MGMT20144 Management Business
Context

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MGMT20144| Unit 11| Page 2
Master of Business Administration (MBA)
School of Business and Law

MGMT20144 Management Business
Context

Unit 11 Issues related to cross cultural and international
management
.
Table of Contents
Introduction 3
Learning objectives 3
The Nature of Cross Culture and International Management 4
What is Culture? 4
Individuals and Groups within Culture 6
Religious and Ethical Systems 7
Language 10
Cultural Dimensions 12
Culture exists by comparison 13
Culture and the Workplace 14
International approaches to Human Resource Management 15
Cultural Intelligence (CQ) 18
Required Reading 21
References
23
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Introduction
The determinants of culture include religion, political philosophy, economic philosophy,
education, language and social structure. This unit focuses on the impact of, social structures,
religion, language, and education on the framing of national culture. The section on religion
explains the the economic implications of Christianity, Islam, Buddhism and Confucianism. In
addition, Geerte Hofstede’s most recent model of national cultural dimensions is considered.
(Hofstede, Hofstede & Minkov, 2010). Though criticised in some quarters and by some
academics, it remains the most applied model for research on comparisons of cross cultural
difference. According to Hofstede, Hofstede and Minkov (2010), cultures vary along six
dimensions. These are power distance, individualism versus collectivism, masculinity versus
femininity, uncertainty avoidance, long term orientation versus short term orientation and
finally, indulgence versus restraint. The concept of ethnocentric behaviour is also discussed as
are the common approaches afforded to managing human resources in the international firm. Of
particular importance to this topic is the development of a growing awareness at the theoretical
level and the practical level of the need for business organisations and their managers to be
aware of cross cultural and diversity issues within the markets they serve and customers needs
they wish to fulfill. Also significant is the awareness of diversity within a global workforce with
different international operating units for a firm. This poses both challenges in identifying core
homogeneous practices and values settings as well as the need to incorporate diverse needs and
finally the opportunity to create unique corporate identity from diversity.
Many of the issues covered in this topic, in particular cross cultural and international
management have facets that will be discussed in courses such as as MRKT20052 Advanced
Marketing Management and MGMT20133 Strategic Business Management. In these courses the
impact of localisation and globalisation will be prevalent as well as the need to craft structures
and systems respondent to cross cultural aspects of markets and competition.
Learning objectives
This unit has the following learning objectives:
1. To understand the key concepts supporting cross cultural and international
management
2. Examine the nature of differing theories to support cross cultural and
international management and the impacts that these have for businesses and
business managers.
3. Consider the opportunities from study of cross cultural and international
management practice to frame new opportunities and capabilities for a business.
4. Apply knowledge and skills gained from this unit towards resolving business
challenges and issues, with particular relevance to cross cultural and
international management practice for improved or breakthrough outcomes for
the firm.

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The Nature of Cross Cultural and International Management
What Is Culture?
Culture is a system of values and norms that are shared among a group of people and that when
taken together constitute a design for living. The fundamental building blocks of culture are
values (abstract ideas about what a group believes to be good, right, and desirable) and norms
(the social rules and guidelines that prescribe appropriate behaviour in particular situations).
The term society refers to a group of people who share a common set of values and norms.
Value and Norms
Values provide the context within which a society’s norms are established and justified and form
the bedrock of a culture. Norms are the social rules that govern the actions of people toward
one another. Norms can be further subdivided into folkways (the routine conventions of
everyday life) and mores (norms that are seen as central to the functioning of a society and to
its social life).
Culture, Society, and the Nation-State
A society can be defined as a group of people that share a common set of values and norms; that
is, a group bound together by a common culture. But there is not a strict one-to-one
correspondence between a society and a nation-state. Nation-states are political creations.
They may contain a single culture or several distinct cultures.
The Determinants of Culture
The values and norms of a culture do not emerge fully formed. They are the evolutionary
product of a number of factors including prevailing political and economic philosophies, the
social structure of a society, and the dominant religion, language, and education.
Social Structure

A society’s social structure refers to its basic social organisation. Two dimensions stand out
when explaining differences between cultures. The first is the degree to which the basic unit of
social organisation is the individual, as opposed to the group.
degree to which a society is stratified into classes or castes.
The second dimension is the

Religion
Culture
Norms &
Value,
Systems
Social
Structure Political
Philosophy
Education
Language Economic
Philosophy

