07 intlbus political economy

8/8/2019 07 IntlBus Political Economy

1/28

WEEK 1:Country Factor: Political Economy

Intl Business

Berkeley City College

Spring 2007

Marino


2/28


I. Political Systems

Democracy vs. Totalitarianism


3/28


Collectivism vs. Individualism

Collectivism

State manages economic activities if they are to benefit

society

Social Democrats (vs. Liberals)

Communists

Individualism

Individual freedom and self-expression

Self-interest = public interest


4/28


Democracy vs. Totalitarianism

Democracy

Government by the people, exercised either directly or

through elected representatives

Totalitarianism

Government in which one person or political party

exercises absolute control over all spheres of human

life and opposing political parties are prohibited.


5/28


Types of Totalitarianism

1. Communism - Collectivism is achievedthrough total dictatorship.

2. Theocratic - Political power is influenced by

religious principles.

3. Tribal -A political party representing the

interests of a particular tribe monopolizes

power.

4. Right-wing - Generally permits individualeconomic freedom, but restricts political

freedom to prevent the rise of communism.


6/28


II. Economic Systems1. Market Economy

2. Command Economy3. Mixed Economy

4. State-Directed Economy

The shift to market-based economies entails:

Deregulation- removal of legal restrictions to free markets.

Privatization- transfer of state ownership of property into private

hands.

ShiftCentrallyPlannedEconomies

Market BasedEconomies


7/28


Determinants of Economic Development

..that throughout history, coastal states, with their longengagements in international trade, have been more

supportive of market institutions than landlocked states,

which have tended to organize themselves as hierarchical

(and often military) societies. Mountainous states, as a

result of physical isolation, have often neglected market-based trade. Temperate climes have generally supported

higher densities of population and thus more extensive

division of labor than tropical regions.

Jeffrey Sachs

Harvard University

Geography

EducationGovernment Policies


8/28


Measures of Economic Development

GDP- Gross Domestic ProductGNP- Gross National Product

PPP- Purchasing Power Parity

HDI- U.N.s Human Development Index


9/28


III. Legal Systems

Rules, or laws, that regulate behavior and the

processes by which laws are enforced andgrievances redressed.

1. Property RightsIntellectual Property

2. Type of Legal System

3. Product Safety and Liability


10/28


Protection of Intellectual Property

Property that is the product of intellectual activity.

1. Patent: through exclusive use rights, it protects the inventor

of a product for a certain period of time.

2. Copyright: Gives exclusive rights to authors, composers,

playwrights and artists to publish and dispense their work.

3. Trademark: Officially registered designs and names that

protect owners product designations.


11/28


Type of Law

1. Common Law

Based on:

TraditionPrecedent

Custom

2. CivilLawDetailed set of laws organized into Codes.


12/28


What Does This Means for Business?More lucrative opportunities

Facing risks

Political

Economic

LegalConfronting ethical issues

Human rights

Regulations

Corruption

Foreign Corrupt Practices Act


13/28

Country Factor: Culture


14/28


What is Culture?

A system of values

and norms sharedamong a group ofpeople and, whentaken together,constitute a designfor living.


15/28


Norms and Values

Norms:Social rules and guidelinesthat prescribe appropriate

behavior in particularsituations.

Folkways:

Routine conventions ofeveryday life.

Mores:Central to functioning ofsociety and its social life.

Values:Abstract ideas about

what a group believes tobe good, right, anddesirable.

Have emotionalsignificance.

Freedom.


16/28


Determinants of Culture

Culture:Norms and

ValueSystems

Education

EconomicPhilosophy

PoliticalPhilosophy

Religion

LanguageSocial

Structure


17/28


Social Structure

MobileManagers

Hard to

BuildTeams

Lackof

Loyalty

Entrepreneurship

Individual

Western

Lack ofEntrepreneurship

LifetimeEmployment

Identity

Group

Eastern

NonmobileManagers

Grouptwo or more individuals

with a shared senseof identity


18/28


Class Consciousness:May play a role in

a firms operations

Social Stratification

Typically defined by familybackground, occupation,

and income.

Class:some social

mobilityCaste:Virtually no mobility


19/28


ReligionShared beliefs and rituals concerned with therealm of the sacred.

Ethical Systems:

Moral principles or values used to guide andshape behavior.

Shapes attitudes toward work andentrepreneurship.

Affects the cost of doing business.


20/28


Worlds Religions

4%5%

20%

18%

43%

10%

Christian

Islam

Hindu

Buddhist

Confucian

Other/Nonreligious


21/28


Religion and Economic Implications

ChristianityProtestant Work Ethic and The Spirit ofCapitalism.

Islam

Favors market-based systems.

No payment or receipt of interest.

Hinduism

Asceticism may have an impact.

Caste system plays a role.

BuddhismLittle emphasis on entrepreneurial behavior.

ConfucianismLoyalty, reciprocal obligations, and honesty in dealings.


22/28


Spoken and Non-Verbal Language

Allows people to communicate.Structures the way the world is perceived.

Directs attention to certain features of theworld rather than others.

Helps define culture.


23/28


Education

Formal educationsupplements family role

in teaching valuesand norms

Focus on facts of social

and political natureof society

Obligations ofcitizenship

Cultural norms such asrespect, obedience, honesty

For intl business, it is adeterminant of nationalcompetitive advantage

Medium to learnlanguage, conceptual,

and math skills

Value of personalachievement andcompetition


24/28


Culture is Dynamic

Cultural Change


25/28


Culture and EthicsDo the right thing.

Suggested Principles:

Respect for core human values (humanrights), which determine the absolute moralthreshold for all business activities.

Respect for local tradition.

The belief that context matters whendeciding what is right and what is wrong.


26/28


Strategies for Conflict Resolution

Q: Is conflict accepted in a culture?

1. Determine the source of conflict

2. Consider the context (history)

3. Determine the balance of powera. Objective power issues

b. Subjective power issues


27/28


Hofstede

Study (IBM) is a general way to look at differencesbetween cultures.4 dimensions:

Power distance.

Individualism versus collectivism.

Uncertainty avoidance.

Masculinity versus femininity.

But:Assumption of one-to-one relationship between culture

and nation-state.Research may be culturally bound.

Respondents worked within a single company.

Work is beginning to look dated (1967-1973).


28/28


Hofstede:Work Related Values for Selected Countries

PowerDistance

UncertaintyAvoidance

Individualism Masculinity

Argentina 49 86 46 56

Brazil 69 76 38 49

France 68 86 71 43

India 77 40 48 56

Japan 54 92 46 95

Mexico 81 82 30 69

Netherlands 38 53 80 14

U.S.A. 40 46 91 62

07 intlbus political economy

Documents