Exam Global BB7

CHAPTER 4: CULTURAL DYNAMICS IN ASSESSING GLOBAL MARKETS

Importance of culture to an international marketer: 

Culture Five elements: values, rituals, symbols, beliefs, and thought processes

Successful marketer must be a student of culture

How these efforts interact with a culture determines the degree of success or failure of the marketing effort.

Definitions and origins of culture:

Edward Hall´s definitionrelevant to international marketing managers comments that cultural differences are often invisible and that marketers who ignore them often hurt both their companies and careers.

The graph below states that humans make adaptations to changing environmentsthroughinnovation. We learn culture through socialization (growing up) and acculturation (adjusting to a new culture)People make decisions about consumption and production through application of their cultural-based knowledge.

• Geography climate, topography, flora, fauna, and microbiology
  • manifest influence in our deepest cultural values developed through the millennia, and as geography changes, humans can adapt almost immediately.
  • Innovations spread faster east to west than north to south

• Historyspecific events in history can be seen reflected in technology, social institutions, cultural values, and even consumer behavior.
  • The post-War baby boom still affects consumption patterns around the world

• Political economyfour approaches to governance competed for world dominance: colonialism, fascism, communism, and democracy/free enterprise
  • influence of the political economy on social institutions and cultural values and ways of thinking.

• Technologyaircraft, air conditioning, televisions, computers, mobile phones, and the Internet all make the list. 
  • But the best answer is most likely the birth control pill

• Social institutionsaffect the ways in which people relate to one another, organize their activities to live in harmony with one another, teach acceptable behavior to succeeding generations

Elements of culture or cultural values: 

Underlying the cultural diversity that exists among countries are fundamental differences in cultural values, that is, the importance of things and ideas

Studying more than 90,000 people in 66 countries cultures of the nations differed along four primary dimensions as follows: 

• Individualism/Collective Index (IDV)focuses on self-orientation
  • High score  reflects “I” mentality 
    • Tend to reward and accept individual initiative 
    • Personal initiative and independence are accepted and endorsed
    • Individualism society in which ties between individuals are loose 
  • Low score  reflects “we” mentality 
    • Subjugate the individual to the group 
    • Collectivism society where people from birth onward are integrated into a strong cohesive group 

• Power Distance Index (PDI) focuses on authority orientation – measures the tolerance of social inequality between superiors and subordinates
  • High score  hierarchical
    • Cites social roles, manipulation, and inheritance as sources of power and social status
    • People are more likely to have general distrust on others 
    • Belief that those who hold power are entitled to privileges
  • Low score  value equality 
    • Cite knowledge and achievement as sources of power
    • Reflects more egalitarian view
• Uncertainty Avoidance Index (UAI)focuses on risk orientation – measures tolerance of uncertainty and ambiguity among members of a society
  • High score highly intolerant of ambiguity
    • distrustful of new ideas or behaviors
    •  high level of anxiety and stress and a concern with security and rule following
    • stick to historically tested patterns of behavior
    • seek absolute truth

CHAPTER 5: CULTURE, MANAGEMENT STYLE AND BUSINESS SYSTEMS

• Culture, including all its elements, profoundly affects management style and overall business systems
• Culture not only establishes the criteria for day-to-day business behavior but also forms general patterns of values and motivations.
• A lack of empathy for and knowledge of foreign business practices can create insurmountable barriers to successful business relations.

Degree of adaptation 

Adaptation key concept in international marketing, and willingness to adapt is a crucial attitude

            Essential to effective adaptation: 

• awareness of one’s own culture
• recognition that differences in others can cause anxiety, frustration, and misunderstanding

Self-reference criterion (SRC)

• If we do not understand our foreign counterpart’s customs, we are more likely to evaluate that person’s behavior in terms of what is familiar to us.
• Remaining open to new ideas, operating in a country other than one’s own, is extremely beneficial for managing in multinational situations

Imperatives, electives and exclusives

• Imperativescustoms that must be recognized and accommodated
  • must be met and conformed to or avoided if relationships are to be successful.
  • what may be an imperative to avoid in one culture is an imperative to do in another
    • in Japan, prolonged eye contact is considered offensive
• Electivescustoms to which adaptation is helpful but not necessary
  • following the custom in question is not particularly important but is permissible
  • demonstrates that the marketer has studied the culture
• Exclusivescustoms in which an outsider must not participate
  • Few cultural traits are reserved exclusively for locals

The impact of American culture on management style 

Reasons to focus on American culture:

• For Americans it is important to be aware of the elements of culture influencing decisions and behaviors
• For non americans it is useful to better understand your business associates from the States
• Since the late 1990s, American business culture has been exported around the world

