Assignment 1: Discussion Questions—Culture and International Trade
Culture and politics are important parts of the external environment and vary greatly, not only between, but also within each country… Research the impact of culture and politics on business using your textbook, Argosy University online library resources, and the Internet. Respond to the following:
Why is understanding culture critical for successful international business? Give examples of how understanding culture has been important for an international business.
Classify and describe at least four different types of political systems that an international business might encounter. What type of political system might have the greatest potential for imposing adverse political risk on an international business? Compare at least one other system to the one you selected and explain why it has less potential for imposing political risk.
For one to truly be successful in the international business market, we must understand and be open to the multitude of cultures and subcultures of our clients. It can be quite easy for someone who is fairly new to the international business world to overlook the fact that within a culture, lies many subcultures. According to Wild (2016), “A subculture can differ from the dominant culture in language, race, lifestyle, values, attitudes, or other characteristics” (page 43). Managers would be wise to educate themselves as much as possible on the many cultural factors that they may encounter while conducting business abroad. This will also assist in preventing monumental mistakes such as ethnocentricity. Remaining educated, flexible, and adaptable are all keys to success when dealing with other cultures.
Personal space is a good example of cultural differences. While Americans are most comfortable remaining at arm’s-length and shaking hands, many Europeans and South Americans have no reservations for standing shoulder-to-shoulder and kissing business associates on each cheek as a greeting (Ray, n.d., para. 2). From our textbook, we are given the example of cultural awareness experienced by the German company Haribo (www.haribo.com). The gelatin that was used in their candy was solely pork-based. Therefore, the company had unwillingly alienated subcultures who adhere to strict religious diets such as Muslims and Jews. This had potentially cost them billions of dollars annually. After years of research, the company was able to find success in a bacteria-based compound which complied with the omitted market’s needs (Wild, 2016, p. 41).
One way to reduce risk while conducting international business is understanding the different type of political systems and their subcategories. A democracy is known as the political system where the government is elected directly by the people or their representatives (Wild, 2016, p. 77). There are two relatively popular types of democracy, direct and representative. The political system known as a republic is one that is governed by representatives of the citizen body and are founded on the ideology that sovereignty rest with its people (Munro, 2018, para. 1). Another political system is communism. This is system believes that only through an established Communist Party and socialism can economic and social equality be reached. (Wild, 2016, p. 76). Finally, a dictatorship is a political system where absolute power is held by an individual. The citizens under a dictatorship have no say in the actions of their government and generally lose all basic human rights. Dictators can suddenly seize a country’s foreign assets for themselves as in the case of Venezuela’s Hugo Chávez (Zegart, C.R., 2018, para. 2). Democracies, unlike dictatorships, are structured to preserve stable business environments with laws which are designed to uphold individual’s rights. With this theory, commerce flourishes when the private sector includes autonomously owned firms that seek to bring in profits (Wild, 2016, p. 79).
Munro, A. (2018, May 02). Republic. Retrieved from https://www.britannica.com/topic/republic-government
Ray, Linda. (n.d.). Examples of Cultural Differences in Business. Small Business – Chron.com. Retrieved from http://smallbusiness.chron.com/examples-cultural-differences-business-21958.html
Wild, J. J. (2016). International Business: The Challenges of Globalization, 8th Edition. [Argosy University]. Retrieved from
Zegart, C. R. (2018, April 17). Preparing for Political Risk When You Don’t Know Where It Will Come From. Retrieved from https://hbr.org/2018/05/managing-21st-century-political-risk

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