International Business 9e

By Charles W.L. HillMcGraw-Hill/Irwin Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

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Chapter 4Differences in Culture

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How Do Cultural Differences Affect International Business? Understanding and adapting to the local cultural is important international companies cross-cultural literacy - an understanding of how cultural differences across and within nations can affect the way in which business is practiced cross-cultural literacy is important for business successA relationship may exist between culture and the costs of doing business in a country or regionMNEs can be agents of cultural changeMcDonalds

*Managers must be sensitive to trends in the evolution of a culture in order to maintain their effectiveness in the workplace.

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What Is Culture?Culture - a system of values and norms that are shared among a group of people and that when taken together constitute a design for living

wherevalues are abstract ideas about what a group believes to be good, right, and desirablenorms are the social rules and guidelines that prescribe appropriate behavior in particular situationsSociety - a group of people who share a common set of values and norms

*LO 1: Explain what is meant by the culture of a society.While culture is a characteristic of society as a whole, it shapes individual behavior by identifying appropriate and inappropriate forms of human interaction. In a sense culture is the collective programming of the mind which distinguishes the members of one human group from another.

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What Are Values And Norms?Values provide the context within which a societys norms are established and justified and form the bedrock of a cultureNorms include folkways - the routine conventions of everyday lifemores - norms that are seen as central to the functioning of a society and to its social life

*Folkways are the routines conventions of everyday life, but generally have little moral significance. Examples would be dress, eating habits, and social graces. An outsider can easily be forgiven for being ignorant of a folkway. Timeliness is a good example. (One way to reinforce the understanding of this concept is to ask individuals in the class what time they would choose to arrive at a party if the party invitation specified that the party starts at 8pm. It is not uncommon for different individuals in the class to have widely varying positions on the right time to arrive for an 8pm party. ) Mores are serious standards of behavior. The term comes from the Latin mos (customs), and although mores are fewer in number than folkways, they are more coercive. Negative mores are taboos, usually supported by religious or philosophical sanctions. Whereas folkways guide human conduct in the more mundane areas of life, mores tend to control those aspects connected with sex, the family, or religion.Mores can vary greatly between countries: what in one country may be viewed as an innocent flirt in another may constitute a serious affront to someone's dignity or even harassment. While it is acceptable, and even expected, to consume alcohol with business associates in Japan, where evening business contacts often border on drunkenness, such actions would be disallowed in the United Arab Emirates.

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How Are Culture, Society, And The Nation-State Related?The relationship between a society and a nation state is not strictly one-to-one Nation-states are political creations can contain one or more culturesA culture can embrace several nations

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What Determines Culture?The values and norms of a culture evolve over timeDeterminants include religionpolitical and economic philosophieseducationlanguagesocial structure

*LO2: Identify the forces that lead to differences in social culture.

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What Determines Culture?Determinants of Culture

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What Is A Social Structure?Social structure - a societys basic social organizationConsiderthe degree to which the basic unit of social organization is the individual, as opposed to the groupthe degree to which a society is stratified into classes or castes

*Country Focus: Breaking Indias Caste System explores the caste system in India that still influences society today particularly in the rural parts of the country.

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How Are Individuals And Groups Different? A group is an association of two or more people who have a shared sense of identity and who interact with each other in structured ways on the basis of a common set of expectations about each others behaviorindividuals are involved in families, work groups, social groups, recreational groups, etc.Societies place different values on groups

*LO3: Identify the business and economic implications of differences in culture.While in earlier times the group was usually the family or the village, today the group may be a work team or business organization.

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How Are Individuals And Groups Different? In Western societies, there is a focus on the individualindividual achievement is common dynamism of the U.S. economyhigh level of entrepreneurshipBut, creates a lack of company loyalty and failure to gain company specific knowledgecompetition between individuals in a company instead of than team buildingless ability to develop a strong network of contacts within a firm

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How Are Individuals And Groups Different? In many Asian societies, the group is the primary unit of social organization discourages job switching between firmsencourages lifetime employment systemsleads to cooperation in solving business problemsBut, might also suppress individual creativity and initiative

*In a social setting, Asian employees often say they work for Sony, while a Western employee may say he/she is an electrical engineer. In Asia, the worth of an individual is more linked to the success of the group rather than individual achievement.

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What Is Social Stratification?All societies are stratified on a hierarchical basis into social categories, or social strataindividuals are born into a particular stratumMust consider

mobility between stratathe significance placed on social strata in business contexts

*LO2: Identify the forces that lead to differences in social culture.The class of a person may be very important in some hiring and promotion decisions, particularly in sales organizations where the person will be dealing with customers that may also come from a particular class.