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Individual and Group views on a Cross Cultural Business Challenge
SCENARIO: Your CEO is travelling to India soon on behalf of a food chain wishing to
establish itself in India. She has been engaged to advise this food chain on the issues it
might have to face on entering India and if there are any unique challenges. She knows
that McDonalds has entered India and has asked you for your advice on issues faced by
McDonald’s in India. She is also aware that the cow is considered sacred in India’s Hindu
culture and this prompted McDonald’s to alter its menu to offer mutton and chicken
alternatives to its traditional beef burgers. McDonald’s now has over 130 restaurants in
India and many more are planned. However, the company was recently the target of
negative reports when it was discovered that its French fries were cooked in oil
containing beef extract. She asks you the following questions:
CEO:
How did McDonald’s change its product line to meet the needs of the Indian market?
Does the Indian version of McDonald’s still maintain the company’s identity?
Your answer: In response to the needs of the Indian market, McDonald’s changed its menu to
include mutton and chicken products rather than the beef based products that are featured
in its regular menu. Many suggest that even with the changes, the company remained true to
its identity because it used names similar to traditional names to describe the new products,
and built its restaurants following the traditional American style.
CEO: Did McDonald’s handle the revelation that its French fries contained beef extract as
well? What would you have done differently?
Your answer: The lawsuit against McDonald’s over the presence of beef extract in its French
fries caught the company off-guard. McDonald’s quickly acknowledged its mistake, and
settled the lawsuit for $10m. The company also made a public apology and vowed to be
more accurate in its food labelling in the future. However, many will probably argue that
the company failed to adequately reassure consumers in India, where angry Hindus protested
in the streets. It could be that the company should have responded not only to the Indians
located in the United States who prompted the lawsuit, but also to the citizens of India, and
other Hindu customers.
Reference:
http://www.icmrindia.org/casestudies/catalogue/Business%20Ethics/The%20McDonald%20Be
ef%20Fries%20Controversy.htm
QUESTIONS:
1. Has McDonald’s approach been culturally aware? Culturally sensitive?
2. Do you believe McDonald’s learned from this cross cultural incident? What do you
consider that they learned or did not learn?
3. What approaches would you advise the CEO of the food chain about to invest in India
regarding cultural awareness and any need for cultural adaptation of products or
services?

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Individuals and Groups within Culture
The Individual
A focus on the individual and individual achievement is common in many Western societies. An
emphasis on individual achievement has positive and negative implications. On the positive side,
the dynamism of many developed country economies owes much to the philosophy of
individualism. On the other hand, individualism can lead to a lack of organisation loyalty and
failure to gain organisation specific knowledge, competition between individuals in an
organisation rather than team building, and can limit people’s ability to develop a strong
network of contacts within an organisation.
The Group
In sharp contrast to the Western emphasis on the individual, in many Asian societies the group
(an association of two or more individuals who have a shared sense of identity and who interact
with each other in structured ways on the basis of a common set of expectations about each
other’s behaviour) is the primary unit of social organisation. While in earlier times the group
was usually the family or the village, today the group may be a work team or business
organisation. When meeting someone she may say she works for Sony rather than say she is an
engineer that designs disk drives. The worth of an individual is more linked to the success of the
group than individual achievement. This emphasis on the group may discourage job switching
between organisations, encourage lifetime employment systems, and lead to cooperation in
solving business problems. On the other hand, individual creativity and initiative is suppressed.
Social Stratification
All societies are stratified on a hierarchical basis into social categories, or social strata.
Social Mobility
Social mobility refers to the extent to which individuals can move out of the strata into which
they are born. A caste system is a form closed system of stratification in which social position is
determined by the family into which a person is born, and change in that position is usually not
possible during an individual’s lifetime whereas a class system is a form of open social
stratification in which the position a person has by birth can be changed through his or her
achievement or luck.
In this video from Erin Long- Crowell M.Ed. the elements comprising Culture are explored.
The video considers – Symbols, Language, Values and Norms.
LINK:
https://www.youtube.com/watch?v=jt2tikGSu98
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Significance
A country’s social strata can have important implications for the management and organisation
of businesses. In cultures where there is a great deal of consciousness over the class of others,
the way individuals from different classes work together (i.e. management and labour) may be
very prescribed and strained in some cultures (i.e. Britain), or have almost no significance in
others (i.e. Japan). Class consciousness refers to a condition where people tend to perceive
themselves in terms of their class background, and this shapes their relationships with others.
Religious and Ethical Systems
Religion can be defined as a system of shared beliefs and rituals that are concerned with the
realm of the sacred. Ethical systems refer to a set of moral principles, or values, that are used
to guide and shape behaviour. The ethical practices of individuals within a culture are often
closely intertwined with their religion. While there are literally thousands of religions
worldwide, four that have the largest following are Christianity, Islam, Hinduism, and Buddhism.
Confucianism, while not a religion, influences behaviour and shapes culture in many parts of Asia.
Christianity
Christianity is the largest religion and is common throughout Europe, the Americas, and other
countries settled by Europeans. About 20 percent of the world’s population is Christian. Within
Christianity there are three major branches: Protestant, Roman Catholic, and Eastern Orthodox.
Economic Implications of Christianity: The Protestant Work Ethic
At the turn of the 19th century, Weber suggested that is was the “Protestant work ethic” that was
the driving force of capitalism. This focus on hard work, wealth creation, and frugality
encouraged capitalism while the Catholic promise of salvation in the next world did not foster
the same kind of work ethic. The Protestant emphasis was on individual religious freedom, in
contrast to the hierarchical Catholic Church.
Islam
Islam has the same underlying roots of Christianity (Christ is viewed as a prophet), and suggests
many of the same underlying societal mores. Islam extends this to more of an all-embracing way
In this video from National Geographic is a small excerpt of a group of young Sudanese boys
who are refugees arriving in the U.S. It explores both their exploration and
misunderstandings and misapprehensions of a new culture and the way in which the U.S.
culture has difficulty accommodating or connecting with other cultures. A great deal to
reflect upon.
LINK:
https://www.youtube.com/watch?v=BT0kzF4A-WQ
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of life that governs one’s being.
should act and live.
It also prescribes many more requirements on how people

