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1.

0 Question 1
According to Geert Hofstede, “culture is the collective programming of the mind that
distinguishes the members of one group or category of people from others.” Generally, five
cultural dimensions are referred to in comparing the culture of different nations.

The first cultural dimension is known as power distance, referring to the degree to
which the less powerful members of an organization or society accepts and expects unequal
distribution of power (Hofstede, 2011; “National Culture,” n.d.). For countries with high degree
of power distance, such as China, children are taught obedience, and the elders are feared and
respected (Hofstede, 2011). However, in low power distance countries, like Germany, income
distribution is relatively equal. Children are treated as equals, and the elders are not necessarily
feared or respected.

The second cultural dimension is uncertainty avoidance; the degree to which members
of an organization or society are uncomfortable with ambiguity, specifically situations that are
unclear or out of the norm. Germany is an example of a country with high degree of uncertainty
avoidance. The country implements strict rules to avoid uncertain situations, and exhibit higher
stress and anxiety (Hofstede, 2011). On the other hand, the United States of America (USA)
tolerates ambiguity and different opinions. The country exhibits lower stress and better self-
control among its people (Keegan & Green, 2013).

The third cultural dimension is individualism. This dimension refers to the degree to
which members of an organization or society are integrated into groups (Hofstede, 2011;
Keegan & Green, 2013). For countries that practice individualistic cultures, members of society
are more concerned about his own well-being, besides his immediate family. Privacy is stressed
on in this culture, and “I” is practiced more than “We.” An example of a country that exhibit
high individualism is the USA. At the other end of the spectrum is collectivism, in which
members of the society are integrated into groups, including extended families. Countries with
low individualism, such as China, stress on the importance of belonging in a group. They would
protect each other in exchange for loyalty, and use “We” more than “I” (Hofstede, 2011).

The fourth cultural dimension is masculinity, the degree to which an organization or


society view men as assertive and competitive, while women are perceived mainly as
caregivers of children. Countries that exhibit masculinity, such as Japan, have a great
admiration for strength. There is also a clear difference in terms of social roles between men
and women (Hofstede, 2011). Opposite to this is femininity, in which an organization or society
do not view both genders as having different roles (Keegan & Green, 2013). In other words,
one gender is not superior than the other. The society in countries that exhibit this particular
culture are more sympathetic, too. An example of a country that exhibits femininity is Spain.

The fifth cultural dimension is long-term versus short-term orientation. This dimension
relates to the search for virtue by an organization or society, whether there should be immediate
or deferred gratification. Long-term orientation is often associated with long-term values,
which consist of persistence, order of relationships, observing this order, thrift, and sense of
shame. Countries with high degrees of long-term orientation, such as Hong Kong, are taught
to persevere in achieving a goal, to be thrifty in terms of savings, as well as to adapt to
situations. Societies with this type of orientation value modern education, as they see the
importance of it in the future. More often than not, success and failure are linked to effort, or
the lack of it. As for countries with low degrees of long-term orientation, such as the United
Kingdom (UK), societies are more prone to honouring traditions, and being suspicious of
change. Success and failure, in this case, are seen as being related to luck (Hofstede, 2011).
2.0 Question 2

As stated in the video, a tariff is a tax that is imposed on a good imported into a country.
According to Keegan and Green (2013), tariffs are made of the “three R’s” of international
trade, which are rules, rate schedules that list duties, and regulations of a country. Tariffs
artificially inflate prices, thus provides price advantage to domestic products over similar
imported goods (Radcliffe, n.d.). When this happens, domestic producers face less competition
due to a decrease in demand for imported products. At the same time, tariffs also raise
government revenues.

The Uruguay Round has reformed the global trading system, in which countries agree to reduce
or eliminate tariffs on imported products. This would lead to improved market access for
countries around the world. Apart from that, the ongoing Doha Round concerns the reduction
of tariffs for the agricultural sector, which would allow free market access in terms of
agricultural goods (World Trade Organization, n.d.).

