Introduction to contemporary business culture.

The American statesman and inventor Benjamin Franklin wrote that the time is money. Globe-trotting businesspeople would add that being aware of culture differences and sensitivities is money too.

Today’s globalization requires professionals to deal with their counter-parts in countries with different economic, cultural, legal, and political environments. When negotiators are from diverse cultures, they often rely on quite different assumptions about social interactions, economic interests, and political realities. Consequently, ability to communicate successfully with colleagues from other cultures is necessary for those who negotiate globally: managers, lawyers, government officials, and diplomats.

Since businesses rely on legal advice, documentation and advocacy throughout the lifecycle of a business undertaking, lawyers are increasingly being asked to provide counsel relating to international business transactions and disputes.

To be effective, legal counsel must be able to develop legal support for international negotiations. The absence of such capabilities in counsel can be disastrous. Cultural miscomprehension can result in significant costs and, sometimes, more lasting damage to future prospects. Differences in business culture may represent a greater obstacle to successful outcomes than even language differences.

The failure of business people to comprehend fully these disparities has led to most international business blunders. For example: - An American business person refused an offer of a cup of coffee from a Saudi businessman. Such a rejection is considered very rude and the business negotiations became stalled.

Differences in business culture may represent a greater obstacle to successful outcomes than even language differences. For example: “General Motors” has stated in court briefs that “cross-cultural competence is the most important new attribute for future effective performance in a global marketplace.” “Microsoft” has acknowledged past losses resulting from an inability to identify and bridge international cultural divides. Microsoft’s response, in common with large sections of the business community, has been to invest heavily to establish and broaden cross-cultural skills. The amount of attention devoted by the business media to cross-cultural management tools and techniques reflects the international business community’s recognition that developing cross-cultural competence internally is essential to international business success.

Culture, itself,is a set of learned core values, beliefs, standards, knowledge, morals, laws and behaviors shared by individuals and societies that determines how an individual acts, feels, and views oneself and others. These qualities shape the way you act, feel and view people — including the way you behave in business relationships. The key cultural components include language, religion, attitudes, manners, customs, the arts, education, social organization and humor. While some of these qualities may be expressed openly, such as spoken language, others are not. For instance, non-verbal communication is expressed through gestures, body language and facial expressions.

For instance, Americans think that looking someone in the eye during negotiations shows honesty and sincerity, whereas the British think a direct look is a sign of rudeness, unless you have a close personal relationship. The Japanese use less eye contact to show a higher level of respect.

Business culture, as a whole, is a congregation of various cultural norms, peculiarities of the thought processes, business practices, conducting meetings and negotiations, protocol and etiquette rules around areas such as personal space, communication, gift giving, business entertaining etc. followed in different nations. Every person is acculturated into a particular culture, learning the ‘‘right way’’ of doing things. Problems may arise when a person acculturated in one culture has to adjust to another one. The process of acculturation —adjusting and adapting to a specific culture other than one’s own—is one of the keys to success in international cooperation.

One way to organize our experience and guide our behavior toward ethnic and national groups is to use stereotyping. Stereotypes never describe individual behavior; rather, they describe the behavioral norm for members of a particular group. Effective stereotyping allows people to understand and act appropriately in new situations. A stereotype can be helpful when it is

• consciously held. The person should be aware that he or she is describing a group norm rather than the characteristics of a specific individual.

• descriptive rather than evaluative. The stereotype should describe what people from this group will probably be like and not evaluate those people as good or bad.

• accurate. The stereotype should accurately describe the norm for the group to which the person belongs.

• modified, based on further observation and experience with the actual people and situations.

In conclusion, some people stereotype effectively and others do not. Stereotypes become counterproductive when we place people in the wrong groups, when we incorrectly describe the group norm, when we inappropriately evaluate the group or category, when we confuse the stereotype with the description of a particular individual, and when we fail to modify the stereotype based on our actual observations and experience.

A number of most valuable studies, which explain the effects of culture on business has been made by Edward T. Hall and Geert Hofstede. In this course of lectures we’ll use some dimensions, developed by these researchers, which are the basis for distinctions between world business cultures. The distinctions between cultures are arranged according to the following dimensions.

1. Individualism versus collectivism - societies that value individualism, such as the U.S., encourage independent thinking and personal success, while collectivist cultures, such as Japan and various Arabic societies, encourage group success and conformity.