Islamic Fundamentalism
The past three decades have witnessed the growth of a social movement often referred to as
“Islamic fundamentalism.” Islamic fundamentalism is associated in the media with militants,
terrorists, and violent upheavals. However, this characterisation is misleading and the vast
majority of Muslims point out that Islam teaches peace, justice, and tolerance. Fundamentalists
exist in every religion. They demand a rigid commitment to traditional religious beliefs and
rituals. Fundamentalists have gained political power in some countries – a theocratic
government.
Economic Implications of Islam
In Islam people do not own property, but only act as stewards for God and thus must take care
of that which they have been entrusted with. They must use property in a righteous, socially
beneficial, and prudent manner; not exploit others for their own benefit; and they have
obligations to help the disadvantaged. Thus Islam is supportive of international business as long
as it is carried out in a way that reflects basic Islamic values.
Hinduism
Hinduism, practiced primarily on the Indian sub-continent, focuses on the importance of
achieving spiritual growth and development, which may require material and physical self-denial.
Economic Implications of Hinduism
Since Hindus are valued by their spiritual rather than material achievements, there is not the
same work ethic or focus on entrepreneurship found in some other religions. Likewise,
promotion and adding new responsibilities may not be the goal of an employee, or may be
infeasible due to the employee’s caste.
Buddhism
Buddhists also stress spiritual growth and the afterlife, rather than achievement while in this
world. Buddhism, practiced mainly in South East Asia, does not support the caste system, so
individuals do have job mobility not found in Hinduism and can work with individuals from
different classes.
Economic Implications of Buddhism
Because Buddhists do not support the caste system, and do not practice the extreme ascetic
behaviour of Hinduism, entrepreneurial activity is possible.
Confucianism
Confucianism, practiced mainly in China, teaches the importance of attaining personal salvation
through right action. Unlike religions, Confucianism is not concerned with the supernatural and
has little to say about the concept of a supreme being or an afterlife. The need for high moral
and ethical conduct and loyalty to others is central in Confucianism.
Economic Implications of Confucianism
Three key teachings of Confucianism – loyalty, reciprocal obligations, and honesty – may all lead
to a lowering of the cost of doing business in Confucian societies. The close ties between
Japanese auto companies and their suppliers, which has been an important ingredient in the
Japanese success in the auto industry, are facilitated by loyalty, reciprocal obligations, and

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honesty. In countries where these relationships are more adversarial and not bound by these
same values, the costs of doing business are probably higher.
Reference: http://www.duke.edu/religion/main/links.html
Individual and Group views on an International Business Challenge.
SCENARIO: Your CEO has recently visited France and became aware of the debate
surrounding Turkey’s membership in the European Community. Turkey has indicated that
it would like to be a part of the regional bloc, but many are concerned that because the
country’s dominant religion is Islam, and its recent failed coup and hard crack down on
political opponents of the Turkish government it may not be a good fit into the EU. Others
however, argue that these fears are unfounded. Supporters of Turkey’s membership in
the European Union note that the country’s central region is still home to many thriving
entrepreneurial ventures. As you have also just returned from visiting Brussels and the
European Union HQ there, she asks for your opinion on the following:
CEO:
Are the concerns of those opposing Turkey’s admittance to the European Union wellfounded? Can Islam, capitalism, and globalization co-exist?
Your opinion: Many will probably suggest that if the country’s religious preferences are the
only issue preventing Turkey’s membership in the European Union, then indeed these fears are
unfounded. Those taking this perspective are likely to point out that Central Turkey, a region
where Islamic values are particularly strong, is also referred to as the Anatolian Tiger because
it is home to so many thriving Muslim companies, many of which are large exporters. Others
however, may note that traditionally Islam is critical of those who earn a profit through the
exploitation of others. Depending on just how this view is defined could influence how Turkey
views the economic activities of other European Union countries.
CEO: Can you explain for me the concept of Islamic Calvinism? How has Islamic Calvinism
helped the Kayseri region of Turkey?
Your opinion: Islamic Calvinism is a fusion of traditional Islamic values and the Protestant
work ethic. In the Kayseri region of Turkey, Islamic Calvinism is evident. The region is home
to many thriving businesses in a wide variety of industries that have successfully meshed
traditional Islamic values with the entrepreneurial values associated with the Protestant work
ethic. Many companies set aside time for daily prayers and trips to Mecca, most restaurants in
the region do not serve alcohol and require women to cover their heads.
CONTINUED NEXT PAGE

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Language
One obvious way in which countries differ is language. By language is meant both the spoken
and the unspoken means of communication. Language is one of the defining characteristics of
culture. It not only allows a society to communicate, but also directs the attention of people
towards certain features of the world and human interactions.
Reference: http://www.june29.com/HLP/ is a comprehensive catalogue of language-related
Internet resources. There are more than 2,400 links available at this site including links to other
CONTINUED
Individual and Group views on an International Business Challenge.
CEO: Can you see anything in the value of Islam that is hostile to business? What does the
experience of the region around Kayseri say about the relationship between Islam and
business? What are the implications of Islamic values towards business for the participation
of a country like Turkey in the global economy?
Your opinion: Islam is firmly against making a profit by exploiting others. Depending on just
how one defines exploitation, this could be a problem. For example, do commercials for
sugary cereal that are traditionally shown during children’s television programs count as
exploitation? A second area is the role of women in business. In Islamic countries, women
make up only a very small part of the workforce. This traditional Islamic value could also
present a problem. Third, the Koran condemns interest as exploitative and unjust. This
could present a problem for the financial industry, and also for companies needing loans.
Despite these concerns, however, many suggest that Turkey’s central region clearly
demonstrates that the country can indeed function successfully in the global economy.
Reference: https://fullfact.org/europe/turkey-likely-join-eu/
Reference: http://www.debatingeurope.eu/focus/infobox-arguments-for-andagainst-turkeys-eu-membership/#.V8J46bXDPoU
QUESTIONS:
1. Does Turkey currently represent the expected cultural values and norms to be part of
cross cultural community such as the EU?
2. Have to recent Brexit vote somewhat based on immigration issues and France’s
secular law crackdown on the Burkini indicated breakdowns in cultural tolerance in
the EU or are they indications of a new focus on National sovereignty and
independence?
3. Is the key issue with Turkey’s membership of the EU cultural, political or both?

