NMIMS

INTERNATIONAL BUSINESS

Q.1 George Bush gave Chinese Premier Li Peng a gift of cowboy boots embroidered with the
American and Chinese flags in it. This act was criticized widely by many diplomats on account
of a significant miss on the part of administration protocol experts. Discuss the above case
highlighting the importance of culture in international business.

Answer:

Highlights of the given case:

Former American President George Bush once presented Li Peng, the then Chinese Premier, a gift of
cowboy boots embroidered with the American and Chinese flags. Unfortunately for the American
President, in China, feet are considered the least sacred parts of the body. A gift of shoes embossed
with their nation’s flag was a disastrous cultural blunder and a huge oversight by the President’s
office.
To become an expert in every culture around the world is not viable for any SME. However, in order
to build longstanding successful relationships with overseas clients, it is important that businesses
take the time to consider the customs and traditions of their export markets.

When George Bush gave Chinese Premier Li Peng a gift of cowboy boots embroidered with the
American and Chinese flags, was it an appropriate gift?

Unfortunately, in China, the soles of the feet are considered to be the lowliest part of the body
and gifts of footwear, no less embossed with the nations’ respective flag, was a significant miss
on the part of administration protocol experts.

Culture establishes the norms of social behavior in a country and therefore determines the way a
business should handle negotiations and customer interaction, which products and services are
suitable and how to approach marketing.

Here are a few of the key cultural considerations to take into account before exporting to a new
country:

Social and Cultural Traditions:

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Ensuring social and cultural traditions are researched will prevent a new market flop. This covers an
extensive list of possibilities from acceptable behavior and whether a population is inclined to follow
the latest fashions to what and how often the inhabitants eat. Some of these may seem obvious, for
example, an advertising campaign in Islamic countries with models revealing too much skin would be
wholly inappropriate. Other things are less obvious and require careful research, for instance, colors
are extremely symbolic in China. Avoid using the color white on branding or marketing as the
Chinese associate it with funerals.

Educational Standards:
Educational standards are evidently important for assessing the spending power of a country.
However, it will also determine other areas such as how to address the tone of a marketing campaign.
In the case of countries with high illiteracy rates it will shape the type of marketing employed. In
these countries, adverts with large amount of text would be ineffective.

Religion:
Businesses must appreciate the importance of religion in many export markets. Sharia law, for
example, is incorporated into many Muslim countries and influences not only politics and economics
but personal matters such as hygiene and diet. For example, many personal care products, cosmetics
and medicines would be considered illegal under sharia law as they contain alcohol and are therefore
not considered Halal.

Gender:
Some cultures still have very defined gender roles. Businesses need to be cautious of this when
outlining their target audience and marketing a product or service. Marketing that may appear unisex
in the UK could alienate an entire gender in other countries.

Market research studies are a useful approach for understanding culture in new markets and
developing export strategies. Through acquiring a thorough understanding of a country’s culture,
businesses can determine if there will be potential demand for their product or service.

The other key consideration that sits alongside culture is language. Language and culture are
intertwined and both need to be employed to create an effective export strategy. Translating
marketing material, packaging and instructions into a target market’s key language is the first logical
step. Ensuring that text isn’t just simply translated, but also written in a style and manner appropriate
for the culture of the export market is vital too.

Importance of culture in international business:

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Doing business on a global basis requires a good understanding of different cultures. What works in
your country might not work well in another, and could even be interpreted as an insult! And in your
role as an international human resources professional, it’s important to raise the awareness of cultural
issues within your organization to ensure effectiveness. When doing business in the Middle East, the
surest indicator of a successful business relationship has very little to do with the content of the
contract or the extent to which the language will hold up in court.

Court systems in many of these countries move slowly with inconsistent results, and your business
counterparts in many Middle Eastern countries do not put their faith in the legal system to determine
the outcome of a conflict. Absolutely essential to the success of the deal is the interpersonal rapport
and relationship established during the negotiation stage and at every point thereafter. Failure to
understand and cultivate this aspect of the deal increases the risk of failure to a critical degree.