2. Power - distance - this dimension relates to how individuals view power and perceive their role in decision-making. In a low power-distance culture, like the U.S., individual employees will feel more empowered, accept more responsibility and want a role in decision-making, whereas in a high power-distance culture, like Russia, Japan employees look up to an authoritarian boss, seek direction and discipline, and accept the boss’s decisions.

3. Uncertainty-avoidance - this dimension relates to the ability to take chances versus the quest for certainty. For example, the Swiss, Germans and Japanese are high-uncertainty-avoidance cultures and prefer security and structure. On the other hand, those in the U.S., in low-uncertainty-avoidance culture, are much more open to taking risks and living with uncertainty. This even affects meetings, because the Japanese will carefully prepare and even rehearse meetings, while U.S. managers are more responsive to questions and changes in the agenda.

4. Masculinity versus femininity - the distinction here is between societies that value masculine traits, such as aggressiveness, assertiveness and material acquisition, versus those that have more feminine traits, such as a concern with personal relationships. For instance, U.S. culture is high in masculine traits but French and Chinese cultures are higher in feminine traits.

Other cultural distinctions include how individuals relate to time, context, tasks, relationships and the future. One distinction is between high- and low -context cultures.

In high-context cultures, such as Japan and Saudi Arabia, context is at least as important as what is actually said. The speaker and the listener rely on a common understanding of the context and what is not being said can carry more meaning than what is said.

In low-context cultures most of the information is contained explicitly in the words. North American cultures engage in low-context communications. Unless one is aware of this basic difference, messages and intentions can easily be misunderstood.

There are also task-driven cultures which focus on making the sale or deal quickly, whereas in relationship-driven cultures, you need to develop the relationship first. And, some places have a more present-oriented, short-term view, as in the U.S., but others, like Japan, have long-term view with much longer time horizon. Some cultures are monochronic, others are polychronic.

Now we are going to talk about some notions essential for understanding of the influence of intercultural awareness on international relations and business.

Cross-cultural competence refers to the knowledge, skills that enable individuals to adapt effectively in cross-cultural environments. Hence, cross-cultural competence is becoming an essential part of qualifications for legal professionals able to operate in international environment. The following components are important for cross-cultural competence of international lawyers: 1. country’s basic information awareness and understanding of non-native culture (foreign countries’ background, that is, history, legal system, religion, national characteristics, etc.); 2. awareness of communication issues (language, nonverbals of particular culture: body language, gestures, etc.); 3. acknowledging and understanding of cultural differences concerning business relationships (meetings, negotiating, business etiquette and protocols, etc.)

Cultural risk - the risk of business blunders, poor customer relations, and wasted negotiations that results when firms fail to understand and adapt to the differences between their own and host countries’ cultures. Cultural risk is just as real as commercial or political risk in the international business arena.

Cross-cultural communication occurs when a person from one culture sends a message to a person from another culture. Cross-cultural miscommunication occurs when the person from the second culture does not receive the sender's intended message. The greater the differences between the sender's and the receiver's cultures, the greater the chance for cross-cultural miscommunication.

For example: A Japanese businessman wants to tell his Norwegian client that he is uninterested in a particular sale. To be polite, the Japanese says, "That will be very difficult." The Norwegian interprets the statement to mean that there are still unresolved problems, not that the deal is off. He responds by asking how his company can help solve the problems. The Japanese, believing he has sent the message that there will be no sale, is mystified by the response. The reason for misunderstanding in this case is the lack of knowledge about Japanese style of communication as high-context culture.

There is one more example. A British boss asked a new, young American employee if he would like to have an early lunch at 11 A.M. each day. The employee answered, "Yeah, that would be great!" The boss, hearing the word yeah instead of the word yes, assumed that the employee was rude, ill-mannered, and disrespectful. The boss responded with a curt, "With that kind of attitude, you may as well forget about lunch!" The employee was bewildered. What had gone wrong? In the process of encoding agreement (the meaning) into yeah (a word symbol) and decoding the yeah spoken by a new employee to the boss (a word, behavior, and context symbol), the boss received an entirely different message than the employee had meant to send. Unfortunately, as is the case in most miscommunication, neither the sender nor the receiver was fully aware of what had gone wrong and why.

