An important decision for a business going global is which foreign market to enter. Write a report recommending a most suitable foreign market for a product or service.
Visit the University online library and locate a peer-reviewed journal article on selecting a foreign market. Include a brief summary of this article in your report.
Cite all sources of information you use. Present your findings as a three-page report in a Word document formatted in APA style. All written assignments and responses should follow APA rules for attributing sources.
Course Project Task 1
Throughout this course, you will work on a research paper that you will submit inModule 8. the complete course project description.
This week, you will select an international marketing topic for the paper and write a synopsis. The facilitator will approve the topic or may recommend revisions.
To select the topic, use the following guidelines:
· The topic must be current. This means that the issues, examples, and events you discuss must not be more than a decade old and should have relevance for the next five years.
· The topic must be specific and not generic.
· The topic must be related to:
· International marketing principles
· Cultural diversity
· Historical and geographical diversity
· Economic and trade policies of countries
· Politics and its effects on international trade
In the synopsis, include the following:
· Description of the topic (1 paragraph)
· Summary of your current knowledge of the topic (2 paragraphs)
· What you expect to learn (1 paragraph)
· Why the topic is important (1 paragraph)
Present the topic and the synopsis in a 2-page Word document formatted in APA style. All written assignments and responses should follow APA rules for attributing sources.
· Read the online lectures for Module 2
· From the textbook, International marketing, read:
· History and geography: The foundations of culture
· Cultural dynamics in assessing global markets
· Culture, management style, and business systems
· From the Internet, read:
· CultureGrams Online http://www.culturegrams.com/ (for-fee databases)
· 3: History and Geography: THE FOUNDATIONS OF CULTURE
· CHAPTER OUTLINE
· Global Perspective: Birth of a Nation—Panama in 67 Hours
· Historical Perspective in Global Business
· History and Contemporary Behavior
· History Is Subjective
· Manifest Destiny and the Monroe Doctrine
· Geography and Global Markets
· Climate and Topography
· Geography, Nature, and Economic Growth
· Social Responsibility and Environmental Management
· Resources
· Dynamics of Global Population Trends
· Controlling Population Growth
· Rural/Urban Migration
· Population Decline and Aging
· Worker Shortage and Immigration
· World Trade Routes
· Communication Links
· CHAPTER LEARNING OBJECTIVES
· What you should learn from Chapter 3:
· • The importance of history and geography in understanding international markets
· • The effects of history on a country’s culture
· • How culture interprets events through its own eyes
· • How the United States moved west, and how this move affected attitudes
· • The effect of geographic diversity on economic profiles of a country
· • Why marketers need to be responsive to the geography of a country
· • The economic effects of controlling population growth versus aging population
· • Communications are an integral part of international commerce
· Global Perspective: BIRTH OF A NATION—PANAMA IN 67 HOURS
· The Stage Is Set
·
· June 1902
· The United States offers to buy the Panama Canal Zone from Colombia for $10 million.
· August 1903
· The Colombian Senate refuses the offer. Theodore Roosevelt, angered by the refusal, refers to the Colombian Senate as “those contemptible little creatures in Bogotá.” Roosevelt then agrees to a plot, led by secessionist Dr. Manuel Amador, to assist a group planning to secede from Colombia.
· October 17
· Panamanian dissidents travel to Washington and agree to stage a U.S.-backed revolution. The revolution is set for November 3 at 6:00 p.m.
· October 18
· A flag, constitution, and declaration of independence are created over the weekend. Panama’s first flag was designed and sewn by hand in Highland Falls, New York, using fabric bought at Macy’s.
· Philippe Jean Bunau-Varilla, a French engineer associated with the bankrupt French—Panamanian canal construction company and not a permanent resident in Panama, is named Panama’s ambassador to the United States.
· A Country Is Born
· Tuesday, November 3
· Precisely at 6:00 p.m., the Colombian garrison is bribed to lay down their arms. The revolution begins, the U.S.S. Nashville steams into Colón harbor, and the junta proclaims Panama’s independence.
· Friday, November 6
· By 1:00 p.m., the United States recognizes the sovereign state of Panama.
· Saturday, November 7
· The new government sends an official delegation from Panama to the United States to instruct the Panamanian ambassador to the United States on provisions of the Panama Canal Treaty.
· Wednesday, November 18
· At 6:40 p.m., the Panamanian ambassador signs the Panama Canal Treaty. At 11:30 p.m., the official Panamanian delegation arrives at a Washington, DC, railroad station and is met by their ambassador, who informs them that the treaty was signed just hours earlier.
· The Present
·
· 1977
· The United States agrees to relinquish control of the Panama Canal Zone on December 31, 1999.
· 1997
· Autoridad del Canal de Panama, the canal authority that will assume control from the U.S. Panama Canal Commission, is created.
· 1998
· Panama gives a Chinese company the right to build new port facilities on both the Pacific and Atlantic sides, to control anchorages, to hire new pilots to guide ships through the canal, and to block all passage that interferes with the company’s business.
· January 1, 2000
· “The canal is ours” is the jubilant cry in Panama.
· January 17, 2000
· The Pentagon sees a potential Chinese threat to the Panama Canal.
· July 2002
· China pressures Panama to extend diplomatic recognition to China and drop recognition of Taiwan.
· 2005
· The Panama Canal is expected to reach maximum capacity by 2010. The administrative board proposes a $5 billion expansion to add a parallel set of locks in response to the threat of a competing project to build canals or “multimodal” systems across Mexico’s Tehuantepec isthmus. Either expand or “run the risk of eventually becoming just a regional canal.”
· 2020
· ????
· This story is a good illustration of how history and geography can affect public and political attitudes in the present and far into the future. To the Panamanians and much of Latin America, the Panama Canal is but one example of the many U.S. intrusions during the early 20th century that have tainted U.S.–Latin American relations. For the United States, the geographical importance of the Panama Canal for trade (shipping between the two coasts via the canal is cut by 8,000 miles) makes control of the canal a sensitive issue, especially if that control could be potentially hostile. That a Chinese-owned company has operational control of both the Pacific and Atlantic ports and could pose an indirect threat to the Panama Canal Zone concerns the U.S. government. The recent history of U.S. conflict with China and the history of Western domination of parts of China create in the minds of many an adversarial relationship between the two countries. Furthermore, some wonder if Panama would be reluctant to ask the United States to intervene at some future date, perhaps fearing that the Americans might stay another 98 years. Although the probability of China sabotaging the canal is slim at best, historical baggage makes one wonder what would happen should U.S. relations with China deteriorate to the point that the canal were considered to be in jeopardy.
· Sources: Bernard A. Weisberger, “Panama: Made in U.S.A.,” American Heritage, November 1989, pp. 24–25; Juanita Darling, “‘The Canal Is Ours’ Is Jubilant Cry in Panama,” Los Angeles Times, January 1, 2000, p. A1; Chris Kraul, “$5-Billion Expansion of Panama Canal Is Considered,” Los Angeles Times, January 22, 2005, p. A15; Rainbow Nelson, “Panama Canal Hits Milestone,” Lloyd’s List, November 1, 2007, p. 4.
· Here we begin the discussion of the Cultural Environment of Global Markets.
Culture
can be defined as a society’s accepted basis for responding to external and internal events. To understand fully a society’s actions and its points of view, you must have an appreciation for the influence of historical events and the geographical uniqueness to which a culture has had to adapt. To interpret a culture’s behavior and attitudes, a marketer must have some idea of a country’s history and geography.
· The goal of this chapter is to introduce the reader to the impact of history and geography on the marketing process. The influence of history on behavior and attitudes and the influence of geography on markets, trade, and environmental issues are examined in particular.
· Historical Perspective in Global Business
· History helps define a nation’s “mission,” how it perceives its neighbors, how it sees its place in the world, and how it sees itself. Insights into the history of a country are important for understanding attitudes about the role of government and business, the relations between managers and the managed, the sources of management authority, and attitudes toward foreign corporations.
· 1000 First millennium ends; Y1K problem overblown—widespread fear of the end of the world proved unfounded
· 1000 Vikings settle Newfoundland
· 1004 Chinese unity crumbles with treaty between the Song and the Liao giving the Liao full autonomy; China will remain fractured until the Mongol invasion in the 13th century (see 1206)
· 1025 Navy of Cholas in southern India crushes the empire of Srivijaya in modern Myanmar to protect its trade with China
· 1054 Italy and Egypt formalize commercial relations
· 1066 William the Conqueror is victorious over Harold II in the Battle of Hastings, establishing Norman rule in England and forever linking the country with the continent
· 1081 Venice and Byzantium conclude a commercial treaty (renewed in 1126)
· 1095 First of the crusades begins; Pope Urban II calls on Europe’s noblemen to help the Byzantines repel the Turks; the crusaders’ travel, stories, and goods acquired along the way help increase trade across Europe and with the Mediterranean and Asia; eighth major crusade ends—Syria expels the Christians
· 1100 Japan begins to isolate itself from the rest of the world, not really opening up again until the mid-19th century (see 1858)
· 1100 China invents the mariner’s compass and becomes a force in trade; widespread use of paper money also helps increase trade and prosperity
· 1100 Inca Empire in the Andes begins to develop, eventually encompassing about 12 million people until its destruction by the Spanish in 1553; cities specialize in certain farming and trade with others for what they don’t make
· 1132 Corporate towns in France grant charters by Henry I to protect commerce
· 1189 German merchants conclude treaty with Novgorod in Russia
· 1200 Islam is introduced by spice traders to Southeast Asia
· 1200 More than 60,000 Italian merchants work and live in Constantinople
· 1206 Genghis Khan becomes the Great Khan, controlling most of northern China; after his death in 1227, the Khan clan conquers much of Asia by midcentury and promotes trade and commerce, reviving the ancient Silk Road that linked Chinese and Western traders
· To understand, explain, and appreciate a people’s image of itself and the attitudes and unconscious fears that are reflected in its view of foreign cultures, it is necessary to study the culture as it is now as well as to understand the culture as it was—that is, a country’s history.
· History and Contemporary Behavior
· Most Americans know the most about European history, even though our major trading partners are now to our west and south. Circa 2008, China has become a hot topic in the United States. It was back in 1776 as well. In a sense, American history really begins with China. Recall the Boston Tea Party: Our complaint then was the British tax, and more important, the British prohibition against Yankee traders dealing directly with merchants in Canton. So it is worthwhile to dwell for a few moments on a couple of prominent points in the history of the fast burgeoning market that is modern-day China. James Day Hodgson, former U.S. Labor Secretary and Ambassador to Japan, suggests that anyone doing business in another country should understand at least the encyclopedic version of the people’s past as a matter of politeness, if not persuasion.1 We first offer a few glimpses of the past that continues to influence U.S.–Chinese relations even today.
· First Opium War and the Treaty of Nanjing (1839–1842).
· During the early 1800s, the British taste for tea was creating a huge trade deficit with China. Silver bullion was flowing fast in an easterly direction. Of course, other goods were being traded too. Exports from China also included sugar, silk, mother-of-pearl, paper, camphor, cassia, copper and alum, lacquer ware, rhubarb, various oils, bamboo, and porcelain. The British “barbarians” returned cotton and woolen textiles, iron, tin, lead, carnelian, diamonds, pepper, betel nuts, pearls, watches and clocks, coral and amber beads, birds’ nests and shark fins, and foodstuffs such as fish and rice. But the tea-for-silver swap dominated the equation.
· Then came the English East India Company epiphany: Opium. Easy to ship, high value to volume and weight ratios, and addicting to customers—what a great product! At the time, the best opium came from British India, and once the full flow began, the tea-caused trade deficit disappeared fast. The Emperor complained and issued edicts, but the opium trade burgeoned. One of the taller skyscrapers in Hong Kong today is the Jardine-Matheson Trading House.2 Its circular windows are reminiscent of the portholes of its clipper-ship beginnings in the opium trade.
· 1215 Magna Carta, a pact between the English king and his subjects, is signed by King John, who becomes subject to the rule of law
· 1229 German merchants sign trade treaty with the Prince of Smolensk in Russia
· 1252 First gold coins issued in the West since the fall of Rome, in Florence
· 1269 England institutes toll roads
· 1270 Venetian Marco Polo and his father travel through Asia and the Middle East, becoming the first European traders to establish extensive links with the region
· 1279 Kublai Khan unites China and creates the Yuan (Origin) dynasty; by the time he dies in 1294, he has created a unified Mongol Empire extending from China to eastern Europe
· 1300 The early stirrings of the Renaissance begin in Europe as people are exposed to other cultures, primarily through merchants and trade; trade fairs are held in numerous European cities
· 1315 A great famine hits Europe, lasting two years, more widespread and longer than any before
· 1348 The Plague (the Black Death) kills one-fourth to one-third of the population in Europe (25 million people) in just three years, disrupting trade as cities try to prevent the spread of the disease by restricting visitors; it likely started in Asia in the 1320s; massive inflation took hold, because goods could only be obtained locally; serfs were in high demand and began moving to higher wage payers, forever altering Europe’s labor landscape
· 1358 German Hanseatic League officially forms by the Hansa companies of merchants for trade and mutual protection, eventually encompassing more than 70 cities and lasting nearly 300 years
· 1375 Timur Lang the Turk conquers lands from Moscow to Delhi
· 1381 English rioters kill foreign Flemish traders as part of the 100,000-strong peasant rebellion against Richard II, which was led by Wat Tyler in a failed attempt to throw off the yoke of feudalism
· 1392 England prohibits foreigners from retailing goods in the country
· 1400 Koreans develop movable-type printing (see 1450)
· 1404 Chinese prohibit private trading in foreign countries, but foreign ships may trade in China with official permission
· In 1836 some high-ranking Chinese officials advocated legalizing opium. The foreign suppliers boosted production and shipments in anticipation of exploding sales. Then the Emperor went the opposite direction and ordered the destruction of the inventories in Canton (now known as Guangzhou). By 1839 the trade was dead. The British responded by sinking junks in the Pearl River and blockading all Chinese ports.
· The “magically accurate” British cannon pointed at Nanjing yielded negotiations there in 1842. The Chinese ceded Hong Kong and $21 million pounds to the British. Ports at Xiamen, Fuzhou, Ningbo, and Shanghai were opened to trade and settlement by foreigners. Hong Kong thus became the gateway to a xenophobic China, particularly for the past 50 years. Perhaps most important, China recognized for the first time its loss of great power status.
· Ultimately the Opium War became about foreign access to Chinese trade, and the treaty of Nanjing really didn’t settle the issue. A second Opium War was fought between 1857 and 1860. In that imbroglio, British and French forces combined to destroy the summer palace in Beijing. Such new humiliations yielded more freedoms for foreign traders; notably, the treaty specifically included provisions allowing Christian evangelism throughout the realm.
· Taiping Rebellion (1851–1864).
· One consequence of the humiliation at the hands of foreigners was a loss of confidence in the Chinese government. The resulting disorder came to a head in Guangxi, the southernmost province of the Empire. The leader of the uprising was a peasant who grew up near Guangzhou. Hong Xiuquan aspired to be a civil servant but failed the required Confucian teachings–based exam. When in Guangzhou for his second try at the exam, he came in contact with Protestant Western missionaries and later began to have visions of God.
· After flunking the exam for a fourth time in 1843, he began to evangelize, presenting himself as Christ’s brother. In the next seven years, he attracted 10,000 followers. In 1851 he was crowned by his followers as the “Heavenly King” of the “Heavenly Kingdom of Peace.” Despite their adopted label, they revolted, cut off their pigtails in defiance of the ruling Manchus, and began to march north. With the fervor of the religious zealots they were, they fought their way through the capital at Nanjing and almost to Tianjing by 1855.
· But then things started to unravel. Chinese opposition forces organized. Because foreigners appreciated neither Hong’s interpretation of the scriptures, nor his 88 concubines, nor his attacks on Shanghai, they formed another army against him. Hong took his own life just before the final defeat and the recapture of Nanjing.
· 1415 Chinese begin significant trading with Africa through government expeditions—some believe they sailed to North America as well in 1421
· 1425 Hanseatic city of Brugge becomes the first Atlantic seaport to be a major trading center
· 1427 Aztec Empire is created by Itzcotl; it will encompass about 6 million people until its destruction in 1519
· 1430 Portuguese Prince Henry the Navigator explores west African coast to promote trade
· 1441 Mayan Empire collapses as the city of Mayapán is destroyed in a revolt
· 1450 Renaissance takes hold in Florence, its traditional birthplace
· 1450 Gutenberg Bible is first book printed with movable type; the ability to mass produce books creates an information revolution
· 1453 Byzantine Empire is destroyed as Muhammad II sacks Constantinople (renaming it Istanbul)
· 1464 French royal mail service established by Louis XI
· 1470 Early trademark piracy committed by Persians who copy mass-produced Chinese porcelain to capitalize on its popularity in foreign countries
· 1479 Under the Treaty of Constantinople, in exchange for trading rights in the Black Sea, Venice agrees to pay tribute to the Ottoman Empire
· 1482 English organize a postal system that features fresh relays of horses every 20 miles
· 1488 Bartolomeu Dias sails around the coast of Africa; this, along with the voyages of Christopher Columbus, ushers in the era of sea travel
· 1492 Christopher Columbus “discovers” the New World
· 1494 Portugal and Spain divide the unexplored world between them with the Treaty of Tordesillas
· 1500 Rise of mercantilism, the accumulation of wealth by the state to increase power, in western Europe; states without gold or silver mines try to control trade to maintain a surplus and accumulate gold and silver; Englishman Thomas Mun was one of the great proponents in 1600, who realized that the overall balance of trade was the important factor, not whether each individual trade resulted in a surplus
· 1500 Slave trade becomes a major component of commerce
· 1504 Regular postal service established among Vienna, Brussels, and Madrid
· Estimates of the death toll from the Taiping Rebellion stand between 20 and 40 million people. We repeat: 20–40 million Chinese lives were lost. By contrast, “only” 2 million were killed in the 1949 Communist Revolution. The Taiping Rebellion is the single most horrific civil war in the history of the world. Surely Hong Xiuquan was insane. And other rebellions also occurred in China during this time; the Muslim one in the northwest is most notable (1862–78). However, based on these events in the mid-1800s, it is easy to see why the Chinese leadership has remained wary of foreign influences in general, and religious movements in particular, even today.3
· History and Japan.
· Trade with Japan was a hot topic in the United States in both the 1850s and the 1980s. Likewise, unless you have a historical sense of the many changes that have buffeted Japan—seven centuries under the shogun feudal system, the isolation before the coming of Commodore Perry in 1853, the threat of domination by colonial powers, the rise of new social classes, Western influences, the humiliation of World War II, and involvement in the international community—you will have difficulty fully understanding its contemporary behavior. Why do the Japanese have such strong loyalty toward their companies? Why is the loyalty found among participants in the Japanese distribution systems so difficult for an outsider to develop? Why are decisions made by consensus? Answers to such questions can be explained in part by Japanese history (and geography).
· Loyalty to family, to country, to company, and to social groups and the strong drive to cooperate, to work together for a common cause, permeate many facets of Japanese behavior and have historical roots that date back thousands of years. Historically, loyalty and service, a sense of responsibility, and respect for discipline, training, and artistry were stressed to maintain stability and order. Confucian philosophy, taught throughout Japan’s history, emphasizes the basic virtue of loyalty “of friend to friend, of wife to husband, of child to parent, of brother to brother, but, above all, of subject to lord,” that is, to country. A fundamental premise of Japanese ideology reflects the importance of cooperation for the collective good. Japanese achieve consensus by agreeing that all will unite against outside pressures that threaten the collective good. A historical perspective gives the foreigner in Japan a basis on which to begin developing cultural sensitivity and a better understanding of contemporary Japanese behavior.
· History Is Subjective
· History is important in understanding why a country behaves as it does, but history from whose viewpoint? Historical events always are viewed from one’s own biases and self-reference criteria (SRC), and thus, what is recorded by one historian may not be what another records, especially if the historians are from different cultures. Historians traditionally try to be objective, but few can help filtering events through their own cultural biases.4
· 1520 First chocolate brought from Mexico to Spain
· 1521 Mexico is conquered by Hernán Cortés after Aztec ruler, Montezuma, is accidentally killed
· 1522 Magellan’s expedition completes its three-year sail around the world; it is the first successful circumnavigation
· 1531 Antwerp stock exchange is the first exchange to move into its own building, signifying its importance in financing commercial enterprises throughout Europe and the rising importance of private trade and commerce; Antwerp emerges as a trading capital
· 1532 Brazil is colonized by the Portuguese
· 1534 English break from the Catholic Church, ending its dominance of politics and trade throughout Europe, as Henry VIII creates the Church of England
· 1553 South American Incan Empire ends with conquest by Spanish; the Incas had created an extensive area of trade, complete with an infrastructure of roads and canals
· 1555 Tobacco trade begins after its introduction to Europe by Spanish and Portuguese traders
· 1557 Spanish crown suffers first of numerous bankruptcies, discouraging cross-border lending
· 1561 Via Dutch traders, tulips come to Europe from Near East for first time
· 1564 William Shakespeare is born; many of his plays are stories of merchant traders
· 1567 Typhoid fever, imported from Europe, kills two million Indians in South America
· 1588 Spanish Armada defeated by British, heralding Britain’s emergence as the world’s greatest naval power; this power will enable Britain to colonize many regions of the globe and lead to its becoming the world’s commercially dominant power for the next 300 years
· 1596 First flush toilet is developed for Britain’s Queen Elizabeth I
· 1597 Holy Roman Empire expels English merchants in retaliation for English treatment of Hanseatic League
· 1600 Potatoes are brought from South America to Europe, where they quickly spread to the rest of world and become a staple of agricultural production
· 1600 Japan begins trading silver for foreign goods
· 1600 Britain’s Queen Elizabeth I grants charter to the East India Company, which will dominate trade with the East until its demise in 1857
·
· The Monumento de los Niños Heroes honors six young cadets who, during the Mexican–American War of 1847, chose death over surrender. The Mexican–American War is important in Mexican history and helps explain, in part, Mexico’s love–hate relationship with the United States. (© Dave G. Houser/Corbis)
· Our perspective not only influences our view of history but also subtly influences our view of many other matters. For example, maps of the world sold in the United States generally show the United States at the center, whereas maps in Britain show Britain at the center, and so on for other nations.
· A crucial element in understanding any nation’s business and political culture is the subjective perception of its history. Why do Mexicans have a love–hate relationship with the United States? Why were Mexicans required to have majority ownership in most foreign investments until recently? Why did dictator General Porfírio Díaz lament, “Poor Mexico, so far from God, so near the United States”? Why? Because Mexicans see the United States as a threat to their political, economic, and cultural sovereignty.
· Most citizens of the United States are mystified by such feelings. After all, the United States has always been Mexico’s good neighbor. Most would agree with President John F. Kennedy’s proclamation during a visit to Mexico that “Geography has made us neighbors, tradition has made us friends.” North Americans may be surprised to learn that most Mexicans “felt it more accurate to say ‘Geography has made us closer, tradition has made us far apart.’”5
· 1601 France makes postal agreements with neighboring states
· 1602 Dutch charter their own East India Company, which will dominate the South Asian coffee and spice trade
· 1607 British colony of Jamestown built
· 1609 Dutch begin fur trade through Manhattan
· 1611 Japan gives Dutch limited permission to trade
· 1612 British East India Company builds its first factory in India
· 1620 Mayflower sails for the New World
· 1620 Father of the Scientific Revolution, Francis Bacon, publishes Novum Organum, promoting inductive reasoning through experimentation and observation
· 1625 Dutch jurist Hugo Grotius, sometimes called the father of international law, publishes On the Laws of War and Peace
· 1636 Harvard University founded
· 1637 Dutch “tulip mania” results in history’s first boom– bust market crash
· 1651 English pass first of so-called Navigation Acts to restrict Dutch trade by forcing colonies to trade only with English ships
· 1654 Spain and Germany develop hereditary land rights, a concept that will help lead to the creation of great wealth in single families and thus to the development of private commercial empires
· 1687 Apple falling on Newton’s head leads to his publication of the law of gravity
· 1694 The Bank of England is established; it offers loans to private individuals at 8 percent interest
· Citizens of the United States feel they have been good neighbors. They see the Monroe Doctrine as protection for Latin America from European colonization and the intervention of Europe in the governments of the Western Hemisphere. Latin Americans, in contrast, tend to see the Monroe Doctrine as an offensive expression of U.S. influence in Latin America. To put it another way, “Europe keep your hands off—Latin America is only for the United States,” an attitude perhaps typified by former U.S. President Ulysses S. Grant, who, in a speech in Mexico in 1880, described Mexico as a “magnificent mine” that lay waiting south of the border for North American interests.
· United States Marines sing with pride of their exploits “from the halls of Montezuma to the shores of Tripoli.” To the Mexican, the exploit to which the “halls of Montezuma” refers is remembered as U.S. troops marching all the way to the center of Mexico City and extracting as tribute 890,000 square miles that became Arizona, California, New Mexico, and Texas (see Exhibit 3.1). A prominent monument at the entrance of Chapultepec Park recognizes Los Niños Heroes (the boy heroes), who resisted U.S. troops, wrapped themselves in Mexican flags, and jumped to their deaths rather than surrender. Mexicans recount the heroism of Los Niños Heroes
6 and the loss of Mexican territory to the United States every September 13, when the president of Mexico, his cabinet, and the diplomatic corps assemble at the Mexico City fortress to recall the defeat that led to the “despojo territorial” (territorial plunder).
· Exhibit 3.1: Territorial Expansion of United States from 1783
·
· The United States expanded westward to the Pacific through a series of financial deals, negotiated settlements, and forcible annexations. The acquisition of territory from Mexico began with the Battle of San Jacinto in 1836, when Texas staged a successful revolt against the rule of Mexico and became The Republic of Texas—later to join the Union in 1845. The Mexican War (1846–1848) resulted in Mexico ceding California and a large part of the West to the United States.
· Source: From Oxford Atlas of the World, 10th ed., 2002. Copyright © 2002 Philip’s Cartography.
· The Mexican Revolution, which overthrew the dictator Díaz and launched the modern Mexican state, is particularly remembered for the expulsion of foreigners—most notably North American businessmen who were the most visible of the wealthy and influential entrepreneurs in Mexico.
· Manifest Destiny and the Monroe Doctrine
· Manifest Destiny and the Monroe Doctrine were accepted as the basis for U.S. foreign policy during much of the 19th and 20th centuries.7 Manifest Destiny, in its broadest interpretation, meant that Americans were a chosen people ordained by God to create a model society. More specifically, it referred to the territorial expansion of the United States from the Atlantic to the Pacific. The idea of Manifest Destiny was used to justify the U.S. annexation of Texas, Oregon, New Mexico, and California and, later, U.S. involvement in Cuba, Alaska, Hawaii, and the Philippines. Exhibit 3.1 illustrates when and by what means the present United States was acquired.
· 1698 First steam engine is invented
· 1719 French consolidate their trade in Asia into one company, the French East India Company; rival British East India Company maintains its grip on the region’s trade, however, and French revert to individual company trading 60 years later
· 1725 Rise of Physiocrats, followers of the economic philosopher François Quesnay, who believed that production, not trade, created wealth and that natural law should rule, which meant producers should be able to exchange goods freely; movement influenced Adam Smith’s ideas promoting free trade
· 1740 Maria Theresa becomes empress of the Holy Roman Empire (until 1780); she ends serfdom and strengthens the power of the state
· 1748 First modern, scientifically drawn map, the Carte Géométrique de la France, comprising 182 sheets, was authorized and subsequently drawn by the French Academy; Louis XV proclaimed that the new map, with more accurate data, lost more territory than his wars of conquest had gained
· 1750 Benjamin Franklin shows that lightning is a form of electricity by conducting it through the wet string of a kite
· 1750 Industrial Revolution begins and takes off with the manufacture, in 1780, of the steam engine to drive machines—increased productivity and consumption follow (as do poor working conditions and increased hardships for workers)
· 1760 Chinese begin strict regulation of foreign trade to last nearly a century when they permit Europeans to do business only in a small area outside Canton and only with appointed Chinese traders
· 1764 British victories in India begin Britain’s dominance of India, Eastern trade, and trade routes
· The Monroe Doctrine, a cornerstone of early U.S. foreign policy, was enunciated by President James Monroe in a public statement proclaiming three basic dicta: no further European colonization in the New World, abstention of the United States from European political affairs, and nonintervention of European governments in the governments of the Western Hemisphere.
· After 1870, interpretation of the Monroe Doctrine became increasingly broad. In 1881, its principles were evoked in discussing the development of a canal across the Isthmus of Panama. Theodore Roosevelt applied the Monroe Doctrine with an extension that became known as the Roosevelt Corollary. The corollary stated that not only would the United States prohibit non-American intervention in Latin American affairs, but it would also police the area and guarantee that Latin American nations met their international obligations. The corollary sanctioning American intervention was applied in 1905 when Roosevelt forced the Dominican Republic to accept the appointment of an American economic adviser, who quickly became the financial director of the small state. It was also used in the acquisition of the Panama Canal Zone from Colombia in 1903 and the formation of a provisional government in Cuba in 1906.
· 1764 British begin numbering houses, making mail delivery more efficient and providing the means for the development of direct mail merchants centuries later
· 1773 Boston Tea Party symbolizes start of American Revolution; impetus comes from American merchants trying to take control of distribution of goods that were being controlled exclusively by Britain
· 1776 American Declaration of Independence proclaims the colonies’ rights to determine their own destiny, particularly their own economic destiny
· 1776 Theory of modern capitalism and free trade expressed by Adam Smith in The Wealth of Nations; he theorized that countries would only produce and export goods that they were able to produce more cheaply than could trading partners; he demonstrates that mercantilists were wrong: It is not gold or silver that will enhance the state, but the material that can be purchased with it
· 1783 Treaty of Paris officially ends the American Revolution following British surrender to American troops at Yorktown in 1781
· 1787 U.S. Constitution approved; it becomes a model document for constitutions for at least the next two centuries; written constitutions will help stabilize many countries and encourage foreign investment and trade with them
· 1789 French Revolution begins; it will alter the power structure in Europe and help lead to the introduction of laws protecting the individual and to limited democracy in the region
· The manner in which the United States acquired the land for the Panama Canal Zone typifies the Roosevelt Corollary—whatever is good for the United States is justifiable. As the Global Perspective at the beginning of this chapter illustrates, the creation of the country of Panama was a total fabrication of the United States.8
· 1792 Gas lighting introduced; within three decades, most major European and U.S. cities will use gas lights
· 1804 Steam locomotive introduced; it will become the dominant form of transport of goods and people until the 20th century when trucks and airplanes become commercially viable
· 1804 Napoleon crowns himself emperor, overthrowing the French revolutionary government, and tries to conquer Europe (after already occupying Egypt as a means of cutting off British trade with the East), the failure of which results in the redrawing of national boundaries in Europe and Latin America
· 1807 Robert Fulton’s steamboat is the first to usher in a new age of transport when his Clermont sails from New York to Albany
· 1807 French Napoleonic Code issued and eventually becomes a model of civil law adopted by many nations around the world
· 1807 U.S. President Thomas Jefferson bans trade with Europe in an effort to convince warring British and French ships to leave neutral U.S. trading ships alone
· 1810 Frenchman Nicolas Appert successfully cans food and prevents spoilage
· 1810 Following Napoleon’s invasion of Spain and Portugal, Simón Bolivar begins wars of independence for Spanish colonies in Latin America, leading to new governments in Bolivia, Columbia, Ecuador, Peru, and Venezuela
· 1814 First practical steam locomotive is built by George Stephenson in England, leading to the birth of railroad transportation in 1825 with the first train carrying 450 passengers at 15 miles per hour
· 1815 Napoleon defeated at Battle of Waterloo and gives up throne days later
· 1815 British build roads of crushed stone, greatly improving the quality and speed of road travel
· According to U.S. history, these Latin American adventures were a justifiable part of our foreign policy; to Latin Americans, they were unwelcome intrusions in Latin American affairs. This perspective has been constantly reinforced by U.S. intervention in Latin America since 1945 (see Exhibit 3.2). The way historical events are recorded and interpreted in one culture can differ substantially from the way those same events are recorded and interpreted in another. From the U.S. view, each of the interventions illustrated in Exhibit 3.2 was justified. A comparison of histories goes a long way in explaining the differences in outlooks and behavior of people on both sides of the border. Many Mexicans believe that their “good neighbor” to the north is not reluctant to throw its weight around when it wants something. Suspicions that self-interest is the primary motivation for good relations with Mexico abound.9
· Exhibit 3.2: U.S. Intervention in Latin America Since 1945
·
· Source: From Oxford Atlas of the World, 10th ed., 2002. Copyright © 2002 Philip’s Cartography.
· CROSSING BORDERS 3.1: Microsoft Adapts Encarta to “Local History”
· Adapting to the local culture is an important aspect of strategy for many products. Understanding a country’s history helps achieve that goal. Microsoft has nine different editions reflecting local “history” in order to be sure that its Encarta multimedia encyclopedia on CD-ROM does not contain cultural blunders. As a consequence, it often reflects different and sometimes contradictory understandings of the same historical events. For example, who invented the telephone? In the U.S., U.K., and German editions, it is Alexander Graham Bell, but ask the question in the Italian edition, and your answer is Antonio Meucci, an Italian-American candle maker whom Italians believe beat Bell by five years. For electric light bulbs, it is Thomas Alva Edison in the United States, but in the United Kingdom, it is the British inventor Joseph Swan. Other historical events reflect local perceptions. The nationalization of the Suez Canal, for example, in the U.S. edition is a decisive intervention by superpowers. In the French and U.K. editions, it is summed up as a “humiliating reversal” for Britain and France—a phrase that does not appear in the U.S. edition.
· Although Microsoft is on the mark by adapting these events to their local historical context, it has, on occasion, missed the boat on geography. South Korean ire was raised when the South Korean island of Ullung-do was placed within Japan’s borders and when the Chon-Ji Lake, where the first Korean is said to have descended from heaven, was located in China. And finally, an embarrassed Microsoft apologized to the people of Thailand for referring to Bangkok as a commercial sex center, assuring the women’s activists group that protested that the revised version would “include all the great content that best reflects its rich culture and history.”
· Microsoft also bows to political pressure. The government of Turkey stopped distribution of an Encarta edition with the name Kurdistan used to denote a region of southeastern Turkey on a map. Hence Microsoft removed the name Kurdistan from the map. Governments frequently lobby the company to show their preferred boundaries on maps. When the border between Chile and Argentina in the southern Andes was in dispute, both countries lobbied for their preferred boundary, and the solution both countries agreed to was—no line.
· Sources: Kevin J. Delaney, “Microsoft’s Encarta Has Different Facts for Different Folks,” The Wall Street Journal, June 25, 1999, p. A1; “Microsoft Apologizes for the Thailand Sex Hub Reference,” Agence France-Presse, February 23, 2000; “Why You Won’t Find Kurdistan on a Microsoft Map of Turkey,” Geographical, November 1, 2004; Les Pobjie, “Trust Encarta,” Central Coast Express, March 21, 2007, p. 72.
· 1817 David Ricardo publishes Principles of Political Economy and Taxation, in which he proposes modern trade theory: Comparative advantage drives trade; countries will produce and export goods for which they have a comparative advantage as opposed to Adam Smith’s absolute advantage (see 1776)
· 1821 Britain is first to adopt gold standard to back the value of its currency
· 1823 U.S. President James Monroe promulgates the doctrine bearing his name that declares the Americas closed to colonization in an attempt to assert U.S. influence over the region
· 1837 Reign of Britain’s Queen Victoria begins; she oversees the growth of the British Empire and Britain’s emergence as an industrial power (she dies in 1901)
· 1837 Electronic telegraph begins wide commercial use, transmitting information, including production orders, swiftly
· History viewed from a Latin American perspective explains how a national leader, under adverse economic conditions, can point a finger at the United States or a U.S. multinational corporation and evoke a special emotional, popular reaction to divert attention away from the government in power. As a case in point, after the U.S. House of Representatives voted to censure Mexico for drug corruption, President Ernesto Zedillo came under pressure to take a hard stand with Washington. He used the anniversary of Mexico’s 1938 expropriation of the oil industry from foreign companies to launch a strong nationalist attack. He praised the state oil monopoly Pemex as a “symbol of our historical struggles for sovereignty.” Union members cheered him on, waving a huge banner that read: “In 1938 Mexico was ‘decertified’ because it expropriated its oil and it won—today we were decertified for defending our dignity and sovereignty.” Apparently Venezuelan President Hugo Chavez was listening, based on his more recent nationalization of foreign oil company assets in the Orinoco River Basin10 and his recent renaming of the country the Bolivarian Republic of Venezuela.11
· These leaders might be cheered for expropriation or confiscation of foreign investments, even though the investments were making important contributions to their economies. To understand a country’s attitudes, prejudices, and fears, it is necessary to look beyond the surface of current events to the inner subtleties of the country’s entire past for clues. Three comments by Mexicans best summarize this section:
· History is taught one way in Mexico and another way in the United States—the United States robbed us but we are portrayed in U.S. textbooks as bandits who invaded Texas.
