International Business Concepts: Demographics, Culture, Organization, Marketing & HR

Posted on Jun 22, 2025 in Business Administration and Innovation Management

Socio-demographic Factors

International Demographic Patterns

The dynamics of population change are closely interrelated with patterns of economic development. Key issues include:

  • Population density
  • Fertility
  • Mortality
  • Migration

Demographic Indicators

Birth rate
Annual number of births per population
Mortality rate
Annual number of deaths per population
Infant mortality rate
Number of deaths of children under one year of age per number of births
Life expectancy
Length of life of individuals
Total fertility rate
Average number of children who would be born to a woman within her reproductive period
Dependency ratio
Young (under 15 years) + elderly (over 64 years) population / adult population (persons 15-64 years)
Natural growth rate
Births – deaths
Total annual growth
(Births – deaths) + (immigrants – emigrants)

Population Pyramids

Also called an “age-sex pyramid,” it is a horizontal bar graph that illustrates the distribution of different age groups (called cohorts) in a country in a given year, showing the number of males on the left and females on the right.

Types:

  1. Constrictive pyramid: It has fewer people in the younger age categories and has been typical of U.S. populations as baby boom populations shift to more conservative birth rates.

  2. Expansive pyramid: It represents greater numbers of people in the younger age categories and is typical of many developing countries where birth rates are high, but conditions are harsh, and life expectancy is short.

  3. Stationary pyramid: It shows roughly equal numbers of people in all age categories, with a tapering towards the older age categories. Countries such as Sweden show stationary age categories because of relatively low, constant birth rates and a high quality of life.

Demographic Transition

It is associated with the broad sweep of economic development and social change.

  1. 1st Stage: High birth rates and high, fluctuating death rates with net growth rates around 1%.

  2. 2nd Stage: Death rates fall sharply (improvements in diets, public health, and scientific medicine), birth rates fall (fertility is lagged), with an explosive increase in population.

  3. 3rd Stage: Death rates at a low level, birth rates low but fluctuating, with net growth rates around 1%.

Migration

Types of migration include:

  • Rural-to-urban migration (urbanization rate)
  • Economic migration

Remittances

Remittances are an increasingly important aspect of globalization. They are the flow of funds from international migrant workers to their home countries.

Characteristics:

  • Unilateral transfers: They do not create any future liabilities.
  • They move counter-cyclically with the economy in recipient countries (as a stabilizer that helps smooth out large fluctuations in the national income over the phases of the business cycle). The U.S. is the largest single source of remittances.
  • They are a source of micro-credit, financing very small enterprises for relatives, or providing start-up funds for self-employment on migrants’ return.

Brain Drain

Brain drain is the result of students and professionals choosing not to return home after the completion of educational courses or training programs in developed countries.

Cultural Factors

Culture Defined

Culture is the sum of the “values, rituals, symbols, beliefs, and thought processes that are learned, shared by a group of people, and transmitted from generation to generation.”

Ethnocentricity

Belief that one’s own ethnic group or culture is superior to that of others (Self-Reference Problem).

Cultural Literacy

Detailed knowledge of a culture that enables a person to function effectively within it (Cross-cultural management).

Levels of Culture

  • Global Culture: Multilateral institutions, networks, multinational corporations (MNCs), globalization.
  • National Culture: Countries.
  • Organizational Culture: Type of industry.
  • Group Culture: Functions, education level.
  • Individual Culture: Behaviors, values, assumptions.

Hofstede’s Cultural Dimensions

Professor Geert Hofstede identified primary dimensions of national culture:

Power Distance Index (PDI)

(Authority orientation) Measures power inequality between superiors and subordinates within a social system.

  • High PDI scores: Cultures tend to be hierarchical and value power and social status. Cultures where those who hold power are entitled to privileges.
  • Low PDI scores: Cultures with values of equality and reflect egalitarian views.

Individualism/Collectivism Index (IDV)

(Self-orientation) Refers to the preference for behavior that promotes one’s self-interest.

  • High IDV cultures: Reflect an “I” mentality and tend to reward and accept individual initiative.
  • Low IDV cultures: Reflect a “we” mentality and generally subjugate the individual to the group.
  • Collectivism: Pertains to societies in which people from birth onward are integrated into strong, cohesive groups, which protect them in exchange for unquestioning loyalty.

