Culture is, “the thought and behavior patterns that member of society learns through language and other forms of symbolic interaction.”
Culture factors in various countries of the globe affect the international business.
Example : Prohibition Of Alcoholic At Different Degrees In Different Countries.
Cultural Attitude & International Business:
Dressing habits, living style, eating habits and other consumption patterns, priority of
need are influenced by culture.
Example : Beef consumption. However, the foreign culture regarding food has been adapted Similarly, dressing habits also vary from country – to- country based on their culture . The international businessmen should eliminate the social, religious and cultural effect in order to understand the foreign cultures. Example: Indianizing all the MC Donald‟s way.
Cultural Universal: Irrespective of the religion, race, region, caste, etc., all of us have more or less the same needs. These common needs are referred to as „Cultural Universals‟. Communication Through Languages: There are safe rules in international communication. People also communicate through non- verbal medium . Example : eye-to- eye contact. Time and Culture Space and Culture: Space between one person and another person plays significant role in communication. Culture of Friendship Culture and Negotiations
Culture and Superstition
Culture and Gifts
Types of Political Systems
Two-party system Multi-party system Single-party system One-party dominated system
Domestication Operation risk
Country Evaluation & Selection
Environmental scanning Strict Bureaucracy & higher order Red Tape increases cost of doing business as well as create greater inconveniences for business to carry-out their operations Monetary risks are concerned with foreign exchange fluctuations, restrictions on FDI & limits on the repatriation of profits
Legal & Political Environment Companies may establish manufacturing facilities in foreign countries rather than exporting owing to high tariffs & restrictions in those countries. For example: Russia‟s political factors create risk while economic factors provide tremendous opportunities.
Capitalist Economy Communist Economy Mixed Economy
Classification of countries based on Income
Low Income Countries: USD 755 or less Lower middle Income Countries: USD 756 to USD 2,995
Upper middle Income Countries: USD 2,996 to USD 9,265
Higher Income Countries: USD 9,266 or more
Comparison of capitalist, communist & mixed economy
Freedom to compete with right to invest
Limited competition with state owned industries
Absence of competition with state owned markets & industries Profits not allowed. Workers urged to work for the glory of the state State provide all resources to start business owned by the state. No depreciation.
Profits & Wages in relation Profits are recognized and to one’s ability & wages in relation to efforts willingness Capital invested by owners, may be reinvested from profits. Depreciation is legal. From owners or stateissued bonds for state owned industries. Depreciation permitted.
Workers are free to select an Workers allowed to select employer and an occupation. occupation. State planning encourages employment. Managers are selected on the Managers in state-owned basis of ability. They have industries are answerable freedom to make decision. to the state. Non-monetary rewards emphasized. Individuals have the right to State owns the basic own a business & to contract industries. Other with the others. businesses may also exists. Losses assumed by owners. May transfer business risks to other businesses through insurance People assume risks of state-owned industries. Losses taken from taxes.
The state determines one’s employer and employment. Key managers must be party members. Absence of freedom to make decisions. State owns all productive capacity including communes. Economic production owned by the state. Risk assumed by the state. Losses reduce standard of living.
Source: Introduction to Modern Business-Issues & Environment
Macro-Economic issues affecting Business Decision
Balance of Payments
Country Evaluation w.r.t. Economic Environment
Cost & Availability of Inputs Proximity to Conglomeration of Markets Exchange Rate fluctuations Market Centres & their Potential