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Internet sites that focus on online language lessons, translating dictionaries, native literature,
translation services, software, and language schools.
Spoken Language
While English is the language of international business, knowing at least some of the local
language can greatly help when working in another country. In some situations, knowing the
local language can be critical for business success.
Unspoken Language
Unspoken language can be just as important for communication. The fact that these can have
different interpretations in different cultures, and that many of these actions may be automatic
or reflexive, obviously complicates international communication. Not only may the person you
are dealing with be unintentionally sending non-verbal signals that you do not comprehend, or
are misunderstanding, you may be unconsciously sending your own signals.
Education
Formal education plays a key role in a society. Formal education is the medium through which
individuals learn many of the language, conceptual, and mathematical skills that are
indispensable in a modern society.
The knowledge base, training, and educational opportunities available to a country’s citizens can
also give it a competitive advantage in the market and make it a more or less attractive place
for expanding business. In nations that have a ready trained workforce for particular types of
jobs, it is easier to start operations than in nations where an investor will also have to undertake
time-consuming and costly training.
This video on considers Culture from the cross cultural difference perspective. It comprises
of three humorous HSBC advertisements base on cultural difference in values and norms.
This leads to the creation of misunderstandings or potential embarrassment.
LINK:
https://www.youtube.com/watch?v=GOHvMz7dl2A
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Cultural Dimensions
Professor Geert Hofstede conducted one of the most comprehensive studies of how values in the
workplace are influenced by culture. He defines culture as “the collective programming of the
mind distinguishing the members of one group or category of people from others”. There are six
dimensions of national culture are based on extensive research done by Professor Geert Hofstede,
Gert Jan Hofstede, Michael Minkov and their research teams.
The six dimensions are: Power Distance, Individualism versus Collectivism, Masculinity versus
Femininity, Uncertainty Avoidance, Long Term Orientation versus Short Term Orientation and
Indulgence versus Restraint. Figure 1 below indicates how comparisons between countries in
relation to these cultural dimensions can be performed. A comparison allows international
managers insights into the degree of difference between countries along key behavioural
attributes that impact on interpersonal interactions such as communication and processing
information and decision making approaches. These insights to degree and nature of cross
cultural difference provide international managers with some degree of foresight to plan for
intercultural training and development and processes and systems of cross cultural
communication support.
Figure 1: Table illustrating a two country comparison of dimensions of national culture
According to Hofstede et al (2010) the model of national culture consists of six dimensions. The
cultural dimensions represent independent preferences for one state of affairs over another that
distinguish countries (rather than individuals) from each other. The country scores on the
dimensions are relative, as we are all human and simultaneously we are all unique. In other
words, culture can be only used meaningfully by comparison. The model consists of the following
dimensions:
0
10
20
30
40
50
60
70
80
90
100
Power Distance Individualism Masculinity Uncertainty
Avoidance
Long Term
Orientation
Indulgence
Dimensions of National Culture
Country A Country B
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Power Distance Index (PDI): This dimension expresses the degree to which the less powerful
members of a society accept and expect that power is distributed unequally. The fundamental
issue here is how a society handles inequalities among people. People in societies exhibiting a
large degree of Power Distance accept a hierarchical order in which everybody has a place and
which needs no further justification. In societies with low Power Distance, people strive to
equalise the distribution of power and demand justification for inequalities of power.
Individualism versus Collectivism (IDV): The high side of this dimension, called individualism, can
be defined as a preference for a loosely-knit social framework in which individuals are expected
to take care of only themselves and their immediate families. Its opposite, collectivism,
represents a preference for a tightly-knit framework in society in which individuals can expect
their relatives or members of a particular in-group to look after them in exchange for
unquestioning loyalty. A society’s position on this dimension is reflected in whether people’s
self-image is defined in terms of “I” or “we.”
Masculinity versus Femininity (MAS): The Masculinity side of this dimension represents a
preference in society for achievement, heroism, assertiveness and material rewards for success.
Society at large is more competitive. Its opposite, femininity, stands for a preference for
cooperation, modesty, caring for the weak and quality of life. Society at large is more
consensus-oriented. In the business context Masculinity versus Femininity is sometimes also
related to as “tough versus tender” cultures.
Uncertainty Avoidance Index (UAI): The Uncertainty Avoidance dimension indicates the degree to
which the members of a society feel uncomfortable with uncertainty and ambiguity. The
fundamental issue here is how a society deals with the fact that the future can never be known.
The critical question becomes should we try to control the future or just let it happen? Countries
exhibiting strong UAI maintain rigid codes of belief and behaviour and are intolerant of
unorthodox behaviours and ideas. Weak UAI societies maintain a more relaxed attitude in which
practice counts more than principles.
Long Term Orientation versus Short Term Orientation (LTO): Every society has to maintain some
links with its own past while dealing with the challenges of the present and the future. Societies
prioritise these two existential goals differently. Societies who score low on this dimension, for
example, prefer to maintain time-honored traditions and norms while viewing societal change
with suspicion. Those with a culture which scores high, on the other hand, take a more
pragmatic approach: they encourage thrift and efforts in modern education as a way to prepare
for the future. In the business context this dimension is related to as “(short term) normative
versus (long term) pragmatic” (PRA).
Indulgence versus Restraint (IND): Indulgence stands for a society that allows relatively free
gratification of basic and natural human drives related to enjoying life and having fun. Restraint
stands for a society that suppresses gratification of needs and regulates it by means of strict
social norms. This information stems from the cross cultural lessons in leadership from Project
GLOBE – Global Leadership and Organizational Behavior Effectiveness
, (Javidan, et al. 2006).
Culture exists by comparison
The country scores on the dimensions are relative, as we are all human and simultaneously we
are all unique. In other words, culture can be only used meaningfully by comparison.

