INTERNATIONAL BUSINESS

INSTRUCTOR: HOANG THI QUE HUONG SESSION 3

DISCUSSIONS

You are working for AMAZON- an e-commerce company. Your

company is planning to move their business into international
market and Viet Nam market is one of their consideration. You
are asked to conduct a study to evaluate the potential of Viet
Nam markets.

Question: Which factors regarding the country you need to

study?
BUSINESS ENVIRONMENT ANALYSIS

Natural

Cultural Political
INTERNATIONAL
BUSINESS
ENVIRONMENT

Legal Economi
c
¡ Evaluate the market
¡ Country Differences: culture, nature, politic, economic, legal à
country attractiveness
¡ Industry attractiveness (Michael Porter)
¡ IB issues

¡ Entry Mode
¡ IB Strategy
¡ IB Functions
 NATIONAL
DIFFERENCES IN
POLITICAL ECONOMY
LEARNING OBJECTIVES

¡ Understand how the political systems of countries differ.

¡ Understand how the economic systems of countries differ.
¡ Understand how the legal systems of countries differ.
¡ Articulate the implications for management practice of
national difference in political economy.
INTRODUCTION

Question:What is the political economy of a country?

Answer:
• A country’s political economy refers to its political,
economic, and legal systems
• These systems are interdependent, and interact and
influence each other
• A country’s political system has major implications for
the practice of international business
POLITICAL SYSTEMS

¡ Political system - the system of government in a nation

¡ Political systems can be assessed in terms of the degree
to which they:
¡ Are democratic or totalitarian
¡ Emphasize collectivism as opposed to individualism
COLLECTIVISM AND
INDIVIDUALISM
Collectivism - a system that stresses the primacy of
collective goals over individual goals
¡ Can be traced to the Greek philosopher Plato
¡ Today, socialists support collectivism
¡ When collectivism is emphasized, the needs of the
society as whole are generally viewed as being more
important than individual freedoms

Socialism
¡ Modern socialists trace their roots to Karl Marx
¡ Advocated state ownership of the basic means of
production, distribution, and exchange
¡ The state then manages the enterprises for the benefit
of society as a whole
COLLECTIVISM AND INDIVIDUALISM

¡ In the early 20th century, socialism split into communists and

social democrats:
¡ Communists - collectivism could only be achieved though revolution
and totalitarian dictatorship
¡ Social democrats worked to achieve the same goals by democratic
means
¡ Many state-owned enterprises failed to succeed, and today,
many nations are implementing privatization programs
COLLECTIVISM AND INDIVIDUALISM

¡ Individualism - suggests individuals should have freedom over

their economic and political pursuits
¡ Can be traced to Aristotle who argued that individual diversity and
private ownership are desirable
¡ Individualism stresses:
¡ Individual freedom and self-expression
¡ Letting people pursue their own self-interests to achieve the best
overall good for society
¡ Democratic systems and free markets
 PUTTING IT INTO PRACTICE

¦Peaceful transfer of
power: Why was the
whole world watching?
ECONOMIC SYSTEMS

Market • The goods and services that a country produces, and the quantity
in which they are produced is determined by supply and demand
economy
• The role of government is to encourage free and fair competition
between private producers
Command • The goods and services that a country produces, the quantity in
which they are produced, and the price at which they are sold are
economy all planned by the government
• All businesses are state owned, and so have little incentive to
control costs and be efficient

Mixed • Some elements of a market economy and some elements of a

command economy
economy
• Governments tend to take over troubled firms that are
considered to be vital to national interests
 IMPORTANT MACROECONOMIC FACTORS IN A COUNTRY THAT
INTERNATIONAL BUSINESS COMPANIES NEED TO CONSIDER

¡ Economic development : growth rate of GDP, GNP

¡ Gross national income (GNI), purchasing power parity (PPP)
¡ Private investment
¡ Unit labor costs
¡ Inflation
¡ Balance of payments
¡ Currency policies
¡ Social data: population, population structure, population growth rate
¡ The country's economic integration with other countries in the region and around
the world
NATURAL ENVIRONMENT

TOPOGRAPHY CLIMATE

NATURAL RESOURCES POPULATION

 GEOGRAPHY, EDUCATION, AND ECONOMIC
PROGRESS

Other factors influencing a country’s rate of economic

development include:
¡ Geography - influences economic policy, and thus economic
development
Countries with favorable geography are more likely to engage in trade
which can promote economic growth
¡ Education levels
Countries that invest more in the education of their young people
develop faster economically
LEGAL SYSTEMS

¡ The legal system of a country refers to the rules, or laws, that regulate
behavior, along with the processes by which the laws of a country are
enforced and through which redress for grievances is obtained
¡ There are three main types of legal systems:
1. Common law - based on tradition, precedent, and custom
¡ Found in most of Great Britain’s former colonies, including the United States
2. Civil law - based on a very detailed set of laws organized into codes
¡ Found in over 80 countries, including Germany, France, Japan, and Russia
3. Theocratic law - based on religious teachings
¡ Islamic law is the most widely practiced
SEVERAL LEGAL FACTORS IMPACT IB
§ Contract law
§ License / exclusive
§ Localizations
§ Trade barriers:
- Tariff
- International price fixing
- Non-tariff barriers:
ü Quantity limit
ü Regulation "buy in the
country"
ü Technical barriers
§ Foreign exchange / currency
control
§ Antidumping legislation,
funding, anti-dumping duties
§ Labor use
§ Environmental Protection
§ Product safety, Product Liability
§ Corruption and anti-corruption
laws
§ The Protection of Intellectual
Property
DIFFERENCES IN CONTRACT LAW

Question: How do common law and civil differ?

