Chapter 11 - Global and International Issues

Africa Business Characteristics

- 30 countries are considered democracies - stabilizing currencies - rapid growing middle class and average GDP growth of 5% has encouraged business from both countries established in and out of the country - by 2025, the goal is for half (50%) the country to be online

The Global Challenge

- America's economy is becoming much less American. - world economy and monetary system are emerging. - markets are shifting rapidly and in many cases converging in tastes, trends, and prices

Cultural Differences Between US and Foreign Managers

- Americans place an exceptionally high priority on time, viewing it as an asset vs Foreigners place more worth on relationships - personal touching and distance norms vary - family roles and relationship variations - role of religion in business and daily life in different societies - difference in the valuation of modesty, team spirit, collectivity, and patience more than competitiveness and individualism (US) - eating habit variations - rules of etiquette variations - Americans have a tendency to do business with individuals they don't know

Benefits of Reshoring

- U.S. laws protect female and minority employees - reliable energy at low cost - excellent security to protect designs from overseas copycats - enable closer tabs on quality control and supply chains - excellent economy with consumers purchasing more - less shipment costs with consumers nearby - excellent human rights, edu, legal, and political systems that promote freedom and opportunity for citizens - capitalize on the new 21% corporate tax rate

India Business Characteristics

- about 35% females in labor force - high amounts of gender disparities - don't like to say no - shaking hands is common, though rarely between men and women - use of right hand to eat - leave a small amount of food on the plate to represent satisfaction - prefer doing business with those whom they have an est. relationship - importance of punctuality - distrust in legal system - importance of age and title

Mexico Business Characteristics

- authoritarian - seek workers who are agreeable, respectful, and obedient - cordial and friendly atmosphere - desire for harmony > conflict - paternalistic - appreciation of the family model - collectivism - non-rigid meeting times - required knowledge of the Mexican way of life, culture, beliefs, and customs

Potential Benefits of Outsourcing

- cost savings - focus on core business - cost restructuring - improve quality - knowledge - contract - access to talent - catalyst for change - reduce time to market - risk management - tax benefit

Indonesia Business Characteristics

- democratic Pacific archipelago comprised of thousands of islands - currency is the rupiah and its economy is one of the fastest growing in Asia - GDP growth of 5% in 2017 - bright economic forecast

Unique Risks Multinational Firms Face

- expropriation of assets - currency losses through exchange rate fluctuations - unfavorable foreign court interpretations of contracts and agreements - social/political disturbances - import/export restrictions - tariffs - trade barriers

Japan Business Characteristics

- facing tight labor market with increasingly older working population, opening the doors to immigrant workers - business confidence is approaching highest point in decades - entertaining is importance, centerance around Wa - formal meetings in informal settings - importance of person's age and status - highly formal and ritualized greetings - focus on long-term relationships - high emphasis on punctuality - small gifts, business cards, etc. - bowing is more appreciative over hand shakes

Advantages of Global Business

- firms can gain new customers for their products and services - foreign operations can absorb excess capacity, reduce unit costs, and spread economic risks over a wider number of markets - foreign operations can allow firms to establish low-cost production facilities in locations close to raw materials or cheap labor - competitors in foreign markets may not exist, or competition may be less intense than in domestic markets - foreign operations may result in reduced tariffs, lower taxes, and favorable political treatment - multinational joint ventures can enable firms to learn the technology, culture, and business practices of other people and to make contacts with potential customers, suppliers, creditors, and distributors in foreign countries - economies of scale can be achieved from operation in global rather than solely domestic markets - firm's power and prestige in domestic markets may be significantly enhanced if the firm competes globally

Disadvantages of Global Business

- foreign operations could be seized by nationalistic factions - firms confront different and often little-understood social, cultural, demographic, environmental, political, governmental, legal, technological, economic, and competitive forces - weaknesses of competitors in foreign lands are often overestimated, and strengths are often underestimated - language, culture, and value systems differ among countries, which can create barriers to communication - gaining an understanding of regional organizations is difficult - dealing with two or more monetary systems can complicate international business operations

China Business Characteristics

- formal greetings with the oldest person greeted first - handshakes are common - sense of humor - avoid white, blue, black paper and the number four - rarely do business with companies/people they don't know - not a general issue of gender bias - avoid business discussions at meals and social events - punctuality is important - cells won't be turned off - most populous country, economic output annually exceeds the U.S. - accounts for nearly one-third of global market for cars - relatively low ranking in ease of doing business due to human rights and substantial disregard for copyright, patent, and trademark rules of law

Monitoring Globalization

- important strategic-management activity - knowing how to use the information for one's competitive advantage

U.S. Business Characteristics

- individualism - achievement - competition - informality and spontaneity

International/Multinational Firms

- organizations that conduct business operations across national/it's own borders - process of strategic management is conceptually the same, but in practice is more complex because of more variables and relationships

Metrics of Thomson Reuters Annual List of the World's Most Innovative Companies

- patent activity - R&D investment - success rate - globalization - influence

Inhwa

- word that represents the context within business behavior revolves in South Korea - harmony-based on respect out of hierarchical relationships, including obedience and authority

Guanxi

- word that represents the context within business relations operate in China - means "personal relations"

Wa

- word that represents the context within business relations operate in Japan - stresses group harmony and social cohesion

worldwide plan

A global strategy integrates actions against competitors into what?