· We may not like gringos for historical reasons, but today the world is dividing into commercial blocks, and we are handcuffed to each other for better or worse.
· We always have been and we continue to be a colony of the United States.12
· Geography and Global Markets
· Geography, the study of Earth’s surface, climate, continents, countries, peoples, industries, and resources, is an element of the uncontrollable environment that confronts every marketer but that receives scant attention.13 The tendency is to study the aspects of geography as isolated entities rather than as important causal agents of the marketing environment. Geography is much more than memorizing countries, capitals, and rivers. It also includes an understanding of how a society’s culture and economy are affected as a nation struggles to supply its people’s needs within the limits imposed by its physical makeup. Thus, the study of geography is important in the evaluation of markets and their environment.
· 1839 Process for recording negative images on paper is introduced in England, the precursor to modern film technology
· 1841 Briton David Livingstone begins 30 years of exploring in Africa
· 1842 Hong Kong ceded to Britain with the Treaty of Nanjing following the Opium War; the city will become a financial and trading center for Asia
· 1844 Chinese open five ports to U.S. ships
· 1847 First government-backed postage stamps issued by United States, leading to more certain and efficient communication by post
· 1848 John Stuart Mill publishes Principles of Political Economy, completing the modern theory of trade by stating that gains from trade are reflected in the strength of the reciprocal demand for imports and exports and that gains would come from better terms of trade (see 1817)
· CROSSING BORDERS 3.2: Innovation and the Water Shortage, from Fog to Kid Power
· When you live in Chungungo, Chile, one of the country’s most arid regions with no nearby source of water, you drink fog. Of course! Thanks to a legend and resourceful Canadian and Chilean scientists, Chungungo now has its own supply of drinkable water after a 20-year drought. Before this new source of water, Chungungo depended on water trucks that came twice a week.
· Chungungo has always been an arid area, and legend has it that the region’s original inhabitants used to worship trees. They considered them sacred because a permanent flow of water sprang from the treetops, producing a constant interior rain. The legend was right—the trees produced rain! Thick fog forms along the coast. As it moves inland and is forced to rise against the hills, it changes into tiny raindrops, which are in turn retained by the tree leaves, producing the constant source of rain. Scientists set out to take advantage of this natural phenomenon.
· The nearby ancient eucalyptus forest of El Tofo Hill provided the clue that scientists needed to create an ingenious water-supply system. To duplicate the water-bearing effect of the trees, they installed 86 “fog catchers” on the top of the hill—huge nets supported by 12-foot eucalyptus pillars, with water containers at their base. About 1,900 gallons of water are collected each day and then piped into town. This small-scale system is cheap (about one-fifth as expensive as having water trucked in), clean, and provides the local people with a steady supply of drinking water.
· In sub-Saharan Africa, inventive folks have come up with a new way to bring water up from wells. A life-changing and life-saving invention—the PlayPump water system—provides easy access to clean drinking water, brings joy to children, and leads to improvements in health, education, gender equality, and economic development in more than 1,000 rural villages in South Africa, Swaziland, Mozambique, and Zambia. The PlayPump systems are innovative, sustainable, patented water pumps powered by children at play. Installed near schools, the PlayPump system doubles as a water pump and a merry-go-round. The PlayPump system also provides one of the only ways to reach rural and peri-urban communities with potentially life-saving public health messages. Please see the accompanying pictures of a new solution to one of humankind’s oldest problems.
· Sources: “Drinking Fog,” World Press Review; “Silver Lining,” The Economist, February 5, 2000, p. 75; “UNESCO Water Portal Weekly Update No. 89: Fog,” April 15, 2005, http://www.unesco.org/water/news/newsletter/89.shtml; http://www.playpumps.org, 2008.
· This section discusses the important geographic characteristics a marketer needs to consider when assessing the environmental aspects of marketing. Examining the world as a whole provides the reader with a broad view of world markets and an awareness of the effects of geographic diversity on the economic profiles of various nations. Climate and topography are examined as facets of the broader and more important elements of geography. A brief look at Earth’s resources and population—the building blocks of world markets—completes the presentation on geography and global markets.
· 1848 The Communist Manifesto, by Germans Karl Marx and Friedrich Engels, is issued; it will become the basis for the communist movements of the 20th century
· 1851 First international world’s fair held in London, showcasing new technology
· 1856 Declaration of Paris recognizes the principle of free movement for trade, even in wartime—blockades could only extend along the enemy’s coast; it also establishes the practice of allowing the accession to treaties of nations other than the original signatories
· 1857 Russia and France sign trade treaty
· 1858 Ansei Commercial Treaties with Japan open the formerly closed country to trade with the West (treaties follow “opening” of Japan to the West by American Matthew Perry in 1854)
· 1860 The Cobden Treaty aims to create free trade by reducing or eliminating tariffs between Britain and France; also leads to most-favored-nation status in bilateral agreements and eventually to multilateral agreements
· Climate and Topography
· Altitude, humidity, and temperature extremes are climatic features that affect the uses and functions of products and equipment. Products that perform well in temperate zones may deteriorate rapidly or require special cooling or lubrication to function adequately in tropical zones. Manufacturers have found that construction equipment used in the United States requires extensive modifications to cope with the intense heat and dust of the Sahara Desert. A Taiwanese company sent a shipment of drinking glasses to a buyer in the Middle East. The glasses were packed in wooden crates with hay used as dunnage to prevent breakage. The glasses arrived in shards. Why? When the crates moved to the warmer, less humid climate of the Middle East, the moisture content of the hay dropped significantly and shriveled to a point that it offered no protection.14
·
· While children have fun spinning on the PlayPump merry-go-round, (1) clean water is pumped (2) from underground (3) into a 2,500-liter tank, (4) standing seven meters above the ground. A simple tap (5) makes it easy for adults and children to draw water. Excess water is diverted from the storage tank back down into the base hole (6). The water storage tank (7) provides rare opportunities to advertise to outlying communities. All four sides of the tank are leased as billboards, with two sides for consumer advertising and the other two sides for health and educational messages. The revenue generated from this unique model pays for pump maintenance. Capable of producing up to 1,400 liters of water per hour at 16 rpm from a depth of 40 meters, it is effective up to a depth of 100 meters. See http://www.playpumps.org. (right: © Frimmel Smith/PlayPumps)
· Within even a single national market, climate can be sufficiently diverse to require major adjustments. In Ghana, a product adaptable to the entire market must operate effectively in extreme desert heat and low humidity and in tropical rainforests with consistently high humidity. Bosch-Siemens washing machines designed for European countries require spin cycles to range from a minimum spin cycle of 500 rpm to a maximum of 1,600 rpm: Because the sun does not shine regularly in Germany or in Scandinavia, washing machines must have a 1,600 rpm spin cycle because users do not have the luxury of hanging them out to dry. In Italy and Spain, however, clothes can be damp, because the abundant sunshine is sufficient to justify a spin cycle speed of 500 rpm.
· 1860 Passports are introduced in the United States to regulate foreign travel
· 1866 The principle of the electric dynamo is found by German Werner Siemens, who will produce the first electric power transmission system
· 1866 The trans-Atlantic cable is completed, allowing nearly instant (telegraphic) communication between the United States and Europe
· 1869 Suez Canal completed after 11 years of construction; the canal significantly cuts the time for travel between Europe and Asia, shortening, for example, the trip between Britain and India by 4,000 miles
· 1869 First U.S. transcontinental rail route is completed, heralding a boon for commerce; first commercially viable typewriter patented; until computer word processing becomes common more than a century later, the typewriter enables anyone to produce documents quickly and legibly
· 1873 United States adopts the gold standard to fix the international value of the dollar
· 1875 Universal Postal Union created in Switzerland to provide for an international mail service
· 1876 Alexander Graham Bell is granted a patent for the telephone, which will revolutionize communications
· Different seasons between the northern and southern hemispheres also affect global strategies. JCPenney had planned to open five stores in Chile as part of its expansion into countries below the equator. It wanted to capitalize on its vast bulk buying might for its North American, Mexican, and Brazilian stores to provide low prices for its expansion into South America. After opening its first store in Chile, the company realized that the plan was not going to work—when it was buying winter merchandise in North America, it needed summer merchandise in South America. The company quickly sold its one store in Chile; its expansion into South America was limited to Brazil.15
· South America represents an extreme but well-defined example of the importance of geography in marketing considerations. Economic and social systems are explained, in part, in terms of the geographical characteristics of the area. It is a continent 4,500 miles long and 3,000 miles wide at its broadest point. Two-thirds of it is comparable to Africa in its climate, 48 percent of its total area is made up of forest and jungle, and only 5 percent is arable. Mountain ranges cover South America’s west coast for 4,500 miles, with an average height of 13,000 feet and a width of 300 to 400 miles. This natural, formidable barrier has precluded the establishment of commercial routes between the Pacific and Atlantic coasts. South America’s natural barriers inhibit both national and regional growth, trade, and communication. It is a vast land area with population concentrations on the outer periphery and an isolated and almost uninhabited interior. In Colombia, mountain ranges are a major barrier to travel. The airtime from Bogotá to Medellín, the second-largest city in Colombia, is 30 minutes; by highway, the same trip takes 10 to 12 hours. Other regions of the world with extreme topographic and climatic variations are China, Russia, India, and Canada.
· Mountains, oceans, seas, jungles, and other geographical features can pose serious impediments to economic growth and trade. Geographic hurdles have a direct effect on a country’s economy, markets, and the related activities of communication and distribution. As countries seek economic opportunities and the challenges of the global marketplace, they invest in infrastructure to overcome such barriers. Once seen as natural protection from potentially hostile neighbors, physical barriers that exist within Europe are now seen as impediments to efficient trade in an integrated economic union.
· For decades the British resisted a tunnel under the English Channel—they did not trust the French or any other European country and saw the channel as protection. But when they became members of the European Union, economic reality meant the channel tunnel had to be built to facilitate trade with other EU members. Now you can take a bullet train through the Chunnel, but even a decade after it opened, its finances are still a bit shaky,16 and most recently, undocumented workers have tried to walk the underwater route to England.17
· 1880 Thomas Edison creates first electric power station, after inventing the electric light in 1878, which lights New York City and starts a revolution in culture and business—making a truly 24-hour day and paving the way for electronic machines
· 1881 Zoopraxiscope, which shows pictures in motion, is developed
· 1884 The basis for establishing standard time and measuring the longitude of any spot in the world is created with the designation of Greenwich, England, as the prime meridian (0° longitude)
· 1886 American Federation of Labor founded, becoming a model for workers around the world to unite against management and gain higher pay and better working conditions
· 1901 Italian Guglielmo Marconi sends the first radio message; the radio could be said to spark the start of globalization because of the speed with which information is able to be transmitted
· 1903 First successful flight of an airplane, piloted by Orville Wright, takes place at Kitty Hawk, North Carolina
· 1904 First vacuum tube is developed by John Fleming, allowing alternating current to become direct current and helping create widespread use of the radio
· 1913 Assembly line introduced by Henry Ford; it will revolutionize manufacturing
· 1914 The first war to involve much of the world begins with the assassination of Archduke Francis Ferdinand and lasts four years; construction of Panama Canal is completed, making trade faster and easier
· 1917 Lenin and Trotsky lead Russian revolution, creating a living economic model that will affect trade (adversely) for the rest of the century
· From the days of Hannibal, the Alps have served as an important physical barrier and provided European countries protection from one another. But with the EU expansion, the Alps became a major impediment to trade. Truck traffic between southern Germany and northern Italy, which choked highways through some of Switzerland’s most treacherous mountain roads and pristine nature areas, was not only burdensome for all travelers but becoming economically unacceptable. The solution, the 21-mile Loetschberg Tunnel, which opened in 2007, burrows under the Alps and trims the time trains need to cross between Germany and Italy from a three-and-a-half-hour trip to less than two hours. By 2014, the 36-mile Gotthard Tunnel will provide additional rail coverage for the area and be the world’s longest rail tunnel.
· Other projects that help further integrate the European Union include the 10-mile-long Oresund Link, a bridge and tunnel across the Baltic Strait to continental Europe completed in 2000. It accommodates freight and high-speed passenger trains and reduces a five-hour trip between Copenhagen, Denmark, and Malmo, Sweden, to two-and-a-half hours. Ultimately, it will be possible to drive from Lapland in northernmost Scandinavia to Calabria in southern Italy and then on to Sicily when the bridge over the Messina Strait connecting Calabria to Sicily is completed—all tangible symbols that these nations are ending their political isolation from one another as they break down natural barriers in an increasingly borderless Europe.18
· Geography, Nature, and Economic Growth
· Always on the slim margin between subsistence and disaster, less-privileged countries suffer disproportionately from natural and human-assisted catastrophes.19 Climate and topography coupled with civil wars, poor environmental policies, and natural disasters push these countries further into economic stagnation. Without irrigation and water management, droughts, floods, and soil erosion afflict them, often leading to creeping deserts that reduce the long-term fertility of the land.20 Population increases, deforestation, and overgrazing intensify the impact of drought and lead to malnutrition and ill health, further undermining these countries’ abilities to solve their problems. Cyclones cannot be prevented, nor can inadequate rainfall, but means to control their effects are available. Unfortunately, each disaster seems to push developing countries further away from effective solutions. Countries that suffer the most from major calamities are among the poorest in the world.21 Many have neither the capital nor the technical ability to minimize the effects of natural phenomena; they are at the mercy of nature.
· 1919 First nonstop trans-Atlantic flight completed, paving the way for cargo to be transported quickly around the globe
· 1920 League of Nations created, establishing a model for international cooperation (though it failed to keep the peace)
· 1923 Vladimir Zworykin creates first electronic television, which will eventually help integrate cultures and consumers across the world
· 1929 Great Depression starts with crash of U.S. stock market
· 1930 Hawley-Smoot Tariff passed by U.S. Senate, plunging the world deeper into the Great Depression
· 1935 Radar developed in Britain; it will allow travel on ships and planes even when there is no visibility, enabling the goods to keep to a transport schedule (eventually allowing the development of just-in-time and other cost-savings processes)
· 1938 American Chester Carlson develops dry copying process for documents (xerography), which, among other things, will enable governments to require that multiple forms be filled out to move goods
· 1939 World War II begins with German invasion of Poland; over 50 million people will die
· 1943 The first programmable computer, Colossus I, is created in England at Bletchley Park; it helps to crack German codes
· 1944 Bretton Woods Conference creates basis for economic cooperation among 44 nations and the founding of the International Monetary Fund to help stabilize exchange rates
· 1945 Atomic weapons introduced; World War II ends; United Nations founded
· 1947 General Agreement on Tariffs and Trade signed by 23 countries to try to reduce barriers to trade around the world
· As countries prosper, natural barriers are overcome. Tunnels and canals are dug and bridges and dams are built in an effort to control or to adapt to climate, topography, and the recurring extremes of nature. Humankind has been reasonably successful in overcoming or minimizing the effects of geographical barriers and natural disasters, but as they do so, they must contend with problems of their own making. The construction of dams is a good example of how an attempt to harness nature for good has a bad side. Developing countries consider dams a cost-effective solution to a host of problems. Dams create electricity, help control floods, provide water for irrigation during dry periods, and can be a rich source of fish. However, there are side effects; dams displace people (the Three Gorges Dam in China will displace 1.3 million people22 while attracting tourists23), and silt that ultimately clogs the reservoir is no longer carried downstream to replenish the soil and add nutrients. Similarly, the Narmada Valley Dam Project in India will provide electricity, flood control, and irrigation, but it has already displaced tens of thousands of people, and as the benefits are measured against social and environmental costs, questions of its efficacy are being raised. In short, the need for gigantic projects such as these must be measured against their social and environmental costs.24
·
· Large trucks are dwarfed by the 185-meter-high sluice gates of the Three Gorges Dam. China began filling the reservoir in a major step toward completion of the world’s largest hydroelectric project. The level is expected to reach 135 meters (446 feet), inundating thousands of acres, including cities and farms along the Yangtze. (AP/Wide World Photos)
·
· A woman sits in the remains of demolished buildings below a water level marker on the bank of the Yangtze River. Many residents along the banks of the river moved their homes and farmland to higher ground but were, nevertheless, caught by rising water, which inundated their crops even though the high water level had been announced well in advance. (AP Photo/Grey Baker)
· 1948 Transistor is invented; it replaces the vacuum tube, starting a technology revolution
· 1949 People’s Republic of China founded by Mao Zedong, which will restrict access to the largest single consumer market on the globe
· 1957 European Economic Community (EEC) established by Belgium, France, West Germany, Italy, Luxembourg, and the Netherlands, the precursor to today’s European Union
· 1961 Berlin Wall is erected, creating Eastern and Western Europe with a physical and spiritual barrier
· 1964 Global satellite communications network established with INTELSAT (International Telecommunications Satellite Organization)
· As the global rush toward industrialization and economic growth accelerates, environmental issues become more apparent. Disruption of ecosystems, relocation of people, inadequate hazardous waste management, and industrial pollution are problems that must be addressed by the industrialized world and those seeking economic development.25 The problems are mostly byproducts of processes that have contributed significantly to economic development and improved lifestyles. During the last part of the 20th century, governments and industry expended considerable effort to develop better ways to control nature and to allow industry to grow while protecting the environment.26
· Social Responsibility and Environmental Management
· Nations, companies, and people reached a consensus during the close of the last decade: Environmental protection is not an optional extra; it is an essential part of the complex process of doing business. Many view the problem as a global issue rather than a national issue and as one that poses common threats to humankind and thus cannot be addressed by nations in isolation. Of special concern to governments and businesses are ways to stem the tide of pollution and to clean up decades of neglect.
· Companies looking to build manufacturing plants in countries with more liberal pollution regulations than they have at home are finding that regulations everywhere have gotten stricter. Many governments are drafting new regulations and enforcing existing ones. Electronic products contain numerous toxic substances that create a major disposal problem in landfills where inadequate disposal allows toxins to seep into groundwater. The EU, as well as other countries, has laws stipulating the amount and types of potentially toxic substances it will require a company to take back to recycle.27 A strong motivator is the realization that pollution is on the verge of getting completely out of control.
· An examination of rivers, lakes, and reservoirs in China revealed that toxic substances polluted 21 percent and that 16 percent of the rivers were seriously polluted with excrement. China has 16 of the world’s 20 most polluted cities.28 The very process of controlling industrial wastes leads to another and perhaps equally critical issue: the disposal of hazardous waste, a byproduct of pollution controls. Estimates of hazardous wastes collected annually exceed 300 million tons; the critical issue is disposal that does not simply move the problem elsewhere. Countries encountering increasing difficulty in the disposal of wastes at home are seeking countries willing to assume the burden of disposal. Waste disposal is legal in some developing countries as governments seek the revenues that are generated by offering sites for waste disposal. In other cases, illegal dumping is done clandestinely. A treaty among members of the Basel Convention that required prior approval before dumping could occur was later revised to a total ban on the export of hazardous wastes by developed nations. The influence and leadership provided by this treaty are reflected in a broad awareness of pollution problems by businesses and people in general.29
· 1965 Unsafe at Any Speed published by Ralph Nader, sparking a revolution in consumer information and rights
· 1967 European Community (EC) established by uniting the EEC, the European Coal and Steel Community, and the European Atomic Energy Community
· 1971 First microprocessor produced by Intel, which leads to the personal computer; communist China joins the United Nations, making it a truly global representative body
· 1971 United States abandons gold standard, allowing the international monetary system to base exchange rates on perceived values instead of ones fixed in relation to gold
· 1972 One billion radios on the planet
· Governments, organizations, and businesses are becoming increasingly concerned with the social responsibility and ethical issues surrounding the problem of maintaining economic growth while protecting the environment for future generations. The Organization for Economic Cooperation and Development, the United Nations, the European Union, and international activist groups are undertaking programs to strengthen environmental policies.30 The issue that concerns all is whether economic development and protection for the environment can coexist.
Sustainable development, a joint approach among those (governments, businesses, environmentalists, and others) who seek economic growth with “wise resource management, equitable distribution of benefits and reduction of negative efforts on people and the environment from the process of economic growth,” is the concept that guides many governments and multinational companies today. Sustainable development is not about the environment or the economy or society. It is about striking a lasting balance between all of these. More and more companies are embracing the idea of sustain able development as a “win–win” opportunity.31 Responsibility for protecting the environment does not rest solely with governments, businesses, or activist groups, however; each citizen has a social and moral responsibility to include environmental protection among his or her highest goals.32
· CROSSING BORDERS 3.3: Garbage without a Country—The Final Solution?
· Orange rinds, beer bottles, newspapers, and chicken bones—it was trash, like all trash, taken to an incinerator in Philadelphia for incineration. The ashes, like all ashes, were to be taken away to a landfill somewhere in Philadelphia. Joseph Paolino & Sons had a $6 million contract to remove the ash but kept having doors slammed in its face.
· Paolino hired Amalgamated Shipping—operator of the Khian Sea, a 17-year-old, 466-foot rust bucket registered in Liberia—to dump the ash in the Bahamas, where Amalgamated was based. The Bahamian government rejected the ash, and the Khian Sea began its 16-year journey as the Flying Dutchman of debris.
· Briefly returning to the United States, it took off for Puerto Rico, Bermuda, the Dominican Republic, Honduras, Guinea-Bissau, and the Netherlands Antilles, where it was turned away again and again. To make the cargo more appealing, the ash was described as “topsoil fertilizer,” and the Haitian government agreed to accept the ship’s cargo. About two-thirds of the ash (4,000 tons) had been unloaded when Greenpeace and local activists protested. The Haitian government then ordered the crew to reload the ash, but the ship departed, leaving the ash.
· The ship returned to Philadelphia, hoping to find a place for the remaining ash, but to no avail. It left again, seeking a resting place. It sailed to Senegal and Cape Verde, Sri Lanka, Indonesia, and the Philippines, arriving in Singapore empty. Years later, the ship’s captain admitted in court that the remaining ash, one-third of the original load, had been dumped in the Atlantic and Indian oceans.
· Meanwhile, in Haiti, where the 4,000 tons of ash had been left on the beach, Greenpeace found that only 2,500 tons of the original 4,000 tons remained. Most had been carried off by wind and water, and Haitians said goats were dying.
· Enter an unlikely hero: New York City. In 1996, to end mob involvement in the city’s waste industry, Mayor Rudolph Giuliani established a Trade Waste Commission to oversee the awarding of trash removal. When Eastern Environmental Services applied to do business in New York, the Trade Waste Commission issued an ultimatum: If Eastern wanted to haul trash in New York, it had to deal with the Khian Sea ash.
· Eastern agreed to find a place in its landfills, and what was left of the ash, 2,500 tons, was loaded on the Khian Sea and departed Haiti. Finally, after a 16-year odyssey, Philadelphia agreed to give the ash a final resting place.
· The saga of the Khian Sea is not an isolated case of wandering toxic waste, albeit the longest journey. In 1999 the MV Ulla was loaded with 2,200 tons of ash from coal-fired power stations in Spain bound for Algeria. The cargo was refused by Algeria, and thus, it began a journey that ended in 2004 with the ship sinking off the Turkish coast, where it lay rusting until 2005, when Spain agreed to remove the toxic waste and the ship.
· Unfortunately, one of the byproducts of economic and technological growth is toxic waste, and as countries such as China and India industrialize, toxic waste disposal will only become worse—there has to be a better solution than wandering ships, though we do not recommend the Naples solution: letting it collect in the streets.
· Sources: “Wandering Waste’s 14-Year Journey,” Toronto Star, May 3, 2000; “Toxic Waste Returns,” Earth Island Journal, Winter 2002–2003, p. 12; “Spain to Remove Sunken Ship with Toxic Cargo Off Turkish Coast,” Agence France-Presse, February 2, 2005; “Italy Announces Emergency Steps for Naples’ Garbage Crisis,” Dow Jones News, January 8, 2008.
· 1973 Arab oil embargo jolts industrial world into understanding the totally global nature of supply and demand
· 1980 CNN founded, providing instant and common information the world over, taking another significant step in the process of globalization started by the radio in 1901
· 1987 ISO issues ISO 9000 to create a global quality standard
· 1988 One billion televisions on the planet
· 1989 Berlin Wall falls, symbolizing the opening of the East to the West for ideas and commerce
·
· A huge offshore discovery has the potential to make Brazil a new major petroleum exporter through its national oil company, Petrobras.36
· Source: The New York Times, January 11, 2008, p. C1. (© Edro Lobo/Bloomberg News/Landov)
· Resources
· The availability of minerals33 and the ability to generate energy are the foundations of modern technology. The locations of Earth’s resources, as well as the available sources of energy, are geographic accidents. The world’s nations are not equally endowed, and no nation’s demand for a particular mineral or energy source necessarily coincides with domestic supply.
· In much of the underdeveloped world, human labor provides the preponderance of energy. The principal supplements to human energy are animals, wood, fossil fuel, nuclear power, and, to a lesser and more experimental extent, the ocean’s tides, geothermal power, and the sun. Of all the energy sources, oil and gas contribute over 60 percent of world energy consumption.34 Because of petroleum’s versatility and the ease with which it is stored and transported, petroleum-related products continue to dominate energy usage.35 (See Exhibit 3.3.)
· Exhibit 3.3: World Energy Consumption
·
· Energy consumed by world regions, measured in quadrillion BTUs in 2001. Total world consumption was 381.8 quadrillion BTUs. The largest portion of the hydro/other category is hydroelectrical energy. Fuels such as wood, peat, animal waste, wind, solar, and geothermal account for less than 1.0 quadrillion BTUs in the other portion of the hydro/other category.
· Sources: Data compiled from “Introduction to World Geography,” Oxford Atlas of the World (New York: Oxford University Press, 2003) and Energy Information Administration (EIA), International Energy Outlook 2004 (Washington, DC, 2005), http://www.eia.doe.gov/oiaf/ieo.
· 1991 Soviet Union formally abandons communism, as most formerly communist states move toward capitalism and the trade it fosters; Commonwealth of Independent States (CIS) established among Russia, Ukraine, and Belarus
· 1993 NAFTA ratified by U.S. Congress; European Union created from the European Community, along with a framework for joint security and foreign policy action, by the 1991 Maastricht Treaty on European Union; the EEC is renamed the EC
· Many countries that were self-sufficient during much of their early economic growth have become net importers of petroleum during the past several decades and continue to become increasingly dependent on foreign sources. A spectacular example is the United States, which was almost completely self-sufficient until 1942, became a major importer by 1950, and between 1973 and 2000 increased its dependency from 36 percent to over 66 percent of its annual requirements.37 If present rates of consumption continue, predictions are that by the mid-2000s the United States will be importing more than 70 percent of its needs, that is, more than 17 million barrels of oil each day. Exhibit 3.3 compares North American domestic energy consumption with other world regions. It is interesting to note that though North America is currently a major consumer of energy, industrializing Asia and the three industrialized areas (as shown in Exhibit 3.3) do not lag far behind. In fact, China has become the world’s second-largest oil importer after the United States, and demand continues to grow rapidly.38
· 1994 The Chunnel (Channel Tunnel) is opened between France and Britain, providing a ground link for commerce between the continent and Britain
· 1995 World Trade Organization (WTO) set up as successor of GATT; by 2000 more than 130 members will account for over 90 percent of world trade
· 1997 Hong Kong, a world trading and financial capital and bastion of capitalism, is returned to communist Chinese control; Pathfinder lands on Mars, and Rover goes for a drive but finds no one with whom to trade
· 1999 Euro introduced in 11 European Union nations, paving the way for the creation of a true trade union and trade bloc
· 1999 Seattle Round of WTO negotiations pits U.S. vs. EU, first great protest against globalization
· 1999 Control of the Panama Canal, a major trade lane, is returned to Panama
·
· Cattle dung, which is used both as farmyard manure and, dried into cakes, as household fuel, is being carried to a local market in India. India’s cattle produce enormous quantities of dung, which some studies suggest provide the equivalent of 10,000 megawatts of energy annually.
·
· This Maasai woman of Tanzania put to good use both cow dung and urine in building her hut pictured, here in her family village (or boma). The semi-nomadic Maasai graze their cattle during the day but enclose them within the acacia bush boma at night to protect them from predators.
· Since World War II, concern for the limitless availability of seemingly inexhaustible supplies of petroleum has become a prominent factor. The dramatic increase in economic growth in the industrialized world and the push for industrialization in the remaining world has put tremendous pressure on Earth’s energy resources. Unfortunately, as countries industrialize, energy sources are not always efficiently utilized. China, for example, spends three times the world average on energy (all sources) to produce one dollar of gross national product (GNP). In comparison with Japan, possibly the world’s most efficient user of energy, where less than 5 ounces of oil is needed to generate $1 in GNP, in China, approximately 80 ounces of oil is needed.39 The reasons for China’s inefficient oil use are numerous, but the worst culprit is outdated technology.40
· 2000 Second millennium arrives, predicted computer problems are a non-event
· 2001 September 11 terrorist attack on the World Trade Center in New York City and the Pentagon in Washington, DC; one billion mobile phones on the planet
· 2002 United States attacks Taliban in Afghanistan
· 2003 United States attacks regime of Saddam Hussein in Iraq
· 2004 Great Indian Ocean tsunami kills 500,000
· 2006 One billion personal computers on the planet
· 2008 Beijing Olympics
· 2040 The United Nations’ earliest estimate for the world population to begin shrink due to the global decline of fertility
· The growth of market-driven economies and an increasing reliance on petroleum supplies from areas of political instability—the Middle East, the former Soviet Union, and Latin America—create a global interdependence of energy resources. The net result is a profound impact on oil prices and on the economies of industrialized and industrializing countries.
· The location, quality, and availability of resources will affect the pattern of world economic development and trade well into the 21st century. In addition to the raw materials of industrialization, an economically feasible energy supply must be available to transform resources into usable products. As the global demand for resources intensifies and prices rise, resources will continue to increase in importance among the uncontrollable elements of the international marketer’s decisions.
· Dynamics of Global Population Trends
· Current population, rural/urban population shifts, rates of growth, age levels, and population control help determine today’s demand for various categories of goods. Although not the only determinant, the existence of sheer numbers of people is significant in appraising potential consumer markets. Changes in the composition and distribution of population among the world’s countries will profoundly affect future demand.
· Recent estimates place world population at more than 6.7 billion people, and this number is expected to grow to about 9 billion by 2050. However, seemingly small differences in assumptions about fertility rates can make big differences in growth forecasts. One possible scenario put forth by United Nations experts suggests the planet’s population may actually peak at about 8 billion and then begin to decline after 2040. All scenarios agree though that almost all of the projected growth for 2050 will occur in less-developed regions.41 Exhibit 3.4 shows that 84 percent of the population will be concentrated in less-developed regions by 2025 and, if growth rates continue, 86 percent by 2050. The International Labor Organization estimates that 1.2 billion jobs must be created worldwide by 2025 to accommodate these new entrants. Furthermore, most of the new jobs will need to be created in urban areas where most of the population will reside.
· Exhibit 3.4: World Population by Region, 2005–2050, and Life Expectancy at Birth, 2005–2010 (millions)
·
· Controlling Population Growth
· Faced with the ominous consequences of the population explosion, it would seem logical for countries to take appropriate steps to reduce growth to manageable rates, but procreation is one of the most culturally sensitive uncontrollable factors. Economics, self-esteem, religion, politics, and education all play a critical role in attitudes about family size. All this makes the impact of China’s long-term enforcement of its one-child policies most remarkable.42
· The prerequisites to population control are adequate incomes, higher literacy levels, education for women, universal access to healthcare, family planning, improved nutrition, and, perhaps most important, a change in basic cultural beliefs regarding the importance of large families. Unfortunately, minimum progress in providing improved living conditions and changing beliefs has occurred. India serves as a good example of what is happening in much of the world. India’s population was once stable, but with improved health conditions leading to greater longevity and lower infant mortality, its population will exceed that of China by 2050, when the two will account for about 50 percent of the world’s inhabitants.43 The government’s attempts to institute change are hampered by a variety of factors, including political ineptitude44 and slow changes in cultural norms. Nevertheless, the government continues to pass laws with the intended purpose of limiting the number of births. The most recent attempt is a law that bars those with more than two children from election to the national Parliament and state assemblies. This rule would mean that many now in office could not seek reelection because of their family size.45
· Perhaps the most important deterrent to population control is cultural attitudes about the importance of large families. In many cultures, the prestige of a man, whether alive or dead, depends on the number of his progeny, and a family’s only wealth is its children. Such feelings are strong. Prime Minister Indira Gandhi found out how strong when she attempted mass sterilization of males, which reportedly was the main cause of her defeat in a subsequent election. Additionally, many religions discourage or ban family planning and thus serve as a deterrent to control.46 Nigeria has a strong Muslim tradition in the north and a strong Roman Catholic tradition in the east, and both faiths favor large families. Most traditional religions in Africa encourage large families; in fact, the principal deity for many is the goddess of land and fertility.
· Family planning and all that it entails is by far the most universal means governments use to control birthrates, but some economists believe that a decline in the fertility rate is a function of economic prosperity and will come only with economic development. Ample anecdotal evidence suggests that fertility rates decline as economies prosper. For example, before Spain’s economy began its rapid growth in the 1980s, families had six or more children; now, Spain has one of the lowest birthrates in Europe, an average of 1.24 children per woman. Similar patterns have followed in other European countries as economies have prospered.
· Rural/Urban Migration
· Migration from rural to urban areas is largely a result of a desire for greater access to sources of education, healthcare, and improved job opportunities.47 In the early 1800s, less than 3.5 percent of the world’s people were living in cities of 20,000 or more and less than 2 percent in cities of 100,000 or more; today, more than 40 percent of the world’s people are urbanites, and the trend is accelerating. Once in the city, perhaps three out of four migrants achieve some economic gains.48 The family income of a manual worker in urban Brazil, for example, is almost five times that of a farm laborer in a rural area.
· By 2030, estimates indicate that more than 61 percent of the world’s population will live in urban areas (up from 49 percent in 2005, with similar changes across all regions), and at least 27 cities will have populations of 10 million or more, 23 of which will be in the less-developed regions. Tokyo has already overtaken Mexico City as the largest city on Earth, with a population of 26 million, a jump of almost 8 million since 1990.
· Although migrants experience some relative improvement in their living standards, intense urban growth without investment in services eventually leads to serious problems. Slums populated with unskilled workers living hand to mouth put excessive pressure on sanitation systems, water supplies,49 and other social services. At some point, the disadvantages of unregulated urban growth begin to outweigh the advantages for all concerned.
· Consider the conditions that exist in Mexico City today. Besides smog, garbage, and pollution brought about by the increased population, Mexico City faces a severe water shortage. Local water supplies are nearly exhausted and in some cases are unhealthy.50 Water consumption from all sources is about 16,000 gallons per second, but the underground aquifers are producing only 2,640 gallons per second. Water comes from hundreds of miles away and has to be pumped up to an elevation of 7,444 feet to reach Mexico City. This grim picture portrays one of the most beautiful and sophisticated cities in Latin America. Such problems are not unique to Mexico; throughout the developing world, poor sanitation and inadequate water supplies are consequences of runaway population growth. An estimated 1.1 billion people are currently without access to clean drinking water, and 2.8 billion lack access to sanitation services. Estimates are that 40 percent of the world’s population, 2.5 billion people, will be without clean water if more is not invested in water resources.51 Prospects for improvement are not encouraging, because most of the world’s urban growth will take place in the already economically strained developing countries.