Management styles around the world

• Authority and decision making 
  • High PDI subordinates are not likely to contradict bosses
  • Low PDI  more egalitarian 
  • Patterns: 
    • Top-level management decisions – absolute control to owners 
    • Decentralized decisions – executives at different levels take part 
    • Committee decisions – group consensus 
• Management objectives and aspirations 
  • Security and mobility 
    • relate directly to basic human motivation and therefore have widespread economic and social implications
  • Personal life 
    • virtue of a good personal life as far more important than profit or achievement

• Formality and tempo
  • Even though Northern Europeans seem to have picked up some American attitudes in recent years, do not count on them being “Americanized.
  • Haste and impatience are probably the most common mistakes of North Americans attempting to trade in the Middle East
  • maximum success have to deal with foreign executives in ways that are acceptable to the foreigner
• P time vs M time 
  • Monochronic time North Americans, Swiss, Germans, and Scandinavians
    • concentrate on one thing at a time
    • divide time into small units and are concerned with promptness.
  • Polychronic time dominant in high-context cultures
    • completion of a human transaction is emphasized more than holding to schedules
    • simultaneous occurrence of many things and “a great involvement with people”
  • Most cultures offer a mix of P-time and M-time behavior but have a tendency to adopt either more P-time or M-time with regard to the role time plays.

Business ethics

Corruption 

• In communist countries profits can be seen as a kind of corruption 
• The individualism so important to Americans also can be seen as a kind of corruption
• Countries high in collectivism (Asia) perceive higher levels of corruption in bank lending practices than do individualistic cultures, regardless of government policies and other possible explanations

The western approach to bribery 

• Before, to most Americans the word corruption meant bribery
• Now in the domestic context, fraud has moved to the more prominent spot in the headlines
• Decision to pay a bribe creates a major conflict between what is ethical and proper, and what is profitable and sometimes necessary for business.
• Long considered almost a way of business life, bribery and other forms of corruption are now being increasingly criminalized

Bribery: variations on a theme 

Although bribery is a legal issue, it is also important to see bribery in a cultural context to understand different attitudes toward it

• Bribery and exortion
  • Difference depends on whether the activity resulted from an offer or from a demand for payment
  • Bribery Voluntarily offered payment by someone seeking unlawful advantage
  • Exortion payments are extracted under duress by someone in authority from a person seeking only what he or she is lawfully entitled to

• Lubrication and subornation 
  • Lubrication small sum of cashor a service given to a low-ranking official in a country where such offerings are not prohibited by law. 
    • The purpose of such a gift is to facilitate or expedite the normal, lawful performance of a duty by that official.
  • Subornation giving large sums of money
    • designed to entice an official to commit an illegal act on behalf of the one offering the bribe

Agent’s fees When a businessperson is uncertain of a country’s rules and regulations, an agent may be hired to represent the company in that country

Ethical and social responsible decisions: 

• Ethical decisions difficulties arise in making decisions, establishing policies, and engaging in business operations in five broad areas: 
  • Employment practices and policies
  • consumer protection, 
  • environmental protection, 
  • political payments and involvement in political affairs of the country
  • basic human rights and fundamental freedoms 

Ethical principles: 

• Utilitarian ethics – optimize the common good 
• Rights of the parties – respect the rights of individuals involved 
• Justice or fairness – respectthe canons of justice or fairness to all parties involved

CHAPTER 6: THE POLITICAL ENVIRONMENT

The Sovereignty of nations: 

Characteristics of a sovereign state

• independent and free from all external control
• enjoys full legal equality with other states
• governs its own territory
• selects its own political, economic, and social systems
• has the power to enter into agreements with other nations

Sovereigntyrefers to both the powers exercised by a state in relation to other countries and the supreme powers exercised over its own members

• The state sets requirements for citizenship, defines geographical boundaries, and controls trade and the movement of people and goods across its borders

Citizen is subject to the state’s laws even when beyond national borders

• The extension of national laws beyond a country’s borders that much of the conflict in international business arises

Nations voluntarily giving up part of their sovereignty: 

• The European Union
• North American Free Trade Agreement (NAFTA)
• North Atlantic Treaty Organization (NATO)
• World Trade Organization (WTO)

• Greece are unhappy about the austerity measures forced on them by the European Union and other international institutions in recent years
• WTO is considered by somethe biggest threat so far to national sovereignty
  • international covenants and arbitration procedures that can override national laws
• Foreign investment also can be perceived as a threat

Stability of government policies: 

Issues that can affect the stability of a government:

• Radical shifts in government philosophy when an opposing political party ascends to power
• Pressure from nationalist and self-interest groups
• Weakened economic conditions
• Bias against foreign investment
• Conflicts between governments 

Five main political causes of international market instability:

• Some forms of government seem to be inherently unstable
• Changes in political parties during elections can have major effects on trade conditions
• Nationalism
• Animosity targeted toward specific countries
• Trade disputes themselves

