D270 midterm

hindrance to domestic investment

focuses resources elsewhere other than investor's home country, FDI doesn't help/ hinders domestic investment FDI disadvantage

peripheral values

less dominant and more pliable

harmful action against people

local employees of a foreign company are threatened by kidnapping, extortion, or terrorist activities

power distance

measurement of employee preference of interaction

civil strife, insurrection, war

military action damages or destroys a company's local operations

merchandise exports/ imports

most popular IB modes, tangible products/ goods, visible imports/ exports ex. purchasing designer brands' products from France/ Italy creates export from those countries and increases imports to US

rule of law

no individual is above laws that are clearly specified, commonly understood and fairly enforced. Citizens regard constitutional principles as legitimate. Laws are clear (anchors legal system in democracies)

authoritarian totalitarianism

tolerates no deviation from state ideology. resistance incurs punishment. officials control political environment but pay less attention to social and economic structure (ex. Chad, North Korea)

destructive government actions

unilateral trade barriers, often via local content requirements, interfere with the distribution of products to local consumers

core values

values so strong that they are nonnegotiable

high masculinity score

"live to work" mentality (ex. Austria)

high femininity score

"work to live" mentality (ex. Sweden)

hybrid regime

- electoral irregularities undermine freedom and justice - government limits opposition parties and candidates - judicial bias signals the state corrupting the rule of law - political culture, public administration and political participation struggles - corruption is extensive, civil society fades, and media are regulated (ex. Bangladesh, Ecuador, Honduras, Thailand, Venezuela)

full democracy

- mature political culture promotes and protects political freedoms and civil liberties - government discharges responsibility transparently - an effective system of checks and balances regulates politics - the judiciary is independent, its decisions are impartially enforced, and the rule of law prevails - media are independent, vigilant, and diverse (ex. Australia, Austria, US, South Korea)

authoritarian regime

- political pluralism is absent/ repressed by state - democratic institutions exist but have little substance, state uses them as single-party rule - elections sometimes occur, not free or fair - state disregards civil liberties - no independence, "rule of man" - media is state-owned - censorship suppresses criticism and state and promotes state propaganda ideology (ex. Afghanistan, Chad, China, Russia, Saudi Arabia)

flawed democracy

- state respects basic civil liberties - free and fair elections - fraud or media restrictions - weak political culture - leadership and policy changes frequently (ex. Brazil, South Africa, Hungary, Mexico, India)

licensing/ franchising

Entering an agreement for local manufacturer to produce and sell goods, low cost, low control ex. franchising. Dunkin', local businesses can run the store and sell the goods licensing, Disney granting rights to toy manufacturers to make Marvel toys

negative influence on exchange rates

FDI can affect exchange rates to the advantage to one country and the downfall of another FDI disadvantage

economic development stimulation

FDI can stimulate the target country's economic development FDI advantage

employment and economic boost

FDI creates new jobs as investors build new companies in the target country, creating new opportunities. increase in income and buying power to the people, leads to economic boost FDI advantage

distributive risk

MNE's often generate greater profits in the local economy, host governments sometimes conclude that they deserve a larger cut

financial anomalies

Regulatory policies that make it difficult for the company to get credit or arrange overseas loans

sales operation

Setting up a sales team in a new market to sell goods produced in home market, moderate cost, moderate control ex. American country selling bikes in Asia, America brings employees to Asia, creating a headquarters in new country

polycentric organization

believes it should act how the companies act abroad - involves adapting to the culture of the country you're entering

ethnocentric organization

believes that it's own practices are superior to those of other countries - "whatever works at home will work abroad"

reshoring

bringing in operations from abroad - can be due to miscalculating benefits offshoring, poor quality, consumer pressure, competitive security

masculinity-femininity index

does not actually measure masculinity or femininity, but measures attitudes towards achievement

tax discrimination

a foreign company is saddled with a higher tax burden than a local competitor

mixed system

a nation uses two or more legal systems either together or separately ex. USA uses common and civil law (ex. Singapore and Pakistan- common, theocratic; Nigeria and Malaysia- common, theocratic, customary)

portfolio investment

a non-controlling financial interest in another entity, shares in or loans to a company/ country

secular totalitarianism

a single-party government controls elections, tolerates dissent as long as it doesn't challenge the state. no all-encompassing ideology, some individual freedoms as long as they don't interrupt social harmony (ex. China, Vietnam)

fascism totalitarianism

a single-party state that controls through force every aspect of people's lives. merges state and corporate power. (ex. WWII era Germany and Italy)

international business (IB)

all commercial transactions (including sales, investments, and transportation) that take place among countries

customary law

based on norms and accepted behavior that gains legitimacy through long-term practice *usually goes along with mixed systems (ex. developing countries- Africa)

theocratic law

based on religious precepts. Ultimate legal authority is given to religious leaders who govern society. (ex. Saudi Arabia, Middle East, Africa)

cultural collision

contact among divergent cultures creates problems - deal-focus (DF) - relationship-focus (RF)

outsourcing

contracting a specific process out to a third party - involves finding someone who specializes in whatever you need done

joint venture

creation of new entity in a new market with one or more other firms, high cost, moderate control ex. Uber and Volvo, Volvo wants driverless cars and Uber wants to help support and provide technology