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What Is Social Stratification?Social mobility - the extent to which individuals can move out of the strata into which they are borncaste system - closed system of stratification in which social position is determined by the family into which a person is born

change is usually not possible during an individual's lifetime class system - form of open social stratification

position a person has by birth can be changed through achievement or luck

*Why is social stratification important? The social stratification of a society is significant if it affects the operation of business organizations In cultures where there is a great deal of consciousness over the class of others, the way individuals from different classes work together (i.e. management and labor) may be very prescribed and strained in some cultures (i.e. Britain), or have almost no significance in others (i.e. Japan).

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What Is Social Stratification?The significance attached to social strata in business contactsclass consciousness - a condition where people tend to perceive themselves in terms of their class background, and this shapes their relationships with othersan antagonistic relationship between management and labor raises the cost of production in countries with significant class differences

*LO3: Identify the business and economic implications of differences in culture.Class consciousness is a condition where people tend to perceive themselves in terms of their class background, and this shapes their relationships with othersThe mobility permitted by culture affects whether individuals can move up in strata, and can limit the types of jobs and education available. In the U.S., individuals are very mobile ("anyone can become president"), in Britain there is less mobility, and the caste system in India used to limit mobility. Despite the laws against it, the effects of the caste system in India still exist today, and are especially prevalent certain rural areas.

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How Do Religious AndEthical Systems Differ?Religion - a system of shared beliefs and rituals that are concerned with the realm of the sacredFour religions dominate society

ChristianityIslamHinduismBuddhismConfucianism is also important in influencing behavior and culture in many parts of Asia

*LO2: Identify the forces that lead to differences in social culture.Country Focus: Islamic Capitalism in Turkey examines the business environment in Turkey. Turkey, a Muslim state, wants to join the European Union, a move many critics believe would not work. The Opening Case: Culture and Business in Saudi Arabia explores the implications of religion on the countrys business culture.

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How Do Religious AndEthical Systems Differ?World Religions

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How Do Religious AndEthical Systems Differ?Ethical systems - a set of moral principles, or values, that are used to guide and shape behaviorReligion and ethics are often closely intertwinedex. Christian or Islamic ethics

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What Is Christianity?Christianity the worlds largest religionfound throughout Europe, the Americas, and other countries settled by Europeans the Protestant work ethic (Max Weber, 1804) hard work, wealth creation, and frugality is the driving force of capitalism

*LO3: Identify the business and economic implications of differences in culture.At the turn of the century Weber suggested that it was the Protestant work ethic (focus on hard work, wealth creation, and frugality) that was the driving force of capitalism.This is the most widely practiced religion in the world, approximately 20% of the worlds people identify themselves as Christians.Christianity grew out of Judaism and has monotheistic beliefs.Christianity can be subdivided into three separate organizations:The Orthodox churchThe Roman Catholic churchProtestants which is an umbrella for several denominations

Several sociologists have argued that protestants have made a significant economic impactMax Weber commentedThat business leaders and owners of capital, as well as the higher grades of skilled labor, and even more the higher technically and commercially trained personnel of modern enterprises, are overwhelmingly Protestant.That Protestant ethics emphasize the importance of hard work and wealth creation (for the glory of God) and frugality (abstinence from worldly pleasures).That the combination of hard work and the accumulation of capital, which could be used to finance investment and expansion, paved the way for the development of capitalism in Western Europe and subsequently in the United States.

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What Is Islam?Islamthe worlds second largest religion dating to AD 610there is only one true omnipotent God an all-embracing way of life that governs one's being associated in the Western media with militants, terrorists, and violent upheavalsbut, in fact teaches peace, justice, and tolerancefundamentalists have gained political power and blame the West for many social problemspeople do not own property, but only act as stewards for Godsupportive of business, but the way business is practiced is prescribed

*LO3: Identify the business and economic implications of differences in culture.The central principle of Islam is that there is but the one true omnipotent God. Islam requires unconditional acceptance of the uniqueness, power, and authority of God and the understanding that the objective of life is to fulfill the dictates of his will in the hope of admission to paradise

According to Islam, worldly gain and temporal power are an illusion. Other major principles of Islam include: Honoring and respecting parentsRespecting the rights of othersBeing generous but not a squandererAvoiding killing except for justifiable causesNot committing adulteryDealing justly and equitably with othersBeing of pure heart and mindSafeguarding the possessions of orphansBeing humble and unpretentious

The Koran establishes some explicit economic principles, many of which are pro-free enterprise The Koran speaks approvingly of free enterprise and of earning legitimate profit through trade and commerce (the prophet Mohammed was once a trader)The protection of the right to private property is also embedded within Islam

Islam is critical of those who earn profit through the exploitation of othersGiven the Islamic proclivity to favor market-based systems, Muslim countries are likely to be receptive to international businesses as long as those businesses behave in a manner that is consistent with Islamic ethics.

