Global Business Management

Mercosur (Common Market of the South)

(1991) free trade within, and a common external tariff for, Argentina, Brazil, Paraguay, Uruguay, and Venezuela; accounts for 70 percent of South America's total economy. now has both political and economic goals to keep peace and stimulates economic growth in South American countries

market entry

(1st stage) companies enter new countries using business models similar to the ones deployed in their home markets. To gain access to local customers, however, companies often need to establish a production presence, either because of the nature of their businesses, such as in-service industries like food retail or banking, or because of local countries' regulatory restrictions, such as in the auto industry.

product specialization

(2nd stage) companies transfer the full production process of a particular product to a single, low-cost location and export the goods to various consumer markets. In this scenario, different locations begin to specialize in different products or components and trade in finished goods.

value chain disaggregation

(3rd stage) represents the next step in the company's globalization of the supply chain infrastructure. In this stage, companies disaggregate the production process and focus on completing each activity in the most advantageous location. Individual components of a single product might be manufactured in several different places and assembled into final products elsewhere. Examples include the PC industry market and the decision by companies to offshore some of their business processes and information technology services

value chain reengineering

(4th stage) companies seek to further increase their cost savings by reengineering their processes to suit local market conditions by substituting lower cost labor for capital. General Electric's (GE) medical equipment division, for example, has tailored its manufacturing processes abroad to take advantage of low labor costs. Not only does it use more labor-intensive production processes, but it also designs and builds the capital equipment for its local plants.

Clean Water Act

(CWA, 1972) set maximum permissible amounts of water pollutants that can be discharged into waterways; aims to make surface waters swimmable and fishable

supply chain management components

(a) creating the supply chain network structure, (b) developing supply chain business processes, and (c) managing the supply chain activities

Geography

(part of CAGE) Generally, as distance goes up, trade goes down, since distance usually increases the cost of transportation. Geographic differences also include time zones, access to ocean ports, shared borders, topography, and climate.

Administration

(part of CAGE) re: similarities in governments, etc. refers to historical governmental ties, such as those between India and the United Kingdom. They have the same format for laws, regulations, institutions, and policies. Membership in the same trading block is also a fundamental similarity. Conversely, the greater the administrative differences between nations, the more difficult the trading relationship is to acquire

Culture

(part of CAGE) refers to a population's norms, shared beliefs, and practices. Cultural distance refers to people's differences based on language, norms, national or ethnic identity, levels of trust, tolerance, respect for entrepreneurship and social networks, or other country-specific qualities.

Economics

(part of CAGE) refers to differences in demographic and socioeconomic conditions. The most apparent economic difference between countries is size (compared with GDP: a measure of the goods produced and services provided by a country in one year). Another difference is per capita income. This distance is likely to have the most significant effect when the nature of demand varies with income level, economies of scale are limited, cost differences are significant, the distribution or business systems are different, or organizations have to be highly responsive to their customers' concerns.

blockchain

- A blockchain is a shared ledger where transactions are permanently recorded by appending blocks - The blockchain serves as a historical record of all transactions that ever occurred, from the genesis block to the latest block, hence the name blockchain.

trademark

A brand that has exclusive legal protection for both its brand name and its design

choice of law clause

A choice of law clause specifies the laws and the jurisdiction under which international disputes will be settled. International businesses operating in different countries include such clauses in their contractual agreements to clarify ahead of time how disputes will be settled. A choice of law clause is a provision that determines which laws would be applied in a dispute.

Which action is used by companies wishing to avoid working with vendors who use sweatshops?

A code of conduct for vendors is contractually imposed, and often publicly posted, to ensure the reputation of the company is protected.

uniform commercial code

A collection of laws that governs various types of business transactions. source of contract law in the US

intellectual property risk

A company is essentially opening its doors and sharing with a stranger its secrets, knowledge, and ideas and designs that drive the company. It is an act of trust. Unfortunately, it is also a risk that can have a serious impact on a company's ability to profit from its innovations if outsourcing partners violate that trust.

Why should a company identify corporate tax rates in various countries to make a strategic business decision, such as expanding the company globally?

A company should identify corporate tax rates to determine the most profitable location of plants and headquarters, which are strategic decisions related to expanding globally. Corporate tax rates affect foreign direct investment and other strategic decisions.

antitrust laws in global business

A consumer is a person who needs, uses, or has used a particular service or product. Consumers are vulnerable when there is little market competition because corporations can control prices. Antitrust laws are aimed at regulating consumer affairs and safeguarding the market from anticompetitive practices, particularly from large companies that may hold a monopoly. In the world of global business, antitrust policies are primarily concerned with limiting the accumulation and use of market power. The World Trade Organization (WTO) attempts to establish global standards in competitive markets in conjunction with the internal competitive laws that govern each nation individually. The European Union (EU) was established in 1951 with the goal of reducing the ability for one country or region to gain a monopoly on critical natural resources; the Maastricht Treaty came into effect in 1993, formally founding the modern European Union with its pillar structure. Further changes have happened since, including the Lisbon Treaty. The Sherman Antitrust Act (1890) was the first American antitrust policy. It dealt with limiting the power of price-controlling cartels. Its scope has since been expanded to include a range of anticompetitive practices. Approximately 120 countries have antitrust policies, although the application of such laws differs significantly around the world. The EU has a centralized administrative system for antitrust enforcement, whereas antitrust enforcement in the United States is considered a matter of criminal law.

internal controls 2

A control is a process of interlocking activities that use properly designed policies and procedures so ethics and compliance officers can do their due diligence—adequately investigating and enforcing given procedures. All the redundancies added to a system to make certain it functions properly are known collectively as internal controls. Discrepancies are accounting errors that are not intentional. These can occur for a wide variety of reasons, such as data points being wrongly entered or shrinkage (e.g., petty theft, mismanaged inventory, perishable goods going unrecorded). Irregularities are the misrepresentation of accounting data with the intention to defraud.

Customs Union

A customs union offers economic collaboration by removing trade barriers between member countries and establishing a mutual trading policy with nonmembers. A group of countries committed to (1) removing all barriers to the free flow of goods and services between each other and (2) the pursuit of a common external trade policy.

MNC

A firm having operations in more than one country, international sales, and a nationality mix of managers and owners. An MNC improves relations between countries, as they need to cooperate to trade.

Market Capitalization

A firm performance metric that captures the total dollar market value of a company's total outstanding shares at any given point in time.

subsidy

A government payment that supports a business or market

Oligarchy

A government ruled by a few powerful people

Monarchy

A government ruled by a king or queen

Which method of entering an international market offers the most potential for above-average returns?

A greenfield venture is a high-risk way to enter a market because the company assumes all of the risk. Along with this risk comes the potential of higher returns than other means of entering a foreign market.

Free Trade Area

A group of countries committed to removing all barriers to the free flow of goods and services between each other, but pursuing independent external trade policies. The free trade area allows basic economic cooperation so member countries remove barriers to trade among themselves.

Civil Law

A law that governs relationships between individuals and defines their legal rights. based on a detailed set of laws that constitute a code and focuses on how the law is applied to the facts.

Common Law

A legal system based on custom and court rulings. judges interpret the law, and judicial rulings can set precedent.2 Common law systems are often adversarial because the judge's role is to act as a moderator between two opposing parties. A jury may determine the facts, and a judge decides which law will be applied to the case. Both prosecutors and defense attorneys have an active role. Victims may serve as witnesses, but they are not a party in criminal cases

strategic alliance

A long-term partnership between two or more companies established to help each company build competitive market advantages.

Monopoly

A market in which there are many buyers but only one seller.

perfectly competitive market

A market that meets the conditions of (1) many buyers and sellers, (2) all firms selling identical products, and (3) no barriers to new firms entering the market.

matrix structure

A matrix structure simultaneously uses functional and divisional structures in combination. Firms that engage in projects of limited duration often use a matrix structure in which employees can be put on different teams to maximize creativity and idea flow. This type of structure is common in high-technology and engineering firms.

Gini Coefficient

A measure of income inequality within a population, ranging from zero for complete equality, to one if one person has all the income.

multibrand strategy

A multibrand strategy is a strategy in which a company makes similar products under different brand names. This is often done when acquiring a company in a new market.

Regiocentric

A philosophy of management whereby the firm tries to blend its own interests with those of the subsidiaries on a regional basis

ASEAN (Association of Southeast Asian Nations)

A political and economic multinational organization around Polynesia.

effects of political systems

A political system is the system of politics and government in a country. It governs a complete set of rules, regulations, institutions, and attitudes. A country's political system can have a significant effect on both local and international businesses. The government can use subsidies and tariffs as well as regulate the monetary system to bring about the desired effect. Firms need to assess the balance of power in a country to determine how local policies, rules, and regulations will affect their business. Governments are motivated to intervene in trade by economic and security factors.

Which country characteristic is most important to foreign direct investors according to a study by the World Bank?

A recent World Bank study showed political stability and security to be the most important country characteristic when choosing a country to invest in.

Doha Round

A series of negotiations under the World Trade Organization that began in Doha, Qatar, in 2001. It followed the Uruguay Round and has focused on agricultural subsidies, intellectual property, and other issues. It has been inconclusive due to agricultural subsudies disagreements

World Bank

A specialized agency of the United Nations that makes loans to countries for economic development, trade promotion, and debt consolidation. Its formal name is the International Bank for Reconstruction and Development.

Socialism

A system in which society, usually in the form of the government, owns and controls the means of production.

Absolute Monarchy

A system of government in which the head of state is a hereditary position and the king or queen has almost complete power

value added tax (VAT)

A tax on increased value of the product at each stage of production and distribution rather than just at the point of sale. Value-added taxes are indirect taxes that many worldwide governments introduce in a sluggish economic global environment.

teams structure

A teams structure is composed of people with complementary skills working together for a common purpose. This structure is less hierarchical, with shared leadership and objectives.

Communism

A theory or system of social organization based on the holding of all property in common, actual ownership being ascribed to the community as a whole or to the state.

Horizontal FDI

A type of FDI in which a firm duplicates its home country-based activities at the same value chain stage in a host country. Horizontal FDI occurs when a company is trying to open a new market—a retailer, for example, that builds a store in a new country to sell to the local market.

Vertical FDI

A type of FDI in which a firm moves upstream or downstream at different value chain stages in a host country.

reduced inventory

A well-executed supply chain management system means that customers receive orders when they need them. Further, this does not necessarily imply that the supplier will be holding the inventory for the customer—although that might occur. It refers to the fact that better communication and better scheduling may enable the supplier to produce the item exactly when it is needed.

short-term orientation

A worldview that values personal stability or happiness and living for the present.

digital divide

A worldwide gap giving advantage to those with access to technology

technology trends

According to Klaus Schwab, the Fourth Industrial Revolution has been building on the third and is evolving at an exponential, not linear, pace. Mobile devices could connect billions of people with the capability to provide almost unlimited processing power, storage capabilities, and access to knowledge. 3-D printers have great potential to build prototypes and finished products like never before. Using stem cells to build organs and skin replacement as well as using metals to make joints is not impossible with 3-D printers. Both AI and enhanced reality have great potential in improving customer experience when shopping and in marketing products. AI can improve worker productivity, and it has almost limitless applications from self-driving cars to medical devices. The workforce is changing from on-site employees to remote contractors and freelance workers, in addition to employees. It is unlikely that robots will replace humans in fields that require creativity and wisdom, at least not soon.

Emerging economies

According to estimates by the World Trade Organization, from 2000 to 2015, imports from developing countries increased from 27% of world trade to 41%, and exports increased from 30% to 43%. In 2005 developing countries contributed 24% of global service exports. In 2015, this figure was 39.4%.

A company plans on using horizontal integration. Which strategy is being adopted by this company?

Acquiring companies that supply the same or similar goods and services. An example of this when two companies that process consumer foods, Heinz and Kraft, became one company in 2015. This is an accurate reflection of horizontal integration.

benefits and drawbacks of globalization

Advances in technology and transportation have led to at least three waves of globalization. The pros and cons of globalization can be interpreted in many different ways: economists may disagree on the extent of globalization, countries may disagree on the benefits and drawbacks of globalization, and corporations may disagree on the risks and benefits of overseas operations. Countries may evaluate their trading partners based on geographic distance, similarity in economic parameters, administrative policies, and homogeneity of culture and values. Significant concerns have been expressed for sustainability in the face of globalization and the ability of richer companies and nations to exercise their power at the expense of less powerful nations. Proponents of globalization point to the increased financial stability of many developing nations as a positive consequence of globalization. In addition, a collaborative global economy may also push the development of technology that could benefit everyone.

bridging the digital divide

Affordable, robust broadband internet service Internet-enabled devices that meet the needs of the user Access to digital literacy training Quality technical support Applications and online content designed to enable and encourage self-sufficiency, participation, and collaboration.

domestic/international law

All people are subject to domestic laws because they all live in a sovereign state. There is a legitimate law-creating authority at the top and people to be governed at the bottom. This is a vertical structure of law because there is some higher authority that imposes a rule of law on the people. In the United States, two primary sources of law govern contracts: the common law and the UCC. Some laws are best thought of in a horizontal structure because neither party is legally dominant over the other.

Stakeholders

All the people who stand to gain or lose by the policies and activities of a business and whose concerns the business needs to address.

Greenfield FDI

An FDI strategy in which a company builds new facilities from scratch

Brownfield FDI

An FDI strategy in which a company or government entity purchases or leases existing production facilities to launch a new production activity.

International Accounting Standards Board (IASB)

An accounting standard-setting body that issues standards adopted by many countries outside of the United States.

aquisition

An acquisition of another company allows entry into markets quickly with established operations.

