International business exam 1

Which term describes a collection of techniques and practices that are used to manage and control​ organizations?

Corporate governance

​________ proposes that countries should export only products that use copious factors of production and import only goods that use limited factors of production.

The factor proportions theory

Small and medium-sized enterprise (SME)

a firm with fewer than 500 employees in the United States, or with fewer than 250 employees in the European Union

Polychronic

a flexible, nonlinear orientation to time, whereby the individual takes a long-term perspective and emphasizes human relationships

Geocentric orientation

a global mind-set in which the manager is able to understand a business or market without regard to country boundaries

Polycentric orientation

a host-country mind-set in which the manager develops a strong attachment with the country in which she or he conducts business

Multinational enterprise (MNE)

a large company with substantial resources that performs various business activities through a network of subsidiaries and affiliates located in multiple countries

Corporate social responsibility

a manner of operating a business that meets or exceeds the ethical, legal, commercial, and public expectations of customers, shareholders, employees, and communities

National industrial policy

a proactive economic development plan a government initiates to build or strengthen a particular industry

Ethical dilemma

a problem that involves two or more possible solutions, all of which entail violating moral principles and values.

Monochronic

a rigid, linear orientation to time, in which people are focused on time, punctuality, and view time as a resource.

Critical incident analysis

a useful technique that managers use to analyze awkward situations in cross-cultural incounters

Born Global Firm

a young entrepreneurial company that initiates international business activity very early in its evolution, moving rapidly into foreign markets

State-owned enterprises (SOEs)

account for substantial portion of economic value added in many countries, even rapidly liberalizing emerging markets such as Russia, China, and Brazil.

Facilitator

is a firm or individual with special expertise in banking, legal advice, customs, clearance, or related support services that helps focal firms perform international business transactions.

freight forwarder

is a specialized logistics service provider that arranges international shipping on behalf of exporting firms, much like a travel agent for cargo.

Material productions are​ ________.

items and technologies that people create to fill some purpose within their environments

Ownership-specific advantages

knowledge, skills, capabilities, relationships, or physical assets that the firm owns and which are the basis of its competitive advantages

Low uncertainty avoidance societies

managers are relatively entrepreneurial and comfortable with risk. Firms make decisions quickly. People are comfortable changing jobs. Examples: Ireland, Jamaica, U.S.

Ethical practices

standards of right and wrong vary considerably around the world. For example, bribery is relatively accepted in some countries in Africa, but is generally unacceptable in Sweden.

Masculine cultures

value competitiveness, assertiveness, ambition, and accumulation of wealth

Common good approach

welfare of the entire community or nation. Respect and compassion for all.

Firm-level Consequences of Market Globalization: Internationalization of the Firm's Value Chain

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

Masculiity versus femininity

society's orientation based on traditional male and female values.

More of a way of thinking than a​ religion, ________ reflects a positive view of human nature and has a strong emphasis on ethical behavior.

Confucianism

Code of conduct

a document that translates the code of ethics into specific rules regarding behaviors and practices that are prohibited or required

Describes procuring money through illegitimate methods and then obscuring that money through legitimate business​ transfers

Money Laundering

Societal Consequences of Market Globalization

-Contagion: Rapid spread of financial or monetary crises from one country to another -Loss of national sovereignty: MNE activities can interfere with governments' ability to control their own economies. Some firms are bigger than economies of many nations (Walmart, shell) -Offshoring and the flight of jobs: jobs are lost as production is moved abroad -Effect on the poor: globalization usually creates jobs, it can also disrupt local job markets. MNE's may pay low wages, exploit workers and child labor. Ex. Many people in India are losing jobs as hand-woven textiles industry is being gradually automated. -Effect on the natural environment: globalization promotes industrialization which generates pollution, habitat destruction, and other environmental harm. -Effect on national culture: traditional norms, values, and behaviors may homogenize over time. National identity may be lost to 'global' culture.

