International Business Study Guide Exam 1

Symbolic Productions

- A symbol can be letters, figures, colors, or other characters that communicate a meaning. - Symbols can represent nations, religions, or corporations. - Color meanings in each country are based on spiritual, social, cultural, historic and political influences. - Colors are important and powerful communication tools that express emotions and feelings.

Ethnocentric Orientation

using our own culture asthe standard for judging other cultures. It is also knownas home-country orientation

Settings for Corporate Social Responsibility

workplace, marketplace, environment, community

Cultural Metaphor

• A distinctive tradition or institution strongly associatedwith a particular society. • It is a guide to deciphering people's attitudes, values,and behavior

Critical Incident Analysis

• A method for analyzing awkward situations in cross-cultural encounters. • Involves becoming more objective and developing empathy for other points of view

Cross-Cultural Risk

• A situation or event where a cultural miscommunication puts some human value at stake. • Cross-cultural risk is posed by differences in language,lifestyles, mindsets, customs, and/or religion. • Understanding things like how people communicate,lead, make decisions or value time are critical.

Religion

• Almost every culture is underpinned by religious beliefs. • Religion is a system of common beliefs or attitudes concerning a being or a system of thought that people consider sacred, divine, or the highest truth and includes the moral codes, values, institutions, traditions, and rituals associated with this system. • Religious concepts of right and wrong have played a key role in the development of ethical values and social responsibility.• Religion influences culture and, therefore, managerial and customer behavior in many ways.

EX:

• Alphabet Inc.'s Google agreed to pay French regulators a fine of nearly $270 million, settling one of the first anti-trust cases globally in 2021. • The EU, in retaliation to U.S. tariffs on steel and aluminum, threatened to increase the import tariff onHarley Davidson motorcycles from 6% to 56%!

Idiom

• An expression whose symbolic meaning is different from its literal meaning. • It is a phrase you cannot understand by knowing only what the individual words in the phrase mean. • Idioms exist in virtually every culture, and people often use them as a short way to express a larger concept. • Managers should study national idioms to gain a better understanding of cultural values

Attitudes

• Attitudes are similar to opinions but are oftenunconsciously held and may not be based on logicalfacts. Prejudices are rigidly held attitudes, and usuallyunfavorable.

Monochronic

• Countries such as Australia, Canada, and the UnitedStates are relatively focused on the present. They tend to have a monochronic orientation to time—a rigid orientation in which people are focused on schedules,punctuality, and time as a resource.

Globalization of Markets

• Cross-border integration and growing interdependency of countries around the world • Drivers include the geopolitical and technological revolutions • Trade between nations, is accompanied by substantial flows of capital, technology, and knowledge • Globalization both compels and facilitates firms to expand abroad (internationalize)LO 2) Key Concepts

Driving Forces of Market Globalization

- worldwide reduction of barriers to trade and investment - market liberalization and adoption of free trade - industrialization, economic development, and modernization - integration of world financial markets - advances in technology

Fifth phase of globalization

-2007 to Present -Rise of digital technologies and other new technologies, which are boosting manufacturing productivity and the efficiency of international trade in services -Leveraging technology to facilitate trade and local production; rising trade in digitally enabled services but slowing growth of trade in merchandise goods

Societal Consequences of Market Globalization

-Contagion: Rapid spread of financial or monetary crises from one country to another -Loss of national sovereignty -Offshoring and the flight of jobs -Effect on the poor -Effect on the natural environment -Effect on national culture

Elements of International Business

-Globalization of markets -International trade -International investment -International business risks -Participants -Foreign market entry strategies

The Four Risks of International Business

1) Cross-cultural risk 2) Country risk 3 ) Currency risk 4) Commercial risk

First Phase of globalization

1830-1880; Rise of manufacturing: cross-border trade of commodities, largely by trading companies

Second Phase of Globalization

1900 - 1930; rise of electricity and steel production; emergence and dominance of early MNEs (mainly from Europe and North America) in manufacturing, extractive, and agricultural industries

Third Phase of Globalization

1948-1970; Focus by industrializingWestern countries to reduce trade barriers; rise of MNEs from Japan;development of globalcapital markets; rise of global trade names

Fourth Phase of Globalization

1980s - 2006; privatization of state enterprises in transition economies; revolution in information, communication, and transportation technologies; remarkable growth of emerging markets; rapid growth in cross-border trade of products, services, and capital; rise of internationally active SMEs and services firms; rising prosperity of emerging markets

High-Context Culture

A culture that emphasizes nonverbal messages andviews communication as a means to promote smooth,harmonious relationships

low-context culture

A culture that relies on elaborate verbal explanations,putting much emphasis on spoken words

deal-oriented cultures

In deal-oriented cultures, managers focus on the task athand and prefer getting down to business. Leading examples of deal-oriented cultures include those ofAustralia, northern Europe, and North America

How do firms internationalize?