Mercantilism

An economic policy under which nations sought to increase their wealth and power by obtaining large amounts of gold and silver and by selling more goods than they bought

Capitalism

An economic system based on private ownership of capital

free market

An economic system in which prices and wages are determined by unrestricted competition between businesses, without government regulation or fear of monopolies.

command economy

An economic system in which the government controls a country's economy. resources and businesses are owned by the government. The government decides which goods and services will be produced and what prices will be charged for them. The government chooses what methods of production will be used and how much workers will be paid. Some necessities like healthcare and education are provided for free as long as the state determines they are needed. With the collapse of the former Soviet Union in the 1990s, command economies were less preferred as an economic system. Currently, only North Korea and Cuba have command economies.

mixed economy

An economy in which private enterprise exists in combination with a considerable amount of government regulation and promotion. In a market economy, the government interferes when needed to provide regulations, prevent theft and violence, collect taxes, and enforce legal contracts. In a command economy, there is a climate of buying and selling, but what is produced and how much is charged are centrally controlled. This high level of control can result in underground economies, where transactions occur without government intervention or approval. Each country must determine the ideal balance between market freedom and governmental regulation.

ambiguity

An event or situation that may be interpreted in more than one way.

fixed exchange rate

An exchange rate policy under which a government commits itself to keep its currency at or around a specific value in terms of another currency or a commodity, such as gold.

benefits of fdi

An inflow of capital can benefit the global and local economy. Invested capital goes to businesses with the highest potential for growth. The profit motive is color blind, and investments are made regardless of religion or politics. Investors can decrease their risk by diversifying (Amadeo, 2019). Investing capital in firms can lead to growth and subsequently increased jobs. Critics of FDI point out that domestic investments in foreign companies take domestic jobs overseas where the comparative advantage may be that the country has cheaper labor costs

contract law

An obvious challenge to laws created in horizontal power structures without any legitimate lawmaking authority above the parties is that enforcement of violations can be difficult. For this reason, many horizontal laws—like treaties—contain provisions that require the parties to the treaty to submit to a treaty-created dispute resolution panel or other neutral tribunal. The UCC Article 2 has rules governing the obligations of parties, specifically to the offer, acceptance, and performance of sales contracts. It also deals with unfair contract terms and rules for merchants. The CISG applies to the sale of goods between parties from countries that are signatories on this treaty. It applies to contracts for international sale of commercial goods.

Japan External Trade Organization (JETRO)

An organization that assists foreign companies in exporting their products to Japan by providing free-market entry information and business-partner matching as well as some subsidies. Also works to attract foreign direct investment into Japan.. JETRO now offers such free services as market entry information, business partner matching, expert business consulting (through bilingual business consultants who are experts in various industries), and access to a global network of executives and advisors.

organizational structure

An organizational structure is how a company groups employees and assigns responsibilities for business activities. An organizational chart is a map of the relationships within a structure. There are several types of traditional organizational structures—functional/departmental, divisional, matrix, and teams—that may be combined to fit the needs and purposes of a company. International businesses often have some combination of functional/departmental, divisional, or matrix structures due to the complexities of operating across borders. Departmentalization aids in specialization but can create communication silos. Common ways to organize divisions or departments are by function, product, process, customer, and geography. Organizational structures evolve over time, changing to respond to business needs and goals.

Organizational structure drawbacks

Another significant hurdle is the ability to efficiently and effectively incorporate new regions into the value chain and corporate structure. In many cases, international expansion requires enormous capital investments, along with the development of a specific strategic business unit (SBU) to manage these accounts and operations.

Ethical business practice drawbacks

Arguably the most substantial of the challenges faced by MNCs— practices in areas such as labor, product safety, environmental stewardship, corruption, and regulatory compliance—has historically played a dramatic role in the success or failure of global players. For example, Nike's brand image was hugely damaged by reports that it used sweatshops and low-wage workers in developing countries.

ethnocentrism

Belief in the superiority of one's nation or ethnic group.

Which technique allows customers to store personal information such as credit card data in one list of records and maintain total ownership and control over such information?

Blockchain technology allows customers to save information in a continuous block or record for security purposes.

BRICS

Brazil, Russia, India, China, South Africa. Goldman Sachs predicts that by 2050, the top five economies would be composed of the BRIC countries (China, India, Brazil, Russia), and the United States.

U.S. Foreign Corrupt Practices Act of 1977

Bribes and payoffs of foreign government officials and other interested parties is illegal

traditional economy

Centered around a family or tribe and guided by tradition Found in hunt-gatherer and nomadic societies; everyone consumes and produces the same goods. Relies on bartering Members produce what they need with no surplus Eventually, the economy evolves to some form of currency

features of command economies

Collective or state ownership of capital—The state owns capital resources such as money, property, and other physical assets. There is no (or very little) private ownership. The state determines inputs and outputs—It has an elaborate planning mechanism in place that determines the level and proportions of inputs that are to be devoted to producing goods and services. Local planning authorities are handed one-year, five-year, ten-year, or, in the case of China, up to twenty-five-year plans. The local authorities then implement these plans by meeting with state-owned enterprises, where further plans are developed specific to the business. Inputs are allocated according to the plans, and output targets are set. Labor is allocated according to state plans—In a command planning economy, there is no choice of profession. When a child is in primary school, a streaming system allocates people into designated industries. Private ownership is not possible—Under a command planning system, an individual cannot own shares, real estate, or any other form of physical or nonphysical asset. The state allocates people's residences. Prices and paying for goods and services—Prices are regulated entirely by the state with little regard for the actual costs of production. Often, a currency does not exist in a command planning economy. When it does, its primary purpose is for accounting. Instead of paying for goods and services when you need to buy them, you are allocated goods and services. This allocation process is often called rationing

theoretical disadvantages of communism

Communism directly controls the means of production. It places strict rules as to how businesses operate so a classless society is born. It allocates the same amount of money to each worker no matter the field the worker specializes in. It discourages the entrepreneurial spirit, which is key to a country's economic growth and development. the government owns all businesses and properties (the means of production). there is no freedom of speech. large or geographically broad populations tend to be diverse, making it difficult to maintain a common goal or set of rules for shared effort and resources. central planning is challenging to achieve. consumers' needs are not considered. productivity and efficiency are difficult to achieve without a profit motive for the workers. it is challenging to achieve internal balances between supply and demand without a price mechanism.

competition drivers

Companies enter foreign markets to keep up with their competitors , retaliate against them, or enter a market first.

middle eastern business practice

Compared to United States and other Western cultures, relationships, including those in business, are more important.

advantages of market economy

Consumers pay for the things they want the most, and businesses produce the goods and services that will earn them a profit. Production methods are efficient in increasing both productivity and profitability. Innovation is encouraged and rewarded. Investments by individuals and organizations in other successful organizations drive both innovation and quality improvement.

contracts

Contracts are a fundamental part of global business. They are legally enforceable promises that, if breached, result in compensable damages. In contracts, this usually means that the party who breaches the contract must pay the injured party an amount that would make that party whole again.

CISG

Contracts for the International Sale of Goods

international corporate tax brackets

Corporate tax rates and brackets vary around the world. Overall, there has been a sharp decrease in corporate taxes globally in the last decade. Most countries now have a corporate tax rate under 30%. Countries with no corporate tax or very low rates are considered tax havens. MNCs use various strategies to maximize profits by minimizing the amount of taxes they must pay. Some of these strategies involve transferring assets across borders to better tax rates or brackets. Corporations also use fronting loans as a way of taking advantage of the tax benefits while transferring funds to subsidiaries. Many countries have been passing legislation and filing lawsuits to stop tax avoidance strategies.

effects of legal systems on globalization

Countries under civil law have more detailed, prescriptive laws in which the role of the judge is to investigate whether a law has been broken. Common law is based on precedence. Any activity that is not clearly illegal may be acceptable. The role of the judge is to hear arguments from both parties and make a judgment. This judgment stands as precedent for future cases. Religious law is based on religious beliefs. One example is a requirement in Sharia that people following Sharia may not borrow money. To compensate for the inability to take on debt, an asset-based system has been established.

Which strategy is used by governments to limit the foreign direct investment in a country?

Creating foreign ownership restrictions in the country. Many countries restrict the percentage of ownership by foreign investors.

learning about foreign cultures

Cultural training and research are important to the success of a global employee. To learn more about a foreign country, look at both primary and secondary sources. Primary sources will provide raw data so you can form your own assessments, but secondary sources can offer guidance and insights.

effect of cultural differences

Cultures differ by geographic area and other factors. Some differences are easy to spot, but other differences are more nuanced and can cause misunderstandings if overlooked. Interactions between people from different cultures can sometimes be misinterpreted based on different cultural expectations. Culture should not be mistaken for personality. Developing cultural literacy will help avoid missteps.

low uncertainty avoidance

Cultures in which people are comfortable in unpredictable situations and have high tolerance for ambiguity: Denmark Jamaica Singapore China Sweden

individualism

Cultures in which people define themselves as individuals and form looser ties with their groups: The United States Australia The United Kingdom Canada Hungary

high uncertainty avoidance

Cultures in which people prefer predictable situations and have low tolerance for ambiguity: Belgium El Salvador Greece Guatemala Portugal

masculinity

Cultures in which people value achievement and competitiveness, as well as acquisition of money and other material objects: Slovakia Japan Hungary Austria Venezuela

femininity

Cultures in which people value maintaining good relationships, caring for the weak, and quality of life: Norway The Netherlands Sweden Costa Rica Chile

collectivism

Cultures where people have stronger bonds to their groups and group membership forms a person's self-identity: Guatemala Ecuador Indonesia Pakistan China

Centralization

Degree to which decision-making authority is restricted to higher levels of management in an organization.

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

ethics and cultural concerns

Different cultures use radically different systems to get things done. Whereas Western cultures are primarily rule-based, most of the world's cultures are relationship-based. Westerners tend to trust the system, whereas non-Westerners are cemented by personal honor, filial duty, friendship, or long-term mutual obligation. What is corrupt in the West may be acceptable elsewhere. In much of the world, cronyism is a foundation for trust. It is in the company's interest for the agent to do business with friends, and cronyism may therefore present no conflict of interest. Paying bribes is relatively common in many countries, and bribes often take the form of grease payments, which are small inducements intended to expedite decisions and transactions.

distribution strategies

Distribution strategies fall into two categories: indirect, which includes intermediaries, and direct, which uses channel between only the producer and the consumer. Both have advantages and disadvantages, such as the indirect strategy that involves people who have expertise in the market but then profits will be spread between more people. Global distribution faces special challenges because of cultural differences and unpredictable conditions in some countries.

documentary training

Documentary training is textbook and classroom learning, which focuses on looking at differences between cultures and is a key part of both low-rigor and high-rigor training approaches.

why go global?

Domestic companies expand into foreign markets for a variety of reasons. Some common reasons are to increase revenues through market growth and to increase cost savings from the economies of scale, local sourcing, and operational flexibility. Diversified investment also reduces operational risk by mitigating the effects of problems in a single area. Multinational corporations continue to expand their reach for all the same reasons. Domestic companies new to international waters and experienced global conglomerate want the same things when entering a new market—to expand their profits and extend the reach of their brands. The MNC may have more complex considerations driving their decisions, such as disruptions in an existing supply chain or a desire to collect the best talent worldwide.

polycentric HRM

Each subsidiary controls its own HR policies and practices. The focus is on each subsidiary as an autonomous business. Leadership roles and key positions are staffed by local professionals who can be immediately effective without the adjustment period needed for by someone new to the culture. This approach is used when the company values efficiency and respects the talents and education of the host country's workforce. The Siemens company embodies the polycentric approach with its attitude about hiring local talent.

market economy

Economic decisions are made by individuals or the open market.leaders make decisions based on consumer demands. Goods and services are produced and distributed according to the rules of supply and demand. In other words, consumers influence how much product and services are made available through their purchasing and usage patterns.

labor movement restrictions

Economic integration often removes labor movement restrictions, which help increase job opportunities.

managing trade

Economic interdependence and globalization have resulted in a system where each country is largely dependent on other countries for economic sustainability. If every country produces goods and services in which it has a competitive advantage, worldwide wealth increases. With the interdependence that comes with globalization, there will be times when nations act in ways that are aggressive toward other nations or take actions that are unacceptable; sanctions are used to show a receiving nation's displeasure. Developing countries frequently do not have the resources, highly trained labor, and technology that developed countries have. Some nations advocate for protecting these infant industries or nations until they have the means and ability to compete on an international level. Dumping is when a country, industry, or person tries to sell goods at below market price to undercut its competitors or get rid of excess inventory. The line between megacorporation and monopolies has become blurred. A concern is that these huge corporations will be too large to be affected by standard mechanisms to manage trade such as tariffs and quotas. Outsourcing labor is frowned upon by some governments, but is frequently a way to take advantage of a country that has a competitive advantage in low-cost labor. Governments regulate trade for health and safety reasons.

Protectionism

Economic policy of shielding an economy from imports.

Which factor is an element of a CAGE analysis when assessing barriers to cross-border activity?

Economics. When looking at economics in a CAGE analysis, the economic distance or socioeconomic differences between countries is evaluated, which includes country size, income, and access to capital.

Which factor of CAGE addresses differences in country size that affect barriers to globalization?

