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 QuestionIs 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.

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