Chapter 3. The culture environment Present by group 1. Miguel tamez kimbralee mosmen Sumitra nilavatanakul

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Chapter 3.The culture environmentPresent by
group 1.Miguel tamezkimbralee mosmenSumitra
nilavatanakul
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LEARNING OBJECTIVES

• To define and demonstrate the effect of cultures
  various dimensions on international business
• To examine ways in which cultural knowledge can
  be acquired and individuals and organizations
  prepared for cross-cultural interaction
• To illustrate ways in which cultural risk poses a
  challenge to the effective conduct of business
  communications and transactions
• To suggest ways in which international
  businesses act as change agents in the diverse
  cultural environments in which they operate

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Back ground

• International marketing requires constant concern
  for different cultures and therefore requires
  adaption.
• Self- reference criterion- a tendency to rely on
  one own cultural values, personal experience and
  knowledge as the primary basis for making
  decisions.

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Back ground

• The ever increasing level of world trade, opening
  of markets enhanced purchasing power of customer,
  and intensifying competition all have allowed and
  even forced marketers to expend their operation.
• Oversea success is very much a function of
  culture adaptability patience, flexibility, and
  tolerance for other beliefs.

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Culture defined

• culture is learned, shared, and transmitted from
  one generation to the next.
• culture is defined as an integrated system of
  learned behavior patterns that are distinguished
  characteristic of the members of any given
  society. It including everything that a group
  thinks, says, does, and makes.

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Key concepts

• High-context culture
• - is where the social context which what is said
  strongly affects the meaning of the message.
• - Examples Japan and Saudi Arabia
• Low-context culture
• - is where the meaning of message
• is explicitly expressed by the word and is
  less
• affected by the social context.
• - Example North American.

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Contextual background of various countries
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Elements of Culture

• 1) Language
• - Verbal
• - Nonverbal
• 2) Religion
• 3) Values and Attitudes
• 4) Manners/Customs
• 5) Material Elements
• Infrastructure
• Convergence

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Elements of Culture (con.)

• 6) Aesthetics
• 7) Education
• 8) Social Institutions
• Learning about other cultures
• experiential knowledge
• factual knowledge

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Language

• Verbal
• - How words are spoken
• Messages are conveyed by the words used, by the
  way the word are spoken
• - Gestures made
• - Body position assumed
• - Degree of eye contact
• Local language capabilitys important role in
  international marketing
• - Aids in information gathering and evaluation
• - Provide access to local society
• - Important to company communications
• - Allows for interpretation of contexts

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Language

• Nonverbal language
• Hidden language of cultures
• - Time flexibility and sensibility
• - Social acquaintance and rapport
• - Personal physical space and personal touching
• - Non-verbal gestures and signaling

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FACE
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Religion

• Religion contains key values and norms that are
  reflected in adherents way of life.
• People try to adopt business practices that will
  satisfy religious tenets without sacrificing
  modern practices in business.

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The major world religions

• Christianity- 2.0 billion followers
• Islam 1.2 billion followers
• Hinduism- 860 million followers
• Buddhism 360 million followers
• Confucianism -150 million followers

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Religion
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Values and Attitudes

• Values
• - are shared beliefs or group norms that have
  been internalized by individuals.
• Attitudes
• - are evaluations of alternatives based on these
  values.

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Manner and Customs

• Potential problem areas for marketers arise from
  an insufficient understanding of
• - different ways of thinking.
• - the necessity of saving face.
• - knowledge and understanding of the host
  country
• - the decision-making process and personal
  relations
• - the allocation of time for negotiations.

