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You are a senior manager in a U.S. automobile company who is considering investing in production facilities in China, Russia, or Germany. These facilities will serve the local market demand. Develop a summary that determines the benefits, costs, and risks associated with doing business in each nation. Which country seems to be the most attractive target for foreign direct investment? Why?
Book reference: Hill, C. W. L. (2021). International business: Competing in the global marketplace (13th ed.). McGraw-Hill Education. https://online.vitalsource.com/#/books/9781264123926
DBA 8710, International Business and Global Strategy 1
Course Learning Outcomes for Unit III Upon completion of this unit, students should be able to:
3. Examine the advantages and disadvantages of multicultural and global strategies. 3.1 Determine the benefits, costs, and risks when selecting a nation to partner with in business.
Course/Unit Learning Outcomes
Unit Lesson Chapter 3, pp. 62–89 Article: “The Application of Vague Language in International Business Negotiations
From a Cross-Cultural Perspective”
Required Unit Resources Chapter 3: National Differences in Economic Development, pp. 62–89 In order to access the resource below, utilize the CSU Online Library to begin your research. The following article discusses how vague language is a kind of cultural phenomenon or an embodiment of culture in language. Zhang, J., & Shi, Y. (2017). The application of vague language in international business negotiations from a
cross-cultural perspective. Theory and Practice in Language Studies, 7(7), 585–589. https://doi.org/10.17507/tpls.0707.13
Unit Lesson In the previous units, we have explored the intricacies of international management and approaches to analyzing global strategies through the context of culture and global consciousness. All of this is about finding out how attractive it is for any place to do business. We have examined economic, political, and legal systems changing around the world, which increases economic development globally. When determining a global strategy, one must understand the shift in global economic systems between deregulation and privatization. During the last 30 years, with the growth of international business operations, many countries have moved toward deregulation (Hill, 2021). Before, many countries worked hard to restrict not just what products could be sold but the direct investment companies could make. As countries saw the immediate positive results of deregulation, other countries followed suit by lowering restrictions on foreign investment to create more competition and advance product development. Hand in hand with deregulation is privatization. Around the world, countries began to remove state-owned assets. In the United States, a good example is the loosening of the telecom industry in the 1980s or the breaking apart of Standard Oil in the early 20th century. Breakups of this type allow private companies (or even publicly traded companies) to increase productivity, create more jobs, and heighten innovation, which all led to an increase of margins and profitability. Yet, with all of the movement toward deregulation and privatization, there is still a large number of industries that are state-owned. Russia is a country that demonstrates this concept. From aerospace to nuclear power, Russia’s governmental controls are clear in regulation and ownership. Plus, not all changes to deregulation are healthy. There are plenty of examples of deregulation causing havoc within the legal systems of a country. In the 20th century, many countries fell to communism; by the late 20th century, these same countries were becoming democracies, but they did not have the legality to operate a deregulated
UNIT III STUDY GUIDE
National Differences in Economic Development
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society. With so many moving parts, it is important to know that it all begins with how people communicate with each other. In examining the advantages and disadvantages of multicultural and global strategies, we need to understand that communication is more than speech and writing. Body language or nonverbal communication is an important part of how we communicate. There are differences in nonverbal communication from culture to culture. As a result, cultural differences may affect the way people utilize nonverbal communication. Indeed, some actions may not be seen as offensive in one country or culture while the actions may be seen as offensive in foreign business ventures. For instance, some cultures rate low in expressiveness; some are more remote and display less nonverbal communication; some stress group cohesiveness and proximity to one another; and some are more expressive with body movement, smiling, loudness, eye contact, and gestures. It is important to understand how each culture’s norms in relation to nonverbal communication can impact international transactions. Indeed, nonverbal codes in communication are different from one community to the other.
