Quiz #2 (ch. 3-4) Flashcards
Consider the four risks in international marketing. Which one is closely related with the political and legal systems?
Country risk (harmful or unstable political system, unfavorable laws to foreign firms, bad legal system, etc.)
MCE hopes to expand into Switzerland but decides to partner with a company with little knowledge of the Swiss landscape. This is an example of what risk?
Commercial risk (weak partner)
I move to Japan to source better talent but all of my new employees are averse to challenging authority. Which risk did I forget to account for?
Cross-cultural risk
I take 50% of my business’s liquid assets and convert it to Venezuelan currency. What is the most prevalent risk involved here?
Currency/financial risk
China does not have good protections of IP - what type of risk does Tesla have expanding there?
Country risk
Country risk
Exposure to company operations and profitability risks caused by developments in a country’s political and/or legal environments.
What is the example given in class for country risk? Hint: Coca-Cola
Germany gov. enacted new recycling plan requiring consumers to return soft-drink containers to stores for 0.25 euro refund. Big chains pulled Coke products from shelves.
Political system
A set of formal institutions that constitute a government and how the groups interact with each other.
What are the three major types of political systems?
- Totalitarian
- Socialism
- Democracy
Can be mixed!
Totalitarianism
Government controls all economic and political matters
Theocratic
A religion-based totalitarian regime
How is power sustained in a totalitarianism
Secret police, propaganda, regulation of free discussion (think The Lives of Others)
Socialism
Government’s role is to control the basic means of production, distribution, and commercial activity.
In a socialist country, (group/individual) welfare outweighs (group/individual) welfare
In a socialist country, group welfare outweighs individual welfare
Is a socialist or democratic country more economically and politically free?
Democracy
Command economies are most associated with which political system?
Totalitarianism
Command economy
The state makes all decisions on what to produce, how much to produce, and what prices to charge (ex. Russia)
Mixed economies are most associated with which political system?
Socialism
Mixed economy
Combines state intervention and market mechanisms (ex. Sweden, Singapore)
Market economies are most associated with which political system?
Democracy
Market economy
Decisions are largely left to market forces (supply and demand)
What are the four major types of legal systems?
- Common Law
- Civil Law
- Religious Law
- Mixed systems
Three traits of a legal system
- Applied to all citizens equally.
- Issued via recognized gov. authorities.
- Enforced fairly and systematically.
Common law is relatively (flexible/rigid)
Flexible. It can change depending on the outcomes of cases.
Common law is mainly ______ in origin whereas civil law is mainly _______ .
Common law is mainly judicial in origin whereas civil law is mainly legislative.
What are the three country risks produced by political systems?
- Confiscation: Seizure of corporate assets without compensation.
- Expropriation: Asset seizure with compensation.
- Nationalization: Takeover of an entire industry, with or without compensation.
What is the Bolivian example of country risk produced by a political system?
The Bolivian government nationalized the oil and gas industry in 2006.
What is the most common country risk today of the three (confiscation, expropriation, nationalization)?
Expropriation, seizing assets with compensation.
What was the example for expropriation given in class?
PayPal will suspend its operations in Turkey because the Turkish government wants the company to set up an IT center within the country and share its IP.
Sanctions vs. embargoes against a country
Sanctions only concern a specific industry or set of products while embargoes bans exports or imports to the entire country.
The Anheuser-Busch example given in class is an example of what?
Country risk due to political system. Closing brewery in Russia due to tougher regulations and higher taxes.
Conciliation
Formal process of negotiation to resolve differences. It is the least adversarial method (similar to mediation)
Arbitration
A neutral third party hears both sides of a case and decides in favor of one party or the other. Can be binding.
Iceberg concept of culture shows three layers of awareness. What are they?
High culture, folk culture, and deep culture
High culture
Cultural makeup that is visible. Ex. Fine arts, music, architecture
Folk culture
Cultural makeup we are aware of. Ex. Humor, religion, cooking, dress
Deep culture
Cultural makeup we are unaware of. Ex. Conversational patterns, concepts of beauty, beliefs on right vs. wrong
According to Hall’s high and low context typology, establishing social trust and ritualistic negotiations are what level?
High context, found in many Asian countries.
Does Germany have a high context or low context culture?
Low context
What are Hofstede’s five dimensions of cultural differences?
- Power distance
- Uncertainty avoidance
- Individualism - collectivism
- Masculinity - femininity
- Time orientation
Ethnocentric orientation (managerial)
Using our own culture as the standard for judging other cultures
Polycentric orientation (managerial)
Where the manager develops a greater affinity for the country where he/she works than for their own country.
Geocentric orientation (managerial)
A global mindset where the manager is able to understand a business/market without regard to national boundaries.
