1 Strategic Market Management 7th Edition – David AakerSocio Cultural Factors By Dr. Ravindra Pratap Gupta

2 ISSUED IN PUBLIC INTERESTAdvisable “All material in slides need not be understood. Use your current working environment and experience to relate to situations. Errors and omissions regrettable. Subject to corrections on Being brought to notice.”

3 Quote-1 The Future “Culture changes over time & can impact an MNC if it does not observe, access changes required and implement at right time” Dr. Ravindra Pratap Gupta

4 Socio-cultural EnvironmentThat part of the firm's external marketing environment in which social or cultural changes (that is, changes to the value system of a society) act to affect the firm's marketing effort. The changing socio-cultural environment may pose threats or present opportunities for the business. Socio -Cultural Society Culture

5 Critical Elements Of Socio-cultural Environment Of BusinessCaste System, Joint Family System, Patriarchal Family, Marriage, Religion Social Institutions & Systems Customs & Superstitions, Traditions, Conventions, Manners, Attitudes Social Values & Movers Attitude towards Education, Business Morality & Organisational Culture Education & Culture Social Responsibility Others A convention is a set of agreed, stipulated, or generally accepted standards, norms, social norms, or criteria, often taking the form of a custom. Certain types of rules or customs may become law and regulatory legislation may be introduced to formalize or enforce the convention (for example, laws that define on which side of the road vehicles must be driven). In a social context, a convention may retain the character of an "unwritten law" of custom (for example, the manner in which people greet each other, such as by shaking each other's hands). Culture shock refers to the feelings of confusion and uncertainty that you experience when you come into contact with a new culture. Business Ethics, Social Welfare Urbanization, Cross Cultural Issues, Language, Cultural Shock

6 Cultural AppreciationValues Customs Aspects of culture Symbols Language

7 Cultural Diversity Values represent personal or socially preferable modes of conduct or states of existence that are enduring. E.g. respecting Indian values McDonald’s doesn’t sell hamburgers in India. Customs are norms and expectations about the way people do things in a specific country. Each country has its own sets of customs. MNC follow them to get acceptable

8 Facts Socio-cultural factors are beliefs, values, norms and traditions of the society determine how individuals and organisations should be interrelated. It consists of factors which are related to human relationships and the impact of social attitudes and cultural values. These are bearing on the business of the organisation. The value and beliefs associated with colour vary significantly between different cultures. For instance, white indication death and mourning in china and Korea; but some country it expresses happiness and is the colour of the wedding dress of the bride. Socio-cultural environment is an important factor that should be analyzed while formulating company business strategies. If company is ignoring the customs, traditions, tastes and preferences and education. it can affect the business. The difference in language sometimes poses a serious problem, even necessitating a change in the brand name. For a business organisation to be successful in international environment due to appropriate strategies one of most important being effective utilization of socio-cultural environmental factors. Therefore, MNC should study of the social cultural activities of the region, where there are introducing their own business.

9 Socio-cultural factories influencing the operating environment of organisationSocial issues like the role of the business in the society, environment pollution, corruption, use of mass media and consumption of products and services which are offered by the company. Social attitudes and values issues like social customs, beliefs, rituals and practices, changing life style patterns and materialism are expectations of society from the business. Family structure, values and attitudes towards the family and these changes also influence to business and its operation. Role of the women, position, nature of responsibilities in society is also influenced to business and its operation in market. Educational levels, awareness and consciousness of rights and work ethics of the society can be influenced to business and its operation. Social practice, beliefs and associated factors are helpful for promotion of the certain products, services or ideas, the success of marketing depends to a very large extent, on the success in terms of changing social attitudes or value systems.

10 Cross-Cultural Differences and SimilaritiesNot possible to do business same way in every global location Procedures and strategies that work well at home can’t be adopted overseas without modifications

11 Similarities Across CulturesManagers in US and Russian firms believe Where managers performed similar functions, devoting effort to communication and networking increased performance and promotion opportunities

12 Similarities of US firms with foreign companies:As size of company increases, commitment decreases As structure of company becomes more employee focused, commitment increases A positive organizational climate increases employee commitment Behavior Management NOT Culturally Bound!

