International Business Midterm

What is a multinational enterprise?

A multinational enterprise is a firm that owns business operations in more than one country. Basically any business that has productive activities in two or more countries. There are have two notable trends in the demographics of the multinational enterprise have been the rise of non-U.S multinationals and the growth of mini-multinationals.

Why is it possible to say that a given country's management is or is not exportable?

We know the impediments of globalization and international business, and therefore we are able to determine is a country's management is exportable or not. Some of the impediments that we can base this rational on is formal and informal barriers to trade between countries, barriers to foreign direct investment, transportation cost, and issues associated with economic and political risk. However other than the known risks of business, we can also understand that certain managerial principles stay the same in every country and that the concern over the differences in cultures should not overshadow the universality of basic management processes in corporate endeavors.

What are the reasons that make management difficult to export?

According to the article, "Is Management Exportable", there are a variety of reasons that makes management to export. First is individualism vs collectivism. In Western societies, the individual is the basic building block of social organization. Individuals emphasize individual achievements but have no physical attachment to their organization. Managers have no moral obligation to keep employees who no longer perform their job duties, and individuals will leave their current job for better conditions. The group mentality is common in other societies, and focuses on the collective good in which the standing of the group is more important than the individual. In these societies, you are hired based on connections either family or friend and are expected to stay and contribute rather than look for better opportunities. Other difficulties, include decision making (in which managers might refer to family or friends), mobility (managers are more likely to hire inside the company rather than the most qualified), ethical concepts, social stratification, and realism or hard work.

Why do many developing countries worry about excess dependency on imports?

An excess dependency on imports can damage a developing country's economy if the prices fluctuate and they aren't able to export enough goods to create a comparative advantage on their product. The dependency on goods from other countries is an unstable model for a country which needs stability to promote growth. A developing country needs to foster its economy in a way that it is producing more exports than imports so that it doesn't rely on the imports of another .

Why should a corporation's decision process take possible ethical dilemmas into account? Explain and give examples.

Corporations should consider possible ethical dilemmas because they can impact the organizational environment, the stakeholders (which can impact the reputation of the company), and your own personal moral compass. For example, GE reviewed the performance of managers by dividing them into several different groups. these included over-performers who displayed the right values and were singled out for advancement and bonuses and over performers who displayed the wrong values and were let go. Welch was not willing to tolerate leaders within the company who did not act in accordance with the central values of the company who did not act in accordance with central values of the company even in they were in all other respects skilled managers.

What are the major ways in which cultures rank people? Why do international managers need to understand these differences?

Cultures rank people based on social stratification which is the hierarchical basis of social categories, also known as the social strata. These are typically defined on the basis of characteristics such as family background, occupation, and income. International managers need to understand the differences because of social mobility. Social mobility refers to the extent to which individuals can move out of the strata into which they are born. Social mobility varies significantly from society to society. For example, in India the most rigid system of social mobility is the caste system. Managers have to consider how cultures rank certain characteristics and the social strata when choosing how to manage their employees.

In what way cultural, political, economic factors make it easier or more difficult for a country to work internationally?

Easier- A county's political and economic systems are a large reason for it's rate of economic development. While it is not necessary for a free market economy to be democratic, there is a strong belief that economic progress leads to the adoption of a democratic regime. For example, although China has a totalitarian government in which human rights are violated, many Western countries have been hesitant to criticize the country too much in fear that it might hamper the country's march towards a free market system. Also, it is easier for a country to work internationally if it is in a favorable area geographically and thus certain societies are more likely to engage in trade than others and be more open to develop market based economic system. Difficult- It may be more difficult to do business in another country based on political, economic, legal, cultural, and ethically boundaries. In regards to political factors, a country may have to pay off a politically powerful entity in a country before the government allows it to do business there. Another factory is the economy, in which if the country's economy is not sophisticated it may be more costly to do business in relatively primitive or undeveloped economies because of the lack of infrastructure and supporting business. Local laws and regulations may also make it more difficult to do business. Lack of local laws may fail to protect intellectual property while harsher laws may lead to contract violations and large costs.

Explain why the role of leadership plays an important part in an organization's ethical behavior. Give examples and counter-examples to illustrate your point.

Leadership or management plays an important part in organizations ethical behavior. There are five things that an international business and it's managers can do to make sure ethical issues are considered in business decisions. 1. Favor hiring and promoting people with well-grounded sense of personal ethics. 2. Build an organizational culture that places a high value on ethical behavior. 3. Make sure that leaders within the business not only articulate the rhetoric of ethical behavior, but also act in a manner that is consistent with that rhetoric. 4. Put decision-making processes in place that require people to consider the ethical dimension of business decisions and 5. Develop moral courage. A couple things that promote business ethics is develop a code of ethics and promote ethics officers that make sure that all employees are trained to be ethically aware.

List and shortly describe five reasons why companies engage in international business. How do companies benefit from it?

Lower Production Cost, Accessibility to lower talent pools, Addition to available resources, Improve the quality or functionality of their product offering, and comparative advantage. There is always a reason that companies choose to globalize or engage in international business. It is either cheaper, the suppliers are better at their particular craft, the resources are readily available, or it increases flexibility in the timeline of that particular product. Companies benefit in someway from international business either from the exporting of the goods or the outsourcing of the production.

Describe the major theories that explain why motivation may differ from one country to another.

Motivation differs from one country to another due to to the individual and collectivism. Individual motivation relies on the person to create their own purpose in the business. They motivate themselves based on promotions, gains, and upward mobility in the country. However, the collective approach relies on group motivation. Mostly Asian cultures which focus on the group rather than the individual. It is the for the good of the company rather than the good of the individual.

Describe three recent events that have entailed three different ethical dilemmas.

