Global Business M3

Iceberg system

• structure informal insititutional environment

• visible parts small (artifacts/vsibile behaviour)

• values and social norms 

• deep/invisible: basic assumptions (ethnic culture, religion)

starbucks in Saudi Arabia

changed the symbol to adapt to their beliefs

verbal

words spoken or written

nonverbal

gestures, expressions, body language

para-verbal 

vocal aspects, tone, speed, pauses

extra-verbal

contexual factors, visual complement

effective communication

understanding and utilizing various dimensions (deep comprehension)

language challenges

• varying degress of profiency (Sprachkompetenz)

• finding semantic equivalents (keine 1zu1 Übersetzung)

• different communication norms/discursive styles

• language similarity with increased trustworthyness forms subgroups 

• emotional challenges (not comfy speaking English)

positive effects for MNCs

• develop company specific language for stronger cohersion 

• ingroup-feeling because all speak broken English

culture

• learned, shared and enduring orientation patterns

• through values, ideas, attitudes, behaviours, symbols

• difficult to analyze and identify unlike political and economic 

• learned 

• interrelated 

• shared 

etic approach

• outsider’s view when analyzing

• objective 

• aim: compare/understand differences/similarities

• problem: using universal theories therefore not specified 

emic approach

• insider’s view

• internal meaning, value

• interpretations by culture members

• aim: understand unique perspectives

• direct engagement with members of culture

Hofstede

• 4+2

• based on empirical study in large MNC (IBM)

• survey 116000 from 70 countries 

• not without critism

global project

• 9

• created bc of critism of Hofstede

• sample from different firms in 62 countries 

Hall

• 3

• purely theoritical 

• more focused on communication

proxemics 

• intimidate space (very close; family, close friends, romantic partner)

• personal space (friends, acquaintances, collegues)

• comfortable distance + personal space 

• social space (formal conversation)

• respectful distance + engaging convo

• public space (public gatherings)

• strangers + sense of anonymitiy 

Latin America, Middle East have smaller personal bubbles 

North America/Europe have larger personal bubbles

Coconut & Peaches

• Coconut: hard on outside (break shell close friends)

• Peaches: soft on outside (hard to break shell)

Kluckhohn & Strodtbeck

• same philosophical basic questions and the answers = reflect culture values

• 6 dimensions

Trompenaars

• 15.000 managers in 50 countries

• how society is organized

• how are business dilemmas handled

• interpersonal studies 

• (business)

• 7 dimensions

drawbacks etic approaches 

• focused on generalized and comparability

• no culture is static/completely homogenous (Japan from US, younger gen less collectiveness)

• culture values are on a spectrum (es gibt kein land das 100% individualistic ist) 

value trumping

• some value become more dominant

• in other circumstances they more background

supranational institutions

• complement national + subnational institutions

• creation of organization foster importance of supranational institutional environment

supranational actors 

• civil society organizations

• (political as collaborators + monitors)

• international economic organizations

• (reduce trade barries, promote fair competition, resolve trade disputes)

• these build supranational institutions (GATT)

Civil Society Organizations

• NGOs, charities, trusts, foundations, advocacy group 

• independed from state 

• transcend borders 

• collaborate/monitor international business

• (bridge national institutional differences)

CSA activities to influence government and corporate agendas

• information gathering 

• (lobbying, advocacy, monitoring, auditing)

• standard setting

• (fairtrade, forest stewardship)

• behaviour modification for MNCs

• (contentious targeting/collaboration → demonstration/boycotts)

CSA concerns

• geographical disparities

• less public scrunity (geringere öffentliche Kontrolle)

• source of fundings (Finanzierung)

how shell was affected by civil society?

• investment in South Africa (should divest)

• faced economic losses 

1. impact transaction costs

2. influence MNEs liability of foreigness

3. shape MNEs strategic decisions

4. affects MNE’s financial returns

Ethical Trading Initiative with TESCO

• worker’s right standard

• responsible sourcing

• maintain high ethical standards across supply chain through CSO helps

• localsocial movement impact MNEs foreign investment

• MNEs engage wth NGOs across

• CS plays role in global business governance 

International economic organizations/IMF

financial assistance (IMF)/economic policy advice

International Monetary Funds

• 1944 (after BW Conference)

• aim: cooperation on global monetary issues 

• faciliate growth of international trade

• stability of international monetary system

• structure: 190 countries; each member financial contribution (quota) 

• quota = voting power + access 

IMF activities

• exchange rate stability (discuss/coordinate policies according currencies)

• financial assistance (payment problem → stabilize economies and restore confidence in currencies)

• policy regarding (economic policy, fiscal responsibility, financial stability by regular assessment)

World Bank

• international financial institution

• provide financial/technical assistance to developing countries in 1944

• aim: reduce poverty

• support sustainable development by providing finances, technical expertise and policy advice

• structure: two main institutions:

1. international bank for reconstruction (IBRD)

2. international development association (IDA) 

World Bank activities

• financial assistance: provide loans, grants, guarantees to support developments projects

1. infrastructure

2. education

3. healthcare

4. environment stability

• technical assistance: help design and implement effective development strategies

