Culture is defined in this course as a learned set of assumption, values and behaviours that have been accepted as successful enough to be passed to newcomers. Cultural differences may be extremely significant; for example, when asked whether managers must have at hand precise questions asked by subordinated, 73% of Indonesian and 78% of Japanese managers answered yes, whereas only 10% of Swedish and 18% of US managers did so. Cultural differences are significant in Australia; 43% of the population were either born overseas or have an overseas born parent.

Culture is a management tool that can be used for understanding and direction. Levels of culture include (i) artifacts (physical manifestations such as clothing, food, architecture) (ii) values (enduring beliefs of conduct and end states) and assumptions (beliefs about the fundamental aspects of life). Assumptions are typically hidden, subconscious motivations. Managing cultural diversity for competitive advantage involves costs, resource acquisition, marketing, creativity, problem solving and system flexibility. Strong and weak organisational cultures refers to the degree the cultural values of an organisation are shared by its members. Subcultures may also exist, which refers to values which are deeply held, but not widely shared. A cultural core value is widely held and deeply shared. A cultural context is the degree to which a situation influences behaviour or perception of appropriateness; different cultures have high and low context cultures (e.g., Anglophone, German, Swiss are low, Vietnamese, Chinese, Arabic etc are high).

Basic assumptions have managerial implications. Some managers will hold that people work as part of their nature; others will claim that people are basically lazy. The former will provide people with responsibilities and encourage their development, the latter will implement systems of monitoring and establish clear punishments for undesired behaviour. Assumptions of human relationships will define power distance and the conflict between individualism and collectivism. There will be assumptions of humanity's relationship to the environment, the nature of truth and of time.

Changing culture may initially involve selection; chossing people whose assumption, values and behaviour already match those you desire. Even if selection is not perfect congruent culture can be introduced and reinforced through socialisation. Newcomers can witness cultural values through performance appraisal and forms of rewards and compensation. Organisational culture is also reinforced through stories, symbols and rituals.