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What Is Hinduism?Hinduismpracticed primarily on the Indian sub-continentfocuses on the importance of achieving spiritual growth and development, which may require material and physical self-denialHindus are valued by their spiritual rather than material achievementspromotion and adding new responsibilities may not be important, or may be infeasible due to the employee's caste

*LO3: Identify the business and economic implications of differences in culture.

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What Is Buddhism?Buddhismhas about 350 millions followersstresses spiritual growth and the afterlife, rather than achievement while in this world does not emphasize wealth creationentrepreneurial behavior is not stresseddoes not support the caste system, individuals do have some mobility and can work with individuals from different classes

*LO3: Identify the business and economic implications of differences in culture.

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What Is Confucianism?Confucianismideology practiced mainly in Chinateaches the importance of attaining personal salvation through right actionhigh morals, ethical conduct, and loyalty to others are stressedthree key teachings of Confucianism - loyalty, reciprocal obligations, and honesty - may all lead to a lowering of the cost of doing business in Confucian societies

*LO3: Identify the business and economic implications of differences in culture.The close ties between Japanese auto companies and their suppliers, called keiretsus, have been an important ingredient in the Japanese success in the auto industry. They have facilitated loyalty, reciprocal obligations, and honesty. In countries where these relationships are more adversarial and not bound by these same values, the costs of doing business are probably higher. Management Focus: DMG-Shanghai underscores the importance of guanxi in getting business done in China.

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What Is The Role Of Language In Culture? Language - the spoken and unspoken (nonverbal communication such as facial expressions, personal space, and hand gestures ) means of communication countries with more than one language often have more than one cultureCanada, Belgium, Spain

*LO2: Identify the forces that lead to differences in social culture.The language of a society allows it to communicate but also directs the attention of people towards certain features of the world and human interactions. A good example is how the Inuit have 24 words for snow, but no word for the overall concept.Language helps describe how different people see the world differently.

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What Is The Role Of Language In Culture? Language is one of the defining characteristics of cultureChinese is the mother tongue of the largest number of peopleEnglish is the most widely spoken language in the worldEnglish is also becoming the language of international businessbut, knowledge of the local language is still beneficial, and in some cases, critical for business successfailing to understand the nonverbal cues of another culture can lead to communication failure

*The language of a society allows it to communicate but also directs the attention of people towards certain features of the world and human interactions. A good example is how the Inuit have 24 words for snow, but no word for the overall concept.Language helps describe how different people see the world differently.

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What Is The Role Of Education In Culture?Formal education is the medium through which individuals learn many of the language, conceptual, and mathematical skills that are indispensable in a modern society important in determining a nations competitive advantageJapans postwar success can be linked to its excellent education systemgeneral education levels can be a good index for the kinds of products that might sell in a countryex. impact of literacy rates

*The knowledge base, training, and educational opportunities available to a country's citizens can also give it a competitive advantage in the market and make it a more or less attractive place for expanding business It is easier to start operations in a nation with a trained workforce, than in nation where time-consuming and costly training is necessary.

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How Does Culture Impact The Workplace?Management processes and practices must be adapted to culturally-determined work-related valuesGeert Hofstede studied culture using data collected from 1967 to 1973 for 100,000 employees of IBMHofstede identified four dimensions that summarized different cultures

*LO4: Recognize how differences in social culture influences values in the workplace. How does a society's culture impact on the values found in the workplace?

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How Does Culture Impact The Workplace?Hofstedes dimensions of culture:

Power distance - how a society deals with the fact that people are unequal in physical and intellectual capabilities Uncertainty avoidance - the relationship between the individual and his fellows Individualism versus collectivism - the extent to which different cultures socialize their members into accepting ambiguous situations and tolerating ambiguityMasculinity versus femininity -the relationship between gender and work roles

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How Does Culture Impact The Workplace?Work-Related Values for 20 Countries

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How Does Culture Impact The Workplace?Hofstede later expanded added a fifth dimension called Confucian dynamism or long-term orientationcaptures attitudes toward time, persistence, ordering by status, protection of face, respect for tradition, and reciprocation of gifts and favorsJapan, Hong Kong, and Thailand scored high on this dimensionthe U.S. and Canada scored low

