Challenges in International Business 1 Commercial Risk Operational Problems 1.1 Planning: - To create long term strategic planning that hold the company.

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Challenges in International Business

Commercial Risk

Operational Problems1.1 Planning: - To create long term strategic planning that hold the company together over a long period of time- To create global competitive viability- Analyze internal (financial, manufacturing, marketing, supply chain, pricing) and external resources1.2 Organizational Structure (Vertical, Horizontal and Diagonal)- To create teams, groups and operational units in strategic ways- Degree of multi- domestic and global policies employed- To analyze the impact of international operations on total corporate performance - Location and foreign facilities1.3 Control in the Internationalization process- Reporting- Cultural controls: McDonald’s, depending on their customer’s taste they come up with all different kinds of burgers - Incentive System: Fixed + Variable Cost

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Commercial Risk

Weak PartnerExample: 'Redbox Instant‘ victim of weak partnership and lack of commitment

Joint Venture

- Between Verizon and Outerwall in 2012

Competitors - Amazon & Netflix

Offering- Offer Internet Streaming Network, Internet network with a subscription business model and facility to stream videos- Venture primarily offered movies instead of TV shows

Weakness - Parties did not want to spend money on content

Consequences

- Redbox Instant has been shut down last year- Verizon moved on from the partnership, decided to acquire ‘Intel Media’ from Intel- Outerwall not only couldn't add new subscribers- Couldn't renew many existing customers

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Commercial RiskTiming of Entry - Company should analyze production efficiency and potential market’s current situation- Example: Children's toys, closely related to geographical market segmentation- New product introduced in countries with similar cultures, language & characteristics- New product launched in one country at a time- Example: Groupon founded in 2008 in the USA with the strategy of ‘acquisition & renaming’. They offered e- commerce, unique marketing style of ‘one deal- one day’ with massive discounts. Groupon serves 500 markets and 44 countries. Market Entry into China: - Hired 1000 permanent staff, building a team in Beijing, paying above the industry salary - Partnered with Tencent- the Chinese internet giant - Groupon failed in China; 1. Arrogance: Adopted a strategy of using high salaries to poach competitor’s employees 2. Co. thought it could pay huge sums to acquire Lashou, the largest Chinese group buying eCommerce site to enter Chinese market but they refused the offer 3. Lack of local understanding: Groupon China thought that all international markets were alike. Groupon insisted on partnering with vendors on 50-50 profit distribution. But, there are a lot of competitor’s in the Chinese market negotiating at 90- 10 ratio, which was unacceptable by Groupon

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Commercial Risk

3. Misaligned Management Structure: Only two management people were Chinese rest all from USA, which made it difficult to manage remote parts of China without much understanding of the local culture4. Wrong Choice of Partner: Groupon made a smart decision to partner with Tencent but they did not depend on Tencent’s local market expertise, Groupon instead chose to hire expats to run its operations all over the country

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Commercial RiskCompetitive Intensity- Competitors are numerous- Competitors have equal market share- Brand loyalty is insignificant- Products are undifferentiated- Competitors are strategically diverse-There is excess production capacityExample: Indian Aviation Sector- India is the 9th largest aviation market in the world (Acc. To Civil Aviation Ministry)- International passengers will grow up to 50 million by 2015.- Market Size: In India handles 2.5 billion passengers across the world in a year, moves 45 million tones of cargo through 920 airlines, using 4,200 airports and deploys 27,000 aircrafts- Evolution of Domestic Indian Aviation Industry:

1953 Nationalization of all private airlines1986 Private players permitted to operate as air taxis 1994 Air Corporation Act repealed, private players can operate scheduled services1995 Jet, Sahara, Modiluft, Damania, East West granted scheduled carrier status1997 4 out of 6 operators shut down; Jet & Sahara continue2001 Aviation Turbine Fuel prices decontrolled

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Commercial RiskCompetitive Intensity- Evolution:

2003 Air Deccan starts operation as India’s first LCC2005 Kingfisher, SpiceJet, Indigo, Go Air, Paramount start operations2007 Jet acquired Sahara, Kingfisher acquired Air Deccan2010 SpiceJet starts international operations2011 Indigo goes international, Kingfisher exit LCC segment2012 Govt. allows direct ATF imports, FDI proposal for allowing foreign carriers to

pick up 49% stake under consideration

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Commercial RiskPoor Execution of Strategy- The idea that execution is distinct from strategy has become firmly ensconced in management thinking over the past decade- Jamie Dimon, now CEO of JPMorgan Chase, opined, “I’d rather have a first-rate execution and

second-rate strategy any time than a brilliant idea and mediocre management.”

