Navigating Global Markets: Culture, Management, and Legal Aspects

Posted on Mar 28, 2025 in Social sciences

Chapter 4: Cultural Dynamics in Assessing Global Markets

Importance of Culture to an International Marketer:

Culture encompasses five key elements: values, rituals, symbols, beliefs, and thought processes. A successful marketer must be a student of culture, understanding how marketing efforts interact with a culture to determine success or failure.

Definitions and Origins of Culture

Edward Hall’s definition, relevant to international marketing managers, highlights that cultural differences are often invisible. Marketers who ignore these differences risk harming their companies and careers.

Humans adapt to changing environments through innovation. We learn culture through socialization (growing up) and acculturation (adjusting to a new culture). People make decisions about consumption and production through the application of their cultural-based knowledge.

Factors Influencing Culture:

  • Geography: Climate, topography, flora, fauna, and microbiology significantly influence our deepest cultural values. Innovations spread faster east to west than north to south.
  • History: Specific historical events are reflected in technology, social institutions, cultural values, and consumer behavior. The post-War baby boom continues to affect consumption patterns globally.
  • Political Economy: Four approaches to governance—colonialism, fascism, communism, and democracy/free enterprise—influence social institutions, cultural values, and ways of thinking.
  • Technology: Advances like aircraft, air conditioning, televisions, computers, mobile phones, and the Internet impact culture. The birth control pill is a notable example.
  • Social Institutions: These affect how people relate, organize activities, and teach acceptable behavior to succeeding generations.

Elements of Culture or Cultural Values

Underlying cultural diversity are fundamental differences in cultural values, reflecting the importance of things and ideas.

A study of over 90,000 people in 66 countries identified four primary dimensions of cultural difference:

  • Individualism/Collectivism Index (IDV): Focuses on self-orientation.
    • High Score: Reflects an “I” mentality, rewarding individual initiative. Personal initiative and independence are accepted. Ties between individuals are loose.
    • Low Score: Reflects a “we” mentality, subjugating the individual to the group. People are integrated into strong, cohesive groups from birth.
  • Power Distance Index (PDI): Focuses on authority orientation, measuring tolerance of social inequality.
    • High Score: Hierarchical, citing social roles, manipulation, and inheritance as sources of power. People distrust others and believe those in power are entitled to privileges.
    • Low Score: Values equality, citing knowledge and achievement as sources of power. Reflects a more egalitarian view.
  • Uncertainty Avoidance Index (UAI): Focuses on risk orientation, measuring tolerance of uncertainty and ambiguity.
    • High Score: Highly intolerant of ambiguity, distrustful of new ideas, and anxious about security. Prefers historically tested behaviors and seeks absolute truth.

Chapter 5: Culture, Management Style, and Business Systems

  • Culture profoundly affects management style and overall business systems.
  • It establishes criteria for day-to-day business behavior and forms general patterns of values and motivations.
  • A lack of empathy for foreign business practices can create barriers to successful business relations.

Degree of Adaptation

Adaptation is a key concept in international marketing, and willingness to adapt is crucial.

Essential to effective adaptation:

  • Awareness of one’s own culture.
  • Recognition that differences in others can cause anxiety, frustration, and misunderstanding.

Self-Reference Criterion (SRC)

  • If we do not understand foreign customs, we are more likely to evaluate behavior in terms of what is familiar.
  • Remaining open to new ideas and operating in a foreign country is beneficial for managing multinational situations.

Imperatives, Electives, and Exclusives

  • Imperatives: Customs that must be recognized and accommodated for successful relationships. What may be an imperative to avoid in one culture is an imperative to do in another (e.g., prolonged eye contact in Japan).
  • Electives: Customs to which adaptation is helpful but not necessary. Following the custom demonstrates cultural understanding.
  • Exclusives: Customs in which an outsider must not participate. Few cultural traits are reserved exclusively for locals.

The Impact of American Culture on Management Style

Reasons to focus on American culture:

  • For Americans, it is important to be aware of cultural elements influencing decisions and behaviors.
  • For non-Americans, it is useful to understand business associates from the States.
  • Since the late 1990s, American business culture has been exported globally.

Management Styles Around the World

  • Authority and Decision Making:
    • High PDI: Subordinates are not likely to contradict bosses.
    • Low PDI: More egalitarian.
    • Patterns:
      • Top-level management decisions: Absolute control to owners.
      • Decentralized decisions: Executives at different levels take part.
      • Committee decisions: Group consensus.
  • Management Objectives and Aspirations:
    • Security and mobility relate directly to basic human motivation.
    • Personal life is often valued more than profit or achievement.
  • Formality and Tempo:
    • Even though Northern Europeans seem to have picked up some American attitudes in recent years, do not count on them being “Americanized.”
    • Haste and impatience are common mistakes of North Americans in the Middle East.
    • Maximum success requires dealing with foreign executives in ways acceptable to them.
  • P-Time vs. M-Time:
    • Monochronic Time: North Americans, Swiss, Germans, and Scandinavians concentrate on one thing at a time and are concerned with promptness.
    • Polychronic Time: Dominant in high-context cultures, emphasizing completion of human transactions over schedules.
    • Most cultures offer a mix of P-time and M-time behavior but tend to adopt one more than the other.

