IBUSEXAM1

Perception of Time and Space

Time dictates expectations about planning, scheduling, profit streams, and what constitutes tardiness in arriving for work and meetings. Perceptions of space reflects each culture's orientation about personal space and conversational distance.

International Investment

Transfer of assets to another country or the acquisition of assets in that country. Also known as "foreign direct investment" (FDI).

Ethical behavior is good business, leading to enhanced corporate image

True

Polychronic

a flexible, non-linear orientation to time in which the individual takes a long- term perspective; time is elastic, long delays are tolerated before taking action. Punctuality is relatively unimportant. Relationships are valued. Examples: Africa, Latin America, Asia.

Geocentric orientation

a global mindset in which the manager is able to understand a business or market without regard to national boundaries. Managers should strive for a geocentric orientation

Multinational enterprise (MNE)

a large company with substantial resources that performs various business activities through a network of subsidiaries and affiliates located in multiple countries. (a)Historically been the most important type of focal firm. (b) Primary market entry strategy: Foreign Direct Investment

GATT (General Agreement on Tariffs and Trade)

a legal agreement between many countries, whose overall purpose was to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas.GATT was signed by 23 countries in October 1947, after World War II, and became law on Jan. 1, 1948. The purpose of the General Agreement on Tariffs and Trade (GATT) was to make international trade easier.

Polycentric orientation

a mindset in which the manager develops a greater affinity for the country in which he or she works than for the home country.

Monochronic

a rigid orientation to time in which the individual is focused on schedules, punctuality, time as a resource, time is "money" For example, people in the U.S.are hurried and impatient.

ethical dilemma

a situation in which a difficult choice has to be made between two courses of action, either of which entails transgressing a moral principle.

Born global firm

a young, entrepreneurial SME that undertakes substantial international business at or near its founding.

The conclusion for the four risks of IB

always present but manageable and some risks are extremely challenging.

Hofstede: Power distance

describes how a society deals with inequalities in power that exist among people. High power distance societies exhibit big gaps between the weak and powerful. Lower power distance societies have small gaps between the weak and powerful.

E.T. Hall's High-context cultures

High-context cultures emphasize nonverbal or indirect language.

Societal Consequences of market globalization

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

Firm-level consequences of market globalization: Internationalization of the Firm's Value Chain

- Countless new business opportunities for internationalizing firms - New risks and intense rivalry from foreign competitors - More demanding buyers who source from suppliers worldwide - Greater emphasis on proactive internationalization - Internationalization of firm's value chain.

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.

Key points to remember from chapter 1

- International trade in services accounts for about one-quarter of all global trade - International business: is conducted across national borders, uses distinctive business methods, is in contact with countries that differ in terms of culture, language, and other factors. When going abroad, firms are faced with four major types of risk.

Digital Technologies

- MNEs leverage digital technologies to optimize their performance, managing operations around the world - Digital technologies opened the global marketplace to firms that historically lacked the resources to internationalize

Manufacturing and Transportation Technologies

- Revolutionary developments facilitate low-scale and low-cost manufacturing; firms can make products cost-effectively even in short production runs. Online platforms are increasing the productivity of business and industrial activity. - In transportation, key advances include fuel-efficient jumbo jets, giant ocean-going freighters, and containerized shipping. The cost of international transportation has declined substantially, spurring rapid growth in global trade. - Collectively, technological advances have greatly reduced the costs of doing business internationally.

Why do firms internationalize?

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

Driving Forces of Market Globalization

- Worldwide reduction of barriers to trade and investment - Market liberalization - Industrialization, economic development, and modernization - Integration of world financial markets - Advances in technology.

Absolute Advantage Principle

A country should produce only those products in which it has absolute advantage or can produce using fewer resources than another country.

Cross-cultural risk

A situation or event where a cultural miscommunication puts some human value at stake. It arises in environments comprises of unfamiliar languages, and unique values, beliefs, and behaviors

Factor Proportions Theory

Also known as Factor Endowments Theory. It argues that each country should produce and export products that intensively use relatively abundant factors of production, and import goods that intensively use relatively scarce factors of production.

New Trade Theory

Argues that economies of scale are an important factor in some industries for superior international performance, even in the absence of superior comparative advantages

Dimensions of Culture: Attitudes

Attitudes and preferences are developed based on values, and are similar to opinions, except that attitudes are often unconsciously held and may not have a rational basis.

Bribery

Bribery is common and may take the form of grease payments, small inducements intended to expedite decisions and transactions, or gain favors.

Key Global Trends

Changing balance of growth towards emerging markets The rise of middle class Environmental concerns Increasing global interconnectivity Service Industries Metaverse Trillion-dollar companies

Corruption

Corruption is the practice of obtaining power, personal gain, or influence through illegitimate means, usually at others' expense.Corruption is a major or severe concern in the global activities of a large proportion of MNEs.

