“Over-generalization is the enemy of science.” —John Kenneth Galbraith

Delis Food Corp. Case Discussion- International Marketing
12/09/2019
real-world applicability in working in teams
12/09/2019

“Over-generalization is the enemy of science.” —John Kenneth Galbraith

271

Chapter 9

Sociocultural Factors

 

Chapter ObjeCtives

this chapter will:

• Define the term “sociocultural” as a combination of societal, political, and cultural norms and responses and discuss their influence in international business

• Discuss how attitudes and beliefs influence human behavior, especially attitudes about time, achievement, work, change, and occupational status

• Present the influence of aesthetics and material culture within different societies

• Examine how communication, both verbal and nonverbal, may serve as a barrier to international business operations

• Investigate the importance of social status and the family within different cultures and their effect on the business environment

• Identify the role of multinational corporations as agents of change in the international community

soCioCultural FaCtors and international Business Multinational corporations operate in different host countries around the world and have to deal with a wide variety of political, economic, geographical, technological, and busi- ness situations. Moreover, each host country has its own society and culture, which are different in many important ways from almost every other society and culture, although there are some commonalities. Although society and culture do not appear to be a part of business situations, they are actually key elements in shaping how business is conducted,

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from what goods are produced and how and through what means they are sold, to the establishment of industrial and management patterns and the determination of the success or failure of a local subsidiary or affiliate.

Society and culture influence every aspect of an MNC’s overseas business, and a successful MNC operation, whether it involves marketing, finance, operations, informa- tion systems, or human resources, has to be acutely aware of the predominant attitudes, feelings, and opinions in the local environment. Differences in values and attitudes between the management at the parent offices and expatriate managers at the subsidiary or affiliate level, on the one hand, and local managers and employees, on the other, can lead to serious operational and functional problems, which arise not because there are individual problems but because of the important differences between the societies and cultures. Society and culture often mold general attitudes about fundamental aspects of life, such as time, money, productivity, and achievement, all of which can differ widely across countries and lead to differing expectations between the management in the home office and local employees of subsidiaries and affiliates.

While some sociocultural differences are obvious, others are relatively subtle though equally important. It is often difficult for international managers to catch on to these subtle differences if they have not lived or worked in cultures other than that of the home country. Cultural dif- ferences can be profound, but expatriate managers who make some attempt to understand them can ensure that these gaps do not materially affect the performance of business.

MNCs have realized, sometimes through costly blunders, that sociocultural factors are vital ingredients that make up the overall business environment and that it is essential to appreciate these differences and their influences on business before attempting to set up an operation in a host country.

soCiety, Culture, and soCioCultural ForCes There are many definitions of culture. In general, culture can be defined as the entire set of social norms and responses that dominates the behavior of a population and makes each social environment different. Culture is the conglomeration of beliefs, rules, techniques, institutions, and artifacts that characterize a human population. It consists of the learned patterns of behavior common to members of a given society—the unique lifestyle of a particular group of people.

The various aspects of culture are interrelated; culture influences individual and group behavior and determines how things are done. Features of culture include religion, educa- tion, caste structure, politics, language differences, and production.

Society refers to a political and social entity that is defined geographically. To under- stand society and culture, we must relate one to the other—hence the term “sociocul- tural.” To be successful in their relationships with people in other countries, international managers must study and understand the various aspects of culture.

How should one begin? With as broad a concept as culture, it is necessary to utilize some type of classification scheme as a guide to studying or comparing cultures. Table 9.1 outlines Murdock’s list of cultural universals that occur in all cultures.1 While this

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Elements of Culture 273

schematic is limited by its one-dimensional approach, it provides an initial guide and checklist for the international firm and manager. For example, the international firm sell- ing contraceptives must be aware that it is dealing with the family customs, population policy, and sexual restrictions of different cultures. Since many individuals base their decisions regarding contraception on religious beliefs, the seller must also consider this aspect of various cultures in the plan.

Students often experience cultural differences when they first travel abroad. The things that cause cognitive dissonance during these trips often represent the things typically taken for granted at home. These things taken for granted often help to identify elements of culture. Students should keep in mind that observing culture can often resemble ob- serving an iceberg. What lies beneath the surface may be more meaningful than things visible to the naked eye (see Figure 9.1).

eleMents oF Culture The number of human variables and different types of business functions preclude an exhaustive discussion of culture here. Instead, we have broken down the broad area of culture into some major topics to facilitate study.

Table 9.1 Murdock’s List of Cultural Universals

Age grading Games Music Athletic sports Gestures Mythology Bodily adornment Gift giving Numerals Calendar Government Obstetrics Cleanliness training Greetings Penal sanctions Community organization Hairstyles Personal names Cooking Hospitality Population policy Cooperative labor Housing Postnatal care Cosmology Hygiene Pregnancy usages Courtship Dancing Decorative art

Incest taboos Inheritance rules Joking

Property rights Propitiation of supernatural beings

Divination Division of labor

Kin Groups Kinship nomenclature

Puberty customs Religious rituals

Dream interpretation Language Residence rules

Education Law Sexual restrictions

Ethics Luck/superstitions Soul concepts

Ethno-botany Magic Status differentiation

Etiquette Marriage Supernatural beings

Faith healing Mealtimes Surgery

Family feasting Medicine Tool making

Fire-making Folklore

Modesty of natural functions Trade Visiting

Food taboos Funeral rites

Mourning Weather control Weaving

Source: Murdock, 1945.

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attitudeS aNd beliefS In every society there are norms of behavior based on the attitudes, values, and beliefs that constitute a part of its culture. The attitudes and beliefs of a culture, which vary from country to country, influence nearly all aspects of human behavior, providing guidelines and organization to a society and its individuals. Identifying the attitudes and beliefs of a society, and how or whether they differ from one’s own culture, will help the business- person more easily understand people’s behavior.

attitudeS about tiMe Everywhere in the world people use time to communicate with one another. In inter- national business, attitudes about time are displayed in behavior regarding punctuality, responses to business communications, responses to deadlines, and the amounts of time that are spent waiting in an outer office for an appointment. For example, while Ameri- cans are known to be punctual, other cultures give less importance to being on time. In terms of business communications, Japanese companies may not respond immediately to an offer from a foreign company. What a foreign company may see as rejection of an offer or disinterest may simply be the lengthy time the Japanese company takes to review the details of a deal. In fact, the US emphasis on speed and deadlines is often used against Americans in foreign business dealings in which local business managers have their own schedules.

Figure 9.1 Iceberg Theory of Culture

Source: Adapted from Hall, 1976.

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attitudeS about Work aNd leiSure Most people in industrial societies work many more hours than are necessary to satisfy their basic needs for food, clothing, and shelter. Their attitudes toward work and achieve- ment are indicative of their view of wealth and material gain. These attitudes affect the types, qualities, and numbers of individuals who pursue entrepreneurial and management careers as well as the way workers respond to material incentives.