Stages in Company Internationalization

1. domestic focus 2. pre-export stage 3. experimental involvement 4. active involvement 5. committed involvement

framework for making ethical decisions

1. identify problem: is there something wrong? Ethical dilemma? Situation that could cause harm? 2. examine the facts: Determine nature of the situation. Interview all relevant persons. Determine who has stakes in the outcome. Anyone have greater stake than another? 3. create alternatives: develop alternative courses of action. Confirm legal compliance with host and home country laws. Confirm compliance with company code of conduct. Determine strengths and weaknesses of each. Evaluate each option using the five ethical standards. 4. implement course of action: Initiate the best options. 5. evaluate results: how effective was the chosen option? Any additional actions or changes needed?

First phase of globalization

1830-1800s. Introduction of railroads, ocean transport, telegraph, and telephone. Rise of manufacturing cross-border trade of commodities, largely by trading companies.

Second phase of globalization

1900-1930. Rise of electricity and steel production. Emergence and dominance of early MNE in manufacturing, extractive, and agricultural industries.

Third phase of globalization

1948-1970s. Formation of General Agreement on Tariffs and Trade (GATT); conclusion of WW2; Marshall plan to reconstruct. Focus by industrializing western countries to reduce trade barriers; rise of MNEs from Japan, development of global capital markets; rise of global trade names.

Fourth phase of globalization

1980s-2006. Privatization of state enterprises in transition economies; revolution in information, communication, and transportation technologies; remarkable growth of emerging markets. Rapid growth in cross border trade of products, services, and capital; rise of internationally active SMEs and services firms.

Fifth phase of globalization

2007-present. Rise of digital technologies, and other new technologies, which are boosting manufacturing productivity and the efficiency of international trade in services. Leveraging technology to facilitate trade and local production; rising trade in digitally enabled services but slowing growth of trade in merchandise goods.

World Trade Organization (WTO)

A multilateral governing body that aims to regulate and ensure fairness and efficiency in global trade and investment.

Industrial cluster

A concentration of businesses, suppliers, and supporting firms in the same industry at a particular location, characterized by a critical mass of human talent, capital, or other factor endowments.

Absolute advantage principle

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

National Industrial Policy

A proactive economic development plan employed by the government to nurture or support promising industry sectors with potential for regional or global dominance

Distribution channel intermediary

A specialist firm that provides various logistics and marketing services for focal firms as part of international supply chains, both in the home country and abroad

Which principle or theory advocates that a country should produce only the goods that use the least amount of​ resources?

Absolute advantage principle

One of the most noteworthy influences on globalization has been​ ________.

Advances in technology, including communications, data, and engineering

Internationalization theory

An explanation of the process by which firms acquire and retain one or more value-chain activities inside the firm, minimizing the disadvantages of dealing with external partners and allowing for greater control over foreign operations.

Idiom

An expression whose symbolic meaning is different from its actual or literal meaning.

New Trade Theory

Argues that economies of scale are an important factor in some industries for superior international performance, even in the absence superior comparative advantages. Some industries succeed best as their volume of production increases.

Which term refers to unconscious​ judgments, often not based on logical​ facts, about what is​ good, acceptable,​ important, and​ normal?

Attitudes

The board of directors of​ XYZ, Inc. realized that by purchasing electronic components from ABC Electronics in​ India, XYZ was implicitly approving​ ABC's practice of hiring only speakers of the​ country's primary​ language, Hindi. ABC refuses to hire workers who speak minority​ languages, such as​ Tamil, which is spoken only in southern India. By breaking off relationships with​ ABC, XYZ was​ ________

Avoiding workplace discrimination

A motivation for international expansion

Being closer to supply sources

When an individual offers money or favors to someone for personal gain or in order to persuade that person to participate in some form of​ corruption, it is called​ ________.

Bribery

Which religion is composed of the Four Noble Truths and encourages​ harmony, internal​ happiness, and peaceful interactions with​ others?

Buddhism

Which stage in the internationalization process of a firm is characterized by targeting numerous foreign markets via foreign direct​ investment?