Economics. in the CAGE analysis refers to demographic and economic differences between countries. When a country size is larger based on gross domestic product, it produces more products and services, which can be available for international trade.

cost globalization drivers

Economies of scale and scope Exploiting cost of factors and production Economies of scale and scope and the exploitation of differences in costs for product development, manufacturing, and sourcing in different parts of the world will assume greater importance as determinants of global strategy. A single market will no longer be large enough to support a competitive strategy on a worldwide scale in many industries.

ethics and cultural concerns 2

Even the most respected of global companies have found themselves on the wrong side of the ethics issue and the law. In 2008, Siemens agreed to pay more than €1.34 billion in fines to settle charges that it routinely used bribes and slush funds to secure huge public works contracts around the world. In 2005, Walmart faced a scandal in which the company orchestrated a large-scale bribery campaign to win market dominance. Global companies are forced to navigate this sensitive area very carefully, as it impacts both their bottom lines and their reputations. In 2019, Herbalife Nutrition Ltd. was ordered to pay $20 million to settle charges that it had made misleading statements about its China business model.

legal and regulatory drawbacks

Every nation has unique laws and regulations that govern business. MNCs need access to legal expertise that will help them understand in-country laws and comply with applicable regulations. Businesses need to understand the legal and regulatory climate for their industry and type of organization before entering a new market so this information can be factored into the business's case and into strategic decisions about where and how to expand globally, as well as strategic and operational planning, in order to ensure profitability.

risk of entry strategies

Exporting is the easiest and least costly way to move into the global market. You work with a distributor or an export management company to handle much of the bureaucracy, but it still carries the risk that someone will start making a similar product locally and price you out of the market. Licensing and franchising are low-risk, fast ways to enter a market, but they can mean a loss of control and a lower return on investment. Joint ventures, strategic partnerships, and alliances are sometimes the best or only way to gain influence in a market. It is critical to partner with someone in country who has the same goals and a compatible work styles. Direct investment and wholly owned subsidiaries are the most risky, but they also carry the most rewards, and they allow you to have total control over the business operations.

impact of trade

Exports are goods and services leaving a country, and imports are coming into the country. All countries, like all businesses, would like the value of exports to exceed the value of imports. Higher exports over imports result in a trade surplus. Tariffs are fees placed on imports to raise the price of foreign goods and services. They are used to protect domestic producers. If foreign goods can be sold at a lower price than domestic goods, consumer demand will go up, but the domestic price will do down. The decrease in price drives down the profit margin for domestic suppliers. Overall, tariffs decrease as countries become fully developed and participate in the WTO. Tariffs on agricultural products are an area of disagreement. With tariffs, domestic producers and the government gain and consumers and foreign producers lose overall Quotas are restrictions on the number of goods that may enter a country. The effect on producers and consumers of using quotas is the same as that of using tariffs. Free trade can increase the wages and availability of jobs in some sectors but have the opposite effect in other sectors. One of the major criticisms of free trade is a selective application of the policy. The WTO requires that a country offer the same lowest tariff rate to all members of the WTO. Trade agreements, because they include a revenue stream, must be passed by both the U.S. Senate and the House of Representatives.

encourage FDI

Financial incentives: Host countries offer businesses a combination of tax incentives and loans to invest. Home country governments may also offer a combination of insurance, loans, and tax breaks to promote their companies' overseas investments. Infrastructure: Host governments improve or enhance local infrastructure—energy, transportation, and communications—to encourage specific industries to invest and to improve the local conditions for domestic firms.

Which economic actors are suppliers of U.S. dollars?

Foreign firms exporting to the U.S.. These firms will earn U.S. dollars but will need their own currency to pay the workers based in their country; thus they are suppliers of U.S. dollars and demanders of their home currency.

Gulf Cooperation Council (GCC)

Formed in 1981, the GCC promotes cooperation between its member states in the fields of economy and industry. These member states include Kuwait, Bahrain, Qatar, Saudi Arabia, Oman and the United Arab Emirates. The GCC is a member of FATF, although its individual members are not.

financing sources

Funding options for international business include cash, debt (loans and bonds), and equity (shares). Sources of funding also include VCs, angel investors, and crowdsourcing. Multinational firms structure their financial assets to minimize risk. Often they use a combination of long-term debt and equity to raise capital. Exporters sometimes have special financing based on collateral or financing supplied by foreign governments.

Which currency contract requires a specific exchange rate and quantity of money on a subsequent date?

Futures contracts oblige an exchange of a certain amount of currency on a defined date and rate.

cultural dimensions

Geert Hofstede created a framework for analyzing national culture based on six dimensions: power distance, individualism, masculinity, uncertainty avoidance, long-term orientation, and indulgence. Business leaders need to be aware of how cultural differences can affect business practices in a global company.

HRM in a global context

Global business usually uses one of three HR strategies: ethnocentric, polycentric, and geocentric. Each type has its advantages and disadvantages and reasons that companies use them. Business communications in the global environment can be tricky. People from different cultures have different communication styles and also interpret some basic communications differently, such as the meaning of "yes" and "no" at times. The global company experiences a variety of staffing issues that stem from the diverse nature of the workforce. The HR teams must decide if it is better to hire expatriates or local nationals. The training required of expatriates is necessary for them to be successful but also requires an investment by the company.

global business risk

Global businesses face a variety of risks. Most managers focus on the direct financial risks. However, political, legal, and sociocultural situations may arise that put a business in jeopardy, which will indirectly cause financial harm. Business leaders should evaluate the short-term and long-term risks before investing resources in an area or country. A major financial risk for international businesses is that international transactions face a fluctuating currency exchange rate.

marketing in foreign markets

Global marketers commonly use one or more of these three marketing strategies: standardization, adaptation, and localization. Standardization is the effort to keep the product the same everywhere and maintain strict quality control to stay true to the brand. Global standardization helps create economies of scale, which increases profits. Adaptation is any modification of the domestic product for the foreign market. Localization is a form of adaptation that customizes a product or the marketing of the product with a special location in mind. Sometimes changing the packaging is a critical step in localization.

Which action of Sure Start represents the application of the global strategic rivalry theory?

Global strategic rivalry theory is about how multinational companies need to gain a competitive advantage against other multinational companies in their industry through activities such as research and development.

global suppy chain management

Global supply chain management can be divided into two categories: The traditional push model focuses on the needs of the product to determine how to manage the supply line. Modern pull models, such as just in time (JIT), focus on lean manufacturing that is determined by customer needs. Instead of creating large amounts of products to have ready to offer customers, the pull model only produces the amounts that are being ordered by customers. Several factors should be considered when selecting production sites in a global supply chain: production method, shipping costs and logistics, available raw materials, quality of workforce, taxes, local costs, business culture, and community incentives. Companies must assess and be willing to adapt to changing circumstances. Sometimes this means that a business must relocate to grow, reduce costs, or innovate.

the process of globalism

Globalism is characterized by an increasing number of worldwide connections, rapid and discontinuous change, an increasing number of diverse participants, and growing complexity. Globalism has economic, political, and cultural effects. Globalism has resulted in a widespread sharing of ideas. Advocates for globalism feel that this sharing exposes people to more cultures and ideas, making them more tolerant. Opponents to globalism worry that cultures are becoming homogenized, especially in the spread of Western culture throughout the world. NGOs transcend borders to work on issues that affect people worldwide.

methods/results of fdi

Governments are careful to protect vital industries and national security and control FDI so the host country benefits. There are benefits and risks in FDIs for both the host and the investor. Developing countries can have stronger economic growth as a result in FDI. Foreign investors bring knowledge, technology, and capital to more rapidly build infrastructure in a developing country. The outcomes of FDIs are overall positive and can mitigate risk and the effects of inflation for the investor. The UN Conference on Trade and Development, the Organization for Economic Cooperation and Development, the International Monetary Fund, and the Bureau of Economic Analysis all provide investors information on FDI possibilities.

currency regulation

Governments may limit the convertibility of one currency (usually its own) into others, often to restrict imports. Additionally, some governments will manage the exchange rate at a high level to create an import disincentive.

Peace of mind

Having a supplier whom one can trust to accurately deliver items in a timely, low-cost fashion, and who has also developed contingency plans to cope with potential problems, is relatively unique and provides the customer with a high level of comfort. One may be unable to place an economic price on such peace of mind

standardized strategy

High global integration and low local responsiveness

What is the directional nature of contracts between international businesses?

Horizontal contracts with vertical legal structure

encouraging FDI incentives

Host countries offer businesses a combination of tax incentives and loans to invest. Home-country governments may also provide a combination of insurance, loans, and tax breaks to promote their companies' overseas investments.1 International investment agreements ensure that foreign investors are treated in a fair, equal manner to their domestic counterparts

ownership restrictions

Host governments can specify ownership restrictions if they want to keep control of local markets or industries in their citizens' hands. Some countries, such as Malaysia, go even further and encourage that ownership is maintained by a person of Malay origin, known locally as Bumiputera. Although the country's foreign investment committee guidelines are being relaxed, most foreign businesses understand that having a Bumiputera partner will improve their chances of obtaining favorable contracts in Malaysia.

assessing a country for risks from a business standpoint

How stable is the government? Is it a democracy or a dictatorship? If a new party comes into power, will the rules of business change dramatically? Is power concentrated in the hands of a few, or is it clearly outlined in a constitution or similar national legal document? How involved is the government in the private sector? Is there a well-established legal environment to both enforce policies and rules and challenge them? How transparent is the government's political, legal, and economic decision-making process?1

the digital divide

ICT provide access to information and promote the growth and development of fields such as health, education, knowledge sharing, agriculture, peace promotion, and disaster reduction, putting those who do not have internet access at a significant disadvantage in all of these areas. Digital literacy is necessary for users to understand how using the internet can provide them with a competitive advantage that can have long-term economic payoffs. Providing farmers with basic text messaging can net them a higher profit. Knowing the going rate for agricultural products protects rural farmers from distributors taking advantage of them and provides tips on farming best practices. Providing temporary internet access in disaster areas can be lifesaving, even if it is not a long-term solution. Providing internet access to a country where a corrupt government is in power, and there is no competition, will result in providing a service the people cannot afford.

intellectual property

IP refers to creations of the mind—creative works or ideas embodied in a form that can be shared or enable others to recreate, emulate, or manufacture them. Many global corporations have engaged in multiyear court battles over IP issues. This is often more an issue of principle than money. The WIPO was established by the UN to implement a global policy related to IP. Today, it helps mediate many disputes. The Sarbanes-Oxley Act of 2002 (SOX) was designed to address the investing public's lack of trust in corporate America by addressing financial accountability issues and requiring public companies to adopt and disclose a code of business conduct and ethics. SOX requires compliance by any company with a dual listing on the U.S. exchange with 500 or more U.S.-based shareholders. Many companies have found compliance too onerous and have gone private. SOX also provides whistleblower protections. These can apply to any company that is indirectly related to a U.S. corporation. Numerous law cases have arisen where whistleblowers for foreign corporations in foreign lands were targeted. Ethics can be defined as a system of moral standards or values. Today, laws aimed at preventing unethical practices in global business face challenges related to cultural understandings and relevancy. Today, global businesses must follow the laws that regulate their behavior or face legal consequences in the form of fines, penalties, and lawsuits. They may also face fallout and loss of competitiveness from noncompliance, as many consumers purchase according to their ethics.

usability divide

If an individual does not know how to fully access the internet and the economic benefits it can bring, then a usability divide occurs.

corporate social responsibility 2

In Iceland, the economic misdeeds of 26 bankers bankrupted the entire country, and by consequence impacted the global economy. Rather than join the EU, Iceland brought the bankers to justice and allowed its banks to fail and the stock market to plunge. It focused on tourism for economic development and ultimately experienced an economic rebound. Poor financial management during the 1980s led Greece to experience soaring inflation rates. This led the Greek government to make numerous unethical decisions, such as joining the EMU under false pretenses and overspending during the 2004 Olympics. As a result, the Greek economy suffered very badly once the global recession hit in 2007. BP initially lied to the public about the severity of the Deepwater Horizon oil spill. This delayed the response effort and made the company look callous and arrogant.

divisional structure

In a divisional structure, employees are divided into departments based on different markets the company serves, product areas, and/or geographic regions. most often used for MNCs

What is a benefit of implementing a system of free trade?

In a free trade system, tariffs are reduced or eliminated to increase the ease and efficiency with which trade can be accomplished.

regional economic integration

In addition to reducing trade barriers, economic integration can allow nations to have a set of integrated monetary and fiscal policies. There are five different levels of economic integration, which exist as a spectrum and allow nations to agree to a level of agreement with which they are comfortable. The more similar the nations are the more likely they are to form a successful trade bloc. The goal of a trade bloc is to help all participating nations attain a higher living standard by encouraging specialization, lowering prices, providing more choices on goods and services, increasing productivity, and allowing for more efficient use of natural resources.

centralized and decentralized

In centralized organizations, only the top managers make decisions, whereas the lower-level managers are tasked with executing the directives. The military is a prime example, as generals give the orders and each successive rank passes on these orders for following. In decentralized organizations, the decision-making is pushed down to the managers who are the closest to the work or client. The issue of which approach to use takes on particular significance for MNCs that need to balance control of their brand with the business needs in different parts of the world. There are cultural implications of each approach that can affect a company's global success.

nonverbal aspects

In the United States, people place their palm upward and use one finger to call someone over. In Malaysia, this is only used for calling animals. In much of Europe, calling someone over is done with palm down, making a scratching motion with the fingers (as opposed to the one finger in the United States). In Columbia, soft handclaps are used. in the United States, it is common to cross your legs, pointing the soles of your shoes to someone. In Southeast Asia, this is an insult since the feet are the dirtiest and lowest part of the body. In the United States, people tend to stand 36 inches (an arm length) from people, but in Chile, for example, the space is much smaller. in Japan, it would be rude to make constant eye contact with someone with more age or seniority.

Which currency contract establishes a specific rate at the beginning of the contract for delivery at a future date?