While tariffs are said to be pro-producers, they are also seen as anti-consumers. There
are theories about how tariffs are merely impediments to the free market, and how the tax levied
on imported goods are at the expense of consumers. The higher price of goods may reduce
consumer welfare in the importing country (“Neoclassical Economics,” n.d.).

Besides tariffs, another barrier to trade is known as quota. A quota refers to the limit on
quantity of a product that can be imported into a country during a certain period of time. It is
imposed by the government to reduce availability of imported goods, ergo protecting domestic
producers.

If the local demand for a commodity good is not sensitive to price changes, a quota is
said to be a more effective trade restriction than tariff. This is simply because quotas are not
affected by the appreciation or depreciation of foreign currencies (“Quota,” n.d.). Aside from
that, tariffs increase revenue for the government, but quotas create surplus for firms with
importing licenses (“Import Quota,” n.d.).

There are several reasons why the government impose tariffs and quotas on imported
goods. For one, they are imposed to protect consumers. A country may impose tariffs and
quotas on imports that may harm its population. For example, South Korea may levy a tariff
on beef products from the USA if the government thinks that the good is not fit for consumption
(Radcliffe, n.d.). Tariffs and quotas are also used to protect domestic producers. The
government encourages the growth of domestic industries by increasing the prices of imports,
which would lead to a decrease in demand for the goods. This would then decrease foreign
competition, and reduce unemployment caused by domestic firms’ need to cut costs. Moreover,
tariffs and quotas are imposed to protect against unfair trade practices, such as dumping; setting
the price of imports below production costs. They help minimize the occurrence of such
activities (“Import Quota,” n.d.). In other words, both tariffs and quotas are forms of
protectionist trade restrictions (“Import Quota,” n.d.).
3.0 Question 3

There are several entry strategies that firms could pursue globally. Based on the video, entry
strategies that are less risky are exporting and franchising. Exporting is defined as “a function
of international trade whereby goods produced in one country are shipped to another country
for future sale or trade” (“Export,” n.d.). For example, Malaysia’s top export products of
January to September of 2015 include electrical and electronic products, chemicals and
chemical products, petroleum products, and palm oil among several others (Malaysia External
Trade Development Corporation, n.d.).

One of the reasons why exporting is considered to be less risky that other entry
strategies is because it involves lower costs. According to Hill (2011), exporting does not
involve high investments of a firm’s resources in another country. Since goods are shipped
from the home country, there is no need to invest in production plants and facilities in other
countries. This would also mean that the company does not have to invest in additional labor
to run the facilities abroad, which makes a home-based production plant far less risky than one
that is set up overseas (Food and Agriculture Organization of the United Nations, n.d.).

Besides that, exporting provides firms with the opportunity to learn about the market
first before making a direct investment. Companies would be able to know their consumers
better; their tastes and preferences, in order to determine the best combination of marketing
activities that would attract these groups of people. This particular strategy would also enable
firms to observe competitors competing in the same market, particularly those who have
already made direct investments in the host country. By doing so, firms would be able to
strategize their move before they decide to directly invest in the country. In addition, companies
who have entered a market via exporting would be able to identify the host country’s
government demand, which would include rules and regulations on various international trade
matters, such as restrictions on pricing.

Another entry strategy that is less risky is franchising. This is a form of licensing
strategy, whereby a contract between a franchiser and franchisee is made, allowing the
franchisee to run a business formed by the franchiser (Keegan & Green, 2013). The main reason
why franchising is less risky is because of its low failure rates, in comparison with starting up
a business from scratch (“Franchising ‘Less Risky’,” 2007). This is because a franchisee would
be backed up by the franchise’s well-known brand image. The business would easily be
recognized simply because people are already familiar with the brand. This indicates that the
franchisee would readily have an established line of loyal customers when starting up the
business.

