Question

Provide an outline as to why the culture of a country may impact the costs of doing business in that country. Explain your answer and provide examples that enhance your point(s).

Answer 1

Culture can be described as the set of beliefs, morals, laws, customs that have an effect on society. Based on this definition, we can infer that because culture affects so many aspects of life,will also have an impact in the way people of the certain country do business. Many countries have a different set of values and norms, and those play a role in businesses. As an example of this, we found countries like Saudi Arabia or many other countries in the Arabian Peninsula were corporations officer expect a valuable gift from corporations once contracts are awarded. A known example of this was during the 80s or 90s were American constructions companies were losing all the contracts against German companies because German companies were allowing to give gift to officers without breaking any laws, on the other hand, American companies were not allowed to do it, because of the Foreign Corrupt Practices Act, which held American companies accountable for such acts in foreign countries. Another example of a culture that impacts how organizations do business in a particular country is the Political and Economics Philosophies of a particular country. In Venezuela for example, the risk of a political turmoil is ever increasing, this risk plays a role in how foreign organizations will approach any kind of endeavor in Venezuela. Moreover, in a country like Venezuela where the central government controls the economy the risk is even higher for companies looking at Venezuela as a possible future investment. As a general rule, more country risk equals to higher interest rates, bigger and more liquid collaterals, more rules and regulations for a particular agreement and more control for the interested party. In these two examples is clear that culture has a role in the costs of doing business in that country. Organizations doing businesses in the Arabian Peninsula will need to take into consideration the cost of the gift to officials into their budget, in the case of Venezuela, organizations need to plan for a possible political and economic breakdown in the near future, and how these breakdowns will impact its business.