Ibm Ad Day 23 Pestl Culture 2023

9/1/2023
International Business
Management
Lecture 2- 3: PESTEL and Culture

International Business
Nguyen Anh Duy, PhD.
Contact: Duyna@uef.edu.vn
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Agenda
• Overview: PESTEL analysis focuses on the six principal
components of strategic significance in the macro-
environment:
– Political
– Economic
– Social
– Technological
– Environmental
– Legal
• Case study: Doing Business Report
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Thảo luận nhóm

1/ What are the key determinants factor for
make decision to invest in one country.
2/ What PESTEL factors should a foreign

firm consider when contemplating
entering the Vietnamese market
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Case for next session:

Question
What PESTEL factors should a foreign firm consider
when contemplating entering the Vietnamese market?
(as well as when already operating there!)
Please identify some factors&/issue that are particularly important for the
firm and be prepare to present and discuss them. Time: 12 minutes.
Aspect Factors to consider

Political
Economic
Social
Technological
Environmental
Legal AD @ UEF 2022
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Case for next session:

Question
What PESTEL factors should a foreign firm consider
when contemplating entering the Chinese market?
(as well as when already operating there!)
Please identify some factors&/issue that are particularly important for the
firm and be prepare to present and discuss them. Time: 12 minutes.
Aspect Factors to consider

Political
Economic
Social
Technological
Environmental
Legal AD @ UEF 2022
PESTEL framework
A tool for understanding the different macro-external factors influencing
companies.
Aspect Factors include
Political Government type and interference in business; taxation, stability, fiscal policy
Economic Economic growth, employment rate, inflation, GDP, raw material costs
Social Culture, lifestyle, attitudes, population growth, age distribution, education level
Technological New technologies for products or processes, disruptive cross-industry innovations
Environmental Impact on environment, sustainability, CSR, CO2 footprint, waste disposal, recycling
Legal Labor laws, trade regulation, consumer laws, standards, patents, insurance
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Why the interest in

China?
•Its local market:
• Market with the fastest growth since 1978 (9%
per year; GDP increased by 227 times
between 1978 and 2017)
• Largest consumer market since 2018
•Part of the ‘global competitive
game’
Why the interest

• Its local market: in China?
• Market with the fastest growth since 1978 (9% per year; GDP
increased by 227 times between 1978 and 2017)
• Largest consumer market since 2018
• Part of the ‘global competitive game’
• Important sourcing platform (world’s largest exporter):

• Cheap (though increasingly less so) and productive manual
labor
• Well developed supply chains (along the coast in particular)
• Huge pool of relatively inexpensive smart and ambitious people,
many of whom have acceptable secondary & technical
education
➔ increasingly important location for R&D operations
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Important Maps
World Region
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International Economic Analysis

 A universal assessment of economic environments is difficult because of:
• System Complexity
– Identifying proper indicators is difficult
– Market Dynamism
• New economic circumstances
– Market Interdependence
• Markets influence each other
– Data Overload
• Complicates decision-making
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Political Ideology
 A political ideology stipulates how society ought to function
and outlines the methods by which it will do so
 Most modern societies are pluralistic

◼ different groups champion competing political ideologies
 Democrats vs. Republicans in the United States
 Democratic Party vs. Liberal Party in Japan
 Political freedom measures
◼ the degree to which fair and competitive elections occur
◼ the extent to which individual and group freedoms are guaranteed
◼ the legitimacy ascribed to the general rule of law
◼ the freedom expression
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Spectrum Analysis
The Political Spectrum
Political System: Structures, processes, and activities by which a nation governs itself
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The Political Risk

 Political risk refers to the risk that political decisions or events in a country negatively affect
the profitability or sustainability of an investment
 Types:
o Systemic
o Procedural
o Distributive
o Catastrophic
• Main sources of political risk include:
– Conflict and violence
– Terrorism and kidnapping
– Property seizure: confiscation, expropriation, or nationalization
– Policy changes
– Local content requirements
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Classifying Political Risk

Characteristics of Political Risk
3-14
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Global Distribution of
Economic Freedom
4-15
© AD-UEF
Value of Economic Freedom

 Economic freedom affects
◼ Growth rates
◼ Productivity
◼ Income levels
◼ Inflation
◼ Employment
◼ Life expectancy
◼ Literacy
◼ Political openness
◼ Environmental sustainability
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Standard of Living
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The World Economy

An economic system refers to the mechanism that deals with the
production, distribution, and consumption of goods and services
• Market economy: what is produced & in what quantity is determined
by supply/demand and signaled to producers through a price system
– Hong Kong is closest
• Command economy: planned by government
– rare today – North Korea, Cuba
• Mixed economy: a balance of both of the above
– most countries, but degree of mixture varies
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Types of Economic Systems
4-19
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Types of Economic Systems

Range of Economic Systems
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Economic System
• Connection between political ideology and economic systems
– In countries where individual goals are given primacy
free market economic systems are fostered
– Countries where collective goals are given primacy there is marked
state control of markets.
1. Traditional Economic System
2. Market Economic System
3. Command Economic System
4. Mixed Economic System AD @ UEF 2019