The second reason why franchising is considered less risky is because of the lower costs
associated with it. For one, the firm would not have to invest heavily on product development
since products are already developed by the franchisor. Take for instance the standard McCafe
(by McDonald’s) menu all over the world. As such, franchisees would not have to fork out
large investments for research and development. Besides that, the franchisee would not have
to spend heavily on marketing the brand as it is already recognized (Griffin, n.d.). Since brand
awareness already exists, advertising the brand is merely to inform the public that the franchise
is now available in the area.

The third reason is related to the assistance provided by the franchisor. When a
franchisee contracts with a franchisor, the latter would provide assistance to the former in
various ways, such as training employees in major areas, namely marketing, accounting, and
human resource management, just to name a few. For fast-food franchises, for instance, the
franchisor would provide training related to proper food handling and food preparation in the
kitchen. The fact that the franchisor would have established relationships with suppliers means
that the franchisee would also have access to quality suppliers that are trustworthy (Griffin,
n.d.).

However, when it comes to entry strategies that higher risks, two particular strategies
are mentioned in the video – joint venture (JV) and direct investment, otherwise known as
foreign direct investment (FDI). A JV is formed when two or more parties agree to work
together and share resources to accomplish a certain task, which is usually a new business
project (“Joint Venture,” n.d.). The advantage if forming a JV is mainly in terms of sharing
knowledge, technological know-hows, as well as the costs and risks involved in the business.

Nonetheless, a JV is still riskier than the aforementioned entry strategies. One of the
reasons for this is because the firm would experience a lack of total control in handling the
business. Because the venture is formed with another party, the firm would have to share its
resources and knowledge with the other party involved. This would include sharing technology
and specific skills. If the firm’s competitive advantage comes from these sources, the firm
would risk exposing its greatest asset to the other company. This is part of the reason why non-
disclosure agreements are commonly formed between parties involved in a JV.
Besides that, conflict between the parties involved may arise in the JV. This could
happen when the firms no longer have the same objectives or opinions pertaining to the venture.
Moreover, the firms may have different management styles, and may be adamant about
pursuing different strategies to achieve business goals. As mentioned by Hill (2011), conflict
in JV often arises when the firms involved are of different nationalities. In cases like this, the
result often is dissolution of the JV. Conflict could also arise between a foreign firm and a local
partner if the foreign firm gains more knowledge about local conditions, ergo becoming less
dependent on its local partner.

Apart from that, lack of communication between the parties involved may occur in a
JV. For example, senior managers and employees in one firm fail to communicate clearly with
those of the other firm. The lack of understanding regarding the overall venture may result in
conflict, or worse, dissolution. This is more likely to occur if the firms entering the JV come
from different cultural backgrounds. For instance, Firm A may be an Asian firm that practices
collectivism, while Firm B is a Western firm that believes in individualism. The different
cultural beliefs may hinder smooth management of the JV.

Besides JV, another entry strategy with higher risks is FDI. FDI is defined as “an
investment made by a company or entity based in another country, into a company or entity
based in another country” (“Foreign Direct Investment,” n.d.). The main reason why FDI is
riskier than other entry strategies is because of the costs associated with it (Hill, 2011). FDI
involves greater costs, specifically to establish production plants and facilities in the host
country (greenfield investment) or acquiring a foreign firm in the host country (acquisition). A
greenfield investment, in particular, involves high capital investments from the firm as it refers
to starting a business in the chosen country from scratch. This is risky, as the firm would have
to ensure that its future return on investment (ROI) would be able to cover its start-up costs.

The second reason why FDI is risky is due to political and economic instability in the
host country. It has to be realized that FDI is a long-term investment. Thus, in order to recover
its costs and gain profit, the firm would have to look at long-term operations in the country
chosen. Sudden political and economic changes in the country would be extremely costly to
the firm, and may leave the firm operating at a loss for months before recovering back.

