Pre-Reading
Pre-Reading Activity
Look at this diagram below. It summarizes the beginning of the reading. Then, discuss the questions below.
- How can political issues be a threat to international business?
- How can cultural differences affect international business?
- What cross-cultural differences do business people need to be aware of?
- How can the economic environment, whether a country is rich or poor, affect international business?
- What other threats or opportunities do businesses face in the global marketplace?
Reading 4: Threats and Opportunities [1]
Threats and Opportunities in the Global Marketplace
To be successful in a foreign market, companies must fully understand the foreign environment in which they plan to operate. Political, cultural, and economic differences can both offer opportunities and cause problems in the global marketplace.
Political Considerations
We have already discussed how tariffs and other governmental actions threaten foreign producers. The political structure of a country may also jeopardize a foreign producer’s success in international trade.
Intense nationalism, for example, can lead to difficulties. Nationalism is the sense of national consciousness that boosts the culture and interests of one country over those of all other countries. Strongly nationalistic countries, such as Iran and New Guinea, often discourage investment by foreign companies. In other, less radical forms of nationalism, the government may take actions to hinder foreign operations. France, for example, requires pop music stations to play at least 40 percent of their songs in French. This law was enacted because the French love American rock and roll. Without enough airtime, the French music industry would suffer a further loss.
The political climate can be even more hostile. Governments occasionally expropriate a foreign company’s assets, taking ownership and compensating the former owners. Even worse is confiscation, when the owner receives no compensation. This happened during rebellions in several African nations during the 1990s and 2000s.
Cultural Differences
Central to any society is the common set of values shared by its citizens that determine what is socially acceptable. Culture underlies the family, educational system, religion, and social class system. Together these systems promote certain values. These values have a tremendous effect on people’s preferences and thus on how businesses market their products. For example, in South Korea, Walmart hosts a food competition with variations on a popular Korean dish, kimchee.
Language is another important aspect of culture. Marketers must take care in selecting product names and translating slogans and promotional messages so as not to convey the wrong meaning. For example, Mitsubishi Motors had to rename its Pajero model in Spanish-speaking countries because the term refers to a sexual activity. Toyota Motor’s MR2 model dropped the 2 in France because the combination sounds like a