cultures place greater value on caring for others,
cooperation, quality of life, etc. Such countries are given a high score for
femininity on this dimension. Despite the problems with these unfortunate
gender-based labels, when you step back and compare countries you will
probably recognize that there are some where businesses seem to value
competition over cooperation, achievement and success over quality of
life, and so on. Japan has a masculinity (MAS) score of 95. The US score
is moderate at 62. The score for France is 43. Sweden has the lowest score
for this dimension, with a 5 (Hofstede, Hofstede, & Minkov, 20110, pp.
141-143).
Uncertainty avoidance (UAI)—This dimension recognizes that there are
differences among countries, which results in differences among the
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leaders of businesses that operate therein and the extent to which they are
willing to take risks. In countries that are low in the uncertainty avoidance
dimension, business leaders might be very comfortable exploring new
opportunities and see this as the likely path to success. In other countries,
this may not be the case. Sometimes those in country cultures that are
highly risk averse (with high uncertainty avoidance scores) have a very
good reason for their responses. There may be, for example, significant
legal penalties for failure, including the possibility of being sent to jail in
the event of bankruptcy or reneging on debts. The country with the highest
score for uncertainty avoidance (UAI) is Greece at 112. France is
relatively high, with a score of 86, and the US score is 46, indicating a
tolerance for uncertainty and acceptance of risk-taking to achieve success
(Hofstede, Hofstede, & Minkov, 2010, pp. 192-194).
Long-term versus short-term orientation (LTO)—In countries with a
high long-term orientation score, shared work values emphasize learning,
accountability, and self-discipline. Patience and waiting to make a profit
are acceptable. Creating and nurturing lifelong networks is valued. In
contrast, those favoring a shorter-term orientation tend to focus on “the
bottom line” and value achievement, freedom, and independent thinking.
Quarterly and annual profitability are important. Korea, Japan, and China
have high long-term orientation scores (100, 88, and 87, respectively).
France has a moderate score of 63. In contrast, the US LTO score is low,
at 26 (Hofstede, Hofstede, & Minkov, 2010, pp. 255-257).
Indulgence versus restraint (IVR)—In countries with high scores on
indulgence, you are likely to find people who value having fun and
enjoying life. In the United States, for example, it is common to find that
employees emphasize the importance of a good work-life balance and
quality of life. The IVR score for the United States is relatively high (68)
and for France is moderate (48). Pakistan has the lowest score (0) among
the countries studied. Territories with the highest indulgence scores are
Venezuela (100), Mexico (97), and Puerto Rico (90) (Hofstede, Hofstede,
& Minkov, 2010, pp. 282 – 285).
A very important caveat when reading and thinking about Hofstede’s work is to remember that
the comparisons are at the societal level, rather than the individual level. In other words, in any
country you will find individuals who are different from what you see suggested as the norm for
the country culture. In fact, for any given dimension you may find yourself thinking “but this
isn’t what I’m like” or “this doesn’t explain what happens in my organization.” Those who have
studied and compared country cultures ask you to suspend these responses temporarily and to try
instead to look at a country as a whole, and then consider how it compares on these dimensions
with other countries. When you adjust your imaginary lens to consider cultural differences from
a broader perspective, you are able to discover things that may be helpful when explaining what
happens when companies do business abroad, when people work together on country teams, and
when they work together in multicultural, multinational organizations.
One challenge is that we are often less knowledgeable about our own shared country culture than
we are about the cultures of others (Hofstede, 1980). This is because our culturally derived
values and preferences are so deeply embedded that we may not be aware of how they influence
our decisions and behaviors. Those who have worked or studied in a country other than their
own are likely to have developed higher levels of cultural intelligence than those who have not
had this experience.
The United States has traditionally tended to place strong emphasis on equality, individualism,
risk-taking, assertiveness, achievement, and the opportunity to enjoy life (pursuit of happiness).
This brief introduction to the comparative work on country cultures and their potential
consequences for individuals and their organizations, along with the Resources below, should
help you understand the possible sources of confusion or conflict that could, if not anticipated
and well-managed, result when multinational and multicultural team members work together.
These issues may include training, coaching, mentoring, and effective leadership. Remember to
consider as well the possible advantages associated with building and using teams with members
who bring different country cultural perspectives to their work (Chakrabarti, Gupta-Mukherjee,
& Jayaraman, 2009).
References
Chakrabarti, R., Gupta-Mukherjee, S., & Jayaraman, N. (2009). MarsVenus marriages: Culture and cross-border M&A. Journal Of
International Business Studies, 40(2), 216-236
http://ezproxy.umgc.edu/login?url=http://search.ebscohost.com/login.
aspx?direct=true&db=bth&AN=36587323&site=eds-live&scope=site
Hofstede, G., Hofstede, G.J., & Minkov, M. (2010). Cultures and
Organizations: Software of the Mind (3rd. ed.). New York: McGraw Hill.
Hofstede, G. (1980). Motivation, leadership, and organization: Do
American theories apply abroad?. Organizational Dynamics,9(1), 42-63.
Retrieved from
http://ezproxy.umgc.edu/login?url=http://search.ebscohost.com/login.
aspx?direct=true&db=pbh&AN=5143098&site=ehost-live&scope=site
Global Business Ethic
The field of ethics is a branch of philosophy that seeks to address
questions about morality—that is, about concepts such as good and bad,
right and wrong, justice, and virtue. Ethics impacts many fields—not just
business—including medicine, government, and science. We must first
try to understand the “origins of ethics—whether they come from
religion, philosophy, the laws of nature, scientific study, study of
political theory relating to ethical norms created in society or other
fields of knowledge” (Baker, 2007). The description below on the field
of ethics shows how people think about ethics in stages, from the origin
of ethical principles to the ways people apply them to specific tasks and
issues.
The field of ethics (or moral philosophy) involves systematizing,
defending, and recommending concepts of right and wrong behavior.
Philosophers today usually divide ethical theories into three general
subject areas: metaethics, normative ethics, and applied ethics.
Metaethics investigates where our ethical principles come from, and
what they mean. Are they merely social inventions? Do they involve
more than expressions of our individual emotions? Metaethical answers
to these questions focus on the issues of universal truths, the will of
God, the role of reason in ethical judgments, and the meaning of ethical
terms themselves. Normative ethics takes on a more practical task,
which is to arrive at moral standards that regulate right and wrong
conduct. This may involve articulating the good habits that we should
acquire, the duties that we should follow, or the consequences of our
behavior on others. Finally, applied ethics involves examining specific
controversial issues, such as animal rights, environmental concerns,
capital punishment, and nuclear war (Fieser, 2009).
This approach will be used to help you understand global business
ethics in a modern and current sense.
Where Do Our Values Come From?
Just as people look to history to understand political, technical, and
social changes, so too do they look for changes in thinking and
philosophy. There’s a history to how thinking has evolved over time.
What may or may not have been acceptable just a hundred years ago
may be very different today—how people present themselves, how they
act and interact, and their customs, values, and beliefs.
Ethics can be defined as a system of moral standards or values. A sense
of ethics is determined by a number of social, cultural, and religious
factor, and this sense influences us beginning early in childhood. People
are taught how to behave by their families, exposure to education, and
the society in which they live. Ethical behavior also refers to behavior
that is generally accepted within a specific culture. Some behaviors are
universally accepted—for example, people shouldn’t physically hurt
other people. Other actions are less clear, such as discrimination based
on age, race, gender, or ethnicity.
Culture impacts how local values influence global business ethics. There
are differences in how much importance cultures place on specific
ethical behaviors. For example, bribery remains widespread in many
countries, and while people may not approve of it, they accept it as a
necessity of a business environment. Each professional is influenced by
the values, social programming, and experiences encountered from
childhood on. These collective factors impact how a person perceives
an issue and related behaviors. Even within a specific culture,
individuals have different ideas of what constitutes ethical or unethical
behavior. Judgments may differ greatly depending on an individual’s
social or economic standing, education, and experiences with other
cultures and beliefs. Just as in the example of bribery, it should be
noted that there is a difference between ethical behavior and normal
practice. It may be acceptable to discriminate in certain cultures, even if
the people in that society know that it is not right or fair. In global
business ethics, people try to understand what the ethical action is and
what the normal practice might be. If these are not consistent, the
focus is placed on how to encourage ethical actions.
While it’s clear that ethics is different from religion, values based on
religious teachings have influenced our understanding of ethical
behavior. Given the influence of Western thought and philosophy over
the world in the last few centuries, many would say that global business
has been heavily impacted by the mode of thinking that began with the
Reformation and post-Enlightenment values, which placed a focus on
equality and individual rights. In this mode of thinking, it has become
accepted that all people in any country and of any background are
equal and should have equal opportunity. Companies incorporate this
principle in their employment, management, and operational guidelines;
yet enforcing it in global operations can be tricky and invite
inconsistency.
Impact of Ethics on Global Business
At first, it may seem relatively easy to identify unethical behavior.