In the forward contract, a firm agrees to pay a specific rate at the beginning of the contract for delivery at a future date.

benefits of socialism

In theory, based on public benefits, socialism has the greatest goal of commonwealth. Since the government controls almost all of society's functions, it can make better use of resources, labors, and lands. Socialism reduces disparity in wealth, not only in different areas, but also in all societal ranks and classes. Those who suffer from illnesses or who are too old to work are still provided for and valued by the government, assuming that the government is more compassionate than the individual's family. Excess or insufficient production can be avoided. Prices can be controlled in a proper extent. Socialism can tackle unemployment to a great extent.

international business exchange

International business encompasses a full range of cross-border exchanges of goods, services, or resources across two or more nations. These exchanges can go beyond the exchange of money for physical goods to include international transfers of other resources such as people; intellectual property such as patents, copyrights, brand trademarks, and data; and contractual assets or liabilities. Such assets or liabilities include the right to use some foreign asset, provide some future service to overseas customers, or execute a complex financial instrument.

creating international divisions

International businesses must consider the advantages and disadvantages of adopting a centralized versus decentralized organizational structure when expanding into the global market. A centralized approach condenses decision-making to executives higher up in the organization. A decentralized approach distributes decision-making power to the people lower in the company hierarchy but closer to the problems. The type of business as well as company culture and existing structure, resources, processes, and assets affect which type will be most effective for an individual company. Two pressures shape international business strategy—local adaptation and global integration. Companies must weigh the costs and benefits of adapting processes, resources, and products to meet the needs and expectations of the local markets while assessing the costs and benefits of global production, distribution, and marketing to the company's bottom line when choosing a strategy for doing business internationally. Balancing local adaption and global integration results in four basic strategies: international export, global standardization, multidomestic localization, and transnational hybrid. The interplay of these four strategies is described on the Bartlett and Ghoshal model.

Foreign direct investment

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

Foreign Direct Investment

Investment made by a foreign company in the economy of another country. Investments made by international companies with the intention of controlling those assets in a foreign market represents foreign direct investment.

hedging risk

Investors use a variety of financial tools called derivatives to hedge or reduce their losses in currency exchange. One way is the forward contract that agrees on an exchange rate at a set point in the future. Other methods include currency swap contracts that are two-way deals to trade currency on different dates, currency option contracts that give the holder the right to a certain rate on a certain date but do not oblige the holder, and currency futures contracts that require an exchange of money on a certain date.

derivatives

Investors use special financial instruments called derivatives to hedge (decrease return volatility) or to speculate (increase the volatility of returns).3 Typically, businesses try to reduce adverse price movements by taking an offsetting position.

Factors That Influence a Firm's Decision to Invest in a Foreign Country

Is it cheaper to produce in the local market than elsewhere? Is it cheaper to produce locally if the transportation costs are high? Has the company identified a significant local market? Is the company interested in obtaining access to local resources or commodities? Does the company want access to local technology or business process knowledge? Does the company's clients or competitors operate in the country? Are there local incentives (cash and noncash) for investing in one country versus another? Is it relatively straightforward to invest or establish operations in the country, or is there another country in which it might be easier? Is the workforce or labor pool already skilled for the company's needs or will extensive training be required? How will this investment impact the company's revenue and profitability? Can the company easily take profits out of the country, or are there local restrictions? Can the company easily and orderly exit from a local investment, or are local laws and regulations cumbersome and expensive?

leadership drawbacks

It can be difficult for businesses to find an effective organizational leadership having the appropriate knowledge and skills to approach a given geographic market successfully. For every geography, unique sets of strategies and approaches apply to language, culture, business networks, management style, etc. Attracting talented managers with high intercultural competence is a critical step in developing an effective global strategy

drawbacks of capitalism

It does not provide for those who cannot compete well. Opportunities are not equal. Inequality limits diversity and innovation. It ignores external costs such as pollution and climate change that can deplete natural resources over time (Amadeo, 2019). Workers and businesses face uncertainty due to competition. There can be insufficient public goods such as education and healthcare for everyone. Unemployment occurs. It must guard against market failure ("Types of Economic Systems," n.d.). There are class distinctions between the rich and the poor. Firms can create monopolies

usmca

It is an agreement to provide protection and enforcement of intellectual property rights. The new intellectual property agreement will provide ten years of data protection for biological drugs. U.S. creators are given the same intellectual protection rights in domestic markets as they are given in foreign markets. The agreement will continue to provide strong patent protection. The agreement requires a minimum copyright term of the life of the author plus 70 years. The country of origin rule that states that automobiles must have 75% of their components manufactured in the United States, Canada, or Mexico to qualify for a zero-tariff rate. Labor provisions for wages state that 40-45% of automobile parts must be made by workers earning a minimum of $16 per hour by 2023. The Canadian dairy market is more accessible to U.S. farmers. A sunset clause that states the agreement expires in 16 years and is subject to review every six years

disadvantages of traditional economy

It is at the mercy of the climate. There is a lower standard of living. It is vulnerable to a more efficient market or to command economies (Amadeo, 2019).

European Union Emissions Trading Scheme

It limits emissions from 11,000 heavy energy-using installations and the airlines operating between countries. Overall, it covers around 45% of the European Union's greenhouse gas emissions.

A company owner is considering manufacturing using a global standardization strategy to achieve economies of scale. Why is this strategy effective?

It manufactures the same product for all markets. Standardizing products globally means that regardless of the place of manufacture, the product can be sold in any market.

benefits of capitalism

It results in the best products available for the best prices. Prices are kept low by competition. Consumers pay the most for what they want the most. It rewards innovation There are individual freedoms. There are a variety of goods and services to choose from. It is focused on customer satisfaction

legislating the use of technology

Just as there are AUPs for individual users, companies have responsibilities to protect the users of their sites on a local, national, and global scale. The term privacy has many definitions, but for purposes here, privacy will mean the ability to control information about oneself. Companies are required to protect your PII, but that does not mean they cannot share it. Every time you fill out a form online, there is the potential for that company to sell your information for a profit. Any company, no matter where it is located, must follow the provisions of the GDPR if it collects information about the citizens of the European Union. The internet and social media technologies are used by businesses and influencers for communication and marketing. International treaties such as the Paris Agreement, the Kyoto Protocol, and the North American Agreement on Environmental Cooperation impact global business. Protecting the environment and decreasing carbon emissions should be a goal of every organization and individual.

time is space

Latin America views time as being subordinate to relationships and situations. Individuals in Latin America will be late to a meeting if an earlier meeting requires time for relationship development or connections need to be made.

licensing advantages

Licensing is a rapid entry strategy, allowing almost instant access to the market with the right partners lined up. Licensing is low risk in terms of assets and capital investment. The licensee will provide the majority of the infrastructure in most situations. Localization is a complex issue legally, and licensing is a clean solution to most legal barriers to entry. Cultural and linguistic barriers are also significant challenges for international entries. Licensing provides critical resources in this regard, as the licensee has local contacts, mastery of local language, and a deep understanding of the local market.

liscensing

Licensing provides a low-cost strategy to enter the market. The products are shipped to the host country and sold there with no localization.

licensing disadvantages

Loss of control is a serious disadvantage in a licensing situation in regard to quality control. Particularly relevant is the licensing of a brand name, as any quality control issue on behalf of the licensee will impact the licensor's parent brand. Depending on an international partner also creates inherent risks regarding the success of that firm. Just like investing in an organization in the stock market, licensing requires due diligence regarding which organization to partner with. Lower revenues due to relying on an external party are also a key disadvantage to this model (lower risk, lower returns).

hiring expatriates

Managerial competence: technical skills, leadership skills, and knowledge specific to the company operations Training: Training or willingness to be trained on the language and culture of the host country Adaptability: The ability to deal with new, uncomfortable, or unfamiliar situations and the ability to adjust to the culture in which the candidate will be assigned

Acquiring domestic business partners

Many companies are not successful in a foreign market without partnering with a strong, domestic business with compatible values. Companies increase risk with this approach when partners do not have objectives that align with the company.

local firms/domestic partners

Many countries continue to require that a certain percentage of a product or item is manufactured or assembled locally. Some countries specify that a local firm must be used as the domestic partner to conduct business.

insustainability with the IMF

Many environmentalists criticize the IMF by blaming IMF loans for the exploitation of natural resources. Some say that the IMF does not consider the effect of its projects on the environment. Also, the struggle to pay back IMF loans can lead to practices that damage natural resources to get adequate capital to repay loans

production and labor laws

Many of our goods today are produced in different countries. Today, numerous NGOs and worker rights and watchdog organizations are involved in antisweatshop activities. Combined with public opinion, these organizations have pushed numerous suppliers to develop their own codes of conduct to ensure worker safety. Despite these efforts, worker safety continues to be an ongoing issue. Numerous international labor conventions have also emerged in recent years. Examples include The Worst Forms of Child Labour Convention (1999), The Maritime Labour Convention (2006), and The Domestic Workers Convention (2011).

international trade theories

Mercantilism and neo-mercantilism state that a country should maintain a trade surplus, and the government should take necessary actions to make that happen. Maintaining a trade surplus results in a zero-sum game in which one country wins at the expense of another. A country has an absolute advantage if it can produce a good more efficiently or cheaper than another country. Everyone benefits from more affordable production costs and specialization. Comparative advantage states that a country should specialize in the production of goods it can produce more efficiently than another and buy the goods it cannot from countries that have a lower relative opportunity cost. This allows countries to focus on the products for which they have the lowest opportunity costs. However, many assumptions are made in this theory. Heckscher-Olin theory states that comparative advantage arises from having a relative excess of the factors of production such as labor, land, or capital. Economies of scale increase the available variety of goods for consumers and decrease the average cost of these goods.

disadvantages of direct channel strategy

More expensive in beginning because it requires capital investment to set up facilities and hire staff Difficult to manage on a large scale Must deal with issues in areas such as shipping or government restrictions without experience Must have own logistics team and transportation

unionized countries moving overseas

Multinational corporations tend to save a lot in labor costs by moving operations overseas. As they seek to lower costs by taking advantage of lower wages overseas, they have better negotiation power with the unions in their home country.

Business opportunities for multinational companies

Multinational organizations can be businesses, governmental agencies, and NGOs. Along with the business owner, other stakeholders in the success of a global business can include workers, government, trade groups, suppliers, and traders. There are five stages of entering a global market. Each step requires a higher commitment and may have greater risks, but it can also bring significant cost savings and increased revenue. The four drivers of globalization are market, cost, government, and competition. Global companies can increase the size of their market and achieve economies of scale, which can result in cost savings. Ethical issues, governmental policies, and economic restrictions are all likely when a company moves into an unfamiliar global space. A multinational company may also face infrastructural and technological challenges in a developing country.

disadvantages of indirect strategy

Must trust intermediaries to represent your brand and interact with customers Intermediaries may develop sense of ownership over your products An existing channel may carry competing products Intermediaries will be in control of the marketing efforts Adds layers of cost and bureaucracy with more intermediaries

Which type of duty is required to take care of the collective environment across the nation?

Nation states and industry have a shared responsibility to take care of the collective environment of the nation. Collectively, both can accomplish more.

accounting for international business

No language can enable communication without some standardization and rules. In the United States, this structure is created by U.S. GAAP. The availability of these authoritative guidelines has played a central role in the growth of the U.S. economy since the end of the Great Depression. GAAP is constantly evolving as accountants seek better methods of providing financial information in an ever-changing business world. The main authority for the development of GAAP lies with the FASB. At some point, GAAP may be replaced by IFRS to provide consistent accounting and financial reporting around the world. Historically, countries have followed different accounting standards. If different accounting standards are used, however, it is difficult for investors or lenders to compare two companies or determine their financial condition. U.S. firms and any listed on a U.S. stock exchange must prepare financial statements in accordance with the U.S. FASB standards, which are known as generally accepted accounting principles (GAAP). Firms based in the EU follow standards adopted by the IASB known as International Financial Reporting Standards (IFRS). Over 100 nations have adopted or permit companies to use IFRS to report their financial results. The United States is moving toward adopting IFRS but has not committed to a time frame. The FASB and IASB are working on harmonizing the two accounting standards.

NAFTA

North American Free Trade Agreement; allows open trade with US, Mexico, and Canada.

unethical practices 2

Odebrecht was a Brazilian construction firm whose unethical behavior included paying bribes to secure lucrative contracts. Once uncovered, the company's general director was sentenced to 19 years in prison. Odebrecht's downfall also implicated many top government officials. The British EIC was founded in the 1600s and used expansionist policies to pursue profits in the East Indies. The company engaged in many unethical acts, such as using torture and stealing from the people it ruled, to generate personal profit. Parmalat was founded in Italy in 1961. For many years, the company engaged in unethical behavior, such as double billing, creating fake assets, hiding debt from investors, and colluding to financial fraud. United Fruit was an American company (1899) that cultivated bananas in Central and South America. Under the guise of economic development, the company set up "banana republics" in areas where it exerted near monopoly power and prevented any development that conflicted with company profits (such as the construction of government roads). The United States Foreign Corrupt Practices Act (1977) and the Organization for Economic Cooperation and Development Convention on Combating Bribery (OECD Anti-Bribery Convention of 1997) criminalized bribery of foreign officials.

What is a reason for companies to engage in foreign direct investments?

Often countries offer tax exemptions to companies that invest in their economies.

skill specialization

One country can gain a particular advantage in manufacturing one type of equipment by the nature of the labor skills and resources.

Which advantage do intermediaries offer when a manufacturer uses an indirect marketing channel to distribute its products?