Example: Four Seasons Hotels and Resorts, one of the world’s leading high-end hotel chains. Early on, chairman and CEO Isadore Sharp made the decision to build his hotel chain based not on satisfying service and formal decor but on a new definition of luxury. He decided, he said, “to redefine luxury as service” He needed every employee, from chambermaid to valet to desk clerk to hotel manager, to make the choices necessary to create a comfortable, welcoming support system for guests.Within which his employees could make informed choices. The goal for everyone at Four Seasons would be “to deal with others—partners, customers, coworkers, everyone—as we would want them to deal with us.” The results have been remarkable. Four Seasons is one of just 13 companies in the world to appear on Fortune’s list of The 100 Best Companies to Work For every year since the list’s inception.

https://hbr.org/2010/07/the-execution-trap

http://money.cnn.com/magazines/fortune/bestcompanies/2010/

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Currency (Financial Risks)Currency Exposure

- A form of risk that arises from the change in price of one currency against another. Example, if you are a U.S. investor and you have stocks in Canada, the return that you will realize is affected by both the change in the price of the stocks and the change in the value of the Canadian dollar against the U.S. dollar. So, if you realize a 15% return in your Canadian stocks but the Canadian dollar depreciates 15% against the U.S. dollar, this will amount to no gain at all

What

- BMW Group (owner of BMW, Mini and Rolls-Royce brands) based in Munich since 1916- Negative effect of exchange rates totalled €2.4bn between 2005 and 2009- Strategy: “Natural Hedge”- develop ways to spend money in the same currency as where sales were taking place, meaning revenues would also be in the local currency. - “Formal Financial Hedges”- BMW set up regional treasury centres in the US, the UK and Singapore

BMW: A case study

http://www.ft.com/cms/s/0/f21b3a92-f907-11e1-8d92-00144feabdc0.html#axzz3PWrqqn85

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Currency (Financial Risks)Currency Exposure

- Strategy Implementation: 1. Establishing factories in the markets where it sold its products 2. Making more purchases (of sums of money) of currencies in its main markets

BMW: A case study

- BMW now has production facilities for cars and components in 13 countries- By 2011, its overseas production volume accounted for 44% of the total

Result

- By moving production to foreign markets the company not only reduces its foreign exchange exposure but also benefits from being close to its customers- Sourcing parts overseas, and therefore closer to its foreign markets, also helps to diversify supply chain risks

Lessons

http://www.ft.com/cms/s/0/f21b3a92-f907-11e1-8d92-00144feabdc0.html#axzz3PWrqqn85

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Currency (Financial Risks)Asset Valuation

- A method of assessing the worth of a company, real property, security, antique or other item of worth- Asset valuation is commonly performed prior to the sale of an asset or prior to purchasing insurance for an asset

What

- One of America's largest independently-owned producers of crushed stone was refinancing (The process through which a company reorganizes its debt obligations by replacing or restructuring existing debts) five production plants. It needed them appraised so it could provide accurate asset valuations to its lender- The case came to Liquidity Services Inc. It examined the original appraisal report made earlier- An appraisal was conducted. It allowed to determine true market value for the client's assets

Liquidity Services Inc.

