BUSA 3000 Exam 1

Fisher Body in Belgium (car exteriors)

"Body by Fisher" = "Corpse by Fisher"

Pepsi in Germany

"Come Alive with Pepsi" = "Come out of the grave with Pepsi"

Pepsi in Taiwan

"Come Alive with Pepsi" = "Pepsi brings your ancestors back from the dead"

Salem cigarettes in Japan

"Salem-feeling Free" = "Smoking Salem makes your mind feel free and empty"

Parker Pen in Latin America

"Use Parker Pen, avoid embarrassment" = "Use Parker Pen, avoid pregnancy!"

Societal Consequences of Market Globalization

-Contagion: Rapid spread of financial or monetary crises from one country to another -Loss of national sovereignty -Offshoring and the flight of jobs -Effect on the poor -Effect on the natural environment -Effect on national culture

Javier's jobs since college:

-United Nations World Food Programme, Guatemala and Honduras -Director of Research, Bates Advertising, Dominican Republic -Manager in a charity in Mexico

death of distance 1

1500 to 1840s; human-powered ships and horse-drawn carriages (10 miles per hour)

Adam Smith

1723 - 1790

death of distance 2

1850 to 1900; Steamships(36 miles per hour); steam locomotive trains (65 miles per hour)

2nd phase of globalization

1900 - 1930; rise of electricity and steel production; emergence and dominance of early MNEs (mainly from Europe and North America) in manufacturing, extractive, and agricultural industries

3rd phase of globalization

1948 to 1970s; formation of General Agreement on Tariff and Trade (GATT); conclusion of World War II; Marshall Plan to reconstruct Europe; focus by industrializing Western countries to reduce trade barriers; rise of MNEs from Japan; development of global capital markets; rise of global trade names

4th phase of globalization

1980s - present; privatization of state enterprises in transition economies; revolution in information, communication, and transportation technologies; remarkable growth of emerging markets; rapid growth in cross-border trade of products, services, and capital; rise of internationally active SMEs and services firms; rising prosperity of emerging markets

MNE Accomplishments examples

A B N A M R O (Netherlands); S C Johnson (United States); GlaxoSmithKline (United Kingdom); Hindustan Unilever (India); Nokia (Finland); Norsk Hydro (Norway); Philips Electronics (Netherlands); Toyota (Japan); Tesla (United States)

Mercantilism

A belief popular in the 16th century that national prosperity results from maximizing exports and minimizing imports; the belief that national prosperity is the result of a positive balance of trade, achieved by maximizing exports and minimizing imports

industrial cluster

A concentration of suppliers and supporting firms from the same industry located within the same geographic area. Similar to Porter's Related and Supporting Industries; A strong cluster can serve as an export platform for the nation.

Absolute Advantage Principle

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

Non-FDI Based Explanations: International Collaborative Ventures

A form of cooperation between two or more firms. Partners pool resources and capabilities to create synergies, and share the risk of joint efforts; Starting in the 1980s, firms increasingly began using collaborative ventures to venture abroad; Collaboration provides access to foreign partners' know-how, capital, distribution channels, or marketing assets. Also helps overcome government imposed obstacles.

Competitive Advantage (Firms)

A foundation concept that explains how individual firms gain and maintain distinctive competencies, relative to competitors, that lead to superior performance; It refers to the distinctive assets, competencies, and capabilities that are developed or acquired by the firm; The collective competitive advantages held by the firms in a nation are the basis for the competitive advantages of the nation at large.

Geocentric orientation

A global mindset in which the manager is able to understand a business or market without regard to national boundaries. Managers should strive for a geocentric orientation.

Polycentric orientation

A host country mindset in which the manager develops a greater affinity for the country in which he or she works than for the home country; all countries cultures are respected

Critical incident analysis 1

A method for analyzing awkward situations in cross cultural interactions by developing empathy for other points of view.

Innovation can develop:

A new product or improve an existing product; New ways of manufacturing; New ways of marketing; New ways of organizing company operations.

National Industrial Policy

A proactive economic development plan employed by the government to nurture or support promising industry sectors with potential for regional or global dominance. Initiatives can include: Tax incentives; Monetary and fiscal policies; Rigorous educational system; Investment in national infrastructure; Strong legal and regulatory systems.

Cross-cultural risk

A situation or event where a cultural miscommunication puts some human value at stake. It arises in environments comprised of unfamiliar languages, and unique values, beliefs, and behaviors

religion

A system of common beliefs or attitudes regarding a being or system of thought that people consider sacred, divine, or the highest truth; and the associated moral values, traditions, and rituals; Influences culture, and therefore business and consumer behavior; Example: The "protestant work ethic" emphasizes hard work, individual achievement, and a sense that people can control their environment - the underpinnings for the development of capitalism.