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Cultural Factors

• Never touch the head of Thai or pass an object
  over it. The head is considered scared in
  Thailand.
• Avoid using triangular shapes in Hong Kong,
  Korean, and Taiwan. It is considered a negative
  shape.
• The number 7 is considered bad luck in Kenya,
  good luck in Czech republic and has a magical
  connotation in Benin, Africa.
• The number 10 is bad luck in Korean
• The number 4 mean death in Japan
• Red represents witchcraft and death in many
  African countries.
• Red is positive color in Denmark

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It s Not the Gift That Counts, but How Your
Present It

• Japan
• Do not open a gift in front of Japanese
  counterpart unless asked, and do not expect the
  Japanese to open your gift. Avoid ribbons and
  bows as part of the gift wrapping, Bows as we
  know them are considered unattractive, and ribbon
  color can have different meaning.
• Europe
• Avoid red rose and white flowers, even numbers,
  and the number 13. Do not wrap flowers in paper.
  Do not risk the impression of bribery by spending
  too much on a gift.

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Material Elements

• Material culture
• - Results from technology and is directly
  related to how
• a society organizes is economic activity.
• - Material culture is manifested in
• - Economic infrastructure
• - Social infrastructure
• - Financial infrastructure
• - Marketing infrastructure
• - Cultural convergence
• - The degree of industrialization can provide a
  
• marketing segmentation variable.

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Aesthetics

• What is or is not acceptable as good taste varies
  widely in cultures.
• The symbolism of colors, forms, and music carries
  different meaning in different meaning in
  different cultures.

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Social Institutions

• Kinship relationships
• - immediate and extended family
• Social stratification
• Reference groups
• - Primary reference groups
• - family, coworkers
• - Secondary reference groups
• - professional associations, trade
  organizations.

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Education

• Assessing the educational level of a culture
• - formal and informal education
• - literacy rates
• - enrollment in secondary or higher education
• - qualitative aspect of emphasizing science
• Education affects
• - employee training
• - competition for labor
• - Product characteristics.

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Culture Analysis

• The key variable of the model is propensity to
  change, which is a function of three constructs
• Culture lifestyle
• Individualism
• Power distance
• Uncertainly avoidance
• Masculinity
• Distinguish culture difference
• Change agent
• Communication

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A model of Cross-Culture Behavior
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Culture Dimension Score for Twelve Countries
(0low100high)
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Reducing the influence of ones own culture values

• Define the problem or goal in terms of domestic
  culture traits, habits, or norms.
• Define the problem or goal in terms of foreign
  cultural traits, habits, or norms. Make no value
  judgment.
• Isolate the self-reference criterion influence in
  the problem and examine it carefully to see how
  is complicate the problem
• Redefine the problem without the self-reference
  criterion influence and solve for the optimal
  goal situation.

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The Training Challenge- Global Managers

• Internal education program that increase cultural
  sensitivity
• - Culture-specific information
• - Culture-general information
• - Self-specific information
• Specialized training for global managers
• - Area studies
• - Environmental briefings
• - Cultural orientation programs
• - Cultural assimilator
• - Sensitivity training

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Making Culture Work for Marketing Success

• Embrace local culture
• Build relationships
• Employs locals to gain culture knowledge
• Help employees understand you.
• Adapt products and processes to local markets.
• Coordinate by region.

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Business Customs

• Cultural Imperatives
• Cultural Adiaphorous
• Cultural Exclusives

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Figure 2.4 Cross Cultural Training Methods
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Chapter 5Host Country Legal, and Political
Environment
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OVERVIEW

• Interpretation Application of regulations ?
  lead to conflict misleading results.
• Graph below represents factors that affect
  countrys investment climate

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OVERVIEW (Cont.)

• Policy uncertainty dominates concerns of firm.
• However, variations in political legal
  environment offer new opportunities to
  international marketers.
• Chapter 5 examines the political-legal
  environment from a Managers point of view.

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OVERVIEW (Cont.)

• Manager must concentrates on 3 areas during
  decision-making process
• Political legal circumstances of home country
• Political legal circumstances of host country
• Bilateral multilateral agreements, treaties,
  laws governing relations b/w home host
  countries.

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LEGAL AND POLITICAL ENVIRONMENT OF A HOME
COUNTRY INTRODUCTION

• May not be designed specifically to address
  international marketing
• However, can have a direct effect on a firms
  opportunities aboard.
• Some are directly aimed at international market
  activities to help firms in international efforts.

