Multinational firms in the turbulent market environemnt of Iran Essay Example
Multinational firms in the turbulent market environemnt of Iran Essay Example

Multinational firms in the turbulent market environemnt of Iran Essay Example

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  • Pages: 9 (2349 words)
  • Published: August 6, 2017
  • Type: Research Paper
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This chapter aims to provide a comprehensive view of Iran's business environment, which includes the research problem, associated challenges, and thesis limitations. The global business environment has grown increasingly complex over the years, experiencing unprecedented and continuous rapid changes. Several Western nations have maintained economic ties with Iran even after the revolution of 1978. Despite this, the market has been highly unstable due to the Nuclear program issue, creating uncertainty about the nation's future. Iran occupies a crucial geostrategic position in the Middle East and Central Eurasia, with over 70 million inhabitants and massive business potential for western companies. However, corruption is rampant, poverty is on the rise, and a significant percentage of the population is dissatisfied with the current situation. The ongoing reform efforts have led to inconsistent economic and political laws. To summarize, th


is chapter aims to give readers a better understanding of Iran's business environment while providing a general outline of the thesis's scope.The Iranian economy is facing uncertainty due to the dynamics in its political scene and the impact of the country’s nuclear program and resulting sanctions. This has created a lack of policy focus in Iranian politics, affecting various sectors including the industry, agribusiness, the government, and the Rial. The disruptive environment has led to wavering business partnerships with international and regional companies due to the country’s volatile conditions. The media also portrays Iran as chaotic. Therefore, it is crucial to build and sustain relationships with different players such as retailers, wholesalers, and importers to cope with current and future changes in the business world. According to Trompenaars (1996), survival in this environment depends on one's ability to cultivate nurturin

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external partnerships that can withstand external conditions rather than outcompeting each other like in a “survival of the fittest” scenario.The importance of constructing sustainable relationships is emphasized as only strong and close relationships can manage unexpected changes and survive in the long-term. Therefore, companies require more knowledge about the actors they plan to do business with in order to establish a well-established, working network that is critical to withstand the disruptive environment in Iran. This stability provides multinational and local companies with stability in their market relationships and reduces uncertainty.

Our main research problem is to describe how a company manages relationships in its distribution network within the disruptive environment of Iran, as well as explore whether it is possible to build sustainable business relationships in such a volatile environment and how this should be achieved. To address this research problem, we have divided it into two sub-problems. The first sub-problem involves describing and analyzing an existing distribution network in the Persian pharmaceutical consumer market, including market characteristics, actors within the distribution network, and linkages between them. The second sub-problem involves illustrating and analyzing the types of exchanges that occur within a dyadic business relationship and how they affect the overall relationship atmosphere.The sub-problem at hand aims to examine various factors such as product/service, information, fiscal, and societal exchange that exist between different actors. The research will also analyze the environment surrounding these relationships, such as the level of power/dependence, cooperation/conflict, and intimacy. The purpose of this study is to illustrate how a company manages its business amid a disruptive environment and establishes sustainable business relationships within a very dynamic business environment. Furthermore, this research

will only focus on Bayer, the case company, and its perspective. The local actors will be presented according to their influence on Bayer's operations in the Persian market, with a complete focus on pharmaceutical products. In terms of literature review, culture is defined as a collective phenomenon that characterizes human beings and shapes their emotions and actions. It is learned through social environments rather than inherited from genes.According to Hofstede (1995), it is important to distinguish between civilization, human nature, and an individual's personality, although the boundaries between them may not be clear and precise (see figure 2.3). Figure 2.3 illustrates three levels of uniqueness in human mental programming. The essence of civilization is not primarily visible on the surface, but rather is a matter of shared ways that groups of people understand and interpret the world. Culture consists of multiple layers, resembling an onion that must be peeled back in order to comprehend it (see figure 2.4). The more layers that are peeled back, the more deeply ingrained values and norms are revealed, although these are not always readily identifiable. Figure 2.4 shows how different cultural differences manifest in symbols that include words, gestures, images, and objects that hold specific meanings for those sharing a particular culture; however, these symbols can change over time through mobility. Heroes, whether real or fictional, dead or alive, help to promote certain behaviors by exemplifying highly prized traits within a given culture.Rituals are collective activities that are seen as socially necessary among people who share common beliefs. Examples of rituals that vary across cultures include social and spiritual ceremonies, as well as different forms of greeting and showing

