International Business #3

Culture

•the knowledge, experience, beliefs, values, attitudes, religion, symbols, and possessions acquired by a group of people who have lived in the same region or country for generations

•transmitted from one generation to the next through education and by example

What is culture?

•People

•Places

•Events

•Food

•Music

•Language

•Religion

These are the things that define a country.

Subculture

•a cultural group that exists inside of larger culture (Uyghurs)

•if new immigrants’ culture is different from the existing one they will form a subculture

•they will not assimilate but maintain their original customs, language

•Small subcultures based on where people live or conduct business: Little Italy, Koreatown (Christie to Bathurst), Brampton

Counterculture

•the opposition of mainstream values and attitudes

•sometimes exhibited/expressed in music, clothing

Cultural awareness and business

•Better know how to:

• shake hands

• greet colleagues (males and females)

• give gifts

•Companies account for small percentage of global trade <5%

•Only a few Canadian brands are truly global

•Majority of our trade in oil, lumber and fish industry

•However, we belong to numerous global trade groups: USMCA, G8, Asia-Pacific Economic Co-op, NATO

Cultural Impact on business

•Culture is as important tariffs, legal regulation, competition

•Failure to understand it or how to navigate can result in poor relationships, derail a marketing campaign, shut down negotiations

Cultural impact on business: Services

•Culture has direct impact on services

•Canadian banks have been able to successfully enter foreign markets

•Banks must understand culture to meet clients’ savings needs

Ex: Scotiabank, Branches in 19 Caribbean, South American countries

RBC: Branches in 36 countries

Cultural impacts on business: Products

•Canada has abundance of products that are in demand globally

•Our raw materials (oil, lumber, wheat) purchased and converted into local products

•Different countries may choose to use raw material differently to meet needs of their consumers

•Wheat – Canada – cereal

•Wheat – Syria – pita bread

Canadian business regulation

•the Canadian government, influenced by labour unions and cultural values, regulates the labour force

Rationalization

•attempting to increase a company’s effectiveness or efficiency by downsizing, cutbacks, layoffs, and/or relocating corporate functions and activities to countries that have cheaper labour and few or no union problems

Not all countries share Canada’s values in terms of labour and the workplace

•Canadian business people may encounter differences in the following areas:

•child labourhttps

•discrimination

•wages

•standards and practices

Indigenous cultures

Discrimination

•Laws in Canada prohibit discrimination based on sex, gender, race, age, disability.

•Muslim countries have laws regarding women working with men

•Sexual preference and orientation is actually illegal in some countries

•Sub-cultures not afforded the same opportunities as dominant one

Minimum wage

•Canadian laws dictate that workers are paid a minimum wage, regardless of age

•Ontario: $14.50

•Quebec: $13.10

•Alberta: $15.00

•in many Third World countries workers earn less than $1/hr.

Business meeting protocols

Countries have meeting culture based on:

• time perception: monochromic – time is linear, things are done in a logical sequence (one at a time)

• Time is flexible, and schedules are not of primary importance

Spatial perception

•comfort levels with personal space and physical contact

non-verbal communication

•: eye contact and body language

Business etiquette

appropriate topics of conversation, gift giving, handshakes

Power distance

1. How the difference in power between people is perceived; based on race, age, gender, social status (caste system in India)

Uncertainty Avoidance

1.measures how a culture adapts to change; high UA cultures have little tolerance for outsiders (Saudi Arabia, Mexico, Japan); low UA cultures seek change, are accepting (Canada)

Masculinity vs femininity

1.the degree to which a culture values assertiveness, competitiveness, ambition, and the accumulation of material goods

Individualism vs collectivism

1.the extent to which people are expected to make their own decisions regarding their choice of education, job, etc.

Orientation

1.the degree to which cultures value short- or long-term goals

Polychronic

• time is seen as involving many things happening simultaneously with the participation of many people

Monochronic

a time-oriented culture or personality where time is viewed as linear and sequential, prioritizing one task at a time and adhering to strict schedules and deadlines

Economic and Political systems

•have the most influence over how business is conducted domestically and globally

Political

the system or type of government that is in place (democratic)

Economic

the way a country organizes its resources and distributes good and serves

Bread lines

•Scarcity of product led to consumers lining up for hours…just to secure bread.

•Gov’t can restrict/cut off access to food, water, gas – essentials

Market economy

•System where the laws of supply and demand determines the production of goods and services

•What impact does this have on price?

•Increase in demand, limited supply drives up price

Market economy characteristics

•corporations and people are encouraged to own private property

•profit belongs to business owners; they can choose how to spend it

•companies compete in terms of quality, services, price, reputation

•allows for greater product selection and companies have an incentive to innovate (multiple offerings in product line

No true market economies globally; all countries have gov’t intervention

Centrally planned economy characteristics

•ownership of property is restricted

•government control over wages, income, employment

•competition is limited; government determines price, quality, style, and amount of goods and services

•Cuba: 80% of its workforce work in state-owned enterprises

•free government-sponsored education, subsidized housing, utilities, entertainment, and food programs 

•Government control over what gets produced, cost of items, distribution

Mixed economy

•an economic system that sits between a market economy and a centrally planned economy