One of the main reasons to use an indirect channel is that the marketing intermediaries to which the producer sells may know more about the markets.

global business laws

One of the more difficult aspects of doing business globally is dealing with vast differences in legal and regulatory environments. Apple is presently facing an antitrust court case involving a group of iPhone users who suggest that Apple is creating an uncompetitive marketplace by forcing iPhone users to purchase apps exclusive through the iOS App Store, while at the same time charging third-party app developers a 30% commission. BP has paid more than $65 million for breaching environmental laws related to the Deepwater Horizon oil spill. Airbnb and HomeAway are presently undergoing court proceedings for not updating their rental contracts to reflect Spanish property laws. The WRC is comprised of universities, international labor rights experts, and student groups. In 2017, many universities cut ties with Nike after the company denied the WRC access to inspect their factories. This pressure ultimately forced Nike to renegotiate and comply with the WRC's demands. Intellectual property law also applies to digital property. Source code theft has recently become a big issue in India. This is compounded by the fact that many multinational IT firms outsource to Indian developers.

What is a potential disadvantage of foreign direct investment from a host government's perspective?

One of the possible problems for a host government is that foreign investors could transfer the natural resources away from the host country.

economic integration between countries

One of the results of the existence of multinational businesses is economic integration among countries. This works to promote economic development and trade between home and host countries of multinational businesses.

FFF

One type of investment comes from personal connections. It is known by the somewhat humorous label "Friends, Family, or Fools" (FFF). Unlike VCs and angel investors, this type of funding is usually only for capital. The FFF does not include help beyond monetary input.

Which currency contract allows for a trade of specific amount of money and exchange rate on a defined date to hedge risk in the global environment?

Option contracts offer the owner the right to a specified exchange rate for a particular quantity of money on a particular date but do not oblige the owner.

European Community (EC)

Organization of European states established in 1957; it was originally called the European Economic Community and was renamed the EC in 1967; it promoted economic growth and integration as the basis for a politically united Europe.

ethics in global business

Organizational ethics is how an organization ethically responds to an internal or external stimulus. Businesses that are perceived as valuing ethical actions more than the bottom line are gaining favor with the buying public. Consumers—especially those in North America—are likely to vote with their wallets against companies whose social and environmental performance is poor. Today, many organizations face pressure as consumers are demanding proof of ethical behavior from the organizations from which they purchase. Consumers are also becoming more and more aware of the environmental and social implications of their day-to-day consumer decisions. They often make purchasing decisions based on environmental and ethical implications. As consumers pay closer attention to the social responsibility of retailers and service providers, visibility into their supply chains has also become a priority. Starbucks faced a racial bias and prejudice crisis in which a store manager called the police on African American customers without adequate reason. The company managed the crisis by demonstrating its commitment to ethics by temporarily closing 8,000 stores for a day of mandatory ethical retraining. Volkswagen faced a major ethical scandal surrounding falsified emissions testing. This led to billions of dollars lost and a very negative reputation. The company responded by hiring a new CEO and undertaking a complete process reengineering strategy.

advantages of command economies

Organizations can mobilize large amounts of resources without fear of lawsuits or environmental regulatory issues. Therefore, large projects can more easily be undertaken. An entire economy can be transformed based on a leader's vision.

outsourcing

Outsourcing is the practice of one company hiring another company to handle business activities that typically would have been completed by in-house staff. By outsourcing, companies can turn over business activities to those who have more expertise or shift production to areas that have lower costs. Outsourcing has risks and does not always work out. Outsourcing may not be effective with some business activities, such as human resources or customer relations, so businesses turn to insourcing, which is keeping or returning responsibility for those activities to in-house staff.

functions of the WTO

Oversee the implementation and administration of the agreements between nations that are under the WTO's scope of authority. The WTO agreements cover goods, services, and intellectual property. Monitor the transparency of individual government's trade policies. All WTO organization members must undergo a periodic review of their policies. Build trade capacity by supporting developing nations. Provide outreach by maintaining a dialogue with nongovernmental agencies, the media, and the general public to aid in transparency about WTO procedures, enhance cooperation, and increase awareness about WTO activities. Provide a forum for negotiations and settling disputes among nations. (WTO, n.d.).

geocentric HRM

Parent company and subsidiaries work together to create an integrated worldwide HR system that allows for differences but shares resources across the organization. Leadership positions are filled by the best employees worldwide based on a meritocracy rather than on nationality. There is more fluid movement among employees, which creates diversity in the workforce.

National Environmental Policy Act

Passed in 1969, the centerpiece of federal environmental policy, which requires agencies to file environmental impact statements.

pegged float exchange rate

Pegged floating currencies are pegged to some band or value, which is either fixed or periodically adjusted. They are a hybrid of fixed and floating regimes.

Which financing source provides funding for capital through private connections with help limited to monetary contributions?

Personal contacts can provide funding, which is usually only for capital, and do not include help beyond monetary contribution.

general data protection regulation (GDPR)

Personal data include a wide range of personal identifiers including name, identification number, location data, or an online identifier. For sensitive data, users are required to opt in explicitly to grant permission. The regulation applies to all companies processing data of EU citizens, no matter where the company is located. Organizations that breach the policies of the GDPR can be fined up to 4% of annual global turnover or €20 million (whichever is greater). Users must be notified of the breach within 72 hours of awareness

foreign direct investment

Portfolio investment in foreign firms is usually to mitigate risk by investing in corporations in diverse countries and industries. According to the Levin Institute, the rapid increase in FDI may be due to technology and transportation, the lure for higher profits, the fall of the Berlin Wall, and financial liberalization. A key requirement of the WTO, the most favored nation treatment, seeks to prevent discrimination in foreign investment. Each member nation of the WTO is obligated to give all investors the same treatment as it provides its most favored trading partner. FDIs benefit both developing and developed nations by increasing jobs and bringing capital to the most successful companies.

Initiatives completed as a result of GATT and the WTO

Promotion of free trade and elimination of tariffs Creation of free trade zones with small or no tariffs Reduction of transportation costs, primarily resulting from the development of containerization for ocean shipping Reduction or removal of capital controls Reduction, elimination, or harmonization of subsidies for local businesses Creation of subsidies for global corporations Harmonization of intellectual property laws across the majority of nation-states, with more restrictions put in place Supranational recognition of intellectual property restrictions (e.g., patents granted by China would be recognized in the United States)1

public relations drawbacks

Public image and branding are critical components of most businesses. Building this public relations potential in a new geographic region is an enormous challenge in both effectively localizing the message and determining the capital expenditures necessary to create momentum.

disadvantages of command economies

Rapid change can lead to the neglect of society's needs. The production of goods and services are not tied to demand, and, if too little is produced, rationing is necessary. Following the rules, not innovation, is rewarded. Black markets or shadow economies are common (Amadeo, 2019). The economy is less flexible and slower to react to change (Zeder, 2019).

Cultural Agility

Recognizing that important communication differences exist among people from different cultures.

Which act affects the global business landscape by clarifying auditor independence issues, accountability of senior executives, disclosure of insider trading, and intellectual property rights?

Sarbanes Oxley. This act clarifies auditor independence issues, puts greater accountability on senior executives, enforces disclosure of insider trading, and prohibits loans to executives.

preventing irregularities

Segregating employee duties Assigning specific duties to each employee Rotating employee job assignments Using mechanical devices (time clock, check protector) keeping records

How are free trade agreements handled differently than treaties in the United States?

Since a free trade agreement involves revenue from trade, it must be approved by both houses of Congress, whereas a treaty only needs to be approved by the Senate.

currency exchange dynamics

Smaller countries may use another country's currency, and multiple countries may use the same currency, such as in the EU; But, generally, each country has its currency that must be exchanged on the foreign exchange. Firms have to pay for supplies and labor in the country where the product was made, but the firm itself gets paid in the currency where the product was sold. Portfolio investors invest in firms based on the anticipated future exchange rate. A government should consider its economic standing and trade balance and consider how it wants to use its policy tools when choosing an exchange rate regime. A free-floating exchange rate fluctuates based on supply and demand. Many country's central banks intervene in a free-floating economy by buying and selling their currency to keep its value within a specific range. This is called a managed float. A fixed exchange rate can be pegged or fixed against gold, or frequently small countries will peg their currency against a large country with which it does the majority of its trade.

high power distance

Societies that view an unequal distribution of power as relatively acceptable: Malaysia Slovakia The Philippines Russia Mexico

low power distance

Societies that view an unequal distribution of power as relatively unacceptable: Austria Denmark Israel Ireland New Zealand

drawbacks of trade specialization

Some parts of the economy may not be able to compete with cheaper or better imports. For example, firms in the United States may see demand for their products fall due to cheaper imports from China. These threats to noncompetitive sectors may lead to structural unemployment. Global demand may shift so there is no longer a demand for the goods or services produced by a country. For example, the global demand for rubber has fallen due to the availability of synthetic substitutes. Countries may experience high levels of persistent structural unemployment and low GDP because the demand for their products has fallen. Relying on another country for vital resources makes a country dependent on that country. Political or economic changes in the second country may impact the supply of goods or services available to the first.

deliverable questions

Statement of work. Work breakdown structure. Project scope statement. Project governance plan.

improvement in the order of accuracy

Supply chain management should guarantee that when orders are shipped, the right items are shipped in the right quantity. This does not disrupt the production of the customer and eliminates product returns, which results in economic benefits for both the customer and the supplier.

Global Reporting Initiative

Sustainability reporting framework developed among stakeholders.

Which currency contracts are two-way agreements to trade currency on different dates?

Swap contracts are two-way agreements to exchange currency on different dates.

discourage FDI

Tax rates and sanctions: A company's home government usually imposes these restrictions to persuade companies to invest in the domestic rather than foreign market. Ownership restrictions: Host governments can specify ownership restrictions if they want to keep the citizens in control of local markets or industries.

Tariffs

Taxes on imported goods

why nations trade

Technology and trade are two mechanisms to increase productivity, which lead to more products and ultimately to lower prices. Critics of the theory of comparative advantage feel that it does not take into account transportation costs and that widespread technology may make the theory obsolete in the future. Specialization leads to increased productivity, which can in turn lead to increased unemployment. Developing countries, like Nepal, may have more difficulty isolating a competitive advantage when their trade partners are further advanced in the usage of technology. A country with coveted natural resources has a competitive advantage. Singapore does not have as many natural resources but has compensated by focusing on the service industry. Government policies influence the feasibility of trade. Economies of scale and specialization are found intra-industry as well as between industries.

How the world got "flat"

The Berlin Wall fell in 1989 and led to a transition from old-style communism to capitalism. When Netscape went public in 1995, web browsing and email helped propel the internet by making it commercially viable and user-friendly. With more powerful, easier-to-use software and improved connectivity, more people can share work. Thus, complex projects with more interdependent parts can be worked on collaboratively from anywhere. Providing basic software online for free gives everyone a source code, thus accelerating collaboration and software development. The internet lets firms use employees worldwide and send specific work to the most qualified and cheapest labor, wherever it is. Enter India with educated and talented people who work at a fraction of U.S. or European wages. Indian technicians and software experts built an international reputation during the Y2K millennium event. The feared computer system breakdown never happened, but the Indian information technology (IT) industry began handling e-commerce and related businesses worldwide. When it comes to jobs leaving and factories being built in cheaper places, people think of jobs sent to China, Malaysia, Thailand, Mexico, Ireland, Brazil, and Vietnam. However, going offshore is not just a moving part of a manufacturing or service process. It means creating a new business model to make more goods for non-U.S. sale, thus increasing U.S. exports. Walmart demonstrates that improved acquisition and distribution can lower costs and encourage suppliers to boost quality. Insourcing, a type of service collaboration, happens when firms devise new service combinations to improve service. Take United Parcel Service (UPS). The "brown" company delivers packages globally, but it also repairs Toshiba computers and organizes delivery routes for Papa John's pizza. With insourcing, UPS uses its logistics expertise to help clients create new businesses. Google revolutionized information searching. Its users conduct some one billion searches annually. This search methodology and the wide access to knowledge on the internet transform information into a commodity people can use to create entirely new businesses. Technological advances range from wireless communication to processing, resulting in extremely powerful computing capability and transmission.1

chilean retailers

The Chilean retailers owned their own banks, and the banking services offered at their retail stores were a major reason for their profitability. Not offering banking services is the main reason the North American companies failed in the Chilean market.

guanxi

The Chinese practice of building networks for social exchange. "You owe me one"

EU governance

The European Council provides political leadership for the EU. It meets four times per year, and each member has a representative, usually the head of its government. Collectively it functions as the EU's head of state. The European Commission provides day-to-day leadership and initiates legislation. The European Parliament forms one-half of the EU's legislative body. The purpose of the parliament is to debate and amend legislation proposed by the European Commission. The Council of the European Union functions as the other half of the EU's legislative body. The Court of Justice is composed of the judicial branch of the EU.

In 2017, the Federal Trade Commission (FTC) passed a law that required a change in the practices used by influencers who participate in video postings and web site tweets. Why did the FTC take this action?

The FTC law required influencers who participate in video postings and web site tweets to stop misleading consumers into believing they were representing a brand without compensation.

Fourth Industrial Revolution

The Fourth Industrial Revolution refers to the indistinguishable combination of what is human and what is technology such that it is difficult to tell where human ends and technology begins.

Which aspect of the International Monetary Fund (IMF) will assist paying the deficit in U.S. dollars, if agreed on by both countries?

The IMF's purpose is to provide a way for countries to easily exchange money, provide financial help to its members, and supervise international economic policies.

world bank

The World Bank's priorities are to help build sustainable economic growth, invest in people, and build resilience for shocks and threats. The World Bank, like the IMF, has its supporters and critics, but it is common to not prefer a world in which a World Bank was not able to assist in disasters and provide emergency loans to countries in need. The power and size of the world's economies are changing, especially since China has the second-largest economy in the world. The power and control at the administrative level of the World Bank have not evolved as quickly. The World Bank Group is comprised of private lending banks as well as the World Bank.

world trade organization

The World Trade Organization has evolved from GATT to becoming an organization with 164 members. The actions of the WTO and GATT have resulted in a significant, steady decrease in tariff rates as well as served as a protector for the trade of goods, services, and intellectual property. In addition to a protector of trade rights, the WTO serves as a negotiator and settles disputes among nations.