· Population Decline and Aging
· While the developing world faces a rapidly growing population,52 the industrialized world’s population is in decline and rapidly aging.53 Birthrates in western Europe and Japan have been decreasing since the early or mid-1960s; more women are choosing careers instead of children, and many working couples are electing to remain childless. As a result of these and other contemporary factors, population growth in many countries has dropped below the rate necessary to maintain present levels. Just to keep the population from falling, a nation needs a fertility rate of about 2.1 children per woman. Not one major country has sufficient internal population growth to maintain itself, and this trend is expected to continue for the next 50 years. Europe’s population could decline by as much as 88 million (from 375 million to 287 million) people if present trends continue to 2015.54
· At the same time that population growth is declining in the industrialized world,55 there are more aging people today than ever before.56 Global life expectancy has grown more in the past 50 years than over the previous 5,000 years. Until the Industrial Revolution, no more than 2 or 3 percent of the total population was over the age of 65 years. Today in the developed world, the over-age-65 group amounts to 14 percent, and by 2030, this group will reach 25 percent in some 30 different countries. Furthermore, the number of “old old” will grow much faster than the “young old.” The United Nations projects that by 2050, the number of people aged 65 to 84 years worldwide will grow from 400 million to 1.3 billion (a threefold increase), while the number of people aged 85 years and over will grow from 26 million to 175 million (a sixfold increase)—and the number aged 100 years and over will increase from 135,000 to 2.2 million (a sixteenfold increase). Exhibit 3.5 illustrates the disparity in aging that is typical among lesser-developed countries (Kenya), developing countries (Brazil), and an economically developed country (United Kingdom). Countries like Kenya, with a high proportion of young people, face high education and healthcare costs, whereas countries like the United Kingdom, with top-heavy population pyramids, face high pension and healthcare costs for the elderly with fewer wage earners to bear the burden.
· Exhibit 3.5: Age Density for World and Selected Countries
·
· Source: From Oxford Atlas of the World, 10th ed., 2002. Copyright © 2002 Philip’s Cartography.
· Europe, Japan, and the United States epitomize the problems caused by an increasing percentage of elderly people who must be supported by a declining number of skilled workers. In 1998, Japan crossed a threshold anticipated with fear by the rest of the developed world: the point at which retirees withdrawing funds from the pension system exceeded those workers contributing to it.57 The elderly require higher government outlays for healthcare and hospitals,58 special housing and nursing homes, and pension and welfare assistance, but the workforce that supports these costs is dwindling. The part of the world with the largest portion of people over 65 years is also the part of the world with the fewest number of people under age 15 years. This disparity means that there will be fewer workers to support future retirees, resulting in an intolerable tax burden on future workers, more of the over-65 group remaining in the labor force, or pressure to change existing laws to allow mass migration to stabilize the worker-to-retiree ratio. No one solution is without its problems.59
· CROSSING BORDERS 3.4: Where Have All the Women Gone?
· Three converging issues in China have the potential of causing a serious gender imbalance:
· • China, the world’s most populous country, has a strict one-child policy to curb population growth.
· • Traditional values dictate male superiority and a definite parental preference for boys.
· • Prenatal scanning allows women to discover the sex of their fetuses and thereby abort unwanted female fetuses.
· The first wave of children born under the one-child policy is reaching marriageable age, and there are far too few brides to go around. The ratio of males to females is unnaturally high, hovering between 117 to 119 boys for every 100 girls in 2000. Thus men in their 20s have to deal with the harsh reality of six bachelors for every five potential brides. So what is a desperate bachelor to do?
· The shortage has prompted some parents to acquire babies as future brides for their sons. Infants are considered more appealing because they are less likely to run away, will look on their buyers as their own parents, and are cheaper than buying a teenage bride. Buying a baby girl can cost as little as $100 and won’t result in the fines imposed on couples who violate birth control limits. Such fines can equal as much as six years’ income.
· Another alternative is to marry a relative. At age 20 years, with his friends already paired off, Liu found himself the odd man out. His parents, farmers in a small backwater village, could not raise the $2,000 required to attract a bride for their son. Desperate, Liu’s mother asked her sister for a favor: Could she ask Hai, her daughter, to be Liu’s bride? Young women like Hai are not likely to defy their parents. And so Liu and Hai were wed.
· Chinese officials are starting to worry about the imbalance and have announced a raft of new programs to reverse the trend. These offers include cash payments for couples who have a daughter and let her live, along with privileges in housing, employment, and job training. Some families with girls will also be exempted from paying school fees. Even though the government staunchly defends its one-child policy, it is experimenting with allowing couples whose firstborn is a girl to have a second child. In the meantime and until the new policy results in more girls, today’s 20-year-old men will just have to compete if they want a wife.
· Sources: “Sex Determination before Birth,” Reuters News Service, May 3, 1994; “China Breeding Frustrated Bachelors,” Vietnam Investment Review, March 2004; “China to Make Sex-Selective Abortions a Crime,”
ITV.com
, January 7, 2005; Nicholas Zamiska, “China’s One-Child Policy Gets Wider Enforcement,” The Wall Street Journal Asia, January 8, 2008, p. 10.
· Worker Shortage and Immigration
· For most countries, mass immigration is not well received by the resident population. However, a recent report from the United Nations makes the strongest argument for change in immigration laws as a viable solution. The free flow of immigration will help ameliorate the dual problems of explosive population expansion in less-developed countries and worker shortage in industrialized regions.60 Europe is the region of the world most affected by aging and thus by a steadily decreasing worker-to-retiree ratio. The proportion of older persons will increase from 20 percent in 1998 to 35 percent in 2050. The country with the largest share of old people will be Spain, closely followed by Italy. Recognizing the problem, Spain has changed immigration laws to open its borders to all South Americans of Spanish descent.61 To keep the worker-to-retiree ratio from falling, Europe will need 1.4 billion immigrants over the next 50 years, while Japan and the United States62 will need 600 million immigrants between now and 2050. Immigration will not help ameliorate the problem though if political and cultural opposition to immigration cannot be overcome.
· CROSSING BORDERS 3.5: History, Geography, and Population Collide in America: Returning to Multigenerational Family Living
· As pension systems, healthcare systems, and retirement plans continue to crumble under the weight of baby-boom numbers, we all will need to rely more on the strengths of family ties and remember the fundamental human characteristic of interdependence. The problem is that such remembrance is particularly hard for Americans, as opposed to all other peoples on the planet.
· America started with The Declaration of Independence. On July 4, 1776, the founding fathers broke from the tyranny of England to form a new country. That document and the idea of independence represent the essence of being American and literally the most celebrated notion of the nation. Indeed, the goal of mainstream American parenting is to inculcate this notion into the noggins of children: We ensure they make their own beds, make their own lunches, wash their own clothes, do their own homework, drive their own cars, and so forth. How else can they become independent adults?
· There are at least three problems with this American obsession with independence. First, it stigmatizes the burgeoning numbers of both boomerang kids and grandparents living with their grandchildren as families across America smartly reunite. According to the most recent U.S. Census figures, there are 22 million adult children living with their parents and 6 million grandparents living in three-generation households, and both numbers are growing fast. Second, teaching independence actually hasn’t worked anyway, as we will see next. And third, there is really no such thing as independence anyway. There is only interdependence.
· This American overemphasis on independence is now being recognized by the most independent-minded of all Americans, CEOs. In Bill George’s wonderful book, Authentic Leadership, he argues that the job of chief executive depends on six constituencies. Without surprise, the former CEO of Medtronic lists shareholders, employees, customers, vendors, and the larger community. But what is unique, and perhaps even revolutionary, in his list is his own family. He recognizes that his own success as a CEO in part depended of the quality of his family life. Thus, he organized his executive team and responsibilities such that he had time to attend kids’ soccer matches and such. Remarkable!
· There’s also another irony about American independence. We made a lot of tanks during World War II. Right after the war, the extra industrial capacity created during the war made cars cheap in this country. Thus, we have far more cars per family than any other nation. Cheap cars created freeways, suburbia, and shopping centers. With our cars, we can load up at the grocery store and become independent of the daily shopping routine that still faces households all around the world. Indeed, a car for every person in the family, and everyone is independent. “See the USA in a Chevrolet” made road trips attractive and promised a new freedom and independence from public transportation. The latest incarnation of the “car = independence” argument has been the billions of dollars spent selling Americans on unsafe, gas-guzzling SUVs, such as, “Go anywhere, any time in your Hummer. Your Hummer even gives you independence from roads (and traffic).”
· So now, while we are independent of our local grocery store, as a nation, we Americans are completely dependent on our cars, big refrigerators, the continuous construction of new highways (for our sanity), and oil from foreign countries. The fuel burned in our cars pollutes the planet, changes global weather patterns, and, given the recent drowning of New Orleans and the polar ice melting, reduces the amount of land to live on. Perhaps the greatest irony of all is that the space taken up by all our cars limits our freedom to build sensible housing. Granny flats are often built above garages, yielding extra steps that will plague the coming elderly generation. And worst of all, providing the parking for our metal monsters subtracts from living space for American families as communities’ codes mandate more and more parking spaces.
· Source: Sharon G. Niederhaus and John L. Graham, Together Again, A Creative Guide to Multigenerational Living (Lanham, MD: Evans, 2007).
· The trends of increasing population in the developing world, with substantial shifts from rural to urban areas, declining birthrates in the industrialized world, and global population aging, will have profound effects on the state of world business and world economic conditions. Without successful adjustments to these trends, many countries will experience slower economic growth, serious financial problems for senior retirement programs, and further deterioration of public and social services, leading to possible social unrest.63
· World Trade Routes
· Trade routes bind the world together, minimizing distance, natural barriers, lack of resources, and the fundamental differences between peoples and economies. As long as one group of people in the world wants something that another group somewhere else has and there is a means of travel between the two, there is trade. Early trade routes were overland; later came sea routes, air routes, and, finally, some might say, the Internet to connect countries.
· As Exhibit 3.6 illustrates, trade routes among Europe, Asia, and the Americas were well established by the 1500s. The Spanish empire founded the city of Manila in the Philippines to receive its silver-laden galleons bound for China. On the return trip, the ship’s cargo of silk and other Chinese goods would be offloaded in Mexico, carried overland to the Atlantic, and put on Spanish ships to Spain. What we sometimes fail to recognize is that these same trades routes remain important today and that many Latin American countries have strong relationships with Europe, Asia, and the rest of the world that date back to the 1500s. The commodities traded have changed between the 1500s and today, but trade and the trade routes continue to be important. Today, instead of offloading goods in Mexico and carrying them on mule carts overland to the Atlantic, ships travel from the Pacific to the Atlantic via the Panama Canal. And ships too large for the canal offload their containers onto a railroad that crosses the Isthmus of Panama to be met by another container ship.64
· Exhibit 3.6: 500 Years of Trade
·
· U.S. negotiators seem miffed that Latin American countries didn’t trip all over themselves to forge a free trade zone of the Americas pact. Indeed, the U.S. team blamed Brazil for the pact’s failure to move further along.
· But the United States often fails to recognize that many Latin American countries have strong relationships with Europe, Asia, and the rest of the world—and these relationships were in place long before the United States even existed.
· CROSSING BORDERS 3.6: Is the Panama Canal Becoming Obsolete with Global Climate Change?
· Although most worry about the potential environmental catastrophes associated with global warming and climate change, others see some advantages.
· The Arctic is not just about oil and gas. A ship travelling at 21 knots between Rotterdam and Yokohama takes 29 days to make the voyage if it goes via the Cape of Good Hope, 22 days via the Suez Canal, and just 15 days if it goes across the Arctic Ocean. In coming years, the Arctic will dramatically alter the dynamics of global trade.
· A combination of global warming melting the ice and new shipping technology means polar shipping routes will open up in the next few years, drastically reducing the time it takes for container traffic to travel from Asia’s booming manufacturing centers to the West’s consumer markets.
· Although it may be possible for container ships to travel across the Arctic now, the amount of ice in winter makes travel extremely difficult, or too slow and expensive if the ships are accompanied by ice breakers. But these hindrances will all change as the ice disappears in coming years.
· The emergence of a northern passage across the Arctic connecting the Atlantic and Pacific oceans could not be happening at a more propitious time as far as global trade routes are concerned. It is estimated that 90 percent of all the goods in the world, measured in tonnes, are transported by sea, and rapid global economic growth, fueled by China and India, means existing routes are becoming clogged. Container shipments on international routes have increased annually by between 5 and 7 percent in recent years, in line with world trade, meaning the volume of shipments approximately doubles every 10 to 15 years.
· The Suez Canal can handle ships with a draught—the depth of water needed for a ship to float—of up to 19 meters, which is sufficient for the largest current container ships but not for the next generation. It is also operating at its maximum capacity, with between 16,000 and 18,000 ships passing through annually. Long queues are commonplace. The Panama Canal is suitable for ships with a draught of up to 11.3 meters, already too small for ships that are now common on longer shipping routes. The Panamanian government has plans to increase the capacity of the canal, build new locks, and deepen and widen the channels. But the planned extensions are not sufficient for a new generation of heavier vessels.
· The Arctic thus is set to become an increasingly important route for world trade, highlighting the need for multilateral agreements over navigation rights and the application of international law in the region.
· Sources: David Ibisonin, “Shippers Chart Polar Bypass for Clogged Global Trade,” Financial Times.com
, August 11, 2007; Mike Toner, “Accelerated Polar Melt Predicted Receding Ice Sheet Could Swamp Coast Areas,” Atlanta Journal-Constitution, March 24, 2006, p. C1.
· Trade routes represent the attempts of countries to overcome economic and social imbalances created in part by the influence of geography. The majority of world trade is among the most industrialized and industrializing countries of Europe, North America, and Asia. It is no surprise that the trade flow, as seen in Map 8 at the end of this chapter links these major trading areas.
· Communication Links
· An underpinning of all commerce is effective communications—knowledge of where goods and services exist and where they are needed and the ability to communicate instantaneously across vast distances. Continuous improvements in electronic communications have facilitated the expansion of trade. First came the telegraph, then the telephone, television, satellites, the computer, and the Internet. Map 5 illustrates the importance of fiber optic cable and satellites in providing global communications. Each revolution in technology has had a profound effect on human conditions, economic growth, and the manner in which commerce functions. Each new communications technology has spawned new business models; some existing businesses have reinvented their practices to adapt to the new technology, while other businesses have failed to respond and thus ceased to exist.65 The Internet revolution will be no different; it too affects human conditions, economic growth, and the manner in which commerce operates. As we discuss in subsequent chapters, the Internet has already begun to shape how international business is managed. However, as the Internet permeates the fabric of the world’s cultures, the biggest changes are yet to come!
· Summary
· One British authority admonishes foreign marketers to study the world until “the mere mention of a town, country, or river enables it to be picked out immediately on the map.” Although it may not be necessary for the student of foreign marketing to memorize the world map to that extent, a prospective international marketer should be reasonably familiar with the world, its climate, and topographic differences. Otherwise, the important marketing characteristics of geography could be completely overlooked when marketing in another country. The need for geographical and historical knowledge goes deeper than being able to locate continents and their countries. Geographic hurdles must be recognized as having a direct effect on marketing and the related activities of communications and distribution. For someone who has never been in a tropical rainforest with an annual rainfall of at least 60 inches (and sometimes more than 200 inches), anticipating the need for protection against high humidity is difficult. Likewise, someone who has never encountered the difficult problems caused by dehydration in constant 100-degrees-plus heat in the Sahara region will find them hard to comprehend. Indirect effects from the geographical ramifications of a society and culture ultimately may be reflected in marketing activities. Many of the peculiarities of a country (i.e., peculiar to the foreigner) would be better understood and anticipated if its history and geography were studied more closely. Without a historical understanding of a culture, the attitudes within the marketplace may not be fully understood.
· Aside from the simpler and more obvious ramifications of climate and topography, history and geography exert complex influences on the development of the general economy and society of a country. In this case, the study of history and geography is needed to provide the marketer with an understanding of why a country has developed as it has rather than as a guide for adapting marketing plans. History and geography are two of the environments of foreign marketing that should be thoroughly understood and that must be included in foreign marketing plans to a degree commensurate with their influence on marketing effort.
· Questions
· 1. Define the following terms:
· Manifest Destiny
· sustainable development
· Roosevelt Corollary
· Monroe Doctrine
· 2. Why study geography in international marketing? Discuss.
· 3. Why study a country’s history? Discuss.
· 4. How does an understanding of history help an international marketer?
· 5. Why is there a love–hate relationship between Mexico and the United States? Discuss.
· 6. Some say the global environment is a global issue rather than a national one. What does this mean? Discuss.
· 7. Pick a country and show how employment and topography affect marketing within the country.
· 8. Pick a country, other than Mexico, and show how significant historical events have affected the country’s culture.
· 9. Discuss the bases of world trade. Give examples illustrating the different bases.
· 10. The marketer “should also examine the more complex effect of geography on general market characteristics, distribution systems, and the state of the economy.” Comment.
· 11. The world population pattern trend is shifting from rural to urban areas. Discuss the marketing ramifications.
· 12. Select a country with a stable population and one with a rapidly growing population. Contrast the marketing implications of these two situations.
· 13. “World trade routes bind the world together.” Discuss.
· 14. Discuss how your interpretations of Manifest Destiny and the Monroe Doctrine might differ from those of a native of Latin America.
· 15. The telegraph, the telephone, television, satellites, the computer, and the Internet have all had an effect on how international business operates. Discuss how each of these communications innovations affects international business management.
· World Maps
· 1 The World
· 2 Global Climate
· 3 Oil and Gas Production and Consumption
· 4 Water
· 5 Global Communications
· 6 Global Terrorism
· 7 Religions
· 8 Global Economy and World Trade
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· 1James Day Hodgson, Yoshihiro Sano, and John L. Graham, Doing Business in the New Japan, Succeeding in America’s Richest Foreign Market (Latham, MD: Rowman & Littlefield, 2008).
· 2In a very interesting paper, it is argued that choices made by Jardine’s and Swire’s (trading houses) in Asia today, for example, are an outgrowth of strategic choices first in evidence more than a century ago! See Geoffrey Jones and Tarun Khanna, “Bringing History (Back) into International Business,” Journal of International Business Studies 37 (2006), pp. 453–68.
· 3N. Mark Lam and John L. Graham, Doing Business in China Now, the World’s Most Dynamic Marketplace (New York: McGraw-Hill, 2007).
· 4An example of such biases is the differing perceptions of Turkey by European Union members in deciding on Turkey’s membership in the EU. See “Which Turkey?” The Economist, March 17, 2005.
· 5For an insightful review of some of the issues that have affected relations between the United States and Mexico, see John Skirius, “Railroad, Oil and Other Foreign Interest in the Mexican Revolution, 1911–1914,” Journal of Latin American Studies, February 2003, p. 25.
· 6When the United Nations recommended that all countries set aside a single day each year to honor children, Mexico designated April 30 as “Dia de Los Niños.” Interestingly, this holiday is often included with Saint Patrick’s Day celebrations, which include recognition of the San Patricios, the Irish-American battalion that fought with the Mexicans in the Mexican–American War. See Carol Sowers, “El Dia de Los Niños Adds International Touch to Celebration,” Arizona Republic, April 29, 2005.
· 7Some say even into the 21st century. See “Manifest Destiny Warmed Up?” The Economist, August 14, 2003. Of course, others disagree. See Joseph Contreras, “Roll Over Monroe: The Influence the United States Once Claimed as a Divine Right in Latin America is Slipping away Fast,” Newsweek International, December 10, 2007.
· 8For an interesting discussion of how past U.S. foreign interventions affect attitudes about U.S. involvement in Iraq, see “Anti-Americanism: The View from Abroad,” The Economist, February 17, 2005.
· 9Many Latin Americans’ elation with the Bush administration’s first-term pronouncements that the United States was looking south “not as an afterthought but as a fundamental commitment”—that a region “too often separated by history or rivalry and resentment” should prepare itself for the start of a “new era” of cooperation—soon became disappointment as the war on terror turned U.S. attention away from Latin America. Marcela Sanchez, “Bush, Looking Every Which Way but South,” Washington Post, January 6, 2005.
· 10“Venezuela: Spirit of the Monroe Doctrine,” Washington Times, June 10, 2007, p. B5; Brian Ellsworth, “Oil at $100, Venezuela’s Chavez Faces Industry Slump,” Reuters, January 4, 2008.
· 11“Venezuela: Chavez’s New Currency Targets Inflation,” Tulsa World, January 1, 2008, p. A6.
· 12“Amid Anti-War Feelings, U.S. Fighting War Myths in Mexico,” Dow Jones International News, March 27, 2003.
· 13The importance of geography in understanding global challenges that exist today is discussed in Harm J. DeBlij, Why Geography Matters (New York: Oxford University Press, 2005).
· 14Michael D. White, International Marketing Blunders (Novato, CA: World Trade Press, 2002), p. 79.
· 15Miriam Jordan, “Penney Blends Two Business Cultures,” The Wall Street Journal, April 5, 2001.
· 16Robert Lea, “Chunnel Rail Link Firm Heads for a Multi-Billion Break-Up,” Evening Standard, November 1, 2007, p. 28.
· 17“Illegals in the Chunnel,” Daily Express, January 4, 2008, p. 39.
· 18Bradley S. Klapper, “Swiss Complete Digging Alpine Tunnel,” Washington Post, April 28, 2005.
· 19“Asia’s Tsunami: Helping the Survivors,” The Economist, January 5, 2005.
· 20See Map 2, “Global Climate,” in the World Maps section for a view of the diversity of the world’s climate. The climatic phenomenon of El Niño wreaks havoc with weather patterns and is linked to crop failures, famine, forest fires, dust and sand storms, and other disasters associated with either an overabundance or a lack of rain.
· 21“Water Shortage Fears in Darfur Camps,” All Africa, December 10, 2007; “Northern Vietnam Likely to Face Water Shortages,” Xinhua News Agency, January 4, 2008.
· 22Anita Chang, “China: Three Gorges Dam Impact Not That Bad,” Associated Press, November 22, 2007.
· 23“Tourist Arrivals to Three Gorges Dam Hit New High in 2007,” Asia Pulse, January 8, 2008.
· 24“Dams Control Most of the World’s Largest Rivers,” Environmental News Service, April 15, 2005.
· 25Sandy Bauers, “Big Wake-Up to Global Warming,” Philadelphia Inquirer, December 24, 2007, p. D1.
· 26Visit http://www.gemi.org for information on the Global Environmental Management Initiative, an organization of U.S. multinational companies dedicated to environmental protection. Also see Keith Bradsher, “Hong Kong Utilities Agree to Pollution-Linked Rates,” The New York Times, January 10, 2008, p. C4.
· 27“Electronics, Unleaded,” The Economist, March 10, 2005.
· 28Jim Yardley, “Consultant Questions Beijing’s Claim of Cleaner Air,” The New York Times, January 10, 2008, p. A3.
· 29For a comprehensive view of OECD programs, including environmental issues, visit http://www.oecd.org.
· 30William C. Clark, “Science and Policy for Sustainable Development,” Environment, January–February 2005.
· 31Visit http://www.oecd.org, the OECD Web site, for a directory and complete coverage of sustainable development.
· 32Visit http://www.webdirectory.com for the Amazing Environmental Organization Web Directory, a search engine with links to an extensive list of environmental subjects.
· 33“Global Copper Shortage Reaches 340,000t in H1,” China Industry Daily News, September 21, 2007.
· 34Visit http://www.eia.doe.gov and search for “International Energy Outlook (most current year)” for details of production, use, and so forth.
· 35See Map 3, “Oil and Gas Production and Consumption,” for a global view of the flow and uses of petroleum.
· 36Alexi Barrinuevo, “Hot Prospect for Oil’s Big League,” The New York Times, January 11, 2008, pp. C1, C4.
· 37“U.S. Energy Bill Won’t End Dependence on Foreign Oil,” Reuters News Service, April 21, 2005.
· 38Koh Chin Ling and Loretta Ng, “China’s Crude Oil Imports Surge in March,” International Herald Tribune, April 22, 2005.
· 39“Lessons from a Miser,” BusinessWeek, April 11, 2005, p. 51.
· 40“Wasteful Ways,” BusinessWeek, April 11, 2005, p. 50.
· 41See World Population Prospects, The 2004 and 2006 Revisions, United Nations Economic and Social Affairs, http://www.unpopulation.org, 2008.
· 42Maureen Fan, “Officials Violating ‘One-Child’ Policy Forced Out in China,” Washington Post, January 8, 2008, p. A16.
· 43“India to Surpass China in Population,” ExpressIndia, May 18, 2005.
· 44Anand Giridharadas, “A Buoyant India Dares to Ask: Is a Billion So Bad?” International Herald Tribune, May 4, 2005.
· 45V. K. Paghunathan, “3 Tykes and You’re Out,” Straits Times, April 11, 2003.
· 46Huma Aamir Malik, “Aziz Seeks Scholars’ Support to Control Population,” Arab News, May 5, 2005.
· 47Tor Ching Li, “Urban Migration Drains Asian Coffee Farms’ Work Force,” Dow Jones Commodities Service, December 13, 2007.
· 48Diane Mosher, “Chinese Urban Migration Creates Opportunities for International Urban Planners,” Multi-Housing News, April 2, 2007.
· 49“China Faces Worsening Water Woes,” Chicago Sun-Times, March 24, 2005.
· 50“Nation Faces Water Shortage,” El Universal (Mexico City), March 23, 2005.
· 51David Usorne, “The Water Crisis: One Billion People Lack Clean Supplies,” The (London) Independent, March 23, 2005.
· 52Gerald Tenywa and Ben Okiror, “Population Growth Highest around Lake Victoria,” All Africa, November 1, 2007.
· 53There are apparent exceptions; see “Finland Sees Record-High Population Growth in 2007,” Xinhua News Agency, January 1, 2008.
· 54Mark Henderson, “Europe Shrinking as Birthrates Decline,” The Times Online (UK), March 28, 2003.
· 55“Russia’s Population Shrinks by 208,000 in 10 Months,” Russia & CIS Newswire, December 21, 2007.
· 56“China Population Ageing Rapidly,” Associated Press Newswires, December 17, 2007.
· 57Sebastian Moffett, “Going Gray: For Ailing Japan, Longevity Begins to Take Its Toll,” The Wall Street Journal, February 11, 2003, p. A1.
· 58Ben Shankland, “Government of Colombia Tries to Sell Beleaguered Hospital Again,” Global Insight Daily Analysis, December 19, 2007.
· 59J. T. Young, “Failure of Social Security Reform Mustn’t Derail Personal Accounts,” Investor’s Business Daily, January 3, 2008.
· 60“Russian Immigration Rules Could Cause Worker Shortage,” Associated Press, Charleston Gazette, January 16, 2007, p. P2D.
· 61“Spain Grants Amnesty to 700,000 Migrants,” Guardian Unlimited, May 9, 2005.
· 62“US Tech Sector Eyes Immigration Bill Revival, Cites Worker Shortage,” Agence France-Presse, June 9, 2007.
· 63David J. Lynch, “Looming Pension Crisis in China Stirs Fears of Chaos,” USA Today, April 19, 2005.
· 64“Panama Canal Expansion Gets Environmental Approval,” Journal of Commerce Online, November 13, 2007.
· 65For an interesting and insightful review of the impact information and communication technology will have on how business operates, see Jose de la Torre and Richard W. Moxon, “Introduction to the Symposium E-Commerce and Global Business: The Impact of the Information and Communication Technology Revolution on the Conduct of International Business,” Journal of International Business Studies 32, no. 4 (2001), p. 617.
· (Cateora 51)
· Cateora. International Marketing, 14th Edition. McGraw-Hill Learning Solutions, 112008.
· 4: Cultural Dynamics in Assessing Global Markets
· CHAPTER OUTLINE
· Global Perspective: Equities and eBay—Culture Gets in the Way
· Culture’s Pervasive Impact
· Definitions and Origins of Culture
· Geography
· History
· The Political Economy
· Technology
· Social Institutions
· Elements of Culture
· Cultural Values
· Rituals
· Symbols
· Beliefs
· Thought Processes
· Cultural Knowledge
· Factual versus Interpretive Knowledge
· Cultural Sensitivity and Tolerance
· Cultural Change
· Cultural Borrowing
· Similarities: An Illusion
· Resistance to Change
· Planned and Unplanned Cultural Change
· Consequences of Innovation
· CHAPTER LEARNING OBJECTIVES
· What you should learn from Chapter 4:
· • The importance of culture to an international marketer
· • The origins and elements of culture
· • The impact of cultural borrowing
· • The strategy of planned change and its consequences
· Global Perspective: EQUITIES AND EBAY—CULTURE GETS IN THE WAY
· Two trillion dollars! That’s about 200 trillion yen. Either way you count it, it’s a lot of money. American brokerage houses such as Fidelity Investments, Goldman Sachs, and Merrill Lynch rushed new investment products and services to market in Japan to try to capture the huge capital out-flow expected from 10-year time deposits, then held in the Japanese postal system. Liberalization of Japan’s capital markets in recent years now gives Japanese consumers more freedom of choice in their investments. Post office time deposits still yield about a 2 percent return in Japan, and bank savings yields have been around 0. By American e-trading standards, that means an electronic flood of money moving out of the post offices and into the stock markets. Right?
· However, Japan is not America. There is no American-style risk-taking culture among Japanese investors. The volume of stock trading in Japan is about one-sixth that of the United States. In Japan, only 12 percent of household financial assets are directly invested in stocks and a mere 2 percent in mutual funds. In contrast, about 55 percent of U.S. households own stock. Says one analyst, “Most of the population [in Japan] doesn’t know what a mutual fund is.” So will the flood be just a trickle? And what about online stock trading? Internet use in Japan has burgeoned—there are now some 85 million users in Japan. That’s about the same percentage as in the United States. But the expected deluge into equities has been a dribble. Merrill Lynch and others are cutting back staff now as fast as they built it just a couple of years ago.
· Making matters worse, for the Japanese, the transition into a more modern and trustworthy securities market has not been a smooth one. In 2005, an astounding transaction took place on the Tokyo Stock Exchange (TSE); instead of placing a small order of 1 share for 610,000 yen of J-Com, a trader with Mizuho Securities Co. mistakenly placed a sell order for 610,000 shares for 1 yen. Mizuho ended up losing 40 billion yen ($344 million) due to a simple computer glitch that ultimately led to the resignation of TSE president Takuo Tsurushima. Ouch!
· A French firm is trying to break through a similar aversion to both e-trading and equities in France. That is, only about 26 million people use the Internet in France, and one-third of that number own stocks. The French have long shied away from stock market investments, seeing them as schemes to enrich insiders while fleecing novices. After the Enron and WorldCom scandals here, you could almost hear the chortling in the sidewalk cafés there. But even in France, investment preferences are beginning to change, especially now that the real estate market has turned. At the same time, the liberalization of Europe’s financial services sector is bringing down transaction costs for institutional and retail investors alike.
· eBay, the personal online auction site so successful in the United States, is running into comparable difficulties in both Japan and France. The lower rate of Internet use in France is just part of the problem. For Japanese it has been embarrassing to sell castoffs to anyone, much less buy them from strangers. Garage sales are unheard of. In France, eBay’s founder Pierre Omidyar’s country of birth, the firm runs into French laws restricting operations to a few government-certified auctioneers.
· Based on a knowledge of differences in cultural values between the United States and both Japan and France, we should expect a slower diffusion of these high-tech Internet services in the latter two countries. E-trading and e-auctions have both exploded on the American scene. However, compared with those in many other countries, U.S. investors are averse to neither the risk and uncertainties of equity investments nor the impersonal interactions of online transactions.
· Sources: William D. Echikson, “Rough Crossing for eBay,” BusinessWeek E.Biz, February 7, 2000, p. EB48; Mark Scott, “Online Trading Blooms in Europe,” BusinessWeek Online, November 27, 2007; Sang Lee, “Japan and the Future of Electronic Trading,” Securities Industry News, November 5, 2007; World Development Indicators, World Bank, 2008.
· Culture deals with a group’s design for living. It is pertinent to the study of marketing, especially international marketing. If you consider the scope of the marketing concept—the satisfaction of consumer needs and wants at a profit—the successful marketer clearly must be a student of culture. For example, when a promotional message is written, symbols recognizable and meaningful to the market (the culture) must be used. When designing a product, the style, uses, and other related marketing activities must be made culturally acceptable (i.e., acceptable to the present society) if they are to be operative and meaningful. In fact, culture is pervasive in all marketing activities—in pricing, promotion, channels of distribution, product, packaging, and styling—and the marketer’s efforts actually become a part of the fabric of culture. How such efforts interact with a culture determines the degree of success or failure of the marketing effort.
· The manner in and amount1 which people consume, the priority of needs and wants they attempt to satisfy, and the manner in which they satisfy them are functions of their culture that temper, mold, and dictate their style of living. Culture is the human-made part of human environment—the sum total of knowledge, beliefs, art, morals, laws, customs, and any other capabilities and habits acquired by humans as members of society.2
· Markets constantly change; they are not static but evolve, expand, and contract in response to marketing effort, economic conditions, and other cultural influences. Markets and market behavior are part of a country’s culture. One cannot truly understand how markets evolve or how they react to a marketer’s effort without appreciating that markets are a result of culture. Markets are the result of the three-way interaction of a marketer’s efforts, economic conditions, and all other elements of the culture. Marketers are constantly adjusting their efforts to cultural demands of the market, but they also are acting as agents of change whenever the product or idea being marketed is innovative. Whatever the degree of acceptance, the use of something new is the beginning of cultural change, and the marketer becomes a change agent.
· This is the first of four chapters that focus on culture and international marketing. A discussion of the broad concept of culture as the foundation for international marketing is presented in this chapter. The next chapter, “Culture, Management Style, and Business Systems,” discusses culture and how it influences business practices and the behaviors and thinking of managers. Chapters 6 and 7 examine elements of culture essential to the study of international marketing: the political environment and the legal environment.
· This chapter’s purpose is to heighten the reader’s sensitivity to the dynamics of culture. It is neither a treatise on cultural information about a particular country nor a thorough marketing science or epidemiological study of the various topics. Rather, it is designed to emphasize the importance of cultural differences to marketers and the need to study each country’s culture(s) and all its origins and elements, as well as point out some relevant aspects on which to focus.
· Culture’s Pervasive Impact
· Culture affects every part of our lives, every day, from birth3 to death,4 and everything in between.5 It affects how we spend money and how we consume in general. It even affects how we sleep. For example, we are told that Spaniards sleep less than other Europeans,6 and Japanese children often sleep with their parents. You can clearly see culture operating in the birthrate tables in Exhibit 4.1. When you look across the data from the three countries, the gradual declines beginning in the 1960s are evident. As countries move from agricultural to industrial to services economies, birthrates decline. Immediate causes may be government policies and birth control technologies, but a global change in values is also occurring. Almost everywhere, smaller families are becoming favored. This cultural change now leads experts to predict that the planet’s population will actually begin to decline after 2050 unless major breakthroughs in longevity intervene, as some predict.
· Exhibit 4.1: Birthrates (per 1,000 women)
·
· Source: World Bank, World Development Indicators, 2008. Copyright © 2008 by World Bank. Reprinted with permission of World Bank via Copyright Clearance Center.
· But a closer look at the tables reveals even more interesting consequences of culture. Please notice the little peaks in 1976 and 1988 in the Singapore data. The same pattern can be seen in birthrate data from Taiwan. Those “extra” births are not a matter of random fluctuation. In Chinese cultures, being born in the Year of the Dragon (12 animals—dogs, rats, rabbits, pigs,7 etc.—correspond to specific years in the calendar) is considered good luck. Such birthrate spikes have implications for sellers of diapers, toys, schools, colleges, and so forth in successive years in Singapore. However, superstitions have an even stronger influence on the birthrates in Japan, as shown in Exhibit 4.1. A one-year 20 percent drop in Japanese fertility rates in 1966 was caused by a belief that women born in the Year of the Fire Horse, which occurs every 60 years, will lead unhappy lives and perhaps murder their husbands. This sudden and substantial decline in fertility, which has occurred historically every 60 years since Japan started keeping birth records, reflects abstinence, abortions, and birth certificate fudging. This superstition has resulted in the stigmatization of women born in 1966 and had a large impact on market potential for a wide variety of consumer goods and services in Japan. It will be interesting to see how technological innovations and culture will interact in Japan in 2026, the next Year of the Fire Horse.8
· Exhibit 4.2: Patterns of Consumption (annual per capita)
·
· Culture’s influence is also illustrated in the consumption data9 presented in Exhibit 4.2. The focus there is on the six European Union countries, but data from the two other major markets of affluence in the world—Japan and the United States—are also included. The products compared are those that might be included in a traditional (American) romantic dinner date.
· First come the flowers and candy. The Dutch are the champion consumers of cut flowers,10 and this particular preference for petals will be explored further in the pages to come. The British love their chocolate. Perhaps the higher consumption rate there is caused by Cadbury’s11 advertising, or perhaps the cooler temperatures have historically allowed for easier storage and better quality in the northern countries. At least among our six EU countries, per capita chocolate consumption appears to decline with latitude.
