Exam 1 - Global

Technological Drivers

-Advances in computers and communications technology permit an increased flow of ideas and information across borders -Smaller companies may find barriers reduced for being able to communicate and serve customers abroad. -Computer-based communication may enhance virtual integration

Political Drivers

-Trends toward the unification and socialization of the global community -Preferential trading arrangements that group several nations into a single market -Potential protectionism by host country markets

absolute advantage

A nation's ability to produce more of a good or service than another country for the same or lower cost of inputs

national competitiveness

A nation's relative ability to design, produce, distribute, or service products within an international trading context while earning increasing returns on its resources

international product life cycle (IPLC)

A theory explaining why a product that begins as a nation's export eventually becomes its import

foreign environment

All the uncontrollable forces originating outside the home country that surround and influence the firm

Transnational Corporation

An enterprise made up of entities in more than one nation, operating under a decision-making system that allows a common strategy and coherent policies

Rules of thumb for managers:

Be prepared. Slow down. Establish trust. Understand the importance of language. Respect the culture. Understand the components of culture.

communitarianism

Belief that the group is the beneficiary of actions

Culture

Beliefs, customs, and traditions of a specific group of people.

Power Distance

Degree to which societies accept the idea that inequalities in the power and well-being of their citizens are due to differences in individuals' physical and intellectual capabilities and heritage

Low Context culture examples:

German-Swiss, German, Scandanavian, US, English Canadian, English, French Canadian, French

monochronic

Having to do with linear time, sequential activities

polychronic

Having to do with simultaneous activities, multi-tasking

attitudes toward the environment

In harmony with nature or in control of nature?

international environment

Interaction between domestic and foreign environmental forces or between sets of foreign environmental forces

global mind-set

Involves an openness to diversity along with an ability to synthesize across diversity

High Context culture examples:

Japanese, Chinese, Arab, Greek, Mexican, Spanish, Italian

specific vs. diffuse

Life divided into public and private vs. life undifferentiated

Competitive Drivers

New competitors from developing nations, entry of foreign firms into a company's home market, access to supplies, and entry into downstream activities to preserve markets for product.

overlapping demand

The existence of similar preferences and demand for products and services among nations with similar levels of per capita income

uncontrollable forces

The external forces that management has no direct control over

resource endowment

The land, labor, capital, and related production factors a nation possesses

foreign business

The operations of a company outside its home or domestic market

economies of scale

The predictable decline in the average cost of producing each unit of output as a production facility gets larger and output increases

portfolio investment

The purchase of stocks and bonds to obtain a return on the funds invested

direct investment

The purchase of sufficient stock in a firm to obtain significant management control

experience curve

The rising scale on which efficiency improves as a result of cumulative experience and learning

exporting

The transportation of any domestic good or service to a destination outside a country or region

importing

The transportation of any good or service into a country or region, from a foreign origination point

eclectic theory of international production

Theory proposing that for a firm to invest in facilities overseas, it must have three kinds of advantages: ownership specific, location specific, and internalization

strategic behavior theory

Theory suggesting that strategic rivalry between firms in an oligopolistic industry will result in firms closely following and imitating each other's international investments in order to keep a competitor from gaining an advantage

dynamic capability theory

Theory that for a firm to successfully invest overseas, it must have not only ownership of unique knowledge or resources, but also the ability to dynamically create, sustain, and exploit these capabilities over time

internalization theory

Theory that to obtain a higher return on its investment, a firm will transfer its superior knowledge to a foreign subsidiary that it controls, rather than sell it in the open market

self-reference criterion

Unconscious reference to your own cultural values when judging behaviors of others in a new and different environment

product differentiation

Unique differences producers build into their products with the intent of positively influencing demand

Who are the top 3 trading partners with US exports?

World $547 Canada $282 Mexico $243

Who are the top 3 trading partners with US imports?

