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20 Cards in this Set
- Front
- Back
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How does countires differ, and what implications does it have for MNC's?
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Nation states are made up of various institutions - political, economic, legal, social and cultural – which are interlinked with one another and form a ‘whole’.
Under the influence of globalisation, there is a debate over whether those distinctive national features disappear or remain stable -Change and continuity co-existing -Still a significant element of stability -Uncertain impact of extreme events on national systems Implications for MNC management: crucial to understand country differences and evolutions |
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What are econimic systems, and what are the different kinds of economies?
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Economic system: structures and processes that guide conduct of business
Market economy: All productive activities are privately owned and production is determined by the interaction of supply and demand Command economy: Government plans the goods and services that a country produces, the quantity that is produced, and the prices at which they are sold Mixed economy: Certain sectors of the economy are left to private ownership and free market mechanisms while other sectors have significant state ownership and government planning (e.g. Norway) Transition economies are those societies that are moving from socialism to a more market-based system. |
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How is Political ideology and economic systems connected?
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Political ideology and economic systems are connected in that countries that stress individual goals are likely to have market based economies.
In countries where state-ownership is common, collective goals are dominant. Totalitarianism (North Korea, Cuba) breeds Collectivism Democracy breeds individualism |
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What does legal systmes do and how do they affect business?
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Legal systems: the rules that regulate behavior along with the processes by which the laws are enforced and through which redress for grievances is obtained
They define how business transactions are executed They identify the rights and obligations of parties involved in business transactions |
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What are the three types of legal systems?
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Common law - based on tradition, precedent, and custom
Civic law - based on detailed set of laws organized into codes Theocratic law - law is based on religious teachings -Many muslim countries’ legal systems are a blend of Islamic and common or civil law (Hill, 2013: pp. 54) |
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What is a contract and what is contract law?
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Contract - document that specifies the conditions under which an exchange is to occur and details the rights and obligations of the parties involved
Contract law is the body of law that governs contract enforcement -Under a common law system, contracts tend to be very detailed with all contingencies spelt out. -Under a civil law system, contracts tend to be much shorter and less specific because many issues are already covered in the civil code. |
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What does the UN convention on contracts for the international sale of goods do?
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It establishes rules for contracts for international businesses
Ratified by the U.S. and about 70 countries but, many larger trading nations including Japan and the U.K. have not agreed to the provisions of CIGS and opt for arbitration instead. |
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What are some important legal-related issues?
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Corruption
Protection of intellectual property Product safety and reliability |
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What are the implications of culture, political systems and laws for MNCs?
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The overall attractiveness of a country as a potential market and/or investment site for an MNC depends on balancing the benefits, costs, and risks associated with doing business in that country
Other things being equal, more attractive countries have democratic political institutions, market based economies, and strong legal systems that protect property rights and limit corruption |
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What does national culture do?
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National culture impacts how people act and relate to one another within a nation
These national values will lead to different conceptions of motivation, leadership, organization. Implications for business: -Cultural differences impact international trade, the nature of MNCs’ practices, consumer behaviour -Cultural differences affect the extent to which an MNC can/should transfer its practices across countries => seeking some level of congruence will yield benefits for the MNC |
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What does Hofstede's Cultural framework say about national culture?
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National culture is constituted of a set of deeply embedded and immutable ‘values’ and social norms: ‘Collective programming of the mind’ which distinguishes the members of one group or category of people from another
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What are the five cultural dimensions of Hofstede's cultural framework?
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Power distance - the degree to which a culture accepts unequal power distribution in society
Individualism/Collectivism – the degree to which a culture prefers the individual in contrast to the group Masculinity / Feminity – dominance on though values (e.g. competitiveness) vs. tender values (e.g. quality of life, care for others) Uncertainty avoidance - the degree to which a culture is willing to accept and deal with ambiguous or risky situations Long-term /short-term orientation – the degree to which a culture emphasises a short-term as opposed to a long-term orientation |
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What are the weaknesses of Hofstede's framework?
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Simplification of the dimensions that constitute a national culture (five values)
Old model, derived from a study based on one organisation (IBM) Those values seen as immutable => people cannot change But the framework has still been hugely influential |
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What does Gehemawat & Reiche say about religion's impact on MNC operations?
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That religious beliefs can have significant influence on people’s behaviour and need to be taken into account by MNCs
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What is Porter's diamond of competitive advantage?
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A framework seeks to explain why a nation can achieve international competitiveness in a given industry.
Four attributes promote or impede the creation of competitive advantage: -Firm Strategy, Structure and Rivalry -Demand Conditions -Related and supporting industries -Factor Conditions |
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What are the four attributes that "promote or impede the creation of competitive advantage" in Porter's diamond of competitive advantage?
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Factor endowments - a nation’s position in factors of production necessary to compete in a given industry
-Either basic (natural resources, climate, location) or advanced (skilled labor, infrastructure, technological know-how) Demand conditions - the nature of home demand for the industry’s product or service -Sophisticated and demanding customers pressure firms to be competitive Relating and supporting industries - the presence or absence of supplier industries and related industries that are internationally competitive -Can spill over and contribute to other industries -Successful industries tend to be grouped in clusters in countries Firm strategy, structure, and rivalry - the conditions governing how companies are created, organized, and managed, and the nature of domestic rivalry -Vigorous domestic rivalry creates pressures to innovate, to improve quality, to reduce costs, and to invest in upgrading advanced features |
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How can Porter's diamond framework be used?
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The diamond framework can explain countries’ competitiveness in certain industries, and the growth of MNCs which might have successfully internationalised thanks (in parts) to the strength of their home environment
Governments can use this framework to decide how they can enhance the competitiveness of their country MNCs can use this framework to decide: -On which basis they may best be able to compete. -Where to locate their value-chain activities. -Still, one has to be careful in making the link between countries’ strengths and MNCs’ success as individual MNCs’ strategies are a key explanatory factor of success not just their country’ natural endowments. |
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What does Ghemawat's (2001) CAGE framework do?
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It gives four dimensions along which the "distance" or differences between countries can be assessed:
Cultural Administrative Geographic Economic Here differences will generally negatively affect cross border transactions |
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What are the four dimensions of Ghemawat's CAGE framework?
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Cultural distance - Attributes creating distance:
-Different languages -Different ethnicities; lack of connective ethnic or social networks -Different religions -Different Social norms Administrative distance - attributes creating distance: - Abscence of colonial ties - Abscence of shared monetary or political association - Political hostility - Government policies - Institutional weakness Geographical distance: - Physical remoteness - Lack of a common border - Lack of sea or river access - Sice of country - Weak transportation or communication links - Differences in climate Economic distance: - Differences in consumer incomes - Differences in cos and quality of: Natural resources Financial resources Human Resources Infrastructure Internmediate inputs Information or knowledge |
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How can Ghemawat's CAGE framework be used?
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Identify differences among countries
Some of those differences may be handicaps for the MNCs, who can then consider ways to respond e.g. set up local joint ventures to overcome their ‘liability of foreigness’ The framework can also help identify home/host country strengths that may be leveraged by MNCs |
