Introduction
Protectionism in trade refers to the policy that aims at protecting local industries against competition from foreign companies by such means as import quotas, subsidies, tariffs, and others that are specifically placed on imports of foreign rival firms. Protectionism has been implemented by many countries worldwide, even though many mainstream economists concur that the global economy primarily benefits from free trade (Cateora et al., 2019). To elaborate further, protectionism involves government-levied tariffs by making the imported product more expensive than the local goods and services. Under protectionism, industries are stimulated where countries are prone to business recession and insufficiency.
Protectionism has both positive and negative effects. One of its major benefits is the desire to keep money locally in the home countries. The authors argue that states can protect home markets by maintaining employment and reducing unemployment, conserving natural resources, and making the country a low-wage standard of industrialization (Cateora et al., 2019). When states carry out protectionism, they are guaranteed a boost in national defense in the economy, enhancing trade policies with other partners in the world, sustainability of production capacity, and quality labor provision.
For example, in the US, the government has imposed various trade barriers, such as monetary and market barriers, boycotts, and quotas. However, Cateora et al. (2019) argue that tariffs under protectionism can weaken the patterns of demand and supply, and commence world trade wars, which, in the end, affect good international relations. In addition, tariffs restrict the variety of options available for customers (Cateora et al., 2019). For example, antidumping cases that have been evident during Trump’s administration are said to have become de facto trade barriers by making investigations costly and taking a long duration to resolve, hence limiting trade.
How and Why Management Styles Vary around the World
The mode in which businesses are conducted worldwide differs for various reasons. First, the difference comes from diverse structures that are put in place for operational efficiencies, such as management hierarchy, shareholder power, and the level under which the performance is expected (Cateora et al., 2019). The second systemic factor that enables the variety in leadership style is the values possessed by managers, such as competency, personal determination in leading a team, goal determination, and safeguarding people and processes during the working environment. The third reason why management styles vary is due to behaviors that are realized in international business (Cateora et al., 2019). Such encounters make a firm alter some processes to fit the international standards of running enterprises.
The book suggests that no matter how well prepared a marketer is in international markets, there always will be a shock in how coordination and correlation of business occur in various regions. Some key factors include the different ethical considerations in many regions in the world, such as sales interactions and negotiations (Cateora et al., 2019). Most business interactions at international levels involve a high degree of attention from respective governments towards a particular foreign trader.
The management styles in the world vary in many ways that are characterized by the individualism or collectivism indexes (IDV) and Power Distance Index (PDI). Cultural values are necessary when evaluating business interaction methods across the world (Cateora et al., 2019). First, the difference comes in terms of authority and decision making where the size of an enterprise, accountability and cultural norms define the status and position, hence determining prominence.
For example, some countries, such as Malaysia, have the notion that understanding a prospect and business partner’s status is vital. The same PDI culture is highly practiced in Mexico, which is present in the Western world. However, some countries, such as Israel, do not value clients’ rank and status, and subordinates sometimes have the possibility of disputing employers in a way that high PDI countries, such as Mexico, do not.
Additionally, in such countries as France in the European Union, the privilege to make decisions for a company is guarded enviously by few top management personnel. On the contrary, in North American countries, for example, Mexico, equal power exists between the heads of divisions and the subordinate bodies. The leadership style in organizations is defined by features such as paternalism and auto criticism (Cateora et al., 2019). It means decisions from the middle management, line supervisors, and team leadership elements, are not emphasized. Therefore, the dominant shareholders, especially if it is a family-based company, are tasked with making top decisions for the firm.
On the other hand, Middle Eastern countries have top management who make major decisions for companies. Therefore, one can only do business with an individual but not the office or the given party’s title. Other ways in which management styles differ are the management goals and targets where security and mobility motivate personal enthusiasm in business tasks (Cateora et al., 2019). Lastly, communication styles vary from one region to another, depending on the context. For example, the word ‘marriage’ may be a business term in the US because of contracts that business parties engage in.
Political Risks of Global Business
Political risks evident in global business are mostly concerned with sovereignty, different philosophies, and nationalism, as many host countries’ actions necessitate them. The dangers ranged from confiscation and expropriation to many lesser issues, such as import barriers, price controls, and domestication. One of the major political risks in global business is confiscation which involves the seizure of a firm’s assets without compensation or other payments. For example, the US suffered two major confiscation occurrences when Fidel Castro took over Cuba (Cateora et al., 2019). The second incident of the US confiscation of property was seen in the 1950s and 1960s when Iran’s shah was successfully overthrown. The incidents led to geopolitical pressure which changed the diplomatic terms between the two countries.
The other political risk that can come from global business is expropriation. The risk happens when governments take an investment but compensate the owner for acquiring their assets. For instance, the regime of Venezuela in 2008 under Chavez expropriated CEMEX operations belonging to Mexico by paying the concurred price between the two parties (Cateora et al., 2019). The third risk in the global business is domestication which happens after the host country causes the transfer of foreign enterprise gradually by making it a national monitor and controller of the investment (Cateora et al., 2019). Domestication is perilous as it forces a foreign company to share the ownership, profits, and management with the country where the investment unit is based.
Risks may lead to weak business operations and poor innovation and technological advancement, especially for foreign investors. The outcome of the perils makes the investor have a major drawback in competitive advantage, rendering them noncompetitive in global markets (Cateora et al., 2019). When countries incur the jeopardies, there may be high chances of falling out, leading to geopolitical tensions that make world trade hard to manage.
Countries that have engaged hugely in foreign investment include Singapore, Taiwan, and South Korea. Activists and interest groups that come to rescue the risk occurrence can provoke respective governments into harmful measures to the business. Out of all the political risks, the most severe ones in terms of cost are the ones that lead to the transfer of assets and entire investment from a given foreign firm to the government of the host country, especially if there is no adequate compensation.
How to Assess and Reduce the Effect of Political Vulnerability
To assess and reduce the effect of political vulnerability, any foreign company should weigh possible outcomes from political philosophies, cultural variations, and other differences. In that way, there will be a guarantee for avoiding some political uncertainties that could come, especially from the host countries’ governing bodies. Other measures could be checking the politically sensitive products and issues (Cateora et al., 2019). To lessen the effects of political vulnerability, firms should learn how to manage external affairs outside their countries to ensure the government and the nationals are aware of the new contribution to the host country’s economic, human and social development.
The inclusion of corporate philanthropy is essential as it aids in creating a positive image in the entire population. An example of a measure to reduce the vulnerability is when Microsoft realized countries need comprehensive technical assistance and pledged over $100 million in tech and education training as part of a deal with the Mexican government. The deal ensured that Microsoft get a good reputation in the foreign country which enabled the prevention of potential political fallouts with the host country.
Reference
Cateora, P., Money, B., Gilly, M., & Graham, J. (2019). International marketing (18th ed.). McGraw-Hill.