GATT

• General Agreement on Tariffs and Trade

• multilateral agreement to  reduce/eliminate trade barriers 

• 1947 (effective 1948) after WWII

• from Bretton Woods Conference 

• aim: prevent trade wars and global economic stability

• critism: exclusion certain issues (service, IP)

• to WTO in 1995 with Uruguay Round negotiations

GATS

• General Agreement on Trade in Services

• expansion of trade in services (while respecting regulatory autonomy of member countries - sind nicht gezwungen)

• services: 

• financial 

• telecommunication

• tourism

• professional

• critism: balance between liberalization + regulatory autonomy in senstive services 

• negative impact on public services/cultural diversity 

TRIPS

• Trade Related Aspects of Intellectual Property Rights 

• Uruguay Round negotiations led to WTO 1995

• harmonise intellectual property standards internationnaly 

• patents, copyrights, trademarks, trade secret, industrial design 

• aim: balance promote innovation + access to IP for broader public while establishing fair and equitable international trade 

• critism: access to essential medicines, public health, cultural and traditional knowledge issues

International trade deals between two or more

• enhance economic cooperation

• reduce trade barriers

1. cost-effective trade: reduce on specific goods

2. measures beyond trade: IP-rights, environmental standards, cooperation in various industries

3. customization: can tailor terms to meet specific economic needs and priorities 

4. political influence: countries seek to advantage economic and geopolitical interest

CETA, EU-Mercosur, NAFTA

Bilateral Investment Treaties (BITs)

• contracts signed by 2 countries with promoting and protecting foreign investments to eachother and contains:

• Investment Framework (admission/establishment conditions and treatment of existing FDI)

• dispute settlement procedures (safeguard against potential expropiation (Enteigung))

• access to international arbitration institutions (ISCID: initiate process against host country to resolve dispute)

• to increase inward FDI but not necessarily from signatory country → signal of commitment (pblicity/political costs)

• example: Germany/Pakistan 1959 (2237 Bits)

Comprehensive Economic and Trade Agreement

• CETA

• trade liberalization: reduce/eliminate tariffs and other barriers between Canada/EU

• market access: increased market access for Canada/EU business to eachother 

• new opportunities for exporters/investors

• regulatory operations: encourage alignment and mutual recognition of standards and regulation

• investment protection: provision, treated fairly, mechanims for dispute resolution

• negotioation in 2009, concluded in 2014

• povisionally applied since 2017 - await ratification by all EU-members states

EU-Mercosur 

• between EU and Mercorsur members 

• aim: comprehensive partnership and free trade area

• reduction/elimination tariffsandtrade barriers

• improved market access

• alignment and mutual recognition 

• negotiation concluded n 2019 → finalized 2024

• BUT: need to undergo legal scrunity, translation, approval success → then signed → ratification by national parliaments and potential provisional application before implementation

• challenges: environmental and sustainable concerns 

North American Free Trade Agreement NAFTA

• between Candada, US, Mexico

• effect 1994

• aim: eliminate trade/investment barriers between 3 North American nations

1. trade liberalization

2. market access

3. investment protection

4. dispute resolution

5. IP

6. energy cooperation 

• 2020 to USMCA → modification 

legitimacy and enforcement challenges

• sovereignty conflicts: resisting to transfer power 

• enforcement deficits: supranational institutions lack enfocement powers 

• decision-making: need consesnus and veto leads to gridlocks

examples: International Court of Justice: lack of enforcement, but legally binding 

UN-Charta: US national sovereignty > supranational obligations 

foreign interventions without UN Council approval

distance and difference matters 

must adapt/adjust to institutional differences → learn to operate effectly within diverse regulatory, cultural, operational frameworks 

differences in formal/informal institutions 

create difficulties in MNCs

international management

• management of distance

• navigate different institutional environments = coretask global business

• relevant for MNC if not bridged by supranational institutions

CAGE-Framework

• most prominent to capture distance

• by Pankaj Ghemawat at Harvard Business School 

1. cultural 

2. administrative

3. geographic 

4. economic differences 

between firm’s host/home markets

Kogut and Singh

• 1988

• related to Hofstede to measure cultural distance 

• using normalized Euclidean distance in combination with Hofestes 4 original dimensions 

• applied in many studies but also critism

Berry et al.

• 2010

• further discussion

• based on CAGE

3 conceptual perspectives:

• national business system 

• national governance system

• national innovation system

Berry et al. dimensions

nine dimensions

1. economic

2. financial

3. political (trade bloc membership)

4. administrative (colonial ties, language, religion, legal system)

5. cultural (authority, trust, individuality, work, family)

6. demographic 

7. knowledge (patents, scientific production)

8. connectedness (tourism, internet use)

9. geographic 

Lindner & Puck

• 2024

• machine learning methods analyze financial markets 

• apply information theory to obtain holistic and reflective measure of distances 

• information distance: measure amount of information necessary to understand one economy 

core assumptions:

• national lead indices on financial market reflect institutional character

• differences in financial market behavior across national markets

• reflect distance between market