Study for the final
Global companies
-MacDonald's -Coke -Walmart -Apple -Ikea -Starbucks -Amazon General Motors
What country where the items in our classroom made?
-Malaysia -Sri Lanka -Japan -USA -China -Indonesia -Vietnam -Mexico -Europe -Philippines
Culture in the U.S.:
-Sitting in the back -relaxed -hand shakes -eye contact -drive vs public transportation -family types -eating habits -buying habits
Two key issues:
1) Adjusting compensation to reflect national differences in economic circumstances and compensation practices 2) How expatriate managers should be paid
Challenges with Global labor markets
1) Compensation practices vary from country to country - based on prevailing management customs 2) Labor laws may prohibit or mandate union organizations 3) Equal employment legislation may be strongly pursued in one country and not another
Pressures for local responsiveness
1) Differences in consumer tastes and preferences 2) Differences in traditional practices and infrastructure 3) Differences in distribution channels 4) Host government demands 5) The rise of regionalism Firms facing these pressures need to differentiate their products and marketing strategy in each country
Firms that operate internationally
1) Expand the market for their domestic product offerings by selling those products in international markets 2) Realize location economies by dispersing individual value creation activities to locations around the globe where they can be performed most efficiently and effectively 3) Realize greater cost economies from experience effects by serving an expanded global market from a central location, thereby reducing the costs of value creation 4) Earn a greater return by leveraging any valuable skills developed in foreign operations and transferring them to other entities within the firm's global network of operations
Modes to enter foreign markets
1) Exporting 2) Turnkey projects 3) Licensing 4) Franchising 5) Joint ventures 6) Wholly owned subsidiaries
Human Resource Management Duties
1) HR Strategy 2) Staffing 3) Performance evaluation 4) Management development 5)Compensation 6) Labor Relations
2 strategies for creating value
1) Low cost 2) Differentiation
The Concerns of Organized Labor
1) Multinationals can counter union bargaining power by threatening to move production to another country 2) Multinationals will keep highly skilled tasks in the home country and farm out only low skilled tasks 3) Imported employment practices and contractual agreements will reduce its influence and power
Goals
1) Profitability: rate of return 2) Profit growth: increase in net profits
Expat Selection:
1) Self- Orientation - high self-esteem, self-confidence, and mental well-being 2) Others- Orientation - good at relationship development and willingness to communicate 3) Perceptual Ability - Ability to understand why people of other countries behave the way they do, ability to empathize 4) Cultural Toughness - Relationship between the country of assignment and how well an expatriate adjusts to the country
Drivers of Globalization:
1) Trade & Investment Barriers 2) The Role of Technology change 3) Transportation
Thomas Friedman's book - "The World is Flat" What does he mean?
1)More accessible 2)Distorted 3)Levels the playing field - US no longer has the advantage
Ethical Decision Making Process
1. Identify which stakeholders the decision would affect in which ways 2. Judge the ethics of the proposed strategic decision 3. Establish moral intent 4. Engage in ethical behavior 5. Audit the decision made to make sure it was consistent with ethical principles
Wholly Owned Subsidiaries
100% ownership of the subsidiary Set up a new operation in that country Acquire an established firm Advantages: -They reduce the risk of losing control over core competencies -They allow for the tight control over operations in different countries that is necessary for engaging in global strategic coordination -They may be required if a firm is trying to realize location and experience curve economies Disadvantages: -Firms bear the full costs and risks of setting up overseas operations
Universal Declaration of Human Rights
A United Nations document that lays down the basic principles of human rights that should be adhered to
Joint Venture
A cooperative undertaking between two or more firms
This chapter made the following points: 13
A disadvantage of strategic alliance is the firm risks giving away technological know-how and market access to its alliance partner in return for very little.
multinational enterprise (MNE)
A firm that owns business operations in more than one country
Differences in Distribution Channels
A firm's marketing strategies may be influenced by differences in distribution channels between countries which may necessitate delegation of marketing functions to national subsidiaries.
Franchising
A form of licensing in which the franchisor sells intangible property and requires the franchisee agree to abide by strict rules as to how it does business Advantages : -It can avoid costs and risks of opening up a foreign market Disadvantages: -It may inhibit the firm's ability to take profits out of one country to support competitive attacks in another -The geographic distance of the firm from its foreign franchisees can make poor quality difficult for the franchisor to detect
This chapter made the following points: 5
A geocentric staffing policy seeks the best people for key jobs throughout the organization, regardless of their nationality. This approach is consistent with building a strong, unifying culture and informational management network and is well suited to both global standardization and transitional strategies. Immigration policies of national governments may limit a firm's ability to pursue this policy.
WTO (World Trade Organization)
A global membership group that promotes and manages free trade. It does this in three ways: 1) it administers existing multilateral trade agreements. 2) it settles trade disputes. Most conflicts occur when one member accuses another of dumping. 3) it manages ongoing negotiations for new trade agreements. The biggest would have been the Doha round in 2006. The WTO's origins began with trade negotiations after World War II. In 1948, the General Agreement on Tariffs and Trade focused on reducing tariffs, anti-dumping, and non-tariff measures. In 1997, the WTO brokered agreements promoting trade in telecommunications services among 69 countries. It also removed tariffs on information technology products between 40 members. It improved trade of banking, insurance, securities and financial information between 70 countries.
This chapter made the following points: 13
A key issue in international labor relations is the degree to which organized labor can limit the choices available to an international business. A firm's ability to pursue a transnational or global standardization strategy can be significantly constrained by the actions of labor unions.
This chapter made the following points: 5
A multinational firm can create additional value by identifying valuable skills created within its foreign subsidiaries and leveraging the skills within its global network operations.
Expatriate Manager:
A national of one country appointed to a management position in another country
Expatriate manager
A national of one country appointed to a management position in another country.
This chapter made the following points: 4
A polycentric staffing policy uses host-country nationals to manage foreign subsidaires and parent-country nationals for the key positions at corporate headquarters. This approach can minimize the dangers o cultural myopia, but can create a gap between home- and host- country operations. The policy is best suited to a localization strategy.
This chapter made the following points: 14
A principal concern of organized labor is that the multinationals can counter union bargaining power with threats to move production to another country.
Turnkey Project
A project in which a firm agrees to set up an operating plant for a foreign client and hand over the "key" when the plant is fully operational.
This chapter made the following points: 6
A prominent issue in the international staffing literature is expatriate failure, defined as the premature return of an expatriate manager to his or her home country. The costs of expatriate failure can be substantial.
Franchising
A specialized form of licensing in which the franchiser sells intangible property to the franchisee and insists on rules to conduct the business
Ethnocentric staffing policy
A staffing approach within the MNE in which all key management positions are filled by parent-country nationals.
Polycentric staffing policy
A staffing policy in an MNE in which host-country nationals are recruited to manage subsidiaries in their own country, while parent-country nationals occupy key positions at corporate headquarters.
Geocentric staffing policy
A staffing policy where the best people are sought for key jobs throughout an MNE, regardless of nationality
This chapter made the following points: 1
A strategy can be defined as actions that managers take to attain the goals of the firm. For most firms, the preeminent goal is to maximize shareholder value. Maximizing shareholder value requires firms to focus on increasing their profitability and the growth rate of profits over time.
Wholly Owned Subsidiary
A subsidiary in which the firm owns 100 percent of the stock
What is culture?
A system of values and norms that are shared among a group of people and that when taken together constitute a design for living
class consciousness
A tendency for individuals to perceive themselves in terms of their class background.
Business Ethics:
Accepted principles of right or wrong governing the conduct of businesspeople
Ethics:
Accepted principles of right or wrong that govern the conduct of a person
The chapter made the following points: 14
Acquisitions are quick to execute, may enable a firm to preempt its global competitors, and involve buying a known revenue and profit stream. Acquisitions may fail: -when the acquiring firm overpays for the target, -when the cultures of the acquiring and acquired firms clash, -when there is a high level of management attrition after the acquisition, and -when there is a failure to integrate the operations of the acquiring and acquired firm.
strategy
Actions managers take to attain the firm's goals
This chapter made the following points: 12
Advantages of alliances are that they facilitate entry into foreign markets, enable partners to share the fixed costs and risks associated with new products and processes, visited the transfer of complementary skills between companies, and help firms establish technical standards.
Timing your entry: First-mover
Advantages: -ability to preempt rivals and capture demand by establishing a strong brand name. -ability to build sales volume in that country and ride down the experience curve ahead of rivals: cost advantage. -ability to create switching costs that tie customers into their products and services. Disadvantages: -may give rise to pioneering costs -regulations can change in a way that diminishes the value of an early entrant's investments
Timing of Entry
After a firm identifies which market to enter, it must determine the timing of entry -Entry is early when a firm enters a foreign market before other foreign firms -Entry is late when a firm enters after other firms have already established themselves in the market
Strategic alliances:
Agreements between potential or actual competition. Firms from different countries. Joint ventures - 2 or more companies have equity stake. Short-term contractual agreements.
The chapter made the following points: 6
All societies are stratified into different classes. Class-conscious societies are characterized by low social mobility and a high degree of stratification. Less class-conscious societies are characterized by high social mobility and a low degree of stratification.
Japan:
Always wait to be directed to your seat for a meeting, always wear formal attire, Always give a small gift to your host, never open gifts in public
Licensing
An arrangement whereby a licensor grants the rights to intangible property to another entity for a specified time period, and in return, receives a royalty fee Intellectual property includes patents, inventions, formulas, processes, designs, copyrights, and trademarks Advantages : -The firm does not have to bear the development costs and risks associated with opening a foreign market -The firm avoids barriers to investment -It allows a firm with intangible property that might have business applications, but which doesn't want to develop those applications itself, to capitalize on market opportunities Disadvantages: -The firm doesn't have the tight control over manufacturing, marketing, and strategy necessary to realize experience curve and location economies -The firm's ability to coordinate strategic moves across countries by using profits earned in one country to support competitive attacks in another is compromised -There is the potential for loss of proprietary (or intangible) technology or property -To reduce this risk, firms can use cross-licensing agreements or link the agreement with the decision to form a joint venture
group
An association of two or more individuals who have a shared sense of identity and who interact with each other in structured ways on the basis of a common set of expectations about each other's behavior.
This chapter made the following points: 3
An ethnocentric approach to staffing policy fills all key management positions in an international business with parent-country nationals. The policy is congruent with an international strategy. A drawback is that ethnocentric staffing can result in cultural myopia.
