Doing Business in Africa–TD Review – September 20th 2022, Dr Diao Abd.

BEM_ Bachelor in International Management – IMP3 – 2022

TD A RENDRE
PART I: outline questions

Describe the context approach to understanding cultural differences

Low context culture: communication is takes at face value without much reliance.
High context culture:
Power distance; individualism and collectivism; masculinity and feminity; uncertainty avoidance;
long term orientation

Describe in brief the different forms of totalitarianism.

On the opposite end of the political spectrum from democracy is totalitarianism:
 communist totalitariasm: was embraced throughout Central and Eastern
Europe and the former Soviet Union
 Theocratic totalitariasm refers to the monopolization of political power in the
hands of on religious party or group.
 Tribal totalitarianism: refers to one tribe or ethnic group monopolizing political
power and oppressing other tribes or ethnic groups.
 Right wing totalitarianism: is characterized by its intense hatred of
communism

How do international businesses respond to violations of their intellectual property?

One fundamental economic function that a legal system serves is to protect
property rights. He is legal rights associated with the ownership of intellectual
property

PART II : True / False Questions

1. Institutional framework pertains only to a firm's behavior.

A. TRUE
B. FALSE

2. An institutional framework is made up of formal and informal institutions governing individual

and firm behavior.
A. TRUE
B. FALSE

3. The laws of a country are part of the formal institution.

A. TRUE
B. FALSE

4. The regulatory pillar supports both informal and formal institutions

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 Doing Business in Africa–TD Review – September 20th 2022, Dr Diao Abd.
BEM_ Bachelor in International Management – IMP3 – 2022

A. TRUE xxxxxxxxxxxxxxxx
B. FALSE

5. The normative pillar supports informal institutions.

A. TRUE xxxxxxxxxxxxxx
B. FALSE

6. The values and beliefs of a culture are examples of a formal institution.

A. TRUE
B. FALSE cognitive pillar

7. Cognitive pillar is the coercive power of governments.

A. TRUE
B. FALSE

8. Force majeure is a method of interpreting a statute by understanding the legislative history

leading up to the adoption of that statute.
A. TRUE
B. FALSE

9. Disabling formal institutes does not affect transaction costs.

A. TRUE
B. FALSE

10. Opportunism is a source of transaction costs.

A. TRUE
B. FALSE

11. Transition economies have static institutions.

A. TRUE
B. FALSE

12. According to the institution-based view, managers and firms make choices outside institutional
constraints.
A. TRUE xxxxxxxxxxxxx
B. FALSE

13. Proposition 1 of the institution-based view specifically concerns bounded rationality.

A. TRUE
B. FALSE

14. Economic systems are examples of formal institutions.

A. TRUE
B. FALSE

15. Right-wing totalitarianism refers to the monopolization of power in the hands of a communist
party.

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 Doing Business in Africa–TD Review – September 20th 2022, Dr Diao Abd.
BEM_ Bachelor in International Management – IMP3 – 2022

A. TRUE xxxxxxxxxxxxxxxxx
B. FALSE

16. Theocratic totalitarianism refers to the monopolization of political power in the hands of one
religious party.
A. TRUE
B. FALSE

17. Totalitarian countries have less political risk than democratic ones.
A. TRUE
B. FALSE

18. Firms operating in democracies never confront political risk.

A. TRUE
B. FALSE xxxxxxxxxxxxx

19. Civil law uses comprehensive statutes and codes as a primary means to form legal judgments.
A. TRUE
B. FALSE

20. The common law tradition is mostly spread in non-English speaking countries.
A. TRUE
B. FALSE

PART III: Answer the following questions

1. State backed corps dominate Rwanda's Business Landscape

 Battle between ruling party RPF and the nations army
 RPF's company is Crystal Ventures
 Ministry of Defense's company is Horizon Group
 Both groups split contracts
 Private sector worry the two corps squeeze out competition will ruin Rwanda's
development
 Hard to track tax records