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Economic System
1. Traditional Economic System
• A traditional economic system is the most ancient types of economy in the
world. Countries that adopt this system typically belong to rural, second- or
third-world areas closely tied to an agrarian landscape.
• In this system, each new generation retains the economic position of its
parents and grandparents. Tradition decides what an individual does for his
living. There is a strong social network that governs behavior.
• This type of society is rather slow to change and does not take advantage of
technological advancements. There is relatively little promotion of intellectual
and scientific promotion and typically the provision of goods and services is
insufficient.
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Economic System
2. Market Economic System:
• A market-based economic system is based on individual or consumer-
related consumption.
• The state has relatively little influence in determining the rules of this system
(separation of the market and the government) apart from promoting competition
and ensuring consumer protection.
• Complete market economies do not utilize price controls or subsidies,
and prefer less regulation of industry and production.
• While capitalist countries, such as the U.S., Japan, and Western Europe, practice a
market-based approach, there are still differences among them.
• A disadvantage of the market economic system may be that it emphasizes growth
and prosperity over social relationships
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Economic System
3. Command Economic System
• A command system is characterized by a centrally controlled economy
where the government makes all the decisions. The state decides which
goods are produced, and consumers can only buy what is available.
• Communism is a typical example of such a system: the government owns
companies or entire industries, and the market plays little to no role in
production decisions.
• These economies are less flexible than market economies and react more
slowly to changes in consumer purchasing patterns and fluctuations in
supply and demand.
• An example: North Korea versus South Korea.
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Economic
4. Mixed Economic System
System
A mixed economic system, also called a dual economy, primarily refers to a mixture of market and
command economy.
• In most mixed economies, state ownership is very low or non-existent except for a few areas, for example, areas
which comprise education or transportation.
• In general, the mixed economy is characterized by the private ownership of the means of production by profit-
seeking enterprises, but unlike a free-market economy, the government would wield indirect macroeconomic
influence over the economy through fiscal and monetary policies and interventions that promote social welfare.
• There are also disadvantages of a mixed economy:

– government regulation requirements may cost a company so much that it puts it out of business;
– unsuccessful regulations may paralyze features of production;
– the government decides the amount of tax on products.
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Key Differences
Among the Three Major Country Groups
Copyright © 2017 Pearson Education, Inc. 8-9
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Trade Conditions in the Major Country Groups
Sources: Based on International Monetary Fund at http://www.imf.org; World Bank, 2015, at

http://www.worldbank.org; and Central Intelligence Agency, World Factbook, 2015,
https://www.cia.gov/library/publications/the-world-factbook/.
8-13
Copyright © 2017 Pearson Education, Inc.
National Characteristics of Major Country Groups
Sources: Based on International Monetary Fund at http://www.imf.org. and Central Intelligence Agency,
World 8-14
Factbook, 2015, https://www.cia.gov/library/publications/the-world-factbook/.
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What Makes Emerging Markets Attractive?
1. Emerging Markets as Target Markets

• Many have huge middle classes, with significant
income for buying electronics, cars, health care
services, and countless other products.
• Many exhibit high economic growth rates.
2. Emerging Markets as Manufacturing Bases
• Home to low-wage, high-quality labor for
manufacturing and assembly operations.
• Large reserves of raw materials and natural
resources. e.g., South Africa, Brazil, Russia.
Estimating the Potential of Emerging Markets
• Estimations are challenging because of peculiar

economic and social environments in these countries.
• Limited availability and reliability of data.
• Market research can be very costly and less precise, as
compared to the advanced economies.
• Market potential indicators include:
GDP growth rate, income
distribution, commercial
infrastructure, unemployment
rate, and consumer expenditures
for discretionary items.
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Purchasing Power Parity (PPP)

Adjustment to per capita GDP
• In relying on per capita GDP for comparison of different

countries, one should use PPP exchange rates, rather than the
market exchange rates.
• PPP adjustment provides a more realistic indicator of purchasing
power of consumers in emerging and developing economies.
• PPP adjusted per capita GDP represents the amount of products

that consumers can buy in a given country, using their own
currency and consistent with their own standard of living.
Difference in Per Capita GDP,

in Conventional and PPP Terms
Source: Based on data from International Monetary Fund, World Economic Outlook Database, April 2015 (www.imf.org). 8-23
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Median Household Income

for a Sample of Emerging Markets
Sources: Based on Euromonitor International January 2015 (www.euromonitor.com) and International Monetary Fund, World
Economic Outlook Database April 2015 (www.imf.org). 8-24
Key Criteria for Assessing the Attractiveness

of Emerging Markets and Developing Economies
• Market Size: The country’s population, especially those living in urban

areas.
• Market Growth Rate: The country’s real GDP growth rate.
• Market Consumption Capacity: Income of the middle class
• Commercial Infrastructure: Density of telephone lines, number of personal
computers, density of paved roads, population per retail outlet, and other
such characteristics.
• Economic Freedom: The degree to which government intervenes in
business activities.
• Country Risk: Degree of political and macroeconomic risk.
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Challenges of Doing Business in Emerging Markets
• Political instability – Corruption, weak legal systems, and

unreliable government authorities increase business risks and
costs, and hinder forecasting.
• Weak intellectual property protection – Discourages
producing or selling goods that entail valuable assets.
• Bureaucracy, red tape, and lack of transparency –
Burdensome rules, excessive requirements for licenses,
approvals, and paperwork; not accountable legal and political
systems. e.g., It may take years, or many bribes, to obtain
permissions to do business. China, India, and Russia are
particularly problematic.
Challenges in Emerging Markets (cont’d)
• Poor physical infrastructure – Basic

infrastructure, such as, high-quality roads, drainage
systems, sewers, and electrical utilities are often
sorely lacking in emerging markets.
• Partner availability and qualifications – Given

emerging market challenges, foreign firms may
seek local partners, who provide access to
markets, supplier and distributor networks, and key
government contacts. But qualified partners are
often hard to find, or require much assistance to
upgrade their abilities.
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This photograph taken by NASA satellite over a 24 hour time span, so as to capture the
view of earth at night from space in every time zone. It shows quite dramatically the
global spread of industrialization, as evidenced by the lights of human civilization.
Note the Nile River Delta, the Siberian Express railway route, the Australian coastal cities,
and Africa, Literally “the dark continent”.
The World Economic Pyramid