When the topic of business ethics is raised, most people immediately
focus on corruption and bribery. However, the concept of business
ethics and global business ethics is much broader. It impacts human
resources, social responsibility, and the environment. The areas of
business impacted by global perceptions of ethical, moral, and socially
responsible behavior include the following:
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ethics and management
ethics and corruption
corporate social responsibility
Ethics and Management Practices
Ethics impacts various aspects of management and operations,
including human resources, marketing, research and development, and
even the corporate mission.
The role of ethics in management practices, particularly those practices
involving human resources and employment, differs from culture to
culture. Local culture impacts the way people view the employeeemployer relationship. In many cultures, there are no clear social rules
preventing discrimination against people based on age, race, gender,
sexual preference, handicap, and so on. Even when there are formal
rules or laws against discrimination, they may not be enforced, as
normal practice may allow people and companies to act in accordance
with local cultural and social practices.
Culture can impact how people see the role of one another in the
workplace. For example, gender issues are at times impacted by local
perceptions of women in the workplace. So how do companies handle
local customs and values for the treatment of women in the workplace?
If you’re a senior officer of an American company, do you send a
woman to Saudi Arabia or Afghanistan to negotiate with government
officials or manage the local office? Does it matter what your industry
is or if your firm is the seller or buyer? In theory, most global firms have
clear guidelines articulating antidiscrimination policies. In reality, global
businesses routinely self-censor. Companies often determine whether a
person—based on their gender, ethnicity, or race—can be effective in a
specific culture based on the prevailing values in that culture. The
largest and most respected global companies, typically the Fortune
Global 500, can often make management and employment decisions
regardless of local practices. Most people in each country will want to
deal with these large and well-respected companies. The person
representing the larger company brings the clout of their company to
any business interaction. In contrast, lesser-known, midsize, and smaller
companies may find that who their representative is will be more
important. Often lacking business recognition in the marketplace, these
smaller and midsize companies have to rely on their corporate
representatives to create the professional image and bond with their incountry counterparts.
Cultural norms may make life difficult for the company as well as the
employee. In some cultures, companies are seen as guardians or
paternal figures. Any efforts to lay off or fire employees may be
perceived as culturally unethical. In Japan, where lifelong loyalty to the
company was expected in return for lifelong employment, the decadelong recession beginning in the 1990s triggered a change in attitude.
Japanese companies finally began to alter this ethical perception and
lay off workers without being perceived as unethical.
Global corporations are increasingly trying to market their products
based not only on the desirability of the goods but also on their social
and environmental merits. Companies whose practices are considered
unethical may find their global performance impacted when people
boycott their products. Most corporations understand this risk.
However, ethical questions have grown increasingly complicated, and
the “correct” or ethical choice has, in some cases, become difficult to
define.
For example, the pharmaceutical industry is involved in a number of
issues that have medical ethicists squirming. First, there’s the wellpublicized issue of cloning. No matter what choice the companies make
about cloning, they are sure to offend a great many consumers. At the
same time, pharmaceutical companies must decide whether to forfeit
profits and give away free drugs or cheaper medicines to impoverished
African nations. Pharmaceutical companies that donate medicines often
promote this practice in their corporate marketing campaigns in hopes
that consumers see the companies in a favorable light.
Tobacco companies are similarly embroiled in a long-term ethical
debate. Health advocates around the world agree that smoking is bad
for a person’s long-term health. Yet in many countries, smoking is not
only acceptable but can even confer social status. The United States
has banned tobacco companies from adopting marketing practices that
target young consumers by exploiting tobacco’s social cache. However,
many other countries don’t have such regulations. Should tobacco
companies be held responsible for knowingly marketing harmful
products to younger audiences in other countries?
Ethics and Corruption
To begin our discussion of corruption, let’s first define it in a business
context. Corruption is “giving or obtaining advantage through means
which are illegitimate, immoral, and/or inconsistent with one’s duty or
the rights of others. Corruption often results from patronage”
(Corruption, n.d.).
Our modern understanding of business ethics notes that following
culturally accepted norms is not always the ethical choice. What may be
acceptable at certain points in history, such as racism or sexism, became
unacceptable with the further development of society’s mind-set. What
happens when cultures change but business practices don’t? Does that
behavior become unethical, and is the person engaged in the behavior
unethical? In some cultures, there may be conflicts with global business
practices, such as in the area of gift giving, which has evolved into
bribery—a form of corruption.
Paying bribes is relatively common in many countries, and bribes often
take the form of grease payments, which are small inducements
intended to expedite decisions and transactions. In India and Mexico,
for example, a grease payment may help get your phones installed
faster—at home or at work. Transparency International tracks illicit
behavior, such as bribery and embezzlement, in the public sector in 180
countries by surveying international business executives. It assigns a
Corruption Perceptions Index (CPI) rating to each country. In 2010,
New Zealand, Denmark, Singapore, and Sweden had the lowest levels
of corruption, while the highest levels of corruption were seen in most
African nations, Russia, Myanmar, and Afghanistan (Transparency
International, 2010a).
Even the most respected of global companies has found itself on the
wrong side of the ethics issue and the law. In 2008, after years of
investigation, Siemens agreed to pay more than 1.34 billion euros in
fines to American and European authorities to settle charges that it
routinely used bribes and slush funds to secure huge public-works
contracts around the world. “Officials said that Siemens, beginning in
the mid-1990s, used bribes and kickbacks to foreign officials to secure
government contracts for projects like a national identity card project in
Argentina, mass transit work in Venezuela, a nationwide cell phone
network in Bangladesh and a United Nations oil-for-food program in
Iraq under Saddam Hussein. ‘Their actions were not an anomaly,’ said
Joseph Persichini Jr., the head of the Washington office of the Federal
Bureau of Investigation. ‘They were standard operating procedures for
corporate executives who viewed bribery as a business strategy'”
(Lichtblau & Dougherty, 2008).
Ethics in Action
Each year Transparency International analyzes trends in global
corruption. The following is an excerpt from their 2010 Global
Corruption Barometer report (Transparency International, 2010b).
“Corruption has increased over the last three years, say six out of 10
people around the world. One in four people report paying bribes in the
last year. These are the findings of the 2010 Global Corruption
Barometer.
The 2010 barometer captures the experiences and views of more than
91,500 people in 86 countries and territories, making it the only worldwide public opinion survey on corruption.
Views on corruption were most negative in Western Europe and North
America, where 73 percent and 67 percent of people respectively
thought corruption had increased over the last three years.
“The fall-out of the financial crisis continues to affect people’s opinions
of corruption, particular in North America and Western Europe.
Institutions everywhere must be resolute in their efforts to restore
good governance and trust,” said Huguette Labelle, chair of
Transparency International.
In the past 12 months one in four people reported paying a bribe to one
of nine institutions and services, from health to education to tax
authorities. The police are cited as being the most frequent recipient of
bribes, according to those surveyed. About 30 percent of those who
had contact with the police reported having paid a bribe.
More than 20 countries have reported significant increases in petty
bribery since 2006. The biggest increases were in Chile, Colombia,
Kenya, FYR Macedonia, Nigeria, Poland, Russia, Senegal and Thailand.
More than one in two people in Sub-Saharan Africa reported paying a
bribe—more than anywhere else in the world.
Poorer people are twice as likely to pay bribes for basic services, such
as education, than wealthier people. A third of all people under the age
of 30 reported paying a bribe in the past 12 months, compared to less
than one in five people aged 51 years and over.
Most worrying is the fact that bribes to the police have almost doubled
since 2006, and more people report paying bribes to the judiciary and
for registry and permit services than five years ago.
Sadly, few people trust their governments or politicians. Eight out of 10
say political parties are corrupt or extremely corrupt, while half the
people questioned say their government’s action to stop corruption is
ineffective.
“The message from the 2010 Barometer is that corruption is insidious.
It makes people lose faith. The good news is that people are ready to
act,” said Labelle. “Public engagement in the fight against corruption will
force those in authority to act—and will give people further courage to
speak out and stand up for a cleaner, more transparent world.”
Gift giving in the global business world is used to establish or pay
respects to a relationship. Bribery, on the other hand, is more
commonly considered the practice in which an individual would benefit
with little or no benefit to the company. It’s usually paid in relation to
winning a business deal, whereas gift giving is more likely to be
ingrained in the culture and not associated with winning a specific piece
of business. Bribery, usually in the form of a cash payment, has reached
such high proportions in some countries that even locals express
disgust with the corruption and its impact on daily life for businesses
and consumers.
The practice of using connections to advance business interests exists
in just about every country in the world. However, the extent and
manner in which it is institutionalized differs from culture to culture.
In Western countries, connections are viewed informally and
sometimes even with a negative connotation. In the United States and
other similar countries, professionals prefer to imply that they have
achieved success on their own merits and without any connections. Gift
giving is not routine in the United States except during the winter
holidays, and even then gift giving involves a modest expression.
Businesses operating in the United States send modest gifts or cards to
their customers to thank them for business loyalty in the previous year.
