BBB4M – Grade 12 International Business – Chapter 3 and 4 Test

Chapter 3 Notes

Culture Intro

  • Culture: encompasses the knowledge, experience, beliefs, values, attitudes, religion, symbols, and possessions acquired by a group of people who lived in the same region or country for generations.
  • Subculture: a cultural group within a larger or predominant culture distinguished from it by factors such as class, ethnic background, and religion, and unified by shared beliefs and interests
  • Counter Culture: A culture that has values or lifestyle that are in opposition to those of a current accepted culture. Members of a counter culture openly reject the established cultural values that surround them.
  • Culture Determinants: The main factor that shape the culture of a specific group include religion, politics, topology, climate, and history.

 

Culture of Saudi Arabia

  • Revolves around religion of Islam
  • Prays 5 times a day
  • Friday is a holy day, Weekend is Thurs – Sat
  • Clothing is loose because its hot
  • Women hide everything except hand feet and face
  • Criminal cases are tried under Sharia (Sunni Islam) courts

 

Culture of Japan

  • Shintoism and Buddhism dominate (caring for nature and logic
  • Hierarchical, status matters
  • Kimonos worn by women during special events
  • Gifts are informal for visits, formal for meetings
  • Wrapping is often more important
  • Opened when recipient is invited to do so
  • Extravagant gifts are not appreciated, sets up inequalities between both parties
  • Belittle your informal gift at visit (“It’s only a token but..”)

 

Cultural Awareness and Business

  • Canadian firms going global must determine the cultural differences
  • Decide whether or not their business can adapt to foreign culture

 

Extent of foreign operations

  • Level of cultural awareness will depend on how much business a company does in foreign country
  • Primary domestic operations that export do not need to care
  • Manufacturing, retail are more crucial

 

Degree of cultural differences

  • If foreign culture is similar, no need to spend as much time
  • If its very different, then you need to spend more time

 

Number of Foreign Operations

  • Businesses in foreign markets need to be aware the difference between cultures

Impact of culture on international business

  • Failure to consider culture could ruin negotiations, marketing, labour, or even death
    • Products
      • Culture has a direct impact on the types of products and services that will be successful in other markets
        • Culture has little impact on the sale of Canadian raw goods
        • Canadian exports depend on foreign culture though (ie pork in jewish/muslim area)
    • Services
      • Financial services are most commonly exported into foreign markets
      • People’s attitude towards money is different in every culture
        • Chinese like to save money, investment firms like to tap into the billions of dollars

 

Impact of culture on labour

  • Canadian values extend into the workplace by means such as minimum wages, safety, discrimination, and holidays

 

  • Rationalization: any attempt to increase a company’s effectiveness and efficiency
    • Ex. Downsizing, layoffs, relocating corporate functions and activities

 

  • Many companies find Canadian labour is very expensive for manufacturing jobs
  • For skilled jobs, Canada is very educated and well fitted for those tasks
  • Canadians who wish to do business abroad must understand the differences between other country’s values about labour

 

  • Child Labour
    • Child Labour is very prominent in Asia and the Pacific countries
    • To Canadian businesses, this is easy to control, just don’t hire kids
    • But to some nations, it may be ok or they don’t care who’s working
    • Some take advantage of kids, putting them in dangerous conditions
      • If a Canadian business is caught doing this, Canadians will see this as unacceptable and will decline to buy their products
  • Discrimination
    • Canadian law prohibits any form of discrimination in the workplace
    • However, in Saudi Arabia, hiring women can be difficult as their values are different
    • Homosexuality may also be less welcomed in other countries
  • Wages
    • Wages reflect standards of living in a country
    • Canadian manager must ask what is an acceptable or average wage in foreign countries
  • Standards and Practices
    • Cultures may have different norms as part of the workplace than Canada
      • Lunch breaks: Canada = 1 hour, Mexico = 2 hours, Muslim Countries have times to pray
    • Labour Unions and benefits may be non-existent in some countries
    • Different labour cultures affect Canadian branch plants that they must respect
  • Indigenous Cultures
    • Foreign branches must be aware of indigenous cultures
    • Positive indigenous effects: employments, medical, roads, water.
      • Ie Businesses who need educated people might benefit local schools etc.
    • Historically, it hadn’t worked out with indigenous people
      • Ex French Canada traders abused Native Indians to do resource extraction
    • Angola and Sierra Leone have rebel forces trading Diamond with bloody conflicts
      • Exploitation of diamonds for guns harms ecosystems, human life, and animal life
      • Thousands of indigenous colonies get displaced when companies expand into forests