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Was Hofstede Right?Hofstedes work has been criticized for several reasonsmade the assumption there is a one-to-one relationship between culture and the nation-statestudy may have been culturally boundused IBM as sole source of informationculture is not static it evolvesBut, it is a starting point for understanding how cultures differ, and the implications of those differences for managers

*While Hofstedes results are interesting, one should be careful about reading too much into them because:He assumes a one-to-one relationship between culture and nation-state. It seems clear that a nation can include multiple cultures. The reality of culture in the workplace is considerably more complex than Hofstedes results would suggest.His research team was composed of Europeans and Americans. This shaped their questions as well their analysis of the answers could be shaped by their own biases.All of his respondents were from a single industry the computer industry and were employees of a single company, IBM!

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Does Culture Change?Culture evolves over timechanges in value systems can be slow and painful for a societySocial turmoil - an inevitable outcome of cultural changeas countries become economically stronger, cultural change is particularly commoneconomic progress encourages a shift from collectivism to individualismglobalization also brings cultural change

*LO5: Demonstrate an appreciation for the economic and business implications of cultural change.For example, economic advancement is often accompanied by a shift away from collectivism towards individualism.

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What Do Cultural Differences Mean For Managers?It is important to develop cross-cultural literacycompanies that are ill informed about the practices of another culture are unlikely to succeed in that cultureTo avoid being ill-informedconsider hiring local citizens transfer executives to foreign locations on a regular basisManagers must also guard against ethnocentrisma belief in the superiority of one's own culture

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What Do Cultural Differences Mean For Managers?There is a connection between culture and national competitive advantagesuggests which countries are likely to produce the most viable competitorshas implications for the choice of countries in which to locate production facilities and do business

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*Managers must be sensitive to trends in the evolution of a culture in order to maintain their effectiveness in the workplace. *LO 1: Explain what is meant by the culture of a society.While culture is a characteristic of society as a whole, it shapes individual behavior by identifying appropriate and inappropriate forms of human interaction. In a sense culture is the collective programming of the mind which distinguishes the members of one human group from another.*Folkways are the routines conventions of everyday life, but generally have little moral significance. Examples would be dress, eating habits, and social graces. An outsider can easily be forgiven for being ignorant of a folkway. Timeliness is a good example. (One way to reinforce the understanding of this concept is to ask individuals in the class what time they would choose to arrive at a party if the party invitation specified that the party starts at 8pm. It is not uncommon for different individuals in the class to have widely varying positions on the right time to arrive for an 8pm party. ) Mores are serious standards of behavior. The term comes from the Latin mos (customs), and although mores are fewer in number than folkways, they are more coercive. Negative mores are taboos, usually supported by religious or philosophical sanctions. Whereas folkways guide human conduct in the more mundane areas of life, mores tend to control those aspects connected with sex, the family, or religion.Mores can vary greatly between countries: what in one country may be viewed as an innocent flirt in another may constitute a serious affront to someone's dignity or even harassment. While it is acceptable, and even expected, to consume alcohol with business associates in Japan, where evening business contacts often border on drunkenness, such actions would be disallowed in the United Arab Emirates.*

*LO2: Identify the forces that lead to differences in social culture.*

*Country Focus: Breaking Indias Caste System explores the caste system in India that still influences society today particularly in the rural parts of the country. *LO3: Identify the business and economic implications of differences in culture.While in earlier times the group was usually the family or the village, today the group may be a work team or business organization. *

*In a social setting, Asian employees often say they work for Sony, while a Western employee may say he/she is an electrical engineer. In Asia, the worth of an individual is more linked to the success of the group rather than individual achievement. *LO2: Identify the forces that lead to differences in social culture.The class of a person may be very important in some hiring and promotion decisions, particularly in sales organizations where the person will be dealing with customers that may also come from a particular class. *Why is social stratification important? The social stratification of a society is significant if it affects the operation of business organizations In cultures where there is a great deal of consciousness over the class of others, the way individuals from different classes work together (i.e. management and labor) may be very prescribed and strained in some cultures (i.e. Britain), or have almost no significance in others (i.e. Japan). *LO3: Identify the business and economic implications of differences in culture.Class consciousness is a condition where people tend to perceive themselves in terms of their class background, and this shapes their relationships with othersThe mobility permitted by culture affects whether individuals can move up in strata, and can limit the types of jobs and education available. In the U.S., individuals are very mobile ("anyone can become president"), in Britain there is less mobility, and the caste system in India used to limit mobility. Despite the laws against it, the effects of the caste system in India still exist today, and are especially prevalent certain rural areas.*LO2: Identify the forces that lead to differences in social culture.Country Focus: Islamic Capitalism in Turkey examines the business environment in Turkey. Turkey, a Muslim state, wants to join the European Union, a move many critics believe would not work. The Opening Case: Culture and Business in Saudi Arabia explores the implications of religion on the countrys business culture.

