International Business

English

"international language of business," native english speaking countries account for 1/3rd of the world's production

When rival religions or factions fight for political control in a country

, business is often negatively affected. You might think of property damage, broken supply chains, or breaches in connections with customers as examples.

Physical and Social Factors

- Geographic influences: natural conditions influence business locations - Political policies: countries determine where and how business occurs within their borders - Legal policies: influence how a company operates - Behavioral factors: may require adaptation in to local conditions - Economic forces: explain differences in costs, currency values, market size

Do managers have to alter their customary practices to succeed in countries with different cultures? Consider...

- Host society acceptance - Degree of cultural differences (cultural distance) - Ability to adjust (culture shock and reverse culture shock) - Company and management orientation

Modes of Operations in IB

- Merchandise/visible exports (goods that are sent out of a country) - Merchandise/visible imports (goods that are brought into a country) - Service exports provider and receiver of payment - Service imports recipient and payer of payment - Investments - Collaborative arrangements - Strategic alliance

It is important to study international business because

- Most companies are either international or compete with international companies - Global events and competition affect almost all companies, regardless of industry - International companies have more complex environments than domestic firms. - An understanding of IB helps you make better career decisions - An understanding helps you decide what government policies to support

Costs of Globalization

- Threats to national sovereignty ~ lose freedom to "act locally" - Economic growth and environmental stress ~ growth consumes nonrenewable natural resources and increases environmental damage - Growing income inequality and personal stress ~ promotes global superstars at the expense of others - Offshoring

how does language act both as a diffuser of culture and as a stabilizer?

- a common language unifies a culture - when people from different areas speak the same language, culture spreads more easily (greater homogeniety among same language countries, easier to do business)

the Nation-State

- a useful definition of society because similarity among people is a cause and an effect of national boundaries - laws apply primarily along national lines - language and values are shared within borders - rites and symbols are shared along national lines

Social ranking is determined by

- an individual's achievements and qualifications - an individual's affiliation with, or membership in, certain groups

Cultural value systems are established early in life but may change through

- choice or imposition --cultural imperialism -contact with other cultures --cultural diffusion --creolization

Strategic alliance

- companies that work together, but the agreement is critical to at least one partner - an agreement that does not involve joint ownership

In foreign markets, companies often have to adapt their typical methods of doing business because

- foreign conditions may dictate a particular method - operating modes may be different from those used domestically

Country-by-country analysis can be difficult because

- subcultures exist within nations similarities link - groups from different countries - managers need to focus on relevant groups

The motivation to work differs across cultures. Studies show:

- the desire for material wealth is a prime motivation to work --promotes economic development - people are more eager to work when the rewards for success are high

Forces Driving Globalization

1. Increase in and application of technology 2. Liberalization of cross-border trade and resource movements 3. Development of services that support international business 4. Growth of consumer pressures 5. Increased global competition 6. Changing political situations and government policies 7. Expanded cross-national cooperation

3 reasons that guide all decisions about whether, where, and how to engage in international business

1. sales expansion 2. resource acquisition 3. risk minimization

Silent language

Color Distance Time and punctuality Body language Prestige

Competitive strategies for products

Cost strategy Differentiation strategy Focus strategy

idealism

Cultures that prefer to establish overall principles before tackling smaller details. in an idealist culture like that of Argentina, labor disputes tend to blur the focus on specific demands as workers tend to rely first on mass action—such as general strikes or political activities—to publicize basic principles.

Three major perspectives on the future of international business and globalization

Further globalization is inevitable International business will grow primarily along regional rather than global lines Forces working against further globalization and international business will slow down both trends

joint venture

If two or more companies share ownership of an investment

We often use the idea of a nation when we talk about culture.

In general, within national borders, people largely share such essential attributes as values, language, and race. There is a feeling of "we" that casts foreigners as "they." Rites and symbols—flags, parades, rallies—and the preservation of national sites, documents, monuments, and museums promote a common perception of history and perpetuates national identity.

Individualism versus collectivism

Individualism is characterized by a preference for fulfilling leisure time and improving skills outside the organization. It also implies a low preference for receiving compensation in the form of benefits and a high preference for personal decision making and on-the-job challenges. (welcome challenges) In contrast, collectivism encourages dependence on the organization and a preference for thorough training, satisfactory workplace conditions, and good benefits. (prefer safe work environment)

Collaborative arrangements

Joint ventures Licensing arrangements Management contracts Minority ownership Long-term contractual arrangements

Many religions even impact specific beliefs that may affect business, such as inhibiting the sale of certain products or the performance of work at certain times.

McDonald's, for example, recognizes the Hindu and Muslim influences in India and chooses not to sell beef or pork in the country. Similarly, El Al, the Israeli national airline, does not fly on Saturday, the Jewish Sabbath.

hierarchy of needs and need-hierarchy combinations

Note that needs are broken down into physiological needs, security needs, affiliation needs, esteem needs, and self-actualization needs. The way in which these needs are ranked differs among countries.