Business Ethics

Corruption

  • In communist countries, profits can be seen as a form of corruption.
  • Individualism, important to Americans, can also be viewed as corruption.
  • Countries high in collectivism perceive higher levels of corruption in bank lending practices.

The Western Approach to Bribery

  • Previously, corruption meant bribery to most Americans.
  • Now, fraud is more prominent.
  • The decision to pay a bribe creates a conflict between ethics and profitability.
  • Bribery is increasingly criminalized.

Bribery: Variations on a Theme

Bribery should be understood in a cultural context.

  • Bribery and Extortion:
    • Bribery: Voluntarily offered payment for unlawful advantage.
    • Extortion: Payments extracted under duress.
  • Lubrication and Subornation:
    • Lubrication: Small sum to a low-ranking official to expedite lawful duty.
    • Subornation: Large sums to entice an official to commit an illegal act.

Agent’s fees are used when a businessperson is uncertain of a country’s rules and regulations.

Ethical and Socially Responsible Decisions

  • Ethical decisions involve difficulties in employment practices, consumer protection, environmental protection, political payments, and human rights.

Ethical Principles

  • Utilitarian ethics: Optimize the common good.
  • Rights of the parties: Respect individual rights.
  • Justice or fairness: Respect justice or fairness to all parties.

Chapter 6: The Political Environment

The Sovereignty of Nations

Characteristics of a Sovereign State

  • Independent and free from external control.
  • Enjoys full legal equality with other states.
  • Governs its own territory.
  • Selects its own political, economic, and social systems.
  • Has the power to enter into agreements with other nations.

Sovereignty refers to powers exercised by a state in relation to other countries and supreme powers over its own members.

  • The state sets citizenship requirements, defines boundaries, and controls trade.

Citizens are subject to the state’s laws even beyond national borders.

  • Extending national laws beyond borders causes conflict in international business.

Nations Voluntarily Giving Up Sovereignty

  • The European Union
  • North American Free Trade Agreement (NAFTA)
  • North Atlantic Treaty Organization (NATO)
  • World Trade Organization (WTO)
  • Greece is unhappy about austerity measures imposed by the European Union.
  • The WTO is considered a threat to national sovereignty due to international covenants overriding national laws.
  • Foreign investment can also be perceived as a threat.

Stability of Government Policies

Issues affecting government stability:

  • Radical shifts in government philosophy.
  • Pressure from nationalist groups.
  • Weakened economic conditions.
  • Bias against foreign investment.
  • Conflicts between governments.

Five main political causes of international market instability:

  • Unstable forms of government.
  • Changes in political parties.
  • Nationalism.
  • Animosity toward specific countries.
  • Trade disputes.
  • Forms of Government:
    • Ancient Greeks criticized monarchy, aristocracy, and democracy.
    • Nowadays, over 200 states have representative governments with universal voting.
  • Political Parties:
    1. In countries with two strong parties, it is important to know each party’s direction.
    2. Unpredictable shifts deter investments.
  • Political philosophy and attitudes affect government stability and market potential.
  • Nationalism: Intense national pride and unity.
    • Aims to preserve national economic autonomy.
    • National interest is more important than international relations.
    • Manifested in calls to buy domestic products, import restrictions, and tariffs.
    • Increases when a country feels threatened or the economy declines.
  • Targeted Fear and Animosity:
    1. Do not confuse nationalism with fear directed at a particular country.
  • No nation tolerates foreign penetration if it threatens its well-being.

Chapter 7: The International Legal Environment

The four heritages of today’s legal systems:

A country’s laws may be based on one legal system, but interpretation varies.

  • Common Law: Derived from English law.
    • Based on tradition, past practices, and legal precedents.
    • Ownership is established by use.
  • Civil or Code Law: Derived from Roman law.
    • Based on a system of written rules.
    • Divided into commercial, civil, and criminal codes.
    • Ownership is determined by registration.
  • Islamic Law: Derived from interpretation of the Koran.
    • Encompasses religious duties and secular law.
    • Prescribes social and economic behavior.
    • Includes property rights and economic freedom.
    • Aims for social justice.
    • Prohibits interest and investment in violating activities.

Jurisdiction of Legal Disputes

Determining jurisdiction is a problem in international marketing.

  • No judicial body exists for commercial problems among citizens of different countries.
  • The International Court of Justice does not handle commercial disputes unless they involve national issues.
  • The clearest decision is made when contracts include a jurisdictional clause.

International courts operate in disputes between sovereign nations:

  • The World Court at The Hague
  • The International Court of Justice

Legal disputes arise in three situations:

  • Between governments: Solved by The World Court.
  • Between a company and a government: Handled in the country’s courts.
  • Between two companies: Handled in the country’s courts.

Jurisdiction is determined by:

  • Jurisdictional clauses in contracts.
  • Where a contract was entered into.
  • Where the contract was performed.

Methods of Dispute Resolution

  • Conciliation: Nonbinding agreement to resolve disputes through mediation.
    • Mediator listens, clarifies options, and finds a solution.
    • Sessions are private and confidential.
    • Not legally binding, so an arbitration clause should be included.
  • Arbitration: Selecting an external party to determine the merits of the case.
    • Conducted under formal arbitration groups.
    • Requires agreement to arbitrate and abide by awards.
  • Litigation: Taking legal action.
    • Seeking a settlement is better than suing.
    • Barriers include poor image, unfair treatment, difficulty collecting judgments, high costs, and loss of confidentiality.