• Different countries have dramatically different levels of economic
development.
• Two common measurements of economic development 75-100
– Gross National Income (GNI)
• superseded Gross National Product or GNP
1,500-
• the sum of all income received by residents of a1,750
nation
– Gross National Income at Purchasing Power Parity (PPP) which
accounts for differences in the cost of living 4,000
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Purchasing Power Parity

• Value of goods and services
Purchasing that can be purchased with
Power one unit of a country’s
currency
Purchasing • Relative ability of two

countries’ currencies to buy
Power the same “basket” of goods in
Parity (PPP) those two countries
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Chapter 4-39
Purchasing Power Parity (PPP)

Adjustment to per capita GDP
• In relying on per capita GDP for comparison of different

countries, one should use PPP exchange rates, rather than the
market exchange rates.
• PPP adjustment provides a more realistic indicator of purchasing
power of consumers in emerging and developing economies.
• PPP adjusted per capita GDP represents the amount of products

that consumers can buy in a given country, using their own
currency and consistent with their own standard of living.
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The World Economic Pyramid

Annual per Capita Income* Tiers Population in Millions
More Than 75-100

$20,000
$1,500-$20,000 1,500-
1,750
Less Than $1,500 4,000
*Bases on Purchasing power parity in U.S. $.

SOURCE: U.N. World Development Reports
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SỰ KẾT NỐI TRONG KINH TẾ

QUỐC TẾ
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Bottom of Pyramid
• What are the Marketing Opportunities for
MNCs?
• Give examples?
Thảo luận nhóm

• Marketing opportunities in BRICS countries
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PHÂN LOẠI THU NHẬP

Các hộ gia đình được chia thành năm tầng lớp dựa trên mức
tiêu dùng hàng ngày (đô la/người/ngày, tính theo sức mua
tương đương - PPP) gồm:
❖cực nghèo (tiêu dùng dưới 1,9 đô la);
❖nghèo (1,9-3,2 đô la);
❖dễ bị tổn thương kinh tế (3,2- 5,5 đô la);
❖an toàn kinh tế (5,5- 15 đô la)
❖tầng lớp trung lưu (trên 15 đô la).
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PHÂN LOẠI THU NHẬP
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THE WORLD ECONOMIC PYRAMID
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Number of People Living in Poverty

(in Billions)
Sources: L. Chandy, N. Ledlie, and V. Penciakova, The Final Countdown: Prospects for Ending Extreme Poverty by 2030, Policy Paper 2013–14
(Washington DC: Brookings Institution); Economist, “Poverty’s Long Farewell,” February 28, 2015, p. 68; World Bank, World Development
Indicators (Washington, DC: World Bank, 2015).
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Low-Income Countries
• GNI per capita of $1,045 or less
• Characteristics
– Limited industrialization
– High percentage of population in farming
– High birth rates
– Low literacy rates
– Heavy reliance on foreign aid
– Political instability and unrest
– Concentrated in Sub-Saharan Africa
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Lower- Middle-Income Countries

• GNI per capita: $1,046 to $4,125
• Characteristics
– Rapidly expanding consumer markets
– Cheap motivated labor
– Mature, standardized, labor-intensive industries like
footwear, textiles and toys
• 50 bottom-ranked countries are LDCs—least developed
countries
• India is the only BRIC nation
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Upper- Middle-Income Countries

• GNP per capita: $4,126 to $12,745
• Characteristics:
• Rapidly industrializing, less agricultural employment
• Increasing urbanization
• Rising wages
• High literacy rates and advanced education
• Lower wage costs than advanced countries
▪ Also called industrializing or developing economies
▪ BRICS: Brazil, China, South Africa
▪ Other countries: Malaysia, Chile, Venezuela, Mexico
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High-Income Countries
• GNI per capita: $12,476 or more
• Also known as advanced, developed, industrialized, or
postindustrial countries
• Characteristics:
– Sustained economic growth through disciplined innovation
– Service sector is more than 50% of GNI
– Households have high ownership levels of basic products
– Importance of information processing and exchange
– Ascendancy of knowledge over capital, intellectual over machine technology, scientists and
professionals over engineers and semiskilled workers
– Future oriented
– Importance of interpersonal relationships
© AD-UEF 52
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Economic Development,
Performance, and Potential
– Developing countries (Bottom of Pyramid)
• largest number of countries
• low per capita income
– Emerging economies (4,000 USD- 12,000 USD)
• fast growing, relatively prosperous
• BRICs – Brazil, Russia, India, and China
– Developed countries
• high per capita income and standard of living
• like the U.S., Japan, France, Australia
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Thảo luận nhóm

2/Why do you think a company should or should not market the
same way around the world?
Tìm các Cơ hội Marketing, Sản phẩm Dịch vụ (sp có
thể bán thành công) mà Các Cty có thể khai thác
phát triển kinh doanh thành công tại các nước, Cho
Ví dụ
❑ Marketing Opportunities in China/ BRICS/ Emerging countries
❑ Marketing Opportunities at BOP (developing & emerging markets)
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Thảo luận nhóm

Thảo luận nhóm

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Bottom of Pyramid
• What are the Marketing Opportunities for
MNCs?
• Give examples?
Các yếu tố Môi trường Kinh Tế - Chính trị - Xã hội – Văn hóa
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CÁC YẾU TỐ MÔI TRƯỜNG KINH TẾ -

CHÍNH TRỊ - XÃ HỘI – VĂN HÓA
Social and cultural environments
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Các yếu tố Môi trường Kinh Tế - Chính trị - Xã hội – Văn hóa
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Higher CQ led to increased effectiveness

across any cultural context
https://www.youtube.com/watch?v=x2C7Mfft9OY
Components Of ICC
Intercultural communication involves:
• Learning from interaction with others
• Seeking and developing ways of understanding
• Responding to those around you.
Three psychological components involved:
Cognitive Affective Behavioral Ethical
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Personal
Relationships
Communication Friends
Holds Things
Together
Organizations
Nations
The Importance of Communication
Introduction
• Cross-cultural literacy - an understanding of how
cultural differences across and within nations can affect
the way in which business is practiced
• There may be a relationship between culture and the
costs of doing business in a country or region
• Culture is not static
Question: What is culture?
Answer:
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International Management and