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These relative scores have been proven to be quite stable over time. The forces that cause
cultures to shift tend to be global or continent-wide. This means that they affect many countries
at the same time, so if their cultures shift, they shift together and their relative positions
remain the same. Exceptions to this rule are failed states and societies in which the levels of
wealth and education increase very rapidly, comparatively speaking. Yet, in such cases, the
relative positions will also only change very slowly.
The country culture scores on The Hofstede Dimensions correlate with other data regarding the
countries concerned. Power Distance, for example, is correlated with income inequality, and
individualism is correlated with national wealth. In addition, Masculinity is related negatively
with the percentage of national income spent on social security. Furthermore, Uncertainty
Avoidance is associated with the legal obligation in developed countries for citizens to carry
identity cards, and long term orientation (LTO) is connected to school mathematics results in
international comparisons
Culture and the Workplace
For an international business with operations in different countries, both the original research
undertaken by Hofstede in the 1970’s and the continuing research that has been added into the
current Cultural Dimensions model provide important insights for managing the international
workplace. The issues that the Hofstede et al (2010) cultural dimensions model raise an
important requirement for effective international management and insights into advantages o be
gained through globalisation need to vary management process and practices, and to take
different culturally determined work-related values into account.
Cultural Change
Culture evolves over time, although changes in value systems can be slow and painful for a
society. Social turmoil is an inevitable outcome of culture change. As countries become
economically stronger and increase in the globalisation of products bought and sold, cultural
change is particularly common.
Focus on Managerial Implications

Culture has three important implications for international business. First, there is a need to
develop cross-cultural literacy. Second, there is a connection between culture and national
competitive advantage.
making.
Third, there is a connection between culture and ethics in decision

Cross-Cultural Literacy
Individuals and firms must develop cross-cultural literacy. International businesses that are ill
informed about the practices of another culture are unlikely to succeed in that culture. One
way to develop cross-cultural literacy is to regularly rotate and transfer people internationally.
Ethnocentrism
One must also beware of ethnocentrism, or a belief in the superiority of one’s own culture.
Individuals who are ethnocentric frequently demonstrate disregard for other cultures.
Reference: http://www.edupass.org/culture/
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Culture and Competitive Advantage
For the international business, the connection between culture and competitive advantage is
important for two reasons. First, the connection suggests which countries are likely to produce
the most viable competitors. Second, the connection between culture and competitive
advantage has important implications for the choice of countries in which to locate production
facilities and do business.
Reference: http://www.executiveplanet.com/index.php?title=Main_Page
International approaches to Human Resource Management
According to Hill (2009) the strategic role of HRM is challenging enough in a purely domestic firm,
but it is more complex in an international business, where profound differences between
countries in labor markets, culture, legal systems, economic systems, and the like complicate
staffing, management development, performance evaluation, and compensation approaches. For
example:

Compensation practices may vary from country to country, depending on prevailing
management customs.
Labor laws may prohibit union organisation in one country and mandate it in another.
Equal employment legislation may be strongly pursued in one country and not in another.

If it is to build a team of managers capable of managing a multinational firm, the HRM function
must deal with a host of issues. It must decide how to staff key management posts in the
company, how to develop managers so they are familiar with the subtleties of doing business in
different countries, how to compensate people in different nations, and how to evaluate the
performance of managers based in different countries.
HRM must also deal with a host of issues related to expatriate managers. (An expatriate manager
is a citizen of one country who is working abroad in one of the firm’s subsidiaries.) It must decide
when to use expatriates, determine whom to send on expatriate postings, be clear about why
the firm is pursuing this approach, compensate expatriates appropriately, and ensure that these
managers are adequately debriefed and reoriented once they return home.
Global firm Staffing Policies
According to Hill (2009), research has identified three types of staffing policies in international
businesses. These are the Ethnocentric approach, the Polycentric approach, and the Geocentric
approach.
An
Ethnocentric approach to staffing policy fills all key management positions in an international
business with parent-country nationals. The policy is congruent with an international strategy
(Hill, 2009). Firms pursue an ethnocentric staffing policy for three reasons. First, the firm may
believe the host country lacks qualified individuals to fill senior management positions. This
argument is heard most often when the firm has operations in less-developed countries. Second,
the firm may see an ethnocentric staffing policy as the best way to maintain a unified corporate
culture. Third, if the firm is trying to create value by transferring core competencies to a foreign
operation. Firms pursuing an international strategy may believe that the best way to accomplish
this goal is to transfer parent-country nationals who have knowledge of that competency to the

