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INTERNATIONAL BUSINESS MANAGEMENT

SESSION 2
ENVIRONMENT OF INTERNATIONAL
BUSINESS
Isaac Teye

CULTURE
Definition:
Culture has been defined in many ways: the man
made part of the environment Harris
Hofstede defines culture as the collective
programming of the human mind
Culture is the way people solve problem and
recognize dilemmas Trompenaars and Hampden
Generally, culture is the knowledge, art, law, morals,
customs and other capabilities of one group
distinguishing from other groups

The features of Culture


All the definitions and explanations have a broad
consensus regarding the main features of culture
Culture is shared
- multiple group affiliations with a nation, firm etc
Culture is intangible
- culture is about meaning
- meanings are not very visible
- many aspect of culture must be inferred
Culture is confirmed by others
- culture can be understood better from outside

Culture and International Business


Explain the importance of culture to international
business

Culture influence the following


Strategy presentation
Decision, perceptions, motivation, leadership style
Marketing, accounting, supply chain etc

However, culture should not be seen as the explanation


of everything that is different
Other non-cultural environmental variables must be
considered

Model of Culture
Trompenaars (1994) suggest that culture comes in
layers like an onion.
To understand it you have to unpeel it layer by layer
On the outer layer are the products of a culture:
Skyscraper in Singapore, private power in USA and
good road in Johannesburg etc.
Values and norms are deeper within the onion and
more difficult to identify
Expressions such as the more the better, leave everything
to God are some examples of values.

Language
Language is one of the defining expressions of culture
It instill basic socialization themes and determines
how values and norms are expressed and
communicated
There are basic differences in the way languages and
dialects are expressed and this gives rise to language
blunders
Differences in grammatical and structural format
produce different types of discourse
Non-verbal language is also used for communications.
Variations in this could lead to embarrassment.

Religion
Religion contains key values and norms that are
reflected in adherents way of life
The impact of religion extends to the everyday
behavior of the population.
Influence of Religion on International Business
Business adopt practices to satisfy religious decrees
Marketing strategies may be modify
Advertising message is altered

National Culture Classifications


Hofstede Theory
1. Power Distance (PD)
-the
way hierarchical differences are accepted in a society and articulated
2. Uncertainty Avoidance (UA)
- the
extent to which ambiguity and uncertainty are tolerated
3. Individualism/Collectivism
- whether self or group is the center point of identification
4. Masculinity-Femininity
- the
extent to which traditional masculine values such as aggressiveness and
assertiveness are emphasized

Power Distance
Organizational Implications
Low

High

Less centralization

Greater centralization

Flatter organizational pyramids

Tall organization pyramids

Fewer supervisory personnel

More supervisory personnel

Smaller wage differentials

Large wage differentials

Manual and clerical work are


valued

White-collar jobs are valued

Uncertainty Avoidance
Low

High

Less structuring of activities

More structuring of activities

Fewer written rules

More written rules

More generalist

More specialist

variability

standardization

Greater willingness to take risk

Less willingness to take risk

Less ritualistic behavior

more ritualistic behavior

Individualism/Collectivism
Low

High

Organization as family

Organization is more
impersonal

Organization defends
employees interests

Employees defend their own


interest

Practice are based on loyalty


sense of duty and group
participation

Practice encourage individual


initiative

Masculinity/Femininity
Low

High

Sex roles are minimized

Sex roles are clearly differentiated

Organization do not interfere with


staffs private life

Organization may interfere to


protect their interest

More women in more qualified


jobs

Fewer women are in qualified jobs

Soft, intuitive skills are rewarded

Aggression, competition, and


justice are rewarded

Trompenaars and Hampden-Turner Classifications

Universalism versus Particularism (rules vs. relationship)


- in universal culture, rules apply in all situation
- legal solutions are prominent
Communitarialism versus Individualism (the group vs. the individual)
See yourself as individual or as a member of a group

Neutral versus Emotional


-In neutral culture, interactions are impersonal and objective whiles
emotional culture are full of emotions
Diffuse versus Specific (private life differentiated in specific culture)
Achievement versus Ascription(status is achieved in achievements
culture
Attitude to time
Attitude towards the Environment

Corporate Culture
Corporate culture is the set of shared, taken-for-granted
implicit assumptions of a group and that determines
how it perceives, thinks about and reacts to its
environments.
Characteristics of corporate culture derived from the
definition
Corporate culture is passed on to new employees
through socialization
It influence behavior at work
It operates in two different levels: at more visible level
is the artifacts such as dress code, acronyms etc. At less
visible level, it reflects values and beliefs shared by the
members.

Other Layers of Culture


Ethnicity
Industry culture
Demographics ( education, age, etc)
Key Cultural Issues
Cultural/Business Etiquette(expected behavior)
Cultural Stereotypes
Cultural Distance

Political Environment
Different countries run different political system
MNE face difficulties in the political environment
than domestic business
MNC must manage; political parties, unions, pressure
groups at both host and home country .etc
Affinity or Animosity between nations reflects how
closely aligned or estranged, nations are based on
both history and political reality.

Political Risk
The probability of disruption to an MNEs
operations from political forces.
Types of political risk
ownership risk (threat of current ownership structure)
operational risk (any change to rules of the game)
transfer risk (impediments to the transfer of production
factors)

Strategies for managing Political Risk


Minimize outright investment, lease rather than buy
Sign bilateral or multilateral treaties protecting the
mutual investment
Avoid high-visibility acquisitions especially firms
viewed as national assets
Opt for strategic alliances
Insure against political risk
Monitor political and economic environment

Legal Environment
Legal systems in different countries vary in their underlying
principles (common law, Civil Law or Theocratic law) as well
as independency, transparency and enforcement
Legal jurisdiction of operation
International level
Regional Level
National level
Legal issues MNE must consider
- Competition law
- Marketing and Distribution law
- Product laws, treaties and patent law