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LEGAL AND POLITICAL ENVIRONMENT OF A HOME COUNTRY

• Examples of regulations that may not be designed
  specifically to address international marketing
  include
• Minimum wage legislation
• affects international competitiveness using
  production processes that are high labor
  intensive.
• Cost of domestic safety regulations
• May impact pricing policies of a firm in
  international marketing efforts.

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LEGAL AND POLITICAL ENVIRONMENT OF A HOME COUNTRY

• Examples of regulations that may not be designed
  specifically to address international marketing
  include
• Environmental Superfund
• Requires payment by chemical firm based on
  production volume, regardless of whether sold
  domestically or exported.
• Firm has disadvantage internationally when
  exporting products b/c have to compete against
  foreign firms not required to make such payment
  and therefore have a cost advantage.

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LEGAL AND POLITICAL ENVIRONMENT OF A HOME COUNTRY

• Examples of regulations that are directly aimed
  at international market activities to help firms
  in international efforts include
• Firms concerned w/ lack of safeguards for
  intellectual property rights in developing
  country.
• Gray market activities
• Situation where companies are hurt b/c products
  enter markets in ways not desired by
  manufacturer.

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LEGAL AND POLITICAL ENVIRONMENT OF A HOME COUNTRY

• Four areas of governmental activities of major
  concern to international marketer
• Embargoes or Trade Sanctions
• Export Controls
• Import Controls
• Regulation of International Business Behavior

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EMBARGOES/ TRADE SANCTIONS

• Governmental actions that distort the free flow
  of trade in goods, services, or ideas for
  decidedly adversarial political, rather than
  strictly economic, purposes.
• Foreign policy tool used by many countries.
• Range of sanctions imposed can be quite broad.
• Typically, intent is to bring commercial
  interchange to complete halt.
• Key concern w/ sanctions is fact that governments
  often consider them as being free of cost.
  However, even though they may not affect budget
  of governments, sanctions imposed by governments
  can mean significant loss of business to firms.

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EMBARGOES/ TRADE SANCTIONS

• Some of the Sanctions currently maintained by
  U.S. against China are as follows
• Limits on US foreign assistance
• US No votes or abstention in international
  banks
• Ban on Overseas Private Investment Corporation
  programs
• Ban on export of defense articles or defense
  services
• Ban on import of munitions or ammunition

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EXPORT CONTROLS SYSTEMS

• Designed to deny or delay acquisition of
  strategically important goods by adversaries.
• Most of systems make controls the exception
  rather than rule, w/ exports taking place
  independently from politics.
• U.S. differs in that exports are considered to be
  privilege rather than a right, and exporting is
  seen as extension of foreign policy.
• Legal basis varies across nations.

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EXPORT CONTROLS SYSTEMS

• Legal basis varies across nations. For Example
• Germany armament exports (defensive exports)
  are covered in War Weapons List remainder of
  exports of goods covered by German Export List.
  Dual-use items are goods useful for both military
  civilian purposes controlled by Joint List of
  EU.
• U.S. laws control all exports of goods, services,
  and ideas.
• Export of goods occur when transferred from U.S.
• Export of services/ideas occur when transferred
  to foreign national.

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EXPORT CONTROLS SYSTEMS

• U.S. export control system is based on
• Export Administration Act, administered by
  Department of Commerce
• Arms Export Control Act, administrated by
  Department of Department of State.
• Commerce Dept. focuses on exports in general.
• States Dept. covers products designed or modified
  for military use, even if such products have
  commercial applicability.
• For any export to take place, exporter has to
  obtain export license.