Certain industries, such as finance, even set clear legal guidelines
restricting the value of gifts, typically a maximum of $100.
In contrast, Asian, Latin American, and Middle Eastern cultures are
quick to value connections and relationships and view them quite
positively. Connections are considered essential for success. In Asia,
gift giving is so ingrained in the culture, particularly in Japan and China,
that it is formalized and structured.
For example, gift giving in Japan was for centuries an established
practice in society and is still taken seriously. There are specific
guidelines for gift giving depending on the identity of the giver or
recipient, the length of the business relationship, and the number of
gifts exchanged. The Japanese may give gifts out of a sense of
obligation and duty as well as to convey feelings such as gratitude and
regret. Therefore, much care is given to the appropriateness of the gift
as well as to its aesthetic beauty. Gift giving has always been
widespread in Japan.
Today there are still business gift-giving occasions in Japan,
specifically oseibo (year’s end) and ochugen (midsummer). These are
must-give occasions for Japanese businesses. Oseibo gifts are
presented in the first half of December as a token of gratitude for
earlier favors and loyalty. This is a good opportunity to thank clients for
their business. Ochugen usually occurs in mid-July in Tokyo and midAugust in some other regions. Originally an occasion to provide
consolation to the families of those who had died in the first half of the
year, ochugen falls two weeks before obon, a holiday honoring the
dead.
Businesses operating in Japan at these times routinely exchange oseibo
and ochugen gifts. While a professional is not obligated to participate, it
clearly earns goodwill. At the most senior levels, it is not uncommon for
people to exchange gifts worth $300 or $400. There is an established
price level that one should pay for each corporate level.
Despite these guidelines, gift giving in Japan has occasionally crossed
over into bribery. This level of corruption became more apparent in the
1980s as transparency in global business gained media attention. Asians
tend to take a very different view of accountability than most
Westerners. In the 1980s and 1990s, several Japanese CEOs resigned
in order to apologize and take responsibility for their companies’
practices, even when they did not personally engage in the offending
practices. This has become an accepted managerial practice in an effort
to preserve the honor of the company. While Japanese CEOs may not
step down as quickly as in the past, the notion of honor remains an
important business characteristic.
Long an established form of relationship development in all business
conducted in Asia, the Arab world, and Africa, gift giving was clearly
tipping into outright bribery. In the past two decades, many countries
have placed limits on the types and value of gifts while simultaneously
banning bribery in any form. In the United States, companies must
adhere to the Foreign Corrupt Practices Act (FCPA), a federal law that
specifically bans any form of bribery. Even foreign companies that are
either listed on an American stock exchange or conduct business with
the US government come under the purview of this law.
There are still global firms that engage in questionable business gift
giving; when caught, they face fines and sanctions. But for the most
part, firms continue with business as usual. Changing the cultural
practices of gift giving is an evolving process that will take time,
government attention, and more transparency in the awarding of global
business contracts.
Companies and their employees routinely try to balance ethical
behavior with business interests. While corruption is now widely
viewed as unethical, firms still lose business to companies that may be
less diligent in adhering to this principle. While the media covers stories
of firms that have breached this ethical conduct, the misconduct of
many more companies goes undetected. Businesses, business schools,
and governments are increasingly making efforts to deter firms and
professionals from making and taking bribes. There are still countless
less visible gestures that some would argue are also unethical. For
example, imagine that an employee works at a firm that wants to land a
contract in China. A key government official in China finds out that you
went to the business school that his daughter really wants to attend. He
asks you to help her in the admission process. Do you? Should you? Is
this just a nice thing to do, or is it a potential conflict of interest if you
think the official will view your company more favorably? This is a gray
area of global business ethics. Interestingly, a professional’s answer to
this situation may depend on his or her culture. Cultures that have clear
guidelines for right and wrong behavior may see this situation
differently than a culture in which doing favors is part of the normal
practice. A company may declare this inappropriate behavior, but
employees may still do what they think is best for their jobs. Cultures
that have a higher tolerance for ambiguity, as this chapter discusses,
may find it easier to navigate the gray areas of ethics—when it is not so
clear.
Most people agree that bribery in any form only increases the cost of
doing business—a cost that is either absorbed by the company or
eventually passed on to the buyer or consumer in some form. While
businesses agree that corruption is costly and undesirable, losing
profitable business opportunities to firms that are less ethically
motivated can be just as devastating to the bottom line. Until
governments in every country consistently monitor and enforce
anticorruption laws, bribery will remain a real and very challenging issue
for global businesses.
Corporate Social Responsibility
Corporate social responsibility (CSR) is the corporate conscience,
citizenship, social performance, or sustainable responsible business, and
is a form of corporate self-regulation integrated into a business model.
CSR policy functions as a built-in, self-regulating mechanism whereby
business monitors and ensures its active compliance with the spirit of
the law, ethical standards, and international norms.
CSR emerged more than three decades ago and has gained increasing
strength over time as companies seek to generate goodwill with their
employees, customers, and stakeholders. “Corporate social
responsibility encompasses not only what companies do with their
profits, but also how they make them. It goes beyond philanthropy and
compliance and addresses how companies manage their economic,
social, and environmental impacts, as well as their relationships in all
key spheres of influence: the workplace, the marketplace, the supply
chain, the community, and the public policy realm” (Defining Corporate
Social Responsibility, 2008). Companies may support nonprofit causes
and organizations, global initiatives, and prevailing themes. Promoting
environmentally friendly and green initiatives is an example of a current
prevailing theme.
Coca-Cola is an example of global corporation with a long-term
commitment to CSR. In many developing countries, Coca-Cola
promotes local economic development through a combination of
philanthropy and social and economic development. Whether by using
environmentally friendly containers or supporting local education
initiatives through its foundation, Coca-Cola is only one of many global
companies that seek to increase their commitment to local markets
while enhancing their brand, corporate image, and reputation by
engaging in socially responsible business practices (“Sustainability,”
n.d.).
Companies use a wide range of strategies to communicate their socially
responsible strategies and programs. Under the auspices of the United
Nations, the Global Compact (n.d.) “is a strategic policy initiative for
businesses that are committed to aligning their operations and
strategies with ten universally accepted principles in the areas of
human rights, labour, environment and anti-corruption.”
Enforcement of Ethical Guidelines and Standards
The concept of culture impacting the perception of ethics is one that
many businesspeople debate. While culture does impact business
ethics, international companies operate in multiple countries and need a
standard set of global operating guidelines. Professionals engage in
unethical behavior primarily as a result of their own personal ethical
values, the corporate culture within a company, or from unrealistic
performance expectations
In the interest of expediency, many governments—the US government
included—may not strictly enforce the rules governing corporate ethics.
The practice of gift giving is one aspect of business that many
governments don’t examine too closely. Many companies have
routinely used gifts to win favor from their customers, without
engaging in direct bribery. American companies frequently invite
prospective buyers to visit their US facilities or attend company
conferences in exotic locales with all expenses paid. These trips often
have perks included. Should such spending be considered sales and
marketing expenses, as they are often booked, or are these companies
engaging in questionable behavior? It’s much harder to answer this
question when you consider that most of the company’s global
competitors are likely to engage in similarly aggressive marketing and
sales behavior.
Governments often do not enforce laws until it’s politically expedient to
do so. Take child labor, for example. Technically, companies operating
in India or Pakistan are not permitted to use child labor in factories,
mines, and other areas of hazardous employment. However, child labor
is widespread in these countries due to deep-rooted social and
economic challenges. Local governments are often unable and unwilling
to enforce national rules and regulations. Companies and consumers
who purchase goods made by children are often unaware that these
practices remain unchecked.
The Evolution of Ethics
Ethics evolves over time. It is difficult for both companies and
professionals to operate within one set of accepted standards or
guidelines only to see them gradually evolve or change. For example,
bribery has been an accepted business practice for centuries in Japan
and Korea. When these nations adjusted their practices in order to
enter the global system, the questionable practices became illegal.
Hence a Korean businessman who engaged in bribery ten or twenty
years ago may not do so today without finding himself on the other side
of the law. Even in the United States, discrimination and businessregulation laws have changed tremendously over the last several
decades. And who can know what the future holds? Some of the
business practices that are commonly accepted today may be frowned
on tomorrow.
It’s clear that changing values, as influenced by global media, and
changing perceptions and cultures will impact global ethics. The most
challenging aspect is that global business does not have a single
definition of fair or ethical. While culture influences the definitions of
those ideas, many companies are forced to navigate this sensitive area
very carefully, as it impacts both their bottom line and their reputations.
References
Baker, W. R. (2007, April). A reflection on business ethics: Implications
for the United Nations Global Compact and social engagement and for
academic research. UNESCO. Retrieved from
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r.pdf/Baker.pdf
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responsibility initiative. Harvard Kennedy School. Retrieved from
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Fieser, J. (2009, May 10). Ethics. Internet Encyclopedia of Philosophy.