Committed involvement

Comparative versus competitive advantage

Comparative advantage: location specific advantages arises from an abundance in a country of valuable resources, buildable land, favorable climate, low-cost labor, skilled labor + Competitive advantage: firm-specific advantage, or ownership specific advantage, arises from an abundance in a firm of specific knowledge, specific capabilities, certain types of skills, superior strategies, strong networks = National competitiveness: in that particular industry, for example mining in Brazil, forest products in Canada, tourism in Spain, automobiles in China

Which of the following terms represents unique traditions that serve as guides for interpreting​ attitudes, values, and​ behaviors?

Cultural metaphor

Which element in​ Porter's diamond model describes a​ nation's position in terms of​ labor, natural​ resources, wealth,​ technology, entrepreneurship, and​ know-how?

Factor conditions

Deal versus Relationship Orientation

Deal oriented cultures focus on the task at hand, are impersonal, typically use contracts, and want to get down to business, ex. North America. Relationship oriented cultures value affiliations with people, rapport, and getting to know the other part in business interactions. Relationships are more important than individual deals, trust is highly valued, ex. China, Japan.

Which determinant of national competitiveness focuses on the need for certain products and services​ domestically?

Demand conditions

What motivator involves expanding overseas in order to grow the customer base and increase the amount of products being manufactured?

Developing economies of scale

What is the first stage in the internationalization process of a​ firm, where the firm is primarily preoocupied with business at​ home?

Domestic focus

International product life cycle theory

Each product and its associated manufacturing technologies go through three stages of evolution: introduction, maturity, and standardization. Introduction: the inventor country enjoys a monopoly in both manufacturing and exports. Maturity: the product's manufacturing becomes relatively standardized, other countries start producing and exporting the product. Standardization: manufacturing ceases in the original innovator country, and it becomes the net importer of the product

​________ involve a​ company's concern with​ wages, taxes, public​ works, and disadvantaged communities.

Economic interests

​________ occurs when an employee purposely mismanages or even steals money belonging to an employer.

Embezzlement

Minimizing the creation of contaminants and working to improve the natural surrounding is the primary focus of​ ________.

Environmental CSR

The​ ________ in the internationalization process model involves commencing limited international activities by way of simple exporting.

Experimental involvement stage

Recently Ravi got a phone call from what he thought was his bank asking him to verify some personal information such as his Social Security number and bank card numbers. He later found suspicious charges on his bank statement from an unknown source. He contacted his​ bank, which informed him that it never contacted him. Ravi was most likely a victim of​ ________.

Fraud

Which statement about masculine and feminine cultures is​ correct?

Gender roles typically overlap in feminine cultures

Which one of the following is considered an important measure of economic development of a country that often characterizes lower levels of​ globalization?

Gross national income per person

​________ is a religion that is not associated with one particular prophet. It is an​ open-hearted faith that fully accepts other faiths and is inspired by central concepts called dharma and karma.

Hinduism

Applying a chosen plan and ensuring that the plan is carried out appropriately is which step in the framework for making ethical​ decisions?

Implementing a course of action

Why act sustainably even though it may cost more?

Implementing corporate citizenship efforts

Which of the following statements regarding information technology is​ accurate?

Information technology has created a competitive advantage for firms by allowing them more opportunities to outdo their competitors.

An example of​ ________ is creating or obtaining pirated or counterfeit materials from various questionable sources.

Intellectual property infringement

Piracy and counterfeiting affect

International trade - exports of legitimate products must compete with trade in counterfeit goods. Direct Investment - firms avoid countries known for widespread intellectual property violations. Company performance - sales, profits, and strategies are harmed. Innovation - companies avoid doing research and development where piracy is common. Tax revenues - pirates usually don't pay taxes. Criminal activity - often linked to organized crime. The natural environment - intellectual property violators disregard environmental standards. National prosperity and wellbeing - ultimately, job prospects, prosperity, and moral standards in affected nations are harmed.