¡ The two systems approach contract law (the body of
law that governs contract enforcement) in different
ways
¡ A contract - specifies the conditions under which an
exchange is to occur and details the rights and obligations
of the parties involved
¡ In a common law state, contracts are very detailed
with all contingencies spelled out
¡ In a civil law state, contracts are shorter and much
less specific
DIFFERENCES IN CONTRACT LAW

Question: In a contract dispute, which country’s laws should

apply?
Answer:
¡ The United Nations Convention in Contracts for the
International Sales of Goods (CIGS) establishes a uniform
set of rules governing certain aspects of the making and
performance of everyday commercial contracts between
sellers and buyers who have their places of business in
different nations
¡ Countries that adopt CIGS signal to other nations that they will
treat the Convention’s rules as part of their law
PROPERTY RIGHTS AND CORRUPTION

Rankings of Corruption by Country, 2011

THE PROTECTION OF INTELLECTUAL PROPERTY

¡ Intellectual property - property that is the product of intellectual activity

¡ Intellectual property rights include:
¡ Patents - give the inventor exclusive rights to the manufacture, use, or sale of that
invention
¡ Copyrights - exclusive legal rights of authors, composers, playwrights, artists, and
publishers to publish and dispose of their work as they see fit
¡ Trademarks - designs and names, often officially registered, by which merchants or
manufacturers designate and differentiate their products
PUTTING IT INTO PRACTICE
¦ Are these products real or counterfeit?
IMPLICATIONS FOR MANAGERS

¡ The overall attractiveness of a country depends

upon the balance between the likely benefits of
doing business in that country against the likely
costs and risks
¡ The benefits of doing business in a country are a
function of market size, and current and future
consumer purchasing power
¡ Firms must be prepared to deal with the costs of
doing business in foreign markets: political, economic
and legal costs
¡ Doing business in foreign markets involves risk:
political, economic and legal risks
OVERALL ATTRACTIVENESS

Country Attractiveness
PUTTING IT INTO PRACTICE
¦ Would you do business here?
PUTTING IT INTO PRACTICE
¦ Which market is more attractive?
SKILLS: SEARCH TIPS

Data sources: Tổng cục thống kê, Worldbank, ADB bank, IMF, hiệp hội ngành nghề,
trademap.org (mặt hàng xuất nhập khẩu chính của một quốc gia bất kỳ), macmap.org (các công
cụ thương mại của các thị trường nhập khẩu đối với mặt hàng bạn quan tâm)…

Previous papers: google scholar, tạp chí trong nước như: tạp chí kinh tế phát triển,tạp chí kinh tế
tài chính việt nam, tạp chí nghiên cứu kinh tế…
DISCUSSION

¡ What criteria used to evaluate a country attractiveness in its

business environment?
¡ What is the relationship between property rights,
corruption, and economic progress?
¡ How important are anticorruption efforts in the effort to
improve a country’s level of economic development?
PORTER’S DIAMOND
DISCUSSIONS

Why a nation achieves

international success in a
particular industry ?
 PUTTING IT INTO PRACTICE
¦Airbus customers: Could it survive without exports?
NATIONAL COMPETITIVE ADVANTAGE
FIRM STRATEGY, STRUCTURE AND
RIVALRY
The nature of domestic rivalry, and conditions that
determine how a nation’s firms are created, organized,
and managed

Italy has many top firms in design

industries such as textiles, furniture,
lighting, and fashion. Vigorous
competitive rivalry puts these firms
under constant pressure to innovate,
which has propelled Italy to leading
position in design, worldwide.
DEMAND CONDITIONS AT HOME
The strengths and sophistication of customer demand

Japan is a densely populated,

hot, and humid country with a
very demanding consumers.
These conditions led Japan to
become one of the leading
producers of superior, compact
air conditioners.
FACTOR CONDITIONS
Quality and quantity of labor, natural resources, capital,
technology, know-how, entrepreneurship and other
factors of production.

An abundance of cost –effective

and well-educated workers give
China a competitive advantage
in the production of laptop
computers
RELATED AND SUPPORTING
INDUSTRIES
The presence of suppliers, competitors, and
complementary firms that excel within a given industry.

The Silicon Valley in

California is a great place to
launch a computer software
firm because it is a home to
thousands of knowledgeable
firms and workers in the
software industry
CHANCE

¡ Random events: changing world financial markets,

Changes in input costs, Increasing global demand
¡ Natural disasters
¡ Scientific break-throughs
¡ Terrorist attacks
¡ New invention
¡ War

38
GOVERNMENT

¡ Government Policies: education

policy, tax law, antitrust law,
allowance
¡ Industry regulation
¡ Government role as a catalyst and a
challenger
39
 Chieán löôïc,
Chính caáu truùc xí
phuû nghieäp &
caïnh tranh

Nhöõng
ñieàu kieän
Nhöõng ñieàu nhu caàu
kieän veà taøi thò tröôøng
nguyeân
Nhöõng
ngaønh CN
hoã trôï & Vaän
lieân quan ruûi

40
QUALITY OF NATIONAL BUSINESS ENVIRONMENT

Source: Professor Michael E.Porter

DISCUSSIONS

Why are almost all big tech companies American?