Retrieved from http://www.iep.utm.edu/ethics
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$1.34 billion in fines. New York Times. Retrieved from
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mens.html
Sustainability. (n.d.). The Coca-Cola Company. Retrieved from
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Transparency International. (2010a). Corruption perceptions index 2010.
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0/results
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United Nations Global Compact. (n.d.). Who we are. Retrieved from
http://www.unglobalcompact.org
Licenses and Attributions
3.4 Global Business Ethics from Challenges and Opportunities in
International Business is available under a Creative Commons
Attribution-NonCommercial-ShareAlike 3.0 Unported license without
attribution as requested by the site’s original creator or licensee. UMGC
has modified this work and it is available under the original license.
The Problem of Corruption
When a large corporation decides to enter a foreign market, it must
usually secure a number of licenses, permits, registrations, or other
government approvals. Certain types of business may be even be illegal
unless the corporation is first able to obtain a change or adjustment to
the nation’s laws or regulations. Since the power to authorize the
foreign corporation’s activities is vested in the hands of local politicians
and officials, and since corporations have access to large financial
resources, it should not be surprising that some corporate executives
resort to financial incentives to influence foreign officials. While certain
financial incentives, such as promises to invest in local infrastructure,
may be legitimate, any form of direct payment to the foreign official
that is intended to influence that official’s public decisions will cross the
line into illegal subornation, also commonly referred to as bribery.
Bribery is one of the archetypal examples of a corporation engaged in
unethical behavior. A number of problems can be attributed to business
bribery. First, it is obviously illegal—all countries have laws that prohibit
the bribery of government officials—so the foreign company engaging
in bribery exposes its directors, executives, and employees to grave
legal risks. Second, the rules and regulations that are circumvented by
bribery often have a legitimate public purpose, so the corporation may
be subverting local social interests or harming local competitors. Third,
the giving of bribes may foment a culture of corruption in the foreign
country, which can prove difficult to eradicate. Fourth, in light of laws
such as the US Foreign Corrupt Practices Act (FCPA) and the
Organization of Economic Cooperation and Development (OECD)
Convention on Anti-Bribery (discussed in greater detail below), bribery
is illegal not only in the target country, but also in the corporation’s
home country. Fifth, a corporation that is formally accused or convicted
of illicit behavior may suffer a serious public relations backlash.
Despite these considerable disincentives, experts report that worldwide
business corruption shows little signs of abating. Transparency
International (TI), a leading anticorruption organization based in Berlin,
estimates that one in four people worldwide paid a bribe in 2009. It
appears that the total number of bribes continues to increase annually.
The World Economic Forum calculated the cost of corruption in 2011
at more than five percent of global GDP (US$ 2.6 trillion) with over $1
trillion paid in bribes each year (ICC, 2011).
Governments and intergovernmental organizations have redoubled
their efforts to combat the perceived increase in international business
corruption. Globalization, which accelerated in the final decades of the
twentieth century, is often cited by specialists as contributing to the
spread of corruption. Corporations and businesses in every nation have
become increasingly dependent on global networks of suppliers,
partners, customers, and governments. The increased interaction
between parties in different countries has multiplied the opportunities
for parties to seek advantage from illicit incentives and payoffs.
Although outright bribery is clearly unethical and illegal, there is great
deal of behavior that falls into a gray zone that can be difficult to
analyze according to a single global standard. When does a business gift
become a bribe? What level of business entertainment is right or
wrong? Over the past two decades, governments and regulators have
sought to clearly define the types of behavior that are considered
unethical and illegal.
Another factor that has heightened the sense of urgency among
regulators is the magnitude of recent cases of corruption (several of
which are described in greater detail below). The cost to shareholders
as well as stakeholders and society has proven enormous. Governments
and international organizations have ramped up their enforcement of
anticorruption laws and sought increasingly severe penalties,
sometimes imposing fines amounting to hundreds of millions of dollars.
Largely as a result of these efforts, most multinational corporations
have developed internal policies to ensure compliance with
anticorruption legislation. However, as we will see in the case study
featured in this chapter, such compliance also raises complex ethical
dilemmas for corporations. It remains difficult to regulate ethical
behavior when social and cultural norms vary significantly from country
to country. Acts that are considered unethical in one country may
represent a traditional way of doing business in another. One legal
scholar explains the difference as follows: “A common misconception,
held in both Western and developing countries, and even among many
researchers on corruption, is to confuse what is corrupt with what is
legal. Laws are defined by values, as are ethical norms, but the two are
not equivalent” (Eiher, 2009).
This resource will explore the impact, reasonableness, and the
effectiveness of anticorruption laws and corporate compliance rules.
Finally, we will discuss a case in which the line between corruption and
traditional business practices remains difficult to ascertain.
The Scope of the Problem
Recent cases of corruption in international business have attracted
considerable media attention. Paying a traffic officer to ignore a minor
traffic violation is unremarkable; paying a senior government official a
secret bribe of millions of dollars to get a large contract signed is a
different matter.
While virtually all multinational companies have adopted anticorruption
policies, it is not clear how often these policies are fully implemented
and internalized as part of the corporate culture. The emphasis on
anticorruption policies is relatively recent and, even in the most
responsible organizations, such policies are still works in progress.
However, there is some evidence that the implementation is not always
as effective as might be hoped.
For example, a study by Control Risks (2013) and
the Economist magazine’s Intelligence Unit showed that while most
companies acknowledge the need to combat bribery and corruption,
many are complacent and unprepared to deal with scandals inside their
own organizations. The review of global attitudes on corruption
surveyed more than 300 senior lawyers and compliance heads in April
2013. It painted a disturbing picture. The authors concluded that “too
many companies still fall short of best practices in their anticorruption
compliance programs.” Despite ranking anticorruption high on most
corporate agendas, the report noted a “danger of complacency” among
companies, and as a result, “the risk of a company finding itself in the
middle of a corruption-based investigation remains real” (Tedesco,
2013).
Transparency International’s Corruption Perceptions Index (CPI) ranks
countries and territories according to their perceived levels of public
sector corruption. It is an aggregate indicator that combines different
sources of information about corruption, making it possible to compare
countries. Perceptions are used because corruption is generally a
hidden activity that is difficult to measure. The CPI confirms that
corruption remains a problem worldwide and takes place even in the
wealthiest countries (Transparency International, 2013). Research in
2012 by the Austrian economist Friedrich Schneider placed the annual
loss to the German economy alone at €250 billion (“Corruption Will
Cost Germany,” 2012).
The Dow Jones State of Anti-Corruption Survey in 2011, which
surveyed more than 300 companies worldwide, found that more than
55 percent of companies have found cause to reconsider working with
certain global business partners due to concerns about possible
violation of anticorruption regulations. Additionally, the biannual survey
indicated than more than 40 percent of companies believe they have
lost business to competitors who won contracts unethically, an increase
from only 10 percent in the 2009 study. “Strict liability provisions in
legislation like the UK Bribery Act make businesses responsible for the
activities of their agents and partners overseas, and this is having a
direct impact on the occurrence of new business partnerships between
firms,” said Rupert de Ruig, managing director of Risk and Compliance,
Dow Jones (Dow Jones Risk and Compliance, 2011).
Global social costs from corruption include the reluctance of investors
to commit to projects in developing economies, inhibited growth of
businesses due to syphoning off of revenues for bribes, and diversion of
funds from food, medical, and educational aid programs. In addition, it
seems likely that corruption hampers the development of executive
talent in developing nations, given that frustrated local executives may
seek to emigrate to countries where corruption is less prevalent.
Consider for example, the long term impact of the necessity of paying a
bribe to get running water in a household in rural India (Campion,
2011). This type of corruption can effectively exclude the poor from
access to vital public services. Economist Daniel Kaufmann (1997) of
the Harvard Institute of International Development cites public sector
corruption as the most severe obstacle to development in developing
and post-communist countries.
Notable Examples of Corruption
The number and magnitude of recent corruption cases prosecuted by
government authorities is disconcerting. Moreover, these widelypublicized cases may represent only the tip of the iceberg: regulatory
bodies focus principally on the bribery of public officials so that other
forms of business corruption are under-reported. As of 2013, the ten
largest cases successfully tried pursuant to the FCPA are listed below
(in order of magnitude of fines) (Cassin, 2013):
1. Siemens (Germany)—$800 million in 2008
2. KBR/Halliburton (USA)—$579 million in 2009
3. BAE (UK)—$400 million in 2010
4. Total SA (France)—$398 million in 2013
5. Snamprogetti Netherlands BV/ENI SpA (Holland/Italy)—$365
million in 2010
6. Technip SA (France)—$338 million in 2010
7. JGC Corporation (Japan)—$218.8 million in 2011
8. Daimler AG (Germany)—$185 million in 2010
9. Alcatel-Lucent (France)—$137 million in 2010
10.
Magyar Telekom/Deutsche Telekom (Hungary/Germany)—
$95 million in 2011
There are other recent examples of large-scale corruption in
international business, described in greater depth in the sections below.
