MGMT 309 CH5

Strategic Alliances/Joint Ventures Advantages & Disadvantages

A-Quick market entry Access to materials and technology D-Shared ownership (limits control and profits)

Importing or Exporting Advantages & Disadvantages

A-Small cash outlay Little risk No adaptation necessary D-Tariffs and taxes High transportation costs Government restrictions

Political-Legal Environment

(1) government stability (wars for example), (2) incentives for multinational trade, (3) controls on international trade (tariffs, quotas, export restraint agreements), and (4) the influence of economic communities (A set of countries that agree to markedly reduce or eliminate trade barriers among member nations (a formalized market system)) on international trade

Levels of International Business Activity

Domestic business-Lowest International business Multinational business Global business-highest

High Potential/High Growth Economies

underdeveloped and immature economies. Has lack of wealth and an underdeveloped infrastructure Ex: China, India, Brazil, Russia, Vietnam and South Africa

Management Challenges in a Global Economy

- Planning and Decision Making > understanding of both environmental issues and competitive issues. "Which markets are growing? Should we buy local firm in this country?" - Organization > addressing issues of creating and managing operations on a world-wide scale. "How much authority and control should we give our local managers in each country facility?" - Leading > learning to interact with and motivate persons of different cultural, social, and economics backgrounds. "What will most motivate employees of different cultural backgrounds?" - Controlling > integrating operations across time-zones, cultural factors, and varying communication methods. "Can we expect for deadlines to be respected?"

Environmental Challenges of International Management

-Economic environment -Political/legal environment -Cultural environment

Approaches to Internationalization...

-Importing or Exporting -Licensing -Strategic Alliances/Joint Ventures -Direct Investment

Globalization and Organization Size

-Multinational corporations (MNCs) •adopt a global perspective and compete in the global marketplace. -Medium-size organizations •remain primarily domestic but may buy/sell products made abroad and may face foreign competition in their own domestic market. -Small organizations •participate as local suppliers to MCCs, and some perform simple importing/exporting.

Other Economies

-The Middle East defies classification. •These countries hold tremendous wealth (due to abundance of oil) yet are politically unstable and exhibit vast cultural differences. -Countries involved in political or ethnic violence are poor business risks. -Cuba offers a unique opportunity as it is only now emerging into the outside world.

Licensing Advantages & Disadvantages

A- Increased profitability, extended profitability D- Inflexibility, competition

Individual Differences Across Cultures

1. social orientation 2. power orientation 3. uncertainty orientation 4. goal orientation 5. time orientation

Domestic Business

A business that acquires all of its resources and sells all of its products or services within a single country

Multinational Business

A business that has a worldwide marketplace from which it buys raw materials, borrows money, where it manufactures its products, and to which it subsequently sells its products

International Business

A business that is based primarily in a single country but acquires some meaningful share of its resources or revenues (or both) from other countries

Global Business

A business that transcends national boundaries and is not committed to a single home country (no business has truly achieved this, but are getting closer and closer)

Direct Investment Advantages & Disadvantages

A- Enhanced control Existing infrastructure D-Complexity Greater economic and political risk Greater uncertainty

Market Economy

An economy based on the private ownership of business that allows market factors such as supply and demand to determine business strategy (US, Canada, Japan, UK, France, Germany, Sweden)

Market Systems

Clusters of countries that engage in high levels of trade with one another Ex: European Union (EU)- The first and most important international market system Pacific Asia -A market system located in Southeast Asia

Cultural Environment

includes all the values, symbols, beliefs, and language that guide behavior

General Agreement on Tariffs and Trade (GATT)

a trade agreement intended to promote international trade by reducing trade barriers and making it easier for all nations to compete in international markets

Economic Environment

linked not only to the state of its infrastructure and to its supply of natural resources, but also to the conditions of its natural environment

World Trade Organization (WTO)

replace GATT, requires members to open their markets to international trade and follow WTO rules