United Nations
An international organization made up of 193 countries headquartered in New York City, formed in 1945 to promote peace, security, and cooperation.
World Bank:
An international organization that helps emerging market countries to reduce poverty. It is not a bank in the conventional sense of the word. Instead, it consists of two development institutions. 1) the International Bank for Reconstruction and Development 2) the International Development Association 189 member countries share ownership. The United States has a controlling voting interest. The Bank works closely with three other organizations: 1) The International Finance Corporation 2) The Multilateral Guarantee Agency 3) The International Centre for the Settlement of Investment Disputes. The World Bank provides low-interest loans, interest-free credit, and grants focusing on improving education, health, and infrastructure. It also uses funds to modernize a country's financial sector, agriculture, and natural resources management. The Bank's stated purpose is to "bridge the economic divide between poor and rich countries." It does this by turning "rich country resources into poor country growth." It has a long-term vision to "achieve sustainable poverty reduction." To achieve this goal, the Bank focuses on six areas: 1) Overcome poverty by spurring growth, especially in Africa. 2) Help reconstruct countries emerging from war, the biggest cause of extreme poverty. 3) Provide a customized solution to help middle-income countries remain out of poverty. 4) Spur governments to prevent climate change. It helps them control communicable diseases, especially HIV/AIDS, and malaria. It also manages international financial crises and promotes free trade. 5) Work with the Arab League on three goals. They are to improve education, build infrastructure, and provide micro-loans to small businesses. 6) Share its expertise with developing countries. Publicize its knowledge via reports and its interactive online database. Jim Yong Kim, M.D., Ph.D., is the president of the World Bank, but he will be stepping down effective February 1, 2019, three years before his term ends. - he resigned over the Trump administration's opposition to stopping climate change. The World Bank president reports to a 25-member Board of Executive Directors. The president of the United States has selected the World Bank president since its founding because it owns 16% of the bank's shares, making it the largest shareholder. -unofficial agreement. The Bank has more than 10,000 employees from over 160 countries. Two-thirds work in Washington, DC. The rest are in 100 country offices in the developing world.
IMF (International Monetary Fund)
An organization of 189 member countries. It stabilizes the global economy in three ways. 1) it monitors global conditions and identifies risks. 2) it advises its members on how to improve their economies. 3) it provides technical assistance and short-term loans to prevent financial crises. The IMF's goal is to prevent these disasters by guiding its members. These countries are willing to give up some of their sovereign authority to achieve that aim. Objectives: -Survey Global Conditions -Advise Member Countries -Provide Technical Assistance and Short-term Loans NOT IMF members: -Cuba -N Korea -Liechtenstein -Taiwan -Barbados -Cabo Verde -Hong Kong -Netherlands Antilles Members do not receive equal voters, yet voting shares based on quota. -Quota is based on their economic size. The IMF has been called upon more and more to provide global economic surveillance. In 2011, the IMF was rocked by a sex scandal involving its Executive Director, Dominique Strauss-Kahn. Police arrested him on allegations he sexually assaulted a hotel maid. Although the charges were subsequently dropped, he resigned. Many emerging market members argued that it was time for a Director to come from one of their countries. The IMF was created at the 1944 Bretton Woods conference. It sought to rebuild Europe after World War II. The Conference also set up a modified gold standard to help countries maintain the value of their currencies. The planners wanted to avoid the trade barriers and high-interest rates that helped cause the Great Depression.
Pros and cons of acquisitions
Are quick to execute. Enable firms to preempt their competitors. Can be less risky than greenfield ventures. However, many acquisition are not successful. Why Do Acquisitions Fail? -The firm overpays for the assets of the acquired firm -There is a clash between the cultures of the acquiring and acquired firm -Attempts to realize synergies by integrating the operations of the acquired and acquiring entities run into roadblocks and take much longer than forecast -There is inadequate pre-acquisition screening Reducing the Risks of Failure -Through careful screening of the firm to be acquired -By moving rapidly once the firm is acquired to implement an integration plan
Focus on Managerial Implications: Organizational Culture and Leadership
Articulate values that emphasize ethical behavior, repeatedly emphasize their importance, provide incentives and rewards -Code of ethics
The chapter made the following points: 6
As a consequence of the globalization of production and markets, in the past decade world trade has grown faster than world output, foreign direct investment has surged, imports have penetrated more deeply into the world's industrial nations, and competitive pressures have increased in industry after industry.
The Evolution of Strategy
As competition increases, international and localization strategies become less viable To survive, firms may need to shift to a global standardization strategy or a transnational strategy in advance of competitors
Describe the changing nature of the global economy.
As late as the 1960s, four stylized facts described the demographics of the global economy. 1) U.S. dominance in the world economy and world trade picture. 2) U.S. dominance in world foreign direct investment. 3) The dominance of large, multinational U.S. 4) Roughly half the globe—the centrally planned economies of the Communist world—were off-limits to Western international businesses. **As will be explained below, all four of these qualities either have changed or are now changing rapidly.
Understand how the process of globalization is creating opportunities and challenges for business managers.
At the most fundamental level, the differences arise from the simple fact that countries are different. Countries differ in their cultures, political systems, economic systems, legal systems, and levels of economic development.
The Ethnocentric Approach: makes sense for firms with an international strategy
Attractive when: -There is a lack of qualified individuals in the host country to fill senior management positions -A unified corporate culture is desired -The firm wants to transfer knowledge of core competencies to the foreign operation Unattractive because: -It limits the advancement of host country nationals -It can lead to cultural myopia
Expatriate Pay continued
Base Salary: normally in the same range as the base salary for a similar position in the home country Foreign Service Premium: extra pay the expatriate receives for working outside his country of origin -Offered as an inducement to accept foreign postings Allowances: -Hardship allowances -Housing allowances -Cost-of-living allowances -Education allowances
The chapter made the following points: 1
Basic entry decisions include identifying which markets to enter, when to enter those markets, and on what scale.
ethnocentrism
Behavior that is based on the belief in the superiority of one's own ethnic group or culture; often shows disregard or contempt for the culture of other countries.
Expatriate Pay continued
Benefits: many expatriates receive the same level of medical and pension benefits abroad that they received at home Taxation: the expatriate may have to pay income tax to both the home country and the host-country governments unless a host country has a reciprocal tax treaty with the expatriate's home country -When a reciprocal tax treaty is not in force, the firm typically pays the expatriate's income tax in the host country
The Roots of Unethical Behavior: Personal Ethics
Business ethics reflect personal ethics Expatriates may face pressure to violate their personal ethics -They are away from their ordinary social context and supporting culture -They are psychologically and geographically distant from the parent company
The Roots of Unethical Behavior: Decision-Making Processes
Business people may behave unethically because they fail to ask the relevant questions Decisions made based on economic logic
Focus on Managerial Implications: Hiring and Promotion
Businesses should strive to identify and hire people with a strong sense of personal ethics Prospective employees should find out as much as they can about the ethical climate in an organization
This chapter made the following points: 4
By rapidly building sales volume for the standardized product, international expansion can assist a firm in moving down the experience curve by realizing learning effects and economies of scale.
The chapter made the following points: 9
By the mid-1990s, the U.S. share of world output had been cut in half, with major shares now being accounted for by Western European and Southeast Asian economies. The U.S. share of worldwide foreign direct investment had also fallen, by about two-thirds. U.S. multinationals were now facing competition from a large number of Japanese and European multinationals. In addition, the emergence of mini-multinationals was noted.
Pros of buying internationally:
Cheaper Support global commerce Shape their government
Strategic role of global HRM
Compensation packages, performance appraisal systems - All must mirror the goal of profitability and culture for the company
The Geocentric Approach: makes sense for firms with global or transnational strategies
Consistent with building a strong unifying culture and informal management network Advantages: -Makes the best use of human resources -Builds a cadre of international executives who feel at home working in a number of different cultures Disadvantages: -Difficulties with immigration laws -Costs associated with implementing the strategy
economies of scale
Cost advantages associated with large-scale production.
pioneering costs
Costs an early entrant bears that later entrants avoid, such as the time and effort in learning the rules, failure due to ignorance, and the liability of being a foreigner.
This chapter made the following points: 11
Country differences in compensation practices raise a difficult question for an international business: Should the firm pay executives in different countries according to the standards in each country or equalize pay on a global basis?
Which foreign market?
Country's potential market for an international business Size of the market - demographics Present wealth - purchasing power Economic Growth
Ethical Strategy:
Course of action that does not violate a company's business ethics
How do you increase profitability of a firm?
Create value: the more value a customer places on a product the higher the price they can charge
Training
Cultural Training Language Training Practical Training
Training for Expatriate Managers
Cultural training: seeks to foster an appreciation for the host country's culture Language training: improves the effectiveness of managers and helps them better relate to the foreign country Practical training: helps the expatriate manager and family ease into day-to-day life of the host country
The chapter made the following points: 1
Culture is a complex whole that includes knowledge, beliefs, art, morals, law, customs, and other capabilities acquired by people as members of society.
Demonstrate an appreciation for the economic and business implications of cultural change.
Culture is not a constant; it evolves over time. Changes in value systems can be slow and painful for for a society.
The chapter made the following points: 11
Culture is not a constant; it evolves. Economic process and globalization seem to be two important engines of cultural change.
Greenfield or Acquisition? Which Choice?
Dependent on circumstances confronting the firm Well-established incumbents might be best for an acquisition as greenfield too slow If no incumbents, then greenfield might be best
foreign direct investment (FDI)
Direct investment in business operations in a foreign country
First Mover Disadvantages
Disadvantages associated with entering a foreign market before other international businesses.
Spain:
Early meetings are focused on building a relationship, so it may take a few meetings for the actual business deal to happen, Punctuality is not as important in the Spanish culture
Host Government Demands
Economic and political demands imposed by host country governments may necessitate a degree of local responsiveness.