A. Contrast Beijing Consensus vs. Washington Consensus

B. What is the role of the ruling party in the Rwandan economy?
C. How is Morocco investing more in Africa and how/why are Moroccan
investments moving south?
D. Pros of doing business in Egypt

2. Ethiopia has produced a China-Style boom

 They have the largest economy in East Africa
 Aims to be next global manufacturing job

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 Doing Business in Africa–TD Review – September 20th 2022, Dr Diao Abd.
BEM_ Bachelor in International Management – IMP3 – 2022

 Hoping the growth of the economy and jobs will help stop protests
 Want to go from agriculture to manufacturing
 Cheap power and labor are reasons for companies to move to Ethiopia
 Plans to expand commercial farms and modernize technology
 Improved infrastructure

A. How does Ethiopia apply Chinese economic development?

Why does Ethiopia think it's the china of Africa?
B. Cons of doin3g business in Egypt
C. Pros of doing business in Egypt
D. How is Morocco investing more in Africa and how/why are Moroccan
investments moving south?

3. the monopolization of political power in the hands of one religious party or group

A. Right-wing totalitarianism
B. Tribal totalitarianism
C. Theocratic totalitarianism
D. Communist totalitarianism

4. a term referring to a system characterized by the "invisible hand" of market forces: government
takes a hands-off approach known as the laissez faire

A. Market economy
B. Normative pillar
C. Command economy
D. Mixed economy

5. a view centered on the unquestioned belief in the superiority of private ownership over state
ownership in economic policymaking that is often spearheaded by two Washington-based
international organizations: the International Monetary Fund and the World Bank

A. Institutional framework
B. Institutional transitions xxxxxxx
C. Washington Consensus
D. Institution-based view

6. legal rights awarded by government authorities to inventors of new products or processes, who
are given exclusive rights to derive income from such inventions through activities such as
manufacturing, licensing, or selling

A. Patents
B. Piracy
C. Copyrights
D. Trademarks

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 Doing Business in Africa–TD Review – September 20th 2022, Dr Diao Abd.
BEM_ Bachelor in International Management – IMP3 – 2022

7. Include norms, cultures, and ethics

A. Informal institutions
B. Institutional transitions
C. Institutional Framework
D. Institutions

8. Which of the following is a proposition of the institution-based view?

A. Decisions based on bounded rationality should be avoided. xxxxxx
B. Dependency on informal constraints will always increase the political risks associated
with a firm.
C. When formal constraints are unclear, informal constraints will play a larger role in
reducing uncertainty and providing constancy to managers and firms.
D. Informal constraints always increase transaction costs for the firm.

9. A fundamental aspect of _____ is that it effectively conducts global business by providing an

individual the right to freedom of expression and organization.

A. Communist totalitarianism
B. Right-Wing totalitarianism
C. Democracy
D. Theocracy

10. Which of the following is a feature of right-wing totalitarianism?

A. It does not curtail an individual's right to freedom of expression and organization.

B. It concentrates power in the hands of one or more religious groups.
C. It bases its economic policies on communist ideologies. xxxxxxxx
D. It does not allow room for political freedom.

11. Which of the following is true of the civil law system?

A. It is the most widely distributed legal system around the world.

B. It originated in England, and was then spread as the legal system for all its former
colonies.
C. It is shaped by precedents and traditions from previous judicial decisions.
D. It allows judges to interpret the law before making judicial decisions.

12. _____ refers to the quality of a society that perceives its own culture, ethics, and norms as
natural, rational, and morally right.

A. Polycentrism
B. Ethnocentrism
C. Anthropocentrism
D. Social mobility xxxxxxxxxxx

13. Which of the following aspects of a culture would be categorized as an informal institution?

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 Doing Business in Africa–TD Review – September 20th 2022, Dr Diao Abd.
BEM_ Bachelor in International Management – IMP3 – 2022

A. Ethics
B. Politics
C. Economics
D. Laws

14. Which of the following is a factor for English being accepted as the global business language?

A. English speakers have traditionally been more mobile than non-English speakers.
B. English is far easier to translate to and from, than any other language.
C. English-speaking countries contribute the largest share of global business output.
D. English is the largest language in terms of the number of native speakers.