Walmart in Mexico
According to a report issued by the Mexican Employers Association in
2011, companies operating in Mexico spend more than 10 percent of
their revenue on corrupt acts. One of the most well-known cases was
the Walmart scandal that was brought to light in September 2005 and
resulted in the company’s stock value dropping by as much as $4.5
billion. Evidence unearthed by internal and external investigations
revealed a widespread use of bribes, alleged to total over $24 million.
The bribes were paid to facilitate the construction of Walmart stores
throughout Mexico. The country is a huge market for Walmart—one in
every five Walmart stores is in Mexico. As of October 2014, the
investigation continued, having implicated Walmart management at the
most senior levels of complicity or awareness.
GlaxoSmithKline in China
In September 2013, China’s Xinhua news agency reported that a police
investigation into bribes paid by drug manufacturer GlaxoSmithKline
(GSK) indicated that the bribes were organized and paid by GSK China
and not by individuals operating on their own prerogative as had been
reported by the company initially. Police also alleged that the corporate
parent merely went through the motions of an internal audit process,
indicating a knowledge and acceptance of the bribery. This very recent
case suggests that the Chinese government’s widely publicized arrests
and convictions for bribery have not yet served as a sufficient deterrent
to corrupt practices by foreign corporations.
Alcatel in Costa Rica
In January 2010 Alcatel agreed to pay Costa Rica US $10 million in
reparations for social damage caused by Alcatel’s payment of US$2.5
million in bribes to get a contract to provide mobile phone services in
that country. This case is notable for its application of the concept of
social damage and the resulting order of compensation to the citizens
of Costa Rica.
Anticorruption Laws and Regulations
The first major international anticorruption law was the United States’
Foreign Corrupt Practices Act , adopted in 1977 (DOJ, 2015). The FCPA
criminalized bribery of foreign public officials by American business
enterprises. Initially, the FCPA was not well received. Few other
countries followed suit, and US companies complained that the FCPA
shut them out of the competition for billions of dollars’ worth of
overseas business contracts. Slowly, however, the push for concerted
anticorruption measures gathered momentum, and intergovernmental
institutions such as the OECD, the African Union, and the United
Nations eventually adopted anticorruption conventions. Further
support for a global anticorruption agenda was provided by the lending
institutions such as the World Bank, by NGOs such as Transparency
International, and by the rapidly evolving CSR movement. Notable
among these efforts was the Communist Party of China’s promulgation
of a code of ethics to fight the widespread corruption within the
Communist Party of China (Sommerville, 2010).
The FCPA applies only to bribes paid (or offered) to foreign government
officials to obtain or retain business or to develop an unfair competitive
advantage. The concepts of bribe and foreign government official can
be interpreted broadly. While companies and executives charged with
FCPA violations have often sought to characterize their payments as
business “gifts,” this has not shielded them from liability when there
was evidence that the payments were intended as a means of obtaining
illicit objectives. However, where payments have been characterized as
“facilitation” or “lubrication” payments, meaning that they merely
created an incentive for an official to promptly execute legal actions,
such as mandatory customs inspections, the payments have been
allowed. In numerous countries, the state owns all or part of
commercial enterprises so that a great number of business executives
could be classified as foreign government officials.
In 1997, the OECD established legally binding standards for defining
bribery in international business transactions. Similar to the FCPA, the
OECD Anti-Bribery Convention focuses on the bribery of public
officials. Like the FCPA, the OECD also potentially creates the
opportunity for companies to circumvent the regulations by hiring
consultants or agents. Notably excluded from the scope of the OECD
Convention is a prohibition against bribing private parties. Despite such
loopholes, the OECD Convention was an important step in the right
direction. By 2012, forty-three countries had ratified the agreement
and begun its implementation.
Corruption and Culture
Prior to the expansion of international trade in the nineteenth and
twentieth centuries, most commerce was local and followed traditional
norms and ethical standards. With the expansion of international trade,
however, businesses began to operate across cultural and linguistic
boundaries. Misunderstandings and transgressions, both intended and
unintended, became commonplace. To some extent, perceptions of
corruption may derive from cultural differences, because behavior that
is considered corrupt in one society may represent a normal business
practice in another.
One example can be found in the Chinese concept of guanxi, which
refers to the reciprocal obligations and benefits expected from a
network of personal connections. A person with a powerful level of
guanxi is considered a preferred business partner because such a
person can utilize connections to obtain business or government
approvals. Guanxi can derive from extended family, school friends and
alumni, work colleagues, members of common clubs or organizations,
and business associates. Chinese businesspeople seek to cultivate an
intricate and extensive web of lifelong guanxi relationships. The key
expectation in guanxi networks is reciprocity in the granting of favors;
the failure to reciprocate is considered a breach of trust. The greater
the favor asked or granted, the greater the favor owed. Guanxi thus
generates a cycle of favors over time. Among the questionable
practices facilitated by guanxi are certain types of corrupt favoritism—
such as nepotism (favoring family members) and cronyism (favoring
friends). In fact, relatively high levels of nepotism or cronyism are
accepted and tolerated in many non-Western cultures, not only in
China. As applied to business transactions, guanxi opens doors and
creates opportunities for business relationships and dealings. In itself,
guanxi is not corrupt. However, strong guanxi connections and
obligations can serve as an incentive to corruption.
Many traditional business practices around the world are rooted in
concepts analogous to guanxi, as in the practice of using business gifts
or personal connections to speed up transactions both large and small.
Russians use the term blat to refer to the ability to get things done
through personal networks or contacts with people of influence. The
Japanese have adapted the English word connections to coin a term of
their own, konne. In Pakistan, the use of
personal sifarish (“recommendation”) refers to the ability to make
contact with the right official on the most favorable terms. The French
expression for bribe is pot de vin (“jug of wine”), which implies friendly
relations. In Urdu and Hindi, petty bribes are known as chai pani (“tea
water”). In West Africa the term is dash. The English colloquial
term grease and the German schmiergeld (“grease money”) imply a
lubrication or easing of resistance to the transaction. In Mozambique,
one term for corruption is cabritismo or “goatism,” which is derived from
the saying “a goat eats where it is tethered.”
The universality of such terms suggests that various forms of business
bribery and graft are prevalent worldwide. However, specific business
activities that are considered acceptable in some societies may be
considered taboo in others. Thus, the American practice of lobbying
legislators and governmental agencies would be considered an illegal
form of buying influence in many other countries. In some societies, gift
giving to chiefs, elders, or religious leaders is considered not only
acceptable and appropriate, but even a mandatory traditional
expression of respect and obligation.
A survey conducted by KPMG in the United Kingdom found that while
80 percent of respondents agreed that the UK Anti-Corruption Act was
an admirable attempt to address the problem of corruption, 58 percent
believed that the act was impractical and ignored the reality that
bribery is an accepted way of doing business in many countries. Other
similar studies have revealed widespread international criticism of US
anticorruption law as hypocritical in light of the American business
practice of offering gifts to potential customers or clients (e.g., trips to
conferences, golf outings, tickets to entertainment and sporting events,
use of luxury facilities such as spas, condos, and country clubs, etc.).
References
Campion, M. J. (2011, June 11). Bribery in India: a website for
whistleblowers. BBC News. Retrieved from
http://www.bbc.co.uk/news/world-south-asia-13616123
Cassin, R. (2013, May 29). France’s total SA cracks our top 10 list. FCPA
Blog. Retrieved from
http://www.fcpablog.com/blog/2013/5/29/frances-total-sa-cracksour-top-10-list.html#
Control Risks. (2013). International Business Attitudes to Corruption:
Survey 2013. Retrieved from
http://www.controlrisks.com/en/services/integrity-risk/internationalbusiness-attitudes-to-coruption.
Corruption ‘will cost Germany €250 billion. (2012, March 16). The Local.
Retrieved from http://www.thelocal.de/20120316/41373
DOJ (US Department of Justice). 2015. A Resource Guide to the U.S.
Foreign Corrupt Practices Act. Retrieved from
http://www.justice.gov/criminal/fraud/fcpa/guide.pdf
Dow Jones Risk and Compliance. (2011, March 31). Dow Jones State of
Anti-Corruption Compliance Survey. Retrieved from
http://www.dowjones.com/pressroom/SMPRs/DJACCSurvey2011.htm
l
Eiher, S. (2009). Corruption in international business: The challenge of
cultural and legal diversity. Abingdon, UK: Routledge.
ICC (International Chamber of Commerce). (2011). Clean business is
good business. Paris: ICC, Transparency International, the United
Nations Global Compact, and the World Economic Forum Partnering
Against Corruption Initiative (PACI).
Kaufmann, D. (1997). Corruption: the facts. Foreign Policy, 114–131.
Retrieved from
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f.
Sommerville, Q. (2010, February 24). China communists get new anticorruption ethics code. BBC News. Retrieved from
http://news.bbc.co.uk/2/hi/asia-pacific/8533410.stm.