Cultures handle information in different ways

Perception of cues Obtaining information (low context versus high context cultures) Information processing Monochronic versus polychronic cultures Idealism versus pragmatism

Religion: Cultural Stabilizer

Religion impacts almost every business function Centuries of profound religious influence continue to play a major role in shaping cultural values and behavior many strong values are the result of a dominant religion

The Future of National Cultures

Scenario 1: New hybrid cultures will develop and personal horizons will broaden Scenario 2: Outward expressions of national culture will continue to become homogeneous while distinct values will remain stable Scenario 3: Nationalism will continue to reinforce cultural identity Scenario 4: Existing national borders will shift to accommodate ethnic differences

Communication across cultures can be problematic when communications are not translated with the same meaning as intended. This problem can occur with not only with spoken and written language and but also with silent language. Even a slight misuse of words or phrases can have a significant impact on the meaning of a message. Moreover, it's important to recognize that even when two countries share a language problems can exist. For example, some 4,000 words have different meanings in British and American English.

Silent language refers to a host of nonverbal cues. How these physical cues or "body language" are perceived and interpreted varies between cultures. Many Western countries, for instance, associate black with death ,while white has the same connotation in some parts of Asia. Similar differences exist with perceptions of time and punctuality. In the United States, people usually arrive early for business appointments, a few minutes late for dinner at someone's home, and a bit later still for large social gatherings. In other countries though, the concept of punctuality in any or all of these situations may be different. The appropriate distance people maintain during conversations and prestige also differs between countries. For Americans, the customary distance for a business discussion is 5 to 8 feet; for personal business, it's 18 inches to 3 feet. The much smaller distances common in Latin America can make many Americans quite uncomfortable. Likewise, a U.S. manager who places great faith in objects as cues to prestige may underestimate the status of foreign counterparts who don't value large, plush offices on high floors. A foreigner may underestimate U.S. counterparts who perform their own services, such as opening their own doors, fetching their own coffee, and answering unscreened phone calls.

Problem areas that can hinder managers' cultural awareness...

Subconscious reactions to circumstances The assumption that all societal subgroups are similar

Why Companies Engage in IB

To create value: - To expand sales: pursuing international sales increases the potential market and potential profits - To acquire resources: may give companies lower costs, new and better products, and additional operating knowledge - To diversify or reduce risks: international operations may reduce operating risk by smoothing sales and profits, preventing competitors from gaining advantage

Examples of service imports/exports

Tourism and transportation Service performance turnkey operations and management contracts Asset use licensing and franchising

Strategies for Instituting Change

Value Systems Cost-Benefit Analysis of change Resistance to too much change Participation of stakeholders Reward Sharing Opinion Leadership Timing Learning Abroad

What is the future of international business and globalization?

Well, there are three different perspectives on what the future might hold. Some believe that future globalization is inevitable. Those taking this perspective note that advances in transportation and communications are so pervasive that consumers everywhere will demand the best products for the best prices regardless of their origins. Moreover because MNEs have so many international production and distribution networks in place, they'll pressure their governments to place fewer rather than more restrictions on the international movement of goods and the means of producing them. The largest challenge to overcome in this scenario will be figuring out how to spread the benefits of globalization equitably while minimizing the hardships placed on individuals and companies affected by increased international competition. Others however, think that in the future international business will grow more along regional rather than along global lines. This argument is based on studies that indicate that companies tend to conduct international business in neighboring countries. It's logical that when companies first engage in international business, they expand into neighboring countries first and continue outwardly from there. This helps reduce transportation costs and companies can benefit from regional trade agreements that reduce barriers. Still others feel that the pace of both globalization and international business will slow down. Recall that antiglobalization sentiments have surfaced over the years, protesting against some of the negative effects of international business activity. This sentiment together with economic recession, growing political instability, and rising fuel costs among other things, threatens to slow international business growth.

Power distance refers to the general relationship between superiors and subordinates.

Where it is high, people prefer little consultation between superiors and subordinates. Employees usually prefer one of two management styles: autocratic -ruling with unlimited authority - or paternalistic - regulating conduct by supplying needs. Where power distance is low, they prefer "consultative" styles

Bringing together people of diverse backgrounds and experience can give companies

a deeper knowledge about products and services and ways in which to produce and deliver them.

portfolio investment

a non-controlling financial interest in another entity Mutual funds often include international companies

Offshoring

a type of outsourcing, involves the transferring of production abroad - it can be beneficial because it reduces costs - but, it also means that jobs move abroad - Yet, offshoring may also create new, better jobs at home

International business consists of

all commercial transactions that take place between two or more countries

Management contracts

arrangements in which one company provides personnel to perform general or specialized management functions for another

Ascribed group memberships

based on gender, family, age, caste, and ethnic, racial, or national origin

Acquired group memberships

based on religion, political affiliation, professional association ALSO education and social connections

Fatalistic culture

believe every event in life is inevitable, they're less likely to accept the basic cause-and-effect relationship between work and reward. If people believe strongly in self-determination, they may be willing to work hard to achieve goals and take responsibility for performance.