15. Which of the following languages is considered the lingua franca of global business?

A. English
B. Chinese
C. Spanish
D. French

16. The hierarchical arrangement of individuals into categories such as classes, castes, or
divisions within a society is referred to as _____.

A. Social dumping
B. Social stratification
C. Social facilitation
D. Social loafing xxxxxxxxxx

17. Social mobility refers to the degree to which A

A. members from a collectivist society move to an individualist society XX

B. members from a lower social category move to a higher social category
C. people from emerging economies move to developed economies
D. people from developed economies move to emerging economies

18. Which of the following statements is true about low-context cultures?

A. Communication relies a lot on the underlying unspoken context.

B. Communication depends equally between the unspoken and spoken contexts.
C. Communication primarily depends on body language.
D. Communication is usually taken at face value.

19. In ____ cultures, the unspoken context is as important as the words used during
communication.

A. high-context
B. low-context

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 Doing Business in Africa–TD Review – September 20th 2022, Dr Diao Abd.
BEM_ Bachelor in International Management – IMP3 – 2022

C. individualistic
D. collectivist

20. A _____ is the highest cultural grouping of people and the broadest level of cultural identity
people have.

A. clan XXXX
B. chiefdom
C. civilization
D. tribe

21. Which of the following cultural clusters contains the group “Hindu”?

A. The GLOBE clusters XXXXX

B. The Huntington civilizations
C. The Ronen and Shenkar clusters
D. The Kogut-Singh cultural index

PART IV: CASE STUDIES 1: Adam Smith Versus Deng Xiaoping

Adam Smith would probably turn in his grave if he heard that in 2008, the fundamental principle of
his theory first published in 1776 in The Wealth of Nations, laissez faire (the idea that governments
should be hands-off when managing the economy), would be severely challenged. Most strikingly,
these challenges came from the United States and Great Britain—the two countries so deeply in
love with Adam Smith that they had often preached “free market principles” around the world until
recently.

To be sure, the times were tough: Financial markets were melting down, banks were failing left
and right, and consumer and investor confidence were reaching all-time lows since the Great
Depression. However, the solutions turned the unthinkable into a new orthodoxy. Labeled “radical
intervention” or even “financial socialism,” the solutions centered on nationalization of failing banks
and financial services firms. Yet, for over three decades (since the 1980s), privatization—the
complete opposite of nationalization—had been largely in the air.

On October 3, 2008, the Emergency Economic Stabilization Act, commonly known as the $700
billion bank bail -out plan or the Paulson plan (named after then-US Treasury Secretary Henry
Paulson in the George W. Bush Administration), was passed. The Congressional debate prior to
its passage was ferocious, because critics argued that this would clearly violate the enshrined free
market principle of nonintervention. On October 15, Paulson announced the first step of
implementation, by injecting $125 billion into eight banks: Bank of America, JPMorgan Chase,
Citigroup, and Wells Fargo obtained $25 billion each, Goldman Sachs and Morgan Stanley $10
billion each, and Bank of New York and State Street between $2 billion and $3 billion each. In

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 Doing Business in Africa–TD Review – September 20th 2022, Dr Diao Abd.
BEM_ Bachelor in International Management – IMP3 – 2022

return, the US government, having turned these banks into (partially) stateowned enterprises
(SOEs), would take non-voting preference shares paying 5% interest.

This action was so at odds with the free market tradition in the United States that its principal
architect, Paulson, admitted that it was “objectionable.” In Paulson's own words at a press
conference: Government owning a stake in any private US company is objectionable to most
Americans, me included. Yet the alternative of leaving businesses and consumers without access
to financing is totally unacceptable.