Tedesco, T. (2013, July 15). Anti-corruption high on corporate agenda,
low in practise: UK study. Financial Post. Retrieved from
http://business.financialpost.com/2013/07/15/anti-corruption-highon-corporate-agenda-low-in-practise-u-k-study/.
Transparency International. (2013). Corruption Perceptions Index 2013.
Retrieved from http://www.transparency.org/cpi2013/results.
Licenses and Attributions
Chapter 10: Corruption in International Business from Good
Corporation, Bad Corporation: Corporate Social Responsibility in the Global
Economy by Guillermo C. Jimenez and Elizabeth Pulos is available under
a Creative Commons Attribution-NonCommercial-ShareAlike 4.0
International license. UMGC has modified this work and it is available
under the original license.
Major Ethical Perspectives
There are several well-respected ways of looking at ethical issues. Some
of them have been around for centuries. It is important to know that
many who think a lot about business and ethics have deeply held beliefs
about which perspective is best. Others would recommend considering
ethical problems from a variety of different perspectives, including
utilitarianism, deontology, social justice and social contract theory,
virtue theory, general theories of justice and rights, and feminist
thought about ethics and patriarchy. We will examine several of these
perspectives below.
Utilitarianism
Utilitarianism is a prominent perspective on ethics, one that is well
aligned with economics and the free-market outlook that has come to
dominate much current thinking about business, management, and
economics. Jeremy Bentham is often considered the founder of
utilitarianism, though John Stuart Mill (who wrote On
Liberty and Utilitarianism) and others promoted it. Utilitarianism
emphasizes not rules but results. An action (or set of actions) is
generally deemed good or right if it maximizes happiness or pleasure
throughout society. Originally intended as a guide for legislators
charged with seeking the greatest good for society, the utilitarian
outlook may also be practiced individually and by corporations.
Bentham believed that the most promising way to obtain agreement on
the best policies for a society would be to look at the various policies a
legislature could pass and compare the good and bad consequences of
each. The right course of action from an ethical point of view would be
to choose the policy that would produce the greatest amount of utility,
or usefulness.
In brief, the utilitarian principle holds that an action is right if and only if
the sum of utilities produced by that action is greater than the sum of
utilities from any other possible act. This statement describes act
utilitarianism—which action among various options will deliver the
greatest good to society? Rule utilitarianism is a slightly different
version; it asks, what rule or principle, if followed regularly, will create
the greatest good?
Notice that the emphasis is on finding the best possible results and that
the assumption is that we can measure the utilities involved. (This turns
out to be more difficult that you might think.) Notice also that “the sum
total of utilities” clearly implies that in doing utilitarian analysis, we
cannot be satisfied if an act or set of acts provides the greatest utility to
us as individuals or to a particular corporation; the test is, instead,
whether it provides the greatest utility to society as a whole. Notice
that the theory does not tell us what kinds of utilities may be better
than others or how much better a good today is compared with a good
a year from today.
Whatever its difficulties, utilitarian thinking is alive and well in US law
and business. It is found in such diverse places as cost-benefit analysis
in administrative and regulatory rules and calculations, environmental
impact studies, the majority vote, product comparisons for consumer
information, marketing studies, tax laws, and strategic planning. In
management, people will often employ a form of utility reasoning by
projecting costs and benefits for Plan X versus Plan Y. But the issue in
most of these cost-benefit analyses is usually (1) put exclusively in
terms of money and (2) directed to the benefit of the person or
organization doing the analysis and not to the benefit of society as a
whole.
An individual or a company that consistently uses the test question,
“What’s the greatest good for me or the company?” is not following the
utilitarian test of the greatest good overall. Another common failing is
to see only one or two options that seem reasonable. The following are
some frequent mistakes that people make in applying what they think
are utilitarian principles in justifying their chosen course of action:
1. Failing to come up with lots of options that seem reasonable and
then choosing the one that has the greatest benefit for the
greatest number. Often, a decision maker seizes on one or two
alternatives without thinking carefully about other courses of
action. If the alternative does more good than harm, the decision
maker assumes it’s ethically okay.
2. Assuming that the greatest good for you or your company is in
fact the greatest good for all—that is, looking at situations
subjectively or with your own interests primarily in mind.
3. Underestimating the costs of a certain decision to you or your
company. The now-classic Ford Pinto case demonstrates how
Ford Motor Company executives drastically underestimated the
legal costs of not correcting a feature on their Pinto models that
they knew could cause death or injury. General Motors was often
taken to task by juries that came to understand that the company
would not recall or repair known and dangerous defects because
it seemed more profitable not to. In 2010, Toyota learned the
same lesson.
4. Underestimating the cost or harm of a certain decision to
someone else or some other group of people.
5. Favoring short-term benefits, even though the long-term costs are
greater.
6. Assuming that all values can be reduced to money. In comparing
the risks to human health or safety against, say, the risks of job or
profit losses, cost-benefit analyses will often try to compare
apples to oranges and put arbitrary numerical values on human
health and safety.
Rules and Duty: Deontology
In contrast to the utilitarian perspective, the deontological view
presented in the writings of Immanuel Kant purports that having a
moral intent and following the right rules is a better path to ethical
conduct than achieving the right results. A deontologist like Kant is
likely to believe that ethical action arises from doing one’s duty and that
duties are defined by rational thought. Duties, according to Kant, are
not specific to particular kinds of human beings but are owed
universally to all human beings. Kant therefore uses “universalizing” as a
form of rational thought that assumes the inherent equality of all
human beings. It considers all humans as equal, not in the physical,
social, or economic sense, but equal before God, whether they are
male, female, Pygmy, Eskimoan, Islamic, Christian, gay, straight, healthy,
sick, young, or old.
For Kantian thinkers, this basic principle of equality means that we
should be able to universalize any particular law or action to determine
whether it is ethical. For example, if you were to consider
misrepresenting yourself on a resume for a particular job you really
wanted and you were convinced that doing so would get you that job,
you might be very tempted to do so. (What harm would it be? you
might ask yourself. When I have the job, I can prove that I was perfect
for it, and no one is hurt, while both the employer and I are clearly
better off as a result!) Kantian ethicists would answer that your chosen
course of action should be a universal one—a course of action that
would be good for all persons at all times. There are two requirements
for a rule of action to be universal: consistency and reversibility.
Consider reversibility: if you make a decision as though you didn’t know
what role or position you would have after the decision, you would
more likely make an impartial one—you would more likely choose a
course of action that would be most fair to all concerned, not just you.
Again, deontology requires that we put duty first, act rationally, and
give moral weight to the inherent equality of all human beings.
In considering whether to lie on your resume, reversibility requires you
to actively imagine both that you were the employer in this situation
and that you were another well-qualified applicant who lost the job
because someone else padded his resume with false accomplishments.
If the consequences of such an exercise of the imagination are not
appealing to you, your action is probably not ethical.
The second requirement for an action to be universal is the search for
consistency. This is more abstract. A deontologist would say that since
you know you are telling a lie, you must be willing to say that lying, as a
general, universal phenomenon, is acceptable. But if everyone lied, then
there would be no point to lying, since no one would believe anyone. It
is only because honesty works well for society as a whole and is
generally practiced that lying even becomes possible! That is, lying
cannot be universalized, for it depends on the pre-existence of honesty.
Similar demonstrations can be made for actions such as polluting,
breaking promises, and committing most crimes, including rape, murder,
and theft. But these are the easy cases for Kantian thinkers. In the gray
areas of life as it is lived, the consistency test is often difficult to apply.
If breaking a promise would save a life, then Kantian thought becomes
difficult to apply. If some amount of pollution can allow employment
and the harm is minimal or distant, Kantian thinking is not all that
helpful. Finally, we should note that the well-known golden rule, “Do
unto others as you would have them do unto you,” emphasizes the
easier of the two universalizing requirements: practicing reversibility
(“How would I like it if someone did this to me?”).
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Introduction to Culture and Business
This chapter will take a closer look at how two key factors, culture and
ethics, impact global business. Most people hear about culture and
business and immediately think about protocol—a list of dos and don’ts
by country. For example, don’t show the sole of your foot in Saudi
Arabia; learn the nuances of bowing in Japan. While these practices are
certainly useful to know, they are just the tip of the iceberg. We often
underestimate how critical local culture, values, and customs can be in
the business environment. We assume, usually incorrectly, that
business is the same everywhere. Culture certainly matters, and more
and more people are realizing its impact on their business interactions.
In the broadest sense, culture refers to how and why we think and
function. It encompasses all sorts of things—how we eat, play, dress,
work, think, interact, and communicate. Everything we do, in essence,
has been shaped by the cultures in which we are raised. Similarly, a
person in another country is also shaped by his or her cultural
influences. These cultural influences impact how we think and
communicate.
Making Local Global
Food is a key part of many cultures. It is part of our early bonds as
children and our warm memories of comfort food and dishes that
continue to whet our appetites.
Two of the most visible American exports are the twin brands, Dunkin’
Donuts and Baskin-Robbins. Owned today by a consortium of private
equity firms known as the Dunkin’ Brands, Dunkin’ Donuts and BaskinRobbins have been sold globally for more than thirty-five years. Today,
the firm has more than 14,800 points of distribution in forty-four
countries with $6.9 billion in global sales.