Tamika believes that business contracts should be very exactly worded. Because of bad​ experiences, she does not trust agreements based on​ assumptions, handshakes, or unspoken understandings. Tamika trusts extensive verbal explanations and spoken words more than relationships. She is from a​ ________ culture.

Low-context

Decision-Making styles

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

non-governmental organization (NGO)

Many of these non-profit organizations conduct cross-border activities. They pursue special causes and serve as advocated for social issues, education, politics, and research.

​________ involves a​ corporation's dealings with its​ consumers, competitors,​ suppliers, and distributors and includes an emphasis on appropriate and ethical behavior for suppliers and distributors to follow.

Marketplace CSR

​________ is the part of the framework for making ethical decisions that involves analyzing the plan after it has been implemented to determine its effectiveness.

Measuring results

Which of the following focuses on the resources a corporation possesses compared with​ others, and recommends that corporations that utilize internationalization strategies own or control certain resources that are not readily accessible to​ competitors?

Monopolistic advantage theory

Which of the following is a contemporary perspective that aids in explaining the emergence of a​ country's competitive​ advantage?

National industrial policy

Which principle or theory advocates exporting and attaining access to a larger global market with the purpose of increasing economies of​ scale?

New trade theory

When a company transfers its​ value-chain activities by launching a subsidiary in a foreign​ country, it is called​ ________.

Offshoring

In international​ business, ________ primarily relates to whether a firm is​ centralized, decentralized,​ bureaucratic, or entrepreneurial.

Organizational structure

​________ attempts to identify possible plans of action and examines each to determine the best decision available.

Producing alternatives

Which of the following is NOT an example of corporate social responsibility​ (CSR) values?

Promoting workplace cleanliness

Town​ Boutique, a local clothing​ store, recently switched suppliers due to rumors that its supplier in Bangladesh was employing underage workers in its factories. By no longer doing business with the supplier in​ Bangladesh, Town Boutique was upholding which CSR​ value?

Reducing child labor

Economic interests

Refer to the firm's economic impact on the localities where it does business, such as regarding job creation, wages and public works.

Which of the following is an example of a sustainable​ practice?

Rotating farm crops

Exporting

Sale of products or services to customers located abroad, from a base in the home country or a third country

Following charges that some of its Indian subcontractors were using forced child​ labor, GAP withdrew a line of​ children's wear from its clothing stores worldwide.​ GAP's action exemplifies that it is pursuing​ ________.

Social interests

Normativism

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

Focal firm

The initiator of an international business transaction, which conceives, designs, and produces offerings intended for consumption by customers worldwide. Focal firms are primarily MNEs and SMEs.

Firm strategy, structure, and rivalry

The nature of domestic rivalry, and conditions that determine how a nation's firms are created, organized, and managed

Socialization

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

Contagion

The tendency of a financial or monetary crisis in one country to spread rapidly to other countries, due to the ongoing integration of national economies

Negotiation patterns

These discussions are required in many types of business transactions. Ex, Mexicans are friendly and emphasize social relations, Americans are assertive and get down to business quickly.

Samantha is an accountant at LM Accounting. Every once in a​ while, when Samantha has a particularly difficult​ client, she tends to charge a bit more for services even if she did not actually work the extra time. She knows for a fact that other employees do the same​ thing, so she feels justified in her actions.​ Samantha's actions are an illustration of​ _________.

Unethical behavior

The greatest significance of globalization is reflected directly in a​ company's ________.

Value chain

Which cultural dimension forms the basis for personal motivations and​ behaviors?

Values

Culture

Values, beliefs, customs, arts, and other products of human thought that characterize the people of a given society. It is not right or wrong, it is relative. Derives from the social environment

What is one of the most significant expressions of a culture that provides cultural​ insight?

Verbal language

Darron Alvarez needs to decide whether to close down a plant located in a country where the factory is a major employer. According to the accounting​ department, closing the plant makes financial​ sense, but Darron does not have the heart to fire the workers. Based on his own personal values and his affection for the​ employees, Darron decides to try harder to find ways to make the plant viable.​ Darron's ethical standard is BEST described as the​ ________ approach.

