MACRO FORCES INFLUENCING

INTERNATIONAL BUSINESS

CULTURE IN NEGOTIATIONS

12/25/16

Global Economy
Jos Luis M Marn A.

Variables influencing
International Business

What is culture?
More than 160 definitions about culture
Generally refers to patterns of human activity
and the symbolic structures that give such
activity significance

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Global Economy
Jos Luis M Marn A.

Culture characteristics

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Is learned
Is shared
Facilitates communication
Is prescriptive
Subjective
Lasting
Cumulative
Dynamics
Global Economy
Jos Luis M Marn A.

Exploring Culture
Behavior, Devices, institutions

Values, beliefs and norms

Assumptions

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Global Economy
Jos Luis M Marn A.

Recognizing the culture

We only perceived our culture when we are
outside of it, confronting it with respect to
another one.
Generally, we used our own culture like a
reference to evaluate others.
Recognizing the cultural differences is a first
necessary step, to anticipate potential threats
and opportunities during an encounter of
businesses.
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Global Economy
Jos Luis M Marn A.

STEREOTYPES

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Global Economy
Jos Luis M Marn A.

STEREOTYPES OF THE MEXICANS

ACCORDING TO EUROPEANS

Natives
Hot meals
Men with great hats
Horses
Donkeys
Tacos
Nice weather TexMex
Tequila

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Global Economy
Jos Luis M Marn A.

Happy people
Dirty cities
Sand
Children working
Nachos
Sun
Mexican pesos
Deserts
Cactus
Salma Hayek
Corona (coronita)
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What is a stereotype?

Mental files that are used to help to process

new information, comparing them with last
experiences and knowledge.

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Global Economy
Jos Luis M Marn A.

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REGIONAL CULTURES

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Global Economy
Jos Luis M Marn A.

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The Cultural Dimensions

of Hofstede
Researcher at
IBM
Studies began in
late 1960s
116,000
employees
40 countries

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Global Economy
Jos Luis M Marn A.

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Dimensions

Power Distance
Masculinity/Femininity
Individualism/Collectivism
Uncertainty Avoidance

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Global Economy
Jos Luis M Marn A.

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Power Distance
The degree to which a
culture accepts an unequal
distribution of power.

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Global Economy
Jos Luis M Marn A.

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Power Distance

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HIGH POWER DISTANCE

LOW POWER DISTANCE

Unequal power
distribution is accepted
Those with power should
look and act powerful
Centralized decision
making
Close supervision
France, India, Mexico,
Singapore

Values equality among

people
Status differences are
minimized
Participative decision
making
Superiors should act as if
they have less power
Stronger work ethic
Australia, Israel,
Netherlands, UK, USA

Global Economy
Jos Luis M Marn A.

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Masculinity/Femininity

Cultural values resemble

stereotypical male or female
characteristics

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Global Economy
Jos Luis M Marn A.

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Masculinity/Femininity
MASCULINITY

FEMININITY

Concerned with
human development
Cooperative
Nurturing
Compassionate
Denmark, Spain,
Sweden, Switzerland

Aggressive
Competitive
Materialistic
Gender roles clearly
defined
Germany, Italy &
Venezuela
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Global Economy
Jos Luis M Marn A.

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Individualism/Collectivism

The focus of the culture is

the individual or the group

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Jos Luis M Marn A.

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Individualism/Collectivism
INDIVIDUALISM
Individual is most
important
Individual rights
Achievement
measured individually
Self-reliance valued
Canada, UK, USA

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Global Economy
Jos Luis M Marn A.

COLLECTIVISM
Group most important
Strong loyalty to
group or clan
Dependence on
organization
Group decision making
Group recognition
Japan, Mexico, India,
Colombia

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Uncertainty Avoidance

The collective tolerance for

ambiguity of a culture

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Global Economy
Jos Luis M Marn A.

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Uncertainty Avoidance

STRONG UA
Dislike change
Seeks the one truth
Rules and regulations
Weaker achievement
motivation
France, Greece and
Portugal

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Global Economy
Jos Luis M Marn A.

WEAK UA
Welcome change
No one best way
Fewer rules
Achievement
motivation
Values diversity
Canada, Hong Kong,
Singapore, USA

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Cultural Maps

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Global Economy
Jos Luis M Marn A.

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Political Risk

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Introduction
1.
2.
3.
4.
5.

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I would define political risk as:

In assessing political risk, I would consider the
following factors:
I think of a country as risky if the following things
are true of that country:
I think a company is subjetc to political risk if the
following things are true of that company:
If your company were involved in a situation that
you felt to be risky, how would you minimize
your exposure to that risk?

Internasionalisation of enterprises
Jos Luis M Marn A

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Definition: Political Risk

It refers about the possibility that decisions of
political type, events or conditions in a certain
country affect the climate of businesses, in such
way which the investors lose money or do not
make the profits waited for, at the moment they
made the investment.