The Roots of Unethical Behavior: Leadership
Employees often take cues from business leaders Actions speak louder than words
G20 (or G-20 or Group of Twenty)
Established in 1999 AKA the G20 Summit Comprises the finance ministers and central bank governors of 19 economies and the European Union. Prevents future international financial crises, seeking to shape the global economic agenda. Represents: -2/3 of the world's people -90% global GDP, 80% of -international global trade. Mandate of the G20 is to promote: -global economic growth, -international trade, and -financial market regulation G20 is a forum, therefore its agreements or decisions have no legal impact. -yet they do influence countries policies and global cooperation Meet twice a year - at the same time as the IMF and the World Bank. Nov/Dec '18 Summit : -Trump and China's President Xi Jinping agreed to start trade negotiations and stop escalation of the ongoing trade war. -Trump cancelled a meeting with Russian President Vladimir Putin to protest Russia's attack on Ukraine -Trump signed the new NAFTA agreement with Mexico and Canada. -All countries except the United States reaffirmed their commitment to the Paris Climate Accord. G-20 Member Nations: --The G-7 nations: Canada, France, Germany, Italy, Japan, the UK and the United States. This group of countries also meets on their own. --There are eleven emerging market and smaller industrialized countries: Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea and Turkey. --The EU is also a member of the G-20. Protesters want the G-20 leaders to focus on one or more of these issues: 1) Poverty 2) Climate Change 3) Gender Equality 4) Immigration
Group of Twenty (G20)
Established in 1999, the G20 comprises the finance ministers and central bank governors of the 19 largest economies in the world, plus representatives from the European Union and the European Central Bank.
The chapter made the following points : 4
Ethical dilemmas are situations in which none of the available alternatives seems ethically acceptable.
The chapter made the following points : 2
Ethical issues and dilemmas in international business are rooted in the variations among political systems, law, economic development, and culture from nation to nation.
The Roots of Unethical Behavior: Societal Culture
Ethical policies differ by country MNEs located in countries where individualism and uncertainty avoidance are strong are more likely to emphasize ethical behavior MNEs located in countries with high masculinity and high power distance are less likely to promote ethical behavior
Introduction
Ethics - accepted principles of right or wrong that govern the conduct of a person, the members of a profession, or the actions of an organization --Business ethics - accepted principles of right or wrong governing the conduct of business people --Ethical strategy - a strategy, or course of action, that does not violate these accepted principles
Expatriate Managers
Ethnocentric and geocentric approaches rely on expatriate managers -Firms that use expatriates must consider the problem of expatriate failure: the premature return of an expatriate manager to the home country
Strategic alliances are cooperative agreements between potential or actual competitors
Examples include: formal joint ventures and short term contractual arrangements The number of international strategic alliances has risen significantly in recent decades
This chapter made the following points: 7
Expatriate failure can be reduced by selection procedures that screen out inappropriate candidates. Te most successful expatriate seems to be those who have high self-esteem and self-confidence, can get along well with others, are willing to attempt to communicate in a foreign language, and can empathize with people of other cultures.
Expatriate Selection
Expatriate failure rates can be reduced through better selection procedures Mendenhall and Oddou identified four dimensions that predict expatriate success 1)Self-orientation 2)Others-orientation 3)Perceptual ability 4)Cultural toughness
Summary : In this chapter we have
Explained the concept of strategy. Recognized how firms can profit by expanding globally. Understood how pressures for cost reductions and pressures for local responsiveness influence strategic choice. Identified the different strategies for competing globally and their pros and cons. Explained the pros and cons of using strategic alliances to support global strategies.
Summary: In this chapter we have
Explained the three basic decisions that firms contemplating foreign expansion must make: which markets to enter, when to enter those markets, and on what scale. Compared and contrasted the different modes that firms use to enter foreign markets. Identified the factors that influence a firm's choice of entry mode. Recognized the pros and cons of acquisitions versus greenfield ventures as an entry strategy.
Summary: In this chapter we have
Explored the ethical issues faced by international businesses. Recognized what is an ethical dilemma. Identified the causes of unethical behavior by managers. Described the different philosophical approaches to ethics. Explained how managers can incorporate ethical considerations into their decision making.
Firms can enter foreign markets through
Exporting Licensing or franchising to host country firms A joint venture with a host country firm A wholly owned subsidiary in the host country
The chapter made the following points: 6
Exporting has the advantages of facilitating the realization of experience curve economies and of avoiding the costs of setting up manufacturing operations in another country. Disadvantages include -high transport costs, -trade barriers, and -problems with local marketing agents.
uncertainty avoidance
Extent to which cultures socialize members to accept ambiguous situations and to tolerate uncertainty
The Advantages of Strategic Alliances
Facilitate entry into a foreign market Allow firms to share the fixed costs and risks of developing new products or processes Bring together complementary skills and assets that neither partner could easily develop on its own Can help establish technological standards for the industry that will benefit the firm
core competencies
Firm skills that competitors cannot easily match or imitate.
This chapter made the following points: 1
Firm success requires HRM policies to be congruent with the firm;s strategy and with its formal and informal structure and controls.
Timing of Entry: First-Mover Advantages
Firms entering a market early can gain first mover advantages -The ability to pre-empt rivals and capture demand by establishing a strong brand name -The ability to build up sales volume in that country and ride down the experience curve ahead of rivals and gain a cost advantage over later entrants -The ability to create switching costs that tie customers into their products or services making it difficult for later entrants to win business
Pressures for Cost Reductions and Entry Mode
Firms facing strong pressures for cost reductions are likely to pursue some combination of exporting and wholly owned subsidiaries -Allows the firm to achieve location and scale economies as well as retain some degree of control over worldwide product manufacturing and distribution -Firms pursuing global standardization or transnational strategies tend to prefer establishing wholly owned subsidiaries
Which Foreign Markets?
Firms need to assess the long run profit potential of each market -The most favorable markets are politically stable developed and developing nations with free market systems, low inflation, and low private sector debt -The less desirable markets are politically unstable developing nations with mixed or command economies, or developing nations where speculative financial bubbles have led to excess borrowing -The value an international business can create in a foreign market depends on the suitability of its product offering to that market and the nature of indigenous competition
This chapter made the following points: 9
Firms pursuing a global standardization strategy focus on reaping the cost reductions that come from experience curve effects and location economies.
This chapter made the following points: 8
Firms pursuing a localization strategy customize their product offering, market strategy, and business strategy to national conditions.
This chapter made the following points: 7
Firms pursuing an international strategy transfer the products derived from core competencies to foreign markets well undertaking some limited local customization.
Location Economies
Firms should locate value creation activities where economic, political, and cultural conditions are most conducive to the performance of that activity -Firms that successfully do this can realize location economies: economies that arise from performing a value creation activity in the optimal location for that activity, wherever in the world that might be Locating value creation activities in optimal locations -Can lower the costs of value creation -Can enable a firm to differentiate its product offering from those of competitors
Scale of Entry and Strategic Commitments
Firms that enter foreign markets on a significant scale make a major strategic commitment that changes the competitive playing field -Involves decisions that have a long-term impact and are difficult to reverse Small-scale entry can be attractive because it allows the firm to learn about a foreign market, but at the same time it limits the firm's exposure to that market
Profitability and Profit Growth Summary
Firms that expand internationally can increase their profitability and profit growth by: 1) Entering markets where competitors lack similar competencies 2) Realizing location economies 3) Exploiting experience curve effects 4) Transferring valuable skills within the organization
Choosing a strategy:
Firms use 4 basic strategies in global markets 1) Global standardization 2) Localization 3) Transnational 4) International
National Differences in Compensation
Firms using a geocentric policy that want to develop an international cadre of managers must pay executives the same salary regardless of their country of origin If a firm does not equalize pay, it could create resentment among foreign nationals A recent Mercer Management Consulting survey showed that some 85% of companies in the survey have a global compensation strategy in place
Timing of Entry: First-Mover Disadvantages
First mover disadvantages: the disadvantages associated with entering a foreign market before other international businesses These may result in pioneering costs (costs that an early entrant has to bear that a later entrant can avoid) such as: -The costs of business failure if the firm, due to its ignorance of the foreign environment, makes some major mistakes -The costs of promoting and establishing a product offering, including the cost of educating the customers
Justice theories
Focus on the attainment of a just distribution (one that is considered fair and equitable) of economic goods and services John Rawls - all economic goods and services should be distributed equally except when an unequal distribution would work to everyone's advantage Impartiality is guaranteed by the veil of ignorance - everyone is imagined to be ignorant of all his or her particular characteristics Under Raul's veil of ignorance would be a system where people would agree that each person is permitted the maximum of basic liberty compatible with similar liberty for others Once equal liberty is assured, inequality in basic social goods are to be allowed only if they benefit everyone The difference principle suggests that inequalities are justified if they benefit the position of the least advantaged person
The chapter made the following points: 9
Formal education is the medium through which individuals learn skills and are socialized into the values and norms of a society. Education plays an important role in the determination of national competitive advantage.
Land:
Forrest production land Retail store online (virtual store)
Confusianism
Found it in the fifth century B.C. by K'ung-Fu-tzu, more generally known as Confucius. For more than 2,000 years until the 1949 communist revolution, Confucianism was the official ethical system of China. Many people still follow the teachings of Confucius principal in China, Korea, and Japan. Confucianism is not a religion, but an ideology.
The chapter made the following points: 10
Geert Hofstede studied how culture relates to values in the workplace. He isolated five dimensions that he claimed summarized different cultures: power distance, uncertainty avoidance, individualism versus collectivism, masculinity versus femininity, and long-term versus short-term orientation.
Pros and Cons of Greenfield Ventures
Greenfield ventures are attractive because they allow the firm to build the kind of subsidiary company that it wants -Are slower to establish -Are risky because they have no proven track record -Can be problematic if a competitor enters via acquisition and quickly builds market share
Society
Group of people who share a common set of values and norms
United Nations - UN
Headquartered in New York International organization of 193 member-states Founded in 1945 to prevent another world war The U.N.'s missions: 1) maintains international peace, 2) fosters friendly relations between its members, 3) solves international problems, 4) promotes human rights, and 5) harmonizes its members' actions. *It works to help countries reduce hunger, disease, and illiteracy. *It promotes sustainable development and the environment. *It protects refugees, provides disaster relief, and economic development. *It counters terrorism, promotes nuclear non-proliferation, and clears landmines. *It also focuses on protecting indigenous cultures. The U.N. is not a government and has no right to make binding laws. Instead, it uses the power of persuasion. U.S. President Franklin D. Roosevelt lobbied for the U.N.'s creation even during World War II. The United Nations is the second attempt at a global peace initiative. In 1919, U.S. President Woodrow Wilson pushed for the League of Nations after World War I. -- Many felt the League failed because it could not prevent the outbreak of World War II. The UN affects the US economy: -The UN buys goods and services from the US; employees Americans; & benefits local NY businesses -The UN has added $3.5 B to the US economy -The UN hired US companies to support US troops in peacekeeping missions -The UN development program does business with more than 1800 US vendors
Hinduism
Hinduism has approximately 1.10 billion adherents, most of them on the Indian subcontinent. It began in the Indus Valley in India more than 4,000 years ago, making it the worlds oldest major religion. Hindus believe that a moral force in society requires the acceptance of certain responsibilities, called dharma. Hindus believe in reincarnation, or rebirth into a different body, after death. They believe in karma, the spiritual progression of each person's soul and is affected by the way he or she lives. Hindus believe that an individual can eventually achieve nirvana, a state of complete spiritual perfection that renders reincarnation no longer necessary.