- The original appraiser had used the cost approach appraisal method, by which businesses are appraised based solely on operating costsProblem/ Risk

https://www.liquidityservicesinc.com/case-studies?title=timely-asset-valuation-helps-crushed-stone-production-company-secure-crucial-refinancing

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Currency (Financial Risks)Asset Valuation

- Having an accurate asset valuation allowed the crushes stone co. to; - Achieve its goal of refinancing its plants - Make informed decisions to manage risk - Support other strategic initiatives in the future

Result

https://www.liquidityservicesinc.com/case-studies?title=timely-asset-valuation-helps-crushed-stone-production-company-secure-crucial-refinancing

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Currency (Financial Risks)Foreign Taxation

- The study or determination of tax on a person or business subject to the tax laws of different countries- Systems of taxation vary widely, and there are no broad general rules

What

- A U.S. corporation with worldwide operations and manufacturing facilities- Prior to 2004, approximately 70 percent of the company’s sales and income came from products manufactured in the U.S.- In 2004 the company acquired a major European business- The acquisition meant a significant increase in worldwide sales. It saw 60 percent of global revenue and income coming from non-U.S. manufactured products

KPMG: A Case Study

- Can the company eliminate the need to send back European earnings

to the U.S.?- Can the company manage the increased tax burden arising from its non-U.S. operations?

Problems

http://www.kpmg.com/global/en/services/tax/international-tax/pages/case-study.aspx

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- A new European entity was formed that assumed all management responsibilities (manufacturing, development, distribution, owned all contracts, owned risks associated with funding R&D activities in entire Europe & Asia) thus eliminating the redundant functions performed by both the USA office & the acquired co.- The European operations were reorganized so they could raise debt

without parental guarantees from the U.S. The reorganization was achieved by creating a partnership under European law. In turn, this partnership sold the relevant entities to the principal European entity

in exchange for a note. The interest payable on this note created an interest deduction that significantly reduced the taxable income of the principal European entity.- Adopted the strategy of “repatriation of dividends” (The process of converting a foreign currency into the currency of one's own country). The company was able to make significant distributions into the U.S. The U.S. company was in turn able to use its other available cash to repay debt

Strategy Execution


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- Consolidation of European functions & risks- The new operating structure significantly decreases the amount of tax the company pays

Result


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Currency (Financial Risks)Transfer Pricing

- The price at which divisions of a company transact with each other- Transfer prices are used when individual entities of a larger multi- entity firm are treated and measured as separately run entities

What

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Country RiskGovt. Intervention, Protectionism and Barriers to Trade and Investment

1. Complicated customs procedures: the checkpoints at the ports of entry into each county where govt. officials inspect imported products & levy tariffs 2. Imposition of tariffs: imposed by a govt. on imported products, effectively increasing the cost of acquisition for the customer 3. Non- tariff barriers; quotas (a quantitative restriction placed on import of a specific product over a specified period of time) & arbitrary administrative rules designed to discourage imports 4. Govt. Intervention may target FDI flows through ‘investment barriers’ that restrict the operation of foreign firms

What

1. Protect their own companies from foreign competition 2. Protect consumers from dangerous and undesirable products: Govt. may pass a law to ensure safe food supply & to prevent sale of product that threaten public safety 3. Creation of revenue: Example; Ghana & Sierra generate more than 25% of total govt. revenue from tariffs 4. Pursue broad economic, political, social objectives: Example: Govt. Policies to increase national employment or promote eco. growth

Why

https://books.google.co.in/books?id=gpJ37L4hpLYC&pg=PA185&lpg=PA185&dq=Govt.+Intervention,+Protectionism+and+Barriers+to+Trade+and+Investment&source=bl&ots=0HTFtfEztg&sig=tB4wTE53E01u5B8xVNiK9QN644s&hl=en&sa=X&ei=g97BVPnbA4PEmwXB1YG4Bg&ved=0CCkQ6AEwAg#v=onepage&q=Govt.%20Intervention%2C%20Protectionism%20and%20Barriers%20to%20Trade%20and%20Investment&f=false

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Country RiskGovt. Intervention, Protectionism and Barriers to Trade and Investment

- In 2000, the bush administration imposed tariffs on the import of foreign steel into the USA- Competition from foreign steel manufacturers had bankrupted numerous US steel firms - Rationale was to give US steel industry time to restructure & revive itself- On the downside, the barriers also increased the production cost of firms that use steel such as Ford, Whirlpool, General Electric- Higher material cost made these firms less competitive, reduced prospects for selling their products in the world market