Similarly, on October 8, 2008, the UK government announced a £400 billion ($692 billion) rescue
package to inject cash into UK banks. The justification was that if the government had not acted,
UK banks faced the real risk of collapse. So used to being lectured by the British about “free
markets,” other EU governments were reluctant to believe this initially. But they quickly followed
UK actions by bailing out their own troubled banks.
By the end of 2008, governments in most developed economies became the largest shareholders
in their financial industries, reversing three decades of deregulation and privatization.
No doubt, these actions will be recorded as an important turning point in economic history,
triggering a fundamental re-think regarding the merits of private ownership and state ownership.
The once-cherished assumptions about the superiority of the
US economic model, centered on more market forces and less government intervention, are now
in doubt. Recently, French President Nicolas Sarkozy announced that such “laissez faire
capitalism is over.” The irony was that he had been elected in 2007 on a campaign platform
promising to practice more “AngloSaxon capitalism” in France.

“Forget Adam Smith. Whatever Works.” This is the title of a Business Week article in October
2008. On October 11, Federal Reserve Bank of Dallas President Richard Fisher gave a speech at
the Group of Seven (G-7) finance ministers meeting in Washington, and borrowed a line from the
late Chinese leader Deng Xiaoping: “Regardless of whether it is a white cat or a black cat, as long
as it can catch mice, it is a good cat.”

Of course, Deng in the early 1980s popularized his pragmatic “cat theory” in an effort to transform
China from a command economy to a market economy. Interestingly, nearly three decades later,
the “cat theory” was being invoked in a totally opposite direction. The upshot is that to the same
extent that a pure command economy does not exist, a pure free market economy does not exist
either. No doubt the post-bailout United States and Great Britain can still be labeled “market
economies,” but it is prudent to drop the “F” word. In other words, let's drop the “free” from the term
“free market economies.”

Sources:
“Forget Adam Smith. Whatever works.” BusinessWeek, 27 October 2008, 22–24;
“Business in America,” Economist, 30 May 2009, special report;
“Is Sarkozy a closet socialist?” Economist, 15 November 2008, 61–62;
“US injection lifts confidence,” Financial Times, 15 October 2008, 1; “
Whatever it took,” Financial Times, 15 October 2008, 11;
M. W. Peng, G. Bruton, and C. Stan, “Theories of the (state-owned) firm,” working paper, University of Texas at Dallas, 2011;
R. Reich, “Government in your business,” Harvard Business Review, July–August 2009: 94–99.

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 Doing Business in Africa–TD Review – September 20th 2022, Dr Diao Abd.
BEM_ Bachelor in International Management – IMP3 – 2022

Questions
1) What are the benefits and costs of private ownership?

By the end of 2008, governments in most developed economies became the largest shareholders
in their financial industries, reversing three decades of deregulation and privatization. Similarly, on
October 8, 2008, the UK government announced a £400 billion ($692 billion) rescue package to
inject cash into UK banks. The justification was that if the government had not acted, UK banks
faced the real risk of collapse. So used to being lectured by the British about “free markets,” other
EU governments were reluctant to believe this initially. But they quickly followed UK actions by
bailing out their own troubled banks.

2) What are the pros and cons of state ownership?

Advantages: On October 15, Paulson announced the first step of implementation, by injecting
$125 billion into eight banks: Bank of America, JPMorgan Chase, Citigroup, and Wells Fargo
obtained $25 billion each, Goldman Sachs and Morgan Stanley $10 billion each, and Bank of New
York and State Street between $2 billion and $3 billion each. In return, the US government, having
turned these banks into (partially) state-owned enterprises (SOEs), would take non-voting
preference shares paying 5% interest.
Inconvenient:

3) What are the political ideologies behind such ownership arrangements? Accord de proprieté
arrange base sur un contrat de prestation
-- chercher le meilleur dans le domaine
--Toute personne physique ou morale qui sera impacte par l’entreprise :partie prenante

Similarly, on October 8, 2008, the UK government announced a £400 billion ($692 billion)
rescue package to inject cash into UK banks. The justification was that if the government had
not acted, UK banks faced the real risk of collapse. So used to being lectured by the British
about “free markets,” other EU governments were reluctant to believe this initially. But they
quickly followed UK actions by bailing out their own troubled banks.

4) 4) Why are the stakes so high?

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