International product life cycle theory

Each product and its associated manufacturing technologies go through three stages of evolution: introduction, maturity, and standardization. In the introduction stage, the inventor country enjoys a monopoly both in manufacturing and exports. Example: the television set. In the maturity stage, the product's manufacturing becomes relatively standardized, other countries start producing and exporting the product. In the standardization stage, manufacturing ceases in the original innovator country, and it becomes a net importer of the product. Today under globalization, the cycle occurs quickly for many products.

International trade

Exchange of products and services across national borders; typically through exporting and importing.

Difference between facilitating payment and bribe

Facilitation payments are different from bribes in that they're offered or solicited in return for a service a person or a company is entitled to receive. In contrast, bribes are offered in return for undue and illegal advantage.

Examples of unethical behavior

Firms may: Falsify or misrepresent contracts or official documents. Pay or accept bribes, kickbacks, or inappropriate gifts. Tolerate sweatshop conditions or abuse employees. Do false advertising or other deceptive marketing. Engage in deceptive or discriminatory pricing. Deceive or abuse intermediaries in the channel. Undertake activities that harm the natural environment.

5 Phases of Globalization

First phase 1830 to late 1800s, peaking in 1880. Introduction of railroads and ocean transport. Rise of manufacturing: cross-border trade of commodities, largely by trading companies. Second phase 1900 to 1930, Rise of electricity and steel production. Emergence and dominance of early MNE's (mainly from Europe and North America) in manufacturing, extractive, and agricultural industries. Third phase 1948 to 1970s, Formation of General Agreement on Tariffs and Trade (G A T T); conclusion of World War II; Marshall Plan to reconstruct Europe. Focus by industrializing Western countries to reduce trade barriers; rise of M N E s from Japan; development of global capital markets; rise of global trade names Fourth phase 1980s to about 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 SME's and services firms; rising prosperity of emerging markets. Fifth phase 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

The advantage for entrance in a market early

First-mover advantage Example: The commercial aircraft industry has very high fixed costs that necessitate high-volume sales to achieve profitability.

What are the elements of International Business?

Globalization of markets, International trade,Foreign market entry strategies, International business risks, International Investment, Participants: Firms, intermediaries, facilitators, governments

International Financial Sector

International banking and financial services are the most internationally active service industries

Foreign Direct Investment (FDI)

Investment made by a foreign company in the economy of another country.

Comparative Advantage Principle

It is beneficial for two countries to trade even if one has absolute advantage in the production of all products. What matters is not the absolute cost of production but the relative efficiency with which it can produce the product.

E.T. Hall's low-context cultures

Low-context cultures rely on explicit explanations, with an emphasis on spoken words. Communication is direct. Agreements are concluded with specific, legal contracts.

Who participates in International Business?

MNEs, SMEs, Born global firms, governmental and non-governmental organizations

Non-governmental organizations

Mainly non-profit organizations conduct cross-border activities. They have a special causes and serves as advocates for social issues, education, politics, and research.

Decision-making styles

Managers make decisions continually on the operations and future direction of the firm. For example, Japanese take considerable time to make important decision. Canadians tend to be decisive, and "shoot from the hip"

Sustainability

Meeting humanity's need without harming future generations. The sustainable firm pursues three types of interests - Economic interests - Social interests - Environment interest

What culture is not

Not right or wrong, it is relative. There is no cultural absolute. Different nationalities simply perceive the world differently.Not about individual behavior, it is about groups. It is a collective phenomenon of shared values and meanings. Not inherited, it derives from the social environment. We are not born with a shared set of values and beliefs; we acquire them as we grow up.

Globalization of markets

Ongoing economic integration and growing interdependency of countries worldwide

CSR (Corporate Social Responsibility)

Operating a business to meet or exceed the ethical, legal, commercial, and public expectations of customers, shareholders, employees, and communities

International portfolio investment

Passive ownership of foreign securities such as stocks and bonds to generate financial returns

International business

Performance of trade and invest activities by firms across national borders

Importing or global sourcing

Procurement of products or services from suppliers located abroad for consumption in the home country or a third country. E.g Toyota imports many parts from China when it manufactures cars in Japan

Guanxi: Important in Business in China

Refers to social connections and relationships based on mutual benefits. Emphasizing reciprocal exchange of favors as well as mutual obligations. Deeply rooted in Confucian philosophy which values social hierarch and reciprocity. Trust is a form of insurance in a potentially risk business environment.

Exporting

Sale of products or services to customers located abroad

Ethical Practices

Standards of right and wrong vary considerable around the world. For example, bribery is relatively accepted in African countries, but is generally unacceptable in Sweden.