The ability to appreciate cultural differences is essential to successful international commerce, and to the provision of legal services that support it. For example, in the United States, profit is seen as a main goal. For the Japanese, the focus may not be on the profit alone, but on human efficiency; the group is superior to the individual. In France, there may be more of an emphasis on moderating one’s own freedom of action in order to avoid harming the interests of others. This is not to say that a French or Japanese person does not seek to make profit. It simply means that they may not necessarily see true return on investment as measurable solely by bottom-line financial gain, but rather as a combination of profit, long-term market position, and the welfare of all stakeholders in the venture, including the workforce, and even the local community.

As commerce is shaped by culture, so is law. Legal systems that have developed organically over time fundamentally reflect the belief system that spawned and upholds them. Indeed, “the rule of law is the very bedrock of our civilization.” It is not surprising, therefore, that cultural diversity is, more pronounced in law than in commerce.

For example: the Anglo-American lawyer tends to evaluate the importance of code provisions, of decisions of higher courts and underestimate treatises or commentaries. The continental lawyer in contrast will usually find himself at a loss among the innumerable precedents which are binding and will vaguely look for precise concepts among the legal synonyms, loosely phrased decisions and unsystematic text books.

However, the conceptual divide between established European civil and common law systems is far narrower than that between the traditional systems of many major trading nations. Both legal paradigms are primarily the product of Christian Western European peoples. For all the differences between them they have far more in common than regulatory mechanisms developed in other parts of the world. Other distinct legal traditions include Sharia law, Hindu law and various forms of cultural “law,” such as the guanxi system of relationships in China, or in Japan.

One of the most frequently used laws within international transactions and resolving of disputes is Contract Law. Where there is trade, some mechanism will have developed to ensure certainty in transactions and disputes resolution. However, this may not be legalistic. Cultural rules may be unwritten or may operate by changing the meanings of written law in ways that reflect the traditional values of the culture. Sometimes, the mechanism operates in the absence of enforced law, or outside of its structures. Dispute resolution may be based on the application of moral codes or interpretations of religious teachings. In such circumstances, transactional undertakings or litigation conducted on the basis of written law alone are unlikely to produce the desired outcome.

The profound impact of such cultural differences is illustrated by considering the differences in the concept of operation of contract between the closely-related Western European civil and common law traditions. Under common law, a contract is not binding unless consideration of at least nominal value is exchanged. Consideration is “an inducement given to enter into a contract that is sufficient to render the promise enforceable in the courts.” In civil law, the critical element is cause, which does not necessarily require any flow of consideration. Thus, gratuitous promises may form the basis of a binding arrangement, and, as a result, contracts in favor of a third party can be recognized and enforced despite no consideration having been tendered for the benefit. Differing attitudes toward contracts can cause even more confusion in other legal systems. For instance, the custom of ‘naniwabushi’ allows the Japanese to request a change in a contract if the terms become onerous or unfair, which is not acceptable in Western cultures.

Counsel should be wary of their own – and their colleague’s culturally conditioned conceptions and the behavior that springs from these.

Language has been described as the mirror of culture. Language itself is multidimensional by nature. Language capability serves three distinct roles in international business.

1. Language aids in information gathering and evaluation. Rather than rely completely on the opinions of others, the visiting person is able to see and hear personally what is going on.

2. Language provides access to local society. Although English may be widely spoken and may even be the official business language, speaking the local language may make a dramatic advantage.

3. Language provides more than the ability to communicate. It extends beyond mechanics to the interpretation of contexts that may influence business operations.

Consider, for example, how dramatically different English terms can be when used in the United Kingdom or the United States. In negotiations, for U.S. delegates, ‘‘tabling a proposal’’ means that they want to delay a decision, while their British counterparts understand the expression to mean that immediate action is to be taken. If the British promise something ‘‘by the end of the day,’’ this does not mean within 24 hours, but rather when they have completed the job. Additionally, they may say that negotiations ‘‘bombed,’’ meaning that they were a success, which to an American could have exactly the opposite message.

Other languages are not immune to this phenomenon either. An advertising campaign presented by Electrolux highlights the difficulties in transferring advertising campaigns between markets. Electrolux’s theme in marketing its vacuum cleaners, ‘‘Nothing Sucks Like an Electrolux,’’ is interpreted literally in the United Kingdom, but in the United States, the slang implications (to be repellent or disgusting) would interfere with the intended message.