USA Govt. & Restrictions on

Import of Foreign Steel: A

Case Study

Negatives- Price Inflation: when tariffs restrict the supply of a particular product, the domestic price of the product has the tendency to rise - Reduces the choices available to buyers

Special Interest Groups

- Strong advocates for trade barriers. Example: trade barrier in USA over Mexican cement- The US govt. imported duty of $50/ ton on the import of Mexican cement - US cement makers lobbied US Congress

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Country Risk

Russia, Venezuela & Philippines- countries with substantial corruption {As per ‘Transparency International’s Ranking (www.tranparency.org)}

Canamo: A Case Study

Bureaucracy, Red Tape, Administrative Delays and Corruption

- Canamo: A Venezuela company was eager to export its products to USA- Must obtain lots of certificates, licenses and paperwork from Venezuela- Took 2~ 6 months time to complete paperwork from Venzula govt.- Canamo abandoned the hope of entering into USA market

Scenario in Chinese Market

- In China, getting a bank loan is arduos (specially for smaller firms)- It could take several months to register, lots of procedures, paperwork- Many firms could not obtain loans on a timely manner delaying their ability to flourish- Smaller businesses contribute 60% of China’s GDP, they account for only 16% of outstanding bank loan

- Lack of Transparency (legal & political system not accountable to public)- Bribery, kickbacks & extortion (specially in the public sector)- Weak anti- corruption laws- Bribery to ensure success of business deals- Burdensome administrative rules- Excessive requirements for licenses, approvals and paperwork

Risks

International Business: The New Realities By S. Tamer Cavusgil, Hussain Rammal, Susan Freeman, 2012, Pearson Australia Edition

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Country Risk

Argentina: A Case Study

Lack of Legal Safeguards for Intellectual Property Rights

- Enforcement of copyrights on recorded music, videos, books and computer software in inconsistent - Laws against internet piracy are weak & ineffective- Inadequate resources to stop such piracy- Slow court procedures hamper enforcement - Violating Intellectual Property Rights is common in China, India, Indonesia & Russia- In India, weak patent laws discourage investment from foreign firms

- Intellectual Property Rights (IPR), as intangible assets - Key factor in the competitiveness of business in the global economy-IPR can protect your innovation from competitors - IPR infringement can lead to loss of business, revenue, reputation and competitive advantage- Slow judicial process to safeguard Intellectual Property Rights

What

International Business: The New Realities By S. Tamer Cavusgil, Hussain Rammal, Susan Freeman, 2012, Pearson Australia Edition

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Country Risk

Bulgaria: A Case Study

Economic Failure & Mismanagement- When a publicly traded company wants to raise capital by issuing stocks or bonds, it hires an investment bank to handle the transaction. This process is called underwriting.- The underwriter gets compensated for the securities it sells, but is not always responsible for the securities it does not sell, as outlined in the underwriting agreement

Risk of Concession

http://www.investopedia.com/terms/c/concession.asp

http://www.novinite.com/articles/152598/Bulgaria+Lacks+Capacity+to+Control+Concession+Agreements+-+Expert

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Country RiskEconomic Failure & Mismanagement

- Person/ Firm whose liabilities exceed the value of owned assets- A situation in which the purchaser (import of goods & services) is unable

to pay for goods & services exported to him - It is illegal for the firm to function anywhere once it is declared as Insolvent- Seller has the rights to cancel the Contract or suspend any further deliveries under the Contract without liability to the Buyer

Risk of Insolvency of

the Buyer

http://www.businessdictionary.com/definition/insolvent.htmlhttp://www.answers.com/Q/What_is_buyer_insolvency

http://www.businessdictionary.com/definition/insolvent.html

http://www.answers.com/Q/What_is_buyer_insolvency

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- If you are an exporter, and you sell using secured terms like cash against documents, one risk in your transaction is that you deliver your product in good faith to your customer’s port, but your customer does not accept them- Risk is heightened when there has been a drop in the price of the product between the time of order and the time of delivery; - Either find a new buyer or re- negotiate with the last buyer - Already incurred shipping cost - Demurrage charges (charges that the charterer pays to the ship owner for its extra use of the vessel) are adding up daily - Risk of product getting spoilt