· In Europe, the Spaniards are the most likely to feast on fish. They even come close to the Japanese preference for seafood. From the data in the table, one might conclude that being surrounded in Japan by water explains the preference for seafood. However, what about the British? The flat geography in England and Scotland allows for the efficient production of beef, and a bit later in this section, we consider the consequences of their strong preference for red meat. The Italians eat more pasta—not a surprise. History is important. The product was actually invented in China, but in 1270, Marco Polo is reputed to have brought the innovation back to Italy, where it has flourished. Proximity to China also explains the high rate of Japanese pasta (noodle) consumption.
· How about alcohol and tobacco? Grapes grow best in France and Italy, so a combination of climate and soil conditions explains at least part of the pattern of wine consumption seen in Exhibit 4.2.12 Culture also influences the laws, age limits, and such related to alcohol. The legal environment also has implications for the consumption of cigarettes. Indeed, the most striking patterns in the table are not the current consumption numbers; the interesting data are the five-year growth rates. Demand is shrinking remarkably fast almost everywhere. These dramatic declines in consumption represent a huge cultural shift that the world seldom sees.
·
· Finding horse or donkey as your entree would not be romantic or even appetizing in most places around the world. Even though horse consumption is generally declining in France, here in Paris you can still buy a steed steak at the local bouchers chevaleries. Escargot oui, Eeyore non!
· Any discussion of tobacco consumption leads immediately to consideration of the consequences of consumption. One might expect that a high consumption of the romance products—flowers, candy, and wine—might lead to a high birthrate. Reference to Exhibit 4.3 doesn’t yield any clear conclusions. The Germans have some of the highest consumption levels of the romantic three but the lowest birthrate among the eight countries.
· Exhibit 4.3: Consequences of Consumption
·
· Perhaps the Japanese diet’s13 emphasis on fish yields them the longest life expectancy. But length of life among the eight affluent countries represented in the table shows little variation. How people die, however, does vary substantially across the countries.
·
· The Floriad, the biggest exhibition of flowers on earth, happens once every decade. You can go to the next one in 2012.
·
· The Pope in St. Peter’s Square on Easter Sunday surrounded by Dutch flowers. (AP Photo/Antonio Calanni)
·
· The Amsterdam flower market—a busy place for local consumers and tourists.
·
· Four hundred years later, the one-dollar black tulip is available in the Amsterdam flower market.
·
· Outside the Aalsmeer Flower Auction—notice the jet landing at nearby Schiphol Airport, which serves both Amsterdam and Aalsmeer.
· We all love flowers. But for the Dutch, flowers are more important than that. For them, it’s more like a national fascination, fixation, or even a fetish for flowers. Why?
· The answer is an instructive story about culture and international markets, the broader subjects of this chapter. The story starts with geography, goes through the origins and elements of culture, and ends with the Dutch being the masters of the exhibition, consumption, and production of flowers.
· Geography. The rivers and the bays make the Netherlands a great trading country. But the miserable weather, rain, and snow more than 200 days per year make it a colorless place, gray nearly year-round. The Flying Dutchmen not only went to the Spice Islands for spice for the palate; they also went to the eastern Mediterranean for spice for the eyes. The vibrant colors of the tulip first came to Europe from the Ottoman Empire on a Dutch ship in 1561.
· History. The Dutch enthusiasm for the new “visual drug” was great. Its most potent form was, ironically, the black tulip. Prices exploded, and speculators bought and sold promissory notes guaranteeing the future delivery of black tulip bulbs. This derivatives market yielded prices in today’s dollars of $1 million or more for a single bulb, enough to buy a 5-story house in central Amsterdam today. Not only did the tulip mania create futures markets, it also caused the first great market bust in recorded history. Prices plummeted when the government took control in 1637. Now at the Amsterdam flower market, you can buy a black tulip bulb for about a dollar!
·
· A view of a Dutch harbor with trading ships circa 1600. (© Archivo Iconografico, S.A./Corbis)
·
· Inside Aalsmeer, 150 football fields of cut flowers, 20 million per day, are readied for auction.
· Technology and Economics. The technology in the story comes in the name of Carolus Clusius, a botanist who developed methods for manipulating the colors of the tulips in the early 1600s. This manipulation added to their appeal and value, and the tulip trade became international for the Dutch.
· Social Institutions. Every Easter Sunday, the Pope addresses the world at St. Peter’s Square in Rome reciting, “Bedankt voor bloemen.” Thus, he thanks the Dutch nation for providing the flowers for this key Catholic ritual. The Dutch government, once every tenth year, sponsors the largest floriculture exhibition in the world, the Floriad. You can go next in 2012. Finally, at the Aalsmeer Flower Auction near Amsterdam, the prices are set for all flowers in all markets around the world. The Dutch remain the largest exporters of flowers (60 percent global market share), shipping them across Europe by trucks and worldwide by air freight.
· Cultural Values. The high value the Dutch place on flowers is reflected in many ways, not the least of which is their high consumption rate, as seen in Exhibit 4.2.
· Aesthetics as Symbols. Rembrandt Van Rijn’s paintings, including his most famous Night Watch (1642, Rijksmuseum, Amsterdam), reflect a dark palette. Artists generally paint in the colors of their surroundings. A quarter century later, his compatriot Vincent Van Gogh used a similar bleak palette when he worked in Holland. Later, when Van Gogh went to the sunny and colorful south of France, the colors begin to explode on his canvases. And, of course, there he painted flowers!
·
· Van Gogh’s Vase with Fifteen Sunflowers, painted in the south of France in 1889, and sold to a Japanese insurance executive for some $40 million in 1987, at the time the highest price ever paid for a single work of art. The Japanese are also big flower consumers—see Exhibit 4.2. (AP Photo/Tsugufumi Matsumoto, file)
·
· The bidders in four huge auction rooms pay attention to the “clock” as high starting prices tick down. The wholesale buyer that stops the clock pays the associated price in this the archetypical “Dutch auction.”
·
· Outside again at Aalsmeer, trucks are loaded for shipment by land across Europe and airfreight worldwide.
·
· Rembrandt’s Night Watch. (© Rijksmuseum, Amsterdam/SuperStock)
·
· Van Gogh’s Potato Eaters, painted in The Netherlands in 1885. (© SuperStock, Inc./SuperStock)
· CROSSING BORDERS 4.1: Human Universals: The Myth of Diversity?
· Yes, culture’s influence is pervasive. But as anthropologist Donald E. Brown correctly points out, we are all human. And since we are all of the same species, we actually share a great deal. Here’s a few of the hundreds of traits we share:
· Use metaphors
· Have a system of status and roles
· Are ethnocentric
· Create art
· Conceive of success and failure
· Create groups antagonistic to outsiders
· Imitate outside influences
· Resist outside influences
· Consider aspects of sexuality private
· Express emotions with face
· Reciprocate
· Use mood-altering drugs
· Overestimate objectivity of thought
· Have a fear of snakes
· Recognize economic obligations in exchanges of goods and services
· Trade and transport goods
· Indeed, the last two suggest that we might be characterized as the “exchanging animal.”
· Source: Donald E. Brown, Human Universals (New York: McGraw-Hill, 1991).
· The influence of fish versus red meat consumption on the incidence of heart problems is easy to see. The most interesting datum in the table is the extremely high incidence of stomach cancer in Japan. The latest studies suggest two culprits: (1) salty foods such as soy sauce and (2) the bacterium Helicobacter pylori. The latter is associated with the unsanitary conditions prevalent in Japan immediately after World War II, and it is still hurting health in Japan today. Finally, because stomach cancer in Japan is so prevalent, the Japanese have developed the most advanced treatment of the disease, that is, both procedures and instruments. Even though the death rate is highest, the treatment success rate is likewise the highest in Japan. Whether you are in Tacoma, Toronto, or Tehran, the best medicine for stomach cancer may be a ticket to Tokyo. Indeed, this last example well demonstrates that culture not only affects consumption; it also affects production (of medical services in this case)!
· The point is that culture matters.14 It is imperative for foreign marketers to learn to appreciate the intricacies of cultures different from their own if they are to be effective in foreign markets.
· Definitions and Origins of Culture
· There are many ways to think about culture. Dutch management professor Geert Hofstede refers to culture as the “software of the mind” and argues that it provides a guide for humans on how to think and behave; it is a problem-solving tool.15 Anthropologist and business consultant Edward Hall provides a definition even more relevant to international marketing managers: “The people we were advising kept bumping their heads against an invisible barrier. . . . We knew that what they were up against was a completely different way of organizing life, of thinking, and of conceiving the underlying assumptions about the family and the state, the economic system, and even Man himself.”16 The salient points in Hall’s comments are that cultural differences are often invisible and that marketers who ignore them often hurt both their companies and careers. Finally, James Day Hodgson, former U.S. ambassador to Japan, describes culture as a “thicket.”17 This last metaphor holds hope for struggling international marketers. According to the ambassador, thickets are tough to get through, but effort and patience often lead to successes.
· Most traditional definitions of culture center around the notion that culture is the sum of the values, rituals, symbols, beliefs, and thought processes that are learned and shared by a group of people,18 then transmitted from generation to generation.19 So culture resides in the individual’s mind. But the expression “a culture” recognizes that large collectives of people can, to a great degree, be like-minded.
· The best international marketers will not only appreciate the cultural differences pertinent to their businesses, but they will also understand the origins of these differences. Possession of the latter, deeper knowledge will help marketers notice cultural differences in new markets and foresee changes in current markets of operation. Exhibit 4.4 depicts the several causal factors and social processes that determine and form cultures and cultural differences. Simply stated, humans make adaptations to changing environments through
innovation
. Individuals learn culture from social institutions through socialization (growing up) and acculturation (adjusting to a new culture). Individuals also absorb culture through role modeling, or imitation of their peers. Finally, people make decisions about consumption and production through application of their cultural-based knowledge. More details are provided below.
· Exhibit 4.4: Origins, Elements, and Consequences of Culture
·
· Geography
· In the previous chapter, we described the immediate effects of geography on consumer choice. But geography exercises a more profound influence than just affecting the sort of jacket you buy. Indeed, geography (broadly defined here to include climate, topography, flora, fauna, and microbiology) has influenced history, technology,20 economics, our social institutions, and, yes, our ways of thinking.21 Geographical influences manifest themselves in our deepest cultural values developed through the millennia, and as geography changes, humans can adapt almost immediately. One sees the latter happening in the new interaction rituals evolving from the HIV/AIDS disaster or more recently the SARS outbreak in China. The ongoing cultural divides across the English Channel or the the Taiwan Strati are also representative of geography’s historical salience in human affairs.
· The ideas of two researchers are particularly pertinent to any discussion of geography’s influence on everything from history to present-day cultural values. First, Jared Diamond,22 a professor of physiology, tells us that historically, innovations spread faster east to west than north to south. Before the advent of transoceanic shipping, ideas flowed over the Silk Road but not across the Sahara or the Isthmus of Panama. He uses this geographical approach to explain the dominance of Euro-Asian cultures, with their superior technology and more virulent germs, over African and American cultures. Indeed, Diamond’s most important contribution is his material on the influence of microbiology on world history.
· Second, Philip Parker,23 a marketing professor, argues for geography’s deep influence on history, economics, and consumer behavior. For example, he reports strong correlations between the latitude (climate) and the per capita GDP of countries. Empirical support can be found in others’ reports of climate’s apparent influence on workers’ wages.24 Parker, like Diamond before him, explains social phenomena using principles of physiology. The management implications of his treatise have to do with using ambient temperature as a market segmentation variable. We return to this issue in Chapter 8.
· History
· The impact of specific events in history can be seen reflected in technology, social institutions, cultural values, and even consumer behavior.25 Diamond’s book is filled with examples. For instance, much of American trade policy has depended on the happenstance of tobacco (i.e., the technology of a new cash crop) being the original source of the Virginia colony’s economic survival in the 1600s. In a like manner, the Declaration of Independence, and thereby Americans’ values and institutions, was fundamentally influenced by the coincident 1776 publication of Adam Smith’s The Wealth of Nations. Notice too that the military conflicts in the Middle East in 2003 bred new cola brands—Mecca Cola, Muslim Up, Arab Cola, and ColaTurka.26
· The Political Economy
· For most of the 20th century, four approaches to governance competed for world dominance: colonialism, fascism, communism, and democracy/free enterprise. Fascism fell in 1945. Colonialism was also a casualty of World War II, though its death throes lasted well into the second half of the century.27 Communism crumbled in the 1990s.28 One pundit even declared the “end of history.”29 Unfortunately, we have September 11 and the conflicts in the Middle East to keep the list of bad things growing. Much more detail is included in Chapters 6 and 7 on the influences of politics and the legal environment on the culture of commerce and consumption, so we will leave this important topic until then. The main point here is for you to appreciate the influence of the political economy on social institutions and cultural values and ways of thinking.
· Technology
· Sit back for a moment and consider what technological innovation has had the greatest impact on institutions and cultural values in the past 50 years in the United States. Seriously, stop reading, look out your window, and for a moment consider the question.
· There are many good answers, but only one best one. Certainly jet aircraft, air conditioning, televisions, computers, and the Internet all make the list. But the best answer is most likely the pill.30 That is, the birth control pill, or more broadly birth control techniques, have had a huge effect on everyday life for most Americans. Mainly, it has freed women to have careers and freed men to spend more time with kids. Before the advent of the pill, men’s and women’s roles were prescribed by reproductive responsibilities and roles. Now half the marketing majors in the United States are women. Now 10 percent of the crews on American navy ships are women. Before the pill, these numbers were unimaginable.
· Obviously, not everyone is happy with these new “freedoms.” For example, in 1968, the Roman Catholic Church forbade use of the birth control pill. But the technology of birth control undeniably has deeply affected social institutions and cultural values. Families are smaller, and government and schools are forced to address issues such as abstinence and condom distribution.
· Social Institutions
· Social institutions including family, religion, school, the media, government, and corporations all affect the ways in which people relate to one another, organize their activities to live in harmony with one another, teach acceptable behavior to succeeding generations, and govern themselves. The positions of men and women in society, the family, social classes, group behavior, age groups, and how societies define decency and civility are interpreted differently within every culture. In cultures in which the social organizations result in close-knit family units, for example, a promotion campaign aimed at the family unit is usually more effective than one aimed at individual family members. Travel advertising in culturally divided Canada has pictured a wife alone for the English-speaking market segment but a man and wife together for the French-speaking segments of the population, because the latter are traditionally more closely bound by family ties.
· The roles and status positions found within a society are influenced by the dictates of social institutions. The caste system in India is one such institution. The election of a low-caste person—once called an “untouchable”—as president made international news because it was such a departure from traditional Indian culture. Decades ago, brushing against an untouchable or even glancing at one was considered enough to defile a Hindu of high status. Even though the caste system has been outlawed, it remains a part of the culture.
· Family.
· Family forms and functions vary substantially around the world, even around the country. For example, whereas nepotism is seen as a problem in American organizations, it is more often seen as an organizing principle in Chinese31 and Mexican32 firms. Or consider the Dutch executive who lives with his mother, wife, and kids in a home in Maastricht that his family has owned for the last 300 years. Then there’s the common practice of the high-income folks in Cairo buying an apartment house and filling it up with the extended family—grandparents, married siblings, cousins, and kids. Or how about the Japanese mother caring for her two children pretty much by herself, often sleeping with them at night, while her husband catches up on sleep during his four hours a day commuting via train. And there’s the American family in California—both parents work to support their cars, closets, and kids in college, all the while worrying about aging grandparents halfway across the country in Texas.
· Even the ratio of male to female children is affected by culture. In most European countries the ratio is about fifty-fifty. However, the gender percentage of boys aged one to six years is 52 in India and of those aged one to four years is 55 in China. Obviously these ratios have long-term implications for families and societies.33 Moreover, the favoritism of boys is deep-seated in such cultures,34 as demonstrated by the Chinese Book of Songs, circa 800 bc:
· When a son is born
· Let him sleep on the bed,
· Clothe him with fine clothes.
· And give him jade to play with. . . .
· When a daughter is born,
· Let her sleep on the ground,
· Wrap her in common wrappings,
· And give her broken tiles for playthings.
· All these differences lead directly to differences in how children think and behave. For example, individualism is being taught the first night the American infant is tucked into her own separate bassinette. Values for egalitarianism are learned the first time Dad washes the dishes in front of the kids or Mom heads off to work or the toddler learns that both Grandpa and little brother are properly called “you.” And there is some good news about gender equality to share: The education gap between men and women is narrowing in many places around the world.35
· Religion.
· In most cultures, the first social institution infants are exposed to outside the home takes the form of a church, mosque, shrine, or synagogue. The impact of religion on the value systems of a society and the effect of value systems on marketing must not be underestimated. For example, Protestants believe that one’s relationship with God is a personal one, and confessions are made directly through prayer. Alternatively, Roman Catholics confess to priests, setting up a hierarchy within the Church. Thus some scholars reason that Protestantism engenders egalitarian thinking. But no matter the details, religion clearly affects people’s habits, their outlook on life, the products they buy, the way they buy them, and even the newspapers they read.
· The influence of religion is often quite strong, so marketers with little or no understanding of a religion may readily offend deeply. One’s own religion is often not a reliable guide to another’s beliefs. Most people do not understand religions other than their own, and/or what is “known” about other religions is often incorrect. The Islamic religion is a good example of the need for a basic understanding of all major religions. Between 800 million and 1.2 billion people in the world embrace Islam, yet major multinational companies often offend Muslims. The French fashion house of Chanel unwittingly desecrated the Koran by embroidering verses from the sacred book of Islam on several dresses shown in its summer collections. The designer said he had taken the design, which was aesthetically pleasing to him, from a book on India’s Taj Mahal and that he was unaware of its meaning. To placate a Muslim group that felt the use of the verses desecrated the Koran, Chanel had to destroy the dresses with the offending designs, along with negatives of the photos taken of the garments. Chanel certainly had no intention of offending Muslims, since some of its most important customers embrace Islam. This example shows how easy it is to offend if the marketer, in this case the designer, has not familiarized him- or herself with other religions.
· School.
· Education, one of the most important social institutions, affects all aspects of the culture, from economic development to consumer behavior. The literacy rate of a country is a potent force in economic development. Numerous studies indicate a direct link between the literacy rate of a country and its capability for rapid economic growth. According to the World Bank, no country has been successful economically with less than 50 percent literacy, but when countries have invested in education the economic rewards have been substantial. Literacy has a profound effect on marketing. Communicating with a literate market is much easier than communicating with one in which the marketer must depend on symbols and pictures. Increasingly, schools are seen as leading to positive cultural changes and progress across the planet.36
· The Media.
· The four social institutions that most strongly influence values and culture are schools, churches, families, and, most recently, the media. In the United States during the past 30 years, women have joined the workforce in growing numbers, substantially reducing the influence of family on American culture. Media time (TV and increasingly the Internet) has replaced family time—much to the detriment of American culture, some argue. At this time, it is hard to gauge the long-term effects of the hours spent with Bart Simpson or an EverQuest cleric-class character. Indeed, the British Prime Minister’s cameo on The Simpsons reflects its prominence around the world.
· American kids spend only 180 days per year in school. Contrast that with 251 days in China, 240 days in Japan, and 200 days in Germany. Indeed, Chinese officials are recognizing the national disadvantages of too much school—narrow minds. Likewise, Americans more and more complain about the detrimental effects of too much media.
·
· In the United States, kids attend school 180 days per year; in China, they attend 251 days— that’s six days a week. There’s a great thirst for the written word in China—here children read books rented from a street vendor. (© Gary Wolinsky)
· Government.
· Compared with the early (during childhood) and direct influences of family, religion, school, and the media, governments hold relatively little sway. Cultural values and thought patterns are pretty much set before and during adolescence. Most often governments try to influence the thinking and behaviors of adult citizens for the citizens’ “own good.” For example, the French government has been urging citizens to procreate since the time of Napoleon. Now the government is offering a new “birth bonus” of $800, given to women in their seventh month of pregnancy—despite France having the second highest fertility rate in the EU behind only Ireland (see Exhibit 4.1). Or notice the most recent French and British government-allowed bans of hijabs (head scarves worn by Muslim schoolgirls) or the Dutch government initiative to ban burkas in that country (full-body coverings warn by Muslim women).37 Also, major changes in governments, such as the dissolution of the Soviet Union, can have noticeable impacts on personal beliefs and other aspects of culture.38
· Of course, in some countries, the government owns the media and regularly uses propaganda to form “favorable” public opinions. Other countries prefer no separation of church and state—Iran is currently ruled by religious clerics, for example. Governments also affect ways of thinking indirectly, through their support of religious organizations and schools. For example, both the Japanese and Chinese governments are currently trying to promote more creative thinking among students through mandated changes in classroom activities and hours. Finally, governments influence thinking and behavior through the passage, promulgation, promotion, and enforcement of a variety of laws affecting consumption and marketing behaviors. The Irish government is newly concerned about its citizens’ consumption of Guinness and other alcoholic products. Their studies suggest excessive drinking costs the country 2 percent of GDP, so to discourage underage drinking, the laws are being tightened again (see The end of Chapter 16 for more details).
· Corporations.
· Of course, corporations get a grip on us early through the media. But more important, most innovations are introduced to societies by companies, many times multinational companies. Indeed, merchants and traders have throughout history been the primary conduit for the diffusion of innovations, whether it be over the Silk Road or via today’s air freight and/or the Internet.39 Multinational firms have access to ideas from around the world. Through the efficient distribution of new products and services based on these new ideas, cultures are changed, and new ways of thinking are stimulated. The crucial role of companies as change agents is discussed in detail in the last section of this chapter.
· Elements of Culture
· Previously culture was defined by listing its five elements: values, rituals, symbols, beliefs, and thought processes. International marketers must design products, distribution systems, and promotional programs with due consideration of each of the five.
· Cultural Values
· Underlying the cultural diversity that exists among countries are fundamental differences in cultural values.40 The most useful information on how cultural values influence various types of business and market behavior comes from seminal work by Geert Hofstede.41 Studying more than 90,000 people in 66 countries, he found that the cultures of the nations studied differed along four primary dimensions. Subsequently, he and hundreds of other researchers have determined that a wide variety of business and consumer behavior patterns are associated with three of those four dimensions.42 The four43 dimensions are as follows: the Individualism/Collective Index (IDV), which focuses on self-orientation; the Power Distance Index (PDI), which focuses on authority orientation; the Uncertainty Avoidance Index (UAI), which focuses on risk orientation; and the Masculinity/Femininity Index (MAS), which focuses on assertiveness and achievement. The Individualism/Collectivism dimension has proven the most useful of the four dimensions, justifying entire books on the subject.44 Because the MAS has proven least useful, we will not consider it further here. Please see Exhibit 4.5 for details.
· Exhibit 4.5: Hofstede’s Indexes, Language, and Linguistic Distance
·
· During the 1990s, Robert House45 and his colleagues developed a comparable set of data, more focused on values related to leadership and organizations. Their data are by themselves quite valuable, and aspects of their study nicely coincide with Hofstede’s data, collected some 25 years earlier. The importance of this work has yielded important criticisms and discussion.46
· Individualism/Collectivism Index.
· The Individualism/Collective Index refers to the preference for behavior that promotes one’s self-interest. Cultures that score high in IDV reflect an “I” mentality and tend to reward and accept individual initiative, whereas those low in individualism reflect a “we” mentality and generally subjugate the individual to the group. This distinction does not mean that individuals fail to identify with groups when a culture scores high on IDV but rather that personal initiative and independence are accepted and endorsed. Individualism pertains to societies in which the ties between individuals are loose; everyone is expected to look after him- or herself and his or her immediate family. Collectivism, as its opposite, pertains to societies in which people from birth onward are integrated into strong, cohesive groups, which throughout people’s lifetimes continue to protect them in exchange for unquestioning loyalty.
· Power Distance Index.
· The Power Distance Index measures the tolerance of social inequality, that is, power inequality between superiors and subordinates within a social system. Cultures with high PDI scores tend to be hierarchical, with members citing social roles, manipulation, and inheritance as sources of power and social status. Those with low scores, in contrast, tend to value equality and cite knowledge and respect as sources of power. Thus people from cultures with high PDI scores are more likely to have a general distrust of others (not those in their groups) because power is seen to rest with individuals and is coercive rather than legitimate. High PDI scores tend to indicate a perception of differences between superior and subordinate and a belief that those who hold power are entitled to privileges. A low score reflects more egalitarian views.
· Uncertainty Avoidance Index.
· The Uncertainty Avoidance Index measures the tolerance of uncertainty and ambiguity among members of a society. Cultures with high UAI scores are highly intolerant of ambiguity and as a result tend to be distrustful of new ideas or behaviors. They tend to have a high level of anxiety and stress and a concern with security and rule following. Accordingly, they dogmatically stick to historically tested patterns of behavior, which in the extreme become inviolable rules. Those with very high UAI scores thus accord a high level of authority to rules as a means of avoiding risk. Cultures scoring low in uncertainty avoidance are associated with a low level of anxiety and stress, a tolerance of deviance and dissent, and a willingness to take risks. Thus those cultures low in UAI take a more empirical approach to understanding and knowledge, whereas those high in UAI seek absolute truth.
· Cultural Values and Consumer Behavior.
· A variety of studies have shown cultural values can predict such consumer behaviors as the propensity to complain47 and movie preferences.48 Going back to the e-trading example that opened this chapter, we can see how Hofstede’s notions of cultural values might help us predict the speed of diffusion of such new consumer services as equity investments and electronic auctions in Japan and France. As shown in Exhibit 4.5, the United States scores the highest of all countries on individualism, at 91, with Japan at 46 and France at 71. Indeed, in America, where individualism reigns supreme, we might predict that the “virtually social” activity of sitting alone at one’s computer might be most acceptable. In both Japan and France, where values favor group activities, face-to-face conversations with stockbrokers and neighbors might be preferred to impersonal electronic communications.
· CROSSING BORDERS 4.2: It’s Not the Gift That Counts, but How You Present It
· Giving a gift in another country requires careful attention if it is to be done properly. Here are a few suggestions.
· Japan
· Do not open a gift in front of a Japanese counterpart unless asked, and do not expect the Japanese to open your gift.
· Avoid ribbons and bows as part of the gift wrapping. Bows as we know them are considered unattractive, and ribbon colors can have different meanings.
· Always offer the gift with both hands.
· Europe
· Avoid red roses and white flowers, even numbers, and the number 13. Do not wrap flowers in paper.
· Do not risk the impression of bribery by spending too much on a gift.
· Arab World
· Do not give a gift when you first meet someone. It may be interpreted as a bribe.
· Do not let it appear that you contrived to present the gift when the recipient is alone. It looks bad unless you know the person well. Give the gift in front of others in less personal relationships.
· Latin America
· Do not give a gift until after a somewhat personal relationship has developed, unless it is given to express appreciation for hospitality.
· Gifts should be given during social encounters, not in the course of business.
· Avoid the colors black and purple; both are associated with the Roman Catholic Lenten season.
· China
· Never make an issue of a gift presentation—publicly or privately. But always deliver gifts with two hands.
· Gifts should be presented privately, with the exception of collective ceremonial gifts at banquets or after speeches.
· Russia
· Generally speaking, Russians take pleasure in giving and receiving gifts—so take plenty. Something for the kids is a good idea.
· When invited to a Russian home, bring chocolates or wine, but not vodka.
· Bringing a bouquet of flowers is a good idea, but make it an odd number. Even numbers are for funerals.
· United States
· Gifts that are too ostentatious can cause big problems.
· Source: http://www.executiveplanet.com, 2008; James Day Hodgson, Yoshiro Sano, and John L. Graham, Doing Business in the New Japan (Latham, MD: Rowman and Littlefield, 2008); Michelle Archer, “From Nose Hair to Networking, a Word of Advice,” USA Today, July 11, 2005, p. B5.
· Similarly, both Japan (92) and France (86) score quite high on Hofstede’s Uncertainty Avoidance Index, and America scores low (46). Based on these scores, both Japanese and French investors might be expected to be less willing to take the risks of stock market investments—and indeed, the security of post office deposits or bank savings accounts is preferred. So in both instances, Hofstede’s data on cultural values suggest that the diffusion of these innovations will be slower in Japan and France than in the United States. Such predictions are consistent with research findings that cultures scoring higher on individualism and lower on uncertainty avoidance tend to be more innovative.49
·
· Every Muslim is enjoined to make the hajj, or pilgrimage to Mecca, once in his or her lifetime if physically able. Here, some 2 million faithful come from all over the world annually to participate in what is the largest ritual meeting on Earth.50 Meanwhile, televised rituals such as the Academy Awards and World Cup soccer draw billions in the form of virtual crowds. (© Mahmoud Mahmoud/AFP/Getty Images)
· Perhaps the most interesting application of cultural values and consumer behavior regards a pair of experiments done with American and Chinese students.51 Both groups were shown print ads using other-focused emotional appeals (that is, a couple pictured having fun on the beach) versus self-focused emotional appeals (an individual having fun on the beach). The researchers predicted that the individualistic Americans would respond more favorably to the self-focused appeals and the collectivistic Chinese to the other-focused appeals. They found the opposite. The Americans responded better to the other-focused ads and the Chinese vice versa. Their second experiment helped explain these unexpected results. That is, in both cases, what the participants liked about the ads was their novelty vis-à-vis their own cultures. So, even in this circumstance, cultural values appear to provide useful information for marketers. However, the complexity of human behavior, values, and culture is manifest.
· Rituals
· Life is filled with rituals, that is, patterns of behavior and interaction that are learned and repeated. The most obvious ones are associated with major events in life. Marriage ceremonies and funerals are good examples. Perhaps the one most important to most readers of this book is the hopefully proximate graduation ritual—Pomp and Circumstance, funny hats, long speeches, and all. Very often these rituals differ across cultures. Indeed, there is an entire genre of foreign films about weddings.52 Perhaps the best is Monsoon Wedding. Grooms on white horses and edible flowers are apparently part of the ceremony for high-income folks in New Delhi.
· Life is also filled with little rituals, such as dinner at a restaurant or a visit to a department store or even grooming before heading off to work or class in the morning. In a nice restaurant in Madrid, dessert may precede the entrée, but dinner often starts at about midnight, and the entire process can be a three-hour affair. Walking into a department store in the United States often yields a search for an employee to answer questions. Not so in Japan, where the help bows at the door as you walk in. Visit a doctor in the States and a 15-minute wait in a cold exam room with nothing on but a paper gown is typical. In Spain the exams are often done in the doctor’s office. There’s no waiting, because you find the doctor sitting at her desk.
· Rituals are important. They coordinate everyday interactions and special occasions. They let people know what to expect. In the final chapter of the text, we discuss the ritual of business negotiations, and that ritual varies across cultures as well.
· Symbols
· Anthropologist Edward T. Hall tells us that culture is communication. In his seminal article about cultural differences in business settings, he talks about the “languages” of time, space, things, friendships, and agreements.53 Indeed, learning to interpret correctly the symbols that surround us is a key part of socialization. And this learning begins immediately after birth, as we begin to hear the language spoken and see the facial expressions and feel the touch and taste the milk of our mothers.54 We begin our discussion of symbolic systems with language, the most obvious part and the part that most often involves conscious communication.
· Language.
· We should mention that for some around the world, language is itself thought of as a social institution, often with political importance. Certainly the French go to extreme lengths and expense to preserve the purity of their français. In Canada the language has been the focus of political disputes including secession, though things seem to have calmed down there most recently. Unfortunately, as the number of spoken languages continues to decline worldwide, so does the interesting cultural diversity of the planet.
· The importance of understanding the language of a country cannot be overestimated, particularly if you’re selling your products in France! The successful international marketer must achieve expert communication, which requires a thorough understanding of the language as well as the ability to speak it. Advertising copywriters should be concerned less with obvious differences between languages and more with the idiomatic and symbolic55 meanings expressed. It is not sufficient to say you want to translate into Spanish, for instance, because across Spanish-speaking Latin America, the language vocabulary varies widely. Tambo, for example, means a roadside inn in Bolivia, Colombia, Ecuador, and Peru; a dairy farm in Argentina and Uruguay; and a brothel in Chile. If that gives you a problem, consider communicating with the people of Papua New Guinea. Some 750 languages, each distinct and mutually unintelligible, are spoken there. This crucial issue of accurate translations in marketing communications is discussed further in Chapters 8 and 16.
· The relationship between language and international marketing is important in another way. Recent studies indicate that a new concept,
linguistic distance
, is proving useful to marketing researchers in market segmentation and strategic entry decisions. Linguistic distance has been shown to be an important factor in determining the amount of trade between countries.56 The idea is that crossing “wider” language differences increases transaction costs.
· Over the years, linguistics researchers have determined that languages around the world conform to family trees57 based on the similarity of their forms and development. For example, Spanish, Italian, French, and Portuguese are all classified as Romance languages because of their common roots in Latin. Distances can be measured on these linguistic trees. If we assume English58 to be the starting point, German is one branch away, Danish two, Spanish three, Japanese four, Hebrew five, Chinese six, and Thai seven. These “distance from English” scores are listed for a sampling of cultures in Exhibit 4.5.
· Other work in the area is demonstrating a direct influence of language on cultural values, expectations, and even conceptions of time.59 For example, as linguistic distance from English increases, individualism decreases.60 These studies are among the first in this genre, and much more work needs to be done. However, the notion of linguistic distance appears to hold promise for better understanding and predicting cultural differences in both consumer and management values, expectations, and behaviors.
· Moreover, the relationship between language spoken and cultural values holds deeper implications. That is, as English spreads around the world via school systems and the Internet, cultural values of individualism and egalitarianism will spread with it. For example, both Chinese Mandarin speakers and Spanish speakers must learn two words for “you” (ni and nin and tu and usted, respectively). The proper use of the two depends completely on knowledge of the social context of the conversation. Respect for status is communicated by the use of nin and usted. In English there is only one form for “you.”61 Speakers can ignore social context and status and still speak correctly. It’s easier, and social status becomes less important. Français beware!
· Aesthetics as Symbols.
· Art communicates. Indeed, Confucius is reputed to have opined, “A picture is worth a thousand words.” But, of course, so can a dance or a song. As we acquire our culture, we learn the meaning of this wonderful symbolic system represented in its aesthetics, that is, its arts,62 folklore, music, drama, dance, dress,63 and cosmetics.64 Customers everywhere respond to images, myths, and metaphors that help them define their personal and national identities and relationships within a context of culture and product benefits. The uniqueness of a culture can be spotted quickly in symbols having distinct meanings.65 Think about the subtle earth tones of the typical Japanese restaurant compared with the bright reds and yellows in the decor of ethnic Chinese restaurants. Similarly, a long-standing rivalry between the Scottish Clan Lindsay and Clan Donald caused McDonald’s Corporation some consternation when it chose the Lindsay tartan design for new uniforms for its restaurant hosts and hostesses. Godfrey Lord Macdonald, Chief of Clan Donald, was outraged and complained that McDonald’s had a “complete lack of understanding of the name.” Of course, the plaid in the uniforms is now the least of the firm’s worries as British consumers are becoming more concerned about health-related matters.
· Exhibit 4.6: Metaphorical Journeys through 23 Nations
·
· Without a culturally correct interpretation of a country’s aesthetic values, a host of marketing problems can arise. Product styling must be aesthetically pleasing to be successful, as must advertisements and package designs. Insensitivity to aesthetic values can offend, create a negative impression, and, in general, render marketing efforts ineffective or even damaging. Strong symbolic meanings may be overlooked if one is not familiar with a culture’s aesthetic values. The Japanese, for example, revere the crane as being very lucky because it is said to live a thousand years; however, the use of the number four should be avoided completely because the word for four, shi, is also the Japanese word for death. Thus teacups are sold in sets of five, not four, in Japan.
· Finally, one author has suggested that understanding different cultures’ metaphors is a key doorway to success. In Exhibit 4.6, we list the metaphors Martin Gannon66 identified to represent cultures around the world. In the fascinating text, he compares “American Football” (with its individualism, competitive specialization, huddling, and ceremonial celebration of perfection) to the “Spanish Bullfight” (with its pompous entrance parade, audience participation, and the ritual of the fight) to the “Indian Dance of the Shiva” (with its cycles of life, family, and social interaction). Empirical evidence is beginning to accumulate supporting the notion that metaphors matter.67 Any good international marketer would see fine fodder for advertising campaigns in the insightful descriptions depicted.