Many industrial psychologists have conducted research in this area to determine what motivates people to work more than is necessary to provide for their basic needs. One explanation is the Protestant ethic, which has its basis in the Reformation, when work was viewed as a means of salvation and people preferred to transform productivity gains into additional output rather than additional leisure. Europeans and Americans are typically considered to adhere to this work ethic because they generally view work as a moral virtue and look unfavorably on the idle. In comparison, in places where work is considered necessary only to obtain the essentials for survival, people may stop working once they obtain the essentials.

Today, few other societies hold to this strict basic concept of work for work’s sake, and leisure is viewed more highly in some societies than in others. It has been argued that many Asian economies are characterized by limited economic needs that reflect the culture. Therefore, it is expected that if incomes start to rise, workers would tend to re- duce their efforts, so personal income would remain unchanged. The promise of overtime pay may fail to keep workers on the job, and raising employees’ salaries could result in their working less, a phenomenon that economists have called the backward-bending labor supply curve. In contrast, the pursuit of leisure activities may have to be a learned process. After a long period of sustained work activity with little time for leisure, people may have difficulty in deciding what to do with additional free time.

These attitudes, however, can change. The demonstration effect of seeing others with higher incomes and better standards of living has motivated workers in such cultures to put in longer hours to improve their own financial status and material well-being. Ad- ditionally, attitudes about work are shaped by the perceived rewards and punishments of the amount of work. In cultures where both rewards for greater amounts of work and punishments for lesser amounts of work are low, there is little incentive for people to work harder than absolutely necessary. Moreover, when the outcome of a particular work cycle is certain, there is little enthusiasm for the work itself. Where high uncertainty of success is combined with some probability of a very positive reward for success, one finds the greatest enthusiasm for work.

attitudeS about achieveMeNt Cultural differences in the general attitude toward work are also accompanied by signifi- cant national differences in achievement motivation. In some cultures, particularly those with highly stratified and hierarchical societies, there is a tendency to avoid personal

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responsibility and to work according to precise instructions that are received from su- pervisors and followed to the letter. In many societies, especially where social security is low and jobs are prized, there is both a tendency to avoid taking risk and little innovation in work or production processes. In such cultures, the prospect of higher achievement is not considered attractive enough to warrant taking avoidable risks. In many industrial societies, however, attitudes toward personal achievement are quite different. Personal responsibility and the ability to take risk for potential gain are considered valuable instru- ments in achieving higher goals. In fact, in many cultures the societal pressure to achieve is so intense that individuals are automatically driven to attempt ambitious goals.

Attitudes among workers and managers often influence the types of management that has to be utilized to achieve corporate goals. In a culture that emphasizes risk-taking, personal responsibility, and individual decision-making, a decentralized management system would be appropriate. In a culture where there is a tendency to put in only ad- equate amounts of work and where achievement is not a valued personal attribute, the company will follow a more centralized management system, with only limited delegation of decision-making authority.

attitudeS about chaNge The international manager must understand what aspects of a culture resist change, how those areas of resistance differ among cultures, how the process of change takes place in different cultures, and how long it will take to implement change. There are two conflict- ing forces within a culture regarding change. People attempt to protect and preserve their culture with an elaborate set of sanctions and laws invoked against those who deviate from their norms. Differences are perceived in light of the belief that “my method is right; thus, the other method must be wrong.”

These contradictory forces suggest the public’s awareness that the cultural environment is continually changing and that a culture must change in order to ensure its own continu- ity. In other words, to balance these attitudes, the manager must remember that the closer a new idea can be related to a traditional one when illustrating its relative advantage, the greater the acceptance of that new concept. Usually cultures with centuries-old traditions that have remained closed to outside influences are more resistant to change than other cultures. The level of education in a society and the exposure of its people to knowledge and the experience of other cultures is an extremely important determinant of its attitude toward change. The influence and nature of religious beliefs in a society also influence attitudes about change.

attitudeS about jobS The type of job that is considered most desirable or prestigious varies greatly across dif- ferent cultures. Thus, while the medical and legal professions are considered extremely prestigious in the United States, civil service is considered the most prestigious occupation

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in several developing countries. The importance of a particular profession in a culture is an important determinant of the number and quality of people who seek to join that profession. Thus, in a country where business is regarded as a prestigious occupation, the MNC will be able to tap a large, well-qualified pool of local managers. On the other hand, if business is not considered an important profession, much of the country’s talent will be focused elsewhere.

There is great emphasis in some countries on being one’s own boss, and the idea of working for someone, even if that happens to be a prestigious organization, tends to be frowned on. In many countries, however, MNCs are able to counter the lower prestige of business as a profession by offering high salaries and other forms of compensation. Some MNCs, in fact, have succeeded in luring some of the best local talent away from jobs that are traditionally considered the most prestigious in those countries. In most cultures, there are some types of work that are considered more prestigious than others, and certain occupations carry a perception of greater rewards than others, which may be because of economic, social, or traditional factors.

doeS religioN affect coMMerce? International business is affected by religious beliefs in many ways, because religion can provide the spiritual foundation of a culture. Business can bring about modernization that disrupts religious traditions, and international business can conflict with holy days and religious holidays. Cultural conflicts in the area of religion can be quite serious. For example, an MNC would have problems with a subsidiary where employees traditionally enjoy a month-long religious holiday.

Religion can also impose moral norms on culture. It may insist on limits, particularly the subordination of impulse to moral conduct. Islamic finance is a variant of international business in Muslim countries that ban the assessment of risk and look unfavorably on excessive risk-taking or speculative endeavors, given their religious beliefs. Another ex- ample of business conflicting with religion is the development of a promotional campaign for contraceptives in any of the predominantly Roman Catholic countries.

In certain countries, religion may require its followers to dress in a particular manner or maintain a certain type of physical appearance, which may conflict with the MNC’s appearance and presentation norms. Certain products manufactured by the MNC or some ingredients used in manufacturing may be taboo in some religions. For example, beef and tallow are taboo in the Hindu religion and cannot be used as ingredients in soap manufac- turing in India. Similarly, pork products cannot be sold or used in manufacture in Muslim countries because pork is religiously impure according to the tenets of Islam.

In many religions, the general philosophy of life is completely different from that in the Western world. Some Asian religions, for example, teach that nothing is permanent and therefore the world is an illusion. To followers of such beliefs, time is cyclical— from birth to death to reincarnation—and the goal of salvation is to escape the cycle and move into a state of eternal bliss (nirvana). These religious beliefs directly affect how

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and why people work; for example, Buddhists and Hindus are supposed to eliminate all desires and therefore may have little motivation for achievement and the acquisition of material goods.

aeStheticS Aesthetics pertains to the sense of beauty and good taste of a culture and includes myths, tales, dramatization of legends, and more modern expressions of the arts: drama, music, painting, sculpture, architecture, and so on. Like language, art serves as a means of com- munication. Color and form are of particular interest to international business because in most cultures these elements are used as symbols that convey specific meanings. Green is a popular color in many Muslim countries but is often associated with disease in countries with dense, green jungles. In France, the Netherlands, and Sweden, green is associated with cosmetics. Similarly, different colors represent death in different cultures. In the United States and many European countries, black represents death, while in Japan and many other Asian countries, white signifies death.