Masculinity/Femininity Index (MAS)

(Value orientation)

  • High MAS: The masculinity side of this dimension represents a preference in society for achievement, heroism, assertiveness, and material rewards for success. Society at large is more competitive.
  • Low MAS: Femininity stands for a preference for cooperation, modesty, caring for the weak, and quality of life. Society at large is more consensus-oriented.

Uncertainty Avoidance Index (UAI)

(Risk orientation) The Uncertainty Avoidance Index measures the tolerance of uncertainty and ambiguity among members of a society.

  • High UAI cultures: Are highly intolerant of ambiguity, experience anxiety and stress, and accord a high level of authority to rules as a means of avoiding risk.
  • Low UAI cultures: Are associated with a low level of anxiety and stress, a tolerance of deviance and dissent, and a willingness to take risks.

New Cultural Dimensions

Additional cultural dimensions have been proposed:

  1. Long-Term Orientation (1991 by Michael Harris Bond) – Confucian thinking
  2. Pragmatic vs. Normative (2010 by Michael Minkov)
  3. Indulgence vs. Restraint (2010)

Managerial Styles in International Business

Cross-cultural differences influence management styles in the following areas:

Authority & Decision Making

In high-PDI countries, subordinates are not likely to contradict bosses, but in low-PDI countries, they often do.

Three typical patterns exist:

  1. Top-level management decisions
  2. Decentralized decisions
  3. Committee or group decisions

Management Objectives & Aspirations

  • Security, especially of lifetime employment.
  • Affiliation and social acceptance by neighbors and fellow workers.
  • Power and achievement orientation sought by managers.
  • Importance of personal/family life over work and profit.

Communication Styles

  • Communication in a high-context culture depends heavily on the contextual (who says it, when it is said, how it is said) or nonverbal aspects of communication.
  • Communication in a low-context culture depends more on explicit, verbally expressed communications.

Formality & Tempo

  • Level of formality in addressing business clients by first name.
  • Level of formality in addressing your boss by first name.
  • Tempo or speed in getting “down to business.”
  • Perception of time varies in many cultures.

Negotiation Emphasis

Differences exist with respect to:

  • The product, its price, and terms.
  • Services associated with the product.
  • Friendship between vendors and customers.

P-Time vs. M-Time

  • M-time, or monochronic time, typifies most North Americans, Swiss, Germans, and Scandinavians. Most low-context cultures operate on M-time, concentrating on one thing at a time.
  • P-time, or polychronic time, is more dominant in high-context cultures. P-time is characterized by multi-tasking and by “a great involvement with people.”

International Organizational Structures

Organizational Structure Framework

Organizational structure is the framework of hierarchical relations, responsibility, and information flow within the firm. It is the result of several factors such as the size of the company, the nature of its international orientation, the number and consistency of the product lines, and its expansion plans.

The differentiation of activities and responsibilities has two dimensions:

  • Horizontal: Activities.
  • Vertical: Authority and hierarchical relations.

Organizational Charts

An organizational chart is the graphical representation of a company’s structure. The best organizational charts are those that follow a branched model:

  • Command unit principle.
  • Authority is staggered.
  • Each responsible party has subordinates in their charge, leading to economies of scale in supervision and control.

Functional Structure

It is set up so that each portion of the organization is grouped according to its purpose (e.g., marketing department, sales department, production department).

  • Advantages: Greater specialization within departments and more standardized processes across the global network.
  • Disadvantages: Lack of inter-department communication and networking, which contributes to more rigidity within the organization.

Multidivisional Structure

Above the divisions, there is always the corporate office in charge of strategic planning, resource distribution, supervision, and evaluation.

  • Disadvantage: It is quite difficult to create this structure, as it may require a new executive.

International Division

It makes decisions regarding operations, logistics, and international activity of the company. It facilitates coordination and adaptation to the host country.

  • Advantages: Better and more direct communication with the headquarters.
  • Disadvantage: The international division may lack the freedom to act and relies on the corporation for assistance.

Product Division

Each product has its own division that is responsible for the production, marketing, finance, and overall strategy of that particular product globally. This allows the multinational company to weed out product divisions that are not successful.

  • Advantages: Economies of scale in R&D activities, marketing, and production.
  • Disadvantages: Lack of integral networks that may increase duplication of efforts across countries, duplicate job positions, and internal tensions.