World $697 China $505 Mexico $314

IC International Company

a company with operations in multiple nations

aesthetics

a culture's sense of beauty and good taste

Market Drivers

a firm will go abroad to protect its home market, managers are under pressure to lower cost and increase sales, find potential customers elsewhere

material culture or artifacts

all human-made objects of a culture

environment

all the forces influencing the life and development of the firm

domestic environment

all the uncontrollable forces originating in the home country that surround and influence the firm's life and development

mercantilism

an economic philosophy based on the belief that: 1. a nation's wealth depends on accumulated treasure, usually precious metals such as gold and silver 2. to increase wealth, government policies should promote exports and discourage imports

oligopolistic industry

an industry with a limited number of competing firms

ethnocentricity

belief that one's own ethnic group or culture is superior to that of others

International business

business that is carried out across national borders

universalist

condition in which concepts apply to all

particularist

condition in which context determines what concepts apply

Gift giving in business:

context is an important and often confusing aspect. It is important to know the expectations of gifts in each culture.

cultural paradox

contradictions in a culture's values

Foreign Direct Investment (FDI)

direct investments in equipment, structures, and organizations in a foreign country at a level sufficient to obtain significant management control

In a small power distance culture

first names are likely to be used in the office because the ideal is equality

Cost Drivers

going abroad can lower the cost of goods sold. There are also reduced tax incentives to go abroad.

Deleterious

harmful

Hall's High and Low context

he classifies cultures based upon their communication patterns based on the role that context plays.

Map-Bridge-Integrate is a useful tool to

help figure out what matters when working across cultures.

Hofstede's Six Dimensions are:

individualism-collectivism power distance uncertainty avoidance masculinity-femininity indulgence vs. restraint pragmatic vs normative

controllable forces

internal forces that management administers to adapt to changes in the uncontrollable forces

High Context Attributes

less verbally explicit less written/formal information more internalized understandings multiple cross-cutting ties and intersections with others strong boundries - insider/outside knowledge is situational, relational decisions and activities focus around personal face-to-face relationships

perfect competition

market situation in which there are numerous buyers and sellers, and no single buyer or seller can affect price

pragmatic vs normative

measure of how people deal with the unexplainable in their lives

Low Context Attributes

rule oriented more knowledge is codified, public, external sequencing, separation - of time, space, activities, relationships more interpersonal connections of shorter duration knowledge is transferable task-centered; decisions and activities focus around what needs to be done division of responsibilities

domestic environment

socioeconomic sociocultural political legal distributive competitive physical labor financial technological economic

foreign environment

socioeconomic sociocultural political legal distributive competitive physical labor financial technological economic

trade deficit

the amount by which the cost of a country's imports exceeds the value of its exports.

trade surplus

the amount by which the value of a country's exports exceeds the cost of its imports.

Masculinity/Femininity

the degree to which a culture values stereotypically male traits (masculinity) or stereotypically female traits (femininity)

indulgence vs restraint

the degree to which a society allows relatively free gratification of basic and natural human drives related to enjoying life and having fun or suppresses gratification of needs and regulates it by means of strict social norms

individualism-collectivism

the degree to which people in the culture are integrated into groups

uncertainty avoidance

the degree to which societies are willing to tolerate uncertainty and risk

greenfield investment

the establishment of new facilities from the ground up

exchange rate

the price of one currency stated in terms of another

cross-border acquisition

the purchase of an existing business in another nation

currency devaluation

the reduction of the value of a nation's currency relative to the currencies of other countries

context

the relevant environment

economic globalization

the tendency toward an international integration and interdependency of goods, technology, information, labor and capital, or the process of making this integration happen.

Monopolistic Advantage Theory

theory that foreign direct investment is made by firms in oligopolistic industries possessing technical and other advantages over indigenous firms

What is Kluckhohn and Strodtbeck's cultural orientations framework?

they created 5 problems they felt were universal: 1. What relationship should people have to nature? 2. What sorts of relationship should exist between individuals? 3. What are the preferred forms or modes of human activity? 4. What is the best way to think about time? 5. What is the basic nature of humans?

Trompenaars's Seven Dimensions are:

universalism vs. particularism (rules vs relationship) individualism vs. communitarianism neutral vs. affective (unemotional vs emotional) specific vs diffuse achievement vs ascription attitudes toward time attitudes toward environment

achievement vs. ascription

what a person does vs. who a person is

comparative advantage

when one nation is less efficient than another nation in the production of each of two goods, the less efficient nation has a comparative advantage in the production of that good for which its absolute disadvantage is less.

attitudes toward time

whether a country focuses on past (asian countries), present (wall street culture), or future (Canada)... and whether actions are sequential (monochronic) or synchronous (polychronic)

neutral vs. affective

withholding emotion vs. expressing emotion