MK006 - I n t e r n a t i o n a l M a r k e t i n g

MODULE 3
Culture, Management Style, and Business Systems

Compiled by: Prof. PAUL MARIA A. PESITO

Source: International Marketing by Cateora, Gilly and Graham
 Chapter Learning Objectives

1. The necessity for adapting to cultural

differences
2. How and why management styles vary around
the world
3. The extent and implications of gender bias in
other countries
4. The importance of cultural differences in
business ethics

5. The differences between relationship-oriented and information-

oriented cultures

COLLEGE OF BUSINESS EDUCATION

 Introduction
Recognize business culture, management values, and business
methods and behaviors as important for success in international
market
Knowledge of foreign business practices and
successful business relations
Importance of developing friendship, human
relations, and attaining a level of trust before
beginning business negotiations
Thus, management style has to be adapted in
international marketing

Need to recognize that patterns of thinking, local business tempo,

religious practices, political structure, and family loyalty, are
different and impact business transactions

COLLEGE OF BUSINESS EDUCATION

 Global Perspective

Culture, including all its elements, profoundly affects management

style and overall business systems.

• Americans
– Individualists
• Japanese
– Consensus oriented & committed to
the group
• Central & Southern Europeans
– Elitists and rank conscious

COLLEGE OF BUSINESS EDUCATION

 Global Perspective
Knowledge of the management style existing in a country and a
willingness to accommodate the differences are important to
success in an international market.

– Business culture
– Management values
– Business methods
– Behaviors

COLLEGE OF BUSINESS EDUCATION

 Required Adaptation
• Adaptation is a key concept in international marketing
• To successfully deal with individuals, firms, or authorities in
foreign countries, managers should exhibit:
1. open tolerance,
2. flexibility,
3. humility,
4. justice/fairness,
5. ability to adjust to varying tempos,
6. curiosity/interest,
7. knowledge of the country,
8. liking for others,
9. ability to command respect, and
10. ability to integrate oneself into the environment

COLLEGE OF BUSINESS EDUCATION

 Cultural Imperatives, Electives
and Exclusives
• Cultural imperatives are the business customs and
expectations that must be met, conformed, recognized and
accommodated if relationships are to be successful

• Cultural electives relate to areas of

behavior or to customs that cultural
aliens may wish to conform to or
participate in but that are not
required

• Cultural exclusives are those customs or behavior patterns

reserved exclusively for the locals and from which the foreigner
is barred and must not participate

COLLEGE OF BUSINESS EDUCATION

 The Impact of American Culture

• Ways in which U.S. culture has influenced management style

include, but are not limited to, the following:

1. “Master of destiny” viewpoint

2. Independent enterprise as the instrument of
social action
3. Personnel selection and reward based on
merit
4. Decisions based on objective analysis
5. Wide sharing in decision making
6. Never-ending quest for improvement
7. Competition yielding efficiency

COLLEGE OF BUSINESS EDUCATION

 Management Styles Around the World

• Management values, and behaviors vary around the world.

• Differences in the contact level,

communications emphasis, tempo,
and formality of foreign businesses
are encountered from culture to
culture.

• Ethical standards and sales interactions and negotiation styles

differ substantially.

COLLEGE OF BUSINESS EDUCATION

 Management Styles Around the World

• Cross-cultural differences influence management styles in the

following areas:

1. Authority and Decision Making

2. Management Objectives and
Aspirations
3. Communication Styles
4. Formality and Tempo
5. P-Time versus M-Time
6. Negotiations Emphasis

COLLEGE OF BUSINESS EDUCATION

 Differences in Management Styles
Around the World
1. Differences in Authority and Decision Making
• In high-PDI countries subordinates are not likely to contradict bosses, but in
low-PDI countries they often do

Three typical patterns exist:

• top-level management decisions,
• decentralized decisions, and
• committee or group decisions

2. Differences in Management Objectives and Aspirations towards:

• Security especially of lifetime employment
• Affiliation and Social Acceptance by neighbors and fellow
workers
• Power and Achievement Orientation sought by managers
• Importance of personal/family life over work and profit

COLLEGE OF BUSINESS EDUCATION

 Annual Hours Worked

COLLEGE OF BUSINESS EDUCATION

 Differences in Management Styles
Around the World

3. Differences in Communication Styles

• According to Edward T. Hall, the symbolic meanings of time,

space, things, friendships, and agreements, vary across cultures
• “In some cultures, messages are explicit; the words carry most of
the information. In other cultures ... less information is contained
in the verbal part of the message since more is in the context”
• Communication in a high-context culture depends heavily on
the contextual (who says it, when it is said, how it is said) or
nonverbal aspects of communication
• Communication in a low-context culture depends more on
explicit, verbally expressed communications
• Hall places eleven cultures along a high-context/low-context
continuum

COLLEGE OF BUSINESS EDUCATION

COLLEGE OF BUSINESS EDUCATION
 Differences in Management Styles
Around the World
4. Differences in Communication Styles