Which organization was formed after World War II to encourage international commerce?

The World Trade Organization was formed after World War II to encourage international trade by creating a mechanism to negotiate trade agreements.

CAGE framework

The analytical framework used to understand country and regional differences along the distance dimensions of culture, administration, geography, and economics

ethnocentric HRM

The company uses the same HR policies and practices in its subsidiaries as in the parent company. Leadership roles and key positions are filled by expatriates from the home country. The focus is on top-down decisions from the home office. This approach is used when the company does not trust the abilities or training of the local employees or has a biased view of foreign workers.

A multinational company plans on setting up a greenfield venture in a foreign country. What is a potential implication for the company?

The company will be seen as an insider who would hire locals. As the company purchases plants and materials in the host country, the company would need to hire locals to make the products.

Which issue was the main purpose of the creation of the European Union?

The driving issue was that one country or region could control natural resources, such as oil or land, in a monopoly to the detriment of other European countries.

Employees in the Vietnam office that are hired locally seek to achieve common goals and are loyal to each other. Which of Hofstede's cultural dimensions is this office low in?

The employees in Vietnam are an example of a culture that is low in the individualistic dimension.

theoretical benefits of communism

The idea that widespread universal social welfare, including improvements in public health and education and the provision of childcare, state-directed social services, and social benefits, will help raise labor productivity and advance a society in its development Universal education with a focus on developing the proletariat with knowledge, class consciousness, and historical understanding The emancipation of women and the ending of their exploitation People are treated equally in the eyes of the government, regardless of education or financial standing. People are entitled to jobs. Because the government owns all means of production, it can provide jobs for at least a majority of the people. Everyone in a communist country is given enough work opportunities to live and survive. Every citizen, however, must do his or her part for the economy to receive pay and other work benefits. The government dictates economic structure; therefore, economic instability is not likely to happen. There are specific laws and goals, which determine resource and responsibility allocation. If the citizens abide by these laws, there is a harmonious spirit of sharing one goal. Everyone can work harmoniously without interfering with each other. Work, responsibility, and rewards are shared equally among the citizens. The sense of cooperation allows for efficiency in resource distribution. This is very important, especially in times of need and in emergencies.

governments and foreign investors

The internet and the use of email have markedly improved the ability of firms to communicate with foreign affiliates. The price and speed of air travel have increased transportation options. When investors see that developing economies are having a period of rapid growth, it is appealing to investors to invest in that economy in anticipation of significant returns of their investment. The end to the Cold War led to the conversion of many socialist economies to capitalist with an accompanying increase in the privatization of industries. In addition, the demise of the Soviet Union made investors feel more comfortable that funds invested in developing nations would not be expropriated if the current government was overthrown

technology drawbacks

The level of technological development of a nation affects the attractiveness of doing business there and the type of operations that are possible. Companies may encounter a variety of technological challenges doing business in foreign countries. These challenges include training workers on unfamiliar equipment; inadequate transportation systems that increase production and distribution costs; poor communication facilities and infrastructure; challenges with technology literacy; and a lack of reliable access to broadband internet and related technologies that facilitate business planning, implementation, and control

Political Risk

The likelihood that political forces will cause drastic changes in a country's business environment that will adversely affect the profit and other goals of a particular business enterprise. Political risk involves governments and the relationships between countries.

What was one of the results of the Uruguay Round of the World Trade Organization negotiations?

The major accomplishment of the Uruguay Round of the World Trade Organization negotiations was a reduction in the number and size of tariffs.

entry to foreign market

The most common entry strategies are exporting, franchising, licensing, joint ventures, partnerships, and direct investment in subsidiaries through acquisition or greenfield ventures. Exporting is selling and shipping goods to customers in other countries and as the easiest approach. It is often the way companies first move into international commerce. Licensing and franchising both provide a way for a person or entity to pay for the right to profit from someone else's idea or business model. Joint ventures and partnerships call for working with other people or businesses in the target country for a common goal. The subsidiary is a company owned or controlled by a parent company. It is a form of direct investment.

drawbacks of socialism

The national economy develops relatively slowly. There is an inability to obtain the most profit from the use of resources, labors, and land. Places that have a geographical advantage lose their chances to develop better, and people who have intelligence and wealth lose chances to make their businesses bigger and more powerful. People lose the initiative to work and the enthusiasm to study because doing more is not rewarded

All hiring decisions will be made in the international markets using policies and procedures applicable to those locations without home office oversight. Which approach to human resource management aligns with this decision?

The polycentric approach allows each market to use hiring policies and procedures that are applicable to that location. All hiring decisions will be made in the international locations using policies and procedures applicable to those markets without home office oversight.

value chain

The process by which an organization adds value to products/services

mnc interest/conflict

The relationships between an MNC and the host country can be both good and bad depending on a number of factors including economic development, resource distribution, and employment.

mnc and international relations

The relationships between government leaders and CEOs of multinational corporations with citizens of a country are complex and ever-changing. This changing environment can complicate a decision for an MNC to enter a particular market. Many MNCs have a higher value than many small countries. Multinational corporations, because they can quickly move capital, are frequently described as highly influential or catalysts for action in countries. Local and national governments compete with each other to attract multinational corporations. The need for market expansion, resource acquisition, and the emergence of China and India are expected to continue to propel world trade.

What makes the enforcement of United Nations Environmental Program regulations difficult?

The sovereign rights of nations preclude the United Nations from enforcing the regulations. United Nations compliance is normally voluntary and agreements tend to be nonbinding.

unethical practices

The world is shrinking, but its cultures remain worlds apart, as do its ethical norms. Bribery, kickbacks, cronyism, and nepotism are more prevalent in some parts of the world. Today, ethical transparency in accounting and finance are key values in Western culture. This is following a series of corporate scandals, such as Enron and WorldCom. In response to these crises, the Sarbanes-Oxley Act (2002) came into effect, influencing accounting and financial ethics in the United States. However, conducting business dealings secretively continues to be accepted in many countries. In some societies, gift giving to chiefs, elders, or religious leaders is considered not only acceptable and appropriate but also a mandatory traditional expression of respect and obligation. The American practice of lobbying legislators and governmental agencies would be considered an illegal form of buying influence in many other countries. International companies must also grapple with key issues such as when a clash occurs between their values, international legal frameworks, and local cultural norms.

drawbacks of fdi

There are drawbacks to foreign direct investment as well. Governments are careful not to allow foreign ownership of strategically important industries as this could lower the competitive advantage of the nation. Foreign investors could also take advantage of the company they are investing in and take away all valuable assets then leave the country

technology in global business

There are many ways to communicate with customers and employees both locally and across the globe. Email and cloud-based document services, videos, and web-based conferences, along with social media and other marketing platforms are all used by most companies. The majority of workers in today's businesses are knowledge workers, which makes maintaining IT a high priority for any organization. The amount of data available to an organization is immense. Data warehouses and database management services are needed to analyze the data before they can provide any value to the organization. Vast amounts of data are collected on every move you make throughout your day. Companies use these data to target advertising toward your interests. Company-wide ERP systems that bring together human resources, operations, and technology are becoming an integral part of business strategy.

cost/benefit of foreign investment

There are two main paths to foreign investment: portfolio investment, which invests in a company's stocks but does not seek control, and FDI, which seeks to be directly involved in business decisions and activities. Foreign investment costs more than monetary expense. It also requires giving up some control, sharing expertise, committing time and staff to developing business relationships, and dealing with government bureaucracies. The benefits are access to new markets, increased profitability, and diversified investment risk. There are five traditional strategies for expanding internationally: exporting, licensing, partnering, strategic alliances, and subsidiaries. The strategies require varying levels of risk, expense, and control. Companies must balance these factors with their assets, structure, and goals when choosing their best option for going global.

vertical structure of law

There is a legitimate law-creating authority at the top and the people to be governed at the bottom.

advantages of traditional economy

There is little or no friction between members. Each member depends on each other for support. Custom and tradition dictate resource allocation. All members understand their position in society and what they are expected to contribute. It is more sustainable.

free trade zones

These areas have reduced tariffs, taxes, customs, procedures, or restrictions to promote trade with other countries.

Financial benefits

These value improvements all translate into significant cost savings. Cost savings experienced by the supplier can be transferred into cost savings for the customer. Relatively modest improvements in inventory reduction, reduced safety stock size, reduced stockouts, improved order fill rates, and reduced transit time can yield surprisingly large financial benefits to both parties.

Worst Forms of Child Labor Convention (1999)

This convention defines a child as a person under 18 years of age and aims to eliminate all practices of slavery or those similar to slavery, such as the sale and trafficking of children, debt bondage, forced or compulsory recruitment of children for use in armed conflict, child prostitution, and so on. The convention requires states to provide appropriate assistance to remove children from such situations and provide their rehabilitation and education.

Domestic Workers Convention, 2011

This convention details specific rights and protections for domestic workers working both in their home country and as migrant workers. This includes a written contract that is enforceable in the country of employment, or a written job offer that is available prior to traveling to the country of employment. It also lists clear conditions under which domestic workers are entitled to repatriation at the end of employment, established protections from abusive practices, and cooperation between countries to ensure application of the convention.

The Maritime Labour Convention (MLC) (2006)

This convention sets out seafarers' rights to decent work conditions. Sometimes referred to as the "Seafarers' Bill of Rights," this international agreement applies to all seafarers, including those with jobs in hotels and those who provide passenger services on cruise ships and commercial yachts. In 2013, the MLC became binding law for 30 countries.

current rate method

This is a method of foreign currency translation in which items in the subsidiaries' financial statements are translated into the currency of the parent corporation at the current exchange rate (i.e., the rate on the date when the statements are prepared)

temporal method

This is a method of foreign currency translation that uses exchange rates based on the rate in place when the assets and liabilities were originally acquired or incurred. This method avoids the paper gain or loss problem of the current-rate method.

Private Export Funding Corporation (PEFCO)

This is a private-sector organization formed in 1970. It aims to support the funding of U.S. exports by supplementing the funding available from commercial banks and other lenders.

disadvantages of market economy

Those who cannot compete as well, such as people with disabilities and their caretakers, may be at a competitive disadvantage. Not all can reach their full potential due to their inability to access education and obtain means to improve skills. There is a significant divide between the privileged and the underprivileged. Society must choose how to balance self-interest and protect the vulnerable

internal controls

To create redundancies in a system to ensure it functions properly. Internal controls are extra procedures built into a system to help guarantee proper functions and reliability of the collected data. Internal controls should ensure systems run efficiently, effectively, and accurately and that they reduce accounting misstatements.

Reduced cycle time for product development

To ensure success, the customer and the supplier must develop new levels of trust. This trust will evolve into a long-term relationship. Both parties begin to know each other better, including each other's needs and capabilities. As this evolves, the supplier is in a better position to help the customer develop new products far more rapidly. It greatly reduces the product cycle time.

How do Congress and the Department of Agriculture use quotas to their advantage?

To increase domestic prices to specific levels to make products profitable. Congress works with departments to determine the quotas of imports that will keep domestic prices at an acceptable level.

Oil Pollution Act

To prevent further oil spills form occurring in the US, company required to make a plan to prevent spills that may occur (must also have containment and cleanup plan in case of emergency). The Oil Pollution Act of 1990 allows organizations damaged by an oil spill to communicate with the company responsible for the spill to ask for compensation and file a civil lawsuit.

internal controls 3

To prevent irregularities, companies can implement numerous internal controls. These include segregating employee duties, assigning specific duties to each employee, rotating employee job assignments, using mechanical devices, and maintaining complete and accurate accounting records. Global businesses experience additional challenges such as operating outside national borders, navigating cultural considerations, and understanding differing legal frameworks. New extraterritorial regulations mean corporations can no longer claim to be unaware of what was happening in a subsidiary in a distant jurisdiction. Global corporations should also place increased focus on employee training and education, including at the top executive level. Internal auditors encourage operating efficiency throughout the company and are alert to breakdowns in the company's internal control structure.

corporate social responsibility

Today, many U.S. citizens expect corporations to conduct themselves in an ethical and socially responsible manner. Corporate social responsibility (CSR) can be defined as the ethical role of a corporation in society. Today you live in a globalized world, in which you share products, services, technology, capital and knowledge. Business decisions and events can have repercussions on a global scale. It is for this reason that it is vitally important for global businesses to act ethically. The Enron scandal impacted stakeholders internationally and shocked the global economy. It led to the implementation of the Sarbanes-Oxley Act (2002) and stricter rules for financial reporting for all publicly traded American companies and foreign firms listing in the United States.

environmental laws

Today, many believe in the notion of a collective environment in which everyone has the right to enjoy their environment and use some of its resources for their survival. This requires a shared commitment to maintain the quality of environmental resources. The UN and World Bank have enacted a number of conventions and treaties to help protect the shared environment from the impact of big business. However, enforcing these efforts is often difficult due to the sovereign rights of countries. Although the United States initially supported the Kyoto Protocol (1997), the Senate failed to ratify the treaty stating the treaty threatened the U.S. economy and did not require developing nations to lower their emissions at the same rate as developed countries. The Paris Agreement is the first legally binding, global climate deal. This agreement proposes concrete steps for keeping long-term global temperature increase at below 2°C. The agreement was formally ratified in October 2016; however, 13 nations have yet to ratify, including some major emitters. The EPA is charged with monitoring the environmental practices of industry. They have carried out bilateral programs with many countries, allowing other nations—particularly countries with economies in transition—to benefit from U.S. experience in developing appropriate and successful environmental measures.