In many countries physical contact in public by persons of opposite sexes is not considered proper, and exposure of the human body is treated as obscene. MNCs must be exceptionally careful in designing their advertising programs, the packaging of their products, and the content of their verbal messages to ensure that they do not offend the aesthetic sensibilities of the country they are operating in.

Material culture Material culture refers to the things that people use and enjoy and includes all human- made objects. Its study is concerned with technology and economics. Material cultures differ very significantly because of tradition, climate, economic status, and a host of other factors. Material culture is an extremely important issue to be considered by an MNC. Almost everything a society consumes, or, in other words, whatever the MNC sells, or hopes to sell, is determined by the material culture of the population. For example, sell- ing humidifiers in a tropical country would be a failure because they are not needed by the local people and are simply not a part of the material culture. Alternatively, selling American-style barbecues would be a failure in parts of the world where outdoor cookery is not a part of popular material culture.

Technology is an important factor that affects the material culture of a society. As more and more new products and processes are made available by technology and become familiar to the population, they ultimately become a part of the material culture. One ex- ample is the cell phone, which has become an integral part of the material culture of most industrialized societies. Therefore, a US multinational might target France or Australia as a major market for selling cell phone accessories. There would not, however, be much of a market for this product in the nations of sub-Saharan Africa, at least at present, because cell phones are not as large a part of the material culture in these countries.

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Tradition also determines material culture to a considerable extent. The French, for example, prefer drinking wine, while Germans prefer drinking beer, the distinction being largely traditional, but critical for a company aiming to establish a market for alcoholic beverages in these countries.

A country’s particular physical and geographic circumstances also play an important part in influencing its material culture. Space limitations in Japan prevent the use of large domestic appliances, such as large-capacity deep freezers or refrigerators, and preclude a real estate market featuring rambling suburban homes, even though the economy may be prosperous enough to pay for these luxuries. Thus, suburban homeowner living is not a part of the material culture of Japan, and this affects the type of products the Japanese middle class will or will not buy. For example, sales of lawn mowers, backyard pools, and playgrounds are likely to be extremely low in Japan, while sales of compact, sophisticated appliances and luxuries that can be accommodated in small apartments are likely to be very high.

literacy rate The literacy rate of a potential overseas market or facility is used by many areas of the international business firm. The marketer uses it to determine the types and sophistica- tion of advertising to employ. The personnel manager uses it as a guide in estimating the types of people available for staffing the operation. Literacy rate numbers, however, rarely provide any information about the quality of education.

Countries with low literacy rates are less likely to provide the MNC with all the quali- fied personnel it needs to staff its local operation and will necessitate the transfer of a large number of expatriate managers. Literacy rates must be used with caution, however, because they often hide the fact that a country with a low literacy rate but a very large population may have a large number of qualified professionals, who as a percentage of the population may be very small but form a fairly large absolute number by themselves. Literacy rates generally have a more direct bearing on the general level of education and abilities of the workers at the lower levels, because much of the population that suffers from illiteracy is at the lowest economic level in society.

educatioN Mix When considering education as an aspect of culture, an MNC should not only look at literacy rates and levels of education but also try to understand the education mix of a certain society; that is, which areas are considered important for concentrated education? For example, a combination of factors caused a proliferation of European business schools patterned on American models. First, increased competition in the European Union resulted in a demand for better-trained managers. Second, Europeans began establishing their own business schools after they were educated at American business schools and returned home. Third, the establishment of American-type schools with faculty from the United States was frequently accomplished with the assistance of American universities.

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This trend toward specialized business education is slower in less-developed countries. Historically, higher education in LDCs has focused on the humanities, law, and medicine; engineering has not been popular, with the exception of architectural and civil engineer- ing, because there were few job opportunities in that field; and business careers have lacked prestige. As income levels in developing countries increase, so will the desire for expanded educational offerings.

braiN draiN Brain drain is a phenomenon experienced by many developing nations, especially China and India. Because governments overinvested in higher education in relation to demand, developing nations have seen rising unemployment among the educated. These unem- ployed professionals must emigrate to industrialized nations to find appropriate work, which effectively represents a loss to the country that has spent substantial amounts of scarce public resources to finance professional education. The brain drain creates a cul- tural diaspora abroad, something also of interest to multinational firms desiring to target ethnic groups in advertising campaigns.

coMMuNicatioN aNd laNguage Communication and language are closely related to culture because each culture reflects what the society values in its language. Culture determines to a large extent the use of spoken language—specific words, phrases, and intonations used to communicate people’s thoughts and needs. These verbal patterns are reinforced by unspoken language—gestures, body positions, and symbolic aids.

Spoken language becomes a cultural barrier between different countries and regions. In China for example, verbal language can consist of many dialects and different col- loquialisms and may be totally different from the written language. There is no way to learn a language so that nuances, double meanings, and slang terms are immediately understood unless one also learns other aspects of the culture.

Languages delineate culture. In some European countries there is more than one lan- guage and, hence, more than one culture. For example, French and Dutch are spoken in Belgium; German, Italian, French, and Romansh are officially spoken in Switzerland. Different cultures exist within each country. One cannot conclude, however, that where only one official language exists, there will be only one culture. The people of both the United States and Great Britain speak English, but each country has its own multifaceted culture.

An example of the problems facing an international firm that must respond to the lan- guage aspects of a culture involves the sort of computer hardware marketed in Canada. Although the Canadian government is officially bilingual, English remains the dominant language; French is dominant only in Quebec. After years of heated national debate about the country’s official language, a joint government-industry committee has come up with

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Canada’s first national standard for computer keyboards with both English and accented French letters. Many English speakers resent the government’s move to promote French. Hence, selling keyboards with both English and accented French letters could prove to be an obstacle in the English-speaking provinces of Canada.

Where many spoken languages exist in a single country, one language usually serves as the principal vehicle for communication across cultures. This is true for many coun- tries that were once colonies, such as India, which uses English. Although they serve as national languages, these foreign substitutes are not the first language of the populace and are therefore less effective than native tongues for reaching mass markets or for day-to- day conversations between managers and workers. In many situations, managers try to ease these communication difficulties by separating the workforce according to origin. The preferred solution is to teach managers the language of their workers.