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foreign operation.
Hill (2009) points out that Despite the rationale for pursuing an ethnocentric staffing policy, the
policy is now on the decline in most international businesses for two reasons. Firstly, an
ethnocentric staffing policy limits advancement opportunities for host-country nationals. This
can lead to resentment, lower productivity, and increased turnover among that group.
Resentment can be greater still if, as often occurs, expatriate managers are paid significantly
more than home-country nationals. Secondly, an ethnocentric policy can lead to cultural myopia,
the firm’s failure to understand host-country cultural differences that require different
approaches to marketing and management. The adaptation of expatriate managers can take a
long time, during which they may make major mistakes. For example, expatriate managers may
fail to appreciate how product attributes, distribution strategy, communications strategy, and
pricing strategy should be adapted to host-country conditions.
A
Polycentric staffing policy requires host-country nationals to be recruited to manage
subsidiaries, while parent-country nationals occupy key positions at corporate headquarters (Hill,
2009). In many respects, a polycentric approach is a response to the shortcomings of an
ethnocentric approach. One advantage of adopting a polycentric approach is that the firm is less
likely to suffer from cultural myopia. Host-country managers are unlikely to make the mistakes
arising from cultural misunderstandings to which expatriate managers are vulnerable. A second
advantage is that a polycentric approach may be less expensive to implement, reducing the
costs of value creation. Expatriate managers can be expensive to maintain.
A polycentric approach also has its drawbacks. Host-country nationals have limited opportunities
to gain experience outside their own country and thus cannot progress beyond senior positions in
their own subsidiary. As in the case of an ethnocentric policy, this may cause resentment.
Perhaps the major drawback with a polycentric approach, however, is the gap that can form
between host-country managers and parent-country managers. Language barriers, national
loyalties, and a range of cultural differences may isolate the corporate headquarters staff from
the various foreign subsidiaries. The lack of management transfers from home to host countries,
and vice versa, can exacerbate this isolation and lead to a lack of integration between corporate
headquarters and foreign subsidiaries. The result can be a “federation” of largely independent
national units with only nominal links to the corporate headquarters.
A
Regio-centric staffing policy attempts to seek out the pest people for key roles within the
region in which the host country is located (Hill, 2009). For example, a firm operating in the
European Union (EU) zone would consider the role capabilities and inter country awareness of
key European nations of importance to the home country headquartered firm. Similarly, a
region-centric approach may be useful in Spanish speaking country in South America in seeking
the best candidate with a wide business network across a number of South American countries.
It is entirely dependent upon the nature of the firm’s strategic needs for the roles in the host
country and the region. The advantages of pursuing a region-centric policy to staffing are
widening the pool of potential candidates in relation to a high level performer, Securing the
capacity of that region-centric appointment’s network capabilities and network connections in
the region. Ensuring staff rotation between country operations within a region as need requires.
The downside with a region-centric solution may include cross cultural sensitivities across
regional countries. There may be long standing differences and mistrusts which actually
outweigh the imposition of an ethnocentric approach applying expatriate managers and other
key staff from the home country firm.

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A Geocentric staffing policy seeks the best people for key jobs throughout the organisation,
regardless of their nationality (Hill, 2009). This approach is consistent with building a strong
unifying culture and informal management network and is well suited to both global
standardisation and transnational strategies. This policy has a number of advantages. First, it
enables the firm to make the best use of its human resources. Second, and perhaps more
important, a geocentric policy enables the firm to build a team of international executives who
feel at home working in a number of cultures. Creation of such a team may be a critical first
step toward building a strong unifying corporate culture and an informal management network,
both of which are required for global standardisation and transnational strategies.
According to Hill (2009), firms pursuing a geocentric staffing policy may be better able to create
value from the pursuit of experience curve and location economies and from the multidirectional
transfer of core competencies than firms pursuing other staffing policies. In addition, the
multinational composition of the management team that results from geocentric staffing tends
to reduce cultural myopia and to enhance local responsiveness. Thus, other things being equal, a
geocentric staffing policy seems the most attractive.
A number of problems limit the firm’s ability to pursue a geocentric policy. Many countries want
foreign subsidiaries to employ their citizens. To achieve this goal, they use immigration laws to
require the employment of host-country nationals if they are available in adequate numbers and
have the necessary skills. Most countries, including the United States, require firms to provide
extensive documentation if they wish to hire a foreign national instead of a local national. This
documentation can be time consuming, expensive, and at times futile. A geocentric staffing
policy also can be expensive to implement. Training and relocation costs increase when
transferring managers from country to country (Hill, 2009).
Table 1: Staffing Approaches for International Business – Advantages & Disadvantages

Staffing Approach Strategic
Appropriateness
Advantages Disadvantages
Ethnocentric International Overcomes lack of
qualified managers
in host country
Unified Culture
Assist in transferring
Core Competencies
Produces resentment
in host country
Can lead to cultural
myopia
Polycentric Localisation Alleviates cultural
myopia
Inexpensive to
implement
Limits career
mobility
Isolates
headquarters from
foreign subsidiaries
Regio-centric Regional Network Alleviates cultural
myopia
Inexpensive to
implement
Builds potential
regional networking
Builds cross cultural
exchanges within
region and career
May surface cross
cultural sensitivities
across regional
countries
National
Immigration policies
may limit
implementation

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mobility
Geocentric Global Standardisation Uses Human
Resource efficiently
and effectively
Assists in building
firm culture and
informal
management
networks
National
Immigration policies
may limit
implementation
Expensive