 

Business Meetings and Negotiations

  • Canada
    • Men wear suits, tie, jacket, black shoes, dress pants
    • Women wear blazers, suit, or dress
    • 10 minutes before meeting
    • Sits at side of meeting table
    • Shakes hand, maintains eye contact
    • Logically paced presentation and scheduling
  • Time Perception
    • Monochronic: sees time as linear and sequential, and focus on one thing at at time
      • Based on contracts, back and forth, formality, fact based, direct
    • Polychronic: sees many things happening at the same time with participation of many people
      • Works based on trust, contacts, and lesser formal
  • Spatial Perception
    • Refers to the personal space and amount of physical contact
    • Europe, South Americans are closer than North American cultures
    • Physical contact can involve kissing, touching
      • Canada: hand shaking, patting on back is appropriate
      • Latin America: Kissing, hugging, patting is appropriate
      • Muslim: touching is offensive
    • Seating can also be different
      • Canada likes sitting across from eachother, China likes side by side
  • Non-Verbal Communication
    • Non-Verbal communication is closely related to cultural norms of space.
      • Ie Japan is strict to have 1 person talking at once, whispering is unacceptable
    • Some gestures are regarded as offences
      • Ie “OK sign” is obscene in Spain
  • Business Etiquette
    • Expectations for how a business person presents him/herself in a meeting is different
    • Business cards, dress, punctuality, gifts, greetings, and topics should be considered

 

Hofstede’s Cultural Dimensions

  • Power Distance (PDI)
    • How different in power between people is perceived differently.
    • High Power Distance
      • Cultures with superiority because of age, wealth, gender, status, job etc.
      • Ex. Mexico, India, Indonesia
    • Lower Power Distance
      • Cultures that assume on equality regardless
        • Assumed based on earned status and how you build yourself
        • People aren’t prejudged
        • Ex. Israel, Canada, Austria
  • Uncertainty Avoidance (UAI)
    • How cultures adapt to change
    • High Uncertainty Avoidance
      • You like rules, routines, religion, belief
      • Act based on beliefs
      • Little tolerance for outsiders
      • Ex. Mexico, Japan, Saudi Arabia
    • Low Uncertainty Avoidance
      • Love risk taking and seeking change
      • Very high tolerance for difference
      • Accepting, diverse
      • Ex. Canada, USA, Sweden, Singapore
  • Masculinity vs Femininity (MAS)
    • Workplace values of males and females
    • Masculinity
      • Something we possess and show
      • Being assertive, competitive, ambition, accumulative of material goods (collecting)
      • Ex. Japan, Mexico
    • Femininity
      • Degree of culture values nurturing, family values, and social support systems
      • Ex South Korea
  • Individualism vs Collectivism (IDV)
    • Extent to which a person makes their own decisions regarding your education, job, and life partner
    • Individually (High IDV)
      • Makes decisions yourself
      • Ex Canada, USA, Australia
    • Collectivism (Low IDV)
      • Members have government, churches, and families make decisions for them
      • Ex. China, Cuba
  • Orientation (LTO)
    • Long term orientation vs Short term orientation
    • Long Term Goals
      • Having perseverance for long term goals
      • Ex. South Korea
    • Short Term Goals
      • Looking at the present, what are you going to do now.
      • Ex. USA, Canada

 

  • Hofstede’s Canada
    • High IDV: individualistic approach and attitude. Privacy.
    • Low LTO: short term driven and appreciates cultural traditions
    • Low PDI: High level of equality.

