International management: An institutional perspective
International management: An institutional perspective

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International management: An institutional perspective

Building a more detailed understanding of country profiles

Just as with simple culture frameworks like those of Hofstede and GLOBE, institutional differences between countries are too complex to be captured by a simple continuum between liberal market economy and coordinated market economy. First, not all economies easily fit into this framework. For example, there seems to be a quite new form of capitalism emerging in China which combines central planning and control with the operation of markets. Developing countries are also particularly challenging to classify in this way. For example, the very high proportion of business activity that is in the informal sector (outside the reach of government monitoring, regulation or support) tends to be very high. Second, there is a lot of important detail which gets missed in such frameworks which is nonetheless very important to the ways in which businesses function.

What you need to pay particular attention to will vary with the nature of your organisation. So we are going to introduce you to some information resources which you should find useful in comparing different countries as environments for your own organisation’s activities. If these resources are to be truly useful to you, you will need to spend some time getting to know what they contain and thinking about what information is most relevant to you. This is also an important part of developing the more advanced information literacy that modern management increasingly demands.

Activity 5

Timing: (120 minutes)

As you explore each of the information resources below, it is important to think critically about not just the reliability of the information offered, but the assumptions that may be involved in how the data is presented and gathered.

For example, the World Bank has produced and disseminated an ‘ease of doing business’ index and has developed data and detailed country-level information about this topic.

While this material can be useful, the World Bank tends to be dominated by a liberal market ideology which tends to emphasise the advantages of light regulation. Thus critics argue that they overemphasise deregulation as a recipe for economic development and under-emphasise the positive role of regulation in creating the conditions for economic growth.

With these cautions in mind, we would like you to have a look at the web-based resources below. For each website we have provided a series of questions to encourage you to start accessing data from the sites and to think about what information is most relevant to your own organisation.

Question 1

Go to the World Bank [Tip: hold Ctrl and click a link to open it in a new tab. (Hide tip)] website. Click on the data tab at the top of the page. Next, navigate to the list of economic indicators (click on the Indicators tab just below the Data page title). Choose a couple of indicators that you think are particularly relevant to your organisation. Make some notes below on these indicators and what you find out by looking at the cross-national differences they reveal. Explore the different ways the data can be presented and choose a country to look at in more detail on the indicators.

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Discussion

I work for a university that recruits students in many different countries around the world and makes much use of the internet. Some key indicators relevant to understanding international management challenges for my organisation might include education and literacy levels in different countries (indicating the size of potential markets) and access to electricity and the internet (indicating availability of a key distribution channel). Per capita GDP also gives some indication of comparative wealth and purchasing power (although this needs to be looked at in relation to the way income is distributed).

We have a collaboration with the Ethiopian government so I spent a while exploring data on Ethiopia. I found that enrolments in tertiary education have been low historically even compared with elsewhere in sub-Saharan Africa but is rising steadily, and is underpinned by rising participation in secondary education. Internet use is low with 0.8 users per 100 in the adult population on latest figures compared with around 70 to 80 per 100 adult population in many developed countries.

In many African countries mobile phones and internet access via mobile phones are becoming an important potential channel for learning (for example in Ghana, on latest figures there are 71 mobile phones per 100 people). However this is not the case in Ethiopia with only 8 mobile phones per 100. Looking more widely at this issue in Africa, I was able to quickly get an overview of mobile phone use in Africa by using the map feature to see that Ethiopia is one of the African countries with the least mobile phone penetration – unlike its immediate neighbour, Kenya, where mobile phone penetration is rising steeply and latest figures are 61 phones per 100 population.

As I looked at this data I also tried to think about its limitations. For example, I noticed that in some countries there are more phones than people. Clearly some people have multiple phones. So this means that the 61 phones per 100 adult population in Kenya may be concentrated in the hands of rather fewer than 61 people, quite possibly taking the number of people with phones to below 50 per cent. We can’t be entirely certain on the basis of this data.