When communication involves translation from one language to another, the problems of ascertaining meanings that arise in different cultures are multiplied many times. Trans- lation is not just the matching of words in one language with words of identical meanings in another language. It involves interpretation of the cultural patterns and concepts of one country into the terms of those of another. It is often difficult to translate directly from one language to another. Many international managers have been unpleasantly surprised to learn that the nodding and yes responses of their Japanese counterparts did not mean that the deal was closed or that they agreed, because the word for yes, hai, can also sim- ply mean “it is understood” or “I hear you.” In fact, it is typical of the Japanese to avoid saying anything disagreeable to a listener.

Many international business consultants advise the manager in a foreign country to use two translations by two different translators. The manager’s words are first translated by a nonnative speaker; then a native speaker translates the first translator’s words back into the original language. Unless translators have a special knowledge of the industry, they often go to a dictionary for a literal translation that is frequently erroneous or simply makes no sense.

Nonverbal language is another form of communication. Silent communication can take several forms, such as body language, space, and language of things. Body talk is a universal form of language that has different meanings from country to country. Usu- ally, it involves facial expressions, postures, gestures, handshakes, eye contact, color or symbols, and time (punctuality). The language of space includes such things as conver- sational distance between people, closed office doors, or office size. Each of these has a different connotation and appropriateness in different cultures. The language of things includes money and possessions.

groupS: faMilieS aNd frieNdS All populations of men, women, and children are commonly divided into groups, and individuals are members of more than one group. Affiliations determined by birth, known as ascribed group memberships, are based on sex, family, age, caste, and ethnic, ra-

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cial, or national origin. Those affiliations not determined by birth are called acquired group memberships and are based on religious, political, and other associations. Both ascribed and acquired group membership reflects one’s place in the social structure. Employment, manners, dress, and expectations are often dictated by each culture to its members. Group rituals, such as marriage, funerals, and graduations, also form a part of the societal organization.

In some societies, acceptance of people for jobs and promotion is based primarily on their performance capabilities. In others, competence is of secondary importance. Whatever factor is given primary importance (seniority, sex, and so on) will determine to a great extent the workers who are eligible to fill certain positions and what their com- pensation will be. The more egalitarian or open a society, the less difference ascribed group membership will make.

Three types of international contrasts indicate how widespread the differences in group memberships are and how important they are as business considerations. These contrasts involve sex, age, and family. Differences in attitudes toward males and females are especially apparent from country to country. The level of rigidity of expected behav- ior because of one’s gender is indicative of cultural differences. Often, these differences are clearly reflected in education statistics; boys get access to education more than girls, although many countries have instituted or have plans to institute additional educational opportunities for females.

In many countries age and wisdom are correlated. Where this is so, advancement is usually based on seniority. In the past, this has been a common practice in Japan. In contrast, in many countries retirement at a particular age is mandatory and rela- tive youthfulness may be an advantage in moving up in an organization. Barriers to employment on the basis of age or sex are undergoing substantial changes around the world, and data collected about these trends that are even only a few years old are not considered reliable.

Kinship, or family associations, plays a more active role as an element of culture in some societies than in others. Individuals may be accepted or rejected based on the social status of their family. Because family ties are so strong, there is a compulsion to cooperate closely within the family but to be distrustful of links involving others outside the family.

In some countries, the word “family” may have very different connotations. In the United States, we have come to depend on the nuclear family—mother, father, and children—as the definition of family. In other societies, the extended family is the norm. A vertically extended family includes grandparents and possibly great-grandparents as part of a single family, while horizontally extended families include aunts, uncles, and cousins.

The impact of the extended family on the foreign firm derives from the fact that it is a source of employees and business connections. Responsibility to a family is often a cause of high absenteeism in developing countries where workers are called to help

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with the harvest. Motivation to work also may be affected in cultures where workers are responsible for the welfare of their extended families. When additional income means additional mouths to feed and further responsibility, workers may reduce output if they are given an increase in salary.

The international firm may be directly affected by the cultural aspect of group and social organizations. Even if individuals have qualifications for certain positions and there are no legal barriers to hiring them, social obstacles may make the international firm think twice about employing them. Class structures can also be so rigid within one type of group that they are difficult to overcome in other contexts. For example, in a society where caste structures are deeply ingrained, serious problems could arise if these caste levels are not considered in determining work groups, supervisor roles, and managerial promotions; if individuals in a lower caste are placed higher within the corporate hierarchy than members of higher-caste groups, internal tensions may arise.

gift-giviNg aNd bribery Gift-giving is a custom that has great value in some business environments. It is impor- tant not only to remember to bring a gift, but also to make certain that the gift you have chosen is appropriate. In other cultures, gift-giving is not expected or encouraged, and the international businessperson must be familiar with the appropriate behavior in each environment.

Gift-giving is viewed as a different and separate activity from bribery, at least in the United States. During the 1970s many large international companies were faced with serious problems after they were caught paying bribes to government officials to obtain large contracts from foreign business firms. While much of the criticism was vented against multinational companies, especially those from the United States, it is important to note that the practice was widespread. In 1977, however, the United States passed the Foreign Corrupt Practices Act, making illegal certain payments to foreign officials by US executives of publicly traded firms. The legislation has been controversial and often called inconsistent. One such inconsistency is that it is clearly legal to make payments to people to expedite their compliance with the law, but illegal to make payments to other govern- ment officials who are not directly responsible for carrying out the law. It is important for the international business executive to identify the thin line between complying with foreign expectations and offering bribes, a form of corruption.

other theories oF Culture cultural cluSter approach Some theorists have attempted to group cultural patterns based on geographical similari- ties. One such theory is the cultural cluster approach. This approach groups cultures together based on where people are located in the world as follows:

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• Nordic countries—Denmark, Finland, Norway, Sweden • Germanic countries—Austria, Germany, Switzerland • Anglo countries—Australia, Canada, Ireland, South Africa, United Kingdom, United

States • Latin American countries—Argentina, Chile, Colombia, Mexico, Peru • Arab countries—Bahrain, Kuwait, Oman, Saudi Arabia • Far Eastern countries—China, Hong Kong, Indonesia, Philippines

A quick glance at the groupings above reveals many differences among the groups themselves, and there are certainly differences within individual countries as well. Few academic cultural theorists would agree that all of the citizens of the United States are culturally the same, so attempting to classify the members of other countries in this manner would appear to be problematic at best. These types of classifications are often too general and have little practical use in a business environment. In the words of economist John Kenneth Galbraith that begin this chapter, “over-generalization is the enemy of science.” This is a key point to remember when considering various cultural theories.