• Level of formality in addressing business clients by first name

• Level of formality in addressing your boss by first name
• Tempo or speed in getting “down to business”
• Perception of time varies in many cultures

Internet communications

• 78% of today’s Web site content is written in English

• An English e-mail message cannot be understood by 35%
of all Internet users

COLLEGE OF BUSINESS EDUCATION

 Differences in Management Styles
Around the World

5. Differences in Negotiations Emphasis

• Differences with respect to the product, its price and terms,

services associated with the product, and finally, friendship
between vendors and customers

COLLEGE OF BUSINESS EDUCATION

 Differences in Management Styles
Around the World

6. P-Time versus M-Time

• M-time, or monochronic time, typifies most North

Americans, Swiss, Germans, and Scandinavians
• Most low-context cultures operate on M-time
concentrating on one thing at a time
• P-time, or polychronic time, is more dominant in
high-context cultures
• P-time is characterized by multi-tasking and by “a
great involvement with people”

COLLEGE OF BUSINESS EDUCATION

COLLEGE OF BUSINESS EDUCATION
 Marketing Orientation

A company’s marketing orientation has been positively related to

profits (U.S.)

Other countries have more traditional approach

Production orientation consumers will prefer products that are
widely available
Product orientation consumers will favor products that offer
the most quality performance, or innovative features
Selling orientation consumers and businesses alike will not
buy enough without prodding

COLLEGE OF BUSINESS EDUCATION

 Gender Bias in International Business

• The gender bias against women managers exists in some

countries

• Women are not accepted in upper level

management roles in Asian, Middle Eastern,
and Latin American
• Women represent only 18% of the employees
who are chosen for international assignments
• Prejudices toward women in foreign countrie

• Gender bias poses significant challenges in cross-cultural

negotiations

COLLEGE OF BUSINESS EDUCATION

 Gender Bias in International Business

Few and Far

Between –
Female Directors
on Corporate
Boards

COLLEGE OF BUSINESS EDUCATION

 Business Ethics

Business ethics is complex in the international marketplace

because value judgments differ widely among culturally diverse
groups

Corruption varyingly defined from culture to

culture

Existence of different levels of corruption,

bribery, and fraud

The Foreign Corrupt Practices Act 1997:

Imprisonment for bribery

Bribery creates a major conflict between ethics and profitability

COLLEGE OF BUSINESS EDUCATION

COLLEGE OF BUSINESS EDUCATION
COLLEGE OF BUSINESS EDUCATION
 Bribery: Variations on a Theme

Bribery:

• Voluntarily offered payment by someone seeking

unlawful advantage

Extortion:

• Payments are extracted under duress by someone in

authority from a person seeking only what they are
lawfully entitled

COLLEGE OF BUSINESS EDUCATION

 Bribery: Variations on a Theme

Lubrication:

• Involves a relatively small sum of cash, a gift, or a service given

to a low-ranking official in a country where such offerings are
not prohibited by law

Subornation:

• Involves giving large sums of money—frequently not properly

accounted for—designed to entice an official to commit an
illegal act on behalf of the one offering the bribe; involves
breaking the law

COLLEGE OF BUSINESS EDUCATION

 Ethical and Socially Responsible Decisions

• Areas of decision making where ethical issues arise:

1. employment practices and policies,

2. consumer protection,
3. environmental protection,
4. political payments and involvement
in political affairs of the country,
and
5. basic human rights and fundamental
freedoms

COLLEGE OF BUSINESS EDUCATION

 A Framework for Ethical Precepts
• Three ethical principles that provide a framework for
distinguishing between right and wrong:

(1) Utilitarian ethics Does the action optimize the “common good”
or benefits of all constituencies? And, who are
the pertinent constituencies?

(2) Rights of the parties Does the action respect the rights of the
individuals involved?

(3) Justice or fairness Does the action respect the canons of justice or
fairness to all parties involved?

COLLEGE OF BUSINESS EDUCATION

 Culture’s Influence on Strategic Thinking

• Culture influences managers’ thinking about business strategy

• The British-American “individualistic” view of capitalism

typifies adversarial relationships among labor, management, and
government

• The “communitarian” form of capitalism in Japan and Germany

are typified by cooperation among government, management,
and labor, particularly in Japan

• The Chinese emphasis on guanxi (one’s network of personal

connections) is a kind of capitalism manifested by culture

COLLEGE OF BUSINESS EDUCATION

COLLEGE OF BUSINESS EDUCATION
 MK006 - I n t e r n a t i o n a l M a r k e t i n g

MODULE 3
The Political Environment: A Critical Concern

Compiled by: Prof. PAUL MARIA A. PESITO

Source: International Marketing by Cateora, Gilly and Graham
The Political Environment:
A Critical Concern

COLLEGE OF BUSINESS EDUCATION

 Intended Learning Objectives
1. What does the sovereignty of nations mean and how can it affect
the stability of government policies, political parties and
nationalism.