Exporting via Local Distributor

goods are produced at home and local distributor sells them in new market, low cost, low control ex. Ulta beauty carries many brands and makes profits off of each sale and has no obligation to sell -> getting paid to carry products

theocracy totalitarianism

government in an expression of given deity, leaders represent its interests on Earth. strict social regulation (ex. Iran, Afghanistan, Saudi Arabia)

rule of man

holds that ultimate authority resides in a person whose word, no matter how unfair or unjust, is law (anchors legal system in a totalitarian state)

restrictions on profit repatriation

host government arbitrarily/ erratically limits amount of profit that a foreign country can remit from its local operations to the home office

expropriation/ nationalization

host government or political faction seizes a company's local assets. compensation is trivial. resurgent totalitarianism and resource nationalism increase risk

geocentric organization

integrates both home and host country practices - balances informed knowledge of their own organizational cultures with home and host country needs, capabilities, and constraints - encourages innovation and improves success

service exports/ imports

international non-product sales and purchases travel, transportation, banking, insurance, use of trademarks/ patents/ copyrights ex. traveling to Japan for Olympics, plane ticket on a Japanese airline are travel expenses -> service exports for Japan, service imports for US

systemic risk

investors commonly face political risk that follows from shifting public policy

development of human capital resources

one big advantage brought about by FDI is the development of human capital resources which isn't immediately apparent. gained by training and sharing experience would increase education and overall human capital of a country FDI advantage

representative democracy

originates in a constitution, protects individuals freedom/ liberties. law treats all citizens the same. elected representatives act in people's interest. officials represent voters and have authority to act as they see fit (ex. US and Japan)

portfolio investment definition

ownership of a stock/ bond/ other financial asset with expectation that it will earn/ grow return in value passive handoffs of ownership, doesn't include management role so isn't a direct investment

intellectual property

ownership rights to intangible assets (ex. creative ideas, patents, copyright, trademarks, trade dress, trade secrets)

tax incentives

parent enterprises provide FDI to get additional expertise, tech., and products. foreign investors can get tax incentives that are useful in selected field of business FDI advantage

polychronic cultures

people are more comfortable when working simultaneously on a variety of tasks - dealing with multiple customers simultaneously (ex. Latin America, African, Middle Eastern countries)

relationship-focus (RF) culture

people are primarily people-oriented - view DF people as too blunt

deal-focus (DF) culture

people are primarily task-oriented - view RF people as time-wasters

high context cultures

people care about indirect information and understand more without explicit instruction (ex. Japan, China, France, Spain, Brazil)

low context cultures

people only care about firsthand information that bears directly on the subject at hand - businesspeople spend little time on smalltalk and get straight to the point - have trouble making inferences and want explicit instructions (ex. US, Northern Europe)

low power distance

people prefer "consultative" styles, higher-ups talk and consult more with subordinates

high power distance

people prefer to be told what to do, prefer autocratic or paternalistic management styles

monochronic cultures

people prefer to work sequentially - finish a transaction with a customer before beginning another task (ex. North-American and Central European countries)

catastrophic risk

political developments that adversely affect the operations of every firm in a country (civil disorder, insurrection)

risk from political changes

political issues in other countries can instantly change so FDI is risky FDI disadvantage

procedural risk

political policies sometimes impose frictions that slow or stop transactions

acquisition

purchase majority stake in existing operating firm in a new market, very high cost, high control ex. AT&T taking over other mobile service companies, easier than starting a new company, benefit from tech. and already has customer base

equity investment

purchase minority stake in existing firm, enter an agreement to work with that firm, moderate/ high cost, low/ moderate control ex. IB invests safely in local company and establish safety measure

common law

relies on tradition, judge-made precedent and usage. Judges interpret the law (ex. Australia, Canada, England, former English colonies)

political risk

risk that political decisions/ events/ conditions in host country will change the business environment

greenfield

set up a new operation from scratch in a new market, very high cost, high control ex. Coca-Cola is a US firm that rebranded itself to go to other countries/ markets

culture

shared values, attitudes, norms, beliefs of a group of individuals

offshoring

shifting production from the domestic country to a foreign one - usually done in an effort to reduce costs - displaces manufacturing workers and creates more jobs

multiparty democracy

three or more parties govern. a single party cannot legislate policy without negotiating with opposition parties (ex. Canada, Germany, Italy)

civil law

starts with a detailed set of codes of law. Judges find and apply established laws to current disputes strictly. Codes cannot be easily modified (ex. France, Germany, Japan and 150+ other countries)

direct exports

taking orders at home and shipping them to a new market, very low cost, moderate control ex. selling computer parts, send products to a foreign manufacturing plant, consumers pay taxes & shipping, no outsourcing needed and no hiring needed

unilateral breach of contract

the host government repudiates a contract negotiated with a foreign company or approves a local firms doing the same

competing perspectives

the host government's policies on human rights/ labor conditions/ environmental sustainability create public relations problems for foreign company at home

individualism

the interests of the individual are more important than the interests of the group

direct investment (FDI)

the investor takes a controlling interest in a foreign company, doesn't need majority- just controlling

globalization

the widening and deepening of interdependent relationships among people from different nations