Other cultural classifications move away from geography and examine factors that are present for individuals rather than trying to classify large groups of people in the same manner. Two theories discussed here are Hall’s low-context, high-context approach and Hofstede’s five dimensions of culture.

hall’S loW-coNtext, high-coNtext approach Edward Hall’s low-context, high-context approach categorizes individuals (and societies) in terms of how they communicate and what is required in order to successfully com- municate in a given society. In a low-context culture, the words used by the speaker explicitly convey the speaker’s message to the listener. This is similar to interacting with a computer. If information is not explicitly stated, the meaning can be distorted. In low-context cultures, behavior and beliefs may need to be spelled out clearly, and the society in question is very rule-oriented. In codified systems such as this, knowledge is easy to transfer between individuals and groups, as there are written directions for what is expected in a given situation. Low-context communication is prevalent in groups that have been together for a short period of time and are engaged in small or specific tasks. Communication among employees at large corporations is typically categorized as low- context, as is that in sports groups, where the rules of engagement are clearly laid out. Among nations, the United States has historically been the example of the low-context approach to communication. In low-context cultures, the information content in advertis- ing should be higher than that in high-context cultures.

The second societal grouping is the high-context culture. In these groups, the context in which a conversation occurs is just as important as the words that are actually spoken. To be successful in this form of communication, an individual or company must understand certain cultural clues that are being communicated along with the spoken words. Groups

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exhibiting the high-context approach typically have been together for a long period of time, and there is more internalized understanding of what is being communicated than in low-context cultures. Much of the knowledge in these settings is situational, and thus there is less written or formal communication. In high-context cultures, it is harder to transfer knowledge outside of the group, given the lack of codified rules of engagement. Some examples of high-context cultures are family gatherings, small religious congregations, or a party with friends. On a national level, prior studies have shown that the citizens of Japan and France typically exhibit behavior that is closer to the high-context approach. In terms of marketing strategies, the information content is less for high-context cultures than for low-context cultures, as less information needs to be conveyed.

To date, there has not been much statistical evidence in support of national cultures clearly exhibiting one approach or the other, but there has been some validation of this theory at the individual or situational level. In other words, the context in which specific communication takes place depends on the group that is involved, and it is hard to apply this theory at the national level.

hofStede’S five diMeNSioNS of culture Other theories of culture better lend themselves to comparison across cultures than does Edward Hall’s theory. Hofstede’s five dimensions of culture is one example of such a theory. The five dimensions of culture as theorized by Hofstede are social orientation, power orientation, uncertainty orientation, goal orientation, and time orientation. These dimensions, as well as the extremes for each, are discussed below.

Social Orientation The first of Hofstede’s five dimensions is social orientation. This orientation reflects a person’s beliefs about the relative importance of the individual and the groups to which that person belongs. One extreme is individualism. This form of social orientation is ex- hibited primarily by Western societies and others that follow a free-market-based system. Individualistic people or countries tend to put themselves ahead of the group as a whole. The other extreme is collectivism. This form of society prefers group consensus rather than individual effort or decision-making. Many of the former communist countries have historically exhibited this form of social orientation.

Power Orientation The next of the five dimensions is power orientation. This dimension refers to the beliefs that people tend to hold about the appropriateness of power and authority differences in hierarchies such as business organizations. One extreme of this dimension is power respect. Individuals in these cultures tend to accept power based on the position and do not question authority as much as do individuals in other cultures. Some examples of power-respect cultures are Brazil, France, Italy, Japan, and Spain. Other societies tend to

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be power-tolerant cultures. These cultures are more often willing to question authority. Some examples of power-tolerant cultures are Denmark, Israel, the United Kingdom, and the United States.

Uncertainty Orientation The third of Hofstede’s cultural dimensions, uncertainty orientation, refers to the feelings that people tend to have regarding uncertain and ambiguous situations. Some cultures exhibit uncertainty acceptance. These cultures tend not to be bothered by change. Some examples of societies that typically represent this category are Canada, Denmark, and the United States. The other extreme in the uncertainty-orientation category is uncertainty avoidance. Societies that are more hierarchical tend to exhibit an avoidance of uncertainty and thus embrace rigid, rules-based systems. Recent studies have shown that former So- viet bloc countries, where employment was certain in a centrally planned system, have yet to completely accept the ambiguity that comes with a free-market economy; these countries tend to avoid uncertainty.2

Goal Orientation Another of Hofstede’s five dimensions, goal orientation, deals with the manner in which people are motivated to work toward different goals. Sometimes in the developed world, we tend to think that all societies have similar aggressive goals regarding achieving ma- terial possessions. This aggressive goal behavior is seen in countries such as Germany, Japan, and the United States. Other countries exhibit passive goal behavior and tend to place a higher value on social relationships and the quality of life. Many of the Nordic countries exhibit these passive goal beliefs. In a recent study comparing the quality of life in different countries in the world, all of the Nordic countries (Denmark, Finland, Iceland, Norway, and Sweden) were in the top ten in this category.3

Time Orientation The final of Hofstede’s five cultural dimensions is time orientation. This category deals with the extent to which members of a culture adopt a long-term outlook versus a short- term outlook regarding life, work, and other issues. Some cultures tend to exhibit a future-oriented viewpoint, and individuals within these cultures value things such as dedication and perseverance, while other cultures tend to have a shorter-term outlook. Two long-term-oriented cultures are China and Japan. Short-term-oriented societies tend to look to the past and the present more than to the future; individuals within these cultures have a respect for traditions. Some examples of short-term-oriented cultures are Pakistan and parts of Western Africa.

Time orientation has an effect on a consumer’s response to marketing content. Those with a past orientation have little use for marketing information. Individuals who are focused on the present will typically exhibit favorable responses to marketing as an aid

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to their current consumption. Individuals with a future orientation will typically view marketing as an aid in their future planning.

One benefit of Hofstede’s approach is that numerous studies have been undertaken to validate his findings. Hofstede’s original study was of IBM employees between the ages of thirty and thirty-four, and subsequent studies have been implemented via behavior- oriented questionnaires designed to determine where individuals rank on each of these five cultural dimensions.

Corporate diversity initiatives What is apparent is that few cultural theories have proved to be effective over entire popu- lations within a specific country. It is helpful, however, to be aware of these approaches in a multinational business environment, as they could aid the successful business manager in managing day-to-day employee issues.

The goal of cultural studies in a business environment is to achieve cultural conver- gence, which involves a business leader’s attempt to avoid using only self-reference criteria when making judgments involving businesses or individuals in different coun- tries. Successful managers for a multinational firm will not only attempt to understand the diverse foreign cultures where the business is involved, but also modify and adapt their behavior to become more compatible with the local culture. This process which is known as acculturation, calls to mind the old adage “When in Rome, do as the Romans do.” As the Danish philosopher Søren Kierkegaard said, “The first thing to understand is that you do not understand.” Prior to entering a foreign market, multina- tional corporations must first realize that the cultural norms observed in other markets may not be the same as those observed in the multinational firm’s home country. Thus, understanding these cultural differences is a requirement for successful entry into a foreign market.