• Forms of government
  • Ancient Greeks criticized three fundamental forms 
    • Rule by one – monarchy 
    • Rule by few – aristocracy 
    • Rule by many – democracy 
  • Nowadays more than 200 sovereign stateshave at least nominally representative governments with universal voting  for those 18 years and over

• Political parties

2. 1. In countries where 2 strong political parties typically succeed one another, it is important to know the direction each party is likely to take
   2. Unpredictable and drastic shifts in government policies deter investments, whatever the cause

• • Political philosophy and attitudes within a country is important in the stability and attractiveness of a government in terms of market potential 

• Nationalisman intense feeling of national pride and unity, an awakening of a nation’s people to pride in their country.
  • one of its central aims the preservation of national economic autonomy
  • national interest and security are more important than international relations
  • manifested in several ways: 
    • call to “buy our country’s products only” 
    • restrictions on imports
    • restrictive tariffs
    • and other barriers
  • the more a country feels threatened by outside force or the domestic economy declines, the more nationalistic it becomes in protecting itself against intrusions

• Targeted fear and or animosity

2. 1. Do not confuse nationalism with widespread fear or animosity directed at a particular country

• • No nation-state will tolerate penetration by a foreign company into its market and economy if it perceives a social, cultural, economic or political threat to its well-being

CHAPTER 7: THE INTERNATIONAL LEGAL ENVIRONMENT

The four heritages of today’s legal systems:

Even though a country’s laws may be based on the doctrine of one of the four legal systems, its individual interpretation may vary significantly

• Common law – derived from English law 
  • is tradition, past practices, and legal precedents set by the courts through interpretations of statutes, legal legislation, and past rulings
  • recognized as not being all-inclusive
  • ownership is established by use

• Civil or code law -derived from roman law 
  • based on an all-inclusive system of written rules (codes) of law
  • legal system is generally divided into three separate codes: commercial, civil, and criminal
  • considered complete as a result of catchall provisions found in most code-law systems
  • ownership is determined by registration

• Islamic law – derived from interpretation of the Koran 
  • encompasses religious duties and obligations, as well as the secular aspect of law regulating human acts
  • prescribes specific patterns of social and economic behavior for all individuals
  • includes property rights, economic decision making, and types of economic freedom
  • objective is social justice
  • prohibition against the payment of interest
  • prohibition against investment in those activities that violate the Shari’ah

The important factors in the jurisdiction of legal disputes:

Determining whose legal system has jurisdiction when a commercial dispute arises is another problem of international marketing

• No judicial body exists to deal with legal commercial problems arising among citizens of different countries
• Unless a commercial dispute involves a national issue between nation states, the International Court of Justice or any similar world court does not handle it
• The most clear-cut decision can be made when the contracts or legal documents supporting a business transaction include a jurisdictional clause

International courts are operative in international disputes between sovereign nations: 

• The World Court at The Hague 
• The International Court of Justice

Legal disputes can arise in three situations: 

• Between governments – solved by The World Court 
• Between a company and a government – handled in the courts of the country’s parties 
• Between two companies – handled in the courts of the country’s parties

Jurisdiction is determined in one of three ways: 

• On the basis of jurisdictional clauses included in contracts
• On the basis of where a contract was entered into
• On the basis of where the provisions of the contract were performed

The various methods of dispute resolution: 

• Conciliation  nonbinding agreement between parties to resolve disputes by asking a third party to mediate differences
  • Mediator functions:
    • carefully listen to each party 
    • explore, clarify, and discuss the various practical options and possibilities  
    • find a solution with the intent that the parties will agree on it.
  • conciliation sessions are private and confidential 
  • statements made by the parties may not be disclosed or used as evidence in any subsequent litigation or arbitration
  • Although conciliation may be the friendly route to resolving disputes it is not legally binding
    • thus, an arbitration clause should be included in all conciliation agreements

• Arbitration  the parties involved select an external party as referees to determine the merits of the case and make a judgment that both parties agree to honor
  • conducted under the auspices of one of the more formal domestic and international arbitration groups
    • organized specifically to facilitate the resolution of commercial disputes
  • The popularity of arbitration has led to a proliferation of arbitral centers established by countries, organizations, and institutions
  • Arbitration clauses require agreement on two counts:
    • Agree to arbitrate in the case of a dispute according to the rules and procedures of some arbitration tribunal 
    • Agree to abide by the awards resulting from the arbitration

• Litigation  the process of taking legal action – suing 
  • The best advice is to seek a settlement rather than suing 
  • Other barriers to litigation are: 
    • Fear of creating a poor image and damaging public relations.
    • Fear of unfair treatment in a foreign court.
    • Difficulty in collecting a judgment that otherwise may have been collected in a mutually agreed settlement through arbitration.
    • The relatively high cost and time required when bringing legal action.
    • Loss of confidentiality