Global Business Management - PUC's Students need it.

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Cross-Culture, Politics, and
Law in Business
DY Chhunsong
Lecture 2
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Objectives of the Lecture
• Define what culture is
• Show what the main elements of culture are and how it affects
international business (IB)
• Explore the roles of political system and laws in IB
• Explain how different political systems and other legal relevant
factors affect IB

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Culture
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What Is Culture?
Set of values, beliefs, rules, and institutions held by a specific
group of people.
Why is culture important for international business?
Culture: National Culture and Subcultures

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National Culture: Nation-states support and promote the concept
of a national culture by building museums and monuments to
preserve the legacies of important events and people. It is a
dominant culture.
Subculture: A group of people who share a unique way of life
within a larger group, dominant culture.
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Components of Culture
Aesthetics
Values and
Attitudes
Manners and
Customs
Social
Structure
Religion
Personal
Communication

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Aesthetics
What a culture considers to be in “good taste” in the arts, the
imagery evoked by expressions and the symbolism of colors.
The selection of appropriate colors for advertising, product
packaging, and work uniforms can enhance chances of success.
Nike recalled its Air Bakin, Air Melt, Air Grill, and Air B-Que just
because “Air” logo assembled Arabic script for “Allah”.
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Values and Attitudes
Values: Ideas, beliefs, and customs to which people are
emotionally attached to (no alcohol in Islamic; freedom in the US).
Attitudes: Positive or negative evaluations, feelings, and
tendencies that individuals have on objects or concepts (adults in
Cambodia are more patient than those in the US).

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Manners and Customs
Manners: Appropriate ways of behaving, speaking, and dressing
(using left hand to serve meal is considered as bad in Arab culture).
Customs: Habits of behaving in specific circumstances that are
passed down through generations (Japanese tradition of throwing
special parties for young women and men who turn age 20).
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Social Structure
A culture’s fundamental organizations including its groups and
institutions, its system of social positions and their relationships,
and the process by which its resources are distributed.
It includes: family status (extended or nuclear), gender equality
(US), and social rankings (India).

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Religion
Different religions take different views of work, savings, and
materials. Understanding why they do so may help us understand
why companies are more competitive in global markets.
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Personal Communication
System of conveying thoughts, feelings, knowledge, and
information through speech, actions, and writing.
Each nation has its own language: spoken and body language.

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Politics and Laws
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What Is Political System?
Political System: Structures, processes, and activities by which a
nation governs itself.

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Political Participation
Wide Participation: Is when people who are capable of
influencing the political system make an effort to do so (US).
Narrow Participation: Occurs when few people participate since
the right to do so is restricted (youths in developing countries).
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Types of Political System
Democracy Totalitarianism

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Democracy
Political system in which government leaders are elected directly
by the wide participation of the people or by their representatives.
Representative Democracy: Democracy in which citizens elect
individuals from their groups to represent their political needs.
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Is it better to do business in a
democratic country?
If yes, why has India experienced slow economic development than
Hong Kong, Singapore, South Korea, and Taiwan?

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Totalitarianism
Political systems in which individuals govern without the support
of the people, government maintains control over many aspects of
people’s lives, and leaders do not tolerate opposing viewpoints.
Adolf Hitler of Germany and Joseph Stalin of the former Soviet
Union are historical examples of totalitarian governments.
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Features of Totalitarianism
Imposed Authority: Forms the political system without the
approval of the people, acquire and retain power by military force
or fraudulent elections, or come to power via legitimacy but remain
in office even after their terms expire.
Lack of Constitutional Guarantees: Limit, abuse, or reject
outright institutions: freedom of expression, periodically held
elections, guaranteed civil and property rights, and minority rights.

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Features of Totalitarianism (1)
Restricted Participation: Political representation is limited either
to parties that are sympathetic to the government or to those that
pose no credible threat.
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Political Risk
Likelihood that a government or society will undergo political
changes that negatively affect local business activity.

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Types of Political Risk
Conflict and Violence: Local conflict and violence can discourage
international investment and harm a company’s manufacturing and
distribution of products (current situation in Cambodia).
Terrorism and Kidnapping: These can show that small groups of
people are dissatisfied with current political or social situations
which affect business investment and operations.
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Types of Political Risk (1)
Property Seizure: Governments sometimes may seize the assets of
companies doing business in their borders (Long Chhen?).
Policy Changes: If policies of a nation keep changing so often it is
hard for companies doing business in the country to adapt.
Local Content Requirements: Laws stipulating that a specified
amount of a good or service be supplied by producers in the
domestic market.

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Managing Political Risk
Adaptation: Incorporate risk into business strategies, often with
the help of local officials or partners (risk management).
Information Gathering: International firms often attempt to gather
information that will help them predict and manage political risk.
Influencing Local Politics: Managers of international firms may
try to propose changes that benefit their local business activities.
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Legal Systems
Set of laws and regulations, including the process by which a
country’s laws are enacted and enforced and the ways in which its
courts hold accountable for their actions.

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Global Legal and Ethical Issues
Standardization: Standardization of law is important since this can
help international companies reduce cost by not hiring local legal
experts to deal with local laws (international articles).
Intellectual Property: Property that results from people’s
intellectual talent and abilities.
Product Safety and Liability: Most countries developed product
safety and liability laws to be met by companies when damage,
injury, or death caused by the companies’ products.
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Global Legal and Ethical Issues (1)
Taxation: If so many taxes are imposed, consumers end up paying
higher. This discourages companies to invest as they have to sell
products at higher price.
Antitrust Regulations: Designed to prevent firms from fixing
prices, sharing markets, and gaining unfair monopoly advantages.
Social Responsibility: Practice of companies going beyond legal
obligations to balance commitments to investors, customers, other
companies, and communities.