International Business 5 Pertinent Topics The Cultural Effect on International Business

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Political Issues Affecting International Business

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Regional Economic Integration AND INTERNATIONAL Business

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Impact of Exchange Rates on International Business

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Corporate Strategy in International Business

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An Analysis of International Business Today

No one can dispute the fact that the world economy is increasingly globalizing as we move into the 21st century. As this internationalization of business grows, there is an increasing challenge being faced to deal with cultural differences. In one survey, cultural differences ranked first among all eight issues listed as potential barriers, including law, price competition, information, language, delivery, foreign currency, time differences, and cultural differences. Great opportunities have been created for global collaboration but these opportunities are accompanied by a unique set of problems and issues relating to effective management in the international environment. The social and cultural nuances that enter the picture when dealing with foreign business partners may make for entertaining conversation in subsequent years, but the daily effort that is required for operations can sometimes be hard on business relationships, especially in the early stages.

This paper looks at five articles covering major areas of concern to international business. The first article in this look at international business looks at the cultural differences between China and the West, using five dimensions, including power distance, individualism / collectivism, masculinity/femininity, uncertainty avoidance, and long-term/short-term orientation.

China and the U.S. appear to differ greatly in nearly all the aspects examined here. It is clear to see that these cultural differences have already had, and will continue to have, a great impact on Sino-American business relationships.

The second article talks about the political aspects of international business, via a discussion about a trade dispute between Intel and China regarding the Chinese government's deadline for compliance with standards for Wi-Fi chips (specialized chips allow PCs and various other electronic devices wirelessly connect to the World Wide Web).

Beijing has demanded that its own standard for wireless security be incorporated into any chips sold in China by June 1, 2004.

Intel and other chip manufacturers are reluctant to give proprietary technology to one of 24 Chinese government sanctioned companies, which is what compliance will mean. There is a concern in the Silicon Valley that China is actually politically motivated by a desire to boost its own chip industry, which is still in its infancy. China denies that allegation and maintains that its purpose is solely to ensure the security of any Wi-Fi technology used in China.

The third article examined here is on the topic of regional economic integration and looks at NAFTA. The North American Free Trade Agreement was put in place on January 1, 1994, accompanied by fears of job losses in the U.S. And revolutionary rhetoric in the south of Mexico. In a single decade, Canada, Mexico and the U.S. have managed to build a market larger than the 15-nation European Union. Trade and investment levels have almost tripled, and the three countries have enjoyed very high degree of social and economic integration. Two crises, the Mexican peso devaluation of 1995 and the terrorist attacks of September 11, 2001, have nearly destroyed the integration experiment. NAFTA has failed to deal with some of the challenges of integration, which may prevent the group from making further progress.

Fourth, an article on outsourcing of legal services to India illustrates the issue of dealing with exchange rates. American firms are increasingly turning to offshore sources for employees, spurred primarily by the large cost savings that are involved, due to favorable exchange. While computer programmers, radiologists and tax preparers have all experienced this phenomena, lawyers have not until recently been subjected to such a situation.

But today, Indian-trained lawyers in Bombay are willing and able to do legal work for American firms for substantially lower fees. Since this trend to outsource legal work is just beginning, the types of work tends toward basic legal research and routine legal matters. Some firms are pioneering another way to take advantage of the disparity in prices generated by exchange rates between countries, setting up businesses directly, enabling them to take advantage not only of cost savings but also of time differences.

And finally, the last article looks at corporate strategy in international business, through the experiences of Macquarie Bank, Australia's sixth-largest finance house. Macquarie's foray into Asia is driven by entrepreneurial spirit, as opposed to a grand vision for regional investment. Macquarie's strategy is to work close...

Macquarie typically enters a market very cautiously, first establishing an alliance with a seasoned institution, then carefully considering the ramifications of opening its own doors. It makes serious efforts to build contacts and trust with the various governments of the countries it wishes to do business in. Macquarie makes its first priority investor returns, not always what politicians worrying about road-toll fees and other infrastructure charges want to hear. Introduction No one can dispute the fact that the world economy is increasingly globalizing as we move into the 21st century. As this internationalization of business grows, there is an increasing challenge being faced to deal with cultural differences. In one survey, cultural differences ranked first among all eight issues listed as potential barriers, including law, price competition, information, language, delivery, foreign currency, time differences, and cultural differences.
Great opportunities have been created for global collaboration but these opportunities are accompanied by a unique set of problems and issues relating to effective management in the international environment. The social and cultural nuances that enter the picture when dealing with foreign business partners may make for entertaining conversation in subsequent years, but the daily effort that is required for operations can sometimes be hard on business relationships, especially in the early stages.

For starters, there are the predictable complications like time zone issues, language issues, and currency issues. Less anticipated and much more challenging are the cultural issues which, when they surface, often blindside Americans. In managing a global business, few core competencies will prove more important than the ability to handle a longer-than expected start-up period. A lot of Americans have not anticipated the teaching function that is required overseas.

Hard-driving U.S. executives often mistakenly think that consensus has been reached when it hasn't. What is heard is not necessarily what is meant.

The first principle is patience. Investments are going to be required to get global sources up to speed and the learning curve is invariably steeper than anticipated.

It is usually advisable to factor a slower pace to the anticipated payout than might first be expected. American companies often like to think that know exactly how to behave abroad and how to transact business on an international basis, but they are relative newcomers to international trade.

They still tend to think the American way is the only way. A lurking danger is that miscommunication can trigger a completely unintended conflict. To successfully lead an international business to profitability, the lesson for global managers is to think about everything else first and the labor component last. It is important to be alert to the different "rules of engagement" that prevail in different places.

In China, for example, trade practices are less consistent than those in Japan and are subject to great regional variation. The Dutch tend to be as confrontational and adversarial as Americans (and some would say, even more so). With them, pushing back is very much part of the business game. In Brazil, conditions are constantly changing, tariffs and customs and labor situations may differ from day-to-day, so doing business there requires that flexibility be built into transactions as a pre-condition for success. It is important to take into account the reality that when a company does business overseas, it is no longer on an accustomed playing field.

All of these elements can have a huge impact on whether or not a business is successful in the international marketplace today. This paper will take a look at five different areas that can specifically impact the likelihood of success. The first is the effect that cultural variations can have, from the perspective of the cross-cultural challenges found when doing business in China. The second focus is how political issues can impact an international business, examined through the prism of a current trade dispute between the U.S. And China over new Wi-Fi standards. Third is an analysis of regional economic integration, with a close look at where NAFTA stands today in terms of effectiveness in promoting trade between the three nations of North America. The fourth perspective is on how exchange rates affect the way companies do business internationally, taking a look at the phenomena of corporate America's outsourcing legal work to India. Finally, the fifth area is corporate strategy, with an analysis of the manner in which Macquarie Bank, Australia's sixth-largest finance house, has handled its "Move on Asia."

The Cultural Effect on International Business

Cross-cultural Challenges when Doing Business in China by Pan Fan and Zhang Zigang, in Singapore Management Review, Volume 26, Issue 1, 2004.

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This article clarifies the differences between China and the West, using Hofstede's four cultural dimensions and Bond's fifth…