International business in India

Résumé du document

The Maharaja Mac is unique, this burger can only be found in India. The McDonald's Big Mac is among the best selling consumer products in the world; it is even used by economists to compare market conditions in different countries, each year economists publish a chart with the different prices of this fast food product in different countries1. The Big Mac is the symbol of globalization; in almost every country where McDonald's is present, the Big Mac is made in the same way, using the same ingredients.

But not in India, where the Big Mac has been renamed, and the recipe is different. In fact, Hindus who constitute 80% of the Indian population don't eat beef, as they revere the cow. Therefore, McDonald's when entering the Indian market had to change its menu to suit the Indian palate and beliefs.

According to Edward Tylor, the culture is "that complex whole which includes knowledge, belief, art, morals, law, custom, and any other capabilities and habits acquired by man as a member of society2" (Tylor, 1924). But many sociologists, anthropologists and economists give their own definitions. Most of them generally conclude that the culture is a set of values and norms shared by a group of people.

In International Business, the culture is an extremely important aspect of the success of a company when it operates in foreign countries. The culture is different in every country, which means that a company will have to adapt itself to the local culture. This involves new management methods, new marketing approaches, and new strategies.

In this essay, we will study the different cultural factors that influence international business and how they influence international business, and then, we will apply this information to the case of India.

Firstly, we need to identify the determinants of the culture. According to Charles Hill, there are six determinants of culture that can be easily identified3 (Hill, 2010):
- Religion
- Political Philosophy
- Economic Philosophy
- Education
- Language
- Social Structure

The religion is often considered as a supra-national value, some such as Islam has a direct impact on the way business is done in Islamic countries. For example, the Islamic finance regulates the practice of loans and prohibits interest rates. This is why many financial products have been especially created for Muslim clients.

The political philosophy is related to the political system in a specific country, the main difference arises between totalitarianism, e.g. North Korea, and democracy. Today, most political regimes are democratic. The political philosophy has a direct influence on the way business is done in the country. It defines the economical policies and the relationship between the private sector and the public sector.

The way you run a business in China is different from the way you run a business in U.S.A. In China, the government will be more interventionist while in the USA, the government refuses to participate in any kind of intervention. As mentioned earlier, the economic philosophy is often related to the political philosophy; democracy tends to be more liberal, encouraging free market, while totalitarianism tends to be more protectionist.

Tags: Indian corporate culture, Hofstede cultural dimension index,PESTL analysis

Extraits

[...] To conclude, the cultural factors in international business are the most important variables to anticipate. We have shown the different reasons why the cultural factors are influencing the business. More important we have seen the cultural factors can be determined and analysed in order to establish an efficient business model. Many tools can be used to analyse the cultural dimensions of a country, the Geert Hofstede's cultural dimensions and the PESTL are two of this tools. Using this information the case of India revealed us the Indian market is way different from the U.K market. [...]

[...] A good legal system provides the insurance of good business conduct. As said before, a framework made by Franklin R. Root describes the different kinds of risk we may encounter when investing abroad11, the investment project must go though this four step with success in order to be set up. The first risk is the general instability risk, which evaluate the risk at the macro-environment level. Then the ownership/control risk deals with the managing and ownership issues. The thirds step is the operation risk that illustrates the legal issues and to finish, the last step is the transfer risk. [...]

[...] The Economical factors define the global economy of a country; these factors can be the exchange rate, the growth of the GDP A country with a good growth of GDP will be more attractive for foreign investors. The social factors describe the society nomenclature, what age category is the most represented, what is the birth rate growth. A growing population also means a growing of demand. The technological factors are excellent to measure the level of development of a country. It is often related to the quality of the infrastructure in place. Good infrastructures and high investments in technologies allow countries to produce good with more value added. [...]

[...] At the beginning the regime was protectionist oriented. We have to remember the context of the independence; the world was split into two camps, the communist and the capitalist. India was one of the leaders of the non-aligned countries. In the nineties, the country adopted liberal reforms and open itself to the foreign investors. Even if the country is politically stable, his bodyguards have assassinated previous prime minister. The Nehru/Gandhi family still has a very important influence on the country political life. [...]

[...] HILL Charles, International Business competing in the Global marketplace, McGraw-Hill International Edition P.91 W. L. HILL Charles, International Business competing in the Global marketplace, McGraw-Hill International Edition Constitution of India, page 330, EIGHTH SCHEDULE, Articles 344 and 351 Geert Hofstede, Robert McCrae, Personality and Culture Revisited: Linking Traits and Dimensions of Culture Geert Hofstede, Cultural dimensions of China, http://www.geert- hofstede.com/hofstede_china.shtml Geert Hofstede, Cultural dimensions of France, http://www.geert- hofstede.com/hofstede_france.shtml PESTEL analysis of the macro-environment, Oxford university Press, http://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_1 2.htm 10- Zhao Huanxin, China to improve copyright protection, China Daily, http://www.chinadaily.com.cn/english/doc/2006- 02/16/content_520675.htm 11- Franklin R. [...]