New Zealand

According to the top 10 nations ranking, which country is the overall best to do business with?

Worldwide: 22% Europe: 18% United States: 21%

Average Corporate Tax Rates Worldwide: _____% Europe: _____% United States: _____%

Feng Shui

Chinese practice of harnessing the natural forces, often expressed in how office furniture is arranged

13% - means the U.S. has substantial room for improvement in doing business - means the nation is still largely a domestic, continental economy

Exports of goods and services from the U.S. account for only about ______% of U.S. gross domestic product (GPD).

obtaining insurance from the U.S. government's Overseas Private Investment Corporation (OPIC)

Firms can offset some risks of doing business internationally by obtaining...

websites, smartphones, and social media

How do small businesses operate outside their home country everyday without the mass networks of large businesses/organizations?

The World Bank and international Finance Corporation Rank 189 Countries Based on Simple Averages of These Percentile Rankings

How easy it is to... 1. Start a business 2. Deal with construction permits 3. Register property 4. Get credit 5. Protect investors 6. Pay taxes 7. Trade across borders 8. Enforce contracts 9. Resolve insolvency 10. Get electricity

15.5%

In 2018, a new U.S. federal tax law went into effect the imposed a one-time, ______% tax on foreign earnings held offshore in cash accounts.

Nemaswashio

Japanese worker expectation of supervisors to alert employees privately of changes rather than informing them in a meeting

- everlasting customers (Japan) versus one-time sale (US) - hourly employees (US) versus lifetime employees (Japan)

Key differences between Japanese managers and U.S. managers

time , effort

More _________ and _________ are required to identify and evaluate external trends and events in multinational firms.

a platform for entry into other regions

Research reveals that countries are attractive not only because of their own institutions, but also their function to serve as what?

globally competitive and nationally responsive

Strategists in global firms are often confronted with the need to be what at the same time?

23%, 11%

The average level of union membership across the EU is about ____%, compared to the United States with about ____%.

labor unions - companies often like to avoid unions due to inc. wages

The existence or prevalence of __________ __________ can be an important factor in many strategic decisions, such as where to locate stores or factories.

declining - exception is Italy, where union membership is slowly growing

The popularity of unions in Europe is ____________.

worldwide

The price and quality of a firm's products must be competitive on a [local , worldwide] basis.

shifts in the nature and location of production systems

The reduction of response time associated with changing market conditions is caused by what, especially to China and India?

short term

U.S. managers place greater emphasis on __________ results than foreign managers do.

- geographic distance - cultural/national differences - variations in business practices

What factors often make communication between domestic HQs and overseas operations difficult?

strength of the dollar

What has led some U.S. firms to look outside of the U.S to produce goods, despite former President Donald Trump's pushes to reshore companies?

growth in demand for goods outside of the U.S. is considerably higher than inside

What is a primary reason why most domestic firms do business globally?

- to be marketable in as many countries as possible - select the lowest-cost source

When firms design a product, they design it to be... When firms manufacture a product, they select the...

inhibits trade among countries and invites retaliation

Why do most economists argue that protectionism harms the world economy?

to gain and sustain competitive advantage

Why is it essential for multinational firms to gain knowledge of business culture variation across counties?

High

__________ ____________ tax rates deter investment in new factories and can also provide strong incentives for corporations to avoid and evade taxes.

Outsourcing

companies hiring other companies to take over various parts of their functional operations - HR, information systems, payroll, accounting, customer service, marketing

Global Strategy

includes designing, producing, and marketing products with global needs in mind rather than considering just a home country

Reason it May Be Risky to Remain a Domestic Competitor in any Industry That's Global

more aggressive rival firms may use global growth to capture economies of scale and learning

Globalization

process of doing business worldwide, such that strategic decisions are made based on global profitability of the firm rather than just domestic considerations

Reshoring

refers to U.S. companies moving a portion of their manufacturing back to the U.S.

Protectionism

refers to companies imposing tariffs, taxes, and regulations on firms outside the country to favor their own companies and people

Global Strategy Purpose

seeks to meet the needs of customers worldwide, with the highest value at the lowest cost

mass communication and high technology - similar patterns of consumption across diverse cultures

two factors that have had a major impact on consumption patterns around the world

Lack of understanding of Asian cultures, including how Asians think and behave

weakness of some U.S. firms competing with Pacific Rim firms