Cultural Issues Affecting International Trade/Culture Defined

Unit 1.2- Cultural Issues Affecting International Trade

Introduction | Culture Defined | Culture Applied | Summary | Resources | Activities | Assessment Go to Unit 1.1 | Unit 1.2 | Unit 1.3 Return to International Finance Module 1: Political and Economic Risk

Culture Defined

Culture is defined as the integrated system of learned behavior patterns that are distinguishing characteristics of the members of any given society, including everything that a group thinks, says, does and makes – its customs, religion, language, material artifacts and shared systems of attitudes and feelings. Understanding culture involves understanding people, which is, as we all know, an extremely difficult task. Today, because of technology, the internet, the media, travel, and the opening of once-closed societies, culture attitudes have shifted somewhat, becoming more dynamic and less geographically sensitive.

Geert Hofstede, a Danish psychologist, interviewed thousands of IBM employees during his employment and subsequently developed a cultural model which he claims summarizes the different cultures.

Hofstede’s model contains five dimensions, with each dimension given a value between 1 and 120:

1. individualism versus collectivism – looks at the relationship between individuals and others in their society.
2. power distance – quantifies how well individuals accept the different levels of power that may be evident among them.
3. uncertainty avoidance – looks at how well individuals accept uncertainty and risk.
4. masculinity versus femininity – ranks the extent to which a society embraces masculine values (assertiveness, status, financial rewards) versus feminine values (quality of life). Societies with a stronger masculine culture tend to emphasize the differences in the role of the sexes.
5. long-term versus short-term orientation – added to help distinguish the difference in thinking between the East and the West.

Models like Hofstede’s provide international managers with a tool to differentiate, compare, and understand cultures and the individuals they will be dealing with abroad. Two important points every international business person must remember:

1. Understanding culture does not mean judging or ranking cultures or individuals. One’s own culture is not the standard against which others are to be judged. Avoid being ethnocentric.
2. Applying too many generalizations is dangerous. A manager must understand culture as a framework in which to deal with individual business partners.

There is a saying in international business, “Business is based on relationships.” Developing strong relationships with individuals is often the best way to make business ventures successful.

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