2. The political risks of global business and

the factors that affect stability

3. The importance of the political system to international marketing

and its effect on foreign investments

COLLEGE OF BUSINESS EDUCATION

 Chapter Learning Objectives

4. The impact of political and social activists, violence and

terrorism on international business

5. Assessing and reducing the effect of political

vulnerability

6. How and why governments encourage foreign investment

COLLEGE OF BUSINESS EDUCATION

 Introduction

• The political environment of countries is a critical

concern for the international marketer

• International law recognizes the sovereign right of

a nation to allow or deny foreign firms to conduct

• Sovereignty refers to both the powers exercised

by a state in relation to other countries and the
supreme powers exercised over its own members

• A sovereign state is independent and free from all

external control; enjoys full legal equality with
other states; and governs its own territory

COLLEGE OF BUSINESS EDUCATION

 Political causes of Instability
1. Some forms of government seem to be
inherently unstable
2. Changes in political parties during elections
can have major effects on trade conditions
3. Nationalism
4. Animosity• targeted toward specific
countries
5. Trade disputes themselves.

COLLEGE OF BUSINESS EDUCATION

 Forms of Government

Circa 500 BC, the ancient Greeks conceived

of and criticized three fundamental forms of
government:

rule by one •- monarchy (or dictatorship),

rule by few - aristocracy (or oligarchy)
rule by many - democracy.

COLLEGE OF BUSINESS EDUCATION

 Forms of Government

COLLEGE OF BUSINESS EDUCATION

 Stability of Government Policies
• The stability or instability of prevailing government policies is
a major concern of foreign businesses
• A change in government, whether by election or coup, does not
always mean a change in the level of political risk

• Conversely, radical changes in

policies toward foreign business
can occur in the most stable
governments as well

• The ideal political climate for a multinational firm to conduct

business is a stable, friendly government
• Be knowledgeable about the philosophies of all major political
parties and their attitudes towards trade

COLLEGE OF BUSINESS EDUCATION

 Nationalism

• Nationalism refers to feelings of national pride and unity

Feelings of nationalism are

manifested by:
1. Call to “buy our country’s
products only,” e.g., “Buy
American”
2. Restrictions on imports,
restrictive tariffs, and other
barriers to trade

COLLEGE OF BUSINESS EDUCATION

 Political Risks of Global Business

• Risks of global business include:

1. Confiscation, Expropriation,
and Domestication
2. Economic Risks, and
3. Price Controls

COLLEGE OF BUSINESS EDUCATION

 Confiscation, Expropriation, and Domestication

• Confiscation, the most severe political risk, is the seizing of a

company’s assets without payment

• Expropriation is where the government

seizes an investment, but some
reimbursement for the assets is made;
often the expropriated investment is
nationalized to become a government run
entity

• Domestication occurs when the government mandates local

ownership and greater national involvement in a foreign
company’s management

COLLEGE OF BUSINESS EDUCATION

 Economic Risks

• International firms face a variety of economic risks

Governments can impose restraints

on business activity to:
a) Protect national security
b) Protect an infant industry
c) To conserve scarce foreign
exchange
d) Raise revenue
e) Retaliate against unfair trade
practices

COLLEGE OF BUSINESS EDUCATION

 Forecasting Political Risk

• Decide if risk insurance is necessary

• Devise an intelligence network and an early warning system

• Develop contingency plans for

unfavorable future political events

• Build a database of past political events

for use in predicting future problems

• Interpret the data gathered by a company’s

intelligence network in order to advise
and forewarn corporate decision makers
about political and economic situations

COLLEGE OF BUSINESS EDUCATION

 Other Political Risks of Global Business

1. Political Sanctions 2. Political and Social

Activists

3. Violence and 4. Cyberterrorism

Terrorism

COLLEGE OF BUSINESS EDUCATION

 Assessing Political Vulnerability

• No absolute guidelines to assess if a firm faces political risks

• No specific guidelines to determine a product’s political
vulnerability, but there are some generalizations

• Politically sensitive products include

those that:
1. effect on the environment,
2. exchange rates
3. national and economic security
4. affect public health, e.g., genetically
modified (GM) foods

COLLEGE OF BUSINESS EDUCATION

 Reducing Political Vulnerability
Relations between governments and MNCs are generally
positive if the investment:

improves the balance of payments by increasing

exports or reducing imports through import
substitution

uses locally produced resources

transfers capital, technology, and/or skills

creates jobs, and/or

makes tax contributions

COLLEGE OF BUSINESS EDUCATION

 Reducing Political Vulnerability
MNC’s can use the following strategies to minimize political
vulnerability and risk:

Joint Ventures

Expanding the Investment Base

Licensing

Planned Domestication

Political Payoffs and Political Bargaining

COLLEGE OF BUSINESS EDUCATION

QUESTIONS?

49
COLLEGE OF BUSINESS EDUCATION
 REFERENCES
• Cateora, P. R., Gilly, M.C., Graham, J.L. (2020)
International Marketing. USA : McGraw-
Hill/Irwin

COLLEGE OF BUSINESS EDUCATION