The risk of email is that it lacks certain social contextual cues such as body language, eye contact and
intonation and can therefore create misunderstandings. There is also no way to see the demeanor or
reaction of your counterpart and adjust your communication strategy to compensate for a
misunderstanding once it is created. When in doubt, it is always safer to err on the side of greater
formality and deference. The Japanese have become accustomed to making allowances for informal
communication from other countries, but you will proceed with more credibility if you make a sincere
effort to adapt to their customs.

The cultural nuances that affect international business obviously go far beyond the ability to greet
your international colleague or choose the correct gift. Issues related to the culture’s time orientation,
whether it is an individualist or collectivist society, space orientation, and power distance, not to
mention conflict assumptions and non-verbal communication all affect understanding your colleague
across the table, as well as your chances of being understood.

Preparation by a trained expert related to these issues not only assures that unnecessary blunders will
be avoided, it brings to each of us a personal knowledge that deepens our understanding of others,
thereby promoting acceptance, understanding, and on the level of international relations, peace and
prosperity.

Q.2 Discuss how McDonald illustrate the blend of product standardization and Product
adaptation strategy in international business.

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Answer:

According to Levitt (1983) and Ohmae (1989) standardisation refers to where firms operating at the
global level attempt to standardize their products and communications to all markets within which
they operate around the world.

Proponents of global standardization such as (Levitt 1983; Ohmae, 1989) argue that a corporation
should operate as a single entity selling the same items everywhere in the same way. They believe the
world is increasingly homogenized in its consumer requirements and that the force driving this
process is technology, which has facilitated communication, information, capital, transport and travel.
The rise of global media giants such as MTV, CNN etc lend weight to the notion that
communications technology is the major negotiator of convergence of human preference in that
technology facilitates the global spread of promotional messages resulting in homogenization of
consumer tastes across the world. Levitt’s (1983) notion of homogenization of consumer taste refers
to a worldwide desire for modern, low priced, world-standard and dependable products from the
modern world.

Product standardization and adaptation Strategy for McDonald's:

When you are running a small business, it is easy to look at chains like McDonald's with disdain, but
there is a lot that you can learn from their success. Part of the success enjoyed by McDonald's stems
from their product development strategy. By familiarizing yourself with the way McDonald's
develops products, you can apply the same methods to your own products whether they are food
products or other consumer goods.

McDonald's features several products on their menu that are permanent and do not change. Examples
of this include their basic hamburger and cheeseburger, the Big Mac and the Quarter Pounder. After
the initial development, these items remain on the menu for extended periods of time without
undergoing significant changes. This strategy ensures that there is always something familiar for
consumers on the menu.

In addition to its permanent product offerings, McDonald's regularly develops temporary products.
The McRib, for example, is a product that is offered only seasonally. The Big Ocean burger is an
example of a burger that was developed as a temporary product, offered only for a few months in
2007. The purpose of this product development strategy is to give customers something new to
experience on each visit and to experiment with new items that may become permanent.

The key factors for McDonald's success in different countries are adaptation as well as innovation.
The company comes up with a variety of services and products catering to the needs of a consumer

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 market that is widely diverse, basing their offerings on consumer
demographics, local and economic factors, for example:
 McDonald's offered fast and low-priced menu to cater to women joining the labor force and the
increasing teenage population in the 1960s.

 Joined the trend of going global in the 1970s and the 1980s by bringing the "American way of life" to
several countries around the world by adapting to the social setting of every country they entered via
franchising to local entrepreneurs.

 Improved the company's corporate image by introducing the ''fast and convenient'' strategy by
adjusting the product listing based on the trends in the food industry. McDonald's renovated their
restaurants to gain a united, up to date environment with a natural dining look and feel. The concept
they introduced was supported by offering natural and healthier elements through the addition of
vegetables (such as carrot sticks), fruits and salads.