Virtue

Which corporate social responsibility​ (CSR) setting emphasizes a​ firm's practices in relation to employee​ diversity, staffing,​ income, safety, and working​ conditions?

Workplace CSR

Cultural metaphor

a distinctive tradition or institution strongly associated with a particular society

Code of ethics

a document that describes the values and expectations that guide decision making by all employees in the firm

Foreign direct investment (FDI)

an internationalization strategy in which the firm establishes a physical presence abroad through acquisition of productive assets such as capital, technology, labor, land, plant, and equipment

Factor proportions theory

argues that each country should produce and export products that intensively use relatively abundant factors of production, and import goods that intensively use relatively scarce factors of production

Competitive advantage

assets or capabilities of a firm that are difficult for competitors to imitate. They are typically derived from specific knowledge, competencies, skills, or superior strategies.

Relativism

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

Rights approach

best protects and respects the moral rights of everyone

Internationalization advantages

control derived from internalizing foreign-based manufacturing, distribution, or other value chain activities

High uncertainty avoidance societies

create institutions to minimize risk and ensure security. Firms emphasize stable careers and regulate worker actions. Decisions are made slowly

Power distance

describes how a society deals with the inequalities in power that exist among people

Information technology

describes the knowledge and process of creating and utilizing informational resources.

Individualism versus collectivism

describes whether a person functions primarily as an individual or as part of a group

Project-based alliances

do not require equity commitment from the partners but simply a willingness to cooperate in R&D, manufacturing, design, or any other value-adding activity. Since project-based alliances have a narrowly defined scope of activities and timeline, they provide greater flexibility to the firm than equity-based ventures.

A clothing factory agrees to pay for public road improvements in the area surrounding the factory. This is an example of a sustainable business pursuing​ ________ interests.

economic

Feminine cultures

emphasize nurturing roles, interdependence among people, and caring for less fortunate people- for both men and women

Fairness approach

everyone should be treated equally and fairly

High power distance societies

exhibit big gaps between the weak and powerful; in firms, top management tends to be autocratic, giving little autonomy to lower-level employees. Examples: Guatemala, Malaysia, Philippines, and several Middle East countries.

Commercial risk

firm's potential loss or failure from poorly developed or executed business strategies, tactics, or procedures

In the​ pre-export stage of the internationalization​ process, ________.

firms receive unsolicited product orders from abroad

Low power distance societies

have small gaps between the weak and powerful. Firms tend toward flat organizational structures, with relatively equal relations between managers and workers. For example, Scandinavian countries instituted various systems to ensure socioeconomic equality.

Virtue approach

ideal virtues that provide for the full development of our humanity.

Intellectual property

ideas or works created by individuals or firms, including discoveries and inventions; artistic, musical, and literary works; and words, phrases, symbols, and designs

Sustainability

meeting humanity's needs without harming future generations

Ethics

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

Cross-cultural risk

occurs when a cultural misunderstanding puts some human value at stake. These risks arise from differences in languages, life-styles, mindsets, customs, and religion.

Globalization of Markets

ongoing economic integration and growing interdependency of countries worldwide

International portfolio investment

passive ownership of foreign securities such as stocks and bonds for the purpose of generating financial returns

Currency risk (also know as financial risk)

potential threat to a firm's operations in a country due to fluctuations in the local currency's exchange rate

Country risk (also known as political risk)

potentially adverse effects on company operations and profitability caused by developments in the political, legal, and economic environment in a foreign country. Includes the possibility of foreign government intervention in a firms' business activities.

Importing or global sourcing

procurement of products or services from suppliers located abroad for consumption in the home country or a third country

Factor conditions

quality and quantity of labor, natural resources, capital, technology, know-how, entrepreneurship, and other factors of production

Social interests

refer to how the firm performs relative to social justice, such as avoiding the use of child labor, sweatshops, as well as providing employee benefits

Environmental interests

refer to the extent of the firm's impact and harm to the natural environment.

