Cpater 3

• Culture


  A system of values and norms that are shared among a group of people and that, when taken together, constitute a design for living
• Components of culture


  • Values
  • Norms
• Values


  Abstract ideas about what a group believes to be good, right, and desirable
• Norms


  Social rules and guidelines that prescribe appropriate behavior in particular situations
• Functions of culture


  • Provides a shared set of rules that aid in interpreting experiences and generating social behavior, essentially shaping the 'way things are done' within a society
• How culture is shaped


  Influenced by religion, political and economic philosophies, education, language, and the underlying social structures of a society
• Influence of culture on business


  The cultural framework of a society can significantly impact how business is conducted, influencing everything from management practices to customer interactions
• Ethnocentrism


  The belief in the superiority of one's own culture can lead to misinterpretations and misunderstandings in international business
• High-context cultures


  Much of the communication is implicit, relying heavily on non-verbal cues. Common in parts of Asia, the Middle East, and Latin America
• Low-context cultures


  Communication is explicit, and messages are conveyed directly through words. Predominant in countries like Germany, Switzerland, and the U.S.
• Cultural clusters


  This approach groups countries with similar cultural attributes to simplify international business strategies
• Cultural dimensions


  Analyzes cultures along several dimensions such as Power Distance, Individualism vs. Collectivism, and Uncertainty Avoidance
• Cultural challenges in international business


  • Communication barriers, negotiation styles, management styles
• Ethical challenges in international business


  • Varied ethical norms, corruption and bribery, intellectual property rights
• Social challenges in international business


  • Labor practices, social responsibility
• Strategies for managing cultural, social, and ethical challenges

  Cultural training, establishing ethical standards, community engagement
• 3 approaches to culture


  • Context approach
  • Cluster approach
  • Dimensions approach
• Dimensions approaches


  • Hofstede (1997) - five dimensions
  • Trompenaar (1993) - seven dimensions
• Collinson, Narula and Rugman (2017)


  How to manage cultural diversity
• Strategies for managing cultural diversity


  • Recognising diversity
  • Building diversity issues
  • Identifying local divisions
  • Cultural balance
  • Leading from the top
• Friedman doctrine (1970)


  The only responsibility of business is to increase profits, if everything is legal, ethics do not need to be considered
• Naïve immoralist approach


  If a manager of a multinational company sees that companies from other countries are not following ethical norms in a host country, that manager should ignore the norms as well
• Ethical relativism


  Follow the local culture
• Ethical imperialism


  Impose company's home culture/ ethics on any new market
• "Middle of the road" approach

  Ethical relativism and imperialism are quite extreme
• Triple bottom line strategies

  Profit, people, and planet
• Four different responses to ethical challenges

  • Reactive strategy
  • Defensive strategy
  • Accommodative strategy
• Willard (2012)


  Five-stage sustainability journey for business enterprises
• What is

  free trade? A situation in which a government does

  not attempt to influence through quotas

  or duties what its citizens can buy from

  another country or what they can

  produce and sell to another country:
• Free trade


  A situation in which a government does not attempt to influence through quotas or duties what its citizens can buy from another country or what they can produce and sell to another country
• Mercantilism aka protectionism


  • The goal was the accumulation of gold
  • A key flaw was that it was a zero-sum game - a country could only achieve its goal of maximizing a trade surplus at the expense of another nation
  • The new version is Protectionism/Neomercantilism - e.g. US claims China is artificially keeping the exchange rate low
• Free trade


  • Can lead to specialization and increases in efficiency and resource utilization rate
  • Economies of scale, scope, and learning all improve with trade
  • Increases in trade are also linked to economic growth
  • Bigger market
• Protectionism


  • May allow for domestic firms to develop before being predated by international players
  • May force countries to have to rely on inefficient/lower quality domestic productions
  • May lead to trade wars and economic retaliations
• Reasons for government intervention in international trade


  • Infant Industries and Strategic Trade Policies
  • National Security
  • Consumer Protection
  • Retaliatory Measures
  • Foreign Policy Objectives
  • Human Rights Promotion
  • Environmental and Social Responsibility
• Consequences of government intervention in international trade

  • Subsidies: Protect infant industries, safeguard domestic employment, encourage R&D, but can lead to inefficient resource allocation, trade disputes, and require public funds
  • Tariff Barriers: Can provide revenue, protect domestic industries, but can provoke trade wars, hurt domestic consumers, and decline export competitiveness
  • Import Quotas: Protect domestic industries, reduce trade deficits, but can cause shortages, higher prices, and corruption
  • Anti-Dumping Policies: Protect domestic industries, ensure fair competition, but determining dumping is difficult, may be used for protectionism, and can provoke retaliation
• Absolute advantage


  A country produces a good more efficiently than another country
• Comparative advantage


  A country produces a good at a lower opportunity cost than another country
• Heckscher–Ohlin theory


  A country's comparative advantage is a result of differences in national factor endowments - countries will produce/export goods that make intensive use of factors of production like land, labour and capital that are locally abundant
• Product life cycle theory

  As products mature, both the sales location and the optimal production location would change - three stages: (1) new, (2) maturing and (3) standardised
• Strategic trade theory


  Due to economies of scale, some industries can support only a few companies - governments can help first movers achieve scale economies and create barriers to entry