Risk of Non- Acceptance

http://www.traderiskgroup.com/how-to-protect-against-commercial-non-acceptance-of-goods/

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- Transaction Exposure: This arises from the effect that exchange rate fluctuations have on a company’s obligations to make or receive payments denominated in foreign currency in future. This type of exposure is short-term to medium-term in nature-Translation Exposure: This exposure arises from the effect of currency fluctuations on a company’s consolidated financial statements, particularly when it has foreign subsidiaries. This type of exposure is medium-term to long-term- Economic Exposure: It is caused by the effect of unexpected currency fluctuations on a company’s future cash flows and market value, and is long-term in nature. The impact can be substantial, as unanticipated exchange rate changes can greatly affect a company’s competitive position, even if it does not operate or sell overseas. For example, a U.S. furniture manufacturer who only sells locally still has to contend with imports from Asia and Europe, which may get cheaper and

thus more competitive if the dollar strengthens markedly.

Risk of Exchange Rate

http://www.investopedia.com/articles/forex/021114/exchange-rate-risk-economic-exposure.asp

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Country RiskSocial & Political Unrest & Instability

Details

- Direct responses to economic distress. Example: Greece- Revolt against dictatorship. Example Egypt (Mohd. Morsi’s Govt.)- Erosion of trust in govt. : A crisis of democracy - Unrest In Turkey (2013) on Urban Development Plan extending to freedom of Speech to issues of authoritarianism - In Bulgaria, what started off as protests against higher electricity bills turned into generalized anti-government demonstrations complaining of corruption—and led to the fall of the government. - Decline in Income: Egypt’s unrest lead to a 95% decline in tourism. Revenue fell from Euros 250 M in 2010 to Euros 10.5 M in 2014- High unemployment: Global Financial Crisis 2008- Wide income inequality: - Reasons: weaker labor market institutions, inadequate social protection system, poor quality education, inadequate access to credit & land, excessive asset concentration Facts: Study conducted by UN- The ultra-high net worth individuals (UHNWIs) in the regions shows that persons with a net worth of $30 million or more accounted for 30%of the region's income in ’12~’13

http://www.greekcrisis.net/http://articles.economictimes.indiatimes.com/2014-10-03/news/54599647_1_income-inequality-gini-coefficient-poor-rich-gap

http://www.greekcrisis.net/

http://articles.economictimes.indiatimes.com/2014-10-03/news/54599647_1_income-inequality-gini-coefficient-poor-rich-gap

http://articles.economictimes.indiatimes.com/2014-10-03/news/54599647_1_income-inequality-gini-coefficient-poor-rich-gap

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Country RiskSocial & Political Unrest & Instability

Details- Poor govt. Example: Nigeria Govt. (world's highest economic growth rates, averaging 7.4% as per 2014 WB Report) - Poverty still remains significant at 33.1% in Africa's biggest economy - To support large population & historic ethnic instability, it adopted ‘Federal Government’ - Lack of a stringent regulatory and monitoring system - Rampant corruption - Hindered poverty alleviation measures- Ethnic tensions: Example: Nigeria - Return of Civilian Rule in 1999, militants from religious & ethnic groups have become more violent - Ethnic unrest and the displeasure of local communities with oil companies has contributed to the conflict over oil trade in the Niger Delta

- Low levels of social provisions- - History of unrest

http://en.wikipedia.org/wiki/Poverty_in_Nigeriahttp://www.economist.com/news/21589143-where-protest-likeliest-break-out-ripe-rebellionhttp://www.economist.com/blogs/theworldin2014/2013/12/social-unrest-2014http://www.theactuary.com/archive/old-articles/part-4/political-and-social-unrest-increasing-risk-to-businesses/https://www.internationalsos.com/en/pressreleases_6237.htm

http://en.wikipedia.org/wiki/Poverty_in_Nigeria

http://www.economist.com/news/21589143-where-protest-likeliest-break-out-ripe-rebellion

http://www.economist.com/blogs/theworldin2014/2013/12/social-unrest-2014

http://www.theactuary.com/archive/old-articles/part-4/political-and-social-unrest-increasing-risk-to-businesses/

http://www.theactuary.com/archive/old-articles/part-4/political-and-social-unrest-increasing-risk-to-businesses/

https://www.internationalsos.com/en/pressreleases_6237.htm

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Cross- Cultural RisksCulture Differences

