Cultural and Political Analysis for International Business Planning and Management

1. Cultural and Political Analysis for International Business Planning and Management Ilan Vertinsky Aviad Pe’er BAIM 502, HA 412, April 20-May 20, 2003 Tuesdays and Thursdays 2:00 – 4:00 p.m.

2. Outline of today’s class • Introductions • Course Overview • Discussion on Globalization and Its Cultural, Political, and Economic Implications

3. Introductions • Personal Introductions • 2 things you would like people to know • Past education, experience, accomplishments • Something that could be an asset in this class • 1 thing others would never guess about you • Please use anecdotes, short-stories, and examples if appropriate

4. Course Overview • Main topics covered • New skills and learning outcomes • More about the learning method • Case study teams • Case draws • Grading • Questions

5. Main Topics Covered • Part I: Cultural Analysis • Sources of Cultural Differences • a) Sensitivity to Different Cultural Values • b) Local Customs (History, Demographics, Social Change) • Influences on Managerial Models • Business Concepts • Internal Practices • Inter-firm Transactions • Part II: Political Analysis • Political Risks, Evaluation and Management • Business-Government Interactions

6. New Skills and Outcomes • Culture • Develop your own intuition and interpretations • Specific applications: changes in organizational design, adjustments in negotiation styles, relevant issues in the formation and management of cross-border alliances • Political Risk • Identify relevant risks, choosing where to invest and how to reduce or manage risks; strategic decisions. • Governmental Actions • Observation, anticipation, planning, and management of on-going interactions; strategic decisions.

7. Learning Approach • Readings offer rich information -- not a burden • Practice sorting out the important facts • Identify main actors and their views • Look for relevant symptoms, but seek causes • Each case = a “Trial Run” of an actual decision (situations are real and frequently encountered) • Think of team effort as providing “Expert Advice” • Content: Thorough thinking, insights, flexibility • formal presentations not required • Process: Mutual reliance on class members

8. Learning Support • Lectures notes posted before class; case comments will only be presented inclass • A variety of in-class exercises – opportunities to have fun while learning and practicing specific skills • I am available to work with you (specific questions, discuss readings, case preparation, debriefing after class-discussions) • Office hours 12-1; make appointments • Consultation with your group members is strongly encouraged (cases, class preparation)

9. Grading Class Participation (40%) Presence, Preparation, and Participation A short journal entry for each week (1 page) – due the following Tuesday Case Presentations (30%) Final Exam (30%) Comment on a specific aspect of one the four cases An applied question from the readings A brief essay (2 pages)

10. Syllabus Questions?

11. Globalization • We are moving away from economic systems where national markets are distinct entities isolated from each other by trade barriers, distance, time and culture toward a system of a global marketplace. • What factors are “pushing” globalization? • Distance is shrinking • Lower costs of communication • Flows of people across borders • Governmental reforms • Liberalization of trade and investment flows

12. International Production 1. GM $20,000 (paid) to GM for LeMans - An American Car $6,000 to South Korea for assembly $3,500 (goes) to Japan for advanced components (engines, transaxles, and electronics) $1,500 (goes) to Germany for design $500 (goes) to GB for advertising and marketing services $100 (goes) to Ireland for data processing services $7,600 to GM headquarters in the U.S. for financial and legal services, etc.

13. International Production (cont.) 2. Airbus Consortium Joint ownership (companies from 4 countries): • wings from U.K.; fuselage and tail – Germany; doors – Spain; cockpit and final assembly – France 1500 suppliers 27 countries • 35% of components from 500 U.S. companies • Other suppliers in India and Singapore 3. Vegetable Exports from Zimbabwe to Tesco Cheap air transport Modern telecommunications (internet-based; to order) Open British Market

14. Changes in Trade Flows

15. International Trade Flows (2001) 48% Latin America 3% 6% Asia 25% 8% 17% 68% 21% 10% Western Europe North America 19% 2% 61% 12% 17% Latin America 17%

16. Company US Outlets Canada Outlets Mexico Outlets North American Triad (%) Intnat. Outlets Intnat. % Total Kroger 3634 100 3634 Wal Mart 3118 174 499 90.5 398 9.5 4189 Albertsons 2300 100 2300 Sears 2167 511 100 2678 K-Mart 2105 100 2105 Target 1381 100 1381 Empirical Evidence Retail Chains Source: Rugman & Girod, European Management Journal 21(1), 2003

17. FDI Inward Flows in US$ billions 1989-94 1997 2000 2000 World 200.1 447.9 1270.8 Developed Countries 137.1 271.4 1005.2 79% Developing Countries 59.6 187.4 240.2 21% Africa 3.9 7.2 8.9 1% Lat America 17.5 71.2 86.2 7% Asia/Pacific 37.9 107.3 143.8 11% C & E Europe 3.4 19.2 25.4 2% LLDCs 1.4 3.0 4.4 China 14.0 44.2 40.8 3% Source: WIR 2001

18. Discussion -- Globalization • What is globalization? • What are the characteristics of the “new economy” and how do they promote globalization? • What are the dimensions of globalization? • How can we measure the extent of globalization? • What are the implications to businesses along the different dimensions?

19. Discussion -- Canada • How is globalization reflected in the Canadian experience? • Does the border with the US matter? • In what ways? • What are the values underlying globalization? • Are these “American” values? • Are these values typically associated with modernization?

20. Foreign Content in Canada’ Cultural Goods and Services

21. Discussion – National Identity • What defines “national identity”? What does it mean to you to be a “Canadian”, “Chinese”, “Japanese”, “Italian” etc.? • How important is it to you that your national identity be preserved? • Do you think that different aspects of globalization might influence your national identity? In what ways?

22. Discussion – Protectionism? • How does the government try to protect culture in Canada? Are governmental actions effective? • What are the forces that prompt or promote protection attempts? What are their effects? • What are the implications of globalization? • for domestic businesses? • for multinationals? • for government-corporate relationships?

23. Summary Comments • Dimensions: economic, social and cultural • Cannot separate economics from culture • Values: efficiency and standardization • American “melting-pot” values • Canada made several indirect politic choices (e.g. immigration policy) that effectively counterbalanced these globalization values • “Mosaic”; tolerance and diversity • However, Canadian protectionist attempts have been rent-seeking (domestic lobbying for local interests) rather than culture-driven.