Week 2 + Ch. 2–4 : Culture, Politics, Law, Economy

Why is culture important in international business (IB)?

Culture shapes values, beliefs, and behaviors that affect management, negotiations, HR, marketing, and operations abroad .

What is the difference between core and peripheral values?

Core values are deeply held and non-negotiable; peripheral values are flexible and adaptable .

What factors influence cultural formation and change?

Language, religion, social stratification, work motivation, relationship preferences, risk-taking, and information processing .

What challenges exist in cross-cultural communication?

Translation issues, silent language (nonverbal cues), and misunderstandings of local norms .

What is culture shock?

Psychological disorientation when adjusting to a new culture; severity depends on cultural distance and host society acceptance .

Opening Case: What makes Saudi Arabia culturally challenging for MNEs?

Religious influence (e.g., Islamic law, Ramadan), gender roles, family-centered trust, uneven modernization, and strict but shifting customs

What is Hofstede’s definition of culture?

“The collective programming of the mind which distinguishes one human group from another. Culture includes systems of values, which are building blocks of culture.”

What are Hofstede’s 6 cultural dimensions?

• Power Distance (hierarchical vs. egalitarian)

• Uncertainty Avoidance (acceptance vs. avoidance)

• Individualism vs. Collectivism

• Masculinity vs. Femininity

• Long-term vs. Short-term Orientation

• Indulgence vs. Restraint

How does culture influence business?

Impacts HRM, finance, dispute resolution, contracts, marketing, negotiations, and product launches.

What are strategies for dealing with cultural differences?

Don’t take personally, compare vs. evaluate, no “right/wrong” culture, awareness, acceptance, adjustment.

What are the two main political ideologies?

Individualism (emphasizes freedom & self-interest) vs. Collectivism (emphasizes group goals & control) .

What are the two main types of political systems?

Democracy and Totalitarianism.

Difference between democracy and totalitarianism?

Democracy allows citizen participation, free elections, and civil liberties; totalitarianism centralizes power, restricts freedoms, and suppresses opposition .

What political conditions foster economic development?

Stable democracy often helps, but examples like China show fast growth can occur under totalitarian systems if economic reforms and openness exist.

What is political risk?

Uncertainty about political decisions or events that may negatively impact business operations .

Types of legal systems?

Common law, civil law, theocratic law (religious), and mixed systems .

What is the difference between “Rule of Man” and “Rule of Law”?

• Rule of Man → arbitrary, leader decides outcomes.

• Rule of Law → predictable, laws apply equally to all.

What are key legal issues in international business?

• Operations: registration, contracts, hiring/firing, closing.

• Strategy: marketplace behavior, country of origin, product safety, liability, jurisdiction, arbitration.

What are operational vs. strategic legal concerns for MNEs?

• Operational: contracts, hiring/firing, registration, closure.

• Strategic: market behavior, product liability, jurisdiction, arbitration .

Why are Intellectual Property Rights (IPR) important in international business?

They protect innovation and ensure legitimacy of product/software protection in global markets.

Case: It’s a Knockoff World → What does it show about IPR?

It highlights tensions between collectivism vs. individualism, democracy vs. totalitarianism, and rule of law vs. rule of man in determining how software IP is protected

What are the three types of economic systems?

Market economy (private ownership), Command economy (government control), Mixed economy (blend of both) .

What is Purchasing Power Parity (PPP)?

Compares currencies by the relative cost of a “basket of goods” across countries.

Define GDP, GNP, and GNI.

GNP: value of all goods/services produced domestically.

GNP: GDP + citizens’ income abroad – domestic income of foreigners.

GNI: GDP + income from international operations.

What is Purchasing Power Parity (PPP)?

Compares currencies by the relative cost of a “basket of goods” across countries.

What factors should be considered in economic analysis?

Inflation, unemployment, debt, poverty, labor costs, productivity, income distribution (Gini index).

What are the three types of economic systems?

• Market economy (private ownership, limited govt intervention)

• Command economy (government control)

• Mixed economy (blend of both)

What is economic freedom, and why does it matter?

The degree to which individuals and businesses can make decisions freely; linked to higher innovation, productivity, and competitiveness .

What are emerging vs. developed vs. transition economies?

• Developed → high income, stability, advanced infrastructure.

• Emerging → rapid growth, increasing middle class, potential but risk.

• Transition → moving from command to market system .

Why is sustainability and stability important in economic analysis?

Long-term growth requires managing debt, poverty, inequality, and environmental risks

Example: BRIC economies (Brazil, Russia, India, China) – why important?

They are key drivers of global GDP growth, shifting economic power away from traditional Western economies .