•combination of government intervention and private enterprise

•Canada, U.S. qualify as mixed

Mixed economy characteristics

•property can be owned by individuals, corporations or government

•Schools under government rule but individuals can open charter,  Montessori (even home school) that follows government curriculum

•High tax rate to support government programs (EI, healthcare):

•HST

•Income tax

•Property tax

Index of Economic freedom

•Measures individual economic freedom based on:

•

1. Property rights

2. Government integrity

3. udicial effectiveness (try cases fairly, timely)

4. Labour freedom

5. investment freedom

Political systems

•Multiple political systems in world

•Theocracy: based on religion (Islam)

•Monarchy: ruling king or queen (U.K., Monaco, Sweden)

•Aristocracy: governed by the wealthy, educated class (Saudi Arabia)

Democracy (Characteristics & Examples)

Characteristics of a democratic country:

•free and fair elections

•free speech (be careful with this one; be prepared for consequences)

•the right to assemble

•a free press

•freedom of religion

Ex: Canada (Canada is a constitutional monarchy, in which the monarch is head of state – King)

•United States

•New Zealand

•France

Autocracy

•A country ruled by a single individual (strongman/woman)

•Are usually in power for a long time

•Autocratic gov’t are usually backed by a strong military presence

•Controls all aspect of citizens’ lives: media, profession, businesses

Ex: Kim Jung-un

Authoritarian

favoring or enforcing strict obedience to authority, especially that of the government, at the expense of personal freedom.

Classification of economic development

•Countries classified by their level of economic development

•Some have strong, striving economies and industries

•Others have citizens who live below the poverty line

•Countries fall into one of three categories

1. Underdeveloped

2. Developing

3. Developed

Underdeveloped countries

•Also referred to as Third World countries

•Characterized by severe poverty, substandard living conditions

•Lack of social services (education, healthcare)

•Poor infrastructure (roads)

•Low literacy rate, limited access to technology, dependent on agriculture

•Plagued by war, dictatorships, corrupt governments

Developing countries

•First world or industrialized nations•

•High per capita income; average income of citizens

•Highest: Luxembourg $109,602

•Canada: $42,080

•World leaders in international business, have strong trade alliances and agreements (Canada, U.S., Mexico: USMCA)

Bombardier

key to infrastructure improvement

• Also a threat due to ability to provide cheap labour; Canada can’t compete on this level

Recession

• economy slows down; two consecutive quarters of negative GDP

• decline in consumer purchasing leading to increase unemployment

• fewer taxes collected; government has less money for social services

• leading indicator of recession: decline in exports and construction

Trough

•The bottom of the business cycle

•Production and employment at their lowest level

•Deep trough is considered depression

•Deep depression occurred for most of 1930s: The Great Depression

Expansion

•Also known as recovery

•Economy begins to grow

•Employment, wages, production, profits all expand

•Investments are strong (stock market), new businesses created

•Strong economic climate

•Canada: 2001 -- 2007

Peak

•The top of business cycle; can’t go any higher

•Economy stops expanding and begins contracting

GDP: Gross Domestic Product

•The total goods and services produced in a country in one year

•Canada: $1.736 trillion (2019)

Economics of trade

•Best defined by looking at two concepts:

1.Absolute advantage

2.Comparative advantage

Absolute advantage

•Country A can manufacture a product more productively than all others

•They can make more using the same amount of resources

•Possess better technology, more efficient labour force, better resources

Comparative advantage

A country (or person) has a comparative advantage when it can produce a good at a lower opportunity cost than another.

The role of government

1.Put import and export laws in place companies need to adhere to

2.Immigration laws

3.Set tariffs

4.Establish environmental policies (How will you dispose waste?)

5.Infrastructure build: roads, sewers, broadban

Trade offices

•Governments welcome expansion to other countries, new markets

•Establish physical presence to assist with operations, navigating local laws

Consular services

•Government provides services for Canadians living, travelling, studying or working overseas

•Services range from finding missing persons, replacing lost passports, property management, information on customs, taxes

•Referred to as consular services

•Open 24 hours a day – more than 260 offices in 150 countries

Types of consular services (embassies)

Located in capital cities (U.S, Mexico, Japan)

Types of consular services (High commission)

Provide same service as embassies but only found in Commonwealth countries (Austrila, Great Britain, Canada, India)

Types of consular services (Permanent missions)

Located in major international organizations (United Nations, WTO)

• Do not provide consular services

Types of consular services (Consulate general)

Located in major non-capital cities (Los Angeles)

Types of consular services (Consulates)

Found in major cities but don’t always offer full range of consular services

Types of consular services (Consulates headed bt honorary consuls)

• A plum appointment given out by government (friends)

• You represent the country in the region

• Man/women on the street

• Excluded from paying taxes on items for official business (alcohol)

Trade missions

•Trips organized by Department of Foreign Affairs and International Trade

•PM and representatives of Canadian businesses visit a country to meet potential customers, suppliers, build relationships/network, study the viability of operating in the region

South Korea (2020):

•Virtual trade mission focused on information and communications technology and life sciences

India (2018):

•PM Trudeau visit India and met with PM Modi

•Was looking to find ways to increase low $8 billion trade between two countries

•Received more negative coverage for his family dressing in traditional Indian clothing