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Internasionalisation of enterprises
Jos Luis M Marn A

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IMPORTANT issues
The role of the political parties, groups and
fractions of the political system.
Political and economic philosophy in the
nation.
The general atmosphere around the
businesses and governmental
relationships.
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Jos Luis M Marn A

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Type of political risk

Ownership/control risk
Transfer risk
Operation risk

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Jos Luis M Marn A

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Type of political risk

Ownership/control risk. Resulting risk of the
policies of the government host or actions that
inhibit the property or the control of the local
operations of an international company.

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Ownership/control risk
Geographic restrictions on the investment
Limitations in investment on certain economic
sectors
Right of property
Limitations on the foreign property
Expropiation and Confiscation
Nationalization and domestication

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Jos Luis M Marn A

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Ownership/control risk
Confiscation. The government takes possession
from a property without compensation.
Expropriation: A company is forced to sell its
property, differs from the confiscation in which
some compensation exists.

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Jos Luis M Marn A

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Ownership/control risk
Nationalization. The government takes possession
and operates the nationalized businesses.
Domestication. The control of foreign companies
happens at the hands of nationals.

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Type of political risk

Transfer risk: One talks about possible acts of the
government that can affect the transference of
payments, capitals, technology and people of a
subsidiary company to the company base.

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Transfer risk

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Export tariffs
Restrictions to the exports
Import tariffs
Import quotas
Restrictions for the transfer of dividends
Restrictions for the capital repatriation

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Type of political risk

Operation risk. Resulting risk of the
policies, regulations and procedures of the
government host, that directly restrict the
administration and the local development
of the operation in production, marketing
research, finances and other functional
areas of the company.

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Jos Luis M Marn A

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Operation risk

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Prices control
Increase of the taxes
Requirements on local content
Requirements on private suppliers
Financial restrictions

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Managing political risk

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How to manage political risk?

To carry out a careful analysis of the country or

countries with which there is relation.

To develop general estimations based on

supposed opinions of experts after observing the
political climate in the last years (this can be useful
when it is to expensive to invest in meticulous and
complex analyses).

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Jos Luis M Marn A

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How to manage political risk?

To avoid relations with countries whose risk is
doubtful.
To acquire an insurance against political risks that
compensate economically due to any problems
that company can face.

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How to get involved in

community in order to
decrease political risk ?

To stimulate the local economy.

To hire people of the country host.
To share the possession of the company
with local capitals.
Economically to lean back of banks and
other financial institutions.

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How to get involved in

community in order to
decrease political risk ?
To develop civil conscience and support social
programs.
To reduce risk exposure non investing or
delaying new investments.
To make lobbying with local government.

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Jos Luis M Marn A

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Political Risk Services

http://www.prsgroup.com
25/12/16

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Jos Luis M Marn A

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Political Risk Services

http://www.prsgroup.com/
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Jos Luis M Marn A

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TRANSPARENCY INTERNATIONAL

http://www.transparency.org/policy_research/surveys_indices/global/cpi
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Legal Environment

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Legal issues faced by

companies

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Regulations about investment and trade

Intelectual property rights
Regulation on financial flows
Taxes

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Legal issues faced by

companies

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Regulation on companies property

Contractual regulations
International treaties
Dispute resolution

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Dispute resolution
Negotiation
Litigation
Written contracts
Jurisdiction

Arbitrage
Dispute resolution by international arbitrage institutes

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Intelectual property
Trademarks

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Patents

Brand name
Motto
Colors
Design

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Jos Luis M Marn A

Inventions
Modelos
Utility model
Formulas
Procesdures
Processes

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Intelectual property
Copyrigths

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Literary works
Software
Plastic arts
Educational materials
Music

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Economic Environment

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IMPORTANT issues
Under what type of economic system it will
operate the company?
The industry in which the company operates is in
the public or private sector?
If the industry is in private sector, Is this moving to
the public sector?
Which is government perception about foreign
companies, like competitors or potential local
partners?
To what extent the government controls the
economy?
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Economic systems
Free economy of market. It involves a balance in
the economy when relating the factors of price,
amount, demand and supply.
Closed economy: The government fixes the goals
and determines the amount of products and
prices.

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Main economic indicators

The GNP (It implies the industrial
development)
Income per capita
Lige quality
Privatization
Spending power
Level of alphabetization
Inflation
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Human Development Index

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Human Development Index

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Governmental Intervention
To support the development of factors of
competitiveness as in the case of the
educational system.
To assure free competition,
oligopolios exists in the country.

although

Support programs to companies related to

the industrial sectors (suppliers and
clients).
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Other Indexes

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Country risk
Country risk forecast
Economic risk by component
Political risk by component

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