Adapted from Hill (2009)
Expatriate Management
A prominent issue in the international staffing literature is expatriate failure, defined as the
premature return of an expatriate manager to his or her home country. The costs of expatriate
failure can be substantial for an international firm. Expatriate failure can be reduced by
selection procedures that screen out inappropriate candidates. The most successful expatriates
seem to be those who have high self-esteem and self-confidence, can get along well with others,
are willing to attempt to communicate in a foreign language, and can empathise with people of
other cultures.
Training can lower the probability of expatriate failure. It should include cultural training,
language training, and practical training, and it should be provided to both the expatriate
manager and the spouse. Research has indicated that the failure to adapt to the new culture and
environment of a host country posting by the expatriate manager’s family members is a key
reason for premature termination of overseas postings.
Cultural Intelligence (CQ)
According to Van Dyne, et al (2012) CQ is an individual’s capability to detect, assimilate, reason,
and act upon cultural cues appropriately in situations characterised by cultural diversity. Thus,
it is domain-specific and has special relevance to multicultural settings and global contexts
(Earley & Ang, 2003). By definition, CQ is a flexible capability that can be enhanced by active
involvement in cross-culturally related education, travel, international assignments, and other
intercultural experiences (Ang & Van Dyne, 2008; Ng, Van Dyne, & Ang, 2009).
The Four Factors of CQ
Metacognitive CQ (CQ Strategy) refers to an individual’s level of conscious cultural awareness
and executive processing during cross-cultural interactions (Ang & Van Dyne, 2008). It is based
on high-level cognitive strategies and deep information processing that allow individuals to
develop discovery processes for social interaction across cultural contexts (Brinol & DeMarree,
2011).
Cognitive CQ (CQ Knowledge) refers to an individual’s knowledge structures about cultural
institutions, norms, practices and conventions in different cultural settings. Comprehending the

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elements that comprise the cultural environment helps individuals appreciate how the systems
shape and cause patterns of behaviours and interactions within a culture, and why behaviours
and interactions differ across alternate cultural environments (Ang & Van Dyne, 2008).
Motivational CQ (CQ Drive) refers to an individual’s capacity to direct attention and energy
toward learning about and functioning in situations characterised by cultural differences (Ang &
Van Dyne, 2008).
Behavioural CQ (CQ Action) refers to an individual’s capability to enact a wide repertoire of
verbal and nonverbal actions when interacting with people from different cultures (Ang & Van
Dyne, 2008). Behavioural CQ allows people to manage and regulate social behaviours in
intercultural encounters so there is minimal misperception and misattribution
The CQ Wheel (LivingInstitute, 2013)
This video on Cultural Intelligence explains the four components of Cultural Intelligence and
how they operate to achieve an effective culturally intelligent capability for an individual in
cross cultural interactions.
LINK:
https://www.youtube.com/watch?v=JJ_LclEJU8k

CQ
Action
CQ
Drive
CQ
Strategy
CQ
Knowledge

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Individual activity – Diagnosing your Cultural Intelligence. (Based on Earley P.C. & Mosakowski,
E. 2004. ‘Cultural Intelligence’,
Harvard Business Review, October, pp. 1 – 8.
These statements reflect different facets of cultural intelligence. For each set, add up your
scores and divide by four to produce an average. Our work with large groups of managers
shows that for purposes of your own development, it is most useful to think about your three
scores in comparison to one another.
Generally, an average of less than 3 would indicate an area calling for improvement, while an
average of greater than 4.5 reflects a true CQ strength. Rate the extent to which you agree with
each statement, using the scale:
1 = strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree.
1. Before I interact with people from a new culture, I ask myself what I hope to achieve.
2. If I encounter something unexpected while working in a new culture, I use this
experience to figure out new ways to approach other cultures in the future.
3. I plan how I’m going to relate to people from a different culture before I meet them.
4. When I come into a new cultural situation, I can immediately sense whether something
is going well or something is wrong.
Total ____ ÷ 4 = ___ Cognitive CQ
1. I can alter my expression when a cultural encounter requires it.
2. I modify my speech style (for example, accent or tone) to suit people from a different
culture.
3. I easily change the way I act when a cross-cultural encounter seems to require it.
4. It’s easy for me to change my body language (e.g. eye contact, or posture) to suit
people from a different culture.
Total ____ ÷ 4 = ___ Physical CQ
1. I have confidence that I can deal with people from a different culture.
2. I am certain that I can befriend people whose cultural backgrounds are different from
mine.
3. I can adapt to the lifestyle of a different culture with relative ease.
4. I am confident that I can deal with a cultural situation that’s unfamiliar.
Total ____ ÷ 4 = ___ Emotional/ motivational CQ

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Required Reading
Reading 1
Hill, C.W. 2009. International Business: Competing in the Global Marketplace, McGraw Hill,
New York, N.Y., Part Two Country Differences, Chapter 3 covers Differences in Culture, at:
[PDF]Charles W. L. Hill
202.74.245.22:8080/…/Charles%20W.%20L.%20Hill%20International%20business_…
I. Title. HD62.4.H55 2009. 658′.049—dc22. 2007045184 www.mhhe.com … Charles W. L. Hill
is the Hughes M. Blake Professor of International Business at the … accessed 26 August
2016.
This is a pdf of the complete e-book edition of Hill’s 2009 text on International Business.
Part Two is Country Differences. It contains Chapter 3 – Differences in Culture.
Reading 2
This reading by Geert Hofstede from 1993 considers his Cultural Dimensions model at the
time of the inclusion of the fifth dimension Long Term Orientation. A six dimension was
added in 2010 namely Indulgence versus Restraint. This article however explores the nature
of management practice through the the cultural dimensions.
Hofstede, G. (1993). Cultural constraints in management.
Academy of Management
Executive, 7
(1), 81-94.
Download document at:
http://users.ipfw.edu/todorovz/teaching/401/readings/Cultural%20constraints%20in%20mg
mt%20theories%20Hofstede.pdf

