Objectives
Through this chapter, the student will be exposed to:
• What is culture
• The elements of culture
• The study of cultural differences
• Culture in the workplace
• Cross-cultural management and training.
Opening Case
Culture Gap
Global: With its domestic operations in trouble, Gap isn’t getting much help from abroad. If any retail brand looked like a sure bet internationally, it was the Gap, the 3700-store clothing chain that has proliferated like kudzu across the United States. With an image as American as Levi’s or Coke, the company figured it would be an easy sell.
Banking on success, Gap bragged about becoming “the world’s head- quarters for khakis” in 1998. However, Gap was in for a serious surprise.
Domestically, Gap was in trouble. Not only were the fourth-quarter profits expected to fall by 37 percent down $262 million from a year ago, but also same-store sales fell off by 12 percent in January: Gap needed all the help it could get and so it turned toward its stores outside the United States for
...
rescue. However, Gap’s international business was suffering equally. Same- store sales in Gap’s 525 international stores fell an estimated 10 percent in January and were off by about 5 percent in the past half-year. The com- pany cryptically acknowledged to analysts last year that in Germany and France it hasn’t been able “to work out the economics.” It is cutting inter- national store growth to 20–25 percent this year from 41 percent in the year just ended. The company’s international operating margin (net before interest and taxes, as a percent of sales) declined to 10 percent in fiscal year 2001 compared to 12 percent in 1999; these margins were far less than the company’s overall profit margin at 16 percent in fiscal 2001.
What went wrong? Gap fell because of the belief that it could apply uniform merchandising and marketing in all its stores around the world. In Japan, for example, the tags on Gap’s clothing are in English. Also, Gap employees cheerfully greet customers with the casual Japanese version of
“hi,” something not welcomed by the mannerly Japanese.
Additionally, despite Americanization, the Japanese seem to be more interested in bargains. Uniqlo, Gap’s 480-store rival owned by Fast Retailing Co., cheaply sources its fashions from China and undercuts the Gap on price. In Harajuku, the heart of the Japanese fashion world, Uniqlo sells denim jackets for $25, half the price of similar jackets at a nearby Gap.
Even monolithic Wal-Mart has figured out how to tailor its merchandise and suppliers to the locale, whether in the United States or abroad. In Beijing, Wal-Mart sells 20-pound moon cakes to coincide with Chinese lunar year holidays. Given the challenge of Byzantine retailing laws overseas, such customization is a big help. In Europe, for instance, retailers need special permission to build stores larger than 40,000 square feet.
Interestingly, however, some foreign tastes flow backward. Gap exper- imented in two of its Old Navy stores in the United States with Japanese punk fashions that included plaid shirts with ripped-off sleeves that were reattached with safety pins. However, the trend was not to the liking of Americans and never caught on.
In 1999 Mickey S. Drexler merged domestic and international operations and installed Kenneth Pilot, the former head of Gap’s outlet business, to run worldwide merchandising. Pilot had replaced son of Gap’s founder Donald Fisher when he quit. Looks like it may be time for Gap to drop the jingoism.
Question: What was Gap’s difficulty? What should Gap do?
Source: Forbes, 3/19/2001, Vol. 167 Issue 7, p. 62, and www.gapinc.com.
This chapter’s Opening Case describes the way in which a lack of under- standing of the local culture might create problems for companies operating in countries other than their own. No matter how big these companies may be, they can ignore the cultural aspect in their international operations
...
only at their own risk. Cultural differences and the unique ways of life that accompany them necessitate that managers develop international expertise to enable them to successfully manage according to the different environ- ments in the countries in which they operate. This dynamic environment consists of political, sociocultural, economic, legal, and technological fac- tors that influence the strategy, functions, and processes of any international business.
A critical skill that international business managers must have is a work- ing knowledge of the cultural variables that could influence their managerial decisions. In other words, they need to be culturally sensitive, possessing a healthy respect for another individual’s culture. This is what cross-cultural literacy is all about: an understanding of how cultural differences across and within nations can affect the way in which business is practiced.
The cultural insensitivity of managers who underestimated the signifi- cance of cultural factors led them to failure in their international operations.
Cultural sensitivity requires the ability to understand the perspective of those living in other, different societies and the willingness to practice cultural empathy, putting oneself in another’s shoes.
International managers can benefit greatly from understanding the nature, dimensions, and variables that constitute a country’s culture and how these affect work and organizational processes. Such cultural awareness enables managers to develop appropriate policies and functions for planning, leading, controlling, and organizing in an international setting. Such an adaptation process is necessary in order to realistically and successfully formulate and implement organizational objectives and strategies. Also, such cultural adaptation greatly contributes to an increase in workforce diversity around the globe.
In Chapter 1 we discussed the global issues and challenges that interna- tional business is confronted with. Because countries are different from one another, international business is different from any other type of business and thus we stress the need for cross-cultural literacy in this chapter. Despite the dynamic technological developments of the twenty-first century—global communications, rapid transportation—and the concept of the “global vil- lage” becoming a reality, we are still faced with tremendous differences across cultures. For example, Westerners, including Americans, assume that because people of other cultures might be using Western products like McDonald’s, Levi’s jeans, Microsoft software, BMW, BP, Shell, Coca-Cola, or are listening to Western music and watching Western movies, they also accept the other elements of Western culture. However, this could not be further from reality. Many Islamic militants responsible for various terrorist attacks against Western ideals were using some, if not all, of the aforemen- tioned Western goods and services. Furthermore, many cultures are in the process of changing their outlook and status vis-à-vis the role of women
...
in their society, for example, the countries of Saudi Arabia and the United Arab Emirates.