Rights theories
Human beings have fundamental rights and privileges that transcend national boundaries and culture Form the basis for the moral compass that managers should navigate by when making decisions that have an ethical component The idea that some fundamental rights transcend national borders and cultures was the underlying motivation for the UN's Universal Declaration of Human Rights
Introduction
Human resource management (HRM) -The activities an organization carries out to utilize its human resources effectively **Determining human resource strategy **Staffing **Performance evaluation **Management development **Compensation **Labor relations HRM is more complex in an international business because of differences between countries in labor markets, culture, legal systems, economic systems, etc. -International HRM also deals with issues related to expatriate managers (citizens of one country working abroad) **When to use expatriates **Who to send on expatriate postings **How expatriates should be compensated **How to handle the repatriation of expatriates
Decision-Making Processes
If a manager can answer "yes" to the following questions, the decision is ethically acceptable -Does my decision fall within the accepted values of standards that typically apply in the organizational environment? -Am I willing to see the decision communicated to all stakeholders affected by it? -Would the people with whom I have significant personal relationships approve of the decision? A five-step process can also help managers think through ethical issues How would a decision affect stakeholders? --Internal stakeholders - people who work for or who own the business such as employees, the board of directors, and stockholders --External stakeholders - the individuals or groups who have some claim on a firm such as customers, suppliers, and unions Determine if a proposed decision violates the fundamental rights of any stakeholders Establish moral intent Engage in ethical behavior Audit decisions - reviewing them to make sure that they were consistent with ethical principles
Culture in South Africa:
If you board a nearly empty bus or enter a nearly empty movie theater, it is regarded as polite to sit next to the only person there
Kantian ethics
Immanuel Kant argued that people should be treated as ends and never purely as means to the end of others -People have dignity and need to be respected, they are not machines
Pressures for Cost Reductions
In industries producing commodity type products that fill universal needs (needs that exist when the tastes and preferences of consumers in different nations are similar if not identical) -When major competitors are based in low cost locations -Where there is persistent excess capacity -Where consumers are powerful and face low switching costs
The chapter made the following points: 5
In some societies, the individual is the basic building block of social organization. These societies emphasize individual achievements above all else. In other societies, the group is the basic building block of social organization. These societies emphasize group members and group achievements above all else.
The chapter made the following points: 8
In the 1960s, the U.S. economy was dominant in the world, U.S. firms accounted for most of the foreign direct investment in the world economy, U.S. firms dominated the list of large multinationals, and roughly half the world—the centrally planned economies of the Communist world—was closed to Western businesses.
Expat Managers Reasons for failure?
Inability of spouse to adjust Difficulties with new environment Personal or emotional problems Lack of technical competence Inability of spouse to adjust
localization strategy:
Increasing profitability by customizing the firm's goods & services so that the provide a good match to tastes and preferences in different national markets.
This chapter made the following points: 2
International expansion may enable a firm to earn greater returns by transferring the product offerings to ride from its core competencies to market where in indigenous competitors lack those product offerings and competencies.
International Monetary Fund (IMF)
International institution set up to maintain order in the international monetary system
World Bank
International institution set up to promote general economic development in the world's poorer nations
General Agreement on Tariffs and Trade (GATT)
International treaty that committed signatories to lowering barriers to the free flow of goods across national borders and led to the WTO
Turnkey projects
Involve a contractor that agrees to handle every detail of the project for a foreign client, including the training of operating personnel At completion of the contract, the foreign client is handed the "key" to a plant that is ready for full operation Advantages: -Allow firms to earn great economic returns from the know-how required to assemble and run a technologically complex process -Less risky in countries where the political and economic environment is such that a longer-term investment might expose the firm to unacceptable political and/or economic risk Disadvantages: -The firm has no long-term interest in the country -The firm can create a competitor -The firm's process technology is a source of competitive advantage
Ethics and International Business: Corruption
Is it ethical to make payments to government officials to secure business? -Foreign Corrupt Practices Act -Convention on Combating Bribery of Foreign Public Officials in International Business Transactions **Facilitating payments/speed money excluded Some argue that paying bribes might be the price of doing a greater good -Where preexisting political structures distort or limit the workings of the market mechanism, corruption -marketeering, smuggling, and side payments to government bureaucrats to "speed up" approval for business investments - may actually enhance welfare Others argue that corruption reduces the returns on business investment and leads to low economic growth
This chapter made the following points: 10
It can be difficult to evaluate the performance of expatriate managers objectively because of unintentional bias. A firm can take a number of steps to reduce this bias.
Staffing policy is concerned with the selection of employees for a particular job
It involves selecting people who have the right skills for a particular job It also involves developing and promoting the corporate culture of the firm: the organization's norms and value systems
This chapter made the following points: 3
It may pay a firm to base each value creation activity it performs at the location where factor conditions are most conductive to the performance of that activity. We are for this strategy is focusing on the attainment of location economies.
Time:
Italy: laid back, relaxed, and slow passed Germany: to the second, on top of things, very scheduled
The chapter made the following points: 10
Joint ventures have the advantages of sharing the costs and risks of opening a foreign market and of gaining local knowledge and political influence. Disadvantages include the risk of losing control over technology and a lack of tight control.
The chapter made the following points : 9
Kantian ethics state that people should be treated as ends and never purely as means to the ends of others. People are not instruments, like a machine. People have dignity and to be respected as much.
This chapter made the following points: 15
Keys to making alliances work seem to be building trust and informal communications networks between partners and taking proactive steps to learn from alliance partners.
Explain the concept of strategy.
LO 12-1
Recognize how firms can profit by expanding globally.
LO 12-2
Understand how pressures for cost reductions and pressures for local responsiveness influence strategic choice.
LO 12-3
Identify the different stages for competing globally and their pros and cons.
LO 12-4
Explain the pros and cans of using strategic alliances to support global strategies.
LO 12-5
Explain the three basic decisions that firms contemplating foreign expansion must make: which markets to enter, when to enter those markets, and on what scale
LO 13-1
Compare and contrast the different modes that firms use to enter foreign markets.
LO 13-2
Identify the factor that influence a firm's choice of entry mode.
LO 13-3
Recognize the pros and cons of acquisitions versus greenfield ventures as an entry strategy.
LO 13-4
Summarize the strategic role of human resource management in the international business.
LO 17-1
Identify the pros and cons of different approaches to staffing policy in the international business.
LO 17-2
Explain why managers may fail to thrive in foreign postings.
LO 17-3
Recognize how management development and training programs can increase the value of human capital in the international business firm.
LO 17-4
Explain how and why performance appraisal systems might vary across nations.
LO 17-5
Understanding how and why compensation systems might vary across nations.
LO 17-6
Understanding how organized labor can influence strategic choices in international business firms.
LO 17-7
Understand the ethical issues faced by international businesses.
LO 5-1
Recognize an ethical dilemma.
LO 5-2
Identify the causes of unethical behavior by managers.
LO 5-3
Describe the different philosophical approaches to ethics.
LO 5-4
Explain how managers can incorporate ethical considerations into their decision making
LO 5-5
Examples of product differentiation: https://blog.hubspot.com/insiders/branding-differentiation
LUSH Airstream Oscar Health Insurance T-Mobile Whole Foods Client Heartbeat Yoh Four Quadrants Advisory The Middle Finger Project INBOUND
4 factors of production:
Labor Energy Capital Land
Capital:
Labor costs Materials Production costs Time Sales promotions Marketing Shipping McGraw Hill
The chapter made the following points: 8
Language is one defining characteristic of a culture. It has both spoken and unspoken dimensions. In countries with more than one spoken language, we tend to find more than one culture.
The chapter made the following points: 4
Large-scale entry into a national market constitutes a major strategic commitment that is likely to change the nature of competition in that market and limit the entrant;s future strategic flexibility. Although making major strategic commitments can yield many benefits, there are also risks associated with such a strategy.
Opening case: Cutco Corporation - Sharpening Your Market Entry
Largest manufacturer of high-quality kitchen cutlery in the U.S. and Canada Originally created as a product for Wear-Ever Aluminum, a division of Alcoa Commitment to fine craftsmanship and Forever Guarantee Formed following a management buyout that took the company private - a leap of faith Sales force of mainly college students use "direct selling" The sales pitch to students is good pay, flexible schedules, personal growth, no experience needed, great training, and engagement with quality products. -In fact, 85% of the sales force at Cutco is college-aged individuals.
Transportation
Local & global Several major innovations in transportation technology have occurred since World War II. In economic terms, the most important are probably: -the development of commercial jet aircraft & super-freighters and -the introduction of containerization, which simplifies transshipment from one mode of transport to another. Commercial jet travel, reduces the time needed to get from one location to another, has effectively shrunk the globe. Containerization has revolutionized the transportation business, significantly lowering the costs of shipping goods over long distances. --ex: shipping, time, trade methods (better ships & shipping containers - more goods & cheaper)
Movie in class:
Made in America: Remolding the home Can not find certain things made in america like a coffee maker or TV. https://abcnews.go.com/WNT/video/made-america-remodeling-home-world-news-us-manufacturing-labor-economy-business-13042595
Focus on Managerial Implications
Making Ethical Decisions Internationally Actions managers can take to ensure ethics are considered 1) Favor hiring and promoting people with a well grounded sense of personal ethics 2) Build an organizational culture that places a high value on ethical behavior 3) Put decision making processes in place that require people to consider the ethical dimension of business decisions 4) Institute ethical officers in the organization 5) Develop moral courage 6) Make corporate social responsibility a cornerstone of the enterprise policy 7) Pursue strategies that are sustainable
This chapter made the following points: 9
Management development programs attempt to increase the overall skill levels of managers though a mix of ongoing management education and rotation of managers through different jobs within the firm to give them varied experiences. Management development is often used as a strategic tool to build a strong unifying culture and informal management network, both of which support transnational and global standardization strategies.