In general, firms can use one of six different modes: 1) exporting/importing 2) turnkey projects 3) licensing 4) franchising 5) establishing joint ventures 6) or setting up a new, wholly owned subsidiary

relationship-oriented cultures

In relationship-oriented cultures, managers put morevalue on relationships with people. It is important to buildtrust and understanding and get to know the other partyin business interactions (e.g., guanxi in China).

long term vs short term orientation

Refers to the degree to which people and organizationsdefer pleasure and gratification to achieve long-termsuccess

Normativism

The belief that ethical behavioral standards are universaland global firms should seek to uphold them

Relativism

The belief that ethical truths are not absolute but differfrom group to group

Indulgence versus Restraint

The extent to which people try to control theirdesires and impulses

power distance

The extent to which the less powerful members ofinstitutions and organizations within a country expectand accept that power is distributed unequally

Uncertainty Avoidance

The extent to which the members of a culture feelthreatened by ambiguous or unknown situations andhave created beliefs and institutions that try to avoidthese

Individualism vs. Collectivism

The fundamental issue addressed by this dimension is the degree of interdependence a society maintains among its members

Masculinity versus Femininity

The issue here is what motivates people, wanting to bethe best (masculine) or liking what you do (feminine)

Firm-Level Consequences of Market Globalization:Internationalization of the Firm's Value Chain

The most direct consequence of market globalization ison the firm's value chain

Internationalization of Firms

The tendency of companies to deepen their international business activities systematically

self-reference criterion

The tendency to view other cultures through the lens ofyour own culture

Corporate Social Responsibility (CSR)

a business's concern for society's welfare

Material Productions

artifacts, objects, and technological systems that people construct to function within their environments

Ethical Challenges in International Business

corruption, bribery, harmful work environment, unethical business practices, harmful global sourcing, illicit products and marketing, intellectual property infringement

company employees are socialized by three cultures

national culture, professional culture, and corporate culture

Creative Expression

of culture include arts, folklore,music, dance, theater, and cuisine

Geocentric Orientation

refers to a global mind-setthrough which the manager can understand a businessor market without regard to country boundaries

Polycentric Orientation

refers to a host-country mind-set in which the manager develops a strong attachment to the country in which she or he conducts business

Exporting

selling products to another country

Firms Value Chain

the sequence of value-adding activities the firm performs in the course of developing, producing, marketing, and servicing a product

Education

• Cultural values, ideas, beliefs, traditions, and attitudes are passed from one generation to the next through education. • Education takes place through lessons and behavior acquired from parents, family, and peers; participation in groups (social, business, and religious); and schooling.

Perception of Space

• Cultures differ in their perceptions of physical space. For example, people in the U.S. keep a greater distance than say, those in Brazil

What is Currency Risk (also known as Financial Risk)?

• Currency risk, or exchange-rate risk, arises from the change in price of one currency in relation to another. • Investors or companies that have assets or business operations across national borders are exposed to currency risk that may create unpredictable profits and losses. • Many multinational corporations use forex futures, options contracts, or other derivatives to hedge the risk.

Language

• Described as the expression or mirror of culture, verbal language is essential to communications, and provides insights into culture. • It's a major differentiator between cultural groups and provides a means for business leaders to communicate effectively with employees, suppliers, and customers.

Acquire Cross-Cultural Competence

• Develop cross-cultural skills. Strive for cross-culturalproficiency (tolerance, perceptiveness, relationships). • Manage cultural differences through recognition, respect and reconciliation processes through time .• Strive to develop a global mind-set by improving your cultural intelligence (cognitive, behavioral, motivational).

Commercial Risk

• Firms' potential loss or failure from poorly conceived or executed business strategies, tactics, or procedures • Business partner risk, timing of market entry, pricing,product features, promotional themes • Risks also include social media risk (unfavorable trending), and cyber risk

International Trade

• Goods and services exchange across national borders(though exporting and importing)

EX:

• In giving employees feedback and evaluating their performance,managers in the U.S. are less direct than is the cultural norm inFrance. • Executives in India may be more relationship-based when it comes to establishing trust whereas in the U.S. we see moretask-based management ('let's get down to business').

