Introduction
Doing business in a foreign country is not an easy thing. A company that is keen on investing in a foreign country has to examine the attractiveness of the foreign market in order to decide whether it is prudent to invest there. In this case, the company has to assess the ease or difficulty of doing business in such a country and some of the hurdles that it needs to overcome (Griffin & Pustay, 2005).
This paper is an attempt to determine the political/legal, economic, socio-cultural and technological environment of the U.S market. In addition, the paper shall also explore the Hofstede’s country characteristics of the United States.
Political/legal environment
The political risk of doing business in the U. S is very low. The country is stable politically, not to mention that it has a very strong legal system. The U.S government has adopted an expansionary fiscal policy aimed at stimulating the economy that was hard hit by the 2007-2009 global financial crisis.
As a result, the country’s budget deficit has increased significantly (Hill & McKaig, 2012). The U.S government is also committed to tackling the issue of national security as this can have a negative impact on business activities (Hill & McKaig, 2012).
The Obama administration is committed to tackling terrorism and this has helped to quell societal tension. In addition, the U.S government enjoys stable international diplomatic relationships with other countries, and this has helped to foster growth and development in foreign direct investments.
The United States also has an integral and reliable legal system. This would be an added advantage to a company that is interested in doing business in the country. However, such a company needs to take note of various municipal, state and federal laws that govern business operations in the United States.
Although federal laws apply across the country, municipal and state laws tend to differ from one state to another and as such, it is important for potential investors to take note of such laws and how they are likely to affect their business. International businesses in the U.S wishing to settle emerging disputes with customers and suppliers have nondiscriminatory access to the country’s legal system. Moreover, such business can easily get good lawyers to handle such disputes.
Economic environment
Some of the issues to consider in terms of the economic environment of the U.S are inflation, infrastructure, wages, interest rates, and taxation. The U.S is ranked as a high income country and as such, it is a viable market worth venturing (Wetherly, & Otter, 2008). The U. S economy is based on a free enterprise system.
The country’s economy has remained relatively stable for decades, up to the recent global financial crisis. However, the Federal Reserve has put in place measures to deal with the global financial crisis and this has seen the U.S currency gain against major foreign currencies. Consequently, the country’s inflation rate has reduced and currency fluctuation has stabilized. This is encouraging news to would-be investors.
Sociocultural environment
When a company decides to do business in another country, it should be prepared to encounter subtle sociocultural differences. For this reason, the company that wishes to invest in a foreign country should make an effort to learn the taboos and cultural practices of the country.
Otherwise, this could lead to a complete lack of trust and grave misunderstandings (Hofstede, Hofstede, & Minkov, 2010). Americans are known to hold business conversations during meals. As such, it is not unusual for business meetings to be conducted during dinner or a luncheon. However, such an arrangement depends on the time schedule and necessity.
In addition, Americans treat dinners or luncheons as social meals where one can build rapport with business partners. Many US companies limit or discourage giving of gifts during business meetings (Hofstede et al., 2010) and bribes are unacceptable. Maintaining good eye contact during business meetings is always recommended. A firm handshake should also be maintained, but it should not exceed 3 to 5 seconds.
Technological Environment
A country’s resource base is the starting point of its technological environment. The United States has managed to shape its technological environment by encouraging both local and foreign investments. In addition, the country has invested heavily in various infrastructures, including communication systems, waterworks, and a sound transport network.
This makes it easier for businesses to both produce and distribute their goods. Besides, the U. S has invested heavily in its human capital by way of improving the skills and knowledge of its citizens. By investing in human capital and infrastructure, the U.S has continued to do well in the global market in spite of having to pay higher wages to its workforce.
In addition, the US legal system offers a high degree of protection to intellectual property rights such as copyrights, patents, brand names, and trademarks. For this reason, an increasingly larger number of foreign businesses are willing to invest in the U. S.
Hofstede’s Country Characteristics
Power/Distance (PD)
PD refers to the level of power disparity among people. A high PD is a sign that the society in question has accepted the existing unequal distribution of power. Furthermore, it is a sign that people know “their place” within the system (Hofstede, 2007). On the other hand, low PD is indicative of well dispersed and shared power.