 

Chapter 4 Notes

Economics and Politics

  • Political System: the type of government by which a country is run
  • Economic System: the way a country organizes its resources and distributes good to citizens
    • Economic systems try to answer:
      • What should the country produce and in what quantities?
      • How should scarce resources such as labour and capital be allocated?
      • How should goods and services be distributed throughout the country?
      • What should be the price of goods and services?
    • Market Economy: capitalism or private enterprise
      • Businesses, consumers, government run independently of each other
      • Ensure there is a variety and little government control
      • Atmosphere in which citizens and corporations can be successful
      • Private Property: encouraged to own property (real estate, automobiles, furniture..)
        • Free to rent, sell, trade, or give properties
      • Profit: encouraged to be profitable because then companies can improve
        • Profit belongs to the owner of the business and they choose how to spend it
      • Competition: Companies compete on quality, services, price, reputation & warrantees
        • competition results in more incentives by the companies to have loyal customers
      • Advantage:
        • Freedom of speech, religion, assembly
        • Efficiency
        • Innovation
        • Economic Growth
        • Low prices
      • Disadvantages
        • Rich and Poor gap
        • No education
        • Unhealthy products
    • Centrally Planned Economies: communism or command economy
      • Government controls all element of the economy and distributes income
      • Government provides education, healthcare, employment, and housing
      • Private Property: Restricted. Government owns all housing & businesses like factories, offices, farms. All workers are employed by the government
      • Profit: Profit belongs to government. No portion belongs to citizens. Governments re-invest revenues into businesses or education, military. Governments control prices to increase revenue when needed
      • Competition: Limited. Government determines size, price, quality, and amounts. Consumers have little variety
      • Ex. North Korea, Cuba.
      • China and Russia are changing to market economy practices
      • Advantages
        • Citizens ensured minimum standards
        • No unemployment
        • All services provided
        • Stability
      • Disadvantages
        • Restriction of freedom
        • No motivation to work
        • No innovation
        • Large military
        • Corruption
    • Mixed Economies: Free enterprise systems
      • Ex. Canada has government services like healthcare and education, yet prosperous businesses and large corporations.
      • Private Property: owned by individuals, corporations, or government. Government has offices, parks, and schools. It sets regulations that affect private property.
        • Ex Canada has regulations for ownership of financial institutions and media
      • Profit: encouraged, but taxed to support government. Federal & provincial level through sales tax, income tax, corporate tax. Municipal collects property taxes
      • Competition: Strong competition between businesses, but government might be a competitor too.
        • Ex. Government owned VIA Rail, Canada Post affect DHL, Fedex, UPS etc.
      • Advantages:
        • Consumer protection
        • Individual incentive
        • Basic social services
      • Disadvantage
        • Higher taxation
        • Individuals have little on input on tax spendings
        • Less working motivation
        • Government might intervene growth

 

  • Political Systems
    • Theocratic: based on religion
    • Monarchy: based on king and queen
    • Aristocracy: based on rich and wealthy
    • Democracy: Free and fair elections, rule of law, free speech, assembly, press, and religion
      • Entitled to education and govern themselves
      • Accompanied by market economy
      • Ex Canada, USA
      • Politicians get concerned with re-election than the overall benefit
      • Politicians rely on corporate funding may be influenced by corporations
      • Similar background from politicians (lack of women, minorities, poor)
      • Expensive to maintain
      • New emerging economies lack judicial systems to maintain political stability (latin america)
    • Autocracy: Ruled by a small group or individual
      • Believe 1 government will have rational decisions for entire country
      • Strong military presence
      • Controls citizen’s lives including media, professions, businesses, religions
      • Citizens have no say in government decisions
      • Ex. North Korea, Cuba are led by a single leader
      • Tied with centrally planned economy, though some countries have foreign investments

 

  • Classifying Economic Development
    • Countries are classified by economic development. Whether they’re poor, rich, or just getting started
    • Countries are ranked based on criteria determined by United Nations (UN) and IMF (International Monetary Fund)
    • Underdeveloped Countries, least developed, or third world
      • Poor infrastructure, no healthcare, education
      • Small economies by comparison
      • Low literacy, limited technology, weak economies
      • Political issues, corruption, war
      • Relies predominantly on agriculture or resources
      • Frequent natural catastrophes result in underdevelopment (Rwanda, Madagascar)
    • Developing Countries, emerging countries
      • Improved literacy rates, increased health care access, technological advancements
      • Shift towards industrialization and manufacturing
      • Ex. China, Brazil, India, South Africa
      • Rural shift to cities as well as urbanization
      • Canadian businesses like Bombardier can benefit by providing for these countries
      • However, lower labour costs Canada can’t match can compete with Canada
      • Often weak regulatory and legal systems.
    • Developed Countries, industrialized nations, first world countries
      • High Income or strong GDP
      • High literacy rates, good healthcare, education, and technology
      • Manufacture diverse complex equipment like cell phones, computers, hybrid cars
      • Strong alliances between developed countries (G8)
      • Correlation between democracy and economic growth