Throughout much of the developed world, corporations have commenced diversity initiatives in an effort to root out insensitivity and to better understand the cultural back- grounds, beliefs, and habits of both employees and customers of multinational firms. The “identity wheel” is one method whereby individuals can identify certain characteristics that define their personality and make up their identity. Religious beliefs, economic status, familial history, sexual orientation, and other facets of an individual’s identity vary considerably even within a single company. The better a company understands the diverse backgrounds of its employees and customers the easier it is to provide products and services that cater to diverse needs. Figure 9.2 provides an illustration of an identity wheel for a hypothetical individual.

Rather than making the assumption that an individual’s identity primarily comprises only a few factors (as in Samuel Huntington’s Clash of Civilizations, which made this claim regarding fervent religious beliefs resulting in cultural clashes, given the singu- lar importance of religion as theorized by this view), the identity wheel assumes that a person’s identity is multifaceted. Smart organizations seek to understand and appeal

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to the components of their customers’ identity in order to gain market share over their competitors.

ManageMent oF Cultural Change Managers must understand what aspects of a culture will resist change, how those aspects will differ among cultures, how the process of change takes place in different cultures, and how long it will take to implement changes. They must also consider that change may occur in different ways: their organization may act as an agent of change, influenc- ing the foreign culture; it may be somewhat changed itself; or it may both create change and be changed at the same time.

In deciding how much change an organization will assume and how an organization may attempt to influence its host environment, a manager must consider the value system of the organization and its strategic mission, goals, and objectives. In addition, the costs and benefits of change need to be outlined, because the costs of change may far outweigh the benefits reaped from change.

If it is determined that some change is necessary in the foreign locale, the international manager should remember that resistance to change is low if the amount of change is not too great. If too much change is perceived by individuals within a certain culture

Figure 9.2 The Identity Wheel

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Summary 289

at the outset, resistance will be stronger. In the same vein, individuals will be more apt to allow and accept change if they are involved in the decision and participate in the change process. Also, people are more likely to support change when they see personal or reference group rewards.

To ease the problems associated with change, the international manager must find opinion leaders and try to convince those who can influence others. The international firm should also time the implementation of change wisely. Change should be planned for a time when there is the least likelihood of resistance. When considering timing, all elements should be considered to avoid conflict, such as political disturbances or religious holidays. Moreover, the international manager needs to look toward the home office for possible areas of change that will improve the potential for acceptance and success within the foreign environment.

suMMary When businesses cross over national borders, they face a diversity of societies and cul- tures quite different from their own. “Society” refers to a political and social entity that is geographically defined and is composed of people and their culture. “Culture” is a set of social norms and responses that conditions the behavior of a population. The term “sociocultural” describes how society and culture relate to each other.

In the study of culture, the major topics are attitudes, beliefs, religion, aesthetics, material culture, education, language, and social organizations. Attitudes and beliefs, including attitudes about time, achievement and work, change, and the importance of occupation, influence human behavior by providing a set of rules and guidelines. Reli- gion provides the spiritual basis for a society by imposing moral norms and appropriate behavior. Aesthetics include various forms of artistic expression. Material culture refers to objects and possessions and focuses on technology, while nonmaterial culture covers a set of intangibles. Communication and language can be silent, as well as spoken or written, and may be a barrier to an international organization. Silent language includes body language, gestures, color, and symbols.

Societal organizations take a number of different forms and indicate the level of social stratification within a society. Social groups are either ascribed (determined by birth) or acquired.

Business customers differ from one country to another and must be understood before an MNC begins any negotiations or business dealings outside its own culture. Understand- ing the importance of gifts and how they differ from bribes can be critical to international business relations.

Cultural theories that pertain to the discussion of an MNC’s international dealings include the cultural cluster approach; Hall’s distinction between low-context and high- context cultures; and Hofstede’s five dimensions of culture. These theories all exhibit strengths and weaknesses in their attempts to categorize individuals and societies based on certain cultural beliefs.

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The international organization must understand cultural differences when attempting to initiate change in a foreign location. Change prompted by an MNC must be carefully planned, and an MNC must clearly identify the costs and benefits of that change before proceeding.

disCussion Questions 1. Define the term “sociocultural.” Why should international business managers be

aware of sociocultural elements when making their everyday decisions? 2. What are the elements of culture? 3. What is the typical American and European attitude toward work? Do you per-

sonally hold this attitude toward work? 4. How can religious beliefs affect international business decisions in the Middle

East? 5. You have found out that your competitor is paying bribes to generate new busi-

ness. Should you also pay them? Explain. 6. How can nonverbal communication affect a business relationship? 7. How might family groups and extended families affect the decisions of an inter-

national manager? 8. Why might multinational corporations act as agents of change? Provide some

examples. 9. How can managers of a multinational firm get their local employees to accept

new ideas?

notes 1. Murdock, “Common Denominator of Cultures.” 2. Dienes, Hofstede, Kolman, and Noorderhaven, “Cross-Cultural Differences in Central Europe.” 3. Economist, “Human Development Index,” 30.

BiBliography Across the Board. “All in Favor of Bribery, Please Stand Up.” June 1984, 3–5. Business International. “Some Guidelines on Dealing with Graft in Korean Operations.” February 25, 1983,

62. Commission of the European Community. The European Community and Education. Brussels: Commission

of the European Community, 1985. Culture at Work. “High and Low Context.” www.culture-at-work.com/highlow.html. Dienes, Elizabeth, Geert Hofstede, Ludek Kolman, and Niels G. Noorderhaven. “Cross-Cultural Differences

in Central Europe.” Journal of Managerial Psychology 18 (January 2003): 76–88. Economist. “Human Development Index.” Pocket World in Figures. London: Profile Books, 2005. ———. “Islam for Beginners.” March 18, 1989, 95–96. ———. “A People Problem.” November 25, 1988, 49–50. Fatemi, Khosrow. “Multinational Corporations, Developing Countries, and Transfer of Technology: A Cultural

Perspective.” Issues in International Business (Summer–Fall 1985): 1–6. Hall, Edward T. Beyond Culture, New York: Anchor Books, 1976.

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Hofstede, Geert. Culture’s Consequences: International Differences in Work Related Values. New York: Sage Publications, 1980.

Huntington, Samuel. The Clash of Civilizations and the Remaking of World Order. New York: Touchstone, 1996.

Jacoby, Neil H., Peter Nehemkis, and Richard Eells. Bribery and Extortion in World Business. New York: Macmillan, 1977.

Kim, W. Chan, and Rene A. Mauborgne. “Cross-Cultural Strategies.” Journal of Business Strategy (Spring 1987): 28–35.

Murdock, George P. “The Common Denominator of Cultures.” In The Science of Man in the World Crisis, ed. Ralph Linton, pp. 123–142. New York: Columbia University Press, 1945.