 The company's innovation continues through additional products, such as healthy drinks and coffee of
high quality, competing directly with local cafés and coffeehouse chain, Starbucks.

Secret to the company's international success:

McDonald's is an example of a company that gained tremendous benefits from Globalization. Of

course, it is largely due to the dual marketing plan of the company:

1. Standardization strategy
Anywhere the company operates, it offers identical food products such as McFlurry, McNuggets,
McChicken, Happy Meal or Filet-O-Fish. The plan provides the company with a strong image. The
strategy is a time and money saver for McDonald's as it helped build economies of scale.

2. Adaptation strategy
The strategy can be compared to localization. With this strategy, McDonald's adapts to the needs of
the consumers as required by the cultures of specific countries.

Adaptation works very well for McDonald's. The strategy enables the fast food chain to have a wider
reach worldwide. The strategy does require higher communication and production costs.

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 Aside from the winning strategies, the company's marketing mix is likewise flexible, in order to tailor
it to the local market requirements in terms of location of distribution, promotions plans and pricing.

As a global business brand, McDonald's strategies likewise employ other strategic marketing tactics
such as segmentation and experimentation/product testing. Comparing the strategies for the American
market and the Japanese market for example, you will see a big difference.

 In the United States. McDonald's spends the biggest slice of their budget. The company does many
new product trials and innovation in its home country, where it has the biggest audience. The
company's advertising is typically skewed to children in the United States, where McDonald's
produces about 250 ads annually.

 In Japan. The company's ad campaigns are widely different. The Japanese ads are focused on adults
as well as children, with some features that are unique to the locale's culture.
McDonald's is able to adapt its menu and business plans to each culture. It shows that it respects the
differences between cultures and adheres to the country's policy when they develop additional items
for their menu.

The company does product tests and experimentation through the addition or removal of food items
based on local trends and popularity among consumers.

In the U.S. McDonald's offers McRibs for a limited time. In Japan, the Teri Tama Burger is a spring
menu item while the Tsukimi Burger is offered in autumn.

Conclusion:

In addition to developing new products for local markets, McDonald's will also use an adaptation
strategy whereby they take a product and modify it to fit local tastes. In India, for instance, the Big
Mac has been modified into the Maharaja Mac which contains no beef, in keeping with local diets. In
Greece, the Big Mac has been adapted to use a pita bread instead of a bun. Even the McLobster has
been adapted to the McCrab in some U.S. markets where crab is a common food.

India has a very large consumer base and McDonald's adapted its menu to cater to the locals' tastes
and preferences. Beef is replaced with chicken. The Maharaja Mac is the local version of the standard
Big Mac. To cater to vegetarian consumers, McDonald's in India offers Masala Grilled Veggie
Burger, McAlloTikki and McVeggie. In 2013, the company opened its first vegetarian restaurant to

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 cater to the local vegetarian consumers.One of McDonald's India's features is the McCurry Pan, a
baked menu item with curried vegetables.

Q.3Corporate social responsibility has been widely accepted and practiced in most of the
organizations throughout the world.
a. Discuss any one company’s CSR Initiatives which has inspired you for all these years.
Highlight the initiatives with respect to CSR Activities.

Answer:
Corporate social responsibility (CSR) is a broad term used to describe a company's efforts to improve
society in some way. These efforts can range from donating money to nonprofits to implementing
environmentally-friendly policies in the workplace. CSR is important for companies, nonprofits, and
employees alike. Many businesses have made significant strategic advances in sustainability,” affirms
Ms Kozlov. “CSR allows businesses to demonstrate their values, engage their employees and
communicate with the public about how they operate and the choices they make, to ensure
a sustainable future.Tata is committed to sustainable development, where business goes hand in hand
with societal wellbeing and environmental consciousness.