respect for others. Customs involve symbols, heroes, and rituals that are visible to people, but their cultural significance exists only in the particular way that members of a specific culture interpret them. Values are the most fundamental elements of a culture, representing broad preferences for certain states over others. Children learn these values subconsciously at an early stage of life, and observing how people act is key to understanding them. Geert Hofstede identified four main cultural dimensions that distinguish one culture from another in their solutions to specific problems, with a fifth dimension later added to compare different nation cultures in terms of short-term versus long-term orientation. (Hofstede, 1995)According to Hofstede (1995, p.40), Power Distance (PDI) refers to the extent to which less powerful members of organizations and companies in a country expect or accept unequal distribution of power. In countries with low PDI, individuals treat each other as equals regardless of age, gender or position, while in those with high PDI, there is a general understanding that inequality exists and everyone has a specific role in society. Individualism (IDV) versus Collectivism relates to the degree to which interpersonal ties are loose or tight. In individualistic societies, people are expected to take care of themselves and their immediate families, while in collectivistic cultures, strong in-groups protect individuals throughout their lives in exchange for unconditional loyalty. Finally, Masculinity (MAS) versus Femininity concerns the balance between assertiveness and collaboration, with masculine cultures valuing competitiveness and femininity favoring compromise and modesty.In a society that upholds masculinity, societal gender roles are noticeably distinct: men are expected to be forward-thinking, tough and competitive, whereas women tend to prioritize tenderness and

quality of life. Conversely, in a feminist society, there is more overlap in societal gender roles and both genders display modesty, softness, and a focus on quality of life. Uncertainty Avoidance Index (UAI) signifies the diverse approaches individuals in a society adopt in handling the inevitable unpredictability of the future. Managing uncertainty and the accompanying emotions reflect a country's cultural background and is continuously reinforced through fundamental institutions such as family, school, and state. These behavioral patterns align with shared values embraced by most members of such societies. In high UAI societies, laws and regulations hold significant importance, and the need for predictability is paramount.

Fons Trompenaars conducted similar research and discovered seven categories or dimensions that differentiate cultures. The first five categories center on issues arising from human relationships, which significantly permeates how businesses operate as well as how individuals respond when confronted by ethical dilemmas.The positioning of individuals along these dimensions influences their beliefs and actions throughout their lives. Category six pertains to the management of time, while the final dimension concerns a person's relationship with the environment.

Universalism versus Particularism, or rules versus relationships, involves the belief that everyone should be treated equally according to general rules. Universalism emphasizes conceptual social codes and is abstract in nature. However, in particularistic cultures, personal relationships and present circumstances hold more importance than following general rules. For instance, a unique individual may receive better treatment than others despite any existing regulations.

Individualism versus Collectivism assesses whether individuals view themselves as autonomous or as members of a larger group. In individualistic cultures, people prioritize themselves and contributing to the collective as they choose. There is a significant

emphasis on self-orientation in these societies. Alternatively, collective cultures prioritize shared public concepts and the greater good over individual wants and desires. People negotiate to reach common ground despite their differences in these cultures.The focus in collectivized societies is on the in-group, where individuals share values and beliefs. The neutral versus affective dimension pertains to the extent that emotions are expressed in a culture. Impersonal cultures expect interactions among people to be objective and detached from feelings, while affectively impersonal cultures do not show their emotions openly and instead seek an indirect reaction from others. On the other hand, showing emotions is widely accepted in affectional cultures as people openly express their feelings through joyful expressions or demonstrative gestures. However, impersonal cultures are not necessarily devoid of emotions, but rather, the intensity of expressed feelings is not as strong as in affectional cultures. The specific versus diffuse dimension highlights how cultures differ in how individuals expect to be treated in different situations and relationships. In particular-oriented cultures, individuals are judged and treated in a specific context.In various scenarios, the approach may vary as every nation recognizes its distinctness from others. It is common for work and personal lives to be kept separate. In a diverse society, individuals interact with others in different countries and on various levels simultaneously. An individual who holds authority in a particular nation is expected to have better knowledge due to their position. A person's reputation is attached to them irrespective of the context or situation. What may appear impersonal to some individuals in a specific culture could be regarded as highly personal by members of a diverse society, and vice