Management Development and Strategy
Management development programs increase the skill levels of managers -Management education -The rotation of managers through jobs Management development is often used as a strategic tool to build a strong unifying culture and informal management network -Both support transnational and global strategies
Focus on Managerial Implications: Moral Courage
Managers must be able to walk away from decisions that are profitable but unethical
Repatriation of Expatriates
Managers need to be prepared for reentry into their home country organization This involves HRM planning -The role of the employee in the home country at the end of the assignment -How to utilize the knowledge the employee acquired while abroad
Ethical Dilemmas
Managers often face situations where the appropriate course of action is not clear Ethical dilemmas - situations in which none of the available alternatives seems ethically acceptable -Exist because real world decisions are complex, difficult to frame, and involve various consequences that are difficult to quantify
The chapter made the following points: 12
Managing an international business is different from managing a domestic business for at least four reasons: (a) countries are different, (b) the range of problems confronted by a manager in an international business is wider and the problems themselves more complex than those confronted by a manager in a domestic business, (c) managers in an international business must find ways to work within the limits imposed by governments' intervention in the international trade and investment system, and (d) international transactions involve converting money into different currencies.
This chapter made the following points: 10
Many industries are now so competitive that firms must adopt a transitional strategy. This involves a simultaneous focus on reducing costs, transferring skills and products, and boosting local responsiveness. Implementing such a strategy may not be easy.
Explain the main arguments in the debate over the impact of globalization.
Many influential economists, politicians, and business leaders argue that falling barriers to international trade and investment are the twin engines driving the global economy toward greater prosperity. They say increased international trade and cross-border investment will result in lower prices for goods and services. They believe that globalization stimulates economic growth, raises the incomes of consumers, and helps to create jobs in all countries that participate in the global trading system.
The Polycentric Approach: best suited to firms pursuing a localization strategy
Minimizes the dangers of cultural myopia, but can create a gap between home and host country operations Attractive because: -The firm is less likely to suffer from cultural myopia -It may be less expensive to implement Unattractive because: -Host country nationals do not gain foreign experience and cannot progress beyond senior positions in their own subsidiaries -A gap can form between host country and parent managers
The chapter made the following points : 6
Moral philosophers contended that approaches to business ethics such as the Friedman doctrine, culture relativism, the righteous moralist, and the naive immoralist are unsatisfactory in important was.
Guidelines for Performance Appraisal
More weight should be given to an on-site manager's appraisal than to an off-site manager's appraisal A former expatriate who has served in the same location should be involved in the appraisal process Home office managers should be consulted before an on-site manager completes a formal termination evaluation
The chapter made the following points : 13
Multinational corporations that are practicing business-focused sustainability integrate a focus on market orientation, addressing the needs of multiple stakeholders, and adhering to corporate social responsibility.
Creating Global Web
Multinationals that take advantage of location economies create a global web of value creation activities Under this strategy, different stages of the value chain are dispersed to those locations around the globe where perceived value is maximized or where the costs of value creation are minimized -Introducing transportation costs and trade barriers complicates this picture -Political and economic risks must be assessed when making location decisions
Recognize how differences in social culture influence values in business.
Of considerable importance for an international business with operations in different countries is how a society's culture affects the values found in the workplace. Management process and practices may need to vary according o culturally determined work-related values. If cultures result in different work-related values, an international business with operations in both countries should vary its management process and practices to account for these differences.
Exporting
Often the first method firms use to enter foreign market Advantages -It is relatively low cost -Firms may achieve experience curve economies Disadvantages -Lower-cost manufacturing locations exist -Transport costs can be high -Tariff barriers can make it uneconomical -Foreign agents fail to act in the exporter's best interest
The chapter made the following points: 12
One danger confronting a company that goes abroad for the first time is being ill-informed. To develop cross-culture literacy, international businesses need to employ host-country nationals, build a cadre of cosmopolitan executives, and guard against the dangers of ethnocentric behavior.
The chapter made the following points: 10
One of the most dramatic developments of the past 20 years has been the collapse of communism in Eastern Europe, which has created enormous long-run opportunities for international businesses. In addition, the move toward free market economies in China and Latin America is creating opportunities (and threats) for Western international businesses.
Righteous moralist
One who claims that a multinational's home-country standards of ethics are the appropriate ones for companies to follow in foreign countries
Strategy and the firm:
Organization: the implementation of strategy
This chapter made the following points: 15
Organized labor has tried to counter the bargaining power of multinationals by forming international labor organizations. In general, these efforts have not been effective.
The chapter made the following points: 1
Over the past two decades, we have witnessed the globalization of markets and production.
Making Alliances Work
Partner Selection -Collect as much information as possible -Gather data from informed third parties -Get to know the potential partner well before committing Alliance Structure -Can be designed to make it difficult to transfer technology meant to be transferred -Contractual safeguards can be written into alliance agreement to guard against risk of opportunism -Both parties can agree in advance to swap skills and technologies that the other covets Managing the Alliance -Requires managers from both companies to build interpersonal relationships (relational capital) -Should promote learning from alliance partners -Should promote the diffusion of learned knowledge throughout the organization
Strategy is implemented through organization
People are the linchpin to the firm's organizational architecture Superior human resource management can be a sustained source of high productivity and competitive advantage in a global economy Success in international business requires that HRM policies be congruent with the firm's strategy
value creation
Performing activities that increase the value of goods or services to consumers
The Roots of Unethical Behavior: Managerial behavior is influenced by:
Personal ethics Decision making processes Organizational culture Unrealistic performance goals Leadership Societal culture
Strategic Positioning
Pick a position on the efficiency frontier that is viable (enough demand to support the choice). Configure internal operations to support the position. Have the right organization structure in place to execute the strategy.
The Roots of Unethical Behavior: Unrealistic Performance Goals
Pressure from parent company to meet goals that are unrealistic and can only be attained by acting in an unethical manner
Operations: The firm as a value chain
Primary activities -Involves the design, creation, and delivery of the product; its marketing; and its support and after-sale service. -Divide into:research and development, production, marketing and sales, customer service. Supportive activities -Provides the inputs that allow the primary activities to occur -Divide into:information systems, company infrastructure, logistics, human resources.
Cons of buying internationally:
Quality Jobs
Leveraging Subsidiary Skills
Recognize that valuable skills can be developed anywhere within the firm's global network (not just at the corporate center) Use incentive systems to encourage local employees to acquire new skills Develop a process to identify when new skills have been created Act as facilitators to transfer valuable skills within the firm
The Rise of Regionalism
Regional convergence of tastes and preferences can influence product offerings within a bloc of nations.
The chapter made the following points: 7
Religion may be defined as a system of shared beliefs and rituals that is concerned with the realm of the sacred. Ethical systems refer to a set of moral principles, or values, that are used to guide and shape behavior. The world's major religions are Christianity, Islam, Hinduism, and Buddhism. Although not a religion, Confucianism has an impact on behavior that is as profound as that of many religions. The value system of different religious and ethical systems have different implications for business practice.
Corporate Culture
Right people for the right jobs Corporate Culture: organization's norms and value system Not just the right people but people who fit the culture. What is the culture where you work?
The chapter made the following points : 10
Rights theories recognize that human beings have fundamental rights and privileges that transcend national boundaries and cultures. These rights establish a minimum level of moral acceptable behavior.
Islam
Second largest of the world's major religions Dates to A.D. 610 although the Muslim calendar begins in A.D. 622 Adherents of Islam are referred to as Muslims. Muslims constitute a majority in more than 40 countries. Islam views Jesus Christ as one of God's prophets. The central principle is that there is but one true omnipotent God (Allah). Objective of life is to fulfill the dictates of His will in the hope of admission to paradise. Other major principles of Islam include: (1) honoring and respecting parents (2) respecting the rights of others (3) being generous but not a squandeer (4) avoiding killing except for justifiable causes (5) not committing adultery (6) dealing justly and equitably with others (7) being of pure heart and mind (8) safeguarding the possessions of orphans, and (9) being humble and unpretentious Orthodox Muslims ritual: -requires prayer 5 times a day, -demands that women should be dressed in a certain manner, and -forbids the consumption of pork and alcohol Business meetings may be put on hold while the Muslim participants engage in their prayer ritual.
Ethics and International Business: Environmental Pollution
Should a multinational feel free to pollute in a developing nation if doing so does not violate laws? -Tragedy of the commons
The chapter made the following points: 5
Since the end of World War II, barriers to the free flow of goods, services, and capital have been lowered significantly. More than anything else, this has facilitated the trend toward the globalization of production and has enabled firms to view the world as a single market.
The Determinants of Culture
Social Structure Language Education Economic Philosophy Political Philosophy Religion The values and norms of a culture evolve based on: -prevailing political and economic philosophies -a society's social structure -the dominant religion, language, and education
Identify the forces that lead to differences in social culture.
Social Structure: the basic social organization in a society. -prevailing political and economic philosophies. -the social structure of a society -the dominant religion -language: both spoken and unspoken
Global Mindset
Some experts believe that a global mindset is essential to the success of global managers It is predicted that people's global mindset will improve significantly in the next 20 years 90% of the time employees are selected based on their technical expertise rather than important traits such as cultural sensitivity and adaptability
This chapter made the following points: 2
Staffing policy is concerned with selecting employees who have the skills required to perform particular jobs. Staffing policy can be a tool for developing and promoting a corporate culture.
This chapter made the following points: 11
Strategic alliances are cooperative agreements between actual or potential competitors.
The Disadvantages of Strategic Alliances
Strategic alliances can give competitors low-cost routes to new technology and markets Unless a firm is careful, it can give away more in a strategic alliance than it receives
Staffing policy
Strategy concerned with selecting employees for particular jobs
Philosophical Approaches to Ethics
Straw men -The Friedman doctrine -Cultural relativism -The righteous moralist -The naïve immoralist Utilitarian and Kantian Ethics Rights theories Justice Theories
Summary: In this chapter we have
Summarized the strategic role of human resource management in the international business. Identified the pros and cons of different approaches to staffing policy in the international business. Explained why managers may fail to thrive in foreign postings. Recognized how management development and training programs can increase the value of human capital in the international business firm. Explained how and why performance appraisal systems might vary across nations. Understood how and why compensation systems might vary across nations. Understood how organized labor can influence strategic choices in international business firms.