13 Similarities Across CulturesUS and Korean employees Similar antecedents influenced organizational commitment (position in hierarchy, tenure, age) Size of firm (larger firms = less commitment) Employee focus (greater focus = more commitment) Perceptions of organization (positive view = more commitment)

14 Cross-Cultural Differences and SimilaritiesDifferences across cultures Far more differences than similarities found in cross-cultural research Wages, compensation, pay equity, maternity leave Importance of criteria used in evaluation of employees

15 Cultural Differences in Selected Countries and RegionsDoing Business in China The Chinese place values and principles above money and expediency. Business meetings typically start with pleasantries such as tea and general conversation about the guest’s trip to the country, local accommodations, and family. The Chinese host will give the appropriate indication for when a meeting is to begin and when the meeting is over. Once the Chinese decide who and what is best, they tend to stick with these decisions. Although slow in formulating a plan of action, once they get started, they make fairly good progress.

16 Cultural Differences in Selected Countries and Regions: ChinaIn negotiations, reciprocity is important. If the Chinese give concessions, they expect some in return. Because negotiating can involve a loss of face, it is common to find Chinese carrying out the whole process through intermediaries. During negotiations, it is important not to show excessive emotion of any kind. Anger or frustration is viewed as antisocial and unseemly. Negotiations should be viewed with a long-term perspective. Those who will do best are the ones who realize they are investing in a long-term relationship.

17 Cultural Differences in Selected Countries and RegionsDoing Business in Russia Build personal relationships with partners. When there are contract disputes, there is little protection for the aggrieved party because of the time and effort needed to legally enforce the agreement. Use local consultants. Because the rules of business have changed so much in recent years, it pays to have a local Russian consultant working with the company. Ethical behavior in the United States is not always the same as in Russia. For example, it is traditional in Russia to give gifts to those with whom one wants to transact business. Be patient. In order to get something done in Russia, it often takes months of waiting.

18 Cultural Differences in Selected Countries and Regions: RussiaRussians like exclusive arrangements and often negotiate with just one firm at a time. Russians like to do business face-to-face. So when they receive s, letters or faxes, they often put them on their desk but do not respond to them. Keep financial information personal. Russians wait until they know their partner well enough to feel comfortable before sharing financial data. Research the company. In dealing effectively with Russian partners, it is helpful to get information about this company, its management hierarchy, and how it typically does business.

19 Cultural Differences in Selected Countries and Regions: RussiaStress mutual gain. The Western idea of “win–win” in negotiations also works well in Russia. Clarify terminology. Double-check and make sure that the other party clearly understands the proposal, knows what is expected and when, and is agreeable to the deal. Be careful about compromising or settling things too quickly because this is often seen as a sign of weakness. Russians view contracts as binding only if they continue to be mutually beneficial, so continually show them the benefits associated with sticking to the deal.

20 Cultural Differences in Selected Countries and RegionsDoing business in France When shaking hands with a French person, use a quick shake with some pressure in the grip. It is extremely important to be on time for meetings and social occasions. Being “fashionably late” is frowned on. During a meal, it is acceptable to engage in pleasant conversation, but personal questions and the subject of money are never brought up. Visiting business people should try very hard to be cultured and sophisticated.

21 Cultural Differences in Selected Countries and Regions: FranceThe French tend to be suspicious of early friendliness in the discussion and dislike first names, taking off jackets, or disclosure of personal or family details. In negotiations the French try to find out what all of the other side’s aims and demands are at the beginning, but they reveal their own hand only late in the negotiations. The French do not like being rushed into making a decision, and they rarely make important decisions inside the meeting. The French tend to be very precise and logical in their approach to things, and will often not make concessions in negotiations unless their logic has been defeated.

22 Cultural Differences in Selected Countries and RegionsDoing business in Arab countries It is important never to display feelings of superiority, because this makes the other party feel inferior. Let one’s action speak for itself and not brag or put on a show of self-importance. One should not take credit for joint efforts. A great deal of what is accomplished is a result of group work, and to indicate that one accomplished something alone is a mistake. Much of what gets done is a result of going through administrative channels in the country. It often is difficult to sidestep a lot of this red tape, and efforts to do so can be regarded as disrespect for legal and governmental institutions.

23 Cultural Differences in Selected Countries and Regions: Arab CountriesConnections are extremely important in conducting business. Patience is critical to the success of business transactions. This time consideration should be built into all negotiations. Important decisions usually are made in person, not by correspondence or telephone. This is why an MNC’s personal presence often is a prerequisite for success in the Arab world. Additionally, while there may be many people who provide input on the final decision, the ultimate power rests with the person at the top, and this individual will rely heavily on personal impressions, trust, and rapport.

24 Cultural Differences in Selected Countries and RegionsDoing business in India It is important to be on time for meetings. But???? Personal questions should not be asked unless the other individual is a friend or close associate. Titles are important, so people who are doctors or professors should be addressed accordingly. Public displays of affection are considered to be inappropriate, so one should refrain from backslapping or touching others.

