POLITICAL

ENVIRONMENT

UNIT 2
 How does politics affect business?
 The type of government can decide, promote, encourage,
shelter or control the businesses in that country.
 The developed countries of today exist as such mainly due to
the open and freedom of their countries.
 Two political systems can exist- democratic or totalitarianism.
Democracy is always the most favored as it helps in
maintaining stable biz environments and laws giving political
rights and civil liberties.
 Totalitarian nations like Hitler’s Germany, Stalin’s Soviet Union
pushed them to destruction. The leaders can be Theocratic
(religious), Secular (military) or Tribal.
 But in reality, the world’s largest democracy- India
experienced only slow growth while totalitarian regimes like
the 4 Asian Tigers built strong market economies.
So what do you think?
In Question-
Is it ETHICAL to do business
with Totalitarian regimes?
(eg. Kingdom of SA, China)
Political Risks in Int. Business
 Macro risks-(affects all biz.) confiscation of
properties, loss of technology/ Intellectual ppty rights
(Microsoft war in China), campaign against foreign
goods, strikes, civil wars, inflation, currency
devaluation etc.
1970, India changed her rules and required that foreign partners
hold no more than 40% stake in any business…Many left.

 Micro risks- (affects specific biz. only) kidnappings,

terrorists, threats, dishonesty of officials, change in
policies of particular sectors etc.
In 97,Chinese protesters against bombing of its embassy in
Belgrade by NATO forces targeted KFC stores but did not
touch Pizza Hut. Why?
Managing Political Risks…….
 Simplest option, Avoid Investment
 Adapt- Mc Donald’s no beef burger for India,
development assistance, Insurance
 Threaten- Microsoft spies & US govt. get
China, control raw materials, other muscle
shows…
 Terrorism Consultants
 Influence local politicians- in clearer words
“BRIBE”
LEGAL ENVIRONMENT
 The laws of the world can be represented into 4
systems
 Islamic Law- followed by Muslim nations, based on
the Holy Quran and teachings of the Prophet.
 Common Law- followed by India, US, UK, Canada,
Australia, New Zealand etc. based on the English law
(cumulative wisdom of judge’s decisions in individual
cases)
 Civil Law- followed by over 70 nations including
Europe and Japan based on the Roman laws of
ancient Rome. (focuses on registration)
 Marxist Law- Communism including China, Cuba,
North Korea etc.
 What do companies have to look out for?
 Protection of IP rights- any movie, song could be copied in
India, Bajaj Vs. TVS
 Advertising & Sales promotion (Japan banned Pepsi’s “
Choice of the new generation), Mc. Dowell’s #1
 Product liability & safety- makes companies responsible
for injury, death caused by defective products eg.
Cadbury, smoking cigarettes etc.
 Bribes & corruption
 Environmental Laws- Euro 1&2, Bharat eg. Dumping of
toxic-waste by Italian mafia in the name of waste-disposal.
 Labor Laws- Gap recalls garments made in India,
discrimination (women paid less than men), SArabia
women not allowed to drive till last year
CULTURAL
ENVIRONMENT
What do you mean by CULTURE?
Culture………
 To the world of business- Culture is 2Ms, 2Ds, 3Fs-
movies, music, dance, drama, fashion, food,
festivals…
 American culture influences the lifestyle of people
worldwide. They have huge income from food
chains, pop culture (70% sales from outside US),
TV shows (Europe gives $600m yearly) and of
course- Hollywood!
 Bond, Madonna, 50 Cent- more popular than
Gandhi, Da Vinci, Mandela and most important
world leaders.
 Malaysia truly asia….
Levels of Culture
 National culture- dominant in a country. May be
plural in countries like India.
 Biz. Culture- etiquettes, norms, values, beliefs
What to wear, shake hands, embrace, smile, showing
feet, asking about family, gifts, discussing religion,,
being punctual, using first name etc.
Malaysia- buildings designed to keep out ghosts and –
ve energy, spirits.
India- vaastu saasthra, god pics in office room etc.
US-family members pics kept in office
 Org. Culture- P& G, Tata, doctors, autos etc.
 The cultural games politicians play…
 Indians are always told by our leaders that we should
forget English, speak in our mother tongues and even
dress Indian ish.
But the fact that India is becoming the “world’s office” and
the common man finds it hard to get jobs exclusively due
to his poor communication skills is hardly talked about.
 On the other hand, another Asian country, Singapore
launched a highly successful program “ speak good
english movement”. The purpose was to get every citizen
to speak excellent english (instead of singlish) and thus
plug into the world economy and give every citizen a
bright and safe future.
Which is more patriotic?
Maintaining good Organizational
culture
 Greeting- handshake
 Frequent interactions- inter personal relation
 Promoting feelings of equality-
races/religion/language
 Reducing culture shock among new members
 Group bonding techniques
 Frequent research and updating of changes
in the workforce
 Matching changes in the work to the culture
of the office
Cultural aspects
 Cultural adaptation- Nothing is permanent but
change
 Cultural shock- new world, new life
 Cultural transmission- It is cumulative every
generation. Films, tv, fashion, economy,
politics play a role.
 Cultural conformity- need to reduce outcasts
 Cultural lag- rapid change in one part of the
culture does not confirm the same about all
parts eg. Moral policing
Cultural traits
 Masculine culture (success depends on individuals
achievements, material focused, efficiency, time
driven, emphasis on written)
Feminine (more emphasis on personal relationships,
contacts, friends & relatives, shy, sympathy for less
fortunate, life long, emphasis on word)
 Individualism (people see themselves as individuals)
while communitarianism (people see themselves as a
group)
 Neutral (hides emotions eg. Japan, UK) and
Emotional (Arabia, India)- World becoming more
neutral as modernization continues..
Some cultural goof ups…
 Chevorlet’s vehicle NOVA was a flop in Spain
as the word in spanish means- “Doesn’t go”
 Pepsi’s ‘come alive” slogan was interpretted
as “ come out of the grave”
 Thumbs up offensive in Iran, Auzzie
 Pat on the head offensive in Korea
 Parker used word “bola” to describe its ball
pen series but the word was mistaken for
“lies”
What to watch out for?
 Consumer preference- Nescafe Vs Bru
 Consumer fears & beliefs- take advantage in ads eg.
Fairness creams
 Consumer perception
- white wedding sari in India?
- number 13 skipped at many lodges
- laughter in some African countries is viewed with
suspicion, discomfort if you’re a stranger.
- gift giving not welcome in some places. In asia it is
preferred privately (to avoid embarrassment), in
middle east it is preferred publicly (to avoid
impression of bribery)
Social trends
 Both husband and wife work today, changing the
times of shopping, products, dining needs etc.
 More buying power among teens of today eg. xbox
 Kids have an important say in purchase of some
products eg. Noodles
 Increase in divorce rates, women gain independence
& knowledge. Eg. Kinetic flyt
 1 in 4 homes of US, person stays alone. So
increased “impulse spending” eg. laZboy
 Modernization has changed markets in india for
movies, music, garments, flats, celebrations etc.