Dimensions of Market Globalization

• Integration and interdependence of national economies • Rise of regional economic integration blocs • Growth of global investment and financial flows • Convergence of buyer lifestyles and preferences • Globalization of production activities • Globalization of services

International and Domestic Business: How They Differ

• International business is in contact with countries that differ in terms of culture, language, political and legal systems, economies, infrastructure and other factors. • A strategic way of organizing these macro-level factor sin order to manage things at the firm-level is by conducting a PESTEL and SWOT analysis.

Foreign Direct Investment (FDI)

• Internationalization strategy in which the firm establishes presence abroad through acquisition of resources. • An investment in the form of a controlling ownership in a business in one country by an entity based in another. • It is distinguished from a foreign portfolio investment by a notion of direct control.

Culture's Effect on International Business

• Managing employees (e.g., planning, organizing, leading) • Developing products and services • Communicating and interacting with foreign business partners • Negotiating and structuring international business ventures • Preparing advertising and promotional materials • Interacting with current and potential customers from abroad

Manners and Customs

• Manners and customs are ways of behaving andconducting oneself in public and business situations. • Appropriate behavior at social gatherings, work hours,personal greetings are some examples

Dimentions of culture

• More than any other feature of human civilization, cultureillustrates the differences among societies based onlanguage, habits, customs, and modes of thought

Nonverbal Communication

• Nonverbal communication is unspoken and nonverbal messages accompany most verbal ones. • Includes facial expressions, body movements, eyecontact, physical distance, posture, and other signals.

Globalization of Markets

• Ongoing economic integration and growing interdependency of national economies. • Globalization both compels and facilitates firms to expand abroad (internationalize).

International Portfolio Investment

• Passive ownership of foreign securities such as stocks and bonds

Importing

• Products or services from suppliers located abroad (also referred to as global sourcing)

Social Structure

• Refers to the pattern of social arrangements and organized relationships that characterize a society. • It is how a society is organized in terms of individuals,families, groups, and socioeconomic strata. • As a manager, understanding the social structure ofinternational employees, clients, and suppliers is vital.

Country Risk (also known as Political Risk)

• Refers to the potentially adverse affects on company operations and profitability. • Can be caused by developments in the political, legaland economic environment of a foreign country. • Includes the possibility of foreign government intervention in a firms' business activities

International Business

• Refers to trade of goods, services, tech, capital and/or knowledge across national borders • Involves cross-border transactions of goods and services between two or more countries • Also defined as the study of the internationalization process of multinational enterprises (MNEs) • Differs from domestic because it crosses borders, has different risks, and different market entry strategies

EX:

• Rising value of the U.S. dollar during 2015 and 2016relative to most currencies cut into revenues of U.S. MNEs such as Apple, Caterpillar, and Pfizer. • Proctor and Gamble's Duracell battery business experienced a 31 percent decline in profits due to weaker currencies in foreign markets

Why do firms internationalize?

• Seek opportunities for growth through market diversification.• Earn higher margins and profits. • Gain new ideas about products, services, and business methods. • Serve key customers better that have relocated abroad. • Be closer to supply sources, benefit from global sourcing advantages, or gain flexibility in product sourcing • Gain access to lower-cost or better value factors of production. • Gain economies of scale in sourcing, production,marketing, and research and development (R&D). • Confront international competitors more effectively orthwart the growth of competition in the home market. • Invest in a potentially rewarding relationship with aforeign partner

Polychronic

• Some cultures have a polychronic perspective on time.In such societies, instead of performing single tasks serially, people are inclined to do many things at once. In this way, members of polychronic cultures are easily distracted

International Trade

• The difference in the growth rates of world production and world trade is why studying international business is so important • While we produce more goods and services today compared with before, a far greater proportion of that production is being traded across national borders than at any time in modern history.

Acculturation

• The process of adjusting and adapting to a culture otherthan one's own

Socialization

• The process of learning the rules and behavioralpatterns appropriate for living in one's own society.

International Investment

• The transfer of assets to another country or the acquisition of assets in that country .• We make the distinction between portfolio investment and foreign direct investment.

EX:

• There are many examples of firms that have not delivered on their global strategy at some point or another, such as Walmart(in Germany and Japan) and eBay (in China). • Cyber risk includes the recent rise in "ransomware" attacks such as when Colonial Pipeline Co. complied with the $4.4 million ransom demand. • Social media risk includes the recent "joke" by Volkswagen it would change the company name to "Voltswagen" because it was producing more electric vehicles. It wasn't well received.

Perceptions of Time

• Time has a strong influence on business. It affectspeople's expectations about planning, scheduling, profitflows, and promptness in arriving for work and meetings

Values

• Values represent a person's judgments about what isgood or bad, acceptable or unacceptable, important orunimportant, and normal or abnormal. Values are thebasis for our motivation and behavior.