· Beliefs
· Of course, much of what we learn to believe comes from religious training. But to consider matters of true faith and spirituality adequately here is certainly impossible. Moreover, the relationship between superstition and religion is not at all clear. For example, one explanation of the origin about the Western aversion to the number 13 has to do with Jesus sitting with his 12 disciples at the Last Supper.
· However, many of our beliefs are secular in nature. What Westerners often call superstition may play quite a large role in a society’s belief system in another part of the world. For example, in parts of Asia, ghosts, fortune telling, palmistry, blood types, head-bump reading, phases of the moon, faith healers, demons, and soothsayers can all be integral elements of society. Surveys of advertisements in Greater China show a preference for an “8” as the last digit in prices listed—the number connotes “prosperity” in Chinese culture.68 The Beijing Olympics started on 8–8–08 for a reason! And recall the Japanese concern about Year of the Fire Horse discussed earlier.
·
· Russian Orthodox priests prepare to bless an assembly line at a Niva sport-utility plant near Moscow, part of a joint venture between General Motors and AvtoVaz. The Niva is the bestselling SUV in Russia, making a profit for GM. Comrade Lenin would have had a tough time with this one! (AP Photo/Maxim Marmur)
· Called art, science, philosophy, or superstition—depending on who is talking—the Chinese practice of feng shui is an important ancient belief held by Chinese, among others. Feng shui is the process that links humans and the universe to ch’i, the energy that sustains life and flows through our bodies and surroundings, in and around our homes and workplaces. The idea is to harness this ch’i to enhance good luck, prosperity, good health, and honor for the owner of a premise and to minimize the negative force, sha ch’i, and its effect. Feng shui requires engaging the services of a feng shui master to determine the positive orientation of a building in relation to the owner’s horoscope, the date of establishment of the business, or the shape of the land and building. It is not a look or a style, and it is more than aesthetics: Feng shui is a strong belief in establishing a harmonious environment through the design and placement of furnishings and the avoidance of buildings facing northwest, the “devil’s entrance,” and southwest, the “devil’s backdoor.” Indeed, Disney has even “feng-shuied” all its new rides in Hong Kong Disneyland.
· Too often, one person’s beliefs are another person’s funny story. To discount the importance of myths, beliefs, superstitions, or other cultural beliefs, however strange they may appear, is a mistake because they are an important part of the cultural fabric of a society and influence all manner of behavior. For the marketer to make light of superstitions in other cultures when doing business there can be an expensive mistake. Making a fuss about being born in the right year under the right phase of the moon or relying heavily on handwriting and palm-reading experts, as in Japan, can be difficult to comprehend for a Westerner who refuses to walk under a ladder, worries about the next seven years after breaking a mirror, buys a one-dollar lottery ticket, and seldom sees a 13th floor in a building.
· Thought Processes
· We are now learning in much more detail the degree to which ways of thinking vary across cultures. For example, new studies are demonstrating cultural differences in consumer impatience69 and in how consumers make decisions about products—culture seems to matter more in snap judgments than in longer deliberations.70 Richard Nisbett, in his wonderful book The Geography of Thought,71 broadly discusses differences in “Asian and Western” thinking. He starts with Confucius and Aristotle and develops his arguments through consideration of historical and philosophical writings and findings from more recent behavioral science research, including his own social-psychological experiments. Although he acknowledges the dangers surrounding generalizations about Japanese, Chinese, and Korean cultures, on the one hand, and European and American cultures, on the other, many of his conclusions are consistent with our own work related to international negotiations, cultural values, and linguistic distance.
· A good metaphor for his views involves going back to Confucius’s worthy picture. Asians tend to see the whole picture and can report details about the background and foreground. Westerners alternatively focus on the foreground and can provide great detail about central figures but see relatively little in the background. This difference in perception—focus versus big picture—is associated with a wide variety of differences in values, preferences, and expectations about future events. Nisbett’s book is essential reading for anyone marketing products and services internationally. His insights are pertinent to Japanese selling in Jacksonville or Belgians selling in Beijing.
· Each of the five cultural elements must be evaluated in light of how they might affect a proposed marketing program. Newer products and services and more extensive programs involving the entire cycle, from product development through promotion to final selling, require greater consideration of cultural factors. Moreover, the separate origins and elements of culture we have presented interact, often in synergistic ways. Therefore, the marketer must also take a step back and consider larger cultural consequences of marketing actions.
· Cultural Knowledge
· There are two kinds of knowledge about cultures. One is factual knowledge about a culture; it is usually obvious and must be learned. Different meanings of colors, different tastes, and other traits indigenous to a culture are facts that a marketer can anticipate, study, and absorb. The other is interpretive knowledge—an ability to understand and to appreciate fully the nuances of different cultural traits and patterns. For example, the meaning of time, attitudes toward other people and certain objects, the understanding of one’s role in society, and the meanings of life can differ considerably from one culture to another and may require more than factual knowledge to be fully appreciated. In this case, interpretive knowledge is also necessary.
· Factual versus Interpretive Knowledge
· Frequently, factual knowledge72 has meaning as a straightforward fact about a culture but assumes additional significance when interpreted within the context of the culture. For example, that Mexico is 98 percent Roman Catholic is an important bit of factual knowledge. But equally important is the meaning of being a Catholic within Mexican culture versus being Catholic in Spain or Italy. Each culture practices Catholicism in a slightly different way. For example, All Souls’ Day is an important celebration among some Catholic countries. In Mexico, however, the celebration receives special emphasis. The Mexican observance is a unique combination of pagan (mostly Indian) influence and Catholic tradition. On the Day of the Dead, as All Souls’ Day is called by many in Mexico, it is believed that the dead return to feast. Hence many Mexicans visit the graves of their departed, taking the dead person’s favorite foods to place on the graves for them to enjoy. Prior to All Souls’ Day, bakeries pile their shelves with bread shaped like bones and coffins, and candy stores sell sugar skulls and other special treats to commemorate the day. As the souls feast on the food, so do the living celebrants. Although the prayers, candles, and the idea of the soul are Catholic, the idea of the dead feasting is pre-Christian Mexican. Thus a Catholic in Mexico observes All Souls’ Day quite differently from a Catholic in Spain. The interpretive, as well as factual, knowledge about religion in Mexico is necessary to fully understand this part of Mexican culture.
· CROSSING BORDERS 4.3: Gainin g Cultural Awareness in 17th- and 18th-Century England: The Grand Tour
· Gaining cultural awareness has been a centuries-old need for anyone involved in international relations. The concept of the Grand Tour, a term first applied over 300 years ago in England, was, by 1706, firmly established as the ideal preparation for soldiers, diplomats, and civil servants. It was seen as the best means of imparting to young men of fortune a modicum of taste and knowledge of other countries. By the summer of 1785, 40,000 English were estimated to be on the continent.
· The Grand Tourist was expected to conduct a systematic survey of each country’s language, history, geography, clothes, food, customs, politics, and laws. In particular, he was to study its most important buildings and their valuable contents, and he was encouraged to collect prints, paintings, drawings, and sculpture. All this could not be achieved in a few weeks, and several years were to lapse before some tourists saw England’s shores again. Vast sums of money were spent. At times, touring was not the relatively secure affair of today. If the Grand Tourist managed to avoid the pirates of Dunkirk, he then had to run a gauntlet of highwaymen on Dutch roads, thieves in Italy and France, marauding packs of disbanded soldiery every-where, and the Inquisition in Spain, to say nothing of ravenous wolves and dogs.
· He had to be self-contained; he carried with him not only the obligatory sword and pistols but also a box of medicines as well as spices and condiments, a means of securing hotel rooms at night, and an overall to protect his clothes while in bed. At the end of these Grand Tours, many returned with as many as 800 or 900 pieces of baggage. These collections of art, sculpture, and writings can be seen today in many of the mansions throughout the British Isles.
· Nowadays, more than 220,000 American college students go on their own international “road trips” in the form of study abroad programs. This amount is double the number of 10 years ago. And a like number of Chinese are now studying abroad as well. A jolly good show!
· Sources: Nigel Sale, Historic Houses and Gardens of East Anglia (Norwich, England: Jerrold Colour Publications, 1976), p. 1; “Record Numbers of U.S. Students Are Studying Abroad—Middle East, Asia, and Africa Growing in Popularity as Student Destinations,” State Department Press Releases and Documents, November 13, 2007.
· Interpretive knowledge requires a degree of insight that may best be described as a feeling. It is the kind of knowledge most dependent on past experience for interpretation and most frequently prone to misinterpretation if one’s home-country frame of reference (SRC) is used. Ideally, the foreign marketer should possess both kinds of knowledge about a market. Many facts about a particular culture can be learned through research in published materials. This effort can also transmit a small degree of empathy, but to appreciate the culture fully, it is necessary to live with the people for some time. Because this ideal solution is not practical for a marketer, other solutions must be sought. Consultation and cooperation with bilingual natives with marketing backgrounds is the most effective answer to the problem. This effort has the further advantage of helping the marketer acquire an increasing degree of empathy through association with people who understand the culture best—locals.
· Cultural Sensitivity and Tolerance
· Successful foreign marketing begins with cultural sensitivity—being attuned to the nuances of culture so that a new culture can be viewed objectively, evaluated, and appreciated. Cultural sensitivity, or cultural empathy, must be carefully cultivated. That is, for every amusing, annoying, peculiar, or repulsive cultural trait we find in a country, others see a similarly amusing, annoying, or repulsive trait in our culture. For example, we bathe, perfume, and deodorize our bodies in a daily ritual that is seen in many cultures as compulsive, while we often become annoyed with those cultures less concerned with natural body odor. Just because a culture is different does not make it wrong. Marketers must understand how their own cultures influence their assumptions about another culture. The more exotic the situation, the more sensitive, tolerant, and flexible one needs to be.73 Being culturally sensitive will reduce conflict and improve communications and thereby increase success in collaborative relationships.
· Besides knowledge of the origins and elements of cultures, the international marketer also should have an appreciation of how cultures change and accept or reject new ideas. Because the marketer usually is trying to introduce something completely new (such as e-trading) or to improve what is already in use, how cultures change and the manner in which resistance to change occurs should be thoroughly understood.
· Cultural Change
· Culture is dynamic in nature; it is a living process. But the fact that cultural change is constant seems paradoxical, because another important attribute of culture is that it is conservative and resists change. The dynamic character of culture is significant in assessing new markets even though changes face resistance. Societies change in a variety of ways. Some have change thrust upon them by war (for example, the changes in Japan after World War II) or by natural disaster. More frequently, change is a result of a society seeking ways to solve the problems created by changes in its environment. One view is that culture is the accumulation of a series of the best solutions to problems faced in common by members of a given society. In other words, culture is the means used in adjusting to the environmental and historical components of human existence.
· Accident has provided solutions to some problems; invention has solved many others. Usually, however, societies have found answers by looking to other cultures from which they can borrow ideas. Cultural borrowing is common to all cultures. Although each society has a few unique situations facing it (such as stomach cancer in Japan), most problems confronting all societies are similar in nature.
· Cultural Borrowing
· Cultural borrowing is a responsible effort to learn from others’ cultural ways in the quest for better solutions to a society’s particular problems.74 Thus cultures unique in their own right are the result, in part, of imitating a diversity of others. Some cultures grow closer together and some further apart with contact.75 Consider, for example, American (U.S.) culture and a typical U.S. citizen, who begins breakfast with an orange from the eastern Mediterranean, a cantaloupe from Persia, or perhaps a piece of African watermelon. After her fruit and first coffee, she goes on to waffles, cakes made by a Scandinavian technique from wheat domesticated in Asia Minor. Over these she pours maple syrup, invented by the Indians of the eastern U.S. woodlands. As a side dish, she may have the eggs of a species of bird domesticated in Indochina or thin strips of the flesh of an animal domesticated in eastern Asia that have been salted and smoked by a process developed in northern Europe. While eating, she reads the news of the day, imprinted in characters invented by the ancient Semites upon a material invented in China by a process also invented in China. As she absorbs the accounts of foreign troubles, she will, if she is a good conservative citizen, thank a Hebrew deity in an Indo-European language that she is 100 percent American.76
· Actually, this citizen is correct to assume that she is 100 percent American, because each of the borrowed cultural facets has been adapted to fit her needs, molded into uniquely American habits, foods, and customs. Americans behave as they do because of the dictates of their culture. Regardless of how or where solutions are found, once a particular pattern of action is judged acceptable by society, it becomes the approved way and is passed on and taught as part of the group’s cultural heritage. Cultural heritage is one of the fundamental differences between humans and other animals. Culture is learned; societies pass on to succeeding generations solutions to problems, constantly building on and expanding the culture so that a wide range of behavior is possible. The point is, of course, that though many behaviors are borrowed from other cultures, they are combined in a unique manner that becomes typical for a particular society. To the foreign marketer, this similar-but-different feature of cultures has important meaning in gaining cultural empathy.
· Similarities: An Illusion
· For the inexperienced marketer, the similar-but-different aspect of culture creates illusions of similarity that usually do not exist. Several nationalities can speak the same language or have similar race and heritage, but it does not follow that similarities exist in other respects—that a product acceptable to one culture will be readily acceptable to the other, or that a promotional message that succeeds in one country will succeed in the other. Even though people start with a common idea or approach, as is the case among English-speaking Americans and the British, cultural borrowing and assimilation to meet individual needs translate over time into quite distinct cultures. A common language does not guarantee a similar interpretation of words or phrases. Both British and Americans speak English, but their cultures are sufficiently different that a single phrase has different meanings to each and can even be completely misunderstood. In England, one asks for a lift instead of an elevator, and an American, when speaking of a bathroom, generally refers to a toilet, whereas in England a bathroom is a place to take a tub bath. Also, the English “hoover”77 a carpet, whereas Americans vacuum. The movie title The Spy Who Shagged Me means nothing to most Americans but much to British consumers. Indeed, anthropologist Edward Hall warns that Americans and British have a harder time understanding each other because of their apparent and assumed cultural similarities.
· The growing economic unification of Europe has fostered a tendency to speak of the “European consumer.” Many of the obstacles to doing business in Europe have been or will be eliminated as the European Union takes shape, but marketers, eager to enter the market, must not jump to the conclusion that an economically unified Europe means a common set of consumer wants and needs. Cultural differences among the members of the European Union are the product of centuries of history that will take centuries to ameliorate.78 The United States itself has many subcultures that even today, with mass communications and rapid travel, defy complete homogenization. To suggest that the South is in all respects culturally the same as the northeastern or midwestern parts of the United States would be folly, just as it would be folly to assume that the unification of Germany has erased cultural differences that arose from over 40 years of political and social separation.
· Marketers must assess each country thoroughly in terms of the proposed products or services and never rely on an often-used axiom that if it sells in one country, it will surely sell in another. As worldwide mass communications and increased economic and social interdependence of countries grow, similarities among countries will increase, and common market behaviors, wants, and needs will continue to develop. As this process occurs, the tendency will be to rely more on apparent similarities when they may not exist. A marketer is wise to remember that a culture borrows and then adapts and customizes to its own needs and idiosyncrasies; thus, what may appear to be the same on the surface may be different in its cultural meaning.
· Resistance to Change
· A characteristic of human culture is that change occurs. That people’s habits, tastes, styles, behavior, and values are not constant but are continually changing can be verified by reading 20-year-old magazines. However, this gradual cultural growth does not occur without some resistance;79 new methods, ideas, and products are held to be suspect before they are accepted, if ever.
·
· The picture here demonstrates the imagery and symbolism used by protest groups in the battle of genetically modified foods or, as the protestors have labeled them, “Frankenfoods.” Of course, the label attempts to associate some very benign innovations in food production with the fictional monster of movie lore—an effective public relations gambit on the part of the protestors. (Illustration by Frances Jetter. Used by permission of Frances Jetter.)
· The degree of resistance to new patterns varies. In some situations, new elements are accepted completely and rapidly; in others, resistance is so strong that acceptance is never forthcoming. One study using Hofstede’s data shows that consumers’ acceptance of innovations varies across cultures—innovation is associated with higher individualism (IDV) and lower power distance (PDI) and uncertainty avoidance (UAI).80 Others argue that culture also influences the production of innovations.
· Additional studies show that the most important factors in determining what kind and how much of an innovation will be accepted is the degree of interest in the particular subject, as well as how drastically the new will change the old—that is, how disruptive the innovation will be to presently acceptable values and behavior patterns. Observations indicate that those innovations most readily accepted are those holding the greatest interest within the society and those least disruptive. For example, rapid industrialization in parts of Europe has changed many long-honored attitudes involving time and working women. Today, there is an interest in ways to save time and make life more productive; the leisurely continental life is rapidly disappearing. With this time consciousness has come the very rapid acceptance of many innovations that might have been resisted by most just a few years ago. Instant foods, labor-saving devices, and fast-food establishments, all supportive of a changing attitude toward work and time, are rapidly gaining acceptance.
· The resistance to genetically modified (GM) foods (some call it “Frankenfood”) has become an important and interesting example. European ethnocentrism certainly entered into the equation early—Europeans protested in the streets the introduction of products such as tomatoes genetically designed to ripen slowly. Conversely, Asian governments labeled the foods as genetically altered, and Asian consumers ate them. In America, where this revolution in biotechnology first took hold, the government didn’t bother labeling food and consumers didn’t care—at least not until about 2000. Now the protests have begun in the United States. Companies such as Frito-Lay have responded by eliminating GM ingredients, and the federal government is debating new labeling laws.
· An understanding of the process of acceptance of innovations is of crucial importance to the marketer. The marketer cannot wait centuries or even decades for acceptance but must gain acceptance within the limits of financial resources and projected profitability periods. Possible methods and insights are offered by social scientists who are concerned with the concepts of planned social change. Historically, most cultural borrowing and the resulting change has occurred without a deliberate plan, but increasingly, changes are occurring in societies as a result of purposeful attempts by some acceptable institution to bring about change, that is, planned change.
· Planned and Unplanned Cultural Change
· The first step in bringing about planned change in a society is to determine which cultural factors conflict with an innovation, thus creating resistance to its acceptance. The next step is an effort to change those factors from obstacles to acceptance into stimulants for change. The same deliberate approaches used by the social planner to gain acceptance for hybrid grains, better sanitation methods, improved farming techniques, or protein-rich diets among the peoples of underdeveloped societies can be adopted by marketers to achieve marketing goals.81
· Marketers have two options when introducing an innovation to a culture: They can wait for changes to occur, or they can cause change. The former requires hopeful waiting for eventual cultural changes that prove their innovations of value to the culture; the latter involves introducing an idea or product and deliberately setting about to overcome resistance and to cause change that accelerates the rate of acceptance.82 The folks at Fidelity Investments in Japan, for example, pitched a tent in front of Tokyo’s Shinjuku train station and showered commuters with investment brochures and demonstrations of its Japanese language WebXpress online stock trading services to cause faster changes in Japanese investor behavior. However, as mentioned previously, the changes have not happened fast enough for most foreign firms targeting this business and similar financial services.83
· Obviously not all marketing efforts require change to be accepted. In fact, much successful and highly competitive marketing is accomplished by a strategy of
cultural congruence
. Essentially this strategy involves marketing products similar to ones already on the market in a manner as congruent as possible with existing cultural norms, thereby minimizing resistance. However, when marketing programs depend on cultural change to be successful, a company may decide to leave acceptance to a strategy of unplanned change— that is, introduce a product and hope for the best. Or a company may employ a strategy of planned change—that is, deliberately set out to change those aspects of the culture offering resistance to predetermined marketing goals.
·
· MTV meets Mom in Mumbai (formerly Bombay), India. Culture does change—dress and even names of major cities! Even so, a local resident tells us everyone still calls it Bombay despite the official alteration. (© Joe McNally)
· As an example of unplanned cultural change, consider how the Japanese diet has changed since the introduction of milk and bread soon after World War II.84 Most Japanese, who were predominantly fish eaters, have increased their intake of animal fat and protein to the point that fat and protein now exceed vegetable intake. As many McDonald’s hamburgers are likely to be eaten in Japan as the traditional rice ball wrapped in edible seaweed, and American hamburgers are replacing many traditional Japanese foods. Burger King purchased Japan’s homegrown Morinaga Love restaurant chain, home of the salmon burger—a patty of salmon meat, a slice of cheese, and a layer of dried seaweed, spread with mayonnaise and stuck between two cakes of sticky Japanese rice pressed into the shape of a bun—an eggplant burger, and other treats. The chain was converted and now sells Whoppers instead of the salmon-rice burger.
· The Westernized diet has caused many Japanese to become overweight. To counter this trend, the Japanese are buying low-calorie, low-fat foods to help shed excess weight and are flocking to health clubs. All this began when U.S. occupation forces introduced bread, milk, and steak to Japanese culture. The effect on the Japanese was unintentional, but nevertheless, change occurred. Had the intent been to introduce a new diet—that is, a strategy of planned change—specific steps could have been taken to identify resistance to dietary change and then to overcome these resistances, thus accelerating the process of change.
· Marketing strategy is judged culturally in terms of acceptance, resistance, or rejection. How marketing efforts interact with a culture determines the degree of success or failure. All too often marketers are not aware of the scope of their impact on a host culture. If a strategy of planned change is implemented, the marketer has some responsibility to determine the consequences of such action.
· Consequences of Innovation
· When product diffusion (acceptance) occurs, a process of social change may also occur. One issue frequently raised concerns the consequences of the changes that happen within a social system as a result of acceptance of an innovation. The marketer seeking product diffusion and adoption may inadvertently bring about change that affects the very fabric of a social system. Consequences of diffusion of an innovation may be functional or dysfunctional, depending on whether the effects on the social system are desirable or undesirable. In most instances, the marketer’s concern is with perceived functional consequences—the positive benefits of product use. Indeed, in most situations, innovative products for which the marketer purposely sets out to gain cultural acceptance have minimal, if any, dysfunctional consequences, but that cannot be taken for granted.
· On the surface, it would appear that the introduction of a processed feeding formula into the diet of babies in underdeveloped countries where protein deficiency is a health problem would have all the functional consequences of better nutrition and health, stronger and faster growth, and so forth. Much evidence, however, suggests that in many situations, the dysfunctional consequences far exceed the benefits. In Nicaragua (and numerous other developing countries), as a result of the introduction of the formula, a significant number of babies annually were changed from breast feeding to bottle feeding before the age of six months. In the United States, with appropriate refrigeration and sanitation standards, a similar pattern exists with no apparent negative consequences. In Nicaragua, however, where sanitation methods are inadequate, a substantial increase in dysentery and diarrhea and a much higher infant mortality rate resulted.
· A change from breast feeding to bottle feeding at an early age without the users’ complete understanding of purification had caused dysfunctional consequences. This dysfunction was the result of two factors: the impurity of the water used with the formula and the loss of the natural immunity to childhood disease that a mother’s milk provides. This situation was a case of planned change that resulted in devastating consequences. The infant formula companies set out to purposely change traditional breast feeding to bottle feeding. Advertising, promotions of infant formula using testimonials from nurses and midwives, and abundant free samples were used to encourage a change in behavior. It was a very successful marketing program, but the consequences were unintentionally dysfunctional. An international boycott of infant formula companies’ products by several groups resulted in the company agreeing to alter its marketing programs to encourage breast feeding. This problem first occurred some 30 years ago and is still causing trouble for the company. The consequences of the introduction of an innovation can be serious for society and the company responsible, whether the act was intentional or not.85
· Some marketers may question their responsibility beyond product safety as far as the consequences of their role as change agents are concerned. The authors’ position is that the marketer has responsibility for the dysfunctional results of marketing efforts, whether intentional or not. Foreign marketers may cause cultural changes that can create dysfunctional consequences. If proper analysis indicates that negative results can be anticipated from the acceptance of an innovation, it is the responsibility of the marketer to design programs not only to gain acceptance for a product but also to eliminate any negative cultural effects.
· Summary
· A complete and thorough appreciation of the origins (geography, history, political economy, technology, and social institutions) and elements (cultural values, rituals, symbols, beliefs, and ways of thinking) of culture may well be the single most important gain for a foreign marketer in the preparation of marketing plans and strategies. Marketers can control the product offered to a market—its promotion, price, and eventual distribution methods—but they have only limited control over the cultural environment within which these plans must be implemented. Because they cannot control all the influences on their marketing plans, they must attempt to anticipate the eventual effect of the uncontrollable elements and plan in such a way that these elements do not preclude the achievement of marketing objectives. They can also set about to effect changes that lead to quicker acceptance of their products or marketing programs.
· Planning marketing strategy in terms of the uncontrollable elements of a market is necessary in a domestic market as well, but when a company is operating internationally, each new environment that is influenced by elements unfamiliar and sometimes unrecognizable to the marketer complicates the task. For these reasons, special effort and study are needed to absorb enough understanding of the foreign culture to cope with the uncontrollable features. Perhaps it is safe to generalize that of all the tools the foreign marketer must have, those that help generate empathy for another culture are the most valuable. Each of the cultural elements is explored in depth in subsequent chapters. Specific attention is given to business customs, political culture, and legal culture in the following chapters.
· Questions
· 1. Define the following terms:
· culture
· cultural values
· cultural sensitivity
· linguistic distance
· social institutions
· cultural borrowing
· factual knowledge
· strategy of unplanned change
· ethnocentrism
· aesthetics
· interpretive knowledge
· strategy of planned change
· strategy of cultural congruence
·
· 2. Which role does the marketer play as a change agent?
· 3. Discuss the three cultural change strategies a foreign marketer can pursue.
· 4 “Culture is pervasive in all marketing activities.” Discuss.
· 5. What is the importance of cultural empathy to foreign marketers? How do they acquire cultural empathy?
· 6. Why should a foreign marketer be concerned with the study of culture?
· 7. What is the popular definition of culture? Where does culture come from?
· 8. “Members of a society borrow from other cultures to solve problems that they face in common.” What does this mean? What is the significance to marketing?
· 9. “For the inexperienced marketer, the ‘similar-but-different’ aspect of culture creates an illusion of similarity that usually does not exist.” Discuss and give examples.
· 10. Outline the elements of culture as seen by an anthropologist. How can a marketer use this cultural scheme?
· 11. Social institutions affect culture and marketing in a variety of ways. Discuss, giving examples.
· 12. “Markets are the result of the three-way interaction of a marketer’s efforts, economic conditions, and all other elements of the culture.” Comment.
· 13. What are some particularly troublesome problems caused by language in foreign marketing? Discuss.
· 14. Suppose you were asked to prepare a cultural analysis for a potential market. What would you do? Outline the steps and comment briefly on each.
· 15. Cultures are dynamic. How do they change? Are there cases in which changes are not resisted but actually preferred? Explain. What is the relevance to marketing?
· 16. How can resistance to cultural change influence product introduction? Are there any similarities in domestic marketing? Explain, giving examples.
· 17. Innovations are described as either functional or dysfunctional. Explain and give examples of each.
· 18. Defend the proposition that a multinational corporation has no responsibility for the consequences of an innovation beyond the direct effects of the innovation, such as the product’s safety, performance, and so forth.
· 19. Find a product whose introduction into a foreign culture may cause dysfunctional consequences and describe how the consequences might be eliminated and the product still profitably introduced.
· 1It seems waistlines are expanding around the affluent world—in France, perhaps because people have more leisure. See “Obesity Rates Increase as French Become Idle,” The Wall Street Journal, January 25, 2007, p. B6. Apparently obesity in the United States is causing Disney to have to deepen the stream on which its Small World boats float; they seem to be bottoming out more frequently. See Kimi Yoshino, “A Sinking Feeling on ‘Small World’ Ride,” Los Angeles Times, November 9, 2007, p. C1. All these effects, despite our study of obesity, as in Adwiat Khare and J. Jeffrey Inman, “Habitual Behavior in American Eating Patterns: The Role of Meal Occasions,” Journal of Consumer Research 32 (March 2006), pp. 567–82.
· 2An interesting Web site that has information on various cultural traits, gestures, holidays, language, religions, and so forth is www.culturegrams.com.
· 3“How to Deal with a Falling Population,” The Economist, July 28, 2007, p. 11; “U.S. Defies Low-Birth Trend in Europe,” Associated Press, January 15, 2008.
· 4Funerals vary in style and cost around the world. See Hiroko Tashiro and Brian Bremner, “Bereaved, but Not Broke in Japan,” BusinessWeek, February 14, 2005, p. 10.
· 5A most important summary of research in the area of culture’s impact on consumption behavior is Eric J. Arnould and Craig J. Thompson, “Consumer Culture Theory (CCT): Twenty Years of Research,” Journal of Consumer Research 3, no. 2 (March 2005), pp. 868–82.
· 6This seems a reasonable proposition to the authors, given that the best restaurants in Madrid are still serving the main course after midnight!
· 7“The Golden Pig Cohort: As China Enters an Auspicious Year, the Birth Rate is Expected to Soar,” The Economist, February 10, 2007, p. 44.
· 8Robert W. Hodge and Naohiro Ogawa, Fertility Change in Contemporary Japan (Chicago: University of Chicago Press, 1991).
· 9Thomas Fuller, “Fans Sour on Sweeter Version of Asia’s Smelliest Fruit,” The New York Times International, April 8, 2007, p. 3.
· 10See Amy Stewart, Flower Confidential: The Good, the Bad, and the Beautiful in the Business of Flowers (Chapel Hill, NC: Algonquin Books, 2007); Catherine Ziegler, Favored Flowers: Culture and the Economy in a Global System (Durham, NC: Duke University Press, 2007). Also see www.vba.nl if you wish to visit the Aalsmeer Flower Market near the Amsterdam airport.
· 11See Cadbury’s Web site for the history of chocolate, www.cadbury.co.uk. Chocolate is also an important product in Switzerland, where the consumption per capita is more than 12 kg. The mountain climate is cooler, and of course, Nestlé has corporate headquarters there.
· 12Actually, Luxembourg, Hungary, and Ireland are the top three consuming countries (on a per capita basis) of alcohol.
· 13Notice we are not referring to the Japanese Diet, that country’s legislature, though fishing rights are a hugely important international issue for that body.
· 14Lawrence E. Harrison and Samuel P. Huntington (eds.), Culture Matters (New York: Basic Books, 2000).
· 15Geert Hofstede, Culture’s Consequences, 2nd ed. (Thousand Oaks, CA: Sage, 2001); Susan P. Douglas, “Exploring New Worlds: The Challenge of Global Marketing,” Journal of Marketing, January 2001, pp. 103–109.
· 16Edward T. Hall, The Silent Language (New York: Doubleday, 1959), p. 26.
· 17James D. Hodgson, Yoshihiro Sano, and John L. Graham, Doing Business in the New Japan, Succeeding in America’s Richest Foreign Market (Latham, MD: Rowman & Littlefield, 2008).
· 18Please note that the group may be smaller than that defined by nation. See Rosalie Tung, “The Cross-Cultural Research Imperative: The Need to Balance Cross-Cultural and Intra-National Diversity,” Journal of International Business Studies 39 (2008), pp. 41–46; Jean-Francois Ouellet, “Consumer Racism and Its Effects on Domestic Cross-Ethnic Product Purchase: An Empirical Test in the United States, Canada, and France,” Journal of Marketing 71 (2007), pp. 113–28 .
· 19Melvin Herskovitz, Man and His Works (New York: Alfred A. Knopf, 1952), p. 634. See also Chapter 10, “Culture,” in Raymond Scupin and Christopher R. Decorse, Anthropology: A Global Perspective, 6th ed. (Englewood Cliffs, NJ: Prentice Hall, 2005).
· 20Along with flowers, the Dutch are also champions at bicycle consumption. Their flat land makes their 20 million bikes for their 16 million people practical! See Molly More, “Bike Nation,” Washington Post, June 24, 2007, p. 5A.
· 21Richard E. Nisbett, The Geography of Thought: How Asians and Westerners Think Differently . . . and Why (New York: The Free Press, 2003).
· 22Jared Diamond’s Guns, Germs and Steel: The Fates of the Human Societies (New York: Norton, 1999) is a Pulitzer Prize winner, recipient of the Phi Beta Kappa Award in Science, and a wonderful read for anyone interested in history and/or innovation. PBS also has produced a video version of Guns, Germs and Steel. Also see Diamond’s most recent book, Collapse (New York: Viking, 2005).
· 23Philip Parker’s Physioeconomics (Cambridge, MA: MIT Press, 2000) is a data-rich discussion of global economics well worth reading.
· 24Evert Van de Vliert, “Thermoclimate, Culture, and Poverty as Country-Level Roots of Workers’ Wages,” Journal of International Business 34, no. 1 (2003), pp. 40–52.
· 25“France’s ‘Trust Deficit’ Limits Its Growth Prospects,” The Wall Street Journal, October 22, 2007, p. B12. The high state of distrust in French society is in part attributed to the German occupation in World War II.
· 26See http://www.colaturka.com.tr.
· 27Indeed, some say it’s still a problem. See Alex Salmond, “Scotland’s Strong Independence Movement Is Hardly a ‘Faint Blip,’” The Wall Street Journal, December 18, 2006, p. A17.
· 28Some might argue that communism has survived in North Korea, Cuba, or the Peoples’ Republic of China, but at least in the last case, free enterprise is on the ascendancy. The former look more like dictatorships to most.
· 29Francis Fukuyama, The End of History and the Last Man (New York: The Free Press, 1992).
· 30Bernard Asbell, The Pill: A Biography of the Drug that Changed the World (New York: Random House, 1995).
· 31Kathy Chen, “China’s Growth Places Strains on Family Ties,” The Wall Street Journal, April 13, 2005, pp. A1, A15.
· 32Anabella Davila and Marta M. Elvira, “Culture and Human Resource Management in Latin America,” in Marta M. Elvira and Anabella Davila (eds.), Managing Human Resources in Latin America (London: Routledge, 2005), pp. 3–24.
· 33Peter Wonacott, “India’s Skewed Sex Ratio Puts GE Sales in Spotlight,” The Wall Street Journal, April 18, 2007, pp. A1, A14.
· 34Margie Mason, “Bias for Boys Troubling, UN Says,” Chicago Tribune, November 4, 2007, p. 24.
· 35“Learning and Equality,” The Economist, November 3, 2007, p. 75.
· 36Emily Flynn Vencat, “The Race Is On,” Newsweek, August 20, 2007, pp. 40–44.
· 37“Dutch Governing Party Would Ban Burka,” International Herald Tribune, November 16–18, 2006, pp. 1, 7.
· 38Shawn T. Thelen and Earl D. Honeycutt Jr., “Assessing National Identity in Russia between Generations Using the National Identity Scale,” Journal of International Marketing 12, no. 2 (2004), pp. 58–81.
· 39Steve Hamm and Nandini Lakshman, “Widening Aisles for Indian Shoppers,” BusinessWeek, April 30, 2007, p. 44.
· 40Ping Ping Fu, Jeff Kennedy, Jasmine Tata, Gary Yukl, Michael Harris Bond, Tai-Kuang Peng, Ekkirala S. Srinivas, Jon P. Howell, Leonel Prieto, Paul Koopman, Jaap J. Boonstra, Selda Pasa, Marie-Francoise Lacassagne, Hiro Higashide, and Adith Cheosakul, “The Impact of Societal Cultural Values and Individual Social Beliefs on the Perceived Effectiveness of Managerial Influence Strategies,” Journal of International Business Studies 35, no. 4 (2004), pp. 284–305.
· 41Geert Hofstede, Culture’s Consequences, 2nd ed. (Thousand Oaks: CA: Sage, 2001).
· 42Debanjan Mitra and Peter N. Golder, “Whose Culture Matters? Near-Market Knowledge and Its Impact on Foreign Market Entry Timing,” Journal of Marketing Research 39, no. 3 (August 2002), pp. 350–65; Boonghee Yoo and Naveen Donthu, “Culture’s Consequences, a Book Review,” Journal of Marketing Research 39, no. 3 (August 2002), pp. 388–89.
· 43In a subsequent study, a fifth dimension, Long-Term Orientation (LTO), was identified as focusing on cultures’ temporal orientations. See Geert Hofstede and Michael Harris Bond, “The Confucius Connection,” Organizational Dynamics 16, no. 4 (Spring 1988), pp. 4–21; Hofstede, 2001.
· 44Harry C. Triandis, Individualism and Collectivism (Boulder, CO: Westview Press, 1995).
· 45Robert J. House, Paul J. Hanges, Mansour Javidan, Peter W. Dorfman, and Vipin Gupta (eds.), Culture, Leadership, and Organizations: The Globe Study of 62 Societies (Thousand Oaks, CA: Sage, 2004).
