Cultural and Political Analysis for International Business Planning and Management

Ilan Vertinsky

Aviad Pe’er

BAIM 502, HA 412, April 20-May 20, 2003

Tuesdays and Thursdays 2:00 – 4:00 p.m.

Outline of today’s class

IntroductionsCourse OverviewDiscussion on Globalization and Its

Cultural, Political, and Economic Implications

Introductions

Personal Introductions2 things you would like people to know

– Past education, experience, accomplishments– Something that could be an asset in this class

1 thing others would never guess about you– Please use anecdotes, short-stories, and

examples if appropriate

Course Overview

Main topics coveredNew skills and learning outcomesMore about the learning method

– Case study teams– Case draws

GradingQuestions

Main Topics Covered

Part I: Cultural AnalysisSources of Cultural Differences

a) Sensitivity to Different Cultural Values b) Local Customs (History, Demographics, Social Change)

Influences on Managerial Models• Business Concepts• Internal Practices • Inter-firm Transactions

Part II: Political AnalysisPolitical Risks, Evaluation and ManagementBusiness-Government Interactions

New Skills and Outcomes

Culture– Develop your own intuition and interpretations– Specific applications: changes in organizational design,

adjustments in negotiation styles, relevant issues in the formation and management of cross-border alliances

Political Risk– Identify relevant risks, choosing where to invest and how

to reduce or manage risks; strategic decisions.Governmental Actions

– Observation, anticipation, planning, and management of on-going interactions; strategic decisions.

Learning Approach

Readings offer rich information -- not a burden– Practice sorting out the important facts– Identify main actors and their views– Look for relevant symptoms, but seek causes

Each case = a “Trial Run” of an actual decision (situations are real and frequently encountered)

Think of team effort as providing “Expert Advice”– Content: Thorough thinking, insights, flexibility

• formal presentations not required– Process: Mutual reliance on class members

Learning Support

Lectures notes posted before class; case comments will only be presented in class

A variety of in-class exercises – opportunities to have fun while learning and practicing specific skills

I am available to work with you (specific questions, discuss readings, case preparation, debriefing after class-discussions) – Office hours 12-1; make appointments

Consultation with your group members is strongly encouraged (cases, class preparation)

Grading

Class Participation (40%)Presence, Preparation, and ParticipationA short journal entry for each week (1 page)

– due the following Tuesday

Case Presentations (30%)Final Exam (30%)

Comment on a specific aspect of one the four cases An applied question from the readingsA brief essay (2 pages)

Syllabus

Questions?

Globalization

We are moving away from economic systems where national markets are distinct entities isolated from each other by trade barriers, distance, time and culture toward a system of a global marketplace.

What factors are “pushing” globalization?– Distance is shrinking– Lower costs of communication– Flows of people across borders– Governmental reforms– Liberalization of trade and investment flows

International Production

1. GM$20,000 (paid) to GM for LeMans - An American Car

$6,000 to South Korea for assembly

$3,500 (goes) to Japan for advanced components (engines, transaxles, and electronics)

$1,500 (goes) to Germany for design

$500 (goes) to GB for advertising and marketing services

$100 (goes) to Ireland for data processing services

$7,600 to GM headquarters in the U.S. for financial and legal services, etc.

International Production (cont.)

2. Airbus ConsortiumJoint ownership (companies from 4 countries):

• wings from U.K.; fuselage and tail – Germany; doors – Spain; cockpit and final assembly – France

1500 suppliers 27 countries• 35% of components from 500 U.S. companies• Other suppliers in India and Singapore

3. Vegetable Exports from Zimbabwe to TescoCheap air transportModern telecommunications (internet-based; to order)Open British Market

Changes in Trade Flows

International Trade Flows (2001)

Western Europe North America

Latin America

10%

19%

17%61%2%

12%

68%

17%

Asia

48%

25%

21%8%

17%

Latin America3%

6%

Empirical Evidence Retail Chains

Company USOutlets

CanadaOutlets

MexicoOutlets

North American Triad (%)

Intnat.Outlets

Intnat. %

Total

Kroger 3634     100     3634

Wal Mart 3118 174 499 90.5 398 9.5 4189

Albertsons 2300     100     2300

Sears 2167 511   100     2678

K-Mart 2105     100     2105

Target 1381     100     1381

 

 Source: Rugman & Girod, European Management Journal 21(1), 2003

FDI Inward Flows in US$ billions

1989-94 1997 2000 2000World 200.1 447.9 1270.8 Developed Countries 137.1 271.4 1005.2 79% Developing Countries 59.6 187.4 240.2 21%

Africa 3.9 7.2 8.9 1%Lat America 17.5 71.2 86.2 7%Asia/Pacific 37.9 107.3 143.8 11%C & E Europe 3.4 19.2 25.4 2%

LLDCs 1.4 3.0 4.4China 14.0 44.2 40.8 3%

Source: WIR 2001

Discussion -- Globalization

What is globalization?What are the characteristics of the “new

economy” and how do they promote globalization?

What are the dimensions of globalization?How can we measure the extent of globalization?What are the implications to businesses along the

different dimensions?

Discussion -- Canada

How is globalization reflected in the Canadian experience?

Does the border with the US matter? – In what ways?

What are the values underlying globalization?– Are these “American” values?– Are these values typically associated with

modernization?

Foreign Content in Canada’ Cultural Goods and Services

0

10

20

30

40

50

60

70

80

90

Books Foreign Films Magazines TelevisionBroadcasting

RadioBroadcasting

Soundrecordings

New spapers

Discussion – National Identity

What defines “national identity”? What does it mean to you to be a “Canadian”, “Chinese”, “Japanese”, “Italian” etc.?

How important is it to you that your national identity be preserved?

Do you think that different aspects of globalization might influence your national identity? In what ways?

Discussion – Protectionism?

How does the government try to protect culture in Canada? Are governmental actions effective?

What are the forces that prompt or promote

protection attempts? What are their effects?

What are the implications of globalization?– for domestic businesses?– for multinationals?– for government-corporate relationships?

Summary Comments

Dimensions: economic, social and cultural– Cannot separate economics from culture

Values: efficiency and standardization – American “melting-pot” values

Canada made several indirect politic choices (e.g. immigration policy) that effectively counterbalanced these globalization values – “Mosaic”; tolerance and diversity

However, Canadian protectionist attempts have been rent-seeking (domestic lobbying for local interests) rather than culture-driven.