Focus on Managerial Implications: Sustainability
Sustainable strategies - strategies that not only help the MNC make good profits, but that also do so without harming the environment while simultaneously ensuring that the company operates in a socially responsible manner with regard to its stakeholders Sustainable strategies can be good for shareholders, the environment, local communities, employees, and customers
experience curve
Systematic production cost reductions that occur over the life of a product.
International strategy:
Taking products first produced for their domestic market & selling internationally with only minimal local customization.
The Role of Technology change
Technological change - particularly the dramatic developments in recent decades in communication, information processing, and transportation. The lowering of trade barriers made globalization of markets and production a theoretical possibility. Technological change has made it a tangible reality. Since the end of World War II, the world has seen major advances in communication, information processing, and transportation technology, including the explosive emergence of the Internet and the World Wide Web. Telecommunications is creating a global audience. Microprocessors and Telecommunications --microprocessor, which enabled the ex¬ plosive growth of high-power, low-cost computing, vastly increasing the amount of information that can be processed by individuals and firms. --technologies rely on the microprocessor to encode, transmit, and decode the vast amount of information that flows along these electronic highways. The Internet and the World Wide Web --In 1990, fewer than 1 million users were connected to the Internet. --By May 2009 the Internet had 1.6 billion users. --The Web makes it much easier for buyers and sellers to find each other, wherever they may be located and whatever their size. --It allows businesses, both small and large, to expand their global presence at a lower cost than ever before.
Why do people pay for Louis Vuitton? How the differentiate
The $800 wallet will never go on sale, not because of it's covetable or iconic reputation, but because Louis Vuitton just plain doesn't do sales. Louis Vuitton opts out of sales altogether. Nothing will be on sale. Ever. Expensive goods are assumed to be higher quality. Goods that others can see are expensive reflect upon the wearer's wealth and taste. Designer purses are desirable enough to cost a fortune because costing a fortune makes them desirable.
The chapter made the following points : 7
The Friedman doctrine states that only social responsibility of business is to increase profits, as long as the company stays within the rules. Cultural relativism contends that one should adopt the ethics of the culture in which one is doing business. The righteous moralist monolithically applies home-country ethics to a foreign situation, while the naive immoralist believes that if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, that manager should not either.
What is strategy?
The actions managers take to attain company goals.
Strategy
The actions taken by managers to attain the goals of the firm. 1) Profitability: the rate of return the firm makes on its invested capital. 2) Profit growth: the percentage increase in net profits over time.
The chapter made the following points: 15
The advantages of a greenfield venture in a foreign country it gives the firm a much greater ability to build the kind of subsidiary company that it wants. For example, it is much easier to build an organization culture from scratch than it is to change the culture of an acquired unit.
The chapter made the following points: 11
The advantages of wholly owned subsidiaries include tight control over technological know-how. The disadvantage is that the firm must bear all the costs and risks of opening a foreign market.
Justice Theory:
The attainment of a just (fair & equitable) distribution of economic goods & services
The chapter made the following points: 11
The benefits and costs of the emerging global economy are being hotly debated among businesspeople, economists, and politicians. The debate focuses on the impact of globalization on jobs, wages, the environment, working conditions, and national sovereignty.
Introduction: Managers must consider
The benefits of expanding into foreign markets. Which strategies to pursue in foreign markets. The value of collaboration with global competitors. The advantages of strategic alliances.
This chapter made the following points: 6
The best strategy for a firm to pursue often depends on a consideration of the pressures for cost reduction and for local responsiveness.
Core Competencies and Entry Mode: Management Know-How
The competitive advantage of many service firms is based upon management know-how International trademark laws are generally effective for protecting trademarks Since the risk of losing control over management skills to franchisees or joint venture partners is not high, the benefits from getting greater use of brand names is significant
The chapter made the following points : 11
The concept of justice developed by John Rawls suggest that a decision is just and ethical if people would allow it when designing a social system under a veil of ignorance.
Trade & Investment Barriers
The decline in barriers to the free flow of goods, services, and capital that has occurred since the end of WW2. -High tariffs on imports of manufactured goods The aim of such tariffs was to protect domestic industries from foreign competition Consequently, "beggar thy neighbor" retaliatory trade policies, with countries progressively raising trade barriers against each other. Ultimately, this depressed world demand and contributed to the Great Depression of the 1930s. Such trades have been driving both globalization of markets and the globalization of production. The lowering of trade and investment barriers allows firms t base production at the optimal location for that activity. Thus a firm might design a product in one country, produce component parts in two countries, assemble the product in yet another country, and then export the finished product around the world. If barriers do not decline more, it may slow the rate of globalization of both markets and production.
The chapter made the following points: 7
The development of the microprocessor and related developments in communication and information processing technology have helped firms link their worldwide operations into sophisticated information networks. Jet air travel, by shrinking travel time, has also helped to link the worldwide operations of international businesses. These changes have enabled firms to achieve tight coordination of their worldwide operations and to view the world as a single market.
Value Creation
The difference between V (the price that the firm can charge for that product given competitive pressures) and C (the costs of producing that product) Two basic strategies: 1) Differentiation 2) Low cost
This chapter made the following points: 14
The disadvantages associated with alliances can be reduced if the firm selects partners carefully, paying close attention to the firm's reputation and the structure of the alliance so as to avoid unintended transfers of know-how.
Joint Ventures
The establishment of a firm that is jointly owned by two or more otherwise independent firms Advantages: -A firm can benefit from a local partner's knowledge of the host country's competitive conditions, culture, language, political systems, and business systems -The costs and risks of opening a foreign market are shared with the partner -They can help firms avoid the risk of nationalization or other adverse government interference Disadvantages: -The firm risks giving control of its technology to its partner -The firm may not have the tight control over subsidiaries that it might need to realize experience curve or location economies -Shared ownership can lead to conflicts and battles for control if goals and objectives differ or change over time
Types of Staffing Policies
The ethnocentric approach: key management positions are filled by parent-country nationals The polycentric approach: host country nationals manage local subsidiaries and parent country nationals hold positions at HQ The geocentric approach: the best people are sought for key jobs throughout the organization, regardless of their nationality -The most attractive policy is the geocentric approach, however it is not always easy to implement
Experience Effects
The experience curve: systematic reductions in production costs that have been observed to occur over the life of a product A product's production costs decline by some quantity about each time cumulative output doubles Learning effects: cost savings that come from learning by doing -Labor productivity increases when individuals learn the most efficient ways to perform particular tasks and management learns how to manage the new operation more efficiently Economies of scale: reductions in unit cost achieved by producing a large volume of a product -The ability to spread fixed costs over a large volume -Not able to attain efficient scale of production unless served global markets -Bargaining power increases with suppliers which may allow economies of scale in purchasing Strategic Significance -Moving down experience curve allows firm to reduce its cost of creating value and increase its profitability -Once firm has established low-cost position it can act as a barrier to new competition
Organizational structure:
The formal division of the organization into subunits. The location of decision-making responsibilities within that structure. The establishment of integrating mechanisms to coordinate the activities of subunits including cross-functional teams and or pan-regional committees.
The chapter made the following points: 2
The globalization of markets implies that national markets are merging into one huge marketplace. However, it is important not to push this view too far.
The chapter made the following points: 3
The globalization of production implies that firms are basing individual productive activities at the optimal world locations for the particular activities. As a consequence, it is increasingly irrelevant to talk about American products, Japanese products, or German products, since these are being replaced by "global" products.
The chapter made the following points: 9
The main advantage of franchising is that the franchisee bears the costs and risks of opening a foreign market. Disadvantages center on problems of quality control of distant franchisees.
The chapter made the following points: 8
The main advantage of licensing is that the licensee bears the costs and risks of opening a foreign market. Disadvantages include he risk of losing technological know-how to the licensee and the lack of a tight control over licensees.
Cont'
The main reasons for expatriate failure for U.S. MNEs -The inability of an expatriate's spouse to adjust -The inability of the manager to adjust -Other family problems -The manager's personal or emotional maturity -The inability to cope with larger overseas responsibilities For European firms, only one reason was found to consistently explain expatriate failure -The inability of the manager's spouse to adjust to a new environment For Japanese firms, the reasons for failure were -The inability to cope with larger overseas responsibility -Difficulties with the new environment -Personal or emotional problems -A lack of technical competence -The inability of a spouse to adjust
The chapter made the following points: 2
The most attractive foreign markets tend to be found in politically stable developed and developing nations that have free market systems and where there is no dramatic upsurge in either inflation rates or private-sector debt.
Expatriate Pay
The most common approach to expatriate pay is the balance sheet approach -Equalizes purchasing power across countries so employees can have the same standard of living in the foreign country as they do at home Typical compensation packages include -Base salary -A foreign service premium -Allowances of various types -Benefits -Tax differentials
This chapter made the following points: 12
The most common approach to expatriate pay is the balance sheet approach. This approach aims to equalize purchasing power so employees can enjoy the same living standard in their foreign posting that they had at home.
Ethics and International Business
The most common ethical issues in business involve -Employment practices -Human rights -Environmental pollution -Corruption
The chapter made the following points : 3
The most common ethical issues in international business involve employment practices, human rights, environmental regulations, corruption, and social responsibility of multinational corporations.
Christianity
The most widely practiced religion in the world The vast majority of Christians live in Europe and the Americas Grew out of Judaism A monotheistic religion- belief in one God
Strategy and the firm: In Sum: Strategic Fit
The operations of the firm must support the firm's strategy. The organizational architecture of the firm must match the firm's operations and strategy. If market conditions shift, so must the firm's strategy, operations, and organization.
The chapter made the following points: 12
The optimal choice of entry mode depends on the firm's strategy. When technological know-how constitutes a firm's core competence, wholly-owned subsidiaries are preferred, since they best control technology. When management know-how constitutes a fir,'s core competence, foreign franchises controlled by joint ventures seem to be optimal. When the firm is pursuing a global standardization or transnational strategy, the need for tight control over operations to realize location and experience curve economies suggest wholly-owned subsidiaries are the best entry mode.
World Trade Organization (WTO)
The organization that succeeded the General Agreement on Tariffs and Trade (GATT) as a result of the successful completion of the Uruguay Round of GATT negotiations.
Moore's law
The power of microprocessor technology doubles and its costs of production fall in half every 18 months.
Expatriate failure
The premature return of an expatriate manager to the home country.
The chapter made the following points: 4
The social structure of a society refers to its basic social organization. Two main dimensions along which social structures differ are the individual-group dimension and the stratification dimension.