· 46Bradley L. Kirkman, Kevin B. Lowe, and Cristina Gibson, “A Quarter Century of Cultures’ Consequences: A Review of Empirical Research Incorporating Hofstede’s Cultural Values Framework,” Journal of International Business Studies 37 (2006), pp. 285–320; Kwock Leung, “Editor’s Introduction to the Exchange between Hofstede and GLOBE,” Journal of International Business Studies 37 (2006), p. 881; Geert Hofstede, “What Did GLOBE Really Measure? Researchers’ Minds versus Respondents’ Minds,” Journal of International Business Studies 37 (2006), pp. 882–96; Mansour Javidan, Robert J. House, Peter W. Dorfman, Paul J. Hanges, and Mary Sully de Luque, “Conceptualizing and Measuring Cultures and Their Consequences: A Comparative Review of GLOBE’s and Hostede’s Approaches,” Journal of International Business Studies 37 (2006), pp. 897–914; Peter B. Smith, “When Elephants Fight, the Grass Gets Trampled: The GLOBE and Hofstede Projects,” Journal of International Business Studies 37 (2006), pp. 915–21; P. Christopher Earley, “Leading Cultural Research in the Future: A Matter of Paradigms and Taste,” Journal of International Business Studies 37 (2006), pp. 922–31.
· 47Piotr Chelminski and Robin A. Coulter, “The Effects of Cultural Individualism and Self-Confidence on Propensity to Voice: From Theory to Measurement to Practice,” Journal of International Marketing 15 (2007), pp. 94–118.
· 48J. Samuel Craig, William H. Greene, and Susan P. Douglas, “Culture Matters: Consumer Acceptance of U.S. Films in Foreign Markets,” Journal of International Marketing 13 (2006), pp. 80–103.
· 49Jan-Benedict E. M. Steenkamp, Frenkel ter Hofstede, and Michel Wedel, “A Cross-National Investigation into the Individual and National Cultural Antecedents of Consumer Innovativeness,” Journal of Marketing 63 (April 1999), pp. 55–69.
· 50Hassan M. Fattar, “The Price of Progress: Transforming Islam’s Holiest Sight,” The New York Times International, March 8, 2007, p. A4.
· 51Jennifer L. Aaker and Patti Williams, “Empathy vs. Pride: The Influence of Emotional Appeals across Cultures,” Journal of Consumer Research 25 (December 1998), pp. 241–61.
· 52Other excellent films in this genre include Cousin, Cousine (French), Four Weddings and a Funeral (U.K.), Bend It Like Beckham (U.K., Asian immigrants), Wedding in Galilee (Palestine/Israel), and The Wedding Banquet (Taiwan). Also see Cam Simpson, “For Jordanians, Shotgun Weddings Can Be a Problem,” The Wall Street Journal, June 5, 2007, pp. A1, A11.
· 53Edward T. Hall, “The Silent in Overseas Business,” Harvard Business Review, May–June 1960, pp. 87–96. A discussion of the salience of Hall’s work appears in John L. Graham, “Culture and Human Resources Management,” in Alan M. Rugman and Thomas L. Brewer (eds.), The Oxford Handbook of International Business (Oxford: Oxford University Press, 2008), pp. 503–36.
· 54The spices a nursing mother consumes actually affect the flavor of the milk she produces.
· 55Eric Yorkston and Gustavo E. De Mello, “Linguistic Gender Marking and Categorization,” Journal of Consumer Research 32 (2005), pp. 224–34.
· 56Pankaj Ghemawat, “Distance Still Matters: The Hard Reality of Global Expansion,” Harvard Business Review, September 2001, pp. 137–47; Jennifer D. Chandler and John L. Graham, “Using Formative Indicators to Discern the Meaning of Corruption and Its Implications for International Marketing,” working paper, University of California, Irvine, 2008.
· 57For the most comprehensive representation of global linguistic trees, see Jiangtian Chen, Robert R. Sokal, and Merrit Ruhlen, “Worldwide Analysis of Genetic and Linguistic Relationships of Human Populations,” Human Biology 67, no. 4 (August 1995), pp. 595–612.
· 58We appreciate the ethnocentricity in using English as the starting point. However, linguistic trees can be used to measure distance from any language. For example, analyses using French or Japanese as the starting point have proven useful as well.
· 59Lera Boroditsky, “Does Language Shape Thought? Mandarin and English Speakers’ Conceptions of Time,” Cognitive Psychology 43 (2001), pp. 1–22.
· 60Joel West and John L. Graham, “A Linguistics-Based Measure of Cultural Distance and Its Relationship to Managerial Values,” Management International Review 44, no. 3 (2004), pp. 239–60.
· 61In English, there was historically a second second-person form. That is, “thee” was the informal form up until the last century. Even in some Spanish-speaking countries, such as Costa Rica, the “tu” is being dropped in a similar manner.
· 62Japanese-style animation is making a strong entry to pop American culture. See Ian Rowley, Chester Dawson, and Hiroko Tashiro, “The Anime Biz: Still an Adolescent,” BusinessWeek, June 27, 2005, pp. 50–52.
· 63“Muslims and the Veil, the Meaning of Freedom,” The Economist, May 12, 2007, pp. 63–64.
· 64Heather Timmons, “Telling India’s Modern Women They Have Power, Even over Their Skin Tone,” The New York Times, May 30, 2007, p. C5.
· 65Robert Frank, “Why Jewels Are Tops in Middle East, but Art Takes Lead in Europe,” The Wall Street Journal, June 29, 2007, p. W2.
· 66Martin J. Gannon, Understanding Global Cultures, Metaphorical Journeys through 23 Nations, 2nd ed. (Thousand Oaks, CA: Sage, 2001).
· 67Cristina B. Gibson and Mary E. Zeller-Bruhn, “Metaphors and Meaning: An Intercultural Analysis of the Concept of Work,” Administrative Science Quarterly 46, no. 2 (2001), pp. 274–303.
· 68Lee C. Simmons and Robert M. Schindler, “Cultural Superstitions and the Price Endings in Chinese Advertising,” Journal of International Marketing 11, no. 2 (2003), pp. 101–111.
· 69Haipen (Allan) Chen, Sharon Ng, and Akshay R. Rao, “Cultural Differences in Consumer Impatience,” Journal of Marketing Research 42 (2007), pp. 291–301.
· 70Donnel A. Briley and Jennifer L. Aaker, “When Does Culture Matter? Effects of Personal Knowledge on the Correction of Culture-Based Judgments,” Journal of Marketing Research 43 (2008), pp. 395–408.
· 71Nisbett, The Geography of Thought.
· 72The information provided in CultureGrams is a good example of readily available factual knowledge. See www.culturegrams.com.
· 73Paul Vitello, “When a Kiss Is More Than a Kiss,” The New York Times, May 6, 2007, Section 4, p. 1.
· 74Consider a discussion about Japanese teenagers as the leaders of cultural change on the planet: Amy Chozick, “Land of the Rising Karaoke Hot Tub,” The Wall Street Journal, March 9, 2007, p. W1.
· 75Kwok Leung, Rabi S. Bhagat, Nancy B. Buchan, Miriam Erez, and Cristina Gibson, “Culture and International Business: Recent Advances and Their Implications for Future Research,” Journal of International Business Studies 36 (2006), pp. 357–78.
· 76Ralph Linton, The Study of Man (New York: Appleton-Century-Crofts, 1936), p. 327.
· 77This is also a good example of a brand name becoming generic, similar to asking someone to “Xerox” a letter instead of asking it to be photocopied. The Hoover brand vacuum cleaner was among the first popular brands in England; thus, “hoover” the carpet.
· 78Tuba Ustuner and Douglas B. Holt, “Dominated Consumer Acculturation: The Social Construction of Poor Migrant Women’s Consumer Identity Projects in a Turkish Squatter,” Journal of Consumer Research 34 (207), pp. 41–56.
· 79Michael Slackman, “The (Not So) Eagerly Modern Saudi,” The New York Times, May 6, 2007, Section 4, pp. 1, 4.
· 80Idil Sayrac Yaveroglu and Naveen Donthu, “Cultural Influences on the Diffusion of New Products,” Journal of International Consumer Marketing 14, no. 4 (2003), pp. 49–63.
· 81Two very important books on this topic are Everett M. Rogers, Diffusion of Innovations, 4th ed. (New York: The Free Press, 1995), and Gerald Zaltman and Robert Duncan, Strategies for Planned Change (New York: John Wiley & Sons, 1979).
· 82“Broadway in Paris: Musicals Change Their Tune in France,” The Wall Street Journal, October 3, 2007, p. B11.
· 83Edwina Gibbs, “Tough Sell in Senior Market [in Japan],” Los Angeles Times, October 29, 2007, p. C5; Andy C. W. Chui and Chuck C. Y. Kwok, “National Culture and Life Insurance Consumption,” Journal of International Business Studies, 39 (2008), 88-101.
· 84The articles we found did not mention this change in diet as a potential factor in the prevalence of stomach cancer in Japan. However, given that medical science has yet to completely understand the disease, one has to wonder. And the other major environmental catastrophe of the time, the atomic bombs, is not mentioned either.
· 85See the Nestlé Infant Formula case toward the end of this book for complete details regarding the ongoing infant formula controversy.
· (Cateora 92)
· Cateora. International Marketing, 14th Edition. McGraw-Hill Learning Solutions, 112008.
5: Culture, Management Style, and Business Systems
CHAPTER OUTLINE
Global Perspective: Do Blondes Have More Fun in Japan?
Required Adaptation
Degree of Adaptation
Imperatives, Electives, and Exclusives
The Impact of American Culture on Management Style
Management Styles around the World
Authority and Decision Making
Management Objectives and Aspirations
Communication Styles
Formality and Tempo
P-Time versus M-Time
Negotiations Emphasis
Marketing Orientation
Gender Bias in International Business
Business Ethics
Corruption Defined
The Western Focus on Bribery
Bribery: Variations on a Theme
Ethical and Socially Responsible Decisions
Culture’s Influence on Strategic Thinking
Synthesis: Relationship-Oriented versus Information-Oriented Cultures
CHAPTER LEARNING OBJECTIVES
What you should learn from Chapter 5:
• The necessity for adapting to cultural differences
• How and why management styles vary around the world
• The extent and implications of gender bias in other countries
• The importance of cultural differences in business ethics
• The differences between relationship-oriented and information-oriented cultures
Global Perspective: DO BLONDES HAVE MORE FUN IN JAPAN?
Recounts one American executive, “My first trip to Japan was pretty much a disaster for several reasons. The meetings didn’t run smoothly because every day at least 20, if not more, people came walking in and out of the room just to look at me. It is one thing to see a woman at the negotiation table, but to see a woman who happens to be blonde, young, and very tall by Japanese standards (5’8″ with no shoes) leading the discussions was more than most of the Japanese men could handle.”
“Even though I was the lead negotiator for the Ford team, the Japanese would go out of their way to avoid speaking directly to me. At the negotiation table I purposely sat in the center of my team, in the spokesperson’s strategic position. Their key person would not sit across from me, but rather two places down. Also, no one would address questions and/or remarks to me—to everyone (all male) on our team—but none to me. They would never say my name or acknowledge my presence. And most disconcerting of all, they appeared to be laughing at me. We would be talking about a serious topic such as product liability, I would make a point or ask a question, and after a barrage of Japanese they would all start laughing.”
Another example regards toys and consumer behavior. For years, Barbie dolls sold in Japan looked different from their U.S. counterparts. They had Asian facial features, black hair, and Japanese-inspired fashions.
Then about five years ago, Mattel Inc. conducted consumer research around the world and learned something surprising: The original Barbie, with her yellow hair and blue eyes, played as well in Hong Kong as it did in Hollywood. Girls didn’t care if Barbie didn’t look like them, at least if you believed their marketing research.
“It’s all about fantasies and hair,” says Peter Broegger, general manager of Mattel’s Asian operations. “Blonde Barbie sells just as well in Asia as in the United States.”
So Mattel began rethinking one of the basic tenets of its $55 billion global industry—that children in different countries want different playthings. The implications were significant for kids, parents, and particularly the company. In the past, giants such as Mattel, Hasbro Inc., and Lego Co. produced toys and gear in a variety of styles. But Mattel went the other direction, designing and marketing one version worldwide. Sales plummeted, forcing a Barbie makeover that most recently includes Hello Kitty clothes and a new video game, iDesign.
Sources: James D. Hodgson, Yoshihiro Sano, and John L. Graham, Doing Business with the New Japan, Succeeding in America’s Richest International Market (Latham, MD: Rowman & Littlefield, 2008); Lisa Banon and Carlta Vitzthum, “One-Toy-Fits-All: How Industry Learned to Love the Global Kid,” The Wall Street Journal, April 29, 2003, p. A1; Melinda Fulmer, “Mattel Sees Results from Barbie Makeover,” Los Angeles Times, February 1, 2005, pp. C1, C12; “Barbie Dressed by Kitty,” Sunday Mail, June 3, 2007, p. 2; “Barbie Takes to the Runway at the 2008 Consumer Electronics Show,” Business Wire, January 7, 2008.
Perhaps nothing causes more problems for Americans negotiating in other countries than their impatience. Everyone around the world knows that delaying tactics work well against time-conscious U.S. bargainers.
Culture, including all its elements, profoundly affects management style and overall business systems. This is not a new idea. German sociologist Max Weber made the first strong case back in 1930.1 Culture not only establishes the criteria for day-to-day business behavior but also forms general patterns of values and motivations.2 Executives are largely captives of their heritages and cannot totally escape the elements of culture they learned growing up.
In the United States, for example, the historical perspective of individualism and “winning the West” seems to be manifest in individual wealth or corporate profit being dominant measures of success. Japan’s lack of frontiers and natural resources and its dependence on trade have focused individual and corporate success criteria on uniformity, subordination to the group, and society’s ability to maintain high levels of employment. The feudal background of southern Europe tends to emphasize maintenance of both individual and corporate power and authority while blending those feudal traits with paternalistic concern for minimal welfare for workers and other members of society. Various studies identify North Americans as individualists, Japanese as consensus oriented and committed to the group, and central and southern Europeans as elitists and rank conscious. Although these descriptions are stereotypical, they illustrate cultural differences that are often manifest in business behavior and practices. Such differences also coincide quite well with Hofstede’s scores listed in Exhibit 4.5 in the last chapter.3
A lack of empathy for and knowledge of foreign business practices can create insurmountable barriers to successful business relations. Some businesses plot their strategies with the idea that their counterparts from other business cultures are similar to themselves and are moved by similar interests, motivations, and goals—that they are “just like us.” Even though that may be true in some respects, enough differences exist to cause frustration, miscommunication, and, ultimately, failed business opportunities if these differences are not understood and responded to properly.
Knowledge of the management style—that is, the business culture, management values, and business methods and behaviors—existing in a country and a willingness to accommodate the differences are important to success in an international market. Unless marketers remain flexible by accepting differences in basic patterns of thinking, local business tempo, religious practices, political structure, and family loyalty, they are hampered, if not prevented, from reaching satisfactory conclusions to business transactions. In such situations, obstacles take many forms, but it is not unusual to have one negotiator’s business proposition accepted over another’s simply because “that one understands us.”
This chapter focuses on matters specifically related to management style. Besides an analysis of the need for adaptation, it reviews differences in management styles and ethics and concludes with a discussion of culture’s influence on strategic thinking.
Required Adaptation
Adaptation is a key concept in international marketing, and willingness to adapt is a crucial attitude. Adaptation, or at least accommodation, is required on small matters as well as large ones.4 In fact, small, seemingly insignificant situations are often the most crucial. More than tolerance of an alien culture is required. Affirmative acceptance, that is, open tolerance may be needed as well. Through such affirmative acceptance, adaptation becomes easier because empathy for another’s point of view naturally leads to ideas for meeting cultural differences.5
As a guide to adaptation, all who wish to deal with individuals, firms, or authorities in foreign countries should be able to meet 10 basic criteria: (1) open tolerance, (2) flexibility, (3) humility, (4) justice/fairness, (5) ability to adjust to varying tempos, (6) curiosity/interest, (7) knowledge of the country, (8) liking for others, (9) ability to command respect, and (10) ability to integrate oneself into the environment. In short, add the quality of adaptability to the qualities of a good executive for a composite of the successful international marketer. It is difficult to argue with these 10 items. As one critic commented, “They border on the 12 Boy Scout laws.” However, as you read this chapter, you will see that it is the obvious that we sometimes overlook.
Degree of Adaptation
Adaptation does not require business executives to forsake their ways and change to local customs; rather, executives must be aware of local customs and be willing to accommodate to those differences that can cause misunderstandings. Essential to effective adaptation is awareness of one’s own culture and the recognition that differences in others can cause anxiety, frustration, and misunderstanding of the host’s intentions. The self-reference criterion (SRC) is especially operative in business customs. If we do not understand our foreign counterpart’s customs, we are more likely to evaluate that person’s behavior in terms of what is familiar to us. For example, from an American perspective a Brazilian executive interrupting frequently during a business meeting may seem quite rude, even though such behavior simply reflects a cultural difference in conversational coordination.
The key to adaptation is to remain American but to develop an understanding of and willingness to accommodate the differences that exist. A successful marketer knows that in China it is important to make points without winning arguments; criticism, even if asked for, can cause a host to lose face. In Germany, it is considered discourteous to use first names unless specifically invited to do so. Instead, address a person as Herr, Frau, or Fraulein with the last name. In Brazil, do not be offended by the Brazilian inclination to touch during conversation. Such a custom is not a violation of your personal space but rather the Brazilian way of greeting, emphasizing a point, or making a gesture of goodwill and friendship. A Chinese, German, or Brazilian does not expect you to act like one of them. After all, you are American, not Chinese, German, or Brazilian, and it would be foolish for an American to give up the ways that have contributed so notably to American success. It would be equally foolish for others to give up their ways. When different cultures meet, open tolerance and a willingness to accommodate each other’s differences are necessary. Once a marketer is aware of cultural differences and the probable consequences of failure to adapt or accommodate, the seemingly endless variety of customs must be assessed. Where does one begin? Which customs should be absolutely adhered to? Which others can be ignored? Fortunately, among the many obvious differences that exist between cultures, only a few are troubling.
Imperatives, Electives, and Exclusives
Business customs can be grouped into
imperatives, customs that must be recognized and accommodated;
electives, customs to which adaptation is helpful but not necessary; and
exclusives, customs in which an outsider must not participate. An international marketer must appreciate the nuances of cultural imperatives, cultural electives, and cultural exclusives.
Cultural Imperatives.
Cultural imperatives are the business customs and expectations that must be met and conformed to or avoided if relationships are to be successful. Successful businesspeople know the Chinese word guanxi,6 the Japanese ningen kankei, or the Latin American compadre. All refer to friendship, human relations, or attaining a level of trust.7 They also know there is no substitute for establishing friendship in some cultures before effective business negotiations can begin.
Informal discussions, entertaining, mutual friends, contacts, and just spending time with others are ways guanxi, ningen kankei, compadre, and other trusting relationships are developed. In those cultures in which friendships are a key to success, the businessperson should not slight the time required for their development. Friendship motivates local agents to make more sales, and friendship helps establish the right relationship with end users, which leads to more sales over a longer period. Naturally, after-sales service, price, and the product must be competitive, but the marketer who has established guanxi, ningen kankei, or compadre has the edge. Establishing friendship is an imperative in many cultures. If friendship is not established, the marketer risks not earning trust and acceptance, the basic cultural prerequisites for developing and retaining effective business relationships.
The significance of establishing friendship cannot be overemphasized, especially in those countries where family relationships are close. In China, for example, the outsider is, at best, in fifth place in order of importance when deciding with whom to conduct business. The family is first, then the extended family, then neighbors from one’s hometown, then former classmates, and only then, reluctantly, strangers—and the last only after a trusting relationship has been established.
In some cultures, a person’s demeanor is more critical than in other cultures. For example, it is probably never acceptable to lose your patience, raise your voice, or correct someone in public, no matter how frustrating the situation. In some cultures such behavior would only cast you as boorish, but in others, it could end a business deal. In Asian cultures it is imperative to avoid causing your counterpart to lose face. In China, to raise your voice, to shout at a Chinese person in public, or to correct one in front of his or her peers will cause that person to lose face.
A complicating factor in cultural awareness is that what may be an imperative to avoid in one culture is an imperative to do in another. For example, in Japan, prolonged eye contact is considered offensive, and it is imperative that it be avoided. However, with Arab and Latin American executives, it is important to make strong eye contact, or you run the risk of being seen as evasive and untrustworthy.
Cultural Electives.
Cultural electives relate to areas of behavior or to customs that cultural aliens may wish to conform to or participate in but that are not required. In other words, following the custom in question is not particularly important but is permissible. The majority of customs fit into this category. One need not greet another man with a kiss (a custom in some countries), eat foods that disagree with the digestive system (so long as the refusal is gracious), or drink alcoholic beverages (if for health, personal, or religious reasons). However, a symbolic attempt to participate in such options is not only acceptable but also may help establish rapport. It demonstrates that the marketer has studied the culture. Japanese do not expect a Westerner to bow and to understand the ritual of bowing among Japanese, yet a symbolic bow indicates interest and some sensitivity to Japanese culture that is acknowledged as a gesture of goodwill. It may help pave the way to a strong, trusting relationship.
BEIJING, CHINA: German Chancellor Angela Merkel and Chinese Prime Minister Wen Jiabao toast after the EU–China Business Summit at the Great Hall of the People in Beijing. The summit was boosted by the settlement of a trade row that had left 80 million Chinese-made garments piled up in European seaports, unable to be delivered to shops under a quota pact agreed to at the time. Drinking half a bottle is a cultural elective, but taking a sip is more of an imperative in this case. (Reuters/Landov)
A cultural elective in one county may be an imperative in another. For example, in some cultures, one can accept or tactfully and politely reject an offer of a beverage, whereas in other cases, the offer of a beverage is a special ritual and to refuse it is an insult. In the Czech Republic, an aperitif or other liqueur offered at the beginning of a business meeting, even in the morning, is a way to establish goodwill and trust. It is a sign that you are being welcomed as a friend. It is imperative that you accept unless you make it clear to your Czech counterpart that the refusal is because of health or religion. Chinese business negotiations often include banquets at which large quantities of alcohol are consumed in an endless series of toasts. It is imperative that you participate in the toasts with a raised glass of the offered beverage, but to drink is optional. Your Arab business associates will offer coffee as part of the important ritual of establishing a level of friendship and trust; you should accept, even if you only take a ceremonial sip. Cultural electives are the most visibly different customs and thus more obvious. Often, it is compliance with the less obvious imperatives and exclusives that is more critical.
Cultural Exclusives.
Cultural exclusives are those customs or behavior patterns reserved exclusively for the locals and from which the foreigner is barred. For example, a Christian attempting to act like a Muslim would be repugnant to a follower of Mohammed. Equally offensive is a foreigner criticizing or joking about a country’s politics, mores, and peculiarities (that is, peculiar to the foreigner), even though locals may, among themselves, criticize such issues. There is truth in the old adage, “I’ll curse my brother, but if you curse him, you’ll have a fight.” Few cultural traits are reserved exclusively for locals, but a foreigner must carefully refrain from participating in those that are reserved.
Foreign managers need to be perceptive enough to know when they are dealing with an imperative, an elective, or an exclusive and have the adaptability to respond to each. There are not many imperatives or exclusives, but most offensive behaviors result from not recognizing them. It is not necessary to obsess over committing a faux pas. Most sensible businesspeople will make allowances for the occasional misstep. But the fewer you make, the smoother the relationship will be. By the way, you can ask for help. That is, if you have a good relationship with your foreign counterparts, you can always ask them to tell you when and how you have “misbehaved.”
The Impact of American Culture on Management Style
There are at least three reasons to focus briefly on American culture and management style. First, for American readers, it is important to be aware of the elements of culture influencing decisions and behaviors. Such a self-awareness will help American readers adapt to working with associates in other cultures. Second, for readers new to American culture, it is useful to better understand your business associates from the States. The U.S. market is the biggest export market in the world. And hopefully, this knowledge will help everyone be more patient while conducting business across borders. Third, since the late 1990s, American business culture has been exported around the world, just as in the 1980s Japanese management practices were imitated almost everywhere. Management practices developed in the U.S. environment will not be appropriate and useful everywhere.8 That is clear. So understanding their bases will help everyone make decisions about applying, adapting, or rejecting American practices. Indeed, most often Peter Drucker’s advice will apply: “Different people have to be managed differently.”9
There are many divergent views regarding the most important ideas on which normative U.S. cultural concepts are based. Those that occur most frequently in discussions of cross-cultural evaluations are represented by the following:
• “Master of destiny” viewpoint.
• Independent enterprise as the instrument of social action.
• Personnel selection and reward based on merit.
• Decisions based on objective analysis.
• Wide sharing in decision making.
• Never-ending quest for improvement.
• Competition producing efficiency.
The “master of destiny” philosophy is fundamental to U.S. management thought. Simply stated, people can substantially influence the future; they are in control of their own destinies. This viewpoint also reflects the attitude that though luck may influence an individual’s future, on balance, persistence, hard work, a commitment to fulfill expectations, and effective use of time give people control of their destinies. In contrast, many cultures have a more fatalistic approach to life. They believe individual destiny is determined by a higher order and that what happens cannot be controlled.
In the United States, approaches to planning, control, supervision, commitment, motivation, scheduling, and deadlines are all influenced by the concept that individuals can control their futures. Recall from Chapter 4 that the United States scored highest on Hofstede’s individualism scale.10 In cultures with more collectivistic and fatalistic beliefs, these good business practices may be followed, but concern for the final outcome is different. After all, if one believes the future is determined by an uncontrollable higher order, then what difference does individual effort really make?
The acceptance of the idea that independent enterprise is an instrument for social action is the fundamental concept of U.S. corporations. A corporation is recognized as an entity that has rules and continuity of existence and is a separate and vital social institution. This recognition can result in strong feelings of obligation to serve the company. Indeed, the company may take precedence over family, friends, or activities that might detract from what is best for the company. This idea is in sharp contrast to the attitudes held by Mexicans, who feel strongly that personal relationships are more important in daily life than work and the company, and Chinese, who consider a broader set of stakeholders as crucial.11
Consistent with the view that individuals control their own destinies is the belief that personnel selection and reward must be made on merit. The selection, promotion, motivation, or dismissal of personnel by U.S. managers emphasizes the need to select the best-qualified persons for jobs, retaining them as long as their performance meets standards of expectations and continuing the opportunity for upward mobility as long as those standards are met. In other cultures where friendship or family ties may be more important than the vitality of the organization, the criteria for selection, organization, and motivation are substantially different from those in U.S. companies. In some cultures, organizations expand to accommodate the maximum number of friends and relatives. If one knows that promotions are made on the basis of personal ties and friendships rather than on merit, a fundamental motivating lever is lost. However, in many other cultures, social pressure from one’s group often motivates strongly. Superstitions can even come into play in personnel selection; in Japan, a person’s blood type can influence hiring decisions!12
The very strong belief in the United States that business decisions are based on objective analysis and that managers strive to be scientific has a profound effect on the U.S. manager’s attitudes toward objectivity in decision making and accuracy of data. Although judgment and intuition are important tools for making decisions, most U.S. managers believe decisions must be supported and based on accurate and relevant information. Thus, in U.S. business, great emphasis is placed on the collection and free flow of information to all levels within the organization and on frankness of expression in the evaluation of business opinions or decisions. In other cultures, such factual and rational support for decisions is not as important; the accuracy of data and even the proper reporting of data are not prime prerequisites. Furthermore, existing data frequently are for the eyes of a select few. The frankness of expression and openness in dealing with data, characteristic of U.S. businesses, do not fit easily into some cultures.
Compatible with the views that one controls one’s own destiny and that advancement is based on merit is the prevailing idea of wide sharing in decision making. Although decision making is not a democratic process in U.S. businesses, there is a strong belief that individuals in an organization require and, indeed, need the responsibility of making decisions for their continued development. Thus decisions are frequently decentralized, and the ability as well as the responsibility for making decisions is pushed down to lower ranks of management. In many cultures, decisions are highly centralized, in part because of the belief that only a few in the company have the right or the ability to make decisions. In the Middle East, for example, only top executives make decisions.
A key value underlying the American business system is reflected in the notion of a never-ending quest for improvement. The United States has always been a relatively activist society; in many walks of life, the prevailing question is “Can it be done better?” Thus management concepts reflect the belief that change is not only normal but also necessary, that nothing is sacred or above improvement. In fact, the merit on which one achieves advancement is frequently tied to one’s ability to make improvements. Results are what count; if practices must change to achieve results, then change is in order. In other cultures, the strength and power of those in command frequently rest not on change but on the premise that the status quo demands stable structure. To suggest improvement implies that those in power have failed; for someone in a lower position to suggest change would be viewed as a threat to another’s private domain rather than the suggestion of an alert and dynamic individual.
What’s different about Adam Smith’s, “By pursuing his own interests he frequently promotes that of society more effectually than when he really intended to promote it,” and Gordon Gekko’s, “Greed is good” statements? It’s the adverb. Smith didn’t say “always,” “most of the time,” or even “often.” He said “frequently.” Today many on Wall Street ignore this crucial difference. (left: © Bettmann/CORBIS; right: 20th Century Fox/The Kobal Collection)
Perhaps most fundamental to Western management practices is the notion that competition is crucial for efficiency, improvement, and regeneration. Gordon Gekko put it most banally in the movie Wall Street: “Greed is good.” Adam Smith in his The Wealth of Nations wrote one of the most important sentences in the English language: “By pursuing his own interests he frequently promotes that of the society more effectually than when he really intended to promote it.”13 This “invisible hand” notion justifies competitive behavior because it improves society and its organizations. Competition among salespeople (for example, sales contests) is a good thing because it promotes better individual performance and, consequently, better corporate performance. When companies compete, society is better off, according to this reasoning. However, managers and policymakers in other cultures often do not share this “greed is good” view. Cooperation is more salient, and efficiencies are attained through reduced transaction costs. These latter views are more prevalent in collectivistic cultures such as China and Japan.
Management Styles around the World14
Because of the diverse structures, management values,15 and behaviors encountered in international business, there is considerable variation in the ways business is conducted.16 No matter how thoroughly prepared a marketer may be when approaching a foreign market, a certain amount of cultural shock occurs when differences in the contact level, communications emphasis, tempo, and formality of foreign businesses are encountered. Ethical standards differ substantially across cultures, as do rituals such as sales interactions and negotiations. In most countries, the foreign trader is also likely to encounter a fairly high degree of government involvement. Among the four dimensions of Hofstede’s cultural values discussed in Chapter 4, the Individual-ism/Collectivism Index (IDV)17 and Power Distance Index (PDI) are especially relevant in examining methods of doing business cross-culturally.
Authority and Decision Making
Business size, ownership, public accountability, and cultural values that determine the prominence of status and position (PDI) combine to influence the authority structure of business.18 In high-PDI countries such as Mexico and Malaysia, understanding the rank and status of clients and business partners is much more important than in more egalitarian (low-PDI) societies such as Denmark and Israel. In high-PDI countries, subordinates are not likely to contradict bosses, but in low-PDI countries, they often do. Although the international businessperson is confronted with a variety of authority patterns that can complicate decision making in the global environment,19 most are a variation of three typical patterns: top-level management decisions, decentralized decisions, and committee or group decisions.
Top-level management decision making is generally found in situations in which family or close ownership20 gives absolute control to owners and businesses are small enough to allow such centralized decision making. In many European businesses, such as those in France, decision-making authority is guarded jealously by a few at the top who exercise tight control. In other countries, such as Mexico and Venezuela, where a semifeudal, land-equals-power heritage exists, management styles are characterized as autocratic and paternalistic. Decision-making participation by middle management tends to be deemphasized; dominant family members make decisions that tend to please the family members more than to increase productivity. This description is also true for government-owned companies in which professional managers have to follow decisions made by politicians, who generally lack any working knowledge about management. In Middle Eastern countries, the top man makes all decisions and prefers to deal only with other executives with decision-making powers. There, one always does business with an individual per se rather than an office or title.
CROSSING BORDERS 5.1: Don’t Beat Your Mother-in-Law!
The crowding and collectivism of Chinese culture provide fertile ground for hierarchy. Add in a little Confucian advice, and status relationships become central for understanding Chinese business systems. Confucius’s teachings were the foundation for Chinese education for 2,000 years, until 1911. He defined five cardinal relationships: between ruler and ruled, husband and wife, parents and children, older and younger brothers, and friends. Except for the last, all relationships were hierarchical. The ruled, wives, children, and younger brothers were all counseled to trade obedience and loyalty for the benevolence of their ruler, husband, parents, and older brothers, respectively. Strict adherence to these vertical relations yielded social harmony, that being the antidote for the violence and civil war of his time.
Obedience and deference to one’s superiors remain a strong value in Chinese culture. The story of the Cheng family illustrates the historical salience of social hierarchy and high power distance:
In October 1865, Cheng Han-cheng’s wife had the insolence to beat her mother-in-law. This was regarded as such a heinous crime that the following punishment was meted out: Cheng and his wife were both skinned alive, in front of the mother, their skin displayed at city gates in various towns and their bones burned to ashes. Cheng’s granduncle, the eldest of his close relatives, was beheaded; his uncle and two brothers, and the head of the Cheng clan, were hanged. The wife’s mother, her face tattooed with the words “neglected the daughter’s education,” was paraded through seven provinces. Her father was beaten 80 strokes and banished to a distance of 3,000 li. The heads of the family in the houses to the right and left of Cheng’s were beaten 80 strokes and banished to Heilung-kiang. The educational officer in town was beaten 60 strokes and banished to a distance of 1,000 li. Cheng’s nine-month-old boy was given a new name and put in the county magistrate’s care. Cheng’s land was to be left in waste “forever.” All this was recorded on a stone stele, and rubbings of the inscriptions were distributed throughout the empire.
We recommend you have your children read this story! But seriously, notice the authorities held responsible the entire social network for the woman’s breach of hierarchy. Status is no joke among Chinese. Age and rank of executives and other status markers must be taken into account during business negotiations with Chinese. American informality and egalitarianism will not play well on the western side of the Pacific.
Sources: Dau-lin Hsu, “The Myth of the ‘Five Human Relations’ of Confucius,” Monumenta Sinica 1970, pp. 29, 31, quoted in Gary G. Hamilton, “Patriarchalism in Imperial China and Western Europe: A Revision of Weber’s Sociology of Domination,” Theory and Society 13, pp. 393–425; N. Mark Lam and John L. Graham, China Now, Doing Business in the World’s Most Dynamic Market (New York: McGraw-Hill, 2006).
As businesses grow and professional management develops, there is a shift toward decentralized management decision making. Decentralized decision making allows executives at different levels of management to exercise authority over their own functions. As mentioned previously, this approach is typical of large-scale businesses with highly developed management systems, such as those found in the United States. A trader in the United States is likely to be dealing with middle management, and title or position generally takes precedence over the individual holding the job.
Committee decision making is by group or consensus. Committees may operate on a centralized or decentralized basis, but the concept of committee management implies something quite different from the individualized functioning of the top management and decentralized decision-making arrangements just discussed. Because Asian cultures and religions tend to emphasize harmony and collectivism, it is not surprising that group decision making predominates there. Despite the emphasis on rank and hierarchy in Japanese social structure, business emphasizes group participation, group harmony, and group decision making—but at the top management level.
The demands of these three types of authority systems on a marketer’s ingenuity and adaptability are evident. In the case of the authoritative and delegated societies, the chief problem is to identify the individual with authority. In the committee decision setup, every committee member must be convinced of the merits of the proposition or product in question. The marketing approach to each of these situations differs.
Management Objectives and Aspirations
The training and background (i.e., cultural environment) of managers significantly affect their personal and business outlooks.21 Society as a whole establishes the social rank or status of management, and cultural background dictates patterns of aspirations and objectives among businesspeople. One study reports that higher CEO compensation is found in Scandinavian firms exposed to Anglo-American financial influence and in part reflects a pay premium for increased risk of dismissal.22 These cultural influences affect the attitude of managers toward innovation, new products, and conducting business with foreigners. To fully understand another’s management style, one must appreciate an individual’s values, which are usually reflected in the goals of the business organization and in the practices that prevail within the company. In dealing with foreign business, a marketer must be particularly aware of the varying objectives and aspirations of management.
Security and Mobility.
