The aim of this assignment is to identify political and cultural risks in Newly Industrialised Economies that means in foreign markets in developing countries. Newly Industrialized Countries (NICs) are still more advanced than countries in the third world or less developed countries. There is not a clear definition for the status of such countries but you can find four main equal characteristics in these countries. Firstly, there is a recent industrialisation that means there is a movement from agriculture to industry. Second there are recent reforms that allow a greater political liberalisation and democracy. You can see increased social freedoms and civil rights and finally there is an increasingly open economy that allows free trade with neighbour countries. NICs often receive support from nongovernmental organisations such as the World Trade Organisation (WTO). [2] As your can see in the case “Qualcomm’s Chinese Odyssey” there can be some difficulties to enter such a Newly Industrialised Country. Qualcomm had to try several times to launch its CDMA technology in China. All in all it took the company more than five years to get the contract signed. Difficulties to enter a foreign market could either be political or cultural.
Table of contents
0 Introduction
1 Political risks
1.1 Political view
1.2 Economic view
1.3 Legal view
2 Cultural risks
3 Strategies to manage risks
4 Conclusion
5 Reference list
Assignment Objectives and Key Themes
The primary objective of this assignment is to identify and analyze the political and cultural risks associated with entering foreign markets, specifically within Newly Industrialized Economies (NIEs). It explores the challenges international corporations face when operating in developing countries, balancing home and host country requirements, and developing strategies to mitigate these inherent risks.
- Political risk assessment (political, economic, and legal systems)
- Cultural risk factors (religion, language, and ethical considerations)
- Strategic risk management and market entry approaches
- The importance of conducting comprehensive risk analysis
- Challenges in international business operations and compliance
Excerpt from the Book
1.3 Legal view
Also the legal system plays an important role in consideration of the risk in developing countries. “Legal systems of a country are rules or laws that regulate behaviour and the processes by which laws are enforced and grievances redressed.” [1] There are three main legal systems in the world: Common law which is based on tradition, precedent and custom; civil law which comprises a detailed set of laws organised into codes; and theocratic law which is based on religious believes. Problems which occur in this context are in connection with property rights, which are legal rights over the use of a resource and its income, and the protection of intellectual property. This is granted firstly through patents, which are exclusive rights to manufacture, use and sale of an invention. Secondly you have the copyright which is similar to patents but which is for authors, composers, artists or publishers. And the last protection is a trademark which is a unique design or name. Trademarks are often officially registered. In developing countries the legal system often is not able to cope with the protection of this intellectual property and this can lead to piracy problems. That means that domestic manufacturers produce products such as software, shoes, clothes, jewellery or videogames cheap but sell it as a known brand such as the ‘Microsoft X-box case in East Asia’. The problem in this case was that local producers modify the product so that it was possible to play pirated games on the x-box which leads to looses of $200 each. Another general example is the large street markets in Poland or Czech Republic where you can buy imitates of for example ‘Levis Jeans’ or ‘Adidas Sweater’. Although the sales of these imitated products are illegal the government does not prohibit these markets or control the markets and dealer. These problems of counterfeiting are a world-wide problem and some companies have already started a global offensive against counterfeiters.
Summary of Chapters
0 Introduction: This chapter defines the scope of the study, identifies characteristics of Newly Industrialized Countries (NICs), and introduces the challenges of entering such markets through the example of Qualcomm.
1 Political risks: This section categorizes risks into political, economic, and legal frameworks, analyzing how governmental systems and interventions impact international business.
2 Cultural risks: This chapter examines the influence of religion, language, and ethical standards on international business operations, highlighting the necessity of respecting local values.
3 Strategies to manage risks: This chapter offers practical recommendations for international firms, such as hiring local staff, utilizing interpreters, and adopting incremental market entry strategies.
4 Conclusion: The concluding chapter emphasizes that while entering NIE markets involves complex risks, a thorough risk analysis enables companies to calculate potential costs and determine the most effective mode of entry.
5 Reference list: This section provides the bibliographical details of the sources cited throughout the assignment.
Keywords
Political risks, Cultural risks, Newly Industrialized Economies, NIE, International Business, Market entry, Risk analysis, Intellectual property, Ethics, Global strategy, Religion, Language barrier, Legal systems, Economic infrastructure, Foreign investment.
Frequently Asked Questions
What is the primary focus of this assignment?
The assignment focuses on identifying and assessing the specific political and cultural risks that international companies encounter when expanding into Newly Industrialized Economies (NIEs).
What are the central thematic areas discussed in the text?
The core themes include political stability, legal systems, cultural norms (such as religion and language), ethical labor practices, and strategies for risk mitigation.
What is the core research goal?
The goal is to demonstrate how a comprehensive risk analysis helps firms prepare for the complexities of developing markets and ultimately informs better decision-making regarding market entry.
Which methodology is applied in this research?
The research adopts a qualitative case study approach, utilizing real-world examples (e.g., Qualcomm, McDonald’s, Nike) to illustrate theoretical concepts regarding business risks.
What aspects are covered in the main body?
The main body examines three pillars of risk: political (ideologies and stability), economic (infrastructure and trade policy), and legal (property rights), followed by cultural risks and management strategies.
Which keywords best describe this paper?
Key terms include political risks, cultural risks, international business, market entry strategy, and NIE market dynamics.
How does the author suggest dealing with cultural barriers in business?
The author suggests hiring local staff, using interpreters to avoid communication faux pas, and respecting local traditions, such as religious dietary restrictions or business etiquette.
Why is the "Enron case in India" cited in the document?
It is cited as a prime example of the difficulties companies face in predicting local political shifts, managing project cancellations, and navigating uncertain regulatory and economic environments.
- Quote paper
- Marieluise Bruch (Author), 2004, Political and cultural risk in NIE foreign markets, Munich, GRIN Verlag, https://www.grin.com/document/38038