Cultural Differences:
Understanding New Cultures
Self-reference Acculturation
criterion
• Cross-cultural
literacy
Chapter 4-65
Introduction: Culture Awareness

• Problem areas that can hinder managers’
cultural awareness…
– Subconscious reactions to circumstances
– The assumption that all societal subgroups are similar
• Managers that educate themselves about other cultures have a greater

chance of succeeding abroad
• Awareness is the first step, but it’s not enough. A culturally intelligent
individual is not only aware but can also effectively work and relate with
people and projects across different cultural contexts.
© AD-UEF 66
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Effective communication creates bonds between people in all social

settings, including the business world.
Task of Global Marketers
• Study and understand the cultures of countries in which they will be

doing business
• Understand how an unconscious reference to their own cultural

values, or self-reference criterion, may influence their
perception of the market
• Incorporate this understanding into the marketing planning process
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Culture affects many managerial tasks, including:
• Developing products and services

• Preparing advertising and promotional materials
• Preparing for overseas trade fairs and exhibitions
• Screening and selecting foreign distributors
• Communicating and interacting with foreign partners
• Negotiating and
structuring ventures
• Interacting with current
and potential customers
from abroad © AD-UEF
Personality Traits for

Cross-Cultural Proficiency
• Tolerance for ambiguity: Ability to tolerate uncertainty
and lack of clarity in the thinking and actions of others.
• Perceptiveness: Ability to closely observe and comprehend subtle
information in the speech and behavior of others.
• Valuing personal relationships: Ability to appreciate personal
relationships; which are often more important than achieving one-time
goals or “winning” arguments.
• Flexibility and adaptability: Ability to be creative in
devising innovative solutions, be open-minded about
outcomes, and show “grace under pressure”.
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Essentials for Understanding Culture
Copyright © 2014 Pearson Education Inc.
Introduction: What is culture?

• “The collective programming of the mind which distinguishes one human
group from another”
- Geert Hofstede
• Systems of ideas that constitute a
“design for living”
- Zvi Namenwirth & Robert Weber .
• is particular way of life which expresses certain meanings and

values not only in art and learning, but also in institutions and
ordinary behavior (Williams, 1965)
The phrase, “a culture” refers to a group that shares the same programming
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What is culture?
• set of beliefs, customs, and attitudes of
a distinct group of people
• system of learned, shared, unifying, and
interrelated beliefs, values, and
assumptions
Văn hóa là gì?

• Là sự tổ chức tập thể của trí tuệ giúp phân biệt nhóm người này với
người khác -“The collective programming of the mind which
distinguishes one human group from another”
- Geert Hofstede
• Hệ thống các ý tưởng cấu thành việc thiết kế cuộc sống Systems of
ideas that constitute a “design for living”
- Zvi Namenwirth & Robert Weber .
• Là cách sống thể hiện các ý nghĩa và giá trị không chỉ trong nghệ thuật
hay học tập nhưng còn có trong các tổ chức và hành vi thông thường
(is particular way of life which expresses certain meanings and values
not only in art and learning, but also in institutions and ordinary
behavior (Williams, 1965)
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Components of Culture:
One standard approach
• Values – basic attitudes about
what is important
• Norms – social rules
• A Society – a group of
people who share common
values & norms
– that is, a common culture
© AD-UEF AD @ UEF 2019
Components of Culture
Aesthetics
Physical & Values &
Environments Attitudes
Manners &
Education Culture Customs
Personal
Social Structure
Communication
Religion
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Culture
as an
Iceberg
Exploring Cultures
You can explore a culture by enjoying the
following activities:
Music
Art
Literature
Architecture
Foods
Holidays
Religious events
Patterns
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Các thành phần của văn hóa

– Tương tác XH Social Interaction (social interactions among
people; nuclear family, extended family; reference groups)
– Thẩm mỹ /Aesthetics (ideas and perceptions that a culture
upholds in terms of beauty and good taste)
– Tôn giáo/Religion (community’s set of beliefs relating to a
reality that cannot be verified empirically)
– Giáo dục/Education (One of the major vehicles to channel
from one generation to the next)
– Hệ thống giá trị/ Value System (values shape people’s norms
and standards) AD @ UEF 2019
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Components of Culture
• Attitude–learned tendency to respond in a consistent way to a
given object or entity
• Belief–an organized pattern of knowledge that an individual
holds to be true about the world
• Value–enduring belief or feeling that a specific mode of conduct
is personally or socially preferable to another mode of conduct
• Subcultures—smaller groups of people with their own shared
attitudes, beliefs, & values (ex. Vegetarians)
© AD-UEF
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Culture and Business

Differences in culture imply that:
1. There is a need for managers to develop cross-cultural literacy
2. There is a connection between culture and national competitive
advantage
3. There is a connection between culture and ethics in decision making
• Avoiding Ethnocentricity:
– Ethnocentricity is the belief that one’s own ethnic group or
culture is superior to that of others.
– Ethnocentricity can seriously undermine international business
projects.
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Example of ETHNOCENTRISM
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Culture and Business:

Cross-Cultural Literacy
• Individuals and firms must develop cross-cultural literacy
– Firms that are ill-informed about the practices of another
culture are unlikely to succeed in that culture
• Do managers have to alter their customary practices to succeed in countries
with different cultures?
 Must consider
◼ Host society acceptance
◼ Degree of cultural differences
 cultural distance
◼ Ability to adjust
 culture shock and reverse culture shock
◼ Company and management orientation
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What is DIFFERENT about competing

GLOBALLY?
▪ Customer wants & demands may be different
▪ Local culture & customs guaranteed to be different
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Managerial Orientations
• Ethnocentric orientation: Using our own culture as the standard

for judging other cultures.
• Polycentric orientation: A mindset in which the manager develops

a greater affinity for the country in which he or she works than for
the home country.
• Geocentric orientation: A global mindset in which the manager is
able to understand a business or market without regard to national
boundaries.
Managers should strive for a geocentric orientation.