Personal security and job mobility relate directly to basic human motivation and therefore have widespread economic and social implications. The word security is somewhat ambiguous, and this very ambiguity provides some clues to managerial variation. To some, security means a big paycheck and the training and ability required for moving from company to company within the business hierarchy; for others, it means the security of lifetime positions with their companies; to still others, it means adequate retirement plans and other welfare benefits. European companies, particularly in the more hierarchical (PDI) countries, such as France and Italy, have a strong paternalistic orientation, and it is assumed that individuals will work for one company for the majority of their lives. For example, in Britain, managers place great importance on individual achievement and autonomy, whereas French managers place great importance on competent supervision, sound company policies, fringe benefits, security, and comfortable working conditions. French managers have much less mobility than British.
Personal Life.
For many individuals, a good personal and/or family life takes priority over profit, security, or any other goal. In his worldwide study of individual aspirations, David McClelland23 discovered that the culture of some countries stressed the virtue of a good personal life as far more important than profit or achievement. The hedonistic outlook of ancient Greece explicitly included work as an undesirable factor that got in the way of the search for pleasure or a good personal life. Alternatively, according to Max Weber,24 at least part of the standard of living that we enjoy in the United States today can be attributed to the hard-working Protestant ethic from which we derive much of our business heritage. Flextime arrangements that allow businesspeople more time to work from home are a compromise that may or may not work. Many U.S. companies are reconsidering such arrangements,25 and Korean and Japanese have not yet adopted the idea, despite their excellent information technology resources.26
To the Japanese, personal life is company life. Many Japanese workers regard their work as the most important part of their overall lives. The Japanese work ethic—maintenance of a sense of purpose—derives from company loyalty and frequently results in the Japanese employee maintaining identity with the corporation. Although this notion continues to be true for the majority, strong evidence indicates that the faltering Japanese economy has affected career advancement patterns27 and has moved the position of the Japanese “salary man” from that of one of Japan’s business elite to one of some derision. Japan’s business culture is gradually shifting away from the lifelong employment that led to the intense company loyalty.28 Now even Japanese formality at the office is bowing to higher oil prices; ties and buttoned collars are being shed to leave thermostats set at 82 degrees.29
CROSSING BORDERS 5.2: The American Tourist and the Mexican Fisherman
An American tourist was at the pier of a small coastal Mexican village when a small boat with just one fisherman docked. Inside the small boat were several large yellowfin tuna. The tourist complimented the Mexican on the quality of the fish and asked how long it took to catch them.
The Mexican replied, “Only a little while.”
The tourist then asked, “Why didn’t you stay out longer and catch more fish?”
The Mexican replied, “With this I have enough to support my family’s needs.”
The tourist then asked, “But what do you do with the rest of your time?”
The Mexican fisherman said, “I sleep late, fish a little, play with my children, take a siesta with my wife, Maria, stroll into the village each evening where I sip wine and play guitar with my amigos. I have a full and busy life.”
The tourist scoffed, “I can help you. You should spend more time fishing and with the proceeds, buy a bigger boat. With the proceeds from the bigger boat you could buy several boats. Eventually you would have a fleet of fishing boats. Instead of selling your catch to a middleman you could sell directly to the processor, eventually opening your own cannery. You would control the product, processing, and distribution. You could leave this small village and move to Mexico City, then Los Angeles, and eventually to New York City where you could run your ever-expanding enterprise.”
The Mexican fisherman asked, “But, how long will this take?”
The tourist replied, “15 to 20 years.”
“But what then?” asked the Mexican.
The tourist laughed and said, “That’s the best part. When the time is right you would sell your company stock to the public and become very rich, you would make millions.”
“Millions?. . . Then what?”
The American said, “Then you would retire. Move to a small coastal fishing village where you would sleep late, fish a little, play with your grandkids, take a siesta with your wife, stroll to the village in the evenings where you could sip wine and play your guitar with your amigos.”
Source: Author unknown.
We can get some measure of the work–personal life trade-off made in different cultures with reference to Exhibit 5.1. As a point of reference, 40 hours per week times 50 weeks equals 2,000 hours. The Americans appear to be in the middle of hours worked, far above the Europeans and below the Southeast Asians. Most Americans are getting about two weeks of paid vacation, while in Europe they are taking between four and six weeks! In Singapore and Hong Kong, Saturday is a workday. Although we do not list the numbers for China, the new pressures of free enterprise are adding hours and stress there as well.30 However, the scariest datum isn’t in the table. While hours worked are decreasing almost everywhere, in the States, the numbers are increasing, up 36 hours from 1990.31 Thank you Max Weber! We wonder: How will things be in 2020?32
Exhibit 5.1: Annual Hours Worked
By the way, the worst work–personal life trade-off seems to be among junior doctors. In the United States, they work 80 hours per week and, because of the associated fatigue, make many mistakes. In Ireland they work 75 hours per week. In both countries, pressure is being put on the medical community to cut down.
Affiliation and Social Acceptance.
In some countries, acceptance by neighbors and fellow workers appears to be a predominant goal within business. The Asian outlook is reflected in the group decision making so important in Japan, and the Japanese place high importance on fitting in with their group. Group identification is so strong in Japan that when a worker is asked what he does for a living, he generally answers by telling you he works for Sumitomo or Mitsubishi or Matsushita, rather than that he is a chauffeur, an engineer, or a chemist.
Power and Achievement.
Although there is some power seeking by business managers throughout the world, power seems to be a more important motivating force in South American countries. In these countries, many business leaders are not only profit oriented but also use their business positions to become social and political leaders. Related, but different, are the motivations for achievement also identified by management researchers in the United States. One way to measure achievement is by money in the bank; another is high rank—both aspirations particularly relevant to the United States.
Communication Styles
Edward T. Hall, professor of anthropology and for decades a consultant to business and government on intercultural relations, tells us that communication involves much more than just words. His article “The Silent Language of Overseas Business,” which appeared in the Harvard Business Review in 1960,33 remains a most worthwhile read. In it he describes the symbolic meanings of time, space, things, friendships, and agreements and how they vary across cultures. In 1960 Hall could not have anticipated the innovations brought on by the Internet. However, all of his ideas about cross-cultural communication apply to that medium as well. We begin here with a discussion of communication in the face-to-face setting and then move to the electronic media.
Speaking of office space: Notice the individualism reflected in the American cubicles and the collectivism demonstrated by the Japanese office organization. (left: © Ed Kashi/Corbis; right: © ANDY RAIN/Bloomberg News/Landov)
Face-to-Face Communication.
No language readily translates into another because the meanings of words differ widely among languages. For example, the word “marriage,” even when accurately translated, can connote very different things in different languages—in one it may mean love, in another restrictions. Although language is the basic communication tool of marketers trading in foreign lands, managers, particularly from the United States, often fail to develop even a basic understanding of just one other language, much less master the linguistic nuances that reveal unspoken attitudes and information.
Verbal communication, no matter how imprecise, is at least explicit. But much business communication depends on implicit messages that are not verbalized. Edward Hall goes on to say, “In some cultures, messages are explicit; the words carry most of the information. In other cultures . . . less information is contained in the verbal part of the message since more is in the context.”
On the basis of decades of anthropological fieldwork, Hall34 places 11 cultures along a high-context/low-context continuum (see Exhibit 5.2). Communication in a high-context culture depends heavily on the contextual (who says it, when it is said, how it is said) or nonverbal aspects of communication, whereas the low-context culture depends more on explicit, verbally expressed communications.
Exhibit 5.2: Context, Communication, and Cultures: Edward Hall’s Scale
A brief exemplar of the high-/low-context dimension of communication style regards an international marketing executive’s description of a Los Angeles business entertainment event: “I picked him [a German client] up at his hotel near LAX and asked what kind of food he wanted for dinner. He said, ‘Something local.’ Now in LA local food is Mexican food. I’d never met anyone that hadn’t had a taco before! We went to a great Mexican place in Santa Monica and had it all, guacamole, salsa, enchiladas, burritos, a real Alka-Seltzer kind of night. When we were done I asked how he liked the food. He responded rather blandly, ‘It wasn’t very good.’”
The American might have been taken aback by his client’s honest, and perhaps too direct, answer. However, the American knew well about German frankness35 and just rolled with the “blow.” Germans, being very low-context oriented, just deliver the information without any social padding. Most Americans would soften the blow some with an answer more like, “It was pretty good, but maybe a bit too spicy.” And a high-context oriented Japanese would really pad the response with something like, “It was very good. Thanks.” But then the Japanese would never order Mexican food again.
An American or German might view the Japanese response as less than truthful, but from the Japanese perspective, he was just preserving a harmonious relationship. Indeed, the Japanese have two words for truth, honne (true mind) and tatemae (official stance).36 The former delivers the information, and the latter preserves the relationship. And in high-context Japan, the latter is often more important.
Internet Communications.
The message on a business-to-business Web site is an extension of the company and should be as sensitive to business customs as any other company representative would be. Once a message is posted, it can be read anywhere, at any time. As a consequence, the opportunity to convey an unintended message is infinite. Nothing about the Web will change the extent to which people identify with their own languages and cultures; thus language should be at the top of the list when examining the viability of a company’s Web site.
Estimates are that 78 percent of today’s Web site content is written in English, but an English e-mail message cannot be understood by 35 percent of all Internet users. A study of businesses on the European continent highlights the need for companies to respond in the languages of their Web sites. One-third of the European senior managers surveyed said they would not tolerate English online. They do not believe that middle managers can use English well enough to transact business on the Internet.
At the extreme are the French, who even ban the use of English terms. The French Ministry of Finance issued a directive that all official French civil service correspondence must avoid common English-language business words such as start-up and e-mail; instead, jeune pousse (literally, “a young plant”) and courrier électronique are recommended.
The solution to the problem is to have country-specific Web sites, like those of IBM and Marriott. Dell Computer, for example, makes its Premier Pages Web sites, built for its business clients, available in 12 languages. A host of companies specialize in Web site translations; in addition, software programs are available to translate the company message into another language. However, cultural and linguistic correctness remains a problem with machine translation. If not properly done, English phrases are likely to be translated in a way that will embarrass or even damage a company. One way to avoid this issue is to prepare the original source material in easy-to-translate English, devoid of complicated phrases, idioms, or slang. Unfortunately, no machine translation is available that can manage all the nuances of language or syntax.
It would be ideal if every representative of your company spoke fluently the language of and understood the culture of your foreign customers or business associates; but that is an impossible goal for most companies. However, there is no reason why every person who accesses a company’s Web site should not be able to communicate in his or her own language if a company wants to be truly global.
In addition to being language friendly, a Web site should be examined for any symbols, icons, and other nonverbal impressions that could convey an unwanted message. Icons that are frequently used on Web sites can be misunderstood. For example, an icon such as a hand making a high-five sign will be offensive in Greece; an image of a thumb-to-index finger, the A-OK gesture, will infuriate visitors in Brazil; a two-fingered peace sign when turned around has a very crude meaning to the British; and AOL’s “You’ve Got Mail” looks a lot like a loaf of bread to a European. Colors can also pose a problem; green is a sacred color in some Middle Eastern cultures and should not be used for something frivolous like a Web background.
Finally, e-mail use and usage rates by managers are also affected by culture. That is, businesspeople in high-context cultures do not use the medium to the same extent as those in low-context cultures. Indeed, the structure of the Japanese language has at least hindered the diffusion of Internet technologies in that country.37 Moreover, businesspeople in Hong Kong behave less cooperatively in negotiations using e-mail than in face-to-face encounters.38 Much of the contextual information so important in high-context cultures simply cannot be signaled via the computer.
Formality and Tempo
The breezy informality and haste that seem to characterize American business relationships appear to be American exclusives that businesspeople from other countries not only fail to share but also fail to appreciate. A German executive commented that he was taken aback when employees of his Indiana client called him by his first name. He noted, “In Germany you don’t do that until you know someone for 10 years—and never if you are at a lower rank.” This apparent informality, however, does not indicate a lack of commitment to the job. Comparing British and American business managers, an English executive commented about the American manager’s compelling involvement in business: “At a cocktail party or a dinner, the American is still on duty.”
Even though Northern Europeans seem to have picked up some American attitudes in recent years, do not count on them being “Americanized.” As one writer says, “While using first names in business encounters is regarded as an American vice in many countries, nowhere is it found more offensive than in France,” where formality still reigns. Those who work side by side for years still address one another with formal pronouns. France is higher on Hofstede’s Power Distance Index (PDI) than the United States, and such differences can lead to cultural misunderstandings. For example, the formalities of French business practices as opposed to Americans’ casual manners are symbols of the French need to show rank and Americans’ tendency to downplay it. Thus the French are dubbed snobbish by Americans, while the French consider Americans crude and unsophisticated.
Haste and impatience are probably the most common mistakes of North Americans attempting to trade in the Middle East. Most Arabs do not like to embark on serious business discussions until after two or three opportunities to meet the individual they are dealing with; negotiations are likely to be prolonged. Arabs may make rapid decisions once they are prepared to do so, but they do not like to be rushed, and they do not like deadlines. The managing partner of the Kuwait office of KPMG Peat Marwick says of the “fly-in visit” approach of many American businesspeople, “What in the West might be regarded as dynamic activity—the ‘I’ve only got a day here’ approach—may well be regarded here as merely rude.”
Marketers who expect maximum success have to deal with foreign executives in ways that are acceptable to the foreigner. Latin Americans depend greatly on friendships but establish these friendships only in the South American way: slowly, over a considerable period of time. A typical Latin American is highly formal until a genuine relationship of respect and friendship is established. Even then the Latin American is slow to get down to business and will not be pushed. In keeping with the culture, mañana (tomorrow) is good enough. How people perceive time helps explain some of the differences between U.S. managers and those from other cultures.
P-Time versus M-Time
North Americans are a more time-bound culture than Middle Eastern and Latin cultures. Our stereotype of those cultures is “they are always late,” and their view of us is “you are always prompt.” Neither statement is completely true, though both contain some truth. What is true, however, is that we are a very time-oriented society—time is money to us— whereas in other cultures, time is to be savored, not spent.
Edward T. Hall defines two time systems in the world: monochronic and polychronic time.
M-time
, or
monochronic time
, typifies most North Americans, Swiss, Germans, and Scandinavians. These Western cultures tend to concentrate on one thing at a time. They divide time into small units and are concerned with promptness. M-time is used in a linear way, and it is experienced as almost tangible, in that one saves time, wastes time, bides time, spends time, and loses time. Most low-context cultures operate on M-time.
P-time
, or
polychronic time
, is more dominant in high-context cultures, where the completion of a human transaction is emphasized more than holding to schedules. P-time is characterized by the simultaneous occurrence of many things and by “a great involvement with people.” P-time allows for relationships to build and context to be absorbed as parts of high-context cultures.
One study comparing perceptions of punctuality in the United States and Brazil found that Brazilian timepieces were less reliable and public clocks less available than in the United States. Researchers also found that Brazilians more often described themselves as late arrivers, allowed greater flexibility in defining early and late, were less concerned about being late, and were more likely to blame external factors for their lateness than were Americans.39 Please see comparisons of 31 countries in Exhibit 5.3.
Exhibit 5.3: Speed Is Relative
Rank of 31 countries for overall pace of life [combination of three measures: (1) minutes downtown pedestrians take to walk 60 feet, (2) minutes it takes a postal clerk to complete a stamp-purchase transaction, and (3) accuracy in minutes of public clocks].
The American desire to get straight to the point and get down to business is a manifestation of an M-time culture, as are other indications of directness. The P-time system gives rise to looser time schedules, deeper involvement with individuals, and a wait-and-see-what-develops attitude. For example, two Latin colleagues conversing would likely opt to be late for their next appointments rather than abruptly terminate the conversation before it came to a natural conclusion. P-time is characterized by a much looser notion of being on time or late. Interruptions are routine, delays to be expected. It is not so much putting things off until mañana as it is the concept that human activity is not expected to proceed like clockwork.
Most cultures offer a mix of P-time and M-time behavior but have a tendency to adopt either more P-time or M-time with regard to the role time plays. Some are similar to Japan, where appointments are adhered to with the greatest M-time precision but P-time is followed once a meeting begins. The Japanese see U.S. businesspeople as too time bound and driven by schedules and deadlines that thwart the easy development of friendships.
When businesspeople from M-time and P-time meet, adjustments need to be made for a harmonious relationship. Often clarity can be gained by specifying tactfully, for example, whether a meeting is to be on “Mexican time” or “American time.” An American who has been working successfully with the Saudis for many years says he has learned to take plenty of things to do when he travels. Others schedule appointments in their offices so they can work until their P-time friend arrives. The important thing for the U.S. manager to learn is adjustment to P-time in order to avoid the anxiety and frustration that comes from being out of synchronization with local time. As global markets expand, however, more businesspeople from P-time cultures are adapting to M-time.
Negotiations Emphasis
Business negotiations are perhaps the most fundamental commercial rituals. All the just-discussed differences in business customs and culture come into play more frequently and more obviously in the negotiating process than in any other aspect of business. The basic elements of business negotiations are the same in any country: They relate to the product, its price and terms, services associated with the product, and, finally, friendship between vendors and customers. But it is important to remember that the negotiating process is complicated, and the risk of misunderstanding increases when negotiating with someone from another culture.
Attitudes brought to the negotiating table by each individual are affected by many cultural factors and customs often unknown to the other participants and perhaps unrecognized by the individuals themselves. His or her cultural background conditions each negotiator’s understanding and interpretation of what transpires in negotiating sessions. The possibility of offending one another or misinterpreting others’ motives is especially high when one’s self-reference criteria (SRC) is the basis for assessing a situation. One standard rule in negotiating is “know thyself” first and “know your counterpart” second. The SRC of both parties can come into play here if care is not taken. How business customs and culture influence negotiations is the focus of Chapter 19.
Marketing Orientation
The extent of a company’s marketing orientation has been shown to relate positively to profits. Although American companies are increasingly embracing this notion (and marketing in general),40 firms in other countries have not been so fast to change from the more traditional production (consumers prefer products that are widely available), product (consumers favor products that offer the best quality, performance, or innovative features), and selling (consumers and businesses alike will not buy enough without prodding) orientations.41 For example, in many countries, engineers dominate corporate boards, and the focus is more toward a product orientation. However, more profitable American firms have adopted strong marketing orientations wherein everyone in the organization (from shop floor to finance) is encouraged to, and even receive rewards, if they generate, disseminate, and respond to marketing intelligence (that is, consumers’ preferences, competitions’ actions, and regulators’ decisions). Recently researchers have empirically verified that, for a variety of complex reasons, including cultural explanations,42 a marketing orientation is less prevalent in a number of other countries;43 it can be difficult to encourage such an orientation across diverse business units in global companies.44
Gender Bias in International Business
The gender bias45 against female managers that exists in some countries, coupled with myths harbored by male managers, creates hesitancy among U.S. multinational companies to offer women international assignments. Although women constitute nearly half of the U.S. workforce, they represent relatively small percentages of the employees who are chosen for international assignments—only 18 percent. Why? The most frequently cited reason, the inability of women to succeed abroad. As one executive was quoted as saying, “Overall, female American executives tend not to be as successful in extended foreign work assignments as are male American executives.” Unfortunately, such attitudes are shared by many and probably stem from the belief that the traditional roles of women in male-dominated societies preclude women from establishing successful relationships with host-country associates. An often-asked question is whether it is appropriate to send women to conduct business with foreign customers in cultures where women are typically not in managerial positions. To some, it appears logical that if women are not accepted in managerial roles within their own cultures, a foreign woman will not be any more acceptable.
Two ways to prevent the harassment of women. Mika Kondo Kunieda, a consultant at the World Bank in Tokyo explains, “I ride in a special women-only metro car that runs between 7:20 and 9:20 am. The cars were created in 2005 due to frequent complaints that women were being groped and sexually harassed. I was a victim a few times when I was younger, and it was—and still is—a humiliating experience. I had to learn how to position myself against moves even in the most overcrowded train. Now, I’ve seen a few men get visibly anxious when they realize they’ve accidentally boarded a car during women-only time!”46 The Koran also specifies the cover-up pictured here in Riyadh, Saudi Arabia. (left: © David Coll Blanco; right: AP PHOTO/Hasan Jamali)
CROSSING BORDERS 5.3: Cultures Change, Albeit Slowly
Seoul
In a time-honored practice in South Korea’s corporate culture, the 38-year-old manager at an online game company took his 10-person team on twice-weekly after-work drinking bouts. He exhorted his subordinates to drink, including a 29-year-old graphic designer who protested that her limit was two glasses of beer. “Either you drink or you get it from me tomorrow,” the boss told her one evening.
She drank, fearing that refusing to do so would hurt her career. But eventually, unable to take the drinking any longer, she quit and sued. In May, in the first ruling of its kind, the Seoul High Court said that forcing a subordinate to drink alcohol was illegal, and it pronounced the manager guilty of a “violation of human dignity.” The court awarded the woman $32,000 in damages for the incidents, which occurred in 2004.
The ruling was as much a testament to women’s growing presence in corporate life there as a confirmation of changes already under way. As an increasing number of women have joined companies as professionals, corporate South Korea has struggled to change the country’s corporate culture, starting with its attitude toward alcohol.
Tokyo
The experience of Kayoko Mura illustrates a big shift in attitudes of Japanese companies toward female workers. When Mura quit her accounting job 16 years ago, food giant Kagome Co. did little to stop her. She was getting married and felt she could not ask for a transfer to Tokyo, where she and her husband were to live.
But last summer, Kagome’s Tokyo office sought out Mura, now 44 years old, and wooed her back to the same kind of job she had had before. It also assigned a system engineer to work with her until she got up to speed with the computer system. Kagome even accepted her request to work part-time, just three days a week, six hours a day. “There are many women who quit after we had spent time and money in training,” says Tomoko Sone, a Kagome spokeswoman. “For the company, [not hiring them back] is such a waste.”
Oslo
Beginning in 2008, all public companies in Norway were mandated to have at least 40 percent women among their board members. Before the law passed in 2003, 7 percent of corporate board members were women. But the number has risen quickly, as suggested in Exhibit 5.4, to 36 percent in 2008, though 75 companies have yet to meet the quota. Statoil’s Chairman of the Board, Grace Reksten Skaugen, explains her gender’s advantages: “Women feel more compelled than men to do their homework, and we can afford to ask the hard questions, because women are not always expected to know the answers.” Reksten Skaugen was voted Norway’s chairperson of the year for 2007.
Exhibit 5.4: Few and Far Between
Sources: Norimitsu Onishi, “Corporate Korea Corks the Bottle as Women Rise,” The New York Times, June 10, 2007, pp. 1, 4; Miho Inada, “Japanese Companies Woo Women Back to Work,” The Wall Street Journal, July 23, 2007, pp. B1, B3; “Girl Power,” The Economist, January 5, 2008, pp. 54–55.
In many cultures—Asian, Middle Eastern, and Latin American—women are not typically found in upper levels of management (see Exhibit 5.4), and men and women are treated very differently. Indeed, the scariest newspaper headline ever written may have been “Asia, Vanishing Point for as Many as 100 Million Women.” The article, appearing in the International Herald Tribune in 1991,47 points out that the birthrate in most countries around the world is about 105 boys for every 100 girls. However, in countries like the United States or Japan, where generally women outlive men, there are about 96 men per 100 women in the population. The current numbers of men per 100 women in other Asian countries are as follows: Korea 102, China 103, India 109, and Pakistan 106. The article describes systematic discrimination against females from birth. Now illegal everywhere, ultrasound units are still being used for making gender-specific abortion decisions, and all this prejudice against females is creating disruptive shortages of women.48 In some provinces in China, there are currently 120 men per 100 women.
Despite the substantial prejudices toward women in foreign countries, evidence suggests that prejudice toward foreign women executives may be exaggerated and that the treatment local women receive in their own cultures is not necessarily an indicator of how a foreign businesswoman is treated. It would be inaccurate to suggest that there is no difference in how male and female managers are perceived in different cultures. However, this difference does not mean that women cannot be successful in foreign postings.
A key to success for both men and women in international business often hinges on the strength of a firm’s backing. When a female manager receives training and the strong backing of her firm, she usually receives the respect commensurate with the position she holds and the firm she represents. For success, a woman needs a title that gives immediate credibility in the culture in which she is working and a support structure and reporting relationship that will help her get the job done.49 In short, with the power of the corporate organization behind her, resistance to her as a woman either does not materialize or is less troublesome than anticipated. Once business negotiations begin, the willingness of a business host to engage in business transactions and the respect shown to a foreign businessperson grow or diminish depending on the business skills he or she demonstrates, regardless of gender. As one executive stated, “The most difficult aspect of an international assignment is getting sent, not succeeding once sent.”
The number of women in managerial positions (all levels) in most European countries, with the exception of Germany, is comparable to the United States. The International Labor Organization notes that in the United States, 43 percent of managerial positions are held by women, in Britain 33 percent, and in Switzerland 28 percent. In Germany, however, the picture is different. According to one economic source, German female executives hold just 9.2 percent of management jobs and meet stiff resistance from their male counterparts when they vie for upper-level positions. But the good news is the indication that some German businesses are attempting to remedy the situation. One step taken to help boost women up the executive ladder is a so-called cross-mentoring system organized by Lufthansa and seven other major corporations. High-ranking managers in one company offer advice to female managers in another firm in an effort to help them develop the kind of old-boy network that allows male managers to climb the corporate ladder successfully.50
As world markets become more global and international competition intensifies, U.S. companies need to be represented by the most capable personnel available, from entry level to CEO. Research shows that global companies are requiring international experience for top executive positions. Executives who have had international experience are more likely to get promoted, have higher rewards, and have greater occupational tenure. The lack of international experience should not be a structural barrier to breaking through the glass ceiling in corporate America; to limit the talent pool simply because of gender seems shortsighted.
So what about our female Ford executive mentioned at the start of the chapter? She was having no fun in Japan when we left her story. However, by all accounts (from peers, supervisors, and even Japanese counterparts) that first encounter was not representative of her continuing successes with the Japanese. She attributes her subsequent effectiveness to the strong support of her male Ford team members and her own recognition of the importance of building personal relationships with the Japanese. She explains:
My husband, also a Ford manager working with Japanese clients, and I decided to have a few of our Mazda associates over for an “All-American” dinner during their next trip to Detroit. So, we started out inviting three people to our home. We thought this would be a nice intimate way to get to know one another and provide the Japanese with an honest-to-goodness homemade American meal. By the eve of the dinner word had gotten out and we had thirteen for dinner. They sort of invited themselves, they changed their meetings around, and some even flew in from the Chicago Auto Show. We had a wonderful time and for the first time they saw me as a person. A mom and a wife as well as a business associate. We talked about families, some business, not particulars, but world economics and the auto industry in general. The dinner party was a key turning point in my relationships with Mazda.51
Business Ethics
The moral question of what is right or appropriate poses many dilemmas for domestic marketers. Even within a country, ethical standards are frequently not defined or always clear. The problem of business ethics is infinitely more complex in the international marketplace because value judgments differ widely among culturally diverse groups.52 That which is commonly accepted as right in one country may be completely unacceptable in another. Giving business gifts of high value, for example, is generally condemned in the United States, but in many countries of the world, gifts are not only accepted but also expected.53
Corruption Defined
Indeed, consistent with the discussions about language, the meaning of the word corruption varies considerably around the world. In formerly communist countries where Marxism was an important part of the educational system for many, profits can be seen as a kind of corruption. What American managers view as essential, others view as a sign of exploitation. The individualism so important to Americans can also be seen as a kind of corruption. The Japanese have an expression: “The nail that sticks up gets hammered down.” In India many attribute the decline in the society there to the rampant consumerism, such as that promoted on MTV. Of course, such rampant consumerism is what kept the American economy afloat right after the turn of the century. In some countries, there is no greater Satan than R-rated American movies with their sex and violence. In China missionaries and religious movements are viewed by the government as potentially dangerous and disruptive. Many in subSaharan Africa view Western intellectual property laws as a kind of exploitation that prevents treatment of AIDS for millions. During the 1997–1998 financial crisis, many government leaders in Southeast Asia decried currency speculation as the worst kind of corruption.
Finally, please recall the 2003 homogenization of Barbie described at the beginning of the chapter. Here’s what we predicted in a previous edition of this text: “And then there is Barbie having great fun in Japan these days. We hope the love affair lasts, but we are not confident it will. The article does describe the extensive marketing research Mattel did with kids. But there is no mention made about marketing research with their parents.54 We guarantee that selling a big-busted, blonde doll to their daughters will be viewed as a kind of corruption by some Asian parents, and perhaps governmental officials as well. Particularly, if America is perceived as pursuing military and economic hegemony, a strong reaction against symbols of America will follow. Watch out Barbie, GI Joe, and your other toy store friends.
Our criticism of Mattel then was on the mark in three ways. First, sales of Barbie declined worldwide after the global standardization. Second, parents and governments did react. Most scandalous was the Saudi Arabian Barbie ban, underscored on the Web site of the Saudi Committee for the Propagation of Virtue and Prevention of Vice: “Jewish Barbie dolls, with their revealing clothes and shameful postures, accessories and tools are symbols of decadence of the perverted West. Let us beware of her dangers and be careful.”55 Third, Mattel’s strategy boosted the sales of its competitors, MGA Entertainment, Inc.’s, multiethnic Bratz,56 Razanne,57 and, in the Arabian Gulf states, Fulla.58 Razanne and Fulla were both designed with Muslim girls and Muslim parents in mind. Fulla has waist-length black hair with red streaks, a round face with big brown eyes, a tan, a flatter chest than Barbie, and clothes that conceal her elbows and knees. We will again touch on this topic as it pertains to marketing research in Chapter 8. But for now, we switch from Barbie to bribery, another kind of corruption.
Scantily clad, blonde Barbie (here in Jakarta, Indonesia, a predominantly Muslim country) or Matrix Reloaded, an R-rated American film (here advertised on the streets of Beijing), might be seen as “corrupting” forces in many countries. Indeed, many parents in the United States would see both in such terms as well. We also note with irony that 60 percent of the Barbies produced worldwide are made in Indonesia.59 (left: © Reuters/Corbis)
Pope Benedict XVI wrote that the Harry Potter books and movies can “deeply distort Christianity in the soul, before it can grow properly.”60 Meanwhile, Antonio Banderas perhaps helped improve European acceptability for Shrek 2 when he showed up for the Madrid premier. In any case, products and services directed at kids get special attention from parents and regulators around the world.
The Western Focus on Bribery
Before the Enron and WorldCom crises, to most Americans, the word corruption meant bribery. Now in the domestic context, fraud has moved to the more prominent spot in the headlines. But high-profile foreign cases of bribery, such those involving the German giant Siemens61 and the execution of China’s top food and drug official for accepting bribes,62 underscore the ethical and legal complexities of international business. During the 1970s, for U.S. companies engaged in international markets, bribery became a national issue with public disclosure of political payoffs to foreign recipients by U.S. firms. At the time, the United States had no laws against paying bribes in foreign countries. But for publicly held corporations, the Securities and Exchange Commission’s (SEC) rules required accurate public reporting of all expenditures. Because the payoffs were not properly disclosed, many executives were faced with charges of violating SEC regulations.
The issue took on proportions greater than that of nondisclosure because it focused national attention on the basic question of ethics. The business community’s defense was that payoffs were a way of life throughout the world: If you didn’t pay bribes, you didn’t do business. The decision to pay a bribe creates a major conflict between what is ethical and proper and what appears to be profitable and sometimes necessary for business. Many global competitors perceive payoffs as a necessary means to accomplish business goals. A major complaint of U.S. businesses was that other countries did not have legislation as restrictive as does the United States. The U.S. advocacy of global antibribery laws has led to a series of accords by the member nations of the Organization for Economic Cooperation and Development (OECD), the Organization of American States (OAS), and the United Nations Convention against Corruption (UNCAC). Long considered almost a way of business life, bribery and other forms of corruption now being increasingly criminalized.
Leaders around the world realize that democracy depends on the confidence the people have in the integrity of their government and that corruption undermines economic liberalization.63 The actions of the OAS, OECD, and UNCAC will obligate a majority of the world’s trading nations to maintain a higher standard of ethical behavior than has existed before. Unfortunately, some countries have not ratified any of the conventions. India and Israel are examples.
An international organization called Transparency International (TI)64 is dedicated to “curbing corruption through international and national coalitions encouraging governments to establish and implement effective laws, policies and anti-corruption programs.” The brand name “Transparency International” has proven most insightful, as more scholars are finding a clear relationship between the availability of information and lower levels of corruption.65 Among its various activities, TI conducts an international survey of business-people, political analysts, and the general public to determine their perceptions of corruption in 180 countries. In the Corruption Perception Index (CPI), shown in part in Exhibit 5.5, Denmark, Finland, and New Zealand, with scores of 9.4 out of a maximum of 10, were perceived to be the least corrupt, and Myanmar and Somalia, with scores of 1.4, as the most corrupt. TI also ranks 30 bribe-paying countries, and the ranking is reported in Exhibit 5.6 in its entirety. TI is very emphatic that its intent is not to expose villains and cast blame but to raise public awareness that will lead to constructive action. As one would expect, those countries receiving low scores are not pleased; however, the effect has been to raise public ire and debates in parliaments around the world—exactly the goal of TI.
Exhibit 5.5: Transparency International Corruption Perception Index
Higher numbers correspond to a lower prevalence of bribe taking. The top 25 and bottom 25 are shown; see http://www.transparency.org for the most complete and up-to-date listings.
Exhibit 5.6: Transparency International Bribe Payers Index*
Higher scores correspond to lower levels of bribe paying internationally.
The most notable datum in the TI scores is Japan’s speedy ascendance in the last decade from a score of 5.8 in 1998 to 7.5 in 2007. As a point of comparison, the United States has fallen in the rankings over the same time period from 7.5 to 7.3. No large, affluent country has moved up the rankings this fast. Now, at least according to TI, America is more corrupt than Japan! Although the difference between the two major exporters is perhaps insignificant, the numbers fly in the face of older Americans’ criticisms of Japan as “corrupt.” So it is worth exploring the explanations behind Japan’s apparent success in addressing its history and changing a culture of corruption.
The confluence of several institutional factors appears to have influenced the business practice changes in Japan reflected in the TI indices. They are summarized in a 42-page description of what has been termed the National Integrity System for Japan:66
[T]he Japanese government has not announced or established to date any comprehensive strategy or scheme to combat corruption in the society. The reform programs the government has implemented for the past 10 years, including deregulation measures adopted mainly for activating markets and privatization of some major public corporations, have helped to a certain extent to curb corrupt practices in the public and private sectors. The business community meanwhile started to emphasize business ethics or integrity in management in the 1990s as businesses were increasingly expected to exercise self-control.
The report also credits the election of Prime Minister Koizumi in 2001 as a key event in the campaign to reduce Japan’s internal corruption. For example, upon his election, he immediately launched a municipal decentralization scheme that promoted mergers among local cities, towns, and villages that has almost halved the number of local governments and may be reducing the opportunities for corruption. A necessary shift in cultural values is also part of the story, according to the report:
In Japan the Western world’s concept of “civil” or “citizen” did not exist for a long time. “Democracy” was introduced to Japan after World War II by the victorious nations, especially the United States, but these concepts and values in relation to the national integrity system have not been very well established in Japan.
In ancient days, the ruling class of Japan guided the people to believe that harmonizing was the most important value to be respected. This belief remains as one of the most fundamental principles among Japanese. This way of thinking makes people believe that it is virtuous to be generous to and forgive others who commit misdeeds. Some people argue that this is the reason why people do not want to criticize or fight actively against corruption.67
Indeed, Japan’s successes in reducing corruption in its business system are all the more remarkable because of its relationship-oriented culture, which would be predicted by many to favor bribery. Finally, the report is strangely mute regarding the influence of outside pressure, in the form of the aforementioned OECD antibribery convention, which Japan joined in 1999 (the United States also joined the OECD convention in 1999). Long-time observers argue that major changes within Japan often result from such outside influences.68 Thus, the years 1999–2001 appear to represent the key turning point in Japan’s fight against corruption.
