IMBA 520 Week 3

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IMBA 520 Week 3

• Politics and Managing Across Cultures

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Week 3 Agenda

• Admin issues and projects
• Video Extreme Oil
• Politics and how to manage political risk
• Managing across cultures
• An intercultural interaction case a simple
  problem?
• Success Orientations

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What to do now on project...

• Research how business is done in country you are
  working with
• PEST Politics, economics, social issues,
  technology
• Cultural barriers or aids to doing business
• Human resource, logistics issues
• Currency stability and safety of the financial
  system.

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How?

• Books
• Journals (databases)
• Case studies in newspapers, and magazines.
• CIA world factbook
• Economist country reports
• Yahoo groups, discussion groups, newsboards, etc.
• Follow a trail of references and links like a
  detective!

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Video Case Extreme Oil

• What are the complicating factors for the group
  putting in the pipeline?
• What are the risks?
• What are the potential rewards?
• What are the political aspects to deal with?
  Cultural? How do the different vested interests
  manage these aspects?
• What can you learn about doing business
  internationally?

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From specific to general

• Take the practical and generate model questions,
  ideas, practices, patterns, themes, trends, and
  theorems.
• Extreme Oil practical
• Lessons? Questions to ask in any international
  operation with political dimensions?

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International Politics

• Political systems are constantly changing This
  presents a constant challenge for business.
• Terms
• Ideologies
• Political systems
• Economic systems
• Privatization / Nationalization

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Government-business Cooperation

• The more support for business, the further down
  the investment line you can go as an
  international business (toward direct investment)
• Its all about risk!
• Countries that directly support local businesses
  USA, Japan, EU, Canada, Singapore,

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How much investment would you do? What model(s)
would you consider?

• Country 1
• Import barriers
• Totalitarian system
• Mixed economy
• Small middle class
• Independent closed currency
• Strong ideologies
• Low literacy rates
• Low taxes

• Country 2
• Import barriers
• Democracy
• Mixed economy
• Large middle class
• Openly traded currency
• Variety of ideologies
• Educated population
• High taxes

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Minimizing political risk

• Research, research, research!
• Analyze, listen, watch, read.
• Economist Intelligence Unit
• Probes Political Agenda Worksheet
• Models such as the following

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Country Risk
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Techniques for minimizing risk

• Use some of your own employees (expatriates).
• Buddy up with existing MNC or company from your
  country who is operating in the new country.
• Gain experience first on a small scale before
  making larger investments. Time, time, time
• Get to know your Business Council and Embassy /
  Consular Officials in the new country
• Relationships, relationships, relationships.
• Be careful who you make friends with initially
  you could be stuck with them for a long time.
• Question, question, question all the time ask
  questions and listen carefully to what you hear!

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Economic Integration between countries and regions

• Every country trades some more than others.
• Groups form trade creation and trade diversion
  WTO, FTZ, EU, NAFTA, FTAA, GCC, Ancom,
  Mercosur, ASEAN, Customs union, common market
• NGOs non-profits that advance different social
  interests.
• More integration more political stability

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Managing across culturesA case...

• Gita, Hong, and Fernando were working on a
  project together.
• Gita My friend Ajit says that we have to do an
  introduction for our report
• Hong The instructions say to do an executive
  summary, not an introduction.
• Fernando Lets just get the paper done! Who
  cares about those little details?
• The three members got very frustrated and ended
  up coming to their teacher for help. We cant
  work together. We dont agree on anything. Please
  put us on different teams.
• What should the teacher do?

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Next Week...

• International Trade and Finance
• Reading this week Chapters 3, 4