3-85

Three company and management orientations
◼ Polycentrism
business units abroad should act like local companies
◼ Ethnocentism
home culture is superior to local culture
overlook national differences
◼ Geocentrism
integrate home and host practices
• Discuss more later on strategy !
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Key Concepts
• Culture: The values, beliefs, customs, arts, and other products of human
thought and work that characterize the people of a given society.
• Cross-cultural risk: A situation or event where a cultural

miscommunication puts some human value at stake. It arises in
environments comprised of unfamiliar languages, and unique values,
beliefs, and behaviors
• Socialization: The process of learning the rules and behavioral patterns
appropriate to one's society.
• Acculturation: The process of adjusting and adapting to a culture
other than one's own; commonly experienced by expatriate workers.
Giving and Receiving Gifts

Common and acceptable gifts include:
• Flowers
• Pens
• Books
• Chocolates
44
9/1/2023
Gifts
“It’s not the gift that counts

but how you present it.”
Gift vs. Bribe
big
difference
gift bribe
an item given to convey an item or money offered to
good will entice the receiver to do
something illegal
45
9/1/2023
Gift protocols have prevailed in Japan for centuries:
Japan
■ types of gifts to give, ■ wrapping, ■ presentation
• Gifts opened in private
• Give & receive gifts with both hands
• No surprises (individual / group)
• Give gift at end of visit
• Comment on modesty & insignific-ance
of your gift (conveys humility)
• Value of gift befits status
• Expect & respect reciprocity
• Avoid cash gifts
• Avoid gifts with company logo (except
souvenirs)
• Avoid bows (considered unattractive)
• Avoid ribbons (different colors have different
meanings)
• Avoid 4 of anything (“shi” = death)
• NEVER give a knife (suggests suicide)
China
Gift giving in China was once a high art form. Communist regime outlawed gift-giving to
officials. Now communism is relaxing and gifts are expected.
• Exchanging gifts is an important part of Chinese culture because it is one
way of building guanxi.
• Proper etiquette to refuse offer of a gift, even more than once. Giver is
expected to persist. Acceptance will follow. No matter its value, the gift is
referred to as “a small token”
• Give and receive gifts with both hands
• Avoid expensive gifts. Quality pen is good.
• No white, blue, black gifts, no red ink.
• No sharp objects; no handkerchiefs
• No clocks
• No flowers (only for funerals)
• Symbolism of numbers 2a 8a 6a 4 x
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9/1/2023
Middle East
Gift giving is an elevated custom
in personal & business
relationships.
• Good manners + generosity
are valued highly.
• Do not give gift when 1st meet
someone (interpreted as bribe)
• Present gift in front of others
(interpreted as bribe if one-on-one)
• Give & receive with right hand
or both hands
• Reciprocate in kind
• No alcohol, no pigskin
• No gifts to wife of colleague
Europe FLOWER POWER

• Avoid red roses (suggest
romance), white flowers,
number 13
• Never wrap flowers in paper;
present flowers unwrapped
• Yellow flowers signal grieving
in Eastern Europe.
• Avoid chrysanthemums in
Italy, France, Belgium, Spain
(only for coffins or graves)
Business gift giving is low-key, few • Carnations are only used for
protocols. Often superfluous funerals in Sweden, Poland &
now. Germany
• UK, France, Italy: Send • Even numbers of flowers
gift (flowers / book) after visit. can be bad luck in
• Good to bring chocolates Germany & Austria
or wine to dinner at home.
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Russia Strong tradition of enthusiastic

giving & receiving gifts.
Spontaneity fuels Russian gift-
giving (rather than strict social
protocols).
Great honor to be invited to a
Russian business associate’s
home.
• Bring chocolates or wine
if invited to a home.
• Avoid bringing vodka.
• Bring a bouquet of flowers, but
there must be an odd number of
flowers. (Even numbers for
funerals).
• From earliest childhood, Russian
boys are taught the importance of
giving flowers.
• Bring gifts for kids.
• Host/business associate may find
it difficult to reciprocate.
• Avoid giving flowers that are white or yellow. In

many countries, those colors are associated with
death.
• In Germany red roses are associated with a
romantic attachment.
• Liquor is offensive to people in Islamic countries.
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Acculturation
Cultural competence
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Directness in Communication
• In some countries, businesspeople engage in pleasant
conversation over a drink or food before focusing on
business.
• Forcing a point is considered rude in some cultures.
Time for Translation

When waiting for a
translator to translate, the
listener should focus on
the speaker, not the
translator.
50
9/1/2023
Intercultural Competence
Business Protocol
Typical Aspects of Business Protocol
Greetings and introductions Acceptable and proper gestures
Use of names and titles Gift giving
Business card etiquette Conducting business meetings
Manners Table manners
Type of dress Visiting the home of a business associate
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Managerial Implications
• Cross-cultural literacy
– You need to understand differences between cultures
• Culture and competitive advantage
– Some cultures make business easier than others
• Culture and business ethics
– As we’ll see in a few weeks, cultural differences create big ethical
issues
Idioms that Symbolize Cultural Values
52
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Verbal Communication Challenges

