International Business Assignment 4 I.

Critical Thinking Questions On Differences In Culture

K. Toufarova

1. Outline why the culture of a country influences the costs of doing business in that country. Illustrate your answer with examples. When considering business expansion abroad, the attributes of culture like language, cultural and religious events, mores, norms, cultural values and religion, influences the way of making business in that country. The cost of doing business in a country is influenced by culture different cultures are more or less supportive of the capitalist approach to production. Examples: a) Muslims all over the world experience Ramadan (lasting a month). Doing business during this month may be significantly affected by several diversions from normal (e.g. more praying, change of eating habits, etc.) b) Jews all over the world celebrate its Pesach (Jewish Easter). It lasts 8 days. c) Easter are celebrated by Christians all over the world (not at the same date, usually during a few days). d) Christmas The Christmas day is not being held on the same day everywhere, but the business is stopped during these days. e) The time around the New Year in many countries in Europe the time starting around the Christmas and terminating in the middle of January experiences significant slowdown. Government departments, banks and shops are closed for few days and many employees have its holiday. f) Samoa (Pacific Island) changed its time zone because of business. After switching driving sides in 2009 to be able to drive on the same side as its major regional trading partners New Zealand, Australia, Fiji and Tonga, the Samoan government joined its time zone as well. (Samoa falls to the east of the international dateline). It enables Samoa to deal with its business partners and banks. 2. Do you think that business practices in an Islamic country are likely to differ from business practices in the United States? If so how? Yes, although the globalization affects the way in which business is doing in Islamic countries as well, we can still see many differences. Contracts in Islamic countries are often made face to face, not in a written form and the style of negotiation is very different. What is a normal business practice in an Islamic country would not be consider as normal business practice in USA. The Islamic negotiation example: Individual nr. 1: You must give me the best price, Im your friend. Individual nr. 2: This is the best price, Im losing money on this deal, because you are my friend. Individual nr. 1: No, you must give me even better price, because YOU are my friend!

Contracts in USA are made in written and both sides must have an eye for detail regarding legal matters (the contract must be prepared by a lawyer). 3. What are the implications for international business of differences in the dominant religion of a country? The way of making business is strongly influenced by the dominant religion in a particular country. It may show up in a form in which people greet their business partners, in forms in which contracts are agreed (face to face, in written), in a attitude towards business (in Islam is not possible to lend money at interest), in dress-code, style of negotiation and also in the attitude to the business partners (or potential business partners) of another religion. Some religions are more supportive and some of them are less supportive. The overall implication is that a business person should bright his/her inter-cultural skills and respect the signs of the business partners (in a foreign country) religion. Also, this business person must be prepared for unexpected situations. II. Read the case on Unocal in Myanmar (page 129). Then, answer the following questions: 1. Was it ethical for Unocal to enter into a partnership with a brutal military dictatorship for financial gain? It cant be ethical to enter into a partnership with a brutal military dictatorship under no circumstances. Even though the infrastructure project supposed to boost Myanmars economic growth and bring better life for 43 millions Myanmars people. The Unocal's investment became highly controversial, when it came to light that under the terms of the contract, the government of Myanmar was contractually obliged to clear a corridor for the pipeline through Myanmar's tropical forests and to protect the pipeline from attacks by the government's enemies. The working conditions were no better than slave labour and those who refused suffered retaliation. Unocal was indeed aware of what was going on in Myanmar. 2. What actions could Unocal have taken, short of not investing at all, to safeguard the human rights of people impacted by the gas pipeline project? Unocal could have manage its own auditing program. Auditors could have been presented during the whole process and make sure all human rights will be adhered. III. Read the case on Wal-Marts Chinese Suppliers (page 148). Then, answer the following questions: 1. Is it legitimate for an enterprise like Wal-Mart to demand that its suppliers adhere to a code of ethics? What are the benefits of this practice to Wal-Mart? What are the costs? Wal-Mart built its rise to dominance on everyday low prices. In order to be able to deliver cheap products to customers, it was forced to source many of those products from plants located in under developed countries. Working conditions in these counties are complicated and poor and workers seriously suffer during the production process. The willingness of Wal-Mart to fight with the abusive system, in which these plants produce their products that we can see on Wal-Mart shelves, is an example of ethical way of doing business. If all shopping chains would adhere to a code of ethic in that way, it would really make a difference in the world. The benefit is that Wal-Mart is a place where people can do their shopping and be sure, they are buying stuff manufactured at plants where working conditions are about its national legal standard. It may be Wal-Marts advantage in the competition on the market. The cost of being sourced from plans with better working conditions for workers is that it cost some money to perform all the audits

and teach those plans how to make its production process more effective instead of paying less to its workers. It may rise prices of products and Wal-Mart must be looking for another ways how make the price reasonable for customers. 2. Wal-Mart is known for constantly demanding the very lowest prices from its suppliers. How might this impact upon ethical behaviour at its suppliers? The impact upon ethical behaviour at its supplier is that some of them try to fake their number of hours their workers worked for, the number of overtime hours, how much they are paid (trying to show that workers are getting at least the minimum salary, which is not truth). Some of them also hired an adviser, who teach them what questions they will be asked and what is the correct answer. The suppliers claimed that in order to reducing prices, while meeting Wal-Mart's demands regarding working conditions inevitably raises their costs, the falsifying records may be their only option. On the other hand Wal-Mart has started to work with some of its suppliers to help them improve their efficiency, rather than by keeping pay low. 3. Is Wal-Mart doing enough to ensure that suppliers adhere to its code of ethics for them? What else might it do? I think that Wal-Mart is doing a lot in this direction. It performs its highly-developed auditing program. Wal-Mart settled its own ethical standards and audits are undertaken on third-party firms as well. If a factory is found to have four high risk violations in a two-year period, it is banned from producing goods for Wal-Mart for one year. Whats more, about 26 percent of those audits were unannounced surprise audits. In 2006, for example, 16,700 audits were conducted in 8,873 factories around the world. Another positive thing is that Wal-Mart is helping to its suppliers to improve their productivity through better utilization of technology and better management practices. What else might it do? Wal-Mart could maybe award (some kind of certification) the plants, which are able to produce according to Wal-Marts code of ethics. It could help the plans in order to showing that they operate on ethical basis. Given that several cases have come to light where Wal-Mart suppliers falsified their books to give the impression that they are conforming to Wal-Marts code of ethics, should the company even be doing business in countries where such behaviour is widespread? Wal-Mart and other chains of shops are actually doing business with those countries, because there are no other countries, where they can get the goods cheaper. Wal-Mart can do business with such countries, but than it must audit the situation. Whether or not, those plants adhere to Wal-Marts code of ethics. Wal-Mart claims that its auditing process is state of the art, and I absolutely agree with it. The companies falsify and fake the real situation and the company must be very careful to believe what they are saying in every minute of an audit.