Global Social Capital Global social capital refers to the competencies that lead to effective network development in culturally diverse settings. Intercultural empathy refers to one’s ability to understand and emotionally connect to people from other cultures. Interpersonal impact is the ability to develop networks with influential people and individuals from other cultures. Finally, diplomacy is defined as an individual's ability to listen to what others have to say and integrate diverse perspectives. The behavioral part of a global mindset requires a bit more effort to develop than the competencies in global intellectual capital; however, global social capital represents the part of a global mindset that requires interacting with those who are culturally different. Doing this requires practice, patience, experience, and willingness. Since some of these qualities may not come natural to a person, developing some of the elements of global social capital can be challenging. However, the good news is that the global social capital is strongly influenced by experience. In other words, as you get more global exposure, interact more with individuals from foreign countries, and gain more experience, it may become easier to start a conversation, network, negotiate, understand signals, and recognize differences in perspectives.
Cultural Behavioral Differences: Eye Contact Many societies have similarities yet cannot be grouped into classes. A good example of this would be Middle Eastern cultures and eye contact. As compared to the United States, eye contact is seldom used in Middle Eastern societies, and that is largely in part due to the Muslim religion having strict rules on eye contact, especially between men and women. These rules matter so much that religious laws are in effect about the appropriateness. If you are in a Middle Eastern country, make sure you only conduct brief eye contact or, better yet, none at all. While Middle Eastern societies are quite harsh on rules, a different perspective takes form in many Asian, African, and Latin American cultures. Extended eye contact here could be seen as a challenge of authority. So, the best way to handle this would be to have quick glances or brief eye contact, and that is especially true between men and women. For example, less eye contact would be appropriate between a student and his or her teacher or between a child and his or her older relatives. If you were in Japan and saw an elderly woman, do not be offended if she does not look at you; she is likely following her cultural norm of being a polite person. As you can see within each of these examples, you should be aware of the kind of eye contact you would create with many kinds of cultural norms and people.
Personal Space What is personal space? Personal space is the overall distance that you would place between yourself and others, and this varies between different cultures. In the United States, individuals tend to keep several feet between each other in public (even within families) and several more feet between business partners and even strangers. As based on the information provided by Hofstede (2001), other countries like Germany, France, Sweden, and the United Kingdom have the same preferences. Yet, in Middle Eastern countries, such as Saudi Arabia, it is customary to stand closer to each other—even strangers! What about Asian cultures?
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They are more similar to Saudi Arabia than to the United States; they are comfortable standing closer and having less personal space. Overall, it is important to understand that even the nonverbal communication involved with how close we stand to others matters on a global scale. By understanding the cultural norms of other societies, you can avoid the possibility of being interpreted as rude or pushy if you are standing too close to others. In the Mediterranean and South American countries, touching is actually particularly important. Unlike the United States, these countries perceive touching as an important part of the communication process in getting to know someone, even strangers. Yet, as you would imagine, touching in the Middle Eastern countries is considered taboo, and you would be sure to quickly offend someone.
Definition of Interpersonal Impact
This requires experience in negotiating contracts and agreements in other cultures.
This involves strong networks with people from other cultures and with influential people.
One’s reputation as a leader is important.
Bringing It All Together
Clearly, there are benefits, costs, and risks associated with doing business on an international level. Nothing is too small to ignore, and knowing how personal, interpersonal, and other behavioral cultural differences compare will be fundamental of understanding multicultural strategies. Companies that desire to do international business can build trust, build loyalty, and gain valuable experience by operating using international business practices. These can pay back massive dividends if that country can achieve economic growth rates. On the other hand, those companies that lack in their understanding of multicultural global strategies can fall short in the areas of brand loyalty, which is needed to be successful in the global marketplace.
References Hill, C. W. L. (2021). International business: Competing in the global marketplace (13th ed.). McGraw-Hill
Education. Hofstede, G. (2001). Culture's recent consequences: Using dimension scores in theory and research.
International Journal of Cross Cultural Management, 1(1), 11–17. https://journals.sagepub.com/doi/abs/10.1177/147059580111002?journalCode=ccma
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