The Challenges of Different Environments
How people speak Technical terms
Time for
Social behavior
translations
Verbal Communication
Nodding
“I agree”
“I disagree”
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What is this?
_____ includes time, space, material

possessions, friendship patterns, and
business agreements. It is more
important in high-context than low-
context cultures.
Non-verbal language
© AD-UEF AD @ UEF 2019 7-107
SOMETIMES IT VARIES ACROSS THE GLOBE.....
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Nonverbal Communications
Nonverbal Communication
• Body language
• Appearance
• Eye contact
• Touching
• Personal space
• Color
• Numbers
• Emblems
• Smells
55
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Sensuality and touch culture in Saudi Arabian versus

European advertising
7-111
AD @ UEF 2019
Gestures
Hungary
US
AD @ UEF 2019
56
9/1/2023
The basic of communication: non-verbal
Gestures
57
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Nonverbal Communication
58
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Space
Relate What distance is too close for you when speaking
to a new acquaintance?
Body Language
• Facial expressions
• Upper and lower body movements
• Gestures
• Not universal across cultures
59
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Colors
• In China and Taiwan, the color red
indicates celebration.
• In Italy the color purple indicates
penance.
• The color white can symbolize death in
some cultures.
Smells
A heavy dose of cologne

might bother people in
some cultures.
60
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Marketing’s Impact on Culture
• Universal aspects of the cultural environment

represent opportunities to standardize elements of a
marketing program
• Increasing travel and improved communications have

contributed to a convergence of tastes and
preferences in a number of product categories
AD @ UEF 2019 121
Contexting
• refers to how direct or indirect communication is.
• low-context culture is one that communicates very
directly.
– e.g., Germany & US
– Not too concerned with being embarrassed
• high-context culture is one that communicates indirectly.
– e.g., Japan & Saudi Arabia
– Embarrassment avoided at all costs
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E. T. Hall’s High- and Low-Context Cultures
• Low-context cultures rely on explicit explanations, with

emphasis on spoken words. Such cultures emphasize clear,
efficient, logical delivery of verbal messages. Communication is
direct. Agreements
are concluded with specific, legal contracts.
• High-context cultures emphasize nonverbal or indirect
language. Communication aims to promote smooth, harmonious
relationships. Such cultures prefer a polite, “face-saving” style
that emphasizes a mutual sense of care and respect for others.
Care is taken not to embarrass or offend others.
3-123
High- and Low-Context Cultures

• High Context • Low Context
– Messages are explicit
– Information resides in context and specific
– Emphasis on background, – Words carry all
information
basic values, societal status – Reliance on legal
– Less emphasis on legal paperwork paperwork
– Focus on personal reputation – Focus on non-personal
documentation of
credibility
Saudi Arabia, Japan
Switzerland, U.S., Germany
AD @ UEF 2019 4-124
62
9/1/2023
So sánh các nền văn hóa

Các nền Văn hóa thì khác nhau, nhưng cùng chia sẻ các khía cạnh.
Các nghiên cứu về “social psychology research” cung cấp những
khác biệt chính giữa Đông /East (high) và Tây/ West (low) về ngữ
cảnh (context cultures) trong cách thức con người nhìn nhận sự
thật và lý luận
High-context cultures: diễn tả các ý/ thông điệp dựa trên các bối
cảnh “contextual cues”; e.g., China, Korea, Japan.
Low-context cultures: đặt trọng tâm vào từ ngữ viết hay nói ; e.g.,
USA, Scandinavia, Germany.
9/1/2023 AD @ UEF 2019 125
High- and Low-Context Cultures
AD @ UEF 2019 4-126
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Cross-Cultural Comparisons
High context Japanese
IMPLICIT Arabian
Latin American
Spanish
Italian
English (UK)
French
English (US)
Scandinavian
German
Low context
Swiss EXPLICIT
9/1/2023 AD @ UEF 2019
Hofstede’s Cultural Typology

• Individualism/Collectivism
• Power Distance
• Uncertainty Avoidance
• Achievement/Nuturing
• Long-term Orientation
AD @ UEF 2019 4-128
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Managerial Guidelines for

Cross-Cultural Success
• Acquire factual and interpretive knowledge about the
other culture; try
to speak their language.
• Avoid cultural bias.
• Develop cross-
cultural skills, such
as perceptiveness,
interpersonal
skills, adaptability
Directness in Communication
• In some countries, businesspeople engage in pleasant
conversation over a drink or food before focusing on
business.
• Forcing a point is considered rude in some cultures.
65
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Characteristics of Culture
• Culture is the collection of values, beliefs, behaviors,
customs, and attitudes that distinguish one society
from another
Characteristics
Learned behavior
Of Culture
Interrelated
Adaptive
Shared
Copyright © 2015 Pearson Education, Inc. Chapter 4-131
Hofstede Framework Dimensions
Individualism
versus Power
Distance
Collectivism
Long-Term Uncertainty
Orientation Avoidance
Indulgence Achievement
versus versus
Restraint Nurturing
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Hofstede Framework Dimensions
Individualism
Power
versus
Collectivism Distance
Long-Term Uncertainty
Orientation Avoidance
Indulgence Achievement
versus versus
Restraint Nurturing
Individualism versus
IDV Collectivism
= degree to which individuals are integrated into groups
Individualist societies
• everyone expected to take care of him/herself &
his/her immediate family
• value hard work, entrepreneurism, individual
responsibility
Collectivist societies
• cohesive groups; often extended families; protection & loyalty
• goal of group harmony in families
• group responsibility for members, actions, success & failure
67
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PDI Power Distance