How individuals attain status differs among societies or cultures. The concern centers on whether status is obtained through individual achievement or whether factors such as birth, gender, age, educational qualifications, or social connections within the society determine an individual's status. In the former instance, status is based on merit, while in the latter instance, it is based on ascribed status, which does not require any rational justification. In an ascribed culture, an individual's position defines them.Achievement-oriented societies highly value "difficult work" and "getting things done", while attribution cultures prioritize "regard for the seniors" and holding family connections as important. While these two may seem mutually exclusive, an individual's accomplishments can influence their attribution, and vice versa.

Attitudes towards time differ across cultures, with varying approaches to tasks depending on how time is perceived. When viewed as a consecutive series of events, each passing minute, hour, day, month and year is seen as a distinct event in a ceaseless sequence. This approach is based on a "critical path" with specific time allowances for each stage, making unforeseen events disruptive. In contrast, synchronous time sees past memories and future thoughts as interconnected with present actions.In a synchronous civilization, a circle best represents the idea of revolving clip. This means that the clip is repeated every hour, day, week and so on. In these cultures, individuals place emphasis on multiple activities happening at the same time while moving towards a clear end goal with interchangeable stepping stones. However, one can "skip between rocks" on their way to the end goal. Time holds significance for both individuals and whole groups or civilizations; Kluckhohn and Strodtbeck have identified three orientations

on how different cultures handle time. Each culture focuses differently on past, present or future orientations. Present-oriented cultures are relatively timeless and traditionless while ignoring the future. Past-oriented cultures are primarily concerned with maintaining and restoring traditions in the present. Future-oriented cultures aim for a more desirable future while progressing towards its attainment. The quality of human bonds within an administration or between the endeavor and its partners is also affected by these orientations. Any strong bond combines the past, present, and future with ties of affection and remembrance.The relationship itself serves as a justification and is valued as a symbol of lasting companionship, both in the past and in the future. Cultural attitudes towards relationships differ based on the perception of time. Some cultures view relationships as instrumental for the present while others see them as a matter of long-term commitment. This cultural dimension extends to attitudes towards the environment and the extent of control over it. In some cultures, people aim to control nature, deriving motives and values from that belief. This inner-directed culture associates success with control over external circumstances. In contrast, in outer-directed cultures, individuals believe humans are part of nature and must adhere to its laws. Nature is viewed as powerful, and individuals should strive to live in harmony with it. Nonetheless, every culture takes notice of both natural and human-made elements, and the two can overlap at times.

2.4 Decisions from chapter two

The second chapter of the model examined various establishments and their impacts on MNCs operating in a country. The Networks Institutions model presents a comprehensive approach to evaluate such establishments, thereby facilitating the development of

suitable strategies and organizational structures for MNCs in specific countries. However, this research aims to focus on a narrower domain, specifically the legal system, business norms, fiscal market, product/service market, and national culture. These establishments are prioritized since they hold significant relevance within the context of this thesis. State culture holds special importance as it has a considerable influence on other establishments. A broader perspective of culture can be obtained by analyzing Hofstede (1995) and Trompenaars (1996) cultural theories, which overlap in several aspects. Thus, Trompenaars' dimensions have been selected for cultural analysis based on reasons explained at the beginning of Chapter six. Culture shapes actors and their operations within a network, and understanding it is pivotal in comprehending the network and its interactions, as outlined in Chapter three.

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