One example was with Coke and their funding the launch of a non-profit which promotes healthy living. However, is it ethical for Coke to funnel money into a corporation that promotes healthy living with it's product. Another example is Nestle's sinister campaign of appointing uniformed nurses to distribute the baby formula to poor mothers for free, long enough for lactating mother's milk to dry up. The mother and child now became entirely dependent on Nestle's infant formula, and since most of them could not afford the formula, they gave their children an insufficient quantity of the formula. The formula also required clean water, which most mothers could not access. The last is Mattel and it's production of of manufacturing hazardous toys. The company outsourced manufacturing to China to cut costs, but the toys that came back were coated with toxic lead paint and contained 180 times the legal limit of lead content. The dolls also came with poorly attached small magnets that could perforate the intestines if swallowed. The dolls became a major hazard, and Mattel had to recall them, and face public ire for its unethical business conduct.

Why are larger countries less dependent on international trade than smaller countries?

Smaller nations are heavily dependent on agricultural or manufacturing based economies and they depend on core nations to buy their natural resources or manufactured products, while larger nations are able to be self-reliant and produce what they need and choose to buy the cheaper products elsewhere.

Compare and contrast three different philosophical approaches to ethics.

Straw Men Approaches- Either deny the value of business ethics or apply the concept in a very unsatisfactory way. These approaches such as The Friedman Doctrine which is that the only social responsibility of business is to increase profits, so long as the company stays within the rules of law. His belief is that a firm should maximize its profits because that is the way to maximize the returns that accrue to the owners of the firm, the stockholders. Basically, Friedman states that businesses should behave in an ethical manner and not engage in deception and fraud. Another straw man is known as Cultural Relativism, which is the belief that ethics are nothing more than the reflection of a culture, all ethics are culturally determined, and that a firm should adopt the ethics of the culture that is operating in. Summarized as "When in Rome, do as the Romans do". The second to last Straw man ethics principle is the righteous moralist, which is the idea that a multinational home country standards of ethics are the appropriate ones for companies to follow in foreign countries This approach is typically associated with managers from developed nations. The last strawman approach is the Naive Immoralist, which asserts that if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, that manger should not either. Example is the druglord problem in which an American Manger in Columbia pays off the local drug lord to guarantee that his plant will not be bombed and that none of his employees will be kidnapped. The manager argues that payments are ethically defensible because everyone is doing it. In Contrast, moral philosophers see value in utilitarian and Kantian approaches to business ethics. Utilitarian approaches to ethics hold that the moral worth of actions or practices is determined by their consequences. An action is judged desirable if it lead s to the best possible balance of good consequences over bad consequences. Recognizes that actions have multiple consequences, some of which are good in a social sense and some of which are harmful. Katian ethics are based on the philosophy of Immanuel Kant. They hold that people should be treated as ends and never purely as means to the end of others. People are not instruments, like a machine. People have dignity and need to be respected as such. Rights theories were developed in the twentieth century, in that humans have fundamental rights and privileges that transcend national boundaries and cultures. Rights establish a minimum level of morally acceptable behavior. This theory was the inspiration of the Universal Declaration of Human Rights.

Most formerly command economies are going through economic transition. What is meant by economic transition? Why are these changes affecting international business in the 21 st century?

The economic transition is from a command based economy to a market economy. Transition economies undergo a set of structural transformations intended to develop market-based institutions. These include economic liberalization, removal of trade barriers, and a push to privatize state owned enterprises. These changes are due to an open and free market and the push of capitalistic market economies rather than socialistic.

Why is understanding trade theory useful to managers in international business?

There are different theories to international trade. Common sense suggests that some international trade is beneficial. However, theories of influential thinkers such as Smith, Ricardo, and Hecksher-Ohlin explain how it is beneficial for a country to engage in international trade even for products it is able to produce for itself. For managers, it is important to understand how their organization benefits from international trade. The gains arise because a country is able to specialize in a certain product, and therefore produce their product more efficiently. This is especially important in business, where it might be more profitable to export their manufacturing or production of their product rather than keep in that country.

What is the difference American and other countries' management rules that make US management difficult to export?

There are many different reasons in particular why American managerial style is difficult to export. The first is the master of destiny psychology, in which we believe that we can influence the future and belief in self-determination. Along with that, Americans believe that our goals should be realistic because man is charge of his own destiny. Because the manager controls his own decisions, he will keep his word and expect that his co-workers will do the same. Because of this individualistic self-determination, there is an underlying assumption that everyone will work hard to achieve their goals.

Why does production shift from one country to another?

There are many reasons for the production shift from one country to another, but they revolve around the idea of free trade. When one country specializes in the manufacture and export of products that can be produced most efficient in that country, while importing products that can be produced more efficiently in other countries. However, sometimes there is a shift in the specialization. For example, India has seen strong growth of India's pharmaceutical industry. At first, they made copies of patented products and violated intellectual property rights. Because of these violations, businesses would refuse to buy into these pharmaceutical markets and India was forced to produce low-cost generic pharmaceuticals. However, in 2005 India signed an agreement with the WTO and brought the country into compliance with these intellectual property rights. This resulted in companies starting to do business with their Indian counterparts. For India, the result has been dramatic growth in its pharmaceutical sector. The outsourcing of manufacturing and packaging has changed the production shift from Western countries to India. The reasons were due to low wage rates, and educated workforce, and the widespread use of English as a business language.

What features encourage cultural stability vs. cultural change?

There is theory called the Hofstede's uncertainty avoidance dimensions which measured the extent to which different cultures socialized their members into accepting ambiguous situations and tolerating uncertainty. Certain high uncertainty avoidance cultures place importance on job security, career patterns, retirement benefits, rules &regulations, clear instructions, and so on. Lower uncertainty avoidance cultures were characteristic by a greater readiness to take risks and less emotional resistance to change.