= extent to which less powerful members
of society/institutions accept & expect
unequal distribution of power
• represents inequality of members by members
• accepting social inequality tantamount to endorsing it
• high PDI means big gap between superiors & subordinates;
more hierarchical management
• low PDI suggests greater equality; power from hard work, seen
as more legitimate
UAI Uncertainty avoidance
= society’s tolerance for uncertainty &

ambiguity
• how comfortable are people with unfamiliar situations?
High UAI
• spur people to minimize uncertainty by erecting strict laws,
rules, consequences for deviation
• often more emotional, anxious, fear change
Low UAI
• societies more tolerant of different opinions & practices
• open to change, new ideas, more entrepreneurial
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MAS
Achievement versus
Nurturing
= Masculinity (achievement) versus
Femininity (nurturing)
• distribution of roles between genders
• values vary less among societies than
• values range from assertive & competitive to modest & caring
• culture’s value of personal achievement & materialism (often
translating into entrepreneurial drive) versus relationships &
quality of life (usually more relaxed lifestyles)
LTO Long-Term Orientation
= society’s time perspective

• essence of differences between Eastern & Western cultures
High LTO
• tradition is adaptable: cultural change is quicker because tradition &
commitment are not obstacles to change
• save & invest, thrift, perseverance, humility
• strong work ethic due to expectation of pay-off from hard work
• status upheld in relationships
Low LTO (= high SHORT-term orientation)
• individual stability, protect reputation
• high respect for tradition, fulfill social obligations
• prefer quick results
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IND Indulgence vs. Restraint
= freedom to express Indulgence

gratification = society that allows
relatively free gratification
of basic and natural human
drives related to enjoying
life and having fun
Restraint
= society that suppresses
gratification of needs, and
regulates it by means of
strict social norms
4 Collect-
ivism
Individualism
versus
Collectivism
LOW HIGH
Power Power
2
Power
Distance
Individ-
ualism
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4 LOW 1
Uncert Uncertainty
-ainty Avoidance
Power
Distance
LOW HIGH
Power Power
2
HIGH
Uncert-
ainty
Managerial Guidelines (cont’d)

• Self-reference criterion: The tendency to view other cultures
through the lens of one's own culture- understanding this is
the first step.
• Critical incident analysis: A method for analyzing awkward
situations in cross cultural interactions by developing empathy
for other points of view.
1. Identify situations where you need to be culturally aware to interact
effectively with people from another culture.
2. When confronted with “strange” or awkward behavior, discipline
yourself to not make judgments.
3. Develop your best interpretation of the foreigner’s behavior, and
formulate your response.
4. Learn from this process and continuously improve.
3-142
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What is this?
What term refers to one’s unconscious

reference to one’s own cultural values
when attempting to understand another
culture?
Self-reference criterion (SRC)
© AD-UEF 7-143
Khả năng thích ứng các nền

văn hóa
• Nhà làm marketing Quốc tế/Global marketers cần nhạy bén trong các
tình huống VH - cultural biases mà ảnh hưởng đến cách suy
nghĩ, hành vi và việc ra quyết định
• Khái niệm tự suy xét Self-reference criterion (SRC): là

xu hướng không ý thức của con người tự sử dụng các trải nghiệm văn
hóa và giá trị văn hóa của mình để diển đạt các tình huống Kinh
doanh (to resort to their own cultural experience and value systems to
interpret a given business situation.)
• Ethnocentrism cảm giác cho rằng văn hóa của mình là ưu việt
9/1/2023 144
72
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Approaches to eliminate SRC

• Define problem or goal in terms of home country culture, traits,
habits, and norms
• Define problems or goals in terms of the foreign culture
• Isolate the SRC influence and examine it carefully to see how it

complicates the problem
• Redefine the problem without the SRC influence and solve for
the foreign market situation
© AD-UEF
Adaptation is key!
• Essential to effective adaptation:
– awareness of own culture
– recognition that differences in others can cause
anxiety, frustration & misunderstanding of host’s
intentions
• Self-reference criterion (SRC) is especially operative
in business customs
• Key to adaptation is to remain true to oneself, but
to develop understanding of & willingness to
accommodate differences
73
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Business Customs
Cultural Imperatives
“GUANXI” 關係 or 关系
Japanese NINGEN KANKEI
Latin American COMPADRE
Cultural Electives
Nice to participate, but not absolutely required
Cultural Exclusives
ONLY for locals, not foreigners
Disney in France & Tokyo

& the Self-Reference Criterion
1. Unlimited 2. Europeans,
demand for especially the
American French, are
culture. Tokyo sensitive about
a huge success. American cultural
No alcohol in imperialism.
parks. Disney characters
are based on
European folk
3. Compare Steps 1 & 2. tales. Real castles
American & Japanese here!
4. Redesign the theme park in
conditions are different.
keeping with European cultural
Modify design for
norms; allow the French to put their
European success.
identify on the park.
© AD-UEF 4-148
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Guanxi: Important in Business in China

The Chinese call this guanxi (关系). Guanxi refers to having personal trust and
a strong relationship with someone, and can involve moral obligations and
exchanging favours
• Refers to social connections and relationships
based on mutual benefits.
• Emphasizes reciprocal exchange of favors as well
as mutual obligations.
• Rooted in ancient Confucian philosophy, which values social hierarchy and
reciprocity.
• Engenders trust, thereby
serving as a form of
insurance in a potentially
risky business environment.
Guanxi: Important in Business in China
75
9/1/2023
Guanxi (Fan, 2002)
• Guanxi is based on relationships, but

relationship do not guarantee the
development of guanxi
• Guanxi is an active connection.
• Guanxi is a long-term social obligation.
• Guanxi is reciprocal exchange.
• Guanxi is a form of social capital.
• Guanix is a dynamic process.
A→ B → C
Review Question:
• Questions:
• How does an understanding of Culture | History help an international
Marketer ?
• What are marketing opportunities for halal products in Islam countries ?
• Discuss: “ World trade routes bind the world together”. Explain the ambition of China
with the New Silk Road project: “One Belt One Road “
• What are the opportunities for new firms in