rei financial growth

Trade agreements create more growth opportunities for countries to trade among themselves as barriers to trade and investment are removed.

benefits of regional economic integration

Trade agreements create more opportunities for countries to trade with one another by removing the barriers to trade and investment. Studies indicate that regional economic integration significantly contributes to the relatively high growth rates in less-developed countries.1 By removing restrictions on the labor movement, economic integration can help expand job opportunities. Member nations may find it easier to agree with smaller numbers of countries. Regional understanding and similarities may also facilitate closer political cooperation.1

rei trade blocs

Trade blocs force companies in the same bloc to compete with each other to lower prices. They present a bigger market so many companies can decrease prices due to economies of scale. Large firms or corporations can force domestic smaller firms out of business. Having a foreign subsidiary may give a firm with the same decreased or absent tariff benefits as the local companies. NAFTA was controversial with workers in manufacturing plants and environmentalists. The United States-Mexico-Canada Agreement may replace the NAFTA agreement. The CAFTA-DR agreement is unusual because of the inequality in economic size between the United States and the other nations. Mercosur is both an economic and political agreement with the goals of keeping peace in the Southern cone and promoting economic growth in the region. The EU was initially established to prevent any future wars. The EU faces many challenges but has its long history and shared governance to help the EU countries overcome their differences. Trade blocs in the global south have increased the speed of the economic growth of its member countries.

regional economic integration

Trading blocs create free trade among geographically close regions, which can lead to lower prices, higher growth, increased competition, and increased export potential. Some domestic firms may lose to multinationals. Less developed regions can attract more FDI and therefore catch up to more developed countries. If one country in the trading bloc has economic difficulties, all of the countries may be affected.

effects of economies and globalization

Traditional economies are found in rural countries where the primary occupation is farming. In a command economy found in a communist country, most of the economic system is controlled by a centralized power. In a planned economy found in a socialist country, the factors of production are used for the common good. In an open economy, a democratic method is used to determine how to use the factors of production. A market economy is a decentralized economy in which firms and households determine how resources are allocated based on how best to satisfy their needs. A mixed economy has less government intervention than a command economy. Supply and demand control the economy, and ideally, the government steps in when needed.

transfer pricing

Transfer pricing involves conducting business among cross-border subsidiaries, often producing the product in the country with the lowest costs and tax rates.

Corruptions Perceptions Index (CPI)

Transparency International tracks illicit behavior, such as bribery and embezzlement, in the public sector in 180 countries by surveying international business executives.Transparency International's corruption perceptions index (CPI) tracks, rates, and ranks 180 countries based on their levels of corruption and illicit behaviors. Identifying nations in which corruption is frequent is important to understanding international business ethics.

US business practice

US business practice is more focused on rules rather than relationships

How does General Data Protection Regulation (GDPR) help protect people's personal data?

Users are required to opt in explicitly to grant permission for sensitive personal data.

venture capitalist

VCs accumulate capital from a number of speculative investors and seek strong business opportunities still in the start-up phase. Winning capital from a VC can be quite lucrative, as the amount of capital invested can be high (high enough to justify international operations). However, investors typically take a significant equity interest in the firm as well. VCs would generally be represented by a board that would assess the viability of the business as an investment and determine the terms (ownership by investors) and returns.

Which type of investor secures funding from a number of speculative financiers and pursues strong global business opportunities still in the start-up phase?

Venture capitalists provide high amount of capital to early-stage, emerging firms that are deemed to have high growth potential.

Trade-Related Investment Measures (TRIMs)

WTO agreement on trade measures governments can impose on foreign firms. To prohibit domestic content provisions To discourage export performance requirements, such as a requirement for exports to match imports

Trade-Related Aspects of Intellectual Property (TRIPS)

WTO agreement re: intellectual property

wto

WTO supports developing nations by providing both training and support. The WTO reviews the trade policies of all nations to ensure that each country is treated fairly and equally under the most favored nation requirement. Criticisms of the WTO organization are similar to the objections to the IMF and World Bank: a lack of transparency; neglect for considering the environment when making decisions; and policies in favor of more affluent, developed countries at the expense of poorer nations.

crowdsourcing

Websites such as Kickstarter and Indiegogo are unique and modern formats where potential business ideas can garner capital and support prior to producing a given product or service. This interesting model allows a high number of people to invest a small amount of capital, which cumulatively may be enough to kick-start a venture (international or otherwise). Reimbursements in the form of credits, t-shirts, early access to the product, and other incentives are often used to motivate small investments.

3 questions when developing an economic system

What to produce? How to produce it? Who gets it?

A business, operating globally, wants to increase its overall productivity. Which strategy should the business use?

When a business adds technology to its process, it allows the business to maximize economies of scale.

What happens to consumer surplus when tariffs and quotas are discontinued?

When barriers to trade are eliminated, consumer surplus increases, meaning that the price of goods or services will decrease and the quantity consumed will increase.

fronting loan

With a fronting loan, the parent deposits the total amount of the loan in the bank. The bank then lends the money to the subsidiary. For the bank, the loan is risk free because the parent has provided the money to the bank. The bank charges the subsidiary a slightly higher interest rate on the loan than it pays to the parent, thus making a profit. loan made between a parent company and its subsidiary through a financial intermediary such as a bank. The advantage of using fronting loans as a way to lend money, rather than the parent lending the money directly to the subsidiary, is that the parent can gain some tax benefits and bypass local laws that restrict the amount of funds that can be transferred abroad.

functional/departmental structure

Within a functional/departmental structure, employees are divided into departments related to a functional area of the business, such as marketing, production, human resources, information technology, and customer service.

WRC

Workers Rights Consortium

General Agreement on Tariffs and Trade (GATT)

a 1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions. replaced by the WTO

International Monetary Fund

a United Nations agency to promote trade by increasing the exchange stability of the major currencies. IMF is owned and directed by governments of member nations. The IMF is cooperative institution and is similar to a credit union for all member nations. The initial purpose of the IMF was to regulate currency exchange between nations. The conditions put on the IMF loan require the recipient country to have a policy of austerity. This policy usually results in a cut in funding for social programs.

corporate social responsibility

a business's concern for society's welfare. The aim of CSR is to increase long-term profits and shareholder trust through positive public relations and high ethical standards.

Political Union

a central political apparatus coordinates economic, social, and foreign policy. A political union is defined as when a single nation is formed and a mutual organization confederates all policies.

greenfield venture

a company creates a subsidiary in another nation from the beginning. International markets are commonly entered through this means, and subsidiaries are considered foreign direct investment strategies.

Centralized Company

a company in which major planning and controlling decisions are made by top management

Decentralized Company

a company that is divided into business segments, with segment managers making planning and controlling decisions for their segments. problems solved at lower levels, closer to the problem

selling online

a direct distribution strategy and creates a stronger connection to the customer base.

forward contract

a firm can lock in a guaranteed foreign exchange rate through a forward contract. In the forward contract, the firm agrees to pay a specific rate at the beginning of the contract for delivery at a future date.

North Atlantic Treaty Organization (NATO)

a group of 29 countries that has agreed to protect each other in case of attack; founded in 1949

Common Market

a group of countries that acts as a single market, without trade barriers between member countries. The common market permits the formation of economically integrated markets between member countries, removing trade barriers and any restrictions on the movement of labor, technology, and capital.

trade bloc

a group of countries that work together to promote trade with one another

conglomerate

a group of diverse companies under common ownership and run as a single organization

sources of funding

a loan from a commercial bank a loan from an intermediary, such as an export management company that provides short-term financing a loan from a supplier, for which the buyer can make a down payment and ask to make further payments incrementally a loan from the corporate parent governmental or other organizational financing

criteria for relocation

a low-cost base, both in terms of start-up and ongoing running costs; a favorable general business environment; the availability of suitable staff—particularly with regard to language skills; a high level of local and international accessibility with good transport links; the attractiveness for international staff; and a robust regulatory framework

unity of command

a management principle that workers should report to just one boss

Happy Planet Index

a measure, produced by the New Economics Foundation, that measures sustainable progress towards the well-being of people

World Trade Organization (WTO)

a permanent global institution to promote international trade and to settle international trade disputes

most favored nation

a policy between countries ensuring fair trading practices

insourcing

a practice in which a company contracts with a specialist firm to handle all or part of its supply chain operations. Insourcing allows the company to maintain control of the quality

six sigma

a rigorous statistical analysis process that reduces defects in manufacturing and service-related processes

International Financial Reporting Standards

a set of standards by the International Accounting Standards Board (IASB) that establishes international accounting standards and reporting expectations.

World Intellectual Property Organization (WIPO)

a specialized agency of the United Nations that administers numerous treaties concerning protection of intellectual property rights

ad valorem tax

a tax levied on the assessed value of real and personal property

Stakeholder analysis

a technique to identify and assess the importance of key people, groups of people, or institutions that may significantly influence the success of an organization's activity, project, or business. An organization most likely pays sales taxes in markets where it sells its products and property and payroll taxes in countries where it has production facilities. Each of these governmental stakeholders has an important economic interest in the company. Moreover, in many countries, the government is responsible for protecting the environment. Many companies have business activities that use energy and produce waste, both of which may have environmental effects.1

long term orientation

a worldview that values thrift and persistence in achieving goals.

due dilligence

adequate investigations and outcomes

Which region of the world continues to face challenges related to being the least connected to the internet?

africa. Only 24.4% of the population is connected, making it one of the least connected areas in the world. Therefore, the digital divide is the greatest in this region

Governmental bodies

also have different international forms. Most national governments, for instance, maintain embassies and consulates in foreign countries. National governments also participate in international treaties related to issues such as trade, the environment, or child labor.

religious law

also known as theocratic law and is based on religious guidelines. The most commonly known example of religious law is Islamic law, that is, Sharia. Sharia governs several Islamic nations and communities around the world and is the most widely accepted religious law system

north american agreement on environmental cooperation

an agreement between the United States, Canada, and Mexico that was signed on January 1, 1994, and is a side treaty to the North American Free Trade Agreement. The North American Commission for Economic Cooperation (CEC) receives any complaints that any of the three countries is failing to enforce its environmental laws.

Paris Agreement

an agreement within the United Nations Framework Convention on Climate Change (UNFCCC) dealing with greenhouse gas emissions mitigation, adaptation, and finance starting in the year 2020.

European Union

an association of European nations formed in 1993 for the purpose of achieving political and economic integration.

planned economy

an economic system directed by government agencies

floating exchange rate

an exchange rate policy under which a government permits its currency to be traded on the open market without direct government control or intervention

Environmental Protection Agency

an independent federal agency established to coordinate programs aimed at reducing pollution and protecting the environment

discrepency

an instance of difference or inconsistency, error, unintentional

Export processing zone

areas where governments create favorable investment and trading conditions to attract export-oriented industries

ethical consumerism

buying products that are not harmful to the environment, animals and society. When a person evaluates a company's values and then makes purchases from the company based on the person and company's matched values, this is ethical consumerism.

types of funding for international business

cash loans bonds equity

marketing channel

consists of individuals and firms involved in the process of making a product or service available for use or consumption by consumers or industrial users

goods and services tax (GST)

consumption tax added to products incrementally through production and collected by the end retailer. Goods and services are indirect taxes many governments worldwide introduce as direct-tax rates continue to decrease.

indirect distribution strategy

contains one or more intermediaries between consumer and producer There are no up-front costs if you are using an existing channel. Intermediaries may have more knowledge of the markets. Intermediaries can use their expertise to speed up the process.

currency future contract

contracts that require the exchange of a specific amount of currency at a specific future date and at a specific exchange rate. Futures contracts are similar but not identical to forward contracts.1 A futures contract is a standardized form that is traded on the exchange market, whereas a forward contract includes custom agreements between parties.

Kyoto Protocol

controlling global warming by setting greenhouse gas emissions targets for developed countries

currency swap contract

coordinated transactions with a simultaneous buy and sell of a currency for two different dates.

opportunities for scale

cost advantages due to increased output and decreased cost of output

A CEO seeks to better use the economies of scale and scope of production to increase the international company's profits. Which type of globalization driver is the CEO seeking to use?

cost driver. Companies seek to put production in low labor-cost countries to lower labor costs and increase the contribution margin. Economies of scale and scope and the exploitation of differences in costs for product development, manufacturing, and sourcing in different parts of the world will assume greater importance as determinants of global strategy.

debates over globalization

critics point to evidence of social disintegration, the spread of diseases, environmental damage, breakdowns in democracy, and increasing poverty in many of the world's nations as unintended consequences of globalization. Environmental challenges such as climate change, cross-boundary water and air pollution, and overfishing in the ocean have all been linked to globalization. Some opponents of globalization see the phenomenon as the promotion of corporate interests. Along with arguments supporting the benefits of a more globally connected economy, critics question the ethics and long-term feasibility of profits captured through global expansion. Some argue that the development of global trade creates unfair exchanges between larger and smaller economies.