Reardon, Kathleen. International Business and Gift-Giving Customs. Janesville, WI: Parker Pen, 1981. Terpstra, Vern, and Kenneth David. The Cultural Environment of International Business. 2nd ed. Cincinnati:

South-Western, 1985.

caSe Study 9.1

delis Foods Corporation

The year 2010 was a very good one for Delis Foods Corporation, a San Francisco– based food conglomerate. Its domestic sales were $24 billion and its international sales were $7 billion, making it one of the largest companies in the processed-foods business. Innovative product development and strong marketing strategies are two of the main reasons for the company’s success. Its international operations are directed out of San Francisco by William Schaefer, an executive with almost eighteen years of experience in international marketing, the last ten in the marketing of food products. Schaefer is proud of the 2010 performance, in which his division registered a world- wide sales increase of 12 percent over the previous year. Despite the overall results, however, he has to acknowledge one failure: the sale of iced tea in Dikorma.

Dikorma, a small country in Southeast Asia with a population of about 60 mil- lion, is a nation that is fast industrializing; the per capita GNP has risen to $6,600 per annum from a level of only $2,400 per annum twelve years ago. Dikorma is viewed by Delis Foods as an important target market that presents excellent oppor- tunities. There is a large middle class that is fairly cosmopolitan and sophisticated. The country has a relatively free export-import market, and the balance of trade is maintained comfortably. Retail distribution is well developed and necessary ancillary services—transportation, banking, and telecommunications—are not a problem. The initial experience of Delis Foods with its large-scale marketing of instant noodles in Dikorma had been a great success. Delis soon became a household brand name, and the company was able to penetrate the market quite successfully with other products, such as ketchup, instant coffee, and nondairy creamers.

(continued)

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Case Study 9.1 (continued)

Following up on its success, Delis Foods decided to make a bid for a segment of the huge cold-drink market. Dikorma is a tropical country where temperatures remain above 80 degrees for eleven months of the year. There is a large urban middle class, which provides a steady market for cold drinks. Delis Foods decided to introduce instant iced tea into this market. The product idea was fairly simple. The company would market iced tea in concentrated liquid form, and the consumer would only have to add water and ice to get a cool drink. There was no other iced tea brand available in Dikorma, and Delis Foods would have a monopoly. Moreover, Dikorma’s middle class had proven receptive to new ideas in the past; the case of instant noodles was clear evidence.

The company decided on a hard-sell campaign across the country, utilizing all major media, including television, radio, newspapers, magazines, and roadside signs. The main theme was simple: “Beat the heat with Velima Iced Tea.” A number of promotions were carried out, and the distributors and retailers were given attractive discounts to push the product.

Despite the initial effort, sales did not take off, and three months after the prod- uct launch, it became increasingly clear that the company had a loser on its hands. Extremely annoyed, Schaefer placed the blame on the marketing staff that designed and implemented the campaign. He asked them to find the reasons the product had not sold well and to modify the campaign accordingly.

The marketing group in Dikorma analyzed the entire project quite intensively, but it came up with little that could be called a mistake in the campaign. Moreover, there was apparently no dissatisfaction with the quality of the product. True, the coverage of the product had been limited to the urban centers, but that was because it was relatively highly priced and the rural market could not afford a sophisticated product such as instant iced tea. The product was retested, but it was found to con- form to all standard requirements and there were no quality problems.

Confident that they had corrected the few errors in the campaign and assured that the product had no quality problems, the local marketing group of Delis Foods launched another, bigger campaign, promoting the product much more aggressively than in the previous campaign. This time attractive consumer incentives were of- fered, such as a free crystal glass with the purchase of every bottle of iced tea. The results were somewhat better. Attracted by the offer of free glasses and by the glittery campaign, consumers reacted positively and sales started to improve. The marketing group heaved a sigh of relief, but not for long.

Within the next six months, for what appeared to be completely inexplicable reasons, sales began to drop off again. The company had not increased its price, and

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no initial incentives were withdrawn, although maintaining these incentives was proving quite expensive to the company. The drop in sales became more accentu- ated each month. The marketing group and Schaefer were perplexed. After eight months of the second promotion, sales were so low that the company started to lose money on the product. The retailers also became nervous and stopped ordering. Some then complained that they were having trouble disposing of their invento- ries. Schaefer made a painful decision: admitting that the product had failed, he withdrew it from the market in July 2011, and Velima Iced Tea was taken off the shelves in Dikorma.

The chair of Delis Foods, Peter Sanderson, is quite philosophical about the fail- ure and tells Schaefer to take things in context: “We all learn from our mistakes.” Sanderson asks Schaefer to find out why the product had failed.

Schaefer realizes that it might be a good idea to get an external view of the problem. After all, in-company analysis, however sharp and intense, still has its limitations, and in this case the limitations were exposed beyond doubt. Delis Foods had tried to think of all the reasons its iced tea failed but did not come up with any that would explain, in concrete form, why an excellent product failed in an excel- lent market despite a great campaign and all other positive circumstances. Schaefer decides to call Gayle Johnston, the chief marketing consultant at MacArthur & As- sociates in Jakarta. Johnston is an expert on Southeast Asia markets. “He should be able to tell us what really went wrong,” thinks Schaefer as he notes his appointment with Johnston for the following Thursday in San Francisco.

The meeting with Johnston is quite illuminating. Johnston suggests a whole new line of thinking. According to him, it was a sociocultural asymmetry that caused problems for Delis Foods in Dikorma. As Johnston explains, there was no way an iced tea product could have succeeded in Dikorma, because it clashed very strongly with ingrained sociocultural values. People in Dikorma, Johnston points out, do not drink tea without milk. In Dikorma iced tea, by definition, would be consumed with milk, but the entire campaign showed the beverage as being essentially sweetened black tea with ice. The other cultural barrier was that tea in Dikorma is viewed as a hot drink, not a cold one. Dikormans have been drinking hot tea for hundreds of years and are not likely to see it as a cold drink. They will drink cold milk, even perhaps cold coffee, but certainly not iced tea.

Schaefer protests that Dikormans had reacted positively to instant noodles, which they had never had before. They also had adopted several other new products: ready- baked cakes, frozen pizzas, and so on. Why this hostility toward iced tea? “That is simple,” replies Johnston. Dikormans do not have pizza or cake ingrained in them as a part of their traditional culture. These are new products and they accepted them

(continued)

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Case Study 9.1 (continued)

as such. But tea is not new in Dikorma; it is ingrained in the culture. Ingrained dietary habits are quite difficult to change, especially if the change is dramatically in opposition to the existing culture.

“Perhaps you are right,” Schaefer admits. “At least the market has proved that you are. In the future we should do better. How about doing a study of the sociocultural traits of Dikorma and of our products to suggest which products we should try to keep out of this market?” “That’s a useful idea,” says Johnson, “but please make sure that you tie in the recommendations of my study with those of your marketing group.”

diScuSSioN QueStioNS 1. What primary errors did Delis make during the market feasibility study? What

kind of strategy would you advise Delis to adopt to avoid this kind of situation in the future?