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U.S. EXPORT CONTROLS SYSTEM

• Decision Steps in Export Licensing Process
• Should a Given Product be Exported?
• To a Given Country?
• To a Given End User?
• For a Particular End User?
• Determinants for Export Controls
• National Security
• Foreign Policy
• Short Supply
• Nuclear Nonproliferation

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NEW ENVIRONMENT FOR EXPORT CONTROLS

• Restricting the flow of materials can be crucial
  in avoiding
• the proliferation of weapons of mass destruction
  
• reducing flows of technological knowledge can
  reduce the sophistication of armaments used by
  insurgents groups
• financial controls can inhibit funding for
  terrorist training.
• Rise in international awareness of threat of
  terrorism has led to a renewed importance of
  global export controls.

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IMPORT CONTROLS

• Either all imports or imports of particular
  products are controlled thru tariff/nontariff
  mechanisms.
• Tariffs place tax on imports and raise prices.
• Nontariffs barriers, like voluntary restraint
  agreements self imposed restrictions cutbacks
  aimed at avoiding punitive trade actions from
  host.
• Quota systems reduce volume of imports accepted
  by a country.

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IMPORT CONTROLS

• For international marketer, restrictions may mean
  most efficient sources of supply are not
  available because government restrict
  importations from those sources.
• Examples of major problems for import controls
  include the following
• Downstream change in import composition that
  results from these controls.
• Efficiency confronting the policymaker.

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REGULATION OF INTERNATIONAL BUSINESS BEHAVIOR

• Home countries may implement regulations to
  ensure that international business of their firms
  are conducted w/I the legal, moral, and ethical
  boundaries considered appropriate.
• Definition of appropriateness may vary from
  country to country govt to govt.

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REGULATION OF INTERNATIONAL BUSINESS BEHAVIOR

• Several major areas that nations attempt to
  govern international marketing activities
• Boycott firms refuse to do business w/ someone,
  often political reasons.
• E.g. put firms in difficult position. Caught in
  web of govt activity, may force them to either
  lose business or pay fines.
• Antitrust measures firms are seen as
  restricting competition
• Corruption occurs when firms obtain contracts
  w/ bribes rather than thru performance.

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Host country political and legal environment

• The political and legal environment of a host
  country will have a direct effect on
  international marketing.
• To be effective an international marketer must be
  familiar with the laws and regulations of a host
  nation.

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Political Risk

• Risk of loss of investment due to changes in a
  country's political structure or policies, such
  as tax laws, tariffs, expropriation of assets, or
  restriction in repatriation of profits.

Czinkota, Ronkainen
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The Political Environment

• It is not always possible to conduct business in
  countries with stable and friendly governments
• Political Risk includes
• Ownership risk, which exposes property and life
• Operating risk, interference with operations
• Transfer risk, while shifting funds between
  counties

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• Political risk can include
• War
• Social unrest
• Politically motivated violence
• Corruption
• Crime
• Labor costs
• Tax discrimination

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Armed conflicts of the world
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Seizure of Assets

• Expropriationseizure of foreign assets by a
  governmental action.
• Compensation provided, usually less than
  satisfactory.
• Appeals to nationalism

• Expropriationseizure of foreign assets by a
  governmental action.
• Compensation provided, usually less than
  satisfactory.
• Appeals to nationalism

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Venezuela Seen Paying Price for Chavez
Expropriation of Oil Contractors

• Venezuelan President Hugo Chavez orders seizure
  of oil service companies
• Petróleos de Venezuela (PDVSA), which now
  supposedly owns around 60 expropriated companies,
  pointed out that the company would have to absorb
  as many as 30,000 people
• Bloomberg news agency ... (warned) that the
  seizure of 60 oilfield services companies could
  reduce Venezuelan oil production because it was
  thought PDVSA didnt have the capacity to run the
  companies that had been taken over.

