Digital class 12. Socio Cultural Factors – Part 3

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Socio Cultural Factors – Part 3


Welcome to this session of the International Socio-Economic Context Course. This class finishes the review of the Sociocultural Factors Chapter that aims for the comprehension of how societal, political and cultural elements have an impact on MNCs activities..

In this session, the relevance of social status and family in different nations as well as the implications for the management of a MNCs is described, since both concepts are of particular consideration. Also, the role of MNCs as drivers of national change will be analyzed as a way to understand the effect in both directions: society towards business and vice versa

So, by the end of this class you will understand why family and social status are of interest for the management of any MNC and also, how those kinds of companies might, eventually, shape the societies in which they are operating.

Content developement

Groups: Families and Friends

Ajami. & Goddard J. (2015), state that 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, racial, 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 compensation 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 behavior 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 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 important 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 government 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 similarities. One such theory is the cultural cluster approach. This approach groups cultures together based on where people are located in the world as follows:

  • Nordic countries—Denmark, Finland, Norway, Sweden
  • Germanic countries—Austria, Germany, Switzerland
  • Anglocountries—Australia,Canada,Ireland,SouthAfrica,UnitedKingdom,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 communicate 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 advertising 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 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.

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 tobe 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 Soviet 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.

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.

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 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 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, influencing 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 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.


In this session, the influence of groups as family and friends in a national context were presented to compare the differences across countries, and how these, based on the society dynamics, led to several impacts in the running of MNCs. 

Also, it was briefly presented how gift-giving culture and bribery are perceived by people of different nationalities and how these acts might be closely related.

Finally, theories of Cultural Cluster Approach, Halls’ Low-Context vs High-Context Approach, and Hoefstede`s five dimensions of culture have been developed as efforts to systematically understand the conformation of national idiosyncrasies about several social and economic phenomena.

The conclusion of this chapter is the emerging importance of corporate diversity initiatives that  represents some of the latest changes in a global society increasingly concerned with historic problems such as discrimintion of certain social groups. The management of change is another part of this analysis that proves the relevance of a Manager properly trained in international environments for the corporate success.

Information sources

Ajami R., & Goddard J. G. (2015). International Business: Theory and Practice. Routledge (281-289)

Belloni, G.. (November 13th, 2016). Hofstede – Cultural Dimensions. Youtube (Video File)

Escobedo Munoz, F.. (September 19th, 2018). How Our Identities Are Socially Constructed.. Tedx Talks. Youtube (Video File)