42. How would you train an international business manager?

43. Which practical tips would you provide as the most appropriate when it comes to international business, and why?

• There are certain consequences when culture is not managed. These might be lack of timely information sharing, derogatory name-calling of cultural “others,” inability to enter a new market, loss of market share, lack of trust between the organization and its cultural counterparts, inability to recruit and retain quality employees, low productivity, and so on.

• International managers should possess the necessary attitudes and skills for managing culture. Be open to clarifying with your colleagues the assumptions, expectations, and behaviors you consider “common sense.”

44. What is social capital? In your opinion, how cross-cultural management can benefit the business from the point of view of its intangible assets and the income statement?

The aggregate of the actual or potential resources which are linked to possession of a durable network of more or less institutionalized relationships of mutual acquaintance and recognition.

International political and legal environment

45. Define and describe the international political environment. Name its key elements. How should the international managers deal with the foreign political environments?

The International Political Environment

Politics: the process of determining the distribution of power (the ability to control) within society.

International Politics: Bilateral political relations between home and host countries and the multilateral international policies governing the relations among groups of countries.

Who are Political Actors:

government members

political parties (including illegal parties)

public interest groups that are trying to affect the political

Supra-governmental entities (e.g. WTO, NAFTA)

Other corporations that might act in a political way

An international business faces a more complex task: It must obey the laws not only of its home country but also of all the host countries in which it operates. These laws determine the markets the .rms serve, the cost of goods and/or services they offer, the price they charge, and costs for labor, raw materials, and technology.

To understanding the politics and laws of both home and host countries, the international manager must consider the overall international political and legal environment.

• International law plays an important role in the conduct of international business. Although there is no body to enforce international law, certain treaties and agreements are respected by a number of countries and in.uence international business operations. The World Trade Organization (WTO) is such an international agency that de.nes internationally acceptable economic practices for its member countries. There are many other agreements that provide some legal regulation of international commerce, including the EU, North American Free Trade Agreement (NAFTA), and others. Similarly, the United Nations (UN) and its many allied organizations (such as the International Labor Organization, World Bank, and the International Monetary Fund) provide the legal and regulatory context within which global business operates;

• An important aspect of the political environment is the phenomenon of ethnicity—a driving force behind political instability around the world. Often, religious disputes lie at the heart of these differences. Many terrorist activities are also based on religious differences, as in the Middle East. Managers must understand the ethnic and religious composition of the host country in order to anticipate problems of general instability as well as those of an operational nature—such as effects on your workforce, on production and access to raw materials, and your market. For examplre: In Cyprus, it is important to understand the differences and similarities between the Greek and Turkish Cypriots; In Malaysia it is essential to recognize the special economic relationship between Chinese and Malay;

• Managers must be aware of the legal systems in the countries in which they operate and the legal relationship that exists between countries and the degree of independence of the judiciary from the political process

Common law is based on tradition, precedent, and custom and usage. The courts ful.ll an important role by interpreting the law according to these characteristics. UK and USA

A civil law system, also called a codi.ed legal system, is based on a detailed set of laws organized into a legal code. Over 70 countries, including Germany, France, and Japan operate on a civil law basis

One important difference between common law and civil law systems is apparent in the roles of judges and lawyers. In a common law system the judge serves as a neutral referee, ruling on various motions by the opposing parties’ lawyers. These lawyers are responsible for developing their clients’cases and choosing which evidence to submit on their clients’ behalf.

An example of an area in which the two systems differ in practice is contracts. In a common law country, contacts tend to be detailed, with all contingencies spelled out. In a civil law country, contracts tend to be shorter and less speci.c because many of the issues that a common law contract would cover are already included in the civil code. Thus, when entering into contracts abroad, it is important for the manager to understand which type of legal system will establish the contract.

Theocratic Law is based on the of.cially established rules governing the faith and

practice of a particular religion. In Iran, for example, a group of mullahs, or holy men, determine the legality or illegality through their interpretation of the Koran, the holy book of Islam. Muslim businesses often rely on leasing arrangements, rather than borrowing money, to obtain long-term assets.

• Countries often impose protectionist policies, such as tariffs, quotas, and other trade restrictions, to give preference to their own products and industries. The American auto industry continues to ask the US government for protection from Japanese car imports.

A country’s tax system in.uences the attractiveness of investing in that country and affects the relative level of pro.tability for an MNC.

The level of government involvement in the economic and regulatory environment varies a

great deal among countries and has a varying impact on management practices. In Canada, the government has a signi.cant involvement in the economy.

Managers should prepare themselves accordingly with an analysis of interest rates and stock prices, the country’s balance of payments, projections of probable macroeconomic policies, and .scal and current account de.cits.