Source Latin American Herald, June 4, 2010
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Seizure of Assets

• Confiscation is similar to expropriation but no
  compensation is provided

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Seizure of Assets

• Domesticationa government takes control of some
  or all of the enterprises in an entire industry
• Will cause inefficiencies due to
• Shielding within the country from foreign
  competition
• Domestic hiring requirements

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Other Risks

• May include
• Limits on movement of capital
• Import restrictions
• Increased local content laws
• Quotas for hiring local nationals
• Price controls
• High tax to foreign investors
• Weak enforcement of patents and trademarks

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Legal Differences and Restraints

• Laws vary between countries
• U.S. is litigious society while Japan is not
• Legal Systems
• Theocracy, based on faith and belief
• Common Law, based on tradition
• Code Law, comprehensive written statutes

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Common Law vs. Code Law

• The Napoleonic Code of 1804 drew on the Roman
  legal system and is the basis for continental
  European law today.
• U.S. law is rooted in English common law.

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Common Law versus Code Law

• Common law country
• Disputes are decided by reliance on the authority
  of past judicial decisions
• Companies are legally incorporated by state
  authority
• Code law is used in few areas the U.S. Uniform
  Commercial Code

• Code law country
• Legal system reflects the structural concepts and
  principles of the Roman Empire
• Companies are formed by contract between two or
  more parties who are fully liable for the actions
  of the company

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Influencing Politics and Laws

• Must deal with national politics and laws
• Viewpoints and laws can be changed
• Change requires an impetus
• Option 1 - ignore the law
• Option 2 negotiate
• Option 3 develop coalition to legislate change

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The International Environment

• International Politics
• Government-to-Government relationships are
  critical
• International Law
• Multilateral treaties and agreements, i.e. WTO
• Bilateral treaties, i.e. U.S. has signed various
  treaties of friendship, commerce, and
  navigation(FCN)

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The International Environment

• International Terrorism and Marketing
• Nigeria, the world's fifth largest oil exporter
  has for years dealt with armed militants
  demanding control over the region's oil wealth.
• Terrorism is intended to interrupt supply and
  demand to affect desired result.
• Chill effect is when buyers become uncertain
  about their nation's economy causing an economic
  downturn

Photo by Christian Science Monitor
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(No Transcript)
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Ethical Issues

• Corporate governance, responsibility,
  intellectual property rights, and corruption are
  all ethical obligations of multinational
  corporations.
• Past tragedies have done much to advance
  industrialized nations
• Should Industrialized nations help developing
  nations avoid our past mishaps?
• Ethical practices are still far from perfect

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BP Texas City Disaster
2005, 15 killed
Photo abc News
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Deepwater Horizon
Photo Popular Mechanics
2010, 11 killed
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Corporate Governance and Responsibility

• Corporate Governance is the relationship among
  stakeholders that determine and control the
  strategic directions and performance of an
  organization.
• Responsible to stakeholders including the
  societies in which they operate.

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Comparative Corporate Governance Regimes

• Regime Basis Characteristics
  Example
• Market-based Efficient equity markets
  United States
• Dispersed ownership
  United Kingdom
• Family-based Management Ownership
  Hong Kong,
• Is combined
  Family/majority Indonesia,
• and minority shareholders
  Malaysia, Singapore
• Bank-based Government influence in bank
  Korea, Germany
• lending lack of
  transparency family control
• Government State ownership of enterprise
  China, Russia
• Affiliated lack of transparency

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Intellectual Property

• Intellectual property (IP) is the legal
  entitlement of exclusive rights to use an idea,
  piece of knowledge, or invention.
• Must be a product of the mind- an intangible, but
  potentially profitable.
• IP law used to be territorial, but now
  increasingly harmonized across nations.
• TRIPs, the WTO Agreement on Trade-Related Aspects
  of Intellectual Property rights

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Bribery and Corruption

• The U.S. Foreign Corrupt Practices Act of 1977
  ("FCPA" or the "Act") prohibits U.S. companies,
  their subsidiaries, as well as their officers,
  directors, employees, and agents from bribing
  "foreign officials"

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Bribery and Corruption

• Functional Lubrication
• Express fee charged by many countries
• Small
• Standardized
• Does not stay with official receiving it

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Sarbanes-Oxley Act
Intended to protect investors by improving the
accuracy and reliability of corporate disclosures.
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Questions?