Transparency International’s CPI is also proving useful in academic studies69 of the causes and consequences of bribery. Completely consistent with our discussion of the origins and elements of culture in Chapter 4 (see Exhibit 4.4), higher levels of bribery have been found in low-income nations and nations with a communist past, both aspects of the political economy. Additionally, higher levels of bribery have been found in collectivistic (IDV) and high power distance (PDI) countries. Moreover, higher levels of bribery and legal constraints such as the Foreign Corrupt Practices Act have deterred firms’ participation in such countries.70 Firms seem generally to eschew investments in corrupt countries as well.71 Finally, when executives of multinational firms behave ethically in such countries, they also tend to promote more ethical business behaviors among their host country counterparts.72
Bribery: Variations on a Theme
Although bribery is a legal issue, it is also important to see bribery in a cultural context in order to understand different attitudes toward it. Culturally, attitudes about bribery are significantly different among different peoples. Some cultures seem to be more open about taking bribes, whereas others, like the United States, are publicly contemptuous of such practices. But U.S. firms are far from virtuous—we believe the TI “grade” of a C (7.2) to be about right. Regardless of where the line of acceptable conduct is drawn, there is no country where the people consider it proper for those in position of political power to enrich themselves through illicit agreements at the expense of the best interests of the nation. A first step in understanding the culture of bribery is to appreciate the limitless variations that are often grouped under the word bribery. The activities under this umbrella term range from extortion through subornation to lubrication.
Bribery and Extortion.
The distinction between bribery and extortion depends on whether the activity resulted from an offer or from a demand for payment. Voluntarily offered payment by someone seeking unlawful advantage is bribery. For example, it is bribery if an executive of a company offers a government official payment in exchange for the official incorrectly classifying imported goods so the shipment will be taxed at a lower rate than the correct classification would require. However, it is extortion if payments are extracted under duress by someone in authority from a person seeking only what he or she is lawfully entitled to. An example of extortion would be a finance minister of a country demanding heavy payments under the threat that a contract for millions of dollars would be voided.
On the surface, extortion may seem to be less morally wrong because the excuse can be made that “if we don’t pay, we don’t get the contract” or “the official (devil) made me do it.” But even if it is not legally wrong, it is morally wrong—and in the United States it is legally wrong.
Lubrication and Subornation.
Another variation of bribery is the difference between lubrication and subornation. Lubrication involves a relatively small sum of cash, a gift, or a service given to a low-ranking official in a country where such offerings are not prohibited by law. The purpose of such a gift is to facilitate or expedite the normal, lawful performance of a duty by that official. This practice is common in many countries of the world. A small payment made to dock workers to speed up their pace so that unloading a truck takes a few hours rather than all day is an example of lubrication.
Subornation, in contrast, generally involves giving large sums of money—frequently not properly accounted for—designed to entice an official to commit an illegal act on behalf of the one offering the bribe. Lubrication payments accompany requests for a person to do a job more rapidly or more efficiently; subornation is a request for officials to turn their heads, to not do their jobs, or to break the law.
Agent’s Fees.
A third type of payment that can appear to be a bribe but may not be is an agent’s fee. When a businessperson is uncertain of a country’s rules and regulations, an agent may be hired to represent the company in that country. For example, an attorney may be hired to file an appeal for a variance in a building code on the basis that the attorney will do a more efficient and thorough job than someone unfamiliar with such procedures. While this practice is often a legal and useful procedure, if a part of that agent’s fee is used to pay bribes, the intermediary’s fees are being used unlawfully. Under U.S. law, an official who knows of an agent’s intention to bribe may risk prosecution and jail time. The Foreign Corrupt Practices Act (FCPA) prohibits U.S. businesses from paying bribes openly or using intermediaries as conduits for a bribe when the U.S. manager knows that part of the intermediary’s payment will be used as a bribe. Attorneys, agents, distributors, and so forth may function simply as conduits for illegal payments. The process is further complicated by legal codes that vary from country to country; what is illegal in one country may be winked at in another and be legal in a third.
The answer to the question of bribery is not an unqualified one. It is easy to generalize about the ethics of political payoffs and other types of payments; it is much more difficult to make the decision to withhold payment of money when the consequences of not making the payment may affect the company’s ability to do business profitably or at all. With the variety of ethical standards and levels of morality that exist in different cultures, the dilemma of ethics and pragmatism that faces international business cannot be resolved until the anticorruption accords among the OECD, UN, and OAS members are fully implemented and multinational businesses refuse to pay extortion or offer bribes.
The Foreign Corrupt Practices Act which prohibits American executives and firms from bribing officials of foreign governments has had a positive effect. According to the latest Department of Commerce figures, since 1994, American businesses have bowed out of 294 major overseas commercial contracts valued at $145 billion rather than paying bribes. This information corroborates the academic evidences cited previously. Even though there are numerous reports indicating a definite reduction in U.S. firms paying bribes, the lure of contracts is too strong for some companies. Lockheed Corporation made $22 million in questionable foreign payments during the 1970s. More recently the company pled guilty to paying $1.8 million in bribes to a member of the Egyptian national parliament in exchange for lobbying for three air cargo planes worth $79 million to be sold to the military. Lockheed was caught and fined $25 million, and cargo plane exports by the company were banned for three years. Lockheed’s actions during the 1970s were a major influence on the passing of the FCPA. The company now maintains one of the most comprehensive ethics and legal training programs of any major corporation in the United States.
It would be naive to assume that laws and the resulting penalties alone will put an end to corruption. Change will come only from more ethically and socially responsible decisions by both buyers and sellers and by governments willing to take a stand.
Ethical and Socially Responsible Decisions
Behaving in an ethically and socially responsible way should be the hallmark of every businessperson’s behavior, domestic or international. Most of us know innately the socially responsible or ethically correct response to questions about knowingly breaking the law, harming the environment, denying someone his or her rights, taking unfair advantage, or behaving in a manner that would bring bodily harm or damage. Meanwhile, the complex relationships among politics, corruption, and corporate social responsibility are only now beginning to receive attention on the part of scholars and practitioners.73 Unfortunately, the difficult issues are not the obvious and simple right-or-wrong ones, and differences in cultural values influence the judgment of managers.74 In many countries, the international marketer faces the dilemma of responding to sundry situations where local law does not exist, where local practices appear to condone a certain behavior, or where a company willing to “do what is necessary” is favored over a company that refuses to engage in certain practices. In short, being socially responsible and ethically correct are not simple tasks for the international marketer operating in countries whose cultural and social values and/or economic needs are different from those of the marketer.
In normal business operations, difficulties arise in making decisions, establishing policies, and engaging in business operations in five broad areas: (1) employment practices and policies, (2) consumer protection, (3) environmental protection, (4) political payments and involvement in political affairs of the country, and (5) basic human rights and fundamental freedoms. In many countries, laws may help define the borders of minimum ethical or social responsibility, but the law is only the floor above which one’s social and personal morality is tested. The statement that “there is no controlling legal authority” may mean that the behavior is not illegal, but it does not mean that the behavior is morally correct or ethical. Ethical business conduct should normally exist at a level well above the minimum required by law or the “controlling legal authority.” In fact, laws are the markers of past behavior that society has deemed unethical or socially irresponsible.
Perhaps the best guides to good business ethics are the examples set by ethical business leaders. However, three ethical principles also provide a framework to help the marketer distinguish between right and wrong, determine what ought to be done, and properly justify his or her actions. Simply stated, they are as follows:
•
Utilitarian ethics. Does the action optimize the “common good” or benefits of all constituencies? And who are the pertinent constituencies?
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Rights of the parties. Does the action respect the rights of the individuals involved?
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Justice or fairness. Does the action respect the canons of justice or fairness to all parties involved?
Answers to these questions can help the marketer ascertain the degree to which decisions are beneficial or harmful, right or wrong, and whether the consequences of actions are ethical or socially responsible. Perhaps the best framework to work within is defined by asking: Is it legal? Is it right? Can it withstand disclosure to stockholders, to company officials, to the public?
Although the United States has clearly led the campaign against international bribery, European firms and institutions are apparently putting more effort and money into the promotion of what they are calling “corporate social responsibility.” For example, the watch-dog group CSR (Corporate Social Responsibility) Europe, in cooperation with INSEAD (the European Institute of Administrative Affairs) business school outside Paris, is studying the relationship between investment attractiveness and positive corporate behaviors on several dimensions. Their studies find a strong link between firms’ social responsibility and European institutional investors’ choices for equity investments.75 All this is not to say that European firms do not still have their own corporate misbehaviors. However, we expect more efforts in the future to focus on measuring and monitoring corporate social responsibility around the world.
Finally, we mention three notable examples of corruption fighting, ranging across the levels of government, corporate, and individual initiatives. First, the government of Norway is investing its vast oil profits in only ethical companies; it recently withdrew funds from companies such as Wal-Mart, Boeing, and Lockheed Martin, in line with its ethical criteria.76 Second, Alan Boekmann, the new CEO of the global construction company Fluor Corp., is fed up with the corruption in his own business. He, along with colleagues at competitor firms, has called for a program of outside auditors to determine the effectiveness firms’ antibribery programs.77 Third, in 2001, Alexandra Wrage founded Trace International, an Annapolis, Maryland, nonprofit that provides corruption reports about potential foreign clients and training for executives involved in business in difficult areas.78 We laud all such efforts.
Culture’s Influence on Strategic Thinking
Perhaps Lester Thurow provided the most articulate description of how culture influences managers’ thinking about business strategy.79 Others are now examining his ideas in even deeper detail.80 Thurow distinguished between the British–American “individualistic” kind of capitalism and the “communitarian” form of capitalism in Japan and Germany.81 The business systems in the latter two countries are typified by cooperation among government, management, and labor, particularly in Japan. Contrarily, adversarial relationships among labor, management, and government are more the norm in the United Kingdom, and particularly in the United States. We see these cultural differences reflected in Hofstede’s results—on the IDV scale, the United States is 91, the United Kingdom is 89, Germany is 67, and Japan is 46.
We also find evidence of these differences in a comparison of the performance of American, German, and Japanese firms.82 In the less individualistic cultures, labor and management cooperate—in Germany labor is represented on corporate boards,83 and in Japan, management takes responsibility for the welfare of the labor force. Because the welfare of the workforce matters more to Japanese and German firms, their sales revenues are more stable over time. American-style layoffs are eschewed. The individualistic American approach to labor–management relations is adversarial—each side takes care of itself. So we see damaging strikes and huge layoffs that result in more volatile performance for American firms. Recent studies are uncovering stability as one of global investors’ key criteria.84
After a decade of stagnation in Japan, the social contract of lifetime employment is softening. This change is reflected in more frequent corporate layoffs, frustrating job searches, and “tent villages” in public places such as Ueno Park in Tokyo. But even at their worst point in history, Japanese jobless are just a trickle compared with the torrent of pink slips and homeless folks when the American economy heads south. (left: © TW Photo/Corbis)
Circa 2000, the American emphasis on competition looked like the best approach, and business practices around the world appeared to be converging on the American model.85 But it is important to recall that key word in Adam Smith’s justification for competition—“frequently.” It’s worth repeating here: “By pursuing his own interest he frequently promotes that of society. . . .” Smith wrote frequently, not always. A competitive, individualistic approach works well in the context of an economic boom. During the late 1990s, American firms dominated Japanese and European ones. The latter seemed stodgy, conservative, and slow in the then-current hot global information economy. However, downturns in a competitive culture can be ugly things. For example, the instability and layoffs at Boeing during the commercial aircraft busts of the late 1990s and early 2000s has been damaging not only to employees and their local communities, but also to shareholders as well. It should also be mentioned that Thurow and others writing in this area omitted a fourth kind of capitalism—that common in Chinese cultures.86 Its distinguishing characteristics are a more entrepreneurial approach and an emphasis on guanxi (one’s network of personal connections)87 as the coordinating principle among firms. This fourth kind of capitalism is also predicted by culture. Chinese cultures are high on PDI and low on IDV, and the strong reciprocity implied by the notion of guanxi fits the data well.
Synthesis: Relationship-Oriented versus Information-Oriented Cultures
With increasing frequency, studies note a strong relationship between Hall’s high-/low-context and Hofstede’s Individualism/Collective and Power Distance indexes. For example, low-context American culture scores relatively low on power distance and high on individualism, whereas high-context Arab cultures score high on power distance and low on individualism. This result is not at all surprising, given that Hofstede88 leans heavily on Hall’s ideas in developing and labeling the dimensions of culture revealed via his huge database. Indeed, the three dimensions—high/low context, IDV, and PDI—are correlated above the r = 0.6 level, suggesting all three dimensions are largely measuring the same thing.89 Likewise, when we compare linguistic distance (to English) and Transparency International’s Corruption Perception Index to the other three, we see similar levels of correlations among all five dimensions. And while metrics for other dimensions of business culture do not yet exist, a pattern appears to be evident (see Exhibit 5.7).
Exhibit 5.7: Dimensions of Culture: A Synthesis
The pattern displayed is not definitive, only suggestive. Not every culture fits every dimension of culture in a precise way. However, the synthesis is useful in many ways. Primarily, it gives us a simple yet logical way to think about many of the cultural differences described in Chapters 4 and 5. For example, American culture is low context, individualistic (IDV), low power distance (PDI), obviously close to English, monochronic time oriented, linguistically direct, and foreground focused,90 and it achieves efficiency through competition; therefore, it is categorized hereafter in this book as an information-oriented culture. Alternatively, Japanese culture is high context, collectivistic, high power distance, far from English, polychronic (in part), linguistically indirect, and background focused, and it achieves efficiency through reduction of transaction costs; therefore, it is properly categorized as a relationship culture. All these traits are so even though both the United States and Japan are high-income democracies. Both cultures do achieve efficiency but through different emphases. The American business system uses competition, whereas the Japanese depends more on reducing transaction costs.
The most managerially useful aspect of this synthesis of cultural differences is that it allows us to make predictions about unfamiliar cultures. Reference to the three metrics available give us some clues about how consumers and/or business partners will behave and think. Hofstede has provided scores for 78 countries and regions, and we have included them in the appendix to this chapter. Find a country on his lists, and you have some information about that market and/or person. One might expect Trinidad to be an information-oriented culture and Russia a relationship-oriented culture, and so on. Moreover, measures of linguistic distance (any language can be used as the focal one, not just English) are available for every country and, indeed, every person. Thus we would expect that someone who speaks Javanese as a first language to be relationship oriented.
In closing, we are quite encouraged by the publication of the important book Culture Matters.91 We obviously agree with the sentiment of the title and hope that the book will help rekindle the interest in culture’s pervasive influences that Max Weber and others initiated so long ago.
Summary
Management styles differ around the world. Some cultures appear to emphasize the importance of information and competition, while others focus more on relationships and transaction cost reductions. However, there are no simple answers, and the only safe generalization is that businesspersons working in another country must be sensitive to the business environment and must be willing to adapt when necessary. Unfortunately, to know when such adaptation is necessary is not always easy; in some instances adaptation is optional, whereas in others, it is actually undesirable. Understanding the culture you are entering is the only sound basis for planning.
Business behavior is derived in large part from the basic cultural environment in which the business operates and, as such, is subject to the extreme diversity encountered among various cultures and subcultures. Environmental considerations significantly affect the attitudes, behavior, and outlook of foreign businesspeople. Motivational patterns of such businesspeople depend in part on their personal backgrounds, their business positions, their sources of authority, and their own personalities.
Varying motivational patterns inevitably affect methods of doing business in different countries. Marketers in some countries thrive on competition; in others, they do everything possible to eliminate it. The authoritarian, centralized decision-making orientation in some nations contrasts sharply with democratic decentralization in others. International variation characterizes contact level, ethical orientation, negotiation outlook, and nearly every part of doing business. The foreign marketer can take no phase of business behavior for granted.
The new breed of international businessperson that has emerged in recent years appears to have a heightened sensitivity to cultural variations. Sensitivity, however, is not enough; the international trader must be constantly alert and prepared to adapt when necessary. One must always realize that, no matter how long in a country, the outsider is not a local; in many countries, that person may always be treated as an outsider. Finally, one must avoid the critical mistake of assuming that knowledge of one culture will provide acceptability in another.
Questions
1. Define the following terms:
cultural imperative
M-time
cultural elective
subornation
cultural exclusive
principle of utilitarian ethics
FCPA
principle of justice or fairness
P-time
silent languages
2. “More than tolerance of an alien culture is required; there is a need for affirmative acceptance of the concept ‘different but equal.’” Elaborate.
3. “We should also bear in mind that in today’s business-oriented world economy, the cultures themselves are being significantly affected by business activities and business practices.” Comment.
4. “In dealing with foreign businesses, the marketer must be particularly aware of the varying objectives and aspirations of management.” Explain.
5. Suggest ways in which persons might prepare themselves to handle unique business customs that may be encountered in a trip abroad.
6. Business customs and national customs are closely interrelated. In which ways would one expect the two areas to coincide, and in which ways would they show differences? How could such areas of similarity and difference be identified?
7. Identify both local and foreign examples of cultural imperatives, electives, and exclusives. Be prepared to explain why each example fits into the category you have selected.
8. Contrast the authority roles of top management in different societies. How do the different views of authority affect marketing activities?
9. Do the same for aspirational patterns.
10. What effects on business customs might be anticipated from the recent rapid increases in the level of international business activity?
11. Interview some foreign students to determine the types of cultural shock they encountered when they first came to your country.
12. Differentiate between:
Private ownership and family ownership
Decentralized and committee decision making
13. In which ways does the size of a customer’s business affect business behavior?
14. Compare three decision-making authority patterns in international business.
15. Explore the various ways in which business customs can affect the structure of competition.
16. Why is it important that the business executive be alert to the significance of differing management styles?
17. Suggest some cautions that an individual from a relationship-oriented culture should bear in mind when dealing with someone from an information-oriented culture.
18. Political payoffs are a problem. How would you react if you faced the prospect of paying a bribe? What if you knew that by not paying, you would not be able to complete a $10 million contract?
19. Differentiate among the following:
subornation
extortion
lubrication
bribery
20. Distinguish between P-time and M-time.
21. Discuss how a P-time person reacts differently from an M-time person in keeping an appointment.
22. What is meant by “laws are the markers of past behavior that society has deemed unethical or socially irresponsible”?
23. What are the three ethical principles that provide a framework to help distinguish between right and wrong? Explain.
24. Visit Transparency International’s Web site and check to see how the CPI Index for countries listed in Exhibits 5.4 and 5.5 have changed. After searching TI’s databank, explain why the changes have occurred. The site is found at http://www.transparency.org.
25. Discuss the pros and cons of “there is no controlling legal authority” as a basis for ethical behavior.
26. “The
company.com
page is a company’s front door and that doorway should be global in scope.” Discuss. Visit several Web pages of major multinational companies and evaluate their “front door” to the global world.
27. Visit the Web sites of Shell and Nike and compare their statements on corporate values. What are the major issues each addresses? Do you think their statements are useful as guides to ethical and socially responsible decision making?
28. Go to your favorite Web reference source and access some recent news articles on Nike and alleged human rights violations. Access the Nike statement on corporate values and write a brief statement on the alleged violations and Nike’s statement of corporate values.
Appendix: Index Scores for Countries and Regions
1Max Weber, The Protestant Ethic and Spirit of Capitalism (London: George Allen & Unwin, 1930, 1976).
2Rohit Deshpande and John U. Farley, “Organizational Culture, Market Orientation, Innovativeness, and Firm Performance: An International Odyssey,” International Journal of Research in Marketing 21, no. 1 (2004), pp. 3–22.
3Geert Hofstede, Culture’s Consequences, 2nd ed. (Thousand Oaks, CA: Sage, 2001).
4Including strategic approaches—see Leo Y. M. Sin, Alan C. B. Tse, Oliver H. M. Yau, Raymond P. M. Chow, and Jenny Lee, “Market Orientation, Relationship Marketing Orientation, and Business Performance: The Moderating Effects of Economic Ideology and Industry Type,” Journal of International Marketing 13, no. 1 (2005), pp. 36–57.
5P. Christopher Earley and Elaine Mosakowski, “Cultural Intelligence,” Harvard Business Review, October 2004, pp. 139–46.
6Alaka N. Rao, Jone L. Pearce, and Katherine Xin, “Governments, Reciprocal Exchange, and Trust Among Business Associates,” Journal of International Business Studies 36 (2005), pp. 104–18; Kam-hon Lee, Gong-ming Qian, Julie H. Yu, and Ying Ho, “Trading Favors for Marketing Advantage: Evidence from Hong Kong, China, and the United States” Journal of International Marketing 13 (2005), pp. 1–35.
7Srilata Zaheer and Akbar Zaheer, “Trust across Borders,” Journal of International Business Studies 37 (2006), pp. 21–29.
8See Michael Song, Jinhong Xie, and Barbara Dyer, “Antecedents and Consequences of Marketing Managers’ Conflict-Handling Behaviors,” Journal of Marketing 64 (January 2000), pp. 50–66, for an excellent discussion of the differences among Chinese, Japanese, U.K., and U.S. managers.
9Peter F. Drucker, Management Challenges for the 21st Century (New York: HarperBusiness, 1999), p. 17.
10Hofstede, Culture’s Consequences.
11Chung-Leung Luk, Oliver H. M. Yau, Alan C. B. Tse, Leo Y. M. Sin, and Raymond P. M. Chow, “Stakeholder Orientation and Business Performance: The Case of Service Companies in China,” Journal of International Marketing 13, no. 1 (2005), pp. 89–110.
12David Picker, “Blood, Sweat, and Type O,” The New York Times, December 14, 2006, p. C15.
13Adam Smith, The Wealth of Nations, Book IV (1776; reprint, New York: Modern Library, 1994), p. 485.
14A Web site that provides information about management styles around the world is www.globalnegotiationresources.com.
15T. Lenartowich and J. P. Johnson, “A Cross-National Assessment of the Values of Latin American Managers: Contrasting Hues or Shades of Gray?” Journal of International Business Studies 34, no. 3 (2003), pp. 266–81.
16This includes how the notion of teamwork varies—see Cristina B. Gibson and Mary E. Zellmer-Bruhn, “Applying the Concept of Teamwork Metaphors to the Management of Teams in Multicultural Contexts,” Organizational Dynamics 31, no. 2 (2002), pp. 101–16.
17Ping Ping Fu et al., “The Impact of Societal Cultural Values and Individual Social Beliefs on the Perceived Effectiveness of Managerial Influence Strategies: A Meso Approach,” Journal of International Business Studies 35, no. 4 (2004), pp. 284–305.
18Michael K. Hui, Kevin Au, and Henry Fock, “Empowerment Effects across Cultures,” Journal of International Business Studies 35, no. 1 (2004), pp. 46–60; William Newburry and Nevena Yakova, “Standardization Preferences: A Function of National Culture, Work Interdependence, and Local Embeddedness,” Journal of International Business Studies 37 (2006), pp. 44–60.
19Xiao-ping Chen and Shu Li, “Cross-National Differences in Cooperative Decision-Making in Mixed-Motive Business Contexts: The Mediating Effect of Vertical and Horizontal Individualism,” Journal of International Business Studies 36 (2005), pp. 622–36.
20Several researchers have empirically demonstrated the influence and downside of such authority structures. See Kathy Fogel, “Oligarchic Family Control, Social Economic Outcomes, and the Quality of Government,” Journal of International Business Studies 37 (2006), pp. 603–22; Naresh Kharti, Eric W. K. Tsang, and Thomas M. Begley, “Cronyism: A Cross-Cultural Analysis,” Journal of International Business Studies 37 (2006), pp. 61–75; Ekin K. Pellegrini and Terri A. Scandura, “Leader-Member Exchange (LMX), Paternalism, and Delegation in the Turkish Business Culture: An Empirical Investigation,” Journal of International Business Studies 37 (2006), pp. 264–79.
21Ted Baker, Eric Gedajlovic, and Michael Lubatkin, “A Framework for Comparing Entrepreneurship Processes across Nations,” Journal of International Business Studies 36 (2005), pp. 492–504.
22Lars Oxelheim and Trond Randoy, “The Anglo-American Financial Influence on CEO Compensation in non–Anglo-American Firms,” Journal of International Business Studies 36 (2005), pp. 470–83.
23David C. McClelland, The Achieving Society (New York: The Free Press, 1985).
24Weber, The Protestant Ethic.
25Jena McGregor, “Flextime: Honing the Balance,” BusinessWeek, December 11, 2006, pp. 64–65.
26Moon Ihlwan and Kenji Hall, “New Tech, Old Habits,” BusinessWeek, March 26, 2007, pp. 48–49.
27George Graen, Ravi Dharwadkar, Rajdeep Grewal, and Mitsuru Wakabayashi, “Japanese Career Progress: An Empirical Examination,” Journal of International Business Studies 37 (2006), pp. 148–61.
28“Sayonara, Salaryman,” The Economist, January 5, 2008, pp. 68–69.
29Sebastian Moffett, “Japan Sweats It Out As It Wages War on Air Conditioning,” The Wall Street Journal, September 11, 2007, pp. A1, A16.
30Michelle Conlin, “Go-Go-Going to Pieces in China,” BusinessWeek, April 23, 2007, p. 88.
31Molly Selvin, “Group Hopes Workers Take Time to Seek More Time Off,” Los Angeles Times, October 20, 2007, p. C1.
32We notice that most predictions about the future of the workplace miss the mark substantially. See Elizabeth Woyke, “Brave New Rat Race,” BusinessWeek, August 20/27, 2007, p. 95.
33Harvard Business Review, May–June 1960, pp. 87–96.
34Edward T. Hall, “Learning the Arabs’ Silent Language,” Psychology Today, August 1979, pp. 45–53. Hall has several books that should be read by everyone involved in international business, including The Silent Language (New York: Doubleday, 1959), The Hidden Dimension (New York: Doubleday, 1966), and Beyond Culture (New York: Anchor Press-Doubleday, 1976).
35Interestingly, the etymology of the term “frankness” has to do with the Franks, an ancient Germanic tribe that settled along the Rhine. This is not mere coincidence; it’s history again influencing symbols (that is, language)!
36James D. Hodgson, Yoshihiro Sano, and John L. Graham, Doing Business with the New Japan (Boulder, CO: Rowman & Littlefield, 2000).
37Ibid.
38Guang Yang and John L. Graham, “The Impact of Computer-Mediated Communications on the Process and Outcomes of Buyer–Seller Negotiations,” working paper, University of California, Irvine, 2006.
39Robert Levine, The Geography of Time (New York: Basic Books, 1998).
40John F. Gaski and Michael J. Etzel, “National Aggregate Consumer Sentiment toward Marketing: A Thirty-Year Retrospective and Analysis,” Journal of Consumer Research 31 (2005), pp. 859–67.
41Philip Kotler and Kevin Lane Keller, Marketing Management (Upper Saddle River, NJ: Prentice Hall, 2006).
42David Welch and Ian Rowley, “Toyota’s All-Out Drive To Stay Toyota,” BusinessWeek, December 3, 2007, pp. 54–55.
43Sin et al., “Marketing Orientation”; John Kuada and Seth N. Buatsi, “Market Orientation and Management Practices in Ghanaian Firms: Revisiting the Jaworski and Kohli Framework,” Journal of International Marketing 13 (2005), pp. 58–88; Reto Felix and Wolfgang Hinck, “Market Orientation of Mexican Companies,” Journal of International Marketing 13 (2005), pp. 111–27.
44Paul D. Ellis, “Distance, Dependence and Diversity of Markets: Effects on Market Orientation,” Journal of International Business Studies 38 (2007), pp. 374–86.
45Gender bias is now taking on a new character that has long-term implications for the workplace. In a reversal of historical patterns, in most industrialized countries, women are now the majority on college campuses. Please see Michelle Colin, “The New Gender Gap,” BusinessWeek, May 26, 2003, pp. 75–81; “The Conundrum of the Glass Ceiling,” The Economist, July 23, 2005, pp. 63–65.
46“Eye on the World,” Marie Claire, April 2007, p. 134.
47January 7, 1991, p. 1.
48Peter Wonacott, “India’s Skewed Sex Ratio Puts GE Sales in Spotlight,” The Wall Street Journal, April 18, 2007, pp. A1, A14.
49Nancy J. Adler, “Pacific Basin Managers: A Gaijin, Not a Woman,” Human Resource Management 26, no. 2 (Summer 1987), pp. 169–91; Nancy J. Adler, International Dimensions of Organizational Behavior (Mason, OH: Southwestern College Publishing, 2007).
50For broader information about global women’s equality (including scores for economic participation and opportunity), go to http://www.weforum.org for the World Economic Forum’s Gender Gap Index, 2007. On the economic opportunity scale, the United States ranks third, Norway eleventh, Germany thirty-second, Japan eighty-third, and Saudi Arabia one hundred-fifteenth, last on the list of 115 countries (see the pictures on page 142).
51Hodgson, Sano, and Graham, Doing Business with the New Japan.
52Pallab Paul, Abhijit Roy, and Kausiki Mukjhopadhyay, “The Impact of Cultural Values on Marketing Ethical Norms: A Study in India and the United States,” Journal of International Marketing 14 (2006), pp. 28–56; Jatinder J. Singh, Scott J. Vitell, Jamal Al-Khatif, and Irvine Clark III, “The Role of Moral Intensity and Personal Moral Philosophies in the Ethical Decision Making of Marketers: A Cross-Cultural Comparison of China and the United States,” Journal of International Marketing 15 (2007), pp. 86–112.
53See http://www.ethics.org and http://www.business-ethics.org for more pertinent information.
54Lisa Bannon and Carlta Vitzthum, “One-Toy-Fits-All,” The Wall Street Journal, April 29, 2003, p. A1.
55“Saudis Bust Barbie’s ‘Dangers,’” CBS News, September 10, 2003.
56Christopher Palmeri, “Hair-Pulling in the Dollhouse,” BusinessWeek, May 2, 2005, pp. 76–77.
57Tarek El-Tablawy, “Razanne Offers Image of Modesty, Self-Esteem for Muslim Girls,” Associated Press, September 6, 2003.
58Brooke Anderson and Simeon Kerr, “Arab Girls Like the Look of New Boy’s Fulla Doll,” Dow Jones Newswires, June 1, 2005.
59Frederik Balfour, “Indonesia: Poised for Rapid Growth?” BusinessWeek Online, November 11, 2007.
60Elisabeth Rosenthal, “As a Cardinal, the Pope Was No Potter Fan,” International Herald Tribune, July 16, 2005, p. 3.2.
61Jack Ewing, “Siemens Braces for a Slap from Uncle Sam,” BusinessWeek, November 26, 2007, pp. 78–79.
62Nelson D. Schwartz, “Bribes and Punishment,” The New York Times, July 15, 2007, p. 14.
63Bribery is attracting greater attention in all countries. Please see Lee et al., “Trading Favors for Marketing Advantage.”
64http://www.transparency.org.
65Cassandra E. DiRienzo, Jayoti Das, Kathryn T. Cort, and John Burbridge Jr., “Corruption and the Role of Information,” Journal of International Business Studies 38 (2007), pp. 320–32.
66Yoich Ishii, Atsuo Konishi, Tatsuro Kuroda, Schu Sugawara, Toru Umeda, and Keiichi Yamazaki, National Integrity Systems, Transparency International Country Study Report, Japan 2006 (Berlin: Transparency International (www.transparency.de), 2006), p. 7.
67Ibid., p. 36.
68Hodgson, Sano, and Graham, Doing Business with the New Japan.
69Rao, Pearce, and Xin, “Governments, Reciprocal Exchange and Trust among Business Associates.”
70H. Rika Houston and John L. Graham, “Culture and Corruption in International Markets: Implications for Policy Makers and Managers,” Consumption, Markets, and Culture 4, no. 3 (2000), pp. 315–40.
71Utz Weitzel and Sjors Berns, “Cross-Border Takeovers, Corruption, and Related Aspects of Governance,” Journal of International Business Studies 37 (2006), pp. 786–806; Alvaro Cuervo-Cazurra, “Who Cares about Corruption,” Journal of International Business Studies 37 (2006), pp. 807–22.
72Yadong Luo, “Political Behavior, Social Responsibility, and Perceived Corruption: A Structural Perspective,” Journal of International Business Studies 37 (2006), pp. 747–66; Chuck C. Y. Kwok and Solomon Tadesse, “The MNC as an Agent of Change for Host-Country Institutions: FDI and Corruption,” Journal of International Business Studies 37 (2006), pp. 767–85.
73Peter Rodriguez, Donald S. Siegel, Amy Hillman, and Lorraine Eden, “Three Lenses on the Multinational Enterprise: Politics, Corruption, and Corporate Social Responsibility,” Journal of International Business Studies 37 (2006), pp. 733–46.
74David A. Waldman, Mary Sully de Luque, Nathan Washburn, Robert J. House, Bolanle Adetoun, Angel Barrasa, Mariya Bobina, Muzaffer Bodur, Yi-jung Chen, Sukhendu Debbarma, Peter Dorfman, Rosemary R. Dzuvichu, Idil Evcimen, Pingping Fu, Mikhail Grachev, Roberto Gonzalez Duarte, Vipin Gupta, Deanne N. Den Hartog, Annebel H.B. de Hoogh, Jon Howell, Kuen-yung Jone, Hayat Kabasakal, Edvard Konrad, P.L. Koopman, Rainhart Lang, Cheng-chen Lin, Jun Liu, Boris Martinez, Almarie E. Munley, Nancy Papalexandris, T.K. Peng, Leonel Prieto, Narda Quigley, James Rajasekar, Francisco Gil Rodriguez, Johannes Steyrer, Betania Tanure, Henk Theirry, V.M. Thomas, Peter T. van den Berg, and Celeste P. M. Wilderom, “Cultural Leadership Predictors of Corporate Social Responsibility Values of Top Management: A GLOBE Study of 15 Countries,” Journal of International Business Studies 37 (2006), pp. 823–37.
75See http://www.csreurope.org.
76Mark Landler, “Norway Tries to Do Well by Doing Good,” The New York Times, May 4, 2007, pp. C1, C4.
77Katherine Yung, “Fluor Chief in War on Bribery,” Dallas Morning News, January 21, 2007, pp. 1D, 4D.
78Eamon Javers, “Steering Clear of Foreign Snafus,” BusinessWeek, November 12, 2007, p. 76. Also see http://www.traceinternational.org.
79Lester Thurow, Head to Head (New York: William Morrow, 1992).
80Gordon Redding, “The Thick Description and Comparison of Societal Systems of Capitalism,” Journal of International Business Studies 36, no. 2 (2005), pp. 123–55.
81Trevor Buck and Azura Shahrim, “The Translation of Corporate Governance Changes across National Cultures: The Case of Germany,” Journal of International Business Studies 36, no. 1 (2005), pp. 42–61.
82Cathy Anterasian, John L. Graham, and R. Bruce Money, “Are U.S. Managers Superstitious about Market Share?” Sloan Management Review 37, no. 4 (1996), pp. 67–77.
83G. Thomas Sims, “German Industry Would Alter Law Requiring Labor Seats on Boards,” The New York Times, April 6, 2007, p. C3.
84Vincentiu Covrig, Sie Tin Lau, and Lilian Ng, “Do Domestic and Foreign Fund Managers Have Similar Preferences for Stock Characteristics? A Cross-Country Analysis,” Journal of International Business Studies 37 (2006), pp. 407–29.
85Tarun Khanna and Krishna G. Palepu, “Globalization and Convergence in Corporate Governance: Evidence from Infosys and the Indian Software Industry,” Journal of International Business Studies 35, no. 6 (2004), pp. 484–507; Kwok Leung, Rabi S. Bhagat, Nancy R. Buchan, Miriam Erez, and Cristina B. Gibson, “Culture and International Business: Recent Advances and Their Implications for Future Research,” Journal of International Business Studies 36, no. 4 (2005), pp. 357–78.
86Don Y. Lee and Philip L. Dawes, “Guanxi, Trust, and Long-Term Orientation in Chinese Business Markets,” Journal of International Marketing 13, no. 2 (2005), pp. 28–56; Steve Hamm and Dexter Robers, “China’s First Global Capitalist,” BusinessWeek, December 11, 2006, pp. 52–58.
87Mark Lam and John L. Graham, Doing Business in the New China, The World’s Most Dynamic Market (New York: McGraw-Hill, 2006).
88Hofstede, Culture’s Consequences.
89This continuum has also been labeled “social context salience” by H. Rika Houston and John L. Graham, “Culture and Corruption in International Markets: Implications for Policy Makers and Managers,” Consumption, Markets, and Culture 4, no. 3 (2000), pp. 315–40.
90Richard E. Nisbett, The Geography of Thought (New York: The Free Press, 2003).
91Lawrence I. Harrison and Samuel P. Huntington (eds.), Culture Matters (New York: Basic Books, 2000).
(Cateora 124)
Cateora. International Marketing, 14th Edition. McGraw-Hill Learning Solutions, 112008.
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