MNO- Test 3

Hofstede's dimensions of national culture

Power distance: the extent to which people in a country accept that power is distributed unequally in society and organizations Individualism: the extent to which societies believe that individuals should be self-sufficient Short or Long term orientation: whether cultures are oriented to immediate gratification or defer gratification for greater good Masculinity or femininity: the extent to which cultures are highly assertive or nurturing Uncertainty avoidance: the degree to which people in a country are uncomfortable with uncertainty or ambiguity use info for how to compensate or motivate global workforces, whether or not to include lower-level employees in decision-making, and how much direction to give employees

Impact of global business as it relates to direct foreign investment

1. direst foreign investment in US by foreign companies 2. US companies investment in business in other countries direct foreign investment worldwide amounts to ~$3.5 trillion per year 2003-2004: direct foreign investment in US and by US soared

Exports

-least risky stage -selling domestically produced products to customers in foreign countries

Wholly owned affiliates

-most risk -foreign offices, facilities, and manufacturing plants that are 100% owned by the parent company

European Union had greatly changed trade among other member nations

-signing the Maastricht Treaty in 1992 1. all tariff and non-tariff barriers lifted = free trade 2. member nations have common external trade policy so that nonmember nations are trading with entire bloc of countries than with separate countries 3. people, capital, and equipment can freely cross EU borders, saving time and money 4. most EU members belong to a single economy, run by a centralized European bank and adopting a single currency, the Euro

Relationship between phase model of globalization and global new ventures

-some companies do not follow phase model of globalization -some companies skip phases on their way to becoming more global and less domestic -others do not follow the phase model at all (new global ventures)

Tradeoffs between global consistency and local adaptation

-two optional strategies that companies can use when they have worldwide operations global consistency: company would run its offices, plants, and facilities around the world based on the same universal rules, guidelines, policies, and procedures -advantages are: creates cost efficiencies and consistent product imagery worldwide local adaptation strategy: company would modify standard operating procedures to adapt to differences in foreign customers, governments, and regulatory agencies -advantages: addresses specific local needs, such as different consumer and employee issues

APEC (Major trade agreements that govern global trade)

Asia-Pacific Economic Corporation -includes all ASEAN countries except Cambodia, Lao PDR, and Myanmar, all NAFTA countries, and the following countries: Australia, Chile, the People's Republic of China, Hong Kong (China), Japan, New Zealand, Papua New Guinea, Peru, Russia, South Korea, and Taiwan much larger trade agreement that includes three largest economies in the world (US, China, and Japan) by 2020 all trade barriers will be reduced in all member nations

ASEAN (Major trade agreements that govern global trade)

Association of Southeast Asian Nations and consists of the following Southeast Asian countries: Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam will become a free trade by 2015 for original 6 countries and 2018 for remaining countries

CAFTA (Major trade agreements that govern global trade)

Central American Free Trade Agreement -regional trade agreement between Costa Rica, the DR, El Salvador, Guatemala, Honduras, Nicaragua, and the US

Major trade agreements that govern global trade

GATT: General Agreement on Tariffs and Trade -many countries signed to increase the ease of selling products and services worldwide promotes trade by: -cutting tariffs worldwide by 40% in 2005 -eliminating tariffs in 10 specific industries -putting stricter limits on gov. subsidies -protecting intellectual property rights -sending trade disputes to arbitration panels of World Trade Organizations

NAFTA (Major trade agreements that govern global trade)

North American Free Trade Agreement -free trade area of Canada, Mexico, and the US -changed trade tremendously by eliminating most tariff and non-tariff barriers among member nations (last set eliminated in 2003)

Cooperative contracts

agreements in which companies combine key resources, costs, risk, technology, and people

Global business

buying and selling of goods or services by people from different countries

Custom classifications

classifications assigned to imported products by gov officials that affect the size of the tariff and imposition of import quotas

Multinational Corporations (MNCs)

companies that own businesses in 2+ countries 1970 more than half the worlds MNCs were headquartered in US

Companies preparing their managers to be successful expatriate managers

companies wanting to send managers oversees should provide both language and cross-cultural training to both managers and their families training programs: -documentary training: identifying specific differences between home country and host country -cultural simulations: opportunity to practice skills in a simulated environment such as a party in the host country -field simulation: spend a few hours or days in a neighborhood with ethnic cultures similar to the ones in hist country

What to consider when choosing a global location for business

first step in deciding where to take your company global- finding an attractive business climate, look for a growing market where consumers have strong purchasing power and foreign competitors are weak when locating office consider- qualitative (work force quality and company strategy) and quantitative (type of facility being built, tariff and non-tariff barriers, exchange rates, transportation and labor costs) factors when conducting global business- identify two types of political risk 1. political uncertainty -risk of major changes in political regimes that can result from war, revolution, death of leaders, social unrest & other influential events 2. policy uncertainty- risk associated with changes in laws and gov. policies that directly affect how foreign companies conduct business -most common form of political risk in global business, and most frustrating

Subsidies

gov. loans, grants, and tax deferments given to domestic companies to protect them from foreign competition

Quotas

limit number or volume of imported

New global ventures

new companies with sales, employees, and financing in different countries that are founded with an active global strategy -global from their inception, they do not start as exporters and global new ventures, they are global from the start-up stage

Stages in the phase model of globalization & level of risk inherent in each

phase model of globalization says that as companies move from a domestic to a global orientation, they use these organizational forms in a sequence: exporting, cooperative contracts (licensing and franchising), strategic alliances, and wholly owned affiliates at each step the company grows much larger, uses those resources to enter more global markets, is less dependent on home country sales, and is more committed in its orientation to global business linear and sequential risks increase with each new stage

Barriers government erect to control trade

tariff- direct tax on imported goods -creates trade barrier by making imports more expensive than domestically produced goods non-tariff barriers: 1. Quotas 2. Voluntary expert restraints 3. Gov. import standards 4. Subsidies 5. Custom classifications

Voluntary export restraints

voluntary imposed limits on the number or volume of products exported to particular country