 

  • The Business Cycle
    • Recession, contraction
      • Economy slows down
      • 2 consecutive quarters of negative GDP
      • decline in consumer purchases, employment, business growth
      • Indication in Canada are construction contracts and exports
    • Trough, Bottom of the cycle
      • Employment and production at their lowest point
      • Turning point to success
      • sometimes worsens to become depression (ie 1930s)
    • Expansion, recovery, prosperity
      • growth of employment, wages, production, and profits
      • Strong investments, businesses created (Ie 2001-2007)
    • Peak
      • Top of the business cycle when economy stops expanding and begins contracting

 

  • Economic Indicators of the business cycle
    • Leading indicators: predict where the economy is headed.
      • adjusts before economy actually experiences change
      • guides investors, businesses, and governments
      • Ex. Housing starts are leading indicators because people won’t purchase new homes if economy is down
    • Lagging Indicators: are adjusted after economic changes.
      • Takes 2-3 quarters for economic change to influence a lagging indicator
      • Ex. Unemployment rate: takes 6 months for unemployment rate to decrease after change
    • Coincident Indicators: move in conjunction with the business cycle
      • Ex International Trade: slumping economies involve less trading

 

  • Governments and the Business Cycle
    • During the 2008-2009 US recession, Canada was affected by decrease in American purchases
    • Governments increased their spending to stimulate the economy
    • Canada allotted $12B for infrastructure, $7.8B for homes, $200B for consumers.
    • USA had a $787B stimulus package to government agencies
    • Democratic governments may invest in social programs to influence voter’s decisions before elections

 

Economics of Trade

  • Absolute Advantage
    • a country has absolute advantage if it makes a product or service more productively than other countries.
    • They use the resources more efficiently to manufacture more products.
    • Country has better technology to produce goods with absolute advantage
    • Opportunity Cost: is the value of what is forgone
      • Opportunity cost of being in school is the money you could be making in a job
  • Comparative Advantage
    • When a country has a comparative advantage, it means that country can produce a good at a lower opportunity cost as the other
    • Countries exporting products in which they have a comparative advantage, and import goods from country with a comparative advantage for that product, both countries will benefit.

 

The Role of Government in International Trade

  • Government’s role include: IN/OUT Laws, tariffs, trade agreements, immigration laws, currency rates, taxation laws, education, tax treaties, military systems, environmental policies, infrastructures, embargoes
  • Canadian government help int’d businesses set up in canada with incentives
  • But impede with regulations, licenses, and laws.

 

  • Government Regulations
    • Government regulates laws such as minimum wage
    • To start a business in Canada, it is easy to start a business with only one online application
    • New registered businesses will receive
      • A registration number
      • GST/HST number
      • Corporate income tax account
      • Import/Export account
      • Payroll deduction information
    • In China, though, it takes 13 stages of approval to open a  business there

 

  • Trade offices
    • Established in foreign countries, it helps foreign businesses operate
    • Trade offices help investments, exports, R&D, and lower costs by providing expertise
  • Government Embassies, High commissions, and Consulates
    • Consular Services in foreign countries help traveling Canadians in case of emergencies
      • Communications with family after accident
      • Lost passports or identifications
      • Customs, Taxes, VISAs
    • Embassies: located in capital cities they provide full range of services
    • High Commissions: Same as embassies, but in Commonwealth countries (GB, Australia)
    • Permanent Missions: Located in UN, WTO and EU. No consular services
    • Consulates General: embassy like offices located in major cities
    • Consulates: located in major cities but do not provide all range of services
    • Consulates headed by honorary consuls: Located around the world headed by honorary consuls. In places like Uganda and Paraguay.
    • Offices: Found in major and capital cities to aid with specific projects without consular services.

 

  • Trade Missions
    • Organized by DFAIT, Team Canada visits a specific country focused on a specific industry
    • Provides Canadians a business opportunity to meet potential customers, suppliers etc.
    • Junior Team Canada are teenagers going abroad to gather business information, contacts, and opportunities.
    • “Brand Canada” promotes Canadian Culture to foreign places