Assignment-I International Business
ALLIANCE BUSINESS SCHOOL SUBJECT- GLOBAL DIMENSIONS OF INTERNATIONAL BUSINESS ASSIGNMENT NO.-1 DATE: 02/03/11 SUBMITTED TO: Prof.M V NARASIMHAN SUBMITTED BY: Akshay Shah Answer: 1 IMPACT OF POLITICAL TURMOIL IN EGYPT ON GLOBAL BUSINESS: Political turbulence in Egypt in casting a poll on world financial markets driving up the prices of crude oil & food and creating new risks for the shaky world economy in the months ahead.
Following are the impacts of political turmoil in Egypt on global business: •
Oil prices reached last week their highest 110 dollar per barrel of raw oil since 2008 & investors sold off both stocks and bonds of many developing nations, particularly in the middle east. • The turbulence on financial markets shows how political upheaval in one place- first Tunisia, now Egypt- can set off hard to predict reverberations around the world, possibly undermining the global economic recovery. • Investors are most concerned that other Muslim nations, particularly those of autocratic leadership & vast oil reserves, will soon see their ruling regimes threatened as well. International organizations also trying to monitor more urgent concerns, what’s going on in Egypt has again reminded world that the world economy is not out of the woods & that things we do not anticipate can have a significant negative effect on global markets & risk sentiment. • Because of political & business instability in Egypt- lead with the problems with foreign receipts & currency. • Economist & Investors all around the world have fear that political developments could disrupt oil exports from Saudi Arabia or other oil reserved nations. •
The greatest threat for global economy- absent a spread of popular revolt to other nations in the middle east or beyond – is the disruption of shopping through the Suez Canal. • In forthcoming days, it will be challenge for government to keep the political stability in Egypt, for smooth business functioning throughout the world & controlling oil prices which are on their peak. Answer 2: IMPORTANCE OF PROPERTY RIGHTS IN GLOBAL BUSINESS ECONOMY: In a legal sense, term property refers to a resource over which an individual or business holds a legal title; that is a resource that it owns.
Resource include land, building, equipment, capital, minerals rights, business and intellectual property. Property Rights refer to the bundle of legal rights over the use to which a resource is put and over the use made of any income that may be derived from that resource. Property Rights are important in the global business economy because:• The philosophy behind protecting property rights in the global business economy, as it is reward to the originator of a new invention, books, musical record, clothes design, restaurant chain and the like; for his or her idea & effort.
Such property rights are very important stimulus to innovation and creative work. They provide An incentive for people to search for novel ways of doing things and they reward creativity. e. g. – Consider an innovation in automobile industry; say a use of non conventional fuel to be used in all kinds of vehicles with maximum efficiency and low cost of fuel. This gives automobile firms an incentive to undertake the expensive, difficult and time consuming basic research required to generate new fuel. (It can cost $800 million in R & D and take 10 years to set a new fuel in the market) Also economic evidences suggests that high levels of corruption i. e. theft of property rights significantly reduce the foreign direct investment, level of international trade, & economic growth rate in a country. By siphoning off profits corrupts politicians & bureaucrats reduce the returns to business investment and hence reduce the incentive of both domestic and foreign businesses to invest in that country. Because of all the above reasons explained it is important to protect property rights to benefit innovator, consumers and to promote healthy competition.
The protection of intellectual property rights differ greatly from country to country. While Many countries have straight intellectual property regulations on their books. Now, 188 countries are members of the “World Intellectual Property Organization”, all of whom have signed international treaties designed to protect intellectual property. Answer: 3 CULTURE AT WORK PLACE BY GEERT HOEFSTEDE: Of considerable importance for an international business with operations in different countries is a how a society’s culture affects the values found in the workplace.
Probably the most famous study of how culture relates to values in the workplace was undertaken by ‘Geert Hoefstede’. As a part of his ob as a psychologist working for IBM, Hoefstede collected data on employee attitudes and values for more than 1,00,000 individuals from 1967 to 1973. This data enabled him to compare dimensions of culture across 40 countries Hoefstede isolated into 4 dimensions:• Hoefstede’s ‘Power Distance’ dimension focussed on how a society deals with the fact That people are unequal in physical & intellectual capabilities.
According to Hoefstede, high power distance cultures were found in countries that let inequalities grow over time into inequalities of power & wealth. • The ‘Individualism versus Collectivism’ dimension focussed on the relationship between The individual and his or her fellows. Individualistic societies, the ties between individuals were loose and individual achievement and freedom were highly valued. In societies where collectivism was emphasized; the ties between individuals were tight. •
Hoefstede’s ‘Uncertainty Avoidance Dimension’ measured the extent to which different cultures socialized their members into accepting ambiguous situations & forecasting uncertainty. Members of high uncertainty avoidance cultures placed a premium on job security, career patterns, retirement benefits and so on. Lower uncertainty avoidance cultures were characterized by a greater readiness to take risks & less emotional resistance to change. • Hoefstede’s ‘Masculinity versus Feminity’ dimensions looked at the relationship between gender & work roles.
In masculine cultures, sex roles were sharply differentiated and traditional “Masculine Values”, such as achievement & effective exercise of power, determined culture ideals. In Feminine cultures sex roles are sharply distinguished, the little differentiation was made between men & women in the same job. Hoefstede created on index score for each of these 4 dimensions that ranged from 0 to 100 And scored high individualism, high power distance, high uncertainty avoidance, & high Masculinity. He averaged the score for all employees from a given country: . g. : Power distance 1) Britain 2) Canada 3) US 4) India 5) Indonesia 6) Mexico 35 39 40 77 78 81 Uncertainty 35 48 46 40 48 82 Individualism Masculinity 89 80 91 48 14 30 From the above table it shows, western nations such as US, Canada, Britain scores High on the individualism scale & low on the power distance scale. At the other extreme are a group of Latin America (Mexico) and Asia (India, Indonesia) that emphasize collectivism over individualism and score high on their power distance scale. 66 52 62 56 46 69