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MGT520 - International Business - Lecture Handout 16

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Religious and Ethical Systems:

  1. 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 behavior. 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 will be discussed: Christianity, Islam, Hinduism, and Buddhism. Confucianism, while not a religion, influences behavior and shapes culture in many parts of Asia. Map 3.1 shows dominant religions across the world.
  2. Christianity is the largest religion and is common throughout Europe, the Americas, and other countries settled by Europeans. Within Christianity there are three major branches: Protestant, Roman Catholic, and Eastern Orthodox. At the turn of the 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 on individual religious freedom, in contrast to the hierarchical Catholic Church, was also consistent with the individualist economic and political philosophy discussed in Chapter 2.
  3. Islam has the same underlying roots of Christianity (Christ is viewed as a prophet), and suggests many of the same underlying societal mores. Islam, however, extends this to more of an allembracing way of life that governs one's being. It also prescribes many more "laws" on how people should act and live. These are laws that are entirely counter to the US "separation of church and state." In Islam people do not own property, but only act as stewards for God and thus must take care of that with which they have been entrusted. 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 while Islam is supportive of business, the way business is practiced is strictly prescribed. For instance, no interest may be paid on business loans. The country focus on Pakistan illustrates how banks deal with, and overcome, that restriction.
  4. 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. 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.
  5. Buddhists also stress spiritual growth and the afterlife, rather than achievement while in this world. Buddhism, practiced mainly in Southeast Asia, does not support the caste system, however, so individuals do have some mobility not found in Hinduism and can work with individuals from different classes.
  6. 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 needs for high moral and ethical conduct and loyalty to others are central in 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, called keiretsus, have been an important ingredient in the Japanese success in the
    auto industry. They have facilitated loyalty, reciprocal obligations, and honesty. In countries where these relationships are more adversarial and not bound by these same values, the costs of doing business are probably higher.


  1. The language of a society allows it to communicate but also directs the attention of people towards certain features of the world and human interactions. A good example is how the Inuit have 24 words for snow, but no word for the overall concept. Language helps describe how different people see the world.
  2. While English is clearly 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. Knowledge of the local language is often taken as an indication that the businessperson is willing to meet the local firm “on its own court.”
  3. Unspoken language can be just as important for communication. Using a few facial expressions and hand gestures to the class can illustrate the point. 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 understand or find misleading, you may be unconsciously sending your own signals. One example I have used in class is to show different perceptions of “personal space” in communications. I have a conversation with one student (about sports or the weather) with us standing “a long distance apart” and a similar conversation with another student with our faces only a few inches apart. Most of the class finds both of these extreme, although a few reserved Midwesterners will find the long distance quite acceptable. Students from different countries will also comment on their perceptions, and how distance also varies with familiarity with the person.


  1. Schools, as a part of the social structure of a society, and one that students are exposed to in their formative years, convey many cultural values and norms.
  2. 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 timeconsuming and costly training.
  3. Map 3.3 shows the literacy rates in the world. Although there is not a perfect correspondence between educational spending and literacy rates, a relation does exist, and spending on education does give an indication of a country's commitment to education.

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