Mgmt 370 Chapter 5
gross domestic product (GDP)
the market value of a nation's total output of goods and services for a given period
quota
the maximum number of units a particular product that may be imported into a country
Levels of Organizational Involvement in Global Business
-exporting/importing -trading companies -licensing and franchising -contract manufacturing -joint venture/strategic alliance -direct investment
World Bank
-formally- International Bank for Reconstruction and Development -established and supported by the industrialized nations in 1946 to loan money to underdeveloped/developing nations
the economic enviornment
-gdp (US, China, India, Japan) -country's infrastructure -exchange rate
sociocultural enviornment
-language -body language -local customs -time perceptions -religious considerations
GLOBE project
-project to build on Hofstede's study -studied humane orientation, assertiveness, performance orientation, gender, future orientation
political-legal enviornment
-tariffs -tax rate -trade restrictions -stability of countries -laws
Hofstede's cultural dimensions theory
-what we use to analyze sociocultural effect, used to predict -Outlined 5 major cultural dimensions that profoundly impact the global business environment: 1. individualism/collectivism- approach as a team or individual 2. power distance- how much percieved power between managers and employees 3. masculinity/femininity-emotional values in a culture 4. uncertainty avoidance- how a culture handles uncertain situations 5. long-term orientation-how they perceive time
International Trade Facilitators
1. World Trade Org 2. World Bank 3. International Monetary Fund 4. Organization for Economic Cooperation and Development - free trade zones and loans
The global business environment: global management:
1. economic 2. legal 3. sociocultural 4. political
International Monetary Fund
Basic mission is to oversee the international monetary system and help ensure stable currencies and exchange rates throughout the world
NAFTA
Jan 1, 1994 -merged Canada, US, Mexico into one market of 400 million customers by eliminating most tariffs and trade restrictions on ag and manufactured products among the three countries
multinational corporation
a corp like IBM, ExxonMobil, Nestle, that operates on a worldwide scale, without significant ties to any one nation or region
franchising
a form of licensing in which a company- the franchiser- agrees to provide a franchisee a name, logo, method of operation, advertising, products and other elements in return for a financial commitment and the agreement to conduct business in accordance with the franchiser's standard of operation
strategic alliance
a partnership formed to create competitive advantage on worldwide basis
global business (globalization)
a strategy in which organizations treat the entire world or major regions of it as the domain for conducting business
trading company
acquires goods in one country and sells them to buyers in another country
UK Bribery Act
all organizations with business operations in the UK can be held liable for bribery, even if the bribery did not occur within the UK
Webb-Pomerene Export Trade Act
allows selected american firms desiring international trade to form monopolies in order to compete with foreign cartels
European Union (EU)
an economic and political union of 28 members nations that are located in Europe
self reference criterion
an unconscious referencing to the way things are done in one's own culture and experiences in making global business decisions
Association of Southeast Asian Nations (ASEAN)
comprised of ten Southeast Asian countries with the goal to promote economic growth and overall progress in the area via trade and security
countertraded agreements
exporting that involves bartering products for other products instead of currency
World Trade Org
global association of member countries that promotes free trade
cartel
group of firms or nations that agree to act as a monopoly and not compete with each other
Organization of Economic Cooperation and Development
international economic org comprised of 30 countries that accept the basic principles of free market economies and representative democracy -recommends and promotes policies to improve the well-being of consumers and societies around the world
outsourcing
involves transferring manufacturing or other functions to countries where labor and supplies are less expensive
contract manufacturing
occurs when a company hires a foreign company to produce a specified volume of the firm's product to specification; the final product carries the domestic firm;s name
dumping
occurs when a country or business firms sells prodcuts at less than what it costs to produce them
Foreign Corrupt Practices Act
outlaws direct payoffs to and bribes of foreign governments or business officials by American companies
Southern Common Market (MERCOSUR)
political and economic agreement among Bolivia, Argentina, Brazil, Venezuela, Urguay and Paraguay
importing
purchase of goods and service from foreign sources
exchange controls
restrictions on the amount of a particular currency that may be bought or sold
exporting
sale of goods and services to foreign markets
import tariff
tax levied by a nation on goods bought outside its borders and imported into the country
international business
the buying, selling and trading of goods and services across boundaries
infrastructure
the physical facilities that support its economic activities, such as railroads, highways, ports, airfields, utilities and power plants, schools, etc
direct investment
the purchase of overseas production and marketing facilities; a company my control the facilities outright or it may be the majority stockholder in the company that controls the faciltieis
exchange rates
the ratio at which one nation;s currency can be exchanged for another nation;s currency or for gold
embargo
the suspension of trade in a particular product by the government
licensing
trade arrangement in which one company- the licencor- allows the other company-the licensee- to use its company name, products, patents, brands, trademarks, raw materials, and/or production processes in exchange for a fee or royalty
joint venture
when a company that wants to do business in another country finds a local partner to share the costs and operation of the business (usually the other country)