25 Cultural Differences in Selected Countries and Regions: IndiaBeckoning is done with the palm turned down; pointing often is done with the chin. When eating or accepting things, use the right hand because the left is considered to be unclean. The namaste gesture can be used to greet people; it also is used to convey other messages, including a signal that one has had enough food. Bargaining for goods and services is common; this contrasts with Western traditions, where bargaining might be considered rude or abrasive.

26 Strategy For Managing Across CulturesMNC strategies must address the cultural similarities and differences in their varied markets Globalization Vs national responsiveness-need to understand the difference consumer taste Regional market response Vs national standards & regulations by government Globalization is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology.

27 MNC analysis of Socio-Cultural EnvironmentCultural Acceptance Socio-Economic Environment

28 MNC analysis of Socio-Cultural EnvironmentInternational marketer surveys Depth of traditional beliefs and attitudes and dominant cultural elements Power of opinion leaders and change agents Communication from different media Cultural Environment Cultural Acceptance Socio-Economic Environment

29 MNC analysis of Socio-Cultural EnvironmentPossible enhancement by internal training General cultural information Culture-specific information packets based on present & past history. Self-specific information & finding own cultural paradigm. Cultural Environment Cultural Acceptance Socio-Economic Environment

30 MNC analysis of Socio-Cultural EnvironmentPopulation and its characteristics Ageing of world populations. Economic Integration NAFTA, EU, SARC, ASEAN, NATO. Cultural Environment Cultural Acceptance Socio-Economic Environment

31 Culture and the workplace (Hofstede)Finds national culture dimensions meaningful to business Basis: Work related values not universal National values may persist over MNC efforts to create corporate culture Home country values often used to determine HQ policies MNC may create morale problems with uniform moral norms Purpose: understanding of business situations across-cultures MUST understand own culture & other culture’s

32 Culture and the workplaceGeert Hofstede – sampled 117,000 IBM employees Compared employee attitudes and values across 40 countries He first focused his research on the 40 largest countries, and then extended it to 50 countries and 3 regions Dimensions of national cultures Power distance index (PDI) Individualism vs. collectivism (IDV) Uncertainty avoidance index (UAI) Masculinity vs. femininity (MAS) Long-term orientation vs. short-term orientation (LTO) Indulgence vs. restraint (IND) Geert Hofstede was hired by IBM in 1965 as the first personnel researcher for the European head office to conduct an international employee morale survey. Hofstede and his team of six researchers prepared the first internationally standardized questionnaire for a simultaneous survey, which consisted of 180 standardized items. During that time conducting an international survey was facing distribution problems as the internet was not yet well established and questionnaires needed to be filled out manually and sent via post back to the headquarter. Issues, such as missing, stolen or lost questionnaires were not uncommon (ibid). Over these six years, Hofstede and his colleagues collected and analysed questionnaires of IBM employees in 53 and later in 72 countries all over the world, from which over 88,000 people responded (Hofstede, 1980; Hofstede, 2001; Jones, 2007; Powell, 2006). IBM’s international employee attitude survey program was carried out between 1967 and 1973 with the purpose of identifying preferences in specific areas of employee morale and attitude (French, 2010; Hofstede, 2001). A factor analysis of 32 questions in 40 countries was made from the obtained data. Four bipolar dimensions emerged from that and became the basis of his characterisations of culture for each country (Jones, 2007). The first study was limited to 40 countries due to low response rates in some countries. A minimum of 50 respondents needed to be ensured for a reasonable result (Hofstede, 2001). From 1971 to 1973 Hofstede taught organisational behaviour at the IMEDE Management Development Institute in Lausanne, Switzerland, a postgraduate and post experience international business school. Using the IBM questionnaire as teaching material he decided to administer a reduced version of the IBM survey and obtained data from 362 managers from 30 different countries. It provided the first hard proof for Hofstede that the differences within the IBM study was not company but country specific (Hofstede, 2001; Hofstede et al., 2010).

