BMA 181 Tutorial Two

Differences between Countries

1. Free market economies stimulate greater economic growth, whereas state-

directed economies stifle growth! Discuss.
2. A visiting American executive finds that a foreign subsidiary in a poor nation
has hired a 12-year-old girl to work on a factory floor, in violation of the
company’s prohibition on child labor. He tells the local manager to replace the
child and tell her to go back to school. The local manager tells the American
executive that the child is an orphan with no other means of support, and she
will probably become a street child if she is denied work. What should the
American executive do?
3. How might Japan’s changing culture affect the way Japanese businesses
operate in the future? What are the potential implications of such changes for
the Japanese economy?
4. How did traditional Japanese culture benefit Matsushita during the 1950s-
1980s? Did traditional values become more of a liability during the 1990s and
early 2000s? How so?
5. What is Matsushita trying to achieve with human resource changes it has
announced? What are the impediments to successfully implementing these
changes? What are the implications for Matsushita if (a) the changes are
made quickly or (b) it takes years or even decades to fully implement the
changes?
 1. Free market economies stimulate greater economic growth, whereas state-
directed economies stifle growth! Discuss.

• When economies are measured from the perspective of GNI per capita and PPP over
the past 3 decades the answer is clear – free market economies stimulate greater
growth because countries with free market economies top the list with the highest GNI
per capita and PPP.
• GNI = Gross National Income is a common measure for the economic activity of a
country and PPP = is a common measure of the differences in the cost of living. The
base for the adjustment is the cost of living in the US
• The reality however, is a little more complex. Measures like GNI per capita and PPP
are static measures, and they do not capture how economies are changing with time.
For examples the growth rates of economies after the 1980s, countries like India and
China have some of the highest growth rates in the world and they certainly are not
free market economies.
• The rapid growth of many high growth economies in recent years can be traced to two
factors.
– First these countries are beginning at a very low base level of economic
development so their capacity for growth is immense.
– Second, in each of these cases – whether you consider India, China, South Korea
or Thailand – the spike in growth rate always coincides with the initiation of free
market reforms in an economy that was historically centrally planned.
 GNI-PPP-GDP
Country GNI GNI-PPP GDP Growth Rate 1993-
2003(%)

Brazil $2,710 $7,480 2.60%

China $1,100 $4,990 9.30%
Germany $25,250 $27,460 1.20%
India $530 $2,880 6.10%
Japan $34,510 $28,620 1.20%
Nigeria $320 $900 3.10%
Poland $5,270 $11,450 4.80%
Russia $2,610 $8,920 0.10%
Switzerland $39,880 $32,030 0.90%
UK $28,350 $27,650 2.80%
United States $37,610 $37,500 3.20%
2 A visiting American executive finds that a foreign subsidiary in a poor nation has
hired a 12-year-old girl to work on a factory floor, in violation of the company’s
prohibition on child labor. He tells the local manager to replace the child and tell
her to go back to school. The local manager tells the American executive that
the child is an orphan with no other means of support, and she will probably
become a street child if she is denied work. What should the American
executive do?

• What do you think the American manager should or can do?

• The underlying challenge here is to sort through whether the corporate rule on child
labor is universal or particular in its application. Is it tied to a developed-nation
context or is it the rule for all places and all times? Are there special circumstances in
the developing nation that might allow for child labor? Are there ways child labor can
be combined with education? This may not be an all-or-nothing situation. It also
brings forward the idea of lesser evil and individual moral responsibility. Would it be
ethical for the American executive to do nothing?

• One difficulty in making ethical decisions across cultures is connected to the difficulty
of giving meaning to what you are seeing. Expatriate managers may interpret a local
practice in a way that such behavior would be interpreted in their home culture, not in
the local context. If the manager does not attempt to understand the meaning of the
practice in the local culture, the manager may miss a huge step in ethical analysis.
For example, Western standards might lead an observer from a Western culture to
fail to properly interpret the local practices. Remember to consider context when
conducting an ethical analysis. In such a process, a local informant can be helpful.
At the same time, be aware of the trap of cultural relativism, the “When in Rome, do
as the Romans do.”
 Matsushita’s and Japan’s Changing Culture

• Forefront consumer electronic giant in Japan during the 1907s and 1980s.
• Company was regarded as a leader of traditional Japanese values based on strong
identification, reciprocal obligations, and loyalty to the company.
• Company taken care of employees from cradle to grave and provided them with a
wide range of benefits – housing, seniority-based pay systems , generous retirement
bonuses and most of all – lifetime employment.
• In return the company expected and got, loyalty and hard work from the employees.
• However, as discussed in lecture, culture does not stay constant, it evolves with time
and generation and environmental changes.
• Newer generations born after 1964 lacked the same commitment to traditional values
as their parents. They grew up in an environment that was richer and more
opportunities and possibilities.
• The economy in the 1990s was slower and companies needed to change to compete
with international companies.
• Change of HR practices and products innovations have helped the company to get on
the road of recovery and in 2004, the company reported a profit.
3 How might Japan’s changing culture affect the way Japanese businesses
operate in the future? What are the potential implications of such changes for
the Japanese economy?

• Japanese businesses may place more risk on the individual.

• In the past, Japanese businesses operated in a quite paternalistic way, assuming
much of the risk of an individual employee’s economic life.
• The implications for the Japanese economy suggest a growth in external
businesses connected to areas that were formerly company responsibilities:
employment agencies (more job switching), individually managed employee
retirement account investing, and more employees choosing to pursue
entrepreneurial interests.
• Over time, this may lead to increased innovation. Increased leisure may also be a
result of these changes. Such changes will have a profound effect on family life,
since traditionally, the salary earner or the bread winner was not home much.
4 How did traditional Japanese culture benefit Matsushita during the 1950s-
1980s? Did traditional values become more of a liability during the 1990s and
early 2000s? How so?

• Traditional culture benefited Masushita because the deal was loyalty and dedicated
service for the benefits Masushita provided.
• The company shouldered much responsibility and the bread winner’s level of
ambiguity was greatly reduced. As the recession progressed, the costs to Masushita
of supporting non-productive workers rose, while their business was falling off.
• They needed a workforce focused on innovation and efficiency. They had a
workforce high in loyalty and obedience.
• They need to turn this loyal and obedience workforce into an innovative and
productive workforce to improves its competitive advantage
5 What is Matsushita trying to achieve with human resource changes it has
announced? What are the impediments to successfully implementing these
changes? What are the implications for Matsushita if (a) the changes are made
quickly or (b) it takes years or even decades to fully implement the changes?

• Masushita is looking for efficiencies so it (Panasonic) can compete successfully in the

global market. The impediments to implementing these changes include cultural
expectations.
• A quick change might be quite difficult to implement because it would appear outside
the norm and negative. A slow change, which gives some measure of control to the
worker, makes much more sense. Culture changes slowly.
• The three steps of culture change:
– Unfreeze
– Change
– Refreeze