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Reading 3
Hill, C.W. 2009. International Business: Competing in the Global Marketplace, McGraw Hill,
New York, N.Y., Part Six International Business Operations – Chapter 18 covers Global Human
Resource Management, at:
[PDF]Charles W. L. Hill
202.74.245.22:8080/…/Charles%20W.%20L.%20Hill%20International%20business_…
I. Title. HD62.4.H55 2009. 658′.049—dc22. 2007045184 www.mhhe.com … Charles W. L. Hill
is the Hughes M. Blake Professor of International Business at the … accessed 26 August 2016.
This is a pdf of the complete e-book edition of Hill’s 2009 text on International Business.
Part Six is International Business Operations. It contains Chapter 18 – Global Human Resource
Management. The section dealing with approaches to international HRM staffing policies is
relevant.
Reading 5
The second reading on Cultural Intelligence considers the current thinking of the four
dimensions that comprise the model, namely: Metacognitive CQ (CQ Strategy); Cognitive CQ
(CQ Knowledge); Motivational CQ (CQ Drive); Behavioral CQ (CQ Action).
Van Dyne, L., Ang, S., Ng, K. Y., Rockstuhl, T., Tan, M.L., & Koh, C. (2012). Sub-dimensions
of the Four Factor Model of Cultural Intelligence: Expanding the conceptualization and
measurement of Cultural Intelligence.
Social and Personality Psychology Compass, 6(4), 295–
313.
Download document at:
http://www.linnvandyne.com/papers/Compass%202012%20Van%20Dyne%20et%20al%20Subdimensions%20of%20CQ.pdf
Reading 4
The first reading on Cultural Intelligence comes from Christopher Earley and Elaine
Moskowski in a HBR article. Earley was one of the first theorists in the field of Cultural
Intelligence. This article looks at the first conceptualization of Cultural Intelligence as a
three, dimension model – Cognitive CQ, Physical CQ and Motivational/Emotional CQ. This
translates to a concept of Cultural Intelligence based upon head, hand and heart.
Earley, P. C., & Mosakowski, E. (2004). Cultural Intelligence.
Harvard Business Review,
October, 1 – 8.
Download document at:
https://espritgloballearning.com/wpcontent/uploads/2015/08/HBR.Cultural-Intelligence1.pdf
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References:
Ang, S., & Van Dyne, L. (2008). Conceptualization of cultural intelligence: Definition,
distinctiveness, and nomological network. In S. Ang & L. Van Dyne (Eds.),
Handbook of Cultural
Intelligence: Theory, Measurement, and Applications
, pp. 3–15. M. E. Sharpe: Armonk, NY.
Brinol, P., & DeMarree, K. G. (Ed). (2011).
Social Metacognition. Psychology Press: New York, NY.
Earley, P.C., & Ang, S. (2003).
Cultural Intelligence: Individual interactions across cultures.
Stanford University Press: Palo Alto, CA.
Earley, P.C., & Mosakowski, E. (2004). Cultural Intelligence.
Harvard Business Review, October,
pp. 1 – 8.
Hill, C. W. (2009).
International business: Competing on the Global Market Place. McGraw-Hill:
Boston, MA.
Hofstede, G. (2016).
National Culture, from Geert-Hofstede website at https://www.geerthofstede.com/national-culture.html accessed 26 August 2016.
Hofstede, G. (2001).
Culture’s consequences: Comparing values, behaviors, institutions, and
organizations across nations
. (2nd Ed.). Sage Publications: Thousand Oaks, CA.
Hofstede, G. (1983). Cultural constraints in management.
Academy of Management Executive,
7
(1), 81-94.
http://users.ipfw.edu/todorovz/teaching/401/readings/Cultural%20constraints%20in%20mgmt%2
0theories%20Hofstede.pdf
accessed @4 August 2016.
Hofstede, G., Hofstede, G. J., & Minkov, M. (2010). Cultures and organizations: Software of the
mind, (3
rd Ed.). McGraw-Hill: New York, NY, U.S.A.
Javidan, M., Dorfman, P.W., de Luque, M.S., & House, R. J. (2006). In the eye of the beholder:
Cross cultural lessons in leadership from Project GLOBE.
Academy of Management Perspectives,
20(1), 67-90. https://business2.fiu.edu/1315548/mydocs/globe_leadership_amp.pdf accessed
24 August 2016.
Ng, K. Y., Van Dyne, L., & Ang, S. (2009). From experience to experiential learning: Cultural
intelligence as a learning capability for global leader development.
Academy of Management
Learning and Education, 8,
511–526.
Van Dyne, L., Ang, S., Ng, K. Y., Rockstuhl, T., Tan, M.L., & Koh, C. (2012). Sub-dimensions of
the Four Factor Model of Cultural Intelligence: Expanding the conceptualization and
measurement of Cultural Intelligence.
Social and Personality Psychology Compass, 6(4), 295–313.
http://www.linnvandyne.com/papers/Compass%202012%20Van%20Dyne%20et%20al%20Subdimensions%20of%20CQ.pdf accessed 24 August 2016.