Cultural risk arises from differences in customs, social norms, attitudes, assumptions, and expectations of the local society in a host country

Question

Name and describe two of the five specific issues as identified in the textbook relating to cultural differences.
What will be an ideal response?

Answer 1

Answer:
(1) Ownership Structure. The cultural norms of a country may demand that a business be locally owned. Such norms may even work their way into laws and regulations so that the interests of the host country will take precedence over the interests of the foreign country, the original home of the business. Many times this means that in order to start a business operation in a foreign country, it will be necessary to utilize a joint venture business form.
(2) Human Resource Norms. Differences in human resource norms can also present problems. In particular, two aspects loom large—hiring and firing practices, and policies for management positions. The hiring of local citizens instead of bringing in foreign expatriates is often a necessary part of doing business abroad. A second problem can arise from different cultural attitudes toward women or minorities in the work place.
(3) Religious Heritage. Religious differences can also affect the way companies manage employees. Issues surrounding religious observances and dress are part of the daily management issues facing a company doing business in a foreign country.
(4) Nepotism and Corrupt Practices. In many countries, bribes are seen as part of the natural flow of cash that makes transactions and business ventures "go." The real issue surrounding bribery arises when a company is competing with other companies not operating under the same set of domestic laws. One other issue close to bribery is the hiring of relatives—a practice known as nepotism. In this practice, companies are forced by a local government official to hire specific individuals and place them in positions of control.
(5) Intellectual Property Rights. Probably the biggest issue in cultural risk is that of intellectual property rights. Property rights, in general, refer to the right of an individual to use his or her talents and properties (assets) for personal gain. Intellectual property rights are similar, but refer to the product or service that is created by the talents of an individual. Intellectual property rights are established through patents and copyrights in order to protect the goods and services of the original developer and the revenues pertaining to them.