33 Power Distance (PDI) Degree of social inequality considered normal by people Distance between individuals at different levels of a hierarchy Scale: from equal (small power distance) to extremely unequal (large power distance)  The Power Distance Index (PDI) is defined as “the extent to which the less powerful members of organizations and institutions (like the family) accept and expect that power is distributed unequally.” In this dimension, inequality and power is perceived from the followers, or the lower level. A higher degree of the Index indicates that hierarchy is clearly established and executed in society, without doubt or reason. A lower degree of the Index signifies that people question authority and attempt to distribute power

34 Individualism Vs. Collectivism (IDV)Degree to which people in a country prefer to act as individuals rather than in groups Describes the relations between the individual and his/her fellows This index explores the “degree to which people in a society are integrated into groups.” Individualistic societies have loose ties that often only relates an individual to his/her immediate family. They emphasize the “I” versus the “we.” Its counterpart, collectivism, describes a society in which tightly-integrated relationships tie extended families and others into in-groups. These in-groups are laced with undoubted loyalty and support each other when a conflict arises with another in-group.

35 Uncertainty Avoidance (UAI)Degree of need to avoid uncertainty about the future Degree of preference for structured versus unstructured situations Structured situations: have tight rules may or may not be written down High uncertainty avoidance: people with more nervous energy (vs easy-going), rigid society. The Uncertainty Avoidance Index is defined as “ a society's tolerance for ambiguity,” in which people avert or embrace an event of something unexpected, unknown, or away from the status quo. Structured-Societies that score a high degree in this index opt for stiff codes of behavior, guidelines, laws, and generally rely on absolute Truth, or the belief that one lone Truth dictates everything and people know what it is. Unstructured situations-A lower degree in this index shows more acceptance of differing thoughts/ideas. Society tends to impose fewer regulations, ambiguity is more accustomed to, and the environment is more free-flowing.

36 Masculinity Vs. Femininity (MAS)Division of roles and values in a society Masculine values prevail: Assertiveness, success, competition In this dimension, masculinity is defined as “a preference in society for achievement, heroism, assertiveness and material rewards for success.” Feminine values prevail: Quality of life, maintenance of warm personal relationships, service, care for the weak, solidarity. Its counterpart represents “a preference for cooperation, modesty, caring for the weak and quality of life.”

37 Long-term orientation vs. short-term orientation (LTO)This dimension associates the connection of the past with the current and future actions/challenges. A lower degree of this index (short-term) indicates that traditions are honored and kept, while steadfastness is valued. Societies with a high degree in this index (long-term) views adaptation and circumstantial, pragmatic problem-solving as a necessity. A poor country that is short-term oriented usually has little to no economic development, while long-term oriented countries continue to develop to a point.

38 Indulgence vs. restraint (IND)This dimension is essentially a measure of happiness; whether or not simple joys are fulfilled. Indulgence is defined as “a society that allows relatively free gratification of basic and natural human desires related to enjoying life and having fun.” Its counterpart is defined as “a society that controls gratification of needs and regulates it by means of strict social norms.” Indulgent societies believe themselves to be in control of their own life and emotions; restrained societies believe other factors dictate their life and emotions.

39 Differences between cultures on the values dimensionsPutting together national scores (from 1 for the lowest to 120 for the highest), Hofstede's six-dimensions model allows international comparison between cultures, also called comparative research Power distance index shows very high scores for Latin and Asian countries, African areas and the Arab world. On the other hand Anglo and Germanic countries have a lower power distance (only 11 for Austria and 18 for Denmark). For example, the United States has a 40 on the cultural scale of Hofstede's analysis. Compared to Guatemala where the power distance is very high (95) and Israel where it is very low (13), the United States is in the middle. In Europe, power distance tends to be lower in northern countries and higher in southern and eastern parts: for example, 68 in Poland and 57 for Spain vs. 31 for Sweden and 35 for the United Kingdom. Regarding the individualism index, there is a clear gap between developed and Western countries on one hand, and less developed and eastern countries on the other. North America and Europe can be considered as individualistic with relatively high scores: for example, 80 for Canada and Hungary. In contrast, Asia, Africa and Latin America have strongly collectivist values: Colombia scores only 13 points on the IDV scale and Indonesia 14. The greatest contrast can be drawn comparing two extreme countries on this dimension: 6 points for Guatemala vs. 91 points for the United States. Japan and the Arab world have middle values on this dimension.