The chapter made the following points : 1
The term ethics refers to accepted principles of right or wrong that govern the conduct of a person, the members of a profession, or the actions of an organization. Business ethics are the accepted principles of right or wrong governing the conduct of businesspeople, and an ethical strategy is one that does not violate these accepted principles.
long-term versus short term orientation
The theory of the extent to which a culture programs its citizens to accept delayed gratification of their material, social, and emotional needs. It captures attitudes toward time, persistence, ordering by status, protection of face, respect for tradition, and reciprocation of gifts and favors.
The chapter made the following points: 13
The value systems and norms of a country can affect the cost of doing business in that country.
Individualism versus collectivism
Theory focusing on the relationship between the individual and his or her fellows. In individualistic societies, the ties between individuals are loose and individual achievement is highly valued. In societies where collectivism is emphasized, ties between individuals are tight, people are born into collectives, such as extended families, and everyone is supposed to look after the interests of his or her collective.
power distance
Theory of how a society deals with the fact that people are unequal in physical and intellectual capabilities. High power distance cultures are found in countries that let inequalities grow over time into inequalities of power and wealth. Low power distance cultures are found in societies that try to play down such inequalities as much as possible.
masculinity versus feminity
Theory of the relationship between gender and work roles. In masculine cultures, sex roles are sharply differentiated and traditional "masculine values" such as achievement and the effective exercise of power determine cultural ideals; in feminine cultures, sex roles are less sharply distinguished, and little differentiation is made between men and women in the same job.
Rights Theory:
Theory that recognizes that human beings have fundamental rights and privileges that transcend national boundaries & cultures
The chapter made the following points: 5
There are 6 modes of entering a foreign market: 1) exporting, 2) creating turnkey projects, 3) licensing, 4) franchising, 5) establishing joint ventures, and 6) setting up a wholly owned subsidiary.
Market Entry Summary
There are no "right" decisions with foreign market entry, just decisions that are associated with different levels of risk and reward Firms in developing countries can learn from the experiences of firms in developed countries
The chapter made the following points: 3
There are several advantages associated with entering a national market early, before other international businesses have established themselves. These advantages must be balanced against the pioneering costs that early entrants often have to bear, including the greater risk of business failure.
Philosophical Approaches to Ethics
There are several approaches to business ethics including: Strawman -Friedman Doctrine -Cultural Relativism -Righteous Moralist -Naive Immoralist Utilitarian and Kantian Rights theories Justice Theories
Focus on Managerial Implications: Corporate social responsibility
There should be a presumption in favor of decisions that have both good economic and good social consequences
Performance appraisal systems are used to evaluate employees
These systems are important components in the firm's control system Performance Appraisal Problems -Unintentional bias -Host country managers can be biased towards their own frame of reference -Tend to rely on hard data: productivity, profitability, market share
Summary:
This chapter discussed the source and nature of ethical issues in international businesses, the different philosophical approaches to business ethics, and the steps managers can take to ensure that ethical issues are respected in international business decisions.
Summary:
This chapter focused on human resource management in international businesses. HRM activities include human resource strategy, staffing, performance evaluation, management development, compensation, and labor relations. None of these activities is performed in a vacuum; all must be appropriate to the firm's strategy.
Summary:
This chapter looked at the nature of social cultural and studied some implications for business practice.
Summary:
This chapter reviewed basic principles of strategy and the vagarious ways in which firms can profit from global expansion. It looked at the strategies that firms that compete globally can adopt.
Summary:
This chapter sets the scene for the rest of the book. It shows how the world economy is becoming more global and reviews the main drivers of globalization, arguing that they seem to be thrusting nation-states toward a more tightly integrated global economy. We looked at how the nature of international business is changing in response to the changing global economy; we discussed some concerns raised by rapid globalization; and we reviewed implications of rapid globalization for individual managers.
Focus on Managerial Implications: Ethics Officers
To encourage ethical behavior in a business, a number of firms now have ethics officers Ethics officers ensure -Employees are trained to be ethically aware -Ethical considerations enter decision-making -The company's code of ethics is followed
Expanding the Market: Leveraging Products and Competencies
To increase growth, a firm can sell products or services developed at home in foreign markets. -Success depends on the type of goods and services, and the firm's core competencies (skills within the firm that competitors cannot easily match or imitate) **Enable the firm to reduce the costs of value creation **Create perceived value so that premium pricing is possible **They are the source of a firm's competitive advantage
The chapter made the following points : 12
To make sure that ethical issues are considered in international business decisions, managers should (a) favor hiring and promoting people with a well-grounded sense of personal ethics; (b) build an organizational culture and exemplify leadership behaviors that place a high value on ethical behavior; (c) put decision-making processes in place that require people to consider the ethical dimension of business decisions (d) establish ethics officers in the organization with responsibility for ethical decision making; (e) be morally courageous and encourage others to do the same; (f) make corporate social responsibility a cornerstone of enterprise policy; and (g) pursue strategies that are sustainable.
Approaches to Labor Relations
Traditionally, most labor relations have been decentralized to individual subsidiaries The trend is toward greater centralized control Some firms threaten unions with moving production in order to limit wage increases In addition, many firms are realizing how work is organized within a plant can be a source of competitive advantage
This chapter made the following points: 8
Training can lower the probability of failure. It should include cultural training, language training, and practical training, and it should be provided to both the expatriate manager and the spouse.
Training & Management Development
Training focuses upon preparing the manager for a specific job Management development focuses on developing the skills of the manager over career with the firm Traditionally, training has been considered more important than management development, however this mindset is beginning to shift
The advantages and disadvantages of each entry mode is determined by
Transport costs and trade barriers Political and economic risks Costs Firm strategy
The Strategy of Organized Labor
Trying to set-up their own international organizations Lobbying for national legislation to restrict multinationals Trying to achieve regulations of multinationals through international organization such as the United Nations So far, these efforts have had only limited success
The chapter made the following points: 7
Turnkey projects allow firms to export their process know-how to countries where foreign direct investment (FDI) might be prohibited, thereby enabling the firm to earn a greater return from this asset. The disadvantage is that the firm may inadvertently create efficient global competitors in the process.
Rights theories
Twentieth-century theories that recognize that human beings have fundamental rights and privileges that transcend national boundaries and cultures.
The chapter made the following points: 4
Two factors seem to underlie the trend toward globalization: declining trade barriers and changes in communication, information, and transportation technologies.
Recognize the main drivers of globalization.
Two macro factors underlie the trend toward greater globalization: 1) the decline in barriers to the free flow of goods, services, and capital that has occurred since the end of World War II 2) technological change, particularly the dramatic developments in recent years in communication, information processing, and transportation technologies.
Expatriate Failure Rates
U.S. firms have higher expatriate failure rates than either European or Japanese firms -Research shows that 76% of U.S. MNEs had expatriate failure rates of 10% or more and 7% had failure rates as high as 20% -Failure rates may have dropped, but estimates of the cost of expatriate failure range from $40,000 to $1 million
Foreign Corrupt Practices Act (FCPA)
U.S. law regulating behavior regarding the conduct of international business in the taking of bribes and other unethical actions.
The chapter made the following points : 5
Unethical behavior is rooted in poor personal ethics, societal culture, the psychological and geographic distances of a foreign subsidiary from the home office, a failure to incorporate ethical issues into strategic and operational decision making, a dysfunctional culture, and failure of leaders to act in an ethical manner.
The Roots of Unethical Behavior: Organizational Culture
Unethical behavior may exist in firms with an organizational culture that does not emphasize business ethics Values and norms shape the culture of a firm, and that culture influences decision making
The chapter made the following points : 8
Utilitarian approaches to ethics hold that the moral worth of actions or practices is determined by their consequences, and the best decisions are those that produce the greatest good for the greater number of people.
The chapter made the following points: 3
Values and norms are influenced by political and economic philosophy, social structure, religion, language, and education.
The chapter made the following points: 2
Values and norms are the central components of a culture. values are abstract ideals about what a society believes to be good, right, and desirable. Norms are social rules and guidelines that prescribe appropriate behavior in particular situations.
Explain what is meant by the culture of a society.
Viewing culture as a system of values and norms that are shared among a group of people and that when taken together constitute a design for living. By values, we mean abstract ideas about what a group believes to be good, right, and desirable. By norms, we mean the social rules and guidelines that prescribe appropriate behavior in particular situations. Society refers to a group of people sharing a common set of values and norms. Folksway are the routine conventions of everyday life. Mores refers to norms that are more widely observed, have greater moral significance than other norms, and are central to the functioning of a society and to its social life.
GATT (General Agreement on Tariffs and Trade)
Was a free trade agreement between 23 countries that eliminated tariffs and increased international trade. It was the first worldwide multilateral free trade agreement. It was in effect from June 30, 1948 until January 1, 1995. It ended when it was replaced by the more robust World Trade Organization. The purpose of GATT was to eliminate harmful trade protectionism. That had sent global trade down 65 percent during the Great Depression. GATT restored economic health to the world after the devastation of the depression and World War II. GATT had three main provisions: 1) Each member must confer most favored nation status to every other member. 2) GATT prohibited restriction on the number of imports and exports. 3) Developed countries agreed to eliminate tariffs on imports of developing countries to boost their economies. GATT prohibited restriction on the number of imports and exports. The exceptions were: --When a government had a surplus of agricultural products. --If a country needed to protect its balance of payments because its foreign exchange reserves were low. --Emerging market countries that needed to protect fledgling industries. Created the World Bank and the International Monetary Fund to coordinate global growth and almost a third organization. Pros: -For 47 years, GATT reduced tariffs. -By increasing trade, GATT promoted world peace. -By showing how free trade works, GATT inspired other trade agreements. -GATT also improved communication. It provided incentives for countries to learn English, the language of the world's largest consumer market. Cons: -Low tariffs destroy some domestic industries, contributing to high unemployment in those sectors. -By the 1980s, GATT did not address the trade of services that allowed them to grow beyond any one country's ability to manage them. -Like other free trade agreements, GATT reduced the rights of a nation to rule its own people. Farmers that stay often grow opium, coca, or marijuana, just because they can't grow traditional crops and stay in business. Violence from the drug trade may force them to emigrate to protect themselves and their children.
International Ethics
What is ok in one country is not ok in another Most common international issues:-■Employment practices - manufacturing-■Human rights - South Africa-■Environmental regulations - move to countries with lower standards ■Corruption - bribes vs "gifts"
Ethics and International Business: Human Rights
What is the responsibility of a foreign multinational when operating in a country where basic human rights are not respected? -South Africa and apartheid -The Sullivan principles adopted by GM
Ethics and International Business: Employment Practices
What practices should be used when work conditions are inferior in the host nation?