What- “Complex whole which includes knowledge, beliefs, art, morals, laws, customs and any other capabilities and habits acquired by man as a member of society”- Taylor- Culture profoundly influences how people think, communicate, and behave- “Cultural Risk” – the possibility that business will go terribly wrong as a result of a lack of understanding about executing in a new, culturally foreign market or context

Cross- Cultural Management by Shobhana Madhavan

Walt Disney Paris: A Case

Study

1992The Walt Disney Co. (Media & Entertainment) opens a new theme park named Euro Disney in Paris. Very lavishly designed.

1994 Euro Disney incurs losses of $900M since its opening

2005On the verge of bankruptcy. Walt Disney Studios, the newest addition to Disneyland is a flop. The French Govt. rescues Disneyland with a financial package.

2008 Disneyland shows its first profit in years.

Lack of sensitivity to French & European culture. Imposition of American Way in Disneyland Paris.

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Cross- Cultural RisksCulture Differences

Cross- Cultural Management by Shobhana Madhavan

Walt Disney Paris: A Case

Study

1. Many French people saw Disney as an act of cultural imperialism2. Initially, Euro Disney restaurants did not have enough seating

capacity. Europeans like their meals sitting down, unlike Americans who eat fast food on the move.

3. Europeans are used to walking, while Americans use drive everywhere. Euro Disney visitors did not use the expensive tram system on which Disney had invested millions of dollars.

4. Americans take several short vacations while, Europeans take less vacations but longer in duration. Disney had based its planning on the US vacation model.

5. Disney wanted to maintain its clean family image by not serving alcohol in Euro Disney. It was forced to withdraw its structure as, drinking wine is an integral part of the French culture.

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Cross- Cultural RisksNegotiation Patterns

What- Diversity of global culture makes it difficult for any negotiator to understand different cultures fully- Elements consistently arise to complicate intercultural negotiations: 1. Contract or relationship? - Asian negotiators, whose negotiating goal is often the creation of a relationship while North Americans often want to rush through this first phase of deal making. 2. Win-Lose or Win-Win? - Win –win negotiators see deal making as a collaborative, problem- solving process; win-lose negotiators view it as confrontational. Japanese view negotiations as a win- win approach, while Spanish executives do not believe in the same. 3. Informal or formal? - Personal style concerns the way a negotiator talks to others, uses titles, dresses, speaks, and interacts with other persons. Culture strongly influences the personal style of negotiators. It has been observed, for example, that Germans have a more formal style than Americans.

http://iveybusinessjournal.com/topics/global-business/the-top-ten-ways-that-culture-can-affect-international-negotiations#.VMipX2y6Yok

Negotiating Goal

Negotiating Attitude

Personal Style

http://iveybusinessjournal.com/topics/global-business/the-top-ten-ways-that-culture-can-affect-international-negotiations


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3. Informal or formal? - A negotiator with a formal style insists on addressing counterparts by their titles, avoids personal anecdotes, and refrains from questions touching on the private or family life of members of the other negotiating team. A negotiator with an informal style tries to start the discussion on a first-name basis, quickly seeks to develop a personal, friendly relationship with the other team, and may take off his jacket and roll up his sleeves when deal making begins in earnest. 4. Direct or indirect? - In a culture that values directness, such as the American, you can expect to receive a clear and definite response to your proposals and questions. In cultures that rely on indirect communication, such as the Japanese, reaction to your proposals may be gained by interpreting seemingly vague comments, gestures, and other signs. What you will not receive at a first meeting is a definite commitment or rejection.

http://iveybusinessjournal.com/topics/global-business/the-top-ten-ways-that-culture-can-affect-international-negotiations#.VMipX2y6Yok