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*LO3: Identify the business and economic implications of differences in culture.At the turn of the century Weber suggested that it was the Protestant work ethic (focus on hard work, wealth creation, and frugality) that was the driving force of capitalism.This is the most widely practiced religion in the world, approximately 20% of the worlds people identify themselves as Christians.Christianity grew out of Judaism and has monotheistic beliefs.Christianity can be subdivided into three separate organizations:The Orthodox churchThe Roman Catholic churchProtestants which is an umbrella for several denominations

Several sociologists have argued that protestants have made a significant economic impactMax Weber commentedThat business leaders and owners of capital, as well as the higher grades of skilled labor, and even more the higher technically and commercially trained personnel of modern enterprises, are overwhelmingly Protestant.That Protestant ethics emphasize the importance of hard work and wealth creation (for the glory of God) and frugality (abstinence from worldly pleasures).That the combination of hard work and the accumulation of capital, which could be used to finance investment and expansion, paved the way for the development of capitalism in Western Europe and subsequently in the United States.

*LO3: Identify the business and economic implications of differences in culture.The central principle of Islam is that there is but the one true omnipotent God. Islam requires unconditional acceptance of the uniqueness, power, and authority of God and the understanding that the objective of life is to fulfill the dictates of his will in the hope of admission to paradise

According to Islam, worldly gain and temporal power are an illusion. Other major principles of Islam include: Honoring and respecting parentsRespecting the rights of othersBeing generous but not a squandererAvoiding killing except for justifiable causesNot committing adulteryDealing justly and equitably with othersBeing of pure heart and mindSafeguarding the possessions of orphansBeing humble and unpretentious

The Koran establishes some explicit economic principles, many of which are pro-free enterprise The Koran speaks approvingly of free enterprise and of earning legitimate profit through trade and commerce (the prophet Mohammed was once a trader)The protection of the right to private property is also embedded within Islam

Islam is critical of those who earn profit through the exploitation of othersGiven the Islamic proclivity to favor market-based systems, Muslim countries are likely to be receptive to international businesses as long as those businesses behave in a manner that is consistent with Islamic ethics.*LO3: Identify the business and economic implications of differences in culture.*LO3: Identify the business and economic implications of differences in culture.*LO3: Identify the business and economic implications of differences in culture.The close ties between Japanese auto companies and their suppliers, called keiretsus, have been an important ingredient in the Japanese success in the auto industry. They have facilitated loyalty, reciprocal obligations, and honesty. In countries where these relationships are more adversarial and not bound by these same values, the costs of doing business are probably higher. Management Focus: DMG-Shanghai underscores the importance of guanxi in getting business done in China. *LO2: Identify the forces that lead to differences in social culture.The language of a society allows it to communicate but also directs the attention of people towards certain features of the world and human interactions. A good example is how the Inuit have 24 words for snow, but no word for the overall concept.Language helps describe how different people see the world differently. *The language of a society allows it to communicate but also directs the attention of people towards certain features of the world and human interactions. A good example is how the Inuit have 24 words for snow, but no word for the overall concept.Language helps describe how different people see the world differently. *The knowledge base, training, and educational opportunities available to a country's citizens can also give it a competitive advantage in the market and make it a more or less attractive place for expanding business It is easier to start operations in a nation with a trained workforce, than in nation where time-consuming and costly training is necessary. *LO4: Recognize how differences in social culture influences values in the workplace. How does a society's culture impact on the values found in the workplace? *

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*While Hofstedes results are interesting, one should be careful about reading too much into them because:He assumes a one-to-one relationship between culture and nation-state. It seems clear that a nation can include multiple cultures. The reality of culture in the workplace is considerably more complex than Hofstedes results would suggest.His research team was composed of Europeans and Americans. This shaped their questions as well their analysis of the answers could be shaped by their own biases.All of his respondents were from a single industry the computer industry and were employees of a single company, IBM!*LO5: Demonstrate an appreciation for the economic and business implications of cultural change.For example, economic advancement is often accompanied by a shift away from collectivism towards individualism. *

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