International business

refers to the performance of trade and investment activities by firms across national borders

International investment

refers to the transfer of assets to another country or the acquisition of assets in that country.

Free trade

relative absence of restrictions to the flow of goods and services between nations

Low-context culture

rely heavily on spoken words and detailed verbal explanations. Europeans and North Americans tend to follow this with traditions of writing and speech making.

Equity-based joint ventures

result in the formation of a new legal entity. In contrast to the wholly-owned FDI, the firm collaborates with local partner(s) to reduce risk and commitment of capital.

Leontief paradox

revealed that countries can successfully export products that use less abundant resources

location-specific advantages

similar to comparative advantages, they are specific advantages that exist in the country that the MNE has entered, or is seeking to enter, such as natural resources, low-cost labor, or skilled labor

High-context culture

such as China and Japan, emphasize nonverbal messages and view communication as a means to promote, smooth, harmonious relationships. They prefer an indirect and polite style that emphasize mutual respect and care for one another.

Comparative advantage

superior features of a country that provide unique benefits in global competition, typically derived from either natural endowments or deliberate national policies. climate, land, etc.

Mercantilism

the belief that national prosperity is the result of a positive balance of trade, achieved by maximizing exports and minimizing imports.

Long-term versus short-term orientation

the degree to which people and organizations defer pleasure or gratification to achieve long term success.

International trade

the exchange of products (merchandise) and services (intangibles) across national borders.

Uncertainty avoidance

the extent to which people can tolerate risk and uncertainty in their lives

Indulgence versus restraint

the extent to which people try to control their desires and impulses

Absolute advantage principle

the idea that a country benefits by producing only those products it can produce using fewer resources

Intellectual property rights

the legal claim through which the proprietary assets of firms and individuals are protected from unauthorized use by other parties

Utilitarian approach

the most good or the least harm

Corruption

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

Related and supporting idustries

the presence of suppliers, competitors, and complementary firms that excel within a given industry.

Acculturation

the process of adjusting and adapting to a culture other than one's own

Value chain

the sequence of value-adding activities performed by the firm in the course of developing, producing, marketing, and servicing a product

Demand conditions at home

the strengths and sophistication of customer demand

Corporate governance

the system of procedures and processes by which corporations are managed, directed, and controlled

Internationalization

the tendency of companies to deepen their international business activities systematically

Self-reference criterion

the tendency to view other cultures through the lens of ones own culture

Ethnocentric orientation

using our own culture as the standard for judging other cultures

Dimensions of Market Globalization

• Integration and interdependence of national economies: governments contribute by lowering trade and investment barriers • Rise of regional economic integration blocs: free trade areas are formed by two or more countries to reduce or eliminate barriers to trade and investment, such as the EU, NAFTA, and MERCOSUR. • Growth of global investment and financial flows: associated with rapid growth in FDI, currency trading, and global capital markets. • Convergence of buyer lifestyles and preferences: facilitated by global media, which emphasizes lifestyles found in the U.S., Europe, or elsewhere. Firms market standardized products. • Globalization of production activities: to cut costs, firms manufacture in low labor-cost locations such as Mexico and Eastern Europe. Firms also source services from abroad. • Globalization of services: firms outsource business processes and other services in the value chain to vendors overseas. And, in a new trend many people fo abroad to take advantage of low-cost services. (banking, hospitality, retailing, and other service industries are rapidly internationalizing)

Driving forces of Market Globalization

• Worldwide reduction of barriers to trade and investment: this trend is partly facilitated by WTO, an org with 150 member nations. • Market liberalization and adoption of free trade: free market reforms opened up about 1/3 of the world to freer trade. • Industrialization, economic development, and modernization: many developing countries have transformed from producers of low-value to higher-value goods, such as electronics and computers. Rising living standards have made such countries more attractive as target markets for sales and investment. • Integration of world financial markets: enables firms to raise capital, borrow funds, and engage in foreign currency transactions wherever they go. • Advances in technology: allows firms to interact cheaply.