Personal Style

Communication



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5 High or low? - In one case that received significant media attention in the mid- 1990 s, a long-term ′ electricity supply contract between an ENRON subsidiary, the Dabhol Power Company, and the Maharashtra state government in India, was subject to significant challenge and was ultimately cancelled on the grounds that it was concluded in “unseemly haste” and had been subject to “fast track procedures” that circumvented established practice for developing such projects in the past. Important segments of the Indian public automatically assumed that the government had failed to protect the public interest because the negotiations were so quick. In the company’s defense, Rebecca Mark, chairman and CEO of Enron International, pointed out to the press: “We were extremely concerned with time, because time is money for us.

http:// http://iveybusinessjournal.com/topics/global-business/the-top-ten-ways-that-culture-can-affect-international-negotiations#.VMipX2y6Yok

. Sensitivity to Time



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6. General or specific? - Americans prefer very detailed contracts that attempt to anticipate all possible circumstances and eventualities. Chinese, prefer a contract in the form of general principles rather than detailed rules. Because, it is claimed, that the essence of the deal is the relationship between the parties. If unexpected circumstances arise,

the parties should look primarily to their relationship, not the contract, to solve the problem.

http:// http://iveybusinessjournal.com/topics/global-business/the-top-ten-ways-that-culture-can-affect-international-negotiations#.VMipX2y6Yok

Form of Agreement:



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Cross- Cultural RisksDecision Making Styles

Utilitarianism Vs Moral Idealism

- The decision making process and value systems influence the overall approach of decision makers from various cultures. -Utilitarianism (John Stuart Mill & Jeremy Bentham) Vs Moral Idealism: Utilitarianism holds the proper course of action is the one that maximizes utility, usually defined as maximizing total benefit and reducing suffering or the negatives. U.S. executives are more influenced

by a short-term, cost-benefit approach to decision making than their Asian counterparts. Leaders from China, who approach problems from a standpoint of moral idealism; they consider the problems, alternatives, and solutions from a long-term, societal perspective rather

than an individual perspective.- Autocratic Vs. Participative Leadership: In many countries with hierarchical cultures: Germany, Turkey, and India, employees expect their boss to do most of the decision making and would not be comfortable otherwise. in the Scandinavian countries, decision making authority is decentralized and built on consensus. Americans talk a lot about the advisability of participative leadership, but in practice they are probably around the middle between autocratic and participative management styles.

Autocratic Vs. Participative

http://bizshifts-trends.com/2012/02/09/comparing-global-decision-making-styles-u-s-china-japan-europe-germany-u-k-middle-east/

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Cross- Cultural RisksDecision Making Styles

Decision Making in Middle East

- In the Middle East region, the area is not solely populated by Arabs but also Kurds, Turks, Iranians and more. In addition, it not only inhabited by Muslims. Arab managers have long traditions of consultative decision making, supported by the sayings in Holy Quran Sharif. However, such consultation occurs more on a person-to-person basis than in group meetings. While business in the Middle East tends to be transacted in a highly personalized manner, the final decisions are made by the top leaders, although there is a level of consultation with others called ‘shura’. China, which is a highly collectivist society, employees expect autocratic

leadership because their value system presupposes the manager to be automatically, ‘the most wise’.

http://bizshifts-trends.com/2012/02/09/comparing-global-decision-making-styles-u-s-china-japan-europe-germany-u-k-middle-east/

Decision Making in China

- China, which is a highly collectivist society, employees expect autocratic

leadership because their value system presupposes the manager to be automatically, ‘the most wise’.

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Cross- Cultural RisksEthical Practices

Factors Affecting Ethics

- Primary: Parenting, Socialization, Education, Religion - Secondary: Systems of Laws, Accepted Human Resource Management Systems, Organizational Culture, Professional Cultures, Code of Conduct

http://home.ubalt.edu/ntsbpitt/ethics.pdf

Factors Affecting Ethics

- Illegal campaign - Bribery- Knowingly selling defective goods- Hiding information

Challenges in International Business 1 Commercial Risk Operational Problems 1.1 Planning: - To create long term strategic planning that hold the company.

Documents

international markets

groupon china

chinese market negotiating

chinese rest

market entry

internet network

largest chinese group

management people