Lecture2

5/13/2015

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Cross-Culture, Politics, andLaw in Business

DY Chhunsong

Lecture 2

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Fundamentals of Global Business Management

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Objectives of the Lecture

• Define what culture is

• Show what the main elements of culture are and how it affects

international business (IB)

• Explore the roles of political system and laws in IB

• Explain how different political systems and other legal relevant

factors affect IB

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Culture


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What Is Culture?

Set of values, beliefs, rules, and institutions held by a specific

group of people.

Why is culture important for international business?

Culture: National Culture and Subcultures

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National Culture: Nation-states support and promote the concept

of a national culture by building museums and monuments to

preserve the legacies of important events and people. It is a

dominant culture.

Subculture: A group of people who share a unique way of life

within a larger group, dominant culture.


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Components of Culture

AestheticsValues andAttitudes

Manners andCustoms

SocialStructure

ReligionPersonal

Communication

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Aesthetics

What a culture considers to be in “good taste” in the arts, the

imagery evoked by expressions and the symbolism of colors.

The selection of appropriate colors for advertising, product

packaging, and work uniforms can enhance chances of success.

Nike recalled its Air Bakin, Air Melt, Air Grill, and Air B-Que just

because “Air” logo assembled Arabic script for “Allah”.


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Values and Attitudes

Values: Ideas, beliefs, and customs to which people are

emotionally attached to (no alcohol in Islamic; freedom in the US).

Attitudes: Positive or negative evaluations, feelings, and

tendencies that individuals have on objects or concepts (adults in

Cambodia are more patient than those in the US).

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Manners and Customs

Manners: Appropriate ways of behaving, speaking, and dressing

(using left hand to serve meal is considered as bad in Arab culture).

Customs: Habits of behaving in specific circumstances that are

passed down through generations (Japanese tradition of throwing

special parties for young women and men who turn age 20).


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Social Structure

A culture’s fundamental organizations including its groups and

institutions, its system of social positions and their relationships,

and the process by which its resources are distributed.

It includes: family status (extended or nuclear), gender equality

(US), and social rankings (India).

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Religion

Different religions take different views of work, savings, and

materials. Understanding why they do so may help us understand

why companies are more competitive in global markets.


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Personal Communication

System of conveying thoughts, feelings, knowledge, and

information through speech, actions, and writing.

Each nation has its own language: spoken and body language.

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Politics and Laws


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What Is Political System?

Political System: Structures, processes, and activities by which a

nation governs itself.

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Political Participation

Wide Participation: Is when people who are capable of

influencing the political system make an effort to do so (US).

Narrow Participation: Occurs when few people participate since

the right to do so is restricted (youths in developing countries).


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Types of Political System

Democracy Totalitarianism

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Democracy

Political system in which government leaders are elected directly

by the wide participation of the people or by their representatives.

Representative Democracy: Democracy in which citizens elect

individuals from their groups to represent their political needs.


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Is it better to do business in a

democratic country?

If yes, why has India experienced slow economic development than

Hong Kong, Singapore, South Korea, and Taiwan?

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Totalitarianism

Political systems in which individuals govern without the support

of the people, government maintains control over many aspects of

people’s lives, and leaders do not tolerate opposing viewpoints.

Adolf Hitler of Germany and Joseph Stalin of the former Soviet

Union are historical examples of totalitarian governments.


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Features of Totalitarianism

Imposed Authority: Forms the political system without the

approval of the people, acquire and retain power by military force

or fraudulent elections, or come to power via legitimacy but remain

in office even after their terms expire.

Lack of Constitutional Guarantees: Limit, abuse, or reject

outright institutions: freedom of expression, periodically held

elections, guaranteed civil and property rights, and minority rights.

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Features of Totalitarianism (1)

Restricted Participation: Political representation is limited either

to parties that are sympathetic to the government or to those that

pose no credible threat.


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Political Risk

Likelihood that a government or society will undergo political

changes that negatively affect local business activity.

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Types of Political Risk

Conflict and Violence: Local conflict and violence can discourage

international investment and harm a company’s manufacturing and

distribution of products (current situation in Cambodia).

Terrorism and Kidnapping: These can show that small groups of

people are dissatisfied with current political or social situations

which affect business investment and operations.


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Types of Political Risk (1)

Property Seizure: Governments sometimes may seize the assets of

companies doing business in their borders (Long Chhen?).

Policy Changes: If policies of a nation keep changing so often it is

hard for companies doing business in the country to adapt.

Local Content Requirements: Laws stipulating that a specified

amount of a good or service be supplied by producers in the

domestic market.

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Managing Political Risk

Adaptation: Incorporate risk into business strategies, often with

the help of local officials or partners (risk management).

Information Gathering: International firms often attempt to gather

information that will help them predict and manage political risk.

Influencing Local Politics: Managers of international firms may

try to propose changes that benefit their local business activities.


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Legal Systems

Set of laws and regulations, including the process by which a

country’s laws are enacted and enforced and the ways in which its

courts hold accountable for their actions.

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Global Legal and Ethical Issues

Standardization: Standardization of law is important since this can

help international companies reduce cost by not hiring local legal

experts to deal with local laws (international articles).

Intellectual Property: Property that results from people’s

intellectual talent and abilities.

Product Safety and Liability: Most countries developed product

safety and liability laws to be met by companies when damage,

injury, or death caused by the companies’ products.


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Global Legal and Ethical Issues (1)

Taxation: If so many taxes are imposed, consumers end up paying

higher. This discourages companies to invest as they have to sell

products at higher price.

Antitrust Regulations: Designed to prevent firms from fixing

prices, sharing markets, and gaining unfair monopoly advantages.

Social Responsibility: Practice of companies going beyond legal

obligations to balance commitments to investors, customers, other

companies, and communities.

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Lecture2

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