40 Differences between cultures on the values dimensionsUncertainty avoidance scores are the highest in Latin American countries, Southern and Eastern Europe countries including German speaking countries, and Japan. They are lower for Anglo, Nordic, and Chinese culture countries. For example, Germany has a high UAI (65) and Belgium even more (94) compared to Sweden (29) or Denmark (23) despite their geographic proximity. However, few countries have very low UAI. Masculinity is extremely low in Nordic countries: Norway scores 8 and Sweden only 5. In contrast, Masculinity is very high in Japan (95), and in European countries like Hungary, Austria and Switzerland influenced by German culture. In the Anglo world, masculinity scores are relatively high with 66 for the United Kingdom for example. Latin countries present contrasting scores: for example Venezuela has a 73 point score whereas Chile's is only 28. High long term orientation scores are typically found in East Asia, with China having 118, Hong Kong 96 and Japan 88. They are moderate in Eastern and Western Europe, and low in the Anglo countries, the Muslim world, Africa and in Latin America. However there are less data about this dimension. There are even less data about the sixth dimension. Indulgence scores are highest in Latin America, parts of Africa, the Anglo world and Nordic Europe; restraint is mostly found in East Asia, Eastern Europe and the Muslim world.

41 Correlations of values with other country differencesResearchers have grouped some countries together by comparing countries' value scores with other country difference such as geographical proximity, shared language, related historical background, similar religious beliefs and practices, common philosophical influences, identical political systems, in other words everything which is implied by the definition of a nation's culture. For example, low power distance is associated with consultative political practices and income equity, whereas high power distance is correlated with unequal income distribution, as well as bribery and corruption in domestic politics. Individualism is positively correlated with mobility and national wealth. As a country becomes richer, its culture becomes more individualistic.

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43 Applications of Hofstede modelCultural-difference awareness of countries The tool can be used to give a general overview and an approximate understanding of other cultures, what to expect from them and how to behave towards groups from other countries. Practical applications of theory leading to success in Business When it comes to business, promoting cultural sensitivity will help people work more effectively when interacting with people from other countries, and will participate to make sure transactions are successful. International communication For professionals who work internationally; people who interact daily with other people from different countries within their company or with other companies abroad; Hofstede's model gives insights into other cultures. In fact, cross-cultural communication requires being aware of cultural differences because what may be considered perfectly acceptable and natural in one country, can be confusing or even offensive in another. All the levels in communication are affected by cultural dimensions: verbals (words and language itself), non verbal (body language, gestures) and etiquette do's and don'ts (clothing, gift-giving, dining, customs and protocol)

44 Applications of Hofstede modelInternational negotiation In international negotiations, communication style, expectation, issue ranking and goals will change according to the negotiators' countries of origin. If applied properly, the understanding of cultural dimensions should increase success in negotiations and reduce frustration and conflicts. For example, in a negotiation between Chinese and Canadian, Canadian negotiators may want to reach an agreement and sign a contract, whereas Chinese negotiators may want to spend more time for non business activities, small talks and hospitality with preferences for protocol and form in order to first establish the relationship. International management International management and cross-cultural leadership. Decisions taken have to be based on the country's customs and values. International marketing In the field of global branding, advertising strategy and consumer behavior. As companies try to adapt their products and services to local habits and preferences they have to understand the specificity of their market. For example, if you want to market cars in a country where the uncertainty avoidance is high, you should emphasize on their safety, whereas in other countries you may base your advertisement on the social image they give you. Cell phone marketing is another interesting example of the application of Hofstede's model for cultural differences: if you want to advertise cell phones in China, you may show a collective experience whereas in the United States you may show how an individual uses it to save time and money. 

45 Limitations of Hofstede's modelQuestionable choice of national level Individual level: cultural dimensions versus individual personalities-Aside from Hofstede's 5 cultural dimensions, there are other factors on which culture can be analyzed. There are other levels for assessing culture. These levels are overlooked often because of the nature of the construction of these levels. Organizational level & Occupational level-Even if country indices were used to control for wealth, latitude, population size, density and growth, privileged males working as engineers or sales personnel in one of the elite organizations of the world, pioneering one of the first multinational projects in history, can not be claimed to represent their nations. Gender level-There is sampling discrepancy that disqualifies the survey from being authoritative on organizations, or societies, or nations as the interviews involved sales and engineering personnel with few, if any, women and undoubtedly fewer social minorities participating (Moussetes, 2007).

46 Managerial ImplicationsEthnocentrism vs Polycentrism Must a company adapt to local cultures or can corporate -- often home-country dominated -- culture prevail? Cross-cultural literacy essential Do some cultures offer a national competitive advantage over others?

47 Dr Ravindra Pratap GuptaQuote-2 “"The most serious mistakes are not being made as a result of wrong answers. The truly dangerous thing is not asking the right questions." Dr Ravindra Pratap Gupta

48 Question Q 10. Discuss Socio-Cultural Environment?Q11. Describe culture using Hofstede’s Model ?

49 Thanks

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