1. . Explain how the dynamic interplay of nation, language and religion shapes the culture of a country.
National cultures are dynamic, they evolve over time, change occurs by choice or by imposition. Change by choice may occur as a reaction to social and economic situations that present people with new alternatives. Change by imposition-sometimes called cultural imperialism-involves imposing certain elements from an alien culture, such as a forced change in laws by an occupying country that, over time, becomes part of the subject culture. Three features are: 1) historical understanding of a nation state. It is a useful de±nition of society because similarity among people is a cause and an eFect of national boundaries. Laws apply primarily along national lines, language and values are shared within borders, and rites and symbols are shared along national lines, 2) language as both a diFusor and stabilizer of culture as language within a country is a unifying force; a shared language between nations facilitates international business, 3) Religion is a cultural stabilizer because it impacts almost every business function, in²uences our consumption and expenditures, and centuries of profound religious in²uence continues to shape cultural values and behavior in these societies (beliefs, ethics, spiritualism)
2. What is political risk? How can we manage political risk?
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- Political risk refers to the risk that political decisions or events in a country negatively affect the profitability or sustainability of an investment
- Political risk represents a very real threat for companies today especially in fast-growing, emerging markets where weak legal systems, makeshift institutions, volatile cities, and fragile regimes complicate the business environment. Moreover, the global credit crisis has aggravated political risk across both developed and developing markets.
- Systemic Risks are risks that impact all firms that operate in the particular political system.
- Procedural Risk refers to the risk evolving from the daily movement of people, products, and funds from point to point in the global market. Each move creates a procedural transaction between the units involved, whether units of a company or units of a country. Political actions sometimes create frictions that interfere with these transactions.
- Distributive Risk is a result of the profits generated by foreign companies in the local economy. If the host country questions the distributive justice of the rewards of operating in its market, it may wonder whether, as the business grows more successful, it is receiving its “fair” share of the growing profits.
- Finally, Catastrophic Risk includes random political developments that adversely affect the operations of every company in a country. Typically, it arises from specific flash points, such as ethnic discord, illegal regime change, civil disorder, or insurrection. It disrupts the business environment in a way that affects every firm in the country. If such disruptions spiral out of control, they devastate companies and nations.
- Managing political risks:
- Be a good corporate citizen (example: participate in development projects, literacy etc.)
- Expand power bases through business relationships (example: joint venture, licensing, political payoffs etc.)
- Study government attitude and participate government incentive programs
- Maintain good relationship with political allies, other embassies in the country
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