Which source permits a high number of funders to each participate with a small amount of capital and cumulatively contribute to a new venture?

crowdsourcing

cultural simulation training

cultural simulations in which they will role-play various situations and practice responding in culturally sensitive ways. This process is most effective when the training takes place in the host country or when the trainer can include people from the actual host country to help. The goal is to duplicate as closely as possible scenarios that the employees may face, such as having to question or to reprimand a local employee, making a presentation to host country upper-level managers, or how to approach a person of the opposite gender in countries where the sexes do not mix as freely as in the United States.

costs associated with failing expatriates

damage to host country relationships less motivation in host country staff costs associated with recruitment and relocation possible loss of that employee once returned missed opportunities to further develop the market

International Monetary Fund

designed to foster global monetary cooperation, secure financial stability, and facilitate international trade. Its headquarters is located in Washington, DC.

scope

developing efficiencies in variety, not volume

process departmentalization

dividing an organization according to production processes used to create a good or service

economic globalization growth

due to improvements in the efficiency of long-distance transportation, advances in telecommunication, the importance of information over physical capital in the modern economy, and developments in science and technology.

Industrialized nations

economies characterized by a healthy climate for private enterprise (business) and by a consumer orientation, meaning the business climate focuses on meeting consumers' long-term wants and needs. These nations have high literacy rates, more modern technology, and higher per capita incomes.

expatriates

employees assigned to work in another country

Overseas Private Investment Corporation (OPIC)

established as an agency of the U.S. government in 1971. It helps U.S. businesses invest overseas, particularly in developing countries. It provides debt financing, political risk insurance, and support for private equity funds

patent

exclusive rights over an invention; copyright

A company would like to expand its operations overseas but has little experience in global markets. What is the easiest way for a company to get started in this market?

exporting

economies of scale

factors that cause a producer's average cost per unit to fall as output rises

government drivers

favorable policies support for industry drivers such as the presence or absence of favorable trade policies, technical standards, policies and regulations, and government-operated or subsidized competitors or customers—affect all other elements of a global strategy. They are therefore crucial in shaping the global competitive environment of an industry. In the past, multinationals almost exclusively relied on governments to negotiate the rules of global competition. Today, however, this is changing. As the politics and economics of global competition become more closely intertwined, multinational companies are beginning to pay more attention to the so-called nonmarket dimensions of their global strategies aimed at shaping the global competitive environment to their advantage.

global strategic rivalry theory

firms have to develop a competitive strategy to sustain in the global competition. Global strategic rivalry theory is about how multinational companies need to gain a competitive advantage against other multinational companies in their industry through activities such as research and development.

democracy

form of government that strives to provide all citizens an equal voice, or vote, in determining state policy, regardless of their socioeconomic status.

A company has decided that a foreign direct investment should be made during the next quarter to strengthen the organization. Which method should be used for this purpose?

greenfield venture

factors in relocation

growth government incentives costs innovation/talent

McKinsey Global Institute

has a mission to help leaders of commercial, public, and social sectors understand global economies

Less-developed nations

have extensive poverty, low per capita income and standards of living, low literacy rates, and minimal technology. These nations often lack strong government, financial, and economic systems needed to support a healthy business community.

export-import bank

helps exporters who have found a buyer, but the buyer is unable to get financing for the purchase in his or her own country. Ex-Im Bank can provide credit support (loans, guarantees, and insurance for small businesses) that covers up to 85% of the transaction's export value.

isolationist policies

in response to globalization some countries have further isolated their citizens/culture (ex. north korea)

Supply Chain Networks

include all of the interconnected individuals, businesses, and processes that are necessary to get a product to the ultimate consumer

infrastructure drawbacks

includes the basic physical and organizational structures needed for a society to operate and for an economy to function. A country's infrastructure will help determine the ease of doing business within that nation. For example, a country with poor road conditions and heavy traffic may not be the best place to conduct business that requires goods to be transported from city to city by land.

classifying economic growth

industrialized, developing, and less-developed nations.

portfolio investment

investment that does not involve obtaining a degree of control in a company

training expatriates

language culture goal setting managing family and stress repatriation

antitrust laws

laws that encourage competition in the marketplace

horizontal law

laws that govern disputes in horizontal structures. A horizontal business structure means that no nation is in a legally dominant position over another.

grease payments

legal payments to speed up or ensure performance of normal government duties

risks associated with outsourcing

loss of control loss of innovation loss of organizational trust higher than expected transaction cost

advantages of outsourcing

lower costs flexibility enhanced expertise greater discipline focus on core activities

5 stages of going global

market entry product specialization value chain disaggregation value chain reengineering creation of new markets

globalization drivers

market, cost, competition, government

multinational production

mitigate risk by having production and supplier globally

benefits of global expansion

more extensive array of goods and services increased volume of sales, growth of GDP more empowerment of individuals and political systems through the acquisition of additional resources and capital For global companies, which are often referred to as multinational corporations (MNCs), typical benefits of expanding into developing markets include unsaturated demand for new products, lower labor costs, less expensive natural resources, and other inputs to products. Technological developments have made doing business internationally much more convenient than in the past.

competitive drivers

new markets increased levels of trade High levels of trade, competitive diversity, and interdependence increase the potential for industry globalization. Industry evolution plays a role as well. As the underlying characteristics of the industry change, competitors will respond in order to enhance and preserve their competitive advantage. Sometimes, this causes industry globalization to accelerate. At other times, such as in the case of the worldwide major appliance industry, the globalization process may be reversed.

National Labor Committee

nongovernmental organization involved in anti-sweatshop activities and labor laws

nongovernmental organizations (NGOs)

nonprofit groups that provide charitable services or promote social and environmental causes

Which business challenge stems from exporting small amounts of goods through e-commerce companies?

obeying legal restrictions. Legal restrictions that cannot be avoided are usually in place in the exporting nation. While legal restrictions may be in place to protect the exporter, such restrictions may affect the company's ability to export a product or service or may add to the time or cost of exporting, all of which are challenges.

dumping

occurs when a company sells a product below market price, often to win market share and weaken a competitor.

secondary sources

offer explanations and interpretations of information, which is useful for learning about new topics.

market drivers

opportunity for scale and scope, convergence and needs. Everyday needs, tastes, and preferences may vary significantly by product and depend on such factors as the importance of cultural variables, disposable income, and homogeneity of conditions in which the product is consumed or used. This applies to the consumer as well as industrial products and services. Soft drink manufacturers offer similar but not identical products around the world. McDonald's, while adapting to local tastes and preferences, has standardized many elements of its operations. Software, oil products, and accounting services look increasingly alike, no matter where they are purchased.

emissions trading system (ETS)

organized by chinas national development and reform commission. These guidelines are scheduled to be implemented in 2020 to control and gradually reduce carbon emissions.

Functional Departmentalization

organizing work and workers into separate units responsible for particular business functions or areas of expertise. The company will use a functional departmentalization structure so that employees are working in teams based on business functions such as marketing, finance, sales, and operations.

customer departmentalization

organizing work and workers into separate units responsible for particular kinds of customers

product departmentalization

organizing work and workers into separate units responsible for producing particular products or services. When an organization is built around the products or services it sells, it is using a product departmentalization structure.

primary sources

original sources, undiluted by someone else's interpretation.

Many governments were required to add a carbon tax to businesses based on the emission levels of their operations. This added tax stemmed from a piece of international legislation that was developed in 2016 to protect the environment. Which international initiative impacted businesses in this manner?

paris agreement. This agreement went into force in 2016 and aimed for a decrease in global temperature.

considerations when manufacturing locally

political stability, statutory and legal environments, infrastructure quality, foreign investment incentives, local telecommunications and utility infrastructure, workforce quality, security and privacy, compensation costs, tax and regulatory costs, and communication costs.

lean manufacturing

reducing waste

Individualistic

refers to people's tendency to take care of themselves and their immediate circle of family and friends, perhaps at the expense of the overall society.

What is the purpose of the IASB?

responsible for creating international standards of accounting.

Financial Accounting Standards Board (FASB)

self-governing and supported by the U.S. government, various accounting establishments, and privately owned companies. an independent group supported by the U.S. government, various accounting organizations, and private businesses. It is charged with establishing and improving the standards by which businesses and not-for-profit organizations (such as charities) produce the financial information that they distribute to decision makers.

factors when choosing production site

shipping cost workforce costs commuynity country factors business environment market impressions

angel investors

similar to VCs but can actually be quite varied in format and motivations. They are more often individuals with capital to spare who have taken an interest in a particular business or product. They may act as advisers or objective investors, they may simply love the product, or they may have investment incentives (most commonly both).

Social and Environmental Missions

some level of sustained financial and economic profits is needed for a business to achieve other outcomes that are measured as social or environmental performance. For example, many companies that are for-profit businesses also have social and environmental missions.1

features of market economies

standard for all goods and services to be privately owned. The owners have the right to buy, sell, or lease their property and make a profit off of their assets. People are free to choose to produce, sell, and purchase goods at the price set with the capital they possess. Every seller aims to make the most profit possible. Competition keeps prices low. Pricing follows the laws of supply and demand. Market economy relies on an efficient market in which all buyers and sellers have equal access to the same information. Government interference is at the minimum that is necessary to ensure the markets are functioning correctly (Amadeo, 2019).

Transnational Strategy

strategy that attempts to combine the benefits of a localization strategy (high local responsiveness) with those of a global-standardization strategy (lowest-cost position attainable). This strategy is one in which a company must be nimble to respond to cost pressures while customizing products to local markets. Transnational strategies have to deal with the problems of standardization (cost) and multidomestic strategies (local responsiveness)

Which strategy has the greatest risk from a financial perspective?

subsidary. This means of entering an international market is the most expensive. The owner must assume all the financial, economic, political, and currency risk.

Polycentric

take the view that native managers in the foreign offices best understand native personnel and practices, and so the home office should leave them alone

comparative advantage

the ability to produce a good at a lower opportunity cost than another producer

absolute advantage

the ability to produce a good using fewer inputs than another producer

International Business

the buying, selling, and trading of goods and services across national boundaries

supply chain

the connected chain of all of the business entities, both internal and external to the company, that perform or support the logistics function

uncertainty avoidance

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

Departmentalization

the dividing of organizational functions into separate units

copyrights

the exclusive legal rights of authors, composers, playwrights, artists, and publishers to publish and disperse their work as they see fit

creation of new markets

the focus is on market expansion. The McKinsey Global Institute estimates that the third and fourth stages together have the potential to reduce costs by more than 50 percent in many industries. This allows companies to substantially lower their sticker prices in both old and new markets and to expand demand. Significantly, the value of new revenues generated in this last stage is often greater than the value of cost savings in the other stages.

culture

the normal or expected behavior in a particular situation

currency option contract

the option or the right—but not the obligation—to exchange a specific amount of currency on a specific future date and at a specific agreed-on rate. The option contract could be to buy (call) or to sell (put). Since a currency option is a right but not a requirement, the party holding an option does not have to actually exchange the currencies if desired.

culture affects business practices

the pace of business business protocol—how to physically and verbally meet and interact decision-making and negotiating managing employees and projects propensity for risk-taking marketing, sales, and distribution

Repatriation

the process of helping employees make the transition back into their home country. Many employees experience reverse culture shock upon returning home, which is a psychological phenomenon that can lead to feelings of fear, helplessness, irritability, and disorientation.

direct distribution strategy

the producer markets the product directly to the consumer and the consumer buys directly from the producer, such as when you buy an apple from a local farmer. You maintain control of the product, marketing, and costs. Shorter channel means the product reaches the consumer faster. It is less costly in the long term. It enables stronger connection to the customer base.

Value Chain

the series of internal departments that carry out value-creating activities to design, produce, market, deliver, and support a firm's products

macroeconomics

the study of economy-wide phenomena, including inflation, unemployment, and economic growth

Cultural globalization

the transmission of ideas, meanings, and values around the world in such a way that extends and intensifies social relations.

Economic globalization

the widespread, international movement of goods, capital, services, technology, and information. It is the increasing economic integration and interdependence of national, regional, and local economies across the world through an intensification of the cross-border movement of goods, services, technologies, and capital.Economic globalization primarily comprises the globalization of production, finance, markets, technology, organizational regimes, institutions, corporations, and labor.

pull model

theory in supply chain management that focuses on the needs of the customers

push model

theory in supply chain manangement that focuses decisions on the needs of products

Developing nations

those that make the transition from economies based on agricultural and raw materials production to industrialized economies. They exhibit rising levels of education, technology, and per capita incomes. Governments in these nations have often made steady progress in improving the climate for business, which attracts business and economic investment.

outsource

to use outside or foreign suppliers and manufacturers to produce goods and services

Drawbacks of Regional Economic Integration

trade diversion, shifts in employment, loss of national sovereignty. Countries may see a dilution of their national cultural identity.Regional integration may encourage mergers and acquisitions within the block to create large rivals.Countries may move production to cheaper labor markets in member countries.The other side to trade creation is trade diversion. Member countries may trade more with each other rather than with nonmember nations. When a regional agreement is made between countries, those members will trade more with each other and trade less with nonmember countries.

Import quotas and voluntary export restraints (VERs)

two strategies of limiting the number of goods coming into a country. The importing government directs import quotas, while VER is imposed at the discretion of the exporting and importing nations.

Enterprise Resource Planning (ERP)

type of software solution design to integrate all a company's data. ERP would integrate data from human resources (HR), employee data, sales information, and development figures.

standardization strategy

used when a company treats the whole world as one market with little meaningful variation. The assumption is that one product can meet the needs of people everywhere. Many business-to-business companies can use this strategy. Machine tools and equipment or information technologies are universal and need little customization for local conditions

multilevel marketing

uses salespeople who work as independent contractors, earn commissions

hedging

using financial instruments and other measures to reduce or eliminate exposure to currency risk by locking in guaranteed foreign-exchange positions

trade surplus

when a country exports more than it imports from another country. For example, China normally exports more manufactured goods to the United States than it imports from the United States. China has a trade surplus.

Globalization

when international integration arises from the interchange of world views, products, ideas, and other aspects of culture.

multidomestic strategy

when multinational firms enable individual subsidiaries to compete independently in domestic markets