After an eleven-year hiatus, Dunkin’ Donuts returned to Russia in 2010
with the opening of twenty new stores, under a new partnership.
Dunkin’ Donuts previously pulled out of Russia “following three years
of losses exacerbated by a rogue franchisee who sold liquor and meat
pies alongside coffee and crullers” (Helliker, 2010). Each culture has
different ingrained habits, particularly in their choice of food and
mealtime customs. The more globally aware businesses are mindful of
these issues and monitor their overseas operations and partners. One
of the key challenges for many companies operating globally with
different resellers, franchisees, and wholly owned subsidiaries is the
ability to control local operations.
This wasn’t the first time that Dunkin’ had encountered an overzealous
local partner who tried to customize operations to meet local
preferences and demands. In Indonesia in the 1990s, the company was
surprised to find that local operators were sprinkling a mild, white
cheese on a custard-filled donut. The company eventually approved the
local customization since it was a huge success (D. Jenkins, personal
communication, 2010).
Dunkin’ Donuts and Baskin-Robbins have not always been owned by
the same firm. They eventually came under one entity in the late
1980s—an entity that sought to leverage the two brands. One of the
overall strategies was to have the morning market covered by Dunkin’
Donuts and the afternoon snack market covered by Baskin-Robbins. It
is a strategy that worked well in the United States and the company
continued its use as it expanded to different countries. The company
was initially unprepared for the wide range of local cultural preferences
and habits that would impact its business. In Russia, Japan, China, and
most of Asia, donuts, if they were known at all, were regarded more as
a sweet type of bakery treat, like an éclair or cream puff. Locals
primarily purchased and consumed them at shopping malls as an
impulse purchase or afternoon-snack item, not as a breakfast food.
In fact, there was no equivalent word for donut in Mandarin, and
European-style baked pastries were not common outside the Shanghai
and Hong Kong markets in China. To further complicate Dunkin’
Donuts’ entry into China, which took place initially in Beijing, the
company name could not even be phonetically spelled in Chinese
characters that made any sense, as Baskin-Robbins had been able to do
in Taiwan. After extensive discussion and research, company executives
decided that the best name and translation for Dunkin’ Donuts in China
would read Sweet Sweet Ring in Chinese characters.
Local cultures also impacted flavors and preferences. For BaskinRobbins, the flavor library is controlled in the United States, but local
operators in each country have been the source of new flavor
suggestions. In many cases, flavors that were customized for local
cultures were added a decade later to the main menus in major markets,
including the United States. Mango and green tea were early custom ice
cream flavors produced for the Asian market in the 1990s. In Latin
America, dulce de leche became a favorite flavor. Today, these flavors
are staples of the North American flavor menu.
One flavor suggestion from Southeast Asia never quite made it onto the
menu. The durian fruit is a favorite in parts of Southeast Asia, but it has
a strong, pungent odor. Baskin-Robbins management was concerned
that the strong odor would overwhelm factory operations. (The odor of
the durian fruit is so strong that the fruit is often banned in upscale
hotels in several Asian countries.) While the durian never became a
flavor, the company did concede to making ice cream flavored after
the ube, a sweetened purple yam, for the Philippine market. It was
already offered in Japan, and the company extended it to the
Philippines. In Japan, sweet corn and red bean ice cream were approved
for local sale and became hot sellers, but the two flavors never made it
outside the country.
When reviewing local suggestions, management conducts a market
analysis to determine if the global market for the flavor is large enough
to justify the investment in research and development and eventual
production. In addition to the market analysis, the company always has
to make sure they have access to sourcing quality flavors and fruit.
Mango proved to be a challenge, as finding the correct fruit puree
differed by country or culture. Samples from India, Hawaii, Pakistan,
Mexico, the Philippines, and Puerto Rico were taste-tested in the
mainland United States. It seems that the mango is culturally regarded
as a national treasure in every country where it is grown, and every
country thinks its mango is the best. Eventually the company settled on
one particular flavor of mango.
A challenging balance for Dunkin’ Brands is to enable local operators to
customize flavors and food product offerings without diminishing the
overall brand of the companies. Russians, for example, are largely
unfamiliar with donuts, so Dunkin’ created several items that
specifically appeal to Russian flavor preferences for scalded cream and
raspberry jam (Helliker, 2010).
In some markets, one of the company’s brands may establish a market
presence first. In Russia, the “Dunkin’ brand already ranks as a dessert
purveyor. Its Baskin-Robbins ice-cream chain boasts 143 shops there,
making it the number two Western restaurant brand by number of
stores behind the hamburger chain McDonald’s Corp” (Helliker, 2010).
The strength of the company’s ice cream brand is now enabling Dunkin’
Brands to promote the donut chain as well.
References
Helliker, K. (2010, April 27). Dunkin’ Donuts heads back to Russia. Wall
Street Journal. Retrieved from
http://online.wsj.com/article/SB10001424052748704464704575208
320044839374.htm
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original license.
What Is Culture? Values, Customs, and
Language
Local preferences, habits, values, and culture impact all aspects of doing
business in a country. But what exactly do we mean by culture? Culture
is different from personality. For our purposes here, let’s
define personality as a person’s identity and unique physical, mental,
emotional, and social characteristics. No doubt one of the highest
hurdles to cross-cultural understanding and effective relationships is
our frequent inability to decipher the influence of culture from that of
personality. Once we become culturally literate, we can more easily
read individual personalities and their effect on our relationships.
So, What Is Culture, Anyway?
Culture in today’s context is different from the traditional, more
singular definition, used particularly in Western languages, where the
word often implies refinement. Culture is the beliefs, values, mind-sets,
and practices of a group of people. It includes the behavior pattern and
norms of that group—the rules, the assumptions, the perceptions, and
the logic and reasoning that are specific to a group. In essence, each of
us is raised in a belief system that influences our individual perspectives
to such a large degree that we can’t always account for, or even
comprehend, its influence. We’re like other members of our culture—
we’ve come to share a common idea of what’s appropriate and
inappropriate.
Culture is really the collective programming of our minds from birth. It’s
this collective programming that distinguishes one group of people
from another. Much of the problem in any cross-cultural interaction
stems from our expectations. The challenge is that whenever we deal
with people from another culture—whether in our own country or
globally—we expect people to behave as we do and for the same
reasons. Culture awareness most commonly refers to having an
understanding of another culture’s values and perspective. This does
not mean automatic acceptance; it simply means understanding another
culture’s mind-set and how its history, economy, and society have
impacted what people think. Understanding so you can properly
interpret someone’s words and actions means you can effectively
interact with them.
When talking about culture, it’s important to understand that there
really are no rights or wrongs. People’s value systems and reasoning are
based on the teachings and experiences of their culture. Rights and
wrongs then really become perceptions. Cross-cultural
understanding requires that we reorient our mind-set and, most
importantly, our expectations, in order to interpret the gestures,
attitudes, and statements of the people we encounter. We reorient our
mind-set, but we don’t necessarily change it.
There are a number of factors that constitute a culture—manners, mindset, rituals, laws, ideas, and language, to name a few. To truly
understand culture, you need to go beyond the lists of dos and don’ts
and understand what makes people tick and how, as a group, they have
been influenced over time by historical, political, and social issues.
When trying to understand how cultures evolve, we look at the factors
that help determine cultures and their values. In general, a value is
defined as something that we prefer over something else—whether it’s
a behavior or a tangible item. Values are usually acquired early in life
and are often nonrational—although we may believe that ours are
actually quite rational. Our values are the key building blocks of our
cultural orientation.
Odds are that each of us has been raised with a considerably different
set of values from those of our colleagues and counterparts around the
world. Exposure to a new culture may take all you’ve ever learned
about what’s good and bad, just and unjust, and beautiful and ugly and
stand it on its head.
Human nature is such that we see the world through our own cultural
lenses. Tucked in between the lines of our cultural laws is an
unconscious bias that inhibits us from viewing other cultures
objectively. Our judgments of people from other cultures will always be
colored by the frame of reference we’ve been taught. As we look at our
own habits and perceptions, we need to think about the experiences
that have blended together to impact our cultural frame of reference.
In coming to terms with cultural differences, we tend to employ
generalizations. This isn’t necessarily bad. Generalizations can save us
from sinking into what may be abstruse, esoteric aspects of a culture.
However, recognize that cultures and values are not static entities.
They’re constantly evolving—merging, interacting, drawing apart, and
reforming. Around the world, values and cultures are evolving from
generation to generation as people are influenced by things outside
their culture. In modern times, media and technology have probably
single-handedly impacted cultures the most in the shortest time
period—giving people around the world instant glimpses into other
cultures. Recognizing this fluidity will help you avoid getting caught in
outdated generalizations. It will also enable you to interpret local cues
and customs and to better understand local cultures.