Geographic Areas Structure

All the functional units for a particular region (namely finance, operations, and human resources) are under the geographical region’s responsibility. This allows the company to evaluate the geographical markets that are most profitable.

  • Advantages: Decision-making process is faster.
  • Disadvantages: Communication problems, internal conflicts, and duplication of costs.

Matrix Structures

Overlap between the functional and divisional structures, featuring dual reporting relationships where employees report both to the functional manager and the divisional manager.

  • Advantages: More cross-functional communication that facilitates innovation; decisions are also more localized.
  • Disadvantages: More confusion and power plays because of the dual line of command.

Transnational Network Structure

Evolved from the matrix structure due to technological changes and communication advancements. This structure focuses on establishing “knowledge pools” and information networks that allow global integration as well as local responsiveness.

Types:

  1. Virtual Organization: V-form.
  2. Federal Organization: Asian cases.

Marketing Mix (4 P’s) in International Context

Product

A product is multidimensional. There are three dimensions to define:

  • Core components: Physical features.
  • Packaging components: Brand, labeling, package.
  • Support services components: Maintenance, financial, warranty.

Quality Management

It’s important to differentiate between:

  • Real quality: Physical attributes.
  • Perceived quality: Consumer’s perception.

Placement (Distribution)

The distribution process includes:

  • Physical handling and distribution of goods.
  • Passage of ownership.
  • Buying and selling negotiations between producers and middlemen.

Channels of Distribution Length

  • Level 0: Direct.
  • Level 1: One intermediary (middlemen).
  • Level 2: Two or more intermediaries.

Factors Affecting Channel Choice

  • Objectives: Volume, profits, market share, control, etc.
  • Character of the company and market: Nature of the goods; own sales force vs. distributors.
  • Coverage: Distribution intensity; main cities.
  • Continuity: Own distributor channel; long-term relationship.

Price

Common pricing strategies include:

  1. Cost-based price strategy: Price is set by calculating the product cost, promotion cost, and overhead cost, then adding the desired profit to those calculations.

  2. Demand-based price strategy: Price is set after analyzing consumer desires and determining the range of prices acceptable to the target market (willingness to pay).

  3. Competition-based price strategy: Price is set in accordance with competitors.

Promotion (Integrated Marketing Communications)

Integrated marketing communications (IMC) are composed of:

  • Advertising
  • Sales promotions
  • Trade shows
  • Personal selling
  • Direct selling
  • Public relations

Sales Promotion

Sales promotions are marketing activities that stimulate consumer purchases and improve retailer or middlemen effectiveness and cooperation. They are short-term efforts directed to the consumer or retailer to achieve specific objectives.

Public Relations

Public relations (PR) involves creating good relationships with the popular press and other media.

International Advertising

Decisions involving advertising are those most often affected by cultural differences among country markets. Seven steps are involved:

  1. Perform marketing research.
  2. Specify the goals of the communication.
  3. Develop the most effective message(s) for the market segments selected.
  4. Select effective media.
  5. Compose and secure a budget.
  6. Execute the campaign.
  7. Evaluate the campaign relative to the goals specified.

Global Human Resources Challenges

Key HR Challenges

Three broad global HR challenges have emerged in international business:

  1. Deployment: Getting the right skills to where they are needed in the organization, regardless of geographical location.

  2. Knowledge and innovation dissemination: Spreading state-of-the-art knowledge and practices throughout the organization, regardless of where they originate.

  3. Identifying and developing talent on a global basis: Identifying who has the ability to function effectively in a global organization and developing these abilities.

Expatriate Management

Practical Aspects for Expatriates

Practical aspects to consider for expatriate assignments:

  1. Candidate identification, assessment, and selection: Focus on cultural sensitivity, interpersonal skills, and flexibility.

  2. Cost projections: Historically, these used to be 3-5 times the pre-departure salary.

  3. Assignment letters: The assignee’s specific job requirements and associated pay will need to be documented and formally communicated in an assignment letter.

  4. Compensation, benefits, and tax programs: Given the vast differences in living expenses around the world.

  5. Relocation assistance: Includes maintenance of the person’s home and automobiles, shipment and storage of household goods, and so forth.

  6. Family support: Cultural orientation, educational assistance, and emergency provisions are just some of the matters to be addressed before the family is sent abroad.