Understanding Country

Differences

Jouhara G. San Juan Dr. V. V. Salentes

DBA Student Professor Lecturer
Flow of Presentation

• National Differences in
Political Economy
• Differences in Culture
 DIFFERENCES: POLITICAL
ECONOMY
 THE POLITICAL ECONOMY
is made up collectively
of:
A. POLITICAL SYSTEMS
B. ECONOMIC SYSTEMS
C. LEGAL SYSTEMS
 A. Political Systems
Question: What is a political system?

• A political system is the system of

government in a nation
• Political systems can be assessed
according to two dimension:
• collectivism VS individualism
• democratic VS totalitarian
 Political Systems
1. Collectivism - stresses the primacy of collective goals
over individual goals
-needs of many outweigh needs of the few. Example:
China , Korea, Japan , Philippines
2 . Individualism - suggests individuals should have

freedom over their economic and political pursuits

-Interests of individuals take precedence over needs of the
State.
Example: US, Great Britain, Sweden
3 . Democracy - government is by the people, exercised

either directly or through elected representatives

- The people are the state
Example: US, Japan , Australia, Finland
4. Totalitarianism - one person or political party exercises

absolute control over all spheres of human life, and opposing

political parties are prohibited
Example: Saudi Arabia, Iran , China
 B. Economic Systems
Question: What is an economic system?
An economic system is a means by which
societies or governments organize and distribute
available resources, services, and goods across a
geographic region or country. Economic systems
regulate factors of production, including capital, 
labor, physical resources, and entrepreneurs. An
economic system encompasses many institutions,
agencies, and other entities.

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ECONOMIC SYSTEMS
There are three types of Economic System

1. MARKET ECONOMY: Production

determined by supply/demand.
•- all productions are privately owned, the
goods/services are not planned by anybody but by
the supply- demand theory.
- Monopoly must not exists in this economic system.
- Government encourages free and fair competition
between private producers.
•Example: Japan, USA, Sweden, Colombia, Mexico
2. COMMAND ECONOMY: Production planned by the Government

•-Government plans the quantity the price of

goods /services to produce within.
- All businesses are state owned .
- The objective is to mobilize economic
resources for public good.
- -scope of efficiency is very low under this
system .
- Example: Cuba , Peoples Republic of
China
3. MIXED ECONOMY: Elements of both of the above

• when some sectors of economy are privately

owned and some are public, depending on the
nature of the sector and government takes
over companies when they run into severe
financial problems to save them from being
bankrupt.
Example: Renault in France and AIG of America
 C. Legal Systems
Question: What is a legal system?

• Legal system - the rules, or laws, that regulate

behavior, along with the processes by which
the laws of a country are enforced and through
which redress for grievances is obtained
• Laws:
• Regulate business practice
• Define the manner in which business
transactions are to be executed
• Set down the rights and obligations of those
involved in business transactions
 Legal Systems

There are three main types of legal systems:

1. Common law - based on tradition, precedent,
and custom
2. Civil law - based on a very detailed set of
laws organized into codes
3. Theocratic law - based on religious
teachings

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 DIFFERENCES: CULTURE

• “A system of values and norms that

are shared among a group of
people and that when taken
together constitute a design for
living.”
-Hofstede, Namenwirth and
Weber
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Different components of culture

• Values and Norms

• Folkways and mores

 Values and norms
• Values: Abstract • Norms: social rules and
ideas/assumptions guidelines that
about what a group prescribe appropriate
believes to be good, behavior in particular
right and desirable situations
Example: Example:
Honesty Expectation of
appropriate behavior is
not to cheat
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 Folkways and mores
• Folkways: Routine
• Mores: Norms central to
conventions of everyday
the functioning of society
life. and its social life
– Little moral – Greater significance
significance than folkways
– Generally, social – Violation can bring
conventions such as serious retribution
dress codes, social • Theft, adultery, incest
manners, and and cannibalism
neighborly behavior Example: Mores in
Example: Japanese Folkways Saudi Arabia

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Determinants of culture

1. Social structure
2. Religion
3. Language
4. Education
5. Economic philosophy
6. Political philosophy
1. Social structure
• Refers to basic social
organization
• the first degree to
which the basic unit of
social organization is
the individual
• the second is
degree to which a
society is stratified
(layered) into classes or
castes Indian Caste
System
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 2. Religious and ethical systems
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• A system of shared beliefs and rituals that

are concerned with the realm of the sacred
• Refers to a set of moral principles or values
that guide and shape behaviour.
• Most of the world’s ethical systems are the
product of religion. Different religions have
their own ethical system.
Example:
• Islam prohibits payment of interest. So
banks operating in Islamic nations should
consider this.
• Religion may affect international
business. E.g. McDonalds in India supply
mutton patty (Maharaja Mc) as beef is taboo
in Hindu religion.
• Women in Middle East cannot be
involved in market research openly/ Single
women can not work
 3. Language

• is one of the defining characteristic of a culture

Language can be divided into two major elements.
a. Spoken- people can communicate with each other.
-the nature of a language structures the way we perceive the world.
b. Unspoken-it is used in non verbal communication by a host of non
verbal cues.
4. Education

• Plays a key role to society

• Is the medium through which individuals learn
many of the language , conceptual and
mathematical skills that are indispensable in a
modern society.
– Example
• Japan

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 5. Economic Philosophy

• Concerns itself with the

methodological , and ethical
issues that arise within the
scientific discipline of economics.
e.g. Mixed Economies , Laissez
Faire, State Capitalism
6. Political Philosophy
• Is the fundamental question about
the state , government , politics,
liberty , justice and the enforcement
of a legal code by authority.
Ex. Utilitarianism
-sacrifice of some in favour of the
majority
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Relationship of Culture and Workplace 

Hofstede’s Theory of Culture
• In 1967-1973 Professor Geert Hofstede conducted
the comprehensive studies on how values in the
workplace is influence by culture
• He identified four dimensions:
1. Power Distance
2. Uncertainty Avoidance
3. Individualism VS Collectivism
4. Masculinity VS Femininity.
Hofstede’s Theory of Culture
:Power distance

• Power Distance: This dimension focused on how a

society deals with the fact that people are unequal in
physical and intellectual capabilities.
High power distance societies let inequalities grow
over time into inequalities of power and wealth.
(Hierarchical organizational structure & bureaucracy)
Low power distance societies try to lower such
inequalities as much as possible. (Encourage flat
organization structure and increased cooperation)
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 Hofstede’s Theory of Culture : Uncertainty
Avoidance
• Uncertainty Avoidance: This dimension measures the extent
to which different cultures socialize their members into
accepting ambiguous situations and tolerating uncertainty.
High uncertainty avoidance
-less comfortable with uncertainty
-often requires rigid code of behaviour and beliefs
Low uncertainty avoidance
-open to new ideas
-flat organizational structure
-more willing to take risk.
Hofstede’s Theory of Culture : Individualism
versus collectivism
• This dimension focuses on the relationship between
the individual and his/her fellows within a culture
– Individualistic societies:
• loose ties
• individual achievement and freedom highly valued
• Collectivist societies-
• tight ties
• tend to be more relationship
• oriented

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Hofstede’s Theory of Culture :
Masculinity versus Femininity
• Masculinity versus Femininity:
• This dimension looks at the relationship
between gender and work roles.
In masculine cultures, gender roles are
sharply differentiated (men and Women have
specific job), while in feminine cultures, gender
roles are less differentiated (no difference is
made between men and women in the same
job).
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