Understanding what we mean by culture and what the components of
culture are will help you better interpret the impact on business at both
the macro and micro levels. Confucius had this to say about cultural
crossings: “Human beings draw close to one another by their common
nature, but habits and customs keep them apart.”
What Kinds of Culture Are There?
Political, economic, and social philosophies all impact the way people’s
values are shaped. Our cultural base of reference—formed by our
education, religion, or social structure—also impacts business
interactions in critical ways. As we study cultures, it is very important to
remember that all cultures are constantly evolving. When we say
“cultural,” we don’t always just mean people from different countries.
Every group of people has its own unique culture—that is, its own way
of thinking, values, beliefs, and mind-sets. For our purposes, we’ll focus
on national and ethnic cultures, although there are many subcultures
within a country or ethnic group.
Precisely where a culture begins and ends can be murky. Some cultures
fall within geographic boundaries; others overlap. Cultures within one
border can turn up within other geographic boundaries looking
dramatically different or pretty much the same. For example, Indians in
India or Americans in the United States may communicate and interact
differently from their countrymen who have been living outside their
respective home countries for a few years.
The countries of the Indian subcontinent, for example, have close
similarities. And cultures within one political border can turn up within
other political boundaries looking pretty much the same, such as the
Chinese culture in China and the overseas Chinese culture in countries
around the world. We often think that cultures are defined by the
country or nation, but that can be misleading because cultural groups
can include nationalities; subcultures (gender, ethnicities, religions,
generations, and even socioeconomic class); and organizations,
including the workplace.
Nationalities
A national culture is—as it sounds—defined by its geographic and
political boundaries and includes regional cultures within a nation as
well as among several neighboring countries. A country’s history,
including changes to its name and boundaries substantially impacts its
culture.
In the past century alone, we have seen many changes as new nations
emerged from the gradual dismantling of the British and Dutch empires
at the turn of the 1900s. For example, today the physical territories
that constitute the countries of India and Indonesia are far different
than they were a hundred years ago. While it’s easy to forget that the
British colonized India for two hundred years and that the Dutch
colonized Indonesia for more than one hundred and fifty years, what is
clearer is the impact of the British and the Dutch on the respective
bureaucracies and business environments. The British and the Dutch
were well known for establishing large government bureaucracies in the
countries they controlled. Unlike the British colonial rulers in India, the
Dutch did little to develop Indonesia’s infrastructure, civil service, or
educational system. The British, on the other hand, tended to hire locals
for administrative positions, thereby establishing a strong and welleducated Indian bureaucracy. Even though many businesspeople today
complain that this Indian bureaucracy is too slow and focused on rules
and regulations, the government infrastructure and English-language
education system laid out by the British helped position India for its
emergence as a strong high-tech economy.
Even within a national culture, there are often distinct regional cultures;
the United States is a great example of diverse and distinct cultures all
living within the same physical borders. In the United States, there’s a
national culture embodied in the symbolic concept of “all-American”
values and traits, but there are also other cultures based on
geographically different regions—the South, Southwest, West Coast,
East Coast, Northeast, Mid-Atlantic, and Midwest.
Subcultures
Many groups are defined by ethnicity, gender, generation, religion, or
other characteristics with cultures that are unique to them. For
example, the ethnic Chinese business community has a distinctive
culture even though it may include Chinese businesspeople in several
countries. This is particularly evident throughout Asia, as many people
often refer to Chinese businesses as making up a single business
community. The overseas Chinese business community tends to
support other Chinese businesses and forge business bonds within the
community with partners in locations spanning Indonesia, Malaysia,
Singapore, and other ASEAN (Association of Southeast Asian Nations)
countries. This group is perceived differently than Chinese from
mainland China or Taiwan. Their common experience being a minority
ethnic community with strong business interests has led to a shared
understanding of how to quietly operate large businesses in foreign
countries. Just as in mainland China, guanxi, or “connections,” are
essential to admission into this overseas Chinese business network. But
once in the network, the Chinese tend to prefer doing business with
one another and offer preferential pricing and other business services.
Organizations
Every organization has its own workplace culture, referred to as
the organizational culture. This term defines simple aspects of the work
environment, such as how people dress (casual or formal), how they
perceive and value employees, or how they make decisions (as a group
or by the manager alone). When we talk about an entrepreneurial
culture in a company, it might imply that the company encourages
people to think creatively and respond to new ideas fairly quickly
without a long internal approval process. One of the issues managers
often have to consider when operating with colleagues, employees, or
customers in other countries is how the local country’s culture will
blend or contrast with the company’s culture.
For example, Apple, Google, and Microsoft all have distinct business
cultures that are influenced both by their industries and by the types of
technology-savvy employees that they hire, as well as by the
personalities of their founders. When these firms operate in a country,
they have to assess how new employees will fit their respective
corporate cultures, which usually emphasize creativity, innovation,
teamwork balanced with individual accomplishment, and a keen sense
of privacy. Their global employees may appear relaxed in casual work
clothes, but underneath there is often a fierce competitiveness. So how
do these companies effectively hire in countries like Japan, where
teamwork and following rules are more important than seeking new
ways of doing things? This is an ongoing challenge that human
resources departments continually address.
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available under a Creative Commons Attribution-NonCommercialShareAlike 3.0 Unported license without attribution as requested by
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it is available under the original license.
Understanding How Culture Impacts Local
Business Practices
Professionals err when thinking that, in today’s shrinking world, cultural
differences are no longer significant. It’s a common mistake to assume
that people think alike just because they dress alike; it’s also a mistake
to assume that people think alike just because they are similar in their
word choices in a business setting. Even in today’s globalizing world,
there are wide cultural differences, and these differences influence how
people do business. Culture impacts many aspects of business
•
•
•
•
•
•
the pace of business
business protocols such as how to physically and verbally meet
and interact
decision making and negotiating
managing employees and projects
the propensity for risk taking
marketing, sales, and distribution
There are still many people around the world who think that business is
just about core business principles and making money. They assume
that issues like culture don’t really matter. These issues do matter—in
many ways. Even though businesses are focused on the bottom line,
people do business with partners they like, trust, and understand.
Culture determines all of these key issues.
A simple issue, such as local flavor preferences, can impact even the
largest companies. The influence of cultural factors on business is
extensive. Culture impacts how employees are best managed based on
their values and priorities. It also influences the functional areas of
marketing, sales, and distribution.
It can affect a company’s analysis and decision on how best to enter a
new market. Do they prefer a partner (tending toward uncertainty
avoidance) so they do not have to worry about local practices or
government relations? Or are they willing to set up a wholly owned unit
to recoup the best financial prospects?
When you’re dealing with people from another culture, you may find
that their business practices, communication, and management styles
are different from those you are accustomed to. Understanding the
culture of the people with whom you are dealing is important to
successful business interactions and to accomplishing business
objectives. For example, you’ll need to understand the following
components of cultural variation:
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•
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•
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how people communicate
how people view time and deadlines
how people are likely to ask questions or highlight problems
how people respond to management and authority
how people perceive verbal and physical communications
how people make decisions
To conduct business with people from other cultures, you must put
aside preconceived notions and strive to learn about the culture of your
counterpart. Often the greatest challenge is learning not to apply your
own value system when judging people from other cultures. It is
important to remember that there are no right or wrong ways to deal
with other people—just different ways. Concepts like time and ethics
are viewed differently from place to place, and the smart business
professional will seek to understand the rationale underlying another
culture’s concepts.
For younger and smaller companies, there’s no room for errors or
delays—both of which may result from cultural misunderstandings and
miscommunications. These miscues can and often do affect the bottom
line.
Spotlight on Cultures and Entrepreneurship
With global media reaching the corners of the earth, entrepreneurship
has become increasingly popular as more people seek a way to
exponentially increase their chances for success. Nevertheless,
entrepreneurs can face challenges in starting to do business in nations
whose cultures require introductions or place more value on large,
prestigious, brand-name firms.
Conversely, entrepreneurs are often well equipped to negotiate global
contracts or ventures. They are more likely to be flexible and creative in
their approach and have less rigid constraints than their counterparts
from more established companies. Each country has different
constraints, including the terms of payment and regulations, and you
will need to keep an open mind about how to achieve your objectives.
In reality, understanding cultural differences is important whether
you’re selling to ethnic markets in your own home country or selling to
new markets in different countries. Culture also impacts you if you’re
sourcing from different countries, because culture impacts
communications.
Your understanding of culture will affect your ability to enter a local
market, develop and maintain business relationships, negotiate
successful deals, conduct sales, conduct marketing and advertising
campaigns, and engage in manufacturing and distribution. Too often,
people send the wrong signals or receive the wrong messages; as a
result, people get tangled in the cultural web. In fact, there are
numerous instances in which deals would have been successfully
completed if finalizing them had been based on business issues alone,
but cultural miscommunications interfered. Just as you would conduct a
technical or market analysis, you should also conduct a cultural analysis.
It’s critical to understand the history and politics of any country or
region in which you work or with which you intend to deal. It is
important to remember that each per…