Ethnocentism

believe home culture is superior to local culture overlook national differences

Polycentrism

business units abroad should act like local companies

cultural collision

can occur when a company implements practices that are less effective or when employees encounter difficulty accepting or adjusting to foreign behaviors. Companies doing business in another country must determine which of that nation's business practices differ from their own and then decide what adjustments, if any, are necessary in order to operate efficiently

Turnkey operations

construction projects performed under contract and transferred to owners when they're operational

Future orientation

culture's attitude toward the future and whether it's worthwhile to delay gratification in order to invest for the future.

Social Stratification

determines an individual's class, status, and financial rewards within a culture

In cultures where there is high uncertainty avoidance

employees prefer following set rules even if breaking them may be in the company's best interest. Similarly, many consumers are not prepared to risk being early adopters of products

Companies involved in international business need to

explore how the external environment will affect their operations. In particular, it's important for managers to understand the social science disciplines and how they affect all functional business fields (consider physical, social, and competitive factors)

pragmatism

focus more on details than on abstract principles. . In a culture of pragmatists like the United States, for example, labor negotiations tend to focus on well-defined issues—say, hourly pay increases for a specific bargaining unit.

Managers that educate themselves about other cultures

have a greater chance of succeeding abroad. In addition, managers should consider the information they gather to determine if it perpetuates unwarranted stereotypes, covers only limited facets of a country and its culture, or relies on outdated data. Managers should also observe the behavior of those people who have garnered the kind of respect and confidence they themselves will need.

masculinity-femininity index

high masculinity score prefers "live to work" than "work to live"

a firm's competitive strategy influences

how and where it operates. Firms might find that their competitive situation differs from market to market, country to country

Geocentrism

integrate home and host practices

Foreign Direct Investment (FDI)

investor takes a controlling interest in a foreign company

Asset use

involves allowing another company to use your trademarks, patents, copyrights, or expertise in exchange for royalties. This takes place through licensing and franchising agreements.

Competitors faced in each market

local or international, competitors a firm faces in each market will dictate to some degree a company's international strategy.

Map shows the distribution of the world's major languages

many english, french, and spanish

Company resources and experience compared to competitive environment

market leaders have more resources for international operations

Creolization

mixing cultural elements as a result of diffusion

Relationships preferences

more specifically the interactions between bosses, subordinates, and peers - also differ from country to country.

MNEs are sometimes referred to as

multinational corporations (MNCs) multinational companies (MNCs) transnational companies (TNCs)

cultural diffusion

natural resulting spread of cultural elements from one society to another

Culture is an integral part of a nation's

operating environment - every business function is subject to potential cultural differences

In low context cultures

people generally regard only firsthand information that bears directly on the subject at hand as being relevant. Managers typically spend little time on small talk and tend to get to the point.

But in a polychronic culture,

people often feel more comfortable working simultaneously on a variety of tasks, such as dealing immediately with multiple customers who need service.

In monochronic cultures

people prefer to work sequentially. So, for example, a transaction with one customer is completed before dealing with another.

in high-context cultures

people see seemingly peripheral information as pertinent and infer meanings from things said either indirectly or casually.

Three company and management orientations

polycentrism, ethnocentrism, geocentrism

International business activities may be performed by

private companies motivated by profit, or by governments that undertake them either for profit or for political reasons.

Hierarchy of needs theory

suggests that people fill lower-level needs before filling higher level needs. An understanding of this theory is helpful to managers as they make decisions regarding reward preferences of employees in different countries. In very poor countries, for example, workers might be motivated with enough compensation to simply satisfy their needs for food and shelter. Workers in other countries may be motivated by other needs.

Multinational enterprises (MNEs)

take a global approach to markets and production or have operations in more than one country

In cultures where trust is high

the cost of doing business tends to be lower because managers don't spend much time fussing over every possible contingency and monitoring every action for compliance with certain business principles.

cultural imperialism

the deliberate imposition of one's own cultural values on another culture

culture shock

the frustration that results from having to absorb a vast array of new cultural cues and expectations, and then reverse culture shock when they return home.

Culture

the learned norms based on values, attitudes, and beliefs of a group of people

Globalization

the widening set of interdependent relationships among people from different parts of a world divided into nations - sometimes refers to the elimination of barriers to international movement of goods, services, capital, technology, and people that influence the integration of world economies

International business activities allow us to

to get more variety, better quality, and/or lower prices.

Four types of risks

uncertainty avoidance, trust, future orientation, and fatalism