Governments are central participants in international trade and investment

TRUE

Foreign Corrupt Practices Act (FCPA)

The Foreign Corrupt Practices Act of 1977 is a United States federal law that prohibits U.S. citizens and entities from bribing foreign government officials to benefit their business interests.

focal firm

The initiator of an international business transaction. Primarily mne and sme

Acculturation

The process of adjusting and adapting to a culture other than one's own; commonly experienced by expatriate workers.

Socialization

The process of learning the rules and behavioral patterns appropriate to one's society. Ex: Confrontational

Culture

The values, beliefs, customs, arts, and other products of human thought and work that characterize the people of a given society

Small and medium-sized enterprise (SME)

Typically, companies with 500 or fewer employees. (a) SMEs are more innovative and have quicker response times (b) They are less bureaucratic (c) A better fit to serve niche markets (d) Primary market entry strategy: Exporting and niche markets

Gross Domestic Product (GDP)

Value of all goods and services produced by a domestic economy over a one-year period

Dimensions of Culture: Values

Values Represent a person's judgments about what is good or bad, acceptable or unacceptable, important or unimportant, and normal or abnormal

Normativism

a belief that ethical behavioral standards are universal, and firms and individuals should seek to uphold them consistently around the world

Hofstede: Indulgence versus restraint

describes to the degree to which people in a society attempt to control their impulses and desires.

Ethics

moral principles and values that govern the behavior of people, firms, and governments, regarding right and wrong.

World Trade Organization (WTO)

multilateral governing body and power to regulate international trade and investment

Negotiation patterns

negotiations are required in many types of business transactions. E.g Mexicans are friendly and emphasize social relations, Americans are assertive and get down to business quickly

Relationship oriented culture

people value affiliations with people. Relationships are more important than individual deals. Trust is highly valued in business agreements.

Dimensions of Culture: Norms

social rules and guidelines

Mercantilism

refers to a belief that national prosperity results from maximizing exports and minimizing imports

Idioms

refers to an expression whose symbolic meaning differs from its literal meaning; you can only understand by knowing the cultural context behind the quote and can't just decipher through individual words.

competitive advantage

refers to factors that allow a company to produce goods or services better or more cheaply than its rivals.

Intellectual property

refers to ideas or works created by individuals or firms and includes a variety of proprietary, intangible assets.

Hofstede: Masculinity versus femininity

refers to society's orientation based on traditional male and female values. Where masculinity culture embodies competitiveness, ambition, assertiveness. Where feminine cultures emphasize nurturing roles, interdependence among people, and caring for less fortunate people for both men and women

Hofstede: Long-term versus short-term orientation

refers to the degree to which people and organizations defer gratification to achieve long-term success.

Commercial Risk

refers to the firm's potential loss or failure stem from poorly developed or executed business strategies or procedures. E.g Weak partner, operational problems, timing of entry, and poor execution of strategy.

Neomercantilism

refers to the idea that the nation should run a trade surplus.

Country risk (also known as political risk)

refers to the potentially adverse effects on company operations and profitability caused by developments in the political, legal, and economic environment in a foreign country. E.g: foreign government intervention in firms' business activities

Currency Risk (Financial risk)

refers to the risk of adverse fluctuations in exchange rates.

Comparative Advantage

refers to the superior features of a country that provide it with unique benefits in global competition.

Ethnocentric orientation

refers to using our own culture as the standard or benchmark for judging other cultures

Manners and customs

refers to ways of behaving and conducting oneself in public and business situations.

Hofstede: Individualism versus collectivism.

refers to whether a person primarily functions as an individual or within a group. In individualistic societies, each person emphasizes his or her own self-interest; competition for resources is the norm; individuals who compete best are rewarded. Examples: Australia, Britain, Canada, and the United States. Ties among People are relatively loose. In collectivist societies, ties among individuals are important; business is conducted in a group context; life is a fundamentally cooperative experience; conformity and compromise help maintain harmony. Examples: China, Panama, Japan, South Korea.

Cultural differences

risk arising from differences in language, lifestyle, attitudes, customs, and religion, where a cultural miscommunication jeopardizes a culturally-valued mindset or behavior.

Free trade

the absence of restrictions to the flow of goods and services among nations.

Relativism

the belief that ethical truths are not absolute, but differ from group-to-group

Intellectual property rights

the legal claim through which proprietary assets are protected from unauthorized use by other parties, via trademarks, copyrights, and patents.

Social Structure

the pattern of social arrangements and organized relationships that characterize a society. Society is organized as: - Individuals - Family - Reference groups - Social stratification - Social mobility

Corruption

the practice of obtaining power, personal gain, or influence through illegitimate means, usually at others' expense.

Value chain

the sequence of value-adding activities performed by the firm in the process of developing, producing, and marketing a product or a service

Corporate governance

the structure of rules, practices, and processes used to direct and manage a company

deal-oriented cultures

typicallyuse contracts, and want to just "get down to business". E.g North America, Northern Europe, and Australia.