Flatter organizations are characterized by low PD whereby both employees and supervisors are regarded as near equals. On the other hand, centralized companies enjoy high PD with strong hierarchies, large gaps in authority, compensation, and respect.
According to Hofstede’s cultural dimension ranking, the US has a PD of 40, which is quite low compared with the global average of 55 (Hofstede, 2007). This means that there is enhanced equality between the government, society, organizational, and families. Such an orientation enhances supportive relations across power levels, in addition to establishing a steady cultural environment.
Individualism (IDV)
IDV entails the existing ties among members of the community. In case the IDV score is high, this is a sign of a loose connection among people in the community. If a county has a high IDV score, it means that its people feel less obligated to share. In addition, they are also less likely to share interpersonal connection with the rest of the population, other than their families and close friends.
In contrast, people in countries with low IDV scores demonstrate strong group cohesion. In addition, they are also highly loyal to and respect group members. The United States has a high IDV score of 91 (Hofstede, 2007). What this means is that the American society has an individualistic attitude. In addition, Americans have relatively loose bonds with other members of society. Americans also tend to be self-reliant.
They are also likely to look out for themselves and their families. In a country with a high IDV score like the United States, society attaches a lot of value to time and freedom. Moreover, American expects to be rewarded for a job well-done. Nevertheless, Americans do not mind working under a challenging environment. Another characteristic of a country with a high IDV score is respect for privacy.
Masculinity (MAS)
A masculine society attaches a lot of value to gender roles. In countries where society expects men to provide for their families, the MAS score is always high. On the other hand, in a low MAS society, there is no reversal of gender roles. In such a society, both genders have to work equally across different professions.
In a country with a low MAS score, women are encouraged to work as hard as their male counterparts in order to succeed in various professions. On the other hand, men in such a society tend to be sensitive to the plight of women. The United States had an MAS score of 62, in comparison with the world average score of 50 (Roberts & Taylor, 2012).
This shows a high level of gender differentiation of roles in the US. Males are quite dominant in terms of power structure and at the societal level. As a result, the female population has become quite competitive and assertive.
Uncertainty/Avoidance Index (UAI)
UAI is a tool used to measure anxiety levels in a society faced with unknown or uncertain situations. Countries with high UAI scores endeavor to shun unclear situations as much as possible. Such countries endeavor to seek for a collective “truth”. In addition, such countries are normally governed in an orderly manner and in line with the existing rules.
In contrast, countries with a low UAI score can accommodate new events and also value differences. However, rules tend to be few and far between and society takes a lot of pride in discovering its own truth. The United States has an UAI of 46, in comparison with a global average of 64 (Roberts & Taylor, 2012). This is a low UAI score. This is a sign that the American society is governed by few rules. Also, the low UAI score is indicative of a society that can tolerate divergent beliefs and ideas.
Long Term Orientation (LTO)
LTO is a measure of the extent to which society upholds long-term standing values and traditions, as opposed to short-term ones. The United States has a low LTO score of 29 against a global average of 45 (Roberts & Taylor, 2012). This is a sign that the society has a lot of faith in fulfilling its obligations. In addition, the low LTO score indicates that the American society appreciates cultural traditions.
Conclusion
The U.S has a low political risk and a stable legal and political system. In addition, the country’s currency is fairly stable. Also, the free enterprise system is quite attractive to companies that would want to do business in the U.S. The country has invested heavily in such infrastructure as communication systems and transport network, further encouraging local and foreign investors.
Also, the high degree of protection to intellectual property is another reason why companies would want to do business in the U.S. The American society is characterized by low power distance, meaning that there is enhanced quality and supportive relations across power levels. On the other hand, the high individualism means that Americans respect privacy and self reliance. In contrast, the low UAI shows that the American society is highly tolerant, while low LTO indicates that the American society upholds cultural traditions.
Reference List
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Hofstede, G., Hofstede, G. J., & Minkov, M. (2010). Culture and Organizations, 3rd Edition. New York: McGraw Hill.
Roberts, K., & Taylor, S. (2012). Geert Hofstede Analysis for United States of America. Retrieved from http://www.cyborlink.com/besite/us.htm
Wetherly, P., & Otter, D. (2008). The Business Environment: Themes and Issues. Oxford: Oxford University Press.