You will, of course, have chosen different kinds of indicators and different countries to look at, but I hope you have begun to see the potential of this kind of data. If you find you have an appetite for this kind of data you might also like to explore the range of country statistics available through United Nations data. On this page you will also find access to the UN World Statistics Pocketbook

Question 2

Our next website is doingbusiness.org. This is a site set up by the World Bank which has a lot of useful data, so long as you remember it comes with a very particular view attached about what is good for business (very light regulation) and is focused primarily on the challenges facing small to medium sized domestic enterprises.

Have a look around the website and try to find out how difficult and expensive import and export procedures are in Azerbaijan compared with the average for OECD countries.

(Hint: look for information on ‘trading across borders’.)

The OECD is the Organisation for Economic Co-Operation and Development. Originally a partnership between 18 European countries and the USA and Canada, it has now expanded to 34 members. A list of current members can be found here. The OECD factbook is also a useful source of cross-country statistical comparisons for member countries.

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Discussion

Going to the Azerbaijan page on trading across borders, we can see that the hassle factor associated with importing and exporting goods is rather higher in Azerbaijan than the average OECD country, needing more documents to be completed and taking longer to go through procedures (38 versus 10 days to export; 42 versus 11 days to import). Costs are also substantially greater (the average cost per container is around three times higher than in the average OECD country). This seems likely to be a consequence of worse-than-average transport links to other countries given that it has no direct access to coastal ports (other than on the Caspian Sea which is an inland sea), necessitating long overland trips or costly air freight.

Question 3

Websites of governments or major media organisations can also be a useful source of information for profiling the business environment in different countries. Again, it is important to consider how the collection and presentation of information will have been affected by the nature of the provider organisation and to think critically about the impact this will have on your use of the information they provide.

A website with a comprehensive range of country profiles is compiled by the USA’s Central Intelligence Agency; the CIA World Factbook. Like many governments they compile information for government purposes but make it widely available. Many media organisations make country profiles available. For example the BBC country profile page. Such media-derived profiles can be useful for getting a better sense of current issues in a country including the political situation. You can also find in-depth profiles of countries on Wikipedia.

Choose a country to research and explore these three websites to get a sense of the kind of information they provide. Make some notes about the particular biases or slants that you think may affect the information on these sites.

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Discussion

We hope you will agree that all the websites we have suggested to you are potentially valuable resources in thinking about the particular challenges that may face leaders and managers in those countries. However, as you will have noted every information source is the product of decisions about what to pay attention to and how to present (or even misrepresent) information. Each of the three websites above does have a commitment to a ‘neutral’ or ‘balanced’ standpoint, but what is seen as neutral or balanced may often depend on where you place yourself on key issues.

The CIA is charged with protecting the interests of the USA and this will drive the kind of information they feel it important to present. For example they play a role in trying to reduce drugs traffic into the USA and reduce the impact of international criminal activity on their citizens. Thus they give some prominence to their views on the role played by each country in drugs trafficking.

The BBC as a news organisation has a particular interest in information that makes a good story and will grab public attention.

All information sources are prone to errors, but perhaps the crowd-sourced nature of Wikipedia makes this a particular issue. However, there is also crowd-sourced error checking and open debate about whether articles meet their ‘neutral’ criterion, adequately representing different viewpoints. It is also increasingly common on Wikipedia for articles without adequate referencing to primary sources to be flagged for improvement.

The key point is not that these websites are not useful, but that like all information sources, they come with particular embedded assumptions about what is useful or valid information and about the meaning of the information they provide (something which is, of course, also true about the learning materials in this course).

In this section we have introduced you to an important framework for understanding institutional differences between countries. We have also encouraged you to go beyond the simple categorisation of countries on a continuum from liberal market to coordinated market economies. In particular, we have introduced you to a range of resources for looking at differences between countries in their business environments.

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