Essay
Democracy, for all its empowering aspects, isn't still practiced by every nation on this planet. Much like the Soviet Union, which collapsed on itself in the early 90s, there are a number of states in today's world that continue to be totalitarian in nature.
For those living in democratic countries, this term might not be familiar and its practices even more so even if a business might want to expand to emerging markets that are controlled by their respective governments very different from the model that the United States among other democratic countries. While the definition of democracy is familiar to one and all, a state that is totalitarian in nature has complete control over its citizens' lives, both in the public and private sphere. This is almost dictatorial in nature and often forces the people to show their affection publicly for those who run the country without any opposition whatsoever (J.Wild & K.Wild, 2013).
Now, apart from this, there are two types of totalitarian states that political scientists have identified such as a theocratic and secular totalitarian state. While Saudi Arabia and Iran are examples of the former, North Korea and probably China are examples of the latter. One might wonder what is the difference between the two. With theocratic totalitarianism, and as with the aforementioned states, the goal is to follow one religion that it considers to be true and enforce the rules provided in the holy texts in modern-day society. As for secular totalitarianism, the ideology is not based on any holy text but that of the oligarchy that control the State. Of course, in North Korea, it is the same family that began its rule in 1948 that continues to do so until this day. Having said that, there is no doubt that politics affects business and with the change of power, especially in the United States, sweeping changes generally occur as a change in policy either restricts or allows businesses to expand in other markets. Of course, in a totalitarian state, power does not change hands but with the government's strict control over everything, the way a business operates in a democracy will be very different to how it will work in a religious or secular totalitarian state – well, it's common sense even if it's worth looking at a couple of case studies to see how businesses work in these types of countries (J.Wild & K.Wild, 2013).
Of course, in stark contract to a country like the United States where information is free-flowing and where an open market encourages innovation and competition, these markets might differ radically since the government or the state has total control over which is business is acceptable to run or otherwise. Given that there wouldn't be laws protecting businesses in the situation of disputes, this might work against businesses to run in such countries that follow the command economy paradigm which does not encourage efficiency and innovation. In fact, the businesses that are allowed to run in these economies are protected by the government even if the latter does not encourage the right for corporations to own property and assets much like they would in democratic countries. This, yet again, is determined by the ideology that runs the entire state and which maintains a grip on both businesses and the people via state policy as well (J.Wild & K.Wild, 2013 ; “Harvard Business”, 2010). In other words, for businesses to penetrate these emerging markets, be it capital or product, largely depends on whether the nature of business is considered acceptable by the state or not. One can clearly note a sense of particularism or national identity within these states that aren't so receptive to the changes that globalization has brought in the world that we live in today. Still, despite these differences, if the state is a part of the international body such as the United Nations, it might also be a participant of the United National Economic and Social Council which oversees international trade and business agreements such as the Contracts for International Sale of Goods set in 1980 (“United Nations Convention”, 2017).
In the case of Saudi Arabia which is usually very resistant to the influx of foreign businesses, it is clear that McDonalds or Coca-Cola will never be allowed in the country, thanks to its imperialist ties and their associations with both Israel and the United States. IKEA, on the other hand, has enjoyed a bit of success even if the way it markets its products across the globe is very different from how it carries this out in Saudi Arabia. Given that Sweden is a champion of women's right, the issue of removing women from IKEA catalogues in Saudi Arabia has been an issue that they clearly take seriously. As a result, the business has no choice but to accede to the demands of Saudi Arabian society since this has implications for its business interests. One can clearly see from this example how a western business has no option but to adjust its values to that of the emerging market in which its products are sold. Quite clearly, this removal of beautiful women from the catalog is based on the rules that the theocratic totalitarian state has set based on Wahhabist Islam. This is just one example of the differences that govern Saudi society in terms of women's rights that is violated and that business from freer markets and democratic societies have no choice but to accept. In other words, while it is possible for businesses like IKEA to set up shop in Saudi Arabia, it's very clear that, by virtue, of the government not allowing businesses to break with conventions in society, it can sometimes turn out to be awkward for them where they have to pick between their values and financial interests. Unfortunately, in identifying the solution as posed by the Saudi government to IKEA, there is none since this involves maintaining a standard of life as imposed by the religious texts used in Islam where women have to dress modestly (Malik, 2012).
As for North Korea, it is the supreme example of anti-globalization given how self-sufficient the country has been since its ruling family has remained in control for over half a century. While it continues to do business with China for several decades now, there is a growing difficulty between these two longstanding partners especially when it comes to heavy industry such as cement manufacturing, hydroelectric generators, pressure vessels and the production of iron ore. The growing issue lies with the need for bribery as well as the constant alteration of contracts. What is most prominent, and much like Saudi Arabia, is the interference of North Korean government policy that disrupts trade between the two countries and which has now become a bone of contention between the two trading partners. Of course, given its stand on anti-globalization, by the ruling family of North Korea, there's bound to be issues that its trading partners will face, thanks to the control that the government has on business, the people and literally every aspect of its society (Kuo, 2014). The problem, yet again, is ideological in nature and for which the only solution is a change in government policy that is not likely to happen in the near future given that Kim Jong-Un is in power now. At least, Saudi Arabia allows for businesses to operate in its emerging market while North Korea seems to be cut off from the rest of the world for reasons known to the country's leadership.
As a whole, it is clear that businesses are not allowed to operate at their very best and in line with their values in both theocratic and secular totalitarian states. This only brings us to the conclusion that businesses that want to branch out into emerging markets must consider government policy and the state's relationship to the United Nations before considering anything else. The implications of these two aspects can determine greatly how a business can evolve into a multinational and whether that goal will be truly achievable or not. In the case of both Saudi Arabia and North Korea, that are theocratic and secular totalitarian states, the challenges might be insurmountable for businesses to pursue profit-making in these countries without making major adjustments or compromises to their organization values or financial interests. Last but not least, this should tell us that expanding into markets whose governments have similar ideological backgrounds and policies is a better choice for businesses as a whole.
References
Wild, J & Wild, K. (2013). International Business: The Challenges of Globalization (7th Ed.). New York City, NY: Pearson Education.
Harvard Business Review. (2010, June 22). How Companies Break Into Emerging Markets [Video File]. Retrieved from http://www.youtube.com/watch?v=V4D7dErKtYM&feature=plcp
United Nations Commission on International Trade Law Website. (2017). United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980) (CISG). Retrieved from http://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG.html
Malik, N. (2012). No women please, we're Saudi Arabian Ikea. The Guardian Website. Retrieved from https://www.theguardian.com/commentisfree/2012/oct/02/no-women-saudi-arabian-ikea
Kuo, L. (2014). Doing business with North Korea is proving impossible, even for China. Quartz India Website. Retrieved from https://qz.com/174446/doing-business-with-north-korea-is-proving-impossible-even-for-china/