Core Competencies and Entry Mode: Technological Know-How
When competitive advantage is based on proprietary technological know-how, firms should avoid licensing and joint venture arrangements in order to minimize the risk of losing control over the technology If a technological advantage is only transitory, or the firm can establish its technology as the dominant design in the industry, then licensing may be attractive
Differences in Consumer Tastes and Preferences
When consumer tastes and preferences differ significantly between countries, firms face strong pressures for local responsiveness.
global web
When different stages of value chain are dispersed to those locations around the globe where value added is maximized or where costs of value creation are minimized
The chapter made the following points: 13
When establishing a wholly owned subsidiary in a country, a firm must decide whether to do so by a greenfield venture or by acquiring an established enterprise in the target market.
Differences in Infrastructure and Traditional Practices
When there are differences in infrastructure and/or traditional practices, a need to customize products emerges.
A firm expanding internationally must decide
Which markets to enter When to enter them Scale of entry
Buddhism
With some 535 million adherents, Buddhism was founded in the sixth century B.C. By Siddhartha Gautama in what is now Nepal. Siddhartha renounced his wealth to pursue in ascetic lifestyle and spiritual perfection. His adherents claimed he achieved nirvana but decided to remain on earth to teach his followers how they, too, could achieve this state of spiritual enlightenment. Siddhartha became known as the Buddha (which means "the awkward one "). Today, most Buddhists are found in Central and Southeast Asia, China, Korea, and Japan. According to Buddhism, suffering originates in peoples desires for pleasureCessation of suffering can be achieved by following a path for transformation.
Labor:
Writer editor printer binder 'lumberjack'
Ethical strategy
a course of action that does not violate a company's business ethics
Just Distribution
a distribution of goods and services that is considered fair and equitable
global standardization strategy
a firm focuses on increasing profitability and profit growth by reaping the cost reductions that come from economies of scale, learning effects, and location economies
society
a group of people who share a common set of values and norms
profitability
a ratio or rate of return concept
ethical system
a set of moral principles, or values, that are used to guide and shape behavior
Ethical dilemma
a situation in which there is no ethically acceptable solution
religion
a system of shared beliefs and rituals that are concerned with the realm of the sacred
caste systems
a system of social stratification in which social position is determined by the family into which a person is born, and change in that position is usually not possible during an individual's lifetime.
class system
a system of social stratification in which social status is determined by the family into which a person is born and by subsequent socioeconomic achievements; mobility between classes is possible
culture
a system of values and norms that are shared among a group of people and that when taken together constitute a design for living.
Values:
abstract ideas about what a society believes to be good, right and desirable EX: individual freedom, democracy, role of women, marriage
values
abstract ideas about what a society believes to be good, right, and desirable
Business ethics
accepted principles of right or wrong governing the conduct of business people
Human resource management (HRM)
activities an organization conducts to use its human resources effectively
First-Mover Advantages
advantages accruing to the first to enter a market
Righteous Moralist
an MNE's home country standards of ethics are the appropriate ones for companies to follow in foreign countries -Approach is common among managers from developed countries
Convention on Combating Bribery of Foreign Public Officials in International Business Transactions
an OECD convention that establishes legally binding standards to criminalize bribery of foreign public officials in international business transactions and provides for a host of related measures that make this effective.
international business
any firm that engages in international trade or investment
Licensing Agreement
arrangement in which a licensor grants the rights to intangible property to the licensee for a specified period and receives a royalty fee in return.
Transnational Strategy
attempt to simultaneously achieve low costs through location economies, economies of scale, and learning effects while also differentiating product offerings across geographic markets to account for local differences and fostering multidirectional flows of skills between different subsidiaries in the firm's global network of operations
strategic alliances
cooperative agreements between potential or actual competitors
location economies
cost advantages from performing a value creation activity at the optimal location for that activity
learning effects
cost savings that come from learning by doing
Incentives:
devices used to reward appropriate managerial behavior
People:
employees and the strategy used to recruit, compensations, and retain those individuals
Timing entry
entry is early when a firm enters a foreign market before other foreign firms and late when a firm enters after other international businesses have established themselves
Cultural relativism
ethics are culturally determined and firms should adopt the ethics of the cultures in which they operate -"When in Rome, do as the Romans do"
A global standardization strategy
focuses on increasing profitability and profit growth by reaping the cost reductions that come from economies of scale, learning effects, and location economies -The goal is to pursue a low-cost strategy on a global scale -Makes sense when there are strong pressures for cost reductions and demands for local responsiveness are minimal
A localization strategy
focuses on increasing profitability by customizing the firm's goods or services so that they provide a good match to tastes and preferences in different national markets -Makes sense when there are substantial differences across nations with regard to consumer tastes and preferences, and where cost pressures are not too intense
Low cost
global standardization: makes sense when cost pressures are intense & demands for local responsiveness are limited
Understand what is meant by the term globalization.
globalization refers to the shift toward a more integrated and interdependent world economy. Several facets, including: -globalization of markets and -the globalization of production. Globalization of Markets: the merging of historically distinct & separate national markets into one huge global marketplace. Globalization of Production: refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production (such as labor, energy, land, and capital).
Social Structure
he basic social organization of society
social strata
hierarchical social categories often based on family background, occupation, and income
Staffing Policies Polycentric Staffing:
host country nationals are recruited to manage subsidiaries in their own country, while parent-country nationals occupy key positions at corporate HQ -This is a way to assure company is understanding of the culture they entered -Less expensive to maintain because manages are nationals
Naïve Immoralist
if a manager of an MNE sees that firms from other nations are not following ethical norms in a host nation, that manager should not either -Actions are ethically justified if everyone else is doing the same thing
factors of production
inputs into the productive process of a firm, including labor, management, land, capital, and technological know-how.
An international strategy
involves taking products first produced for the domestic market and then selling them internationally with only minimal local customization -Makes sense when there are low cost pressures and low pressures for local responsiveness
Child Labor
is still common in many poor nations
Culture in China:
it is acceptable to stare at others in public it is acceptable to stand very close to others in public spaces
Process:
manner in which decisions are made and work is performed
Controls:
metrics used to measure the performance of subunits and make judgments about how well the subunits are run.
globalization of markets
moving away from economic system in which national markets are distinct entities, isolated by trade barriers and barriers of distance, time, and culture, and toward a system in which national markets are merging into one global market
universal needs
needs that are the same all over the world, such as steel, bulk chemicals, and industrial electronics
England:
no small talk - very formal, punctual, business cards exchanged at only at the end of meeting
Organizational culture:
norms and value systems that are shared among the employees
mores
norms seen as central to the functioning of a society and to its social life
international trade
occurs when a firm exports goods or services to consumers in another country
Naive immoralist
one who asserts that if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, that manager should not either
Energy:
production - plant
folkways
routine conventions of everyday life
Exporting
sale of products produced in one country to residents of another country
norms
social rules and guidelines that prescribe appropriate behavior in particular situations
Staffing Policies Ethnocentric Policy:
staffing approach in which all key management positions are filled by parent-country nationals Why? -Host country lacks qualified individuals -Best way to maintain unified culture -Create value by transferring core competencies to a foreign operation Is it popular? No- limits advancement opportunities for host-country nationals Firm may fail to understand host-country cultural differences that require different approaches to marketing & management
social structure
the basic social organization of a society
Cultural relativism
the belief that ethics are culturally determined and that firms should adopt the ethics of the cultures in which they operate
Kantian ethics
the belief that people should be treated as ends and never as means to the ends of others
Staffing Policies Geocentric Staffing:
the best people for key jobs throughout the organization, regardless of nationality -Enable firms to make best use of HR -Enables firm to build a cadre or international executives who feel at home working in a number of cultures
incentives
the devices used to reward appropriate managerial behavior
people
the employees of the organization, the strategy used to recruit, compensate, and retain those individuals, and the type of people that they are in terms of their skills, values, and orientation.
social mobility
the extent to which individuals can move out of the social strata into which they are born.
processes
the manner in which decisions are made and work is performed within any organization
controls
the metrics used to measure the performance of subunits and make judgments about how well managers are running those subunits
Utilitarian approach
the moral worth of actions or practices is determined by their consequences -Actions have multiple consequences, some good, some not -Actions are desirable if they lead to the best possible balance of good consequences over bad consequences
Friedman doctrine
the only social responsibility of business is to increase profits, so long as the company stays within the rules of law -Companies should do only what is mandated by law and what is required to run a business efficiently
Corporate culture
the organization's norms and value systems
profit growth
the percentage increase in net profits over time
organizational structure
the three-part structure of an organization, including its formal division into subunits such as product divisions, its location of decision making responsibilities within that structure, and the establishment of integrated mechanisms to coordinate the activities of all subunits.
stock of foreign direct investment
the total accumulated value of foreign-owned assets at a given time
Organization architecture:
the totality of a firm's organization - formal organizational structure, control systems and incentives, organizational culture, processes, and people
Organization Architecture
the totality of a firm's organization, including formal organizational structure, control systems and incentives, organizational culture, processes, and people
Organizational Culture
the values and norms shared among an organization's employees
organizational culture
the values and norms shared among an organization's employees
operations
the various value creation activities a firm undertakes
Utilitarian approaches to ethics
these hold that the moral worth of actions or practices is determined by their consequences
globalization
trend away from distinct national economic units and toward one huge global market
globalization of production
trend by individual firms to disperse parts of the productive processes to different locations around the globe to take advantage of national differences in the cost and quality of factors of production
A transnational strategy
tries to simultaneously: -Achieve low costs through location economies, economies of scale, and learning effects -Differentiate the product offering across geographic markets to account for local differences -Foster a multidirectional flow of skills between different subsidiaries -Makes sense when there are both high cost pressures and high pressures for local responsiveness
International Strategy
trying to create value by transferring core competencies to foreign markets where indigenous competitors lack those competencies
cross-cultural literacy
understanding how the culture of a country affects the way business is practiced
Norms:
unwritten rules that are acceptable in a society EX: Chewing with you mouth closed, the way you dress, elevator etiquette
Corporate Social Responsibility (CSR)
■The ideas that businesses should consider social consequences of economic actions when making business decisions ■Sustainable Strategies: strategies that help the firm be profitable without harming the environment