Sharing Economy ?
AD @ UEF 2019 152
76
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Thảo luận nhóm
AD @ UEF 2019
World Legal Systems

• While there are five legal systems in the world, Civil, Common, and Islamic Law are dominant.
• Only about 30 percent of the world's gross domestic product is generated in countries governed by
civil and common law systems.
• Civil Law: Found in Europe, Asia, and Central and South America. Consists of codified legislation
interpreted by judges.
• Common Law: Adopted in most states of North America. Court adjudications are the primary source
of law, although governments pass statutes and legislation. Each case that raises new issues is
considered on its own merits and then becomes a precedent for future decisions on that same issue.
• Muslim Law - There are five types of conduct under Muslim law (Shari'a): mandatory, recommended,
permitted, recommended against, and banned. Given the intricacies of Islamic law, expert legal advice
is a necessity in practically all areas of business behavior.
– For example, engaging in commerce is recommended, but taking interest is banned.

– There are areas where Islamic law is vague, such as how to treat intellectual property.
– Multinational companies operating in Muslim countries face many challenges in the management of human resources.
AD @ UEF 2019
77
9/1/2023
Legal System
• Hệ thống Luật – là các điều luật quy định- điều chỉnh các hành vi cũng như các quy
trình mà nơi đó các luật được thực thi . (“rule that regulate behavior as well as the
processes by which the laws are enforced”.)
• Các loại hệ thống Luật

– Common law: based on tradition, precedent, and custom
– Civil law: based on detailed set of laws organized into codes
– Theocratic law: based on religious teachings
– Customary law: based on the wisdom of daily experience or important traditions.
• Depending on the legal system, contracts are approached in different ways. For
example, contract tends to be shorter and less specific under civil law because many
issues already covered in the civil code.
• United Nations Convention on Contracts for the International Sale of Goods (CIGS)
9/1/2023 AD @ UEF 2019 155
Legal System: Managerial Guidelines
9/1/2023 156
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The Legal Environment

The Wide World of Legal Systems
Các vấn đề luật trong International Businesses

• Mối quan hệ lao động
– Các quy định về sức khỏe – an toàn
Health and safety standards
– Thời gian làm việc
• Các quy định làm việc
• Các quy định cấm về độc quyền -Antitrust prohibitions
• Mối quan hệ hợp đồng -Contractual relationships
• Các quy định về môi trường -Environmental practices
• Bảo vệ về Thương hiệu, bản quyền và Sở hữu trí tuệ
-Patents, trademarks, and intellectual property protection
• Quy định về thuế - báo cáo thuế. (Taxes and reporting
requirements
3-15
9/1/2023 158
79
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Các vấn đề luật trong International Business

Operational concerns
• ease of entry and exit
• hiring and firing employees
• contract enforcement
• What country has the most
favorable operating
environment?
Strategic concerns
• product safety and liability
• marketplace behavior i.e. China no
comparison ads
• product origin and local content
• legal jurisdiction Arbitration
9/1/2023 159
• Home or host country?
Legal Issues for Global Marketing

• Global marketers must understand the legal systems in which they operate.
Common legal scenarios include:
– Sales agencies
– Distributorship agreements
– Customs and international trade regulation
– Export incentives and controls
– Arbitration
– Patents
– Trademarks
– Intellectual property rights
– International technology transfer
– Political vulnerability of the product in the target market
– Parallel importing
– Marketing mix regulations
– Consumer protection
– Employment practices
– Environmental regulations.
80

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9/1/2023

Lecture 2- 3: PESTEL and Culture

Thảo luận nhóm

2/ What PESTEL factors should a foreign

Case for next session:

Aspect Factors to consider

Case for next session:

Aspect Factors to consider

Technological New technologies for products or processes, disruptive cross-industry innovations

Why the interest in

Why the interest

• Important sourcing platform (world’s largest exporter):

AD @ UEF 2019 4-9

International Economic Analysis

 Most modern societies are pluralistic

The Political Risk

Classifying Political Risk

Value of Economic Freedom

AD @ UEF 2019 4-16

AD @ UEF 2019 4-17

The World Economy

Types of Economic Systems

Types of Economic Systems

AD @ UEF 2019 4-20

1. Traditional Economic System

2. Market Economic System

3. Command Economic System

4. Mixed Economic System AD @ UEF 2019

• There are also disadvantages of a mixed economy:

Copyright © 2017 Pearson Education, Inc. 8-9

Trade Conditions in the Major Country Groups

Sources: Based on International Monetary Fund at http://www.imf.org; World Bank, 2015, at

National Characteristics of Major Country Groups

What Makes Emerging Markets Attractive?

1. Emerging Markets as Target Markets

Estimating the Potential of Emerging Markets

• Estimations are challenging because of peculiar

Purchasing Power Parity (PPP)

• In relying on per capita GDP for comparison of different

• PPP adjusted per capita GDP represents the amount of products

Copyright © 2017 Pearson Education, Inc. 8-22

Difference in Per Capita GDP,

Median Household Income

Key Criteria for Assessing the Attractiveness

• Market Size: The country’s population, especially those living in urban

Challenges of Doing Business in Emerging Markets

• Political instability – Corruption, weak legal systems, and

Challenges in Emerging Markets (cont’d)

• Poor physical infrastructure – Basic

• Partner availability and qualifications – Given

The World Economic Pyramid

Purchasing Power Parity

Purchasing • Relative ability of two

Purchasing Power Parity (PPP)

• In relying on per capita GDP for comparison of different

• PPP adjusted per capita GDP represents the amount of products

Copyright © 2017 Pearson Education, Inc. 8-22

The World Economic Pyramid

More Than 75-100

Less Than $1,500 4,000

*Bases on Purchasing power parity in U.S. $.

SỰ KẾT NỐI TRONG KINH TẾ

Thảo luận nhóm