Tata Motors CSR Initiatives:

Education:
TML believes education is the cornerstone of one’s cognitive, psychological and intellectual faculties.
Vidyadhanam, TML’s CSR programme for education, provides support to young learners by ensuring
holistic development in education infrastructure and services. The programme focusses on the
academic, physical and social development of students, in conjunction with value education. It
facilitates their mentoring by professionals who are experts in their subjects of interest.

The key projects under Vidyadhanam include:

 Scholarships

 Financial aid to students of IITs and government engineering colleges

 Coaching classes

 Special coaching for IIT-JEE and other competitive exams

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 School infrastructure improvement

 Co-curricular activities

Employability:
Without formal skills, the employability of a person gets affected. To address this issue, TML has
partnered with numerous skill development centres across India. TML’s skill development
programme, Kaushalya, seeks to empower unemployed youth by providing vocational training in
automotive and other industrial trades.

Additionally, TML also facilitates the following:

 Train youth in vocational skills for employment areas such as electrician, nursing assistant and so on

 Engage in capacity building of community-based groups, including women and farmers, in

agriculture and allied industries

Environment: Vasundhara project

Depletion of forests disturbs the delicate ecological balance and also contributes to climate change.
With our initiatives under Vasundhara, we aim to promote environmental consciousness among
community members, school students and our employees by engaging them in plantation and
cleanliness drives. The underlying vision is that environment being a common global concern, any
effort at promoting environmental sustainability at a local level would benefit the environment as well
as local communities and society at large. We also encourage community members to use renewable
energy products like solar lamps and promote innovative products like fuel efficient chulhas that
reduce the carbon footprint.
We partner with the communities and NGOs around our manufacturing plants and office locations for
deployment of Vasundhara projects. This approach meets the needs of the local community, and also
inculcates in them a sense of responsibility. This, we believe, is essential for ensuring long-term
sustainability of our collective interventions.

CSR is the procedure of assessing an organization’s impact on society and evaluating their
responsibilities. The most effective CSR plans ensure that while organizations comply with
legislation, their investments also respect the growth and development of marginalized communities
and the environment. CSR should also be sustainable – involving activities that an organization can
uphold without negatively affecting their business goals.

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 b. Enumerate the Benefits of CSR.
Answer:

The scale and nature of the benefits of CSR for an organization can vary depending on the nature of
the enterprise, and are difficult to quantify, though there is a large body of literature exhorting
business to adopt measures beyond financial ones (e.g., Deming's Fourteen Points, balanced
scorecards).

Benefits of CSR:

Human resources

A CSR programme can be an aid to recruitment and retention, particularly within the competitive
focuisgraduate student market. Potential recruits often ask about a firm's CSR policy during an
interview, and having a comprehensive policy can give an advantage. CSR can also help improve the
perception of a company among its staff, particularly when staff can become involved through payroll
giving, fundraising activities or community volunteering. CSR has been found to encourage customer
orientation among frontline employees. Corporate Social Entrepreneurship is another possibility,
whereby CSR can also be driven by employees' personal values, in addition to the more obvious
economic and governmental drivers.

Risk management

Managing risk is a central part of many corporate strategies. Reputations that take decades to build up
can be ruined in hours through incidents such as corruption scandals or environmental accidents.
These can also draw unwanted attention from regulators, courts, governments and media. Building a
genuine culture of 'doing the right thing' within a corporation can offset these risks.

Brand differentiation

In crowded marketplaces, companies strive for a unique selling proposition that can separate them
from the competition in the minds of consumers. CSR can play a role in building customer loyalty
based on distinctive ethical values. There are major brands which are built on ethical values. Business
service organizations can benefit too from building a reputation for integrity and best practice.

License to operate Corporations are keen to avoid interference in their business through taxation or
regulations. By taking substantive voluntary steps, they can persuade governments and the wider

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public that they are taking issues such as health and safety, diversity, or the environment seriously as
good corporate citizens with respect to labour standards and impacts on the environment.

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