In addition, the host country may practice a culture that is different from the firm’s
home country. This means that rules, beliefs, and ethical norms would be different. Because of
this, the firm is more likely to make costly mistakes. Take for instance a United States firm
investing in an Asian country, such as Japan. If the firm is not well-versed in Asian culture and
practices, problems may ensue, especially if the firm plans to hire local workers. There would
be a need to adapt management styles and strategies to suit the local culture, and ensure success
in the business. The lack of experience of operating in a different country, particularly one with
a different culture may lead to efficiency loss, and overall ineffectiveness.
4.0 Question 4

Three global product strategies are mentioned in the video. The first strategy involves selling
the same product or service in both the home country market and host country market, which
basically translates to mass production of the same product and service, or global product
standardization strategy (Hill, 2011). In this particular strategy, products or services are
undifferentiated, and a mass market exists globally (Keegan & Warren, 2013). There is limited
product adaptation, or none at all. Example of products categorized under this strategy are
commodity goods, such as rice and cooking oil.

A standardization strategy is usually coupled with an intensive distribution strategy,


whereby the products are made available at as many locations as possible (Kotler & Armstrong,
2012). The benefit of pursuing this strategy is the opportunity to reduce production costs. This
is mainly because firms would not have to spend on product modifications. They would be able
to carry out production in low-cost locations, such as Indonesia, to take advantage of lower
labor costs, for example. Due to the nature of mass production, companies would be able to
achieve economies of scale, whereby the higher the volume of production, the lower the
production costs.

However, a disadvantage associated with a global product standardization strategy is


the firm’s inability to fulfil varying consumer needs and wants in different countries. Different
consumers may have different tastes and preferences, which leads to different desires. For
instance, consumers in country A may put greater importance on having a good camera on their
smartphone, while consumers in country B may be more interested in greater storage space on
their phones. As such, while this strategy may work for commodity goods, it would less likely
be effective for other types of products that require some form of adaptation.

The second strategy mentioned in the video revolves around selling a product or service
similar to that sold in the home country, but include minor adaptations. This is known as a
product adaptation strategy (Hunt, n.d.). This particular strategy involves modifying products
and services to meet local consumers’ needs and wants. Adaptation may be needed due to
different cultural beliefs, or the society’s economic status in the host country. Take for instance,
McDonald’s in India. The fast-food chain in this particular country does not serve beef or pork
burgers to its customers. Instead, the restaurant serves vegetarian burgers. This is because a
majority of the people in India are Hindus or practice Hinduism; a religion that preaches non-
violence towards animals.
The benefit of a product adaptation strategy is the ability to adapt the firm’s products
according to local needs, ergo ensuring that the products would sell in the chosen market. For
example, technological products may be adapted to suit local consumer demands. For less
affluent countries, the firm may downgrade some of the product’s specifications to make it
more affordable and attractive for consumers (Hunt, n.d.). Having said that, this particular
strategy does involve higher costs. Because products are adapted to suit the needs of consumers
in various regions, production costs would increase.

Another strategy mentioned in the video is selling totally new products and services in
the host country, otherwise known as product invention strategy (Hunt, n.d.). This strategy
involves developing products specifically to meet the needs of a particular market or country
(Hunt, n.d.; Mehra, 2011). Take for instance, a country where people are always on-the-go.
Consumers may want a product that allows them to keep with their daily tasks without the
hassle of constantly holding a mobile phone in their hands. Hence, the creation of the
smartwatch, which allows users to use applications or “apps” that are synced with their
smartphones via the smartwatch.

If done right, the product invention strategy could lead to massive sales for a company,
especially if the firm pioneered the idea. The first-mover advantage would lead to global
success for the business. However, this strategy comes with greater investments, particularly
in research and development (R&D). The firm would have to invest more on marketing
research in order to uncover issues faced by consumers, and develop products to overcome
them. Besides that, the firm would also have to invest in product development, which involves
developing the product, or solution for the issue faced, and conducting product tests to ensure
effectiveness and efficiency.