2. Analyze the sociocultural traits of a select country and devise a food product strategy that suits the cultural environment.

3. Suggest a list of typical processed food items that would not be successful in a country with a tropical climate and explain why.

4. Can cultural values be changed?

caSe Study 9.2

air aMeriCa

Herbert Manning, general manager of Air America’s Qamran office, has been with the company for twelve years. Manning had an undergraduate degree in econom- ics and business and had worked for a leading travel agency in San Francisco before joining Air America as a sales executive. With his earlier experience and his enthusiasm and energy on the job, Manning made a favorable impression very quickly. Within two years he was promoted to the rank of area sales manager and elected vice president of Air America’s worldwide sales club, having had the second highest level of sales among all of Air America’s sales executives worldwide.

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Case Study 9.2 295

Manning continued to perform well as area sales manager, and three years later he was moved to the company’s corporate headquarters in Dallas, Texas, as vice president of international marketing and sales with responsibility for planning and implementing the company’s marketing and sales strategies in the Middle East, Africa, and southern Asia. Air America, though a major international airline, was not very strong in these markets, which it perceived would become increasingly important in the future. Manning took up the challenge with his well-known drive and energy, and during the next three years, Air America succeeded in negotiating air route agreements with four countries in North Africa, three in the Middle East, and three in southern Asia. Qamran, a small sheikdom in the Middle East, was designated as the regional base for this area and as a hub location for the airline. In these three years, Manning’s region became an important source of revenue from international operations for Air America. Apart from an aggressive and well-targeted sales policy, overall increase in passenger traffic arising out of the oil price boom helped to boost ticket sales.

Toward the end of the third year, however, Air America, like many other air- lines operating in the region, was suddenly hit with a sharp decline in demand as oil prices rose sharply and the world economy went into a deep recession. As the market shrank, competition intensified, and it became increasingly difficult to hold on to market share. Air America’s share of the Persian Gulf market dropped by 7 percent. Combined with a sharp decline in overall market size, the drop led to a steep reduction in total revenues.

Concerned with the difficult situation in the region, Air America’s senior man- agement decided that an aggressive strategy had to be adopted to recapture market share and rebuild the airline’s image as a dominant force in the region. A key ele- ment of the strategy was to appoint Manning as the regional manager of the Middle East and North Africa.

It was a big promotion for Manning. Regional managers were considered senior management in the company and were responsible for participating in the formu- lation of global strategy. Moreover, Air America’s corporate policy emphasized considerable delegation and decentralization. Regional managers were, therefore, almost completely independent in their local operations and were primarily re- sponsible for their own results. Manning was elated when his boss told him the news. He had wanted to go back to the field for some time now, and the position apparently offered all that he was looking for. In addition, relocation as a regional manager in Qamran meant that he would have several liberal fringe benefits given to Air America’s expatriate managers: a large, furnished company house, a chauffeur-driven car, at least four servants, and additional allowances, including a large entertainment budget.

(continued)

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296 Chapter 9 • Sociocultural Factors

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Manning’s first year was extremely successful. His drive and enthusiasm were infused throughout the local office, because he set a good example by his own untir- ing efforts. His years in the marketing division had provided him with considerable background knowledge of the operations, and he used that knowledge to seek and implement new ways to fight off Air America’s competitors. Market share began to inch back upward and the revenue drop was reversed. Although the revenues were helped by a slight improvement in market conditions, there was no doubt that Manning’s arrival was a key factor in the reversal of Air America’s fortunes in the region.

The second year was good, too, although not as good as the first. Market share increased, as did the revenues by smaller degrees. One significant explanation for the slowing of increases offered by Manning was that other airlines had initiated equally aggressive counterstrategies, and it was not possible to improve the rate of Air America’s gains without seriously compromising profitability.

Results started to decline in the third year, however. Market share gains slid back by 2 percent and revenues showed a slight decline. Manning seemed to have lost the drive and initiative that had characterized his work just a few months before, and some of Manning’s subordinates seemed unhappy with his behavior and left the company. Gilbert Wyles, Air America’s senior vice president of human resources, was quick to guess that the problem was Manning himself. Wyles decided that a meeting at corporate headquarters would be useful to discuss the whole issue. Man- ning was, after all, a star performer, and if he was facing any problems the company was fully prepared to help him.

The meeting lasted three hours. Initially hesitant to state the real problem, Man- ning finally admitted that his wife, Sandra, was having difficulties in adjusting to life in Qamran. Back in the United States, she had been a client relations executive in a small advertising company. It was not a very high position, but it allowed her to use her skills at dealing with people constructively. She had developed a fairly close network of good friends and a large circle of pleasant acquaintances through her job. Her decision to leave the job and accompany Manning to Qamran had not been easy, but she had decided to make the best of a new lifestyle that awaited her in their new overseas home. She did make a sincere effort at adjustment, but Qamran’s society was governed by strict Islamic tenets, which meant that social freedoms for women were severely restricted. Although the Mannings enjoyed various social activities with diplomats and other expatriates, Mrs. Manning had little to do dur- ing the day. Women were not allowed to work in Qamran unless they were granted special work permits under exceptional circumstances. Even then women had to dress in a particular fashion prescribed by the authorities.

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Case Study 9.2 297

After the first year, Mrs. Manning grew increasingly restless about her new situa- tion. Her problems were accentuated by the long absences of her husband, who went on frequent business trips that were essential to the success of his assignment. Mrs. Manning thought of various solutions and different ways in which her life could be made more interesting, but nothing worked, and her mental discomfort continued to increase. In the past few months, she had suffered long periods of depression and was not responding very well to treatment, which caused Mr. Manning tremendous anxiety and had adversely affected his professional performance.

Gilbert Wyles suggested that the Mannings take a vacation immediately, at the place of their choice, and that by the time they returned the company would have an answer to the problem. Manning was relieved, but at the same time he was skeptical of the company’s intentions. As he walked out of the corporate headquarters to catch a cab for his hotel, he wondered whether he had done the right thing.

Meanwhile, Wyles, in his well-appointed office, put together a confidential memo to the international human resources policy group, a small set of top Air America executives in charge of framing company policies in international human resources management. The memo explained the background and circumstances of the situ- ation and placed three options before the members:

1. The option suggested by Manning, to give his wife a job in his office in Qamran as a public relations officer. This would be possible if the company modified its personnel policy on employment of spouses and if enough pressure was exerted on the Qamran government.

2. Replace Manning with another expatriate executive, which could be easily done, but might lead to similar problems for the replacement.

3. Appoint a local national as regional manager or bring in a third-country national from Air America’s other overseas offices.

diScuSSioN QueStioNS 1. Which of the three options would you recommend to Air America and why?

What would be the problems with the other options? 2. Is there a need for Air America to change its international staffing policies to

avoid sending expatriate managers to overseas locations?

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