Cultural and Political Differences and Global Business

cultural competency

The ability to understand, appreciate, and interact effectively with people from different cultures. It enables individuals to navigate cultural differences and work effectively with people from diverse backgrounds, “awareness” and “attitude”, avoid ethnocentrism

ethnocentrism

the tendency to judge other cultures by the standards and values of your own, often leading to a belief that your culture is superior and viewing others as strange or inferior, which fuels prejudice, stereotypes, and conflict

HBR Case Study – Global Managers’ Perceptions on Cultural Competence

The research analyzed 116 Mexican managers doing business with the U.S.

Among the Mexican managers’ assessments of Americans

Pragmatism (or ‘coldness’); Competitive; Americans view confrontation as an opportunity, Risk-taking; Sharp distinction between personal and business relationships, Punctuality, the value of time; Directness; Informality; Yes, no, and promises, Talking about sports as a great ice-breaker

Different nations have not only different cultures but also different economic and political systems

Remember the German court ordered Walmart to “raise” their prices? Even within capitalist economies, there are vastly different economic and political systems

By the way, economic, political, and cultural systems are interrelated with each other

f you want to build a command economy, it is likely that you have a collectivist view, and you will need to build a legal system for it. If you want to build a free market economy, it is likely that you have an individualist view, and you will need a corresponding legal system

When his elderly father, King Salman, ascended to the throne in 2015, he gave his son, Mohammed bin Salman (commonly known as MBS)

oversight of the kingdom’s most important portfolios: defense, economy, religion, and oil

MBS father remained head of state but

it was clear that Prince Mohammed was the hands-on ruler

MBS’s economic reforms

Diversification of the economy: the reform pursues to reduce the reliance on oil revenues (about 70% of total exports is oil and gas)

why reduce reliance on oil revenues?

The global economy is pursuing a long-term transition away from fossil fuels (ex. Electric cars and sustainable energy industries), Oil prices fluctuate a lot

MBS’s economic reforms

The reform pursues a slimmer government

slimmer government example

Saudi Arabia is an absolute monarchy. The state controls large portions of economic activity, but now, they want to grow their private sector

privatization of social services such as

electricity, health care, and education into the private sector

MBS’s economic reforms

General movements toward improving women’s rights

General movements toward improving women’s rights examples

The economy can utilize a higher volume of the labor force, 25% of Saudi women now work, compared to 15% percent in 2018

MBS’s economic reforms

Attracting foreign capital

attracting foreign capital example

Investing $500 billion in a new city called NEOM that will serve as a hub for private and foreign investment

MBS’s economic reforms

Loosening of the stifling moral codes that have limited cultural life – an opportunity for entertainment industries