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CHAPTER 11 • GLOBAL/INTERNATIONAL ISSUES 335

A Weak Economy
A weak economy still plagues many countries around the world. The British pound
reached a 23-year low against the U.S. dollar in January 2009. Two consecutive quarters of
a decline in real gross domestic product is commonly used as a definition of a recession,
and the last quarter of 2008 marked this occurrence in the United Kingdom. The speed and
breadth at which the United Kingdom’s economy shrunk makes economists think the UK
recession could last through 2012. Like the U.S. government, the UK government has
poured hundreds of billions of pounds into stimulus and financial bailout measures.
Further interest rate cuts by the Bank of England are expected soon, although the bank’s
rates are already the lowest in the bank’s 315-year history. The pound’s fall has done little
to boost exports. David Sandall, a businessman in Cheshire, Northern England, says, “It
doesn’t matter what the price of something is if your customer hasn’t got the money.” And
that is the primary situation in the United Kingdom’s two largest trading regions—Europe
and the United States.
Unemployment rates are high across the United States and around the world.
Consumer spending remains low and cautious while banks continue to be reluctant to loan
money. Stock prices have rebounded, but many investors still have an appetite only for
government securities. New corporate profit warnings and bankruptcies spell continued
recession in many countries.

United States versus Foreign Business Cultures

To compete successfully in world markets, U.S. managers must obtain a better knowl-
edge of historical, cultural, and religious forces that motivate and drive people in other
countries. In Japan, for example, business relations operate within the context of Wa,
which stresses group harmony and social cohesion. In China, business behavior
revolves around guanxi, or personal relations. In South Korea, activities involve con-
cern for inhwa, or harmony based on respect of hierarchical relationships, including
obedience to authority. 4
In Europe, it is generally true that the farther north on the continent, the more participa-
tory the management style. Most European workers are unionized and enjoy more frequent
vacations and holidays than U.S. workers. A 90-minute lunch break plus 20-minute morning
and afternoon breaks are common in European firms. Guaranteed permanent employment is
typically a part of employment contracts in Europe. In socialist countries such as France,
Belgium, and the United Kingdom, the only grounds for immediate dismissal from work is a
criminal offense. A six-month trial period at the beginning of employment is usually part of
the contract with a European firm. Many Europeans resent pay-for-performance, commis-
sion salaries, and objective measurement and reward systems. This is true especially of
workers in southern Europe. Many Europeans also find the notion of team spirit difficult to
grasp because the unionized environment has dichotomized worker–management relations
throughout Europe.
A weakness of some U.S. firms in competing with Pacific Rim firms is a lack of
understanding of Asian cultures, including how Asians think and behave. Spoken Chinese,
for example, has more in common with spoken English than with spoken Japanese or
Korean. U.S. managers consistently put more weight on being friendly and liked, whereas
Asian and European managers often exercise authority without this concern. Americans
tend to use first names instantly in business dealings with foreigners, but foreigners find
this presumptuous. In Japan, for example, first names are used only among family mem-
bers and intimate friends; even longtime business associates and coworkers shy away from
the use of first names. Table 11-1 lists other cultural differences or pitfalls that U.S.
managers need to know about.
U.S. managers have a low tolerance for silence, whereas Asian managers view extended
periods of silence as important for organizing and evaluating one’s thoughts. U.S. managers
are much more action oriented than their counterparts around the world; they rush to appoint-
ments, conferences, and meetings—and then feel the day has been productive. But for many
foreign managers, resting, listening, meditating, and thinking is considered productive.