Valuing personal relationships

Ability to appreciate personal relationships; which are often more important than achieving one-time goals or "winning" arguments

Flexibility and adaptability

Ability to be creative in devising innovative solutions, be open-minded about outcomes, and show "grace under pressure".

Perceptiveness

Ability to closely observe and comprehend subtle information in the speech and behavior of others

Tolerance for ambiguity

Ability to tolerate uncertainty and lack of clarity in the thinking and actions of others

ethical connections 3

Access to cell phones saves wasted trips, provides access to education and healthcare, and facilitates communication between suppliers and customers.

Managerial Guidelines for Cross-Cultural Success

Acquire factual and interpretive knowledge about the other culture; try to speak their language; Avoid cultural bias; Develop cross-cultural skills, such as perceptiveness, interpersonal skills, adaptability

develop economies of scale in sourcing, production, marketing, and R&R

Airbus lowers its overall costs by sourcing, manufacturing, and selling aircraft worldwide

Factor Proportions Theory

Also known as Factor Endowments Theory. It argues that each country should produce and export products that intensively use relatively abundant factors of production, and import goods that intensively use relatively scarce factors of production; However, the Leontief Paradox revealed that countries can successfully export products that use less abundant resources (e.g., the U.S. often exports labor-intensive goods). Implies that international trade is complex and cannot be fully explained by a single theory.

Cultural Metaphors examples

American football represents systematic planning, strategy, leadership, and struggling against rivals; The Swedish stuga (a summer cottage) represents the love of nature and desire for individualism, in Sweden; The Spanish bullfight reflects the importance of ritual, style, courage, and pride in Spain.

Factor conditions examples

An abundance of cost-effective and well-educated workers give China a competitive advantage in the production of laptop computers.

idioms

An expression whose symbolic meaning differs from its literal meaning; You can't understand it simply by knowing what the individual words mean

be closer to supply sources, benefit from global sourcing advantages, or gain flexibility in the sourcing of products

Apple sources parts and components from the best suppliers worldwide

country risk examples 4

Argentina has suffered high inflation and other economic turmoil

Comparative Advantage Principle Example 1

Arguably, no country is better than Japan at making cars and cell phones. But because Japan is especially good at making cars, it concentrates its resources on making them.

FDI Based Explanations: Monopolistic Advantage Theory

Argues that MNEs prefer FDI because it provides the firm with control over resources and capabilities in the foreign market, and a degree of monopoly power relative to foreign competitors; Key sources of monopolistic advantage include proprietary knowledge, patents, unique know-how, and sole ownership of other assets.

New Trade Theory

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

Coca-Cola

As water grows scarce in much the world, some multinational firms are conserving their use of this critical resource. Coca-Cola, a major water consumer, conducts a water sustainability program to address shortages in India.

Ashley Lumb 4

Ashley's Success Factors Hard work and networking; Ashley made a strong effort to meet lots of people. She sent out many resumes, asked a lot of questions, and researched job markets that interested her; To keep afloat between assignments, she worked several "unglamorous" jobs.

Ashley Lumb 3

Ashley's jobs since college: - Marketing Representative in Nice, France - Account Representative in Monte Carlo - Marketing Associate in Rome, Italy - Marketing Manager at Italian Vogue magazine

idioms examples

Australia: "The tall poppy gets cut down" (importance of not being showy or pretentious); Thailand: "If you follow older people, dogs won't bite you" (wisdom); Japan: "The nail that sticks out gets hammered down" (group conformity)

Tesla (United States)

Automobiles; A world leader in developing electric vehicles

Toyota (Japan)

Automobiles; The world leader in developing efficient gas-electric vehicles such as the top-selling Prius

globalization of services

Banking, hospitality, retailing, and other service industries are rapidly internationalizing. Firms outsource business processes and other services in the value chain to vendors overseas. And, in a new trend, many people go abroad to take advantage of low-cost services.

Sustainable Practices examples

Beneficial agricultural practices that do no harm; Water conservation. Clean water is scarce worldwide; Air quality protection; Reduced energy and fuel consumption; Increased use of solar and wind energy; Improved work processes that improve sustainability reduce costs and support the natural environment.

Currency Risk example 3

Brazil and Turkey have experienced very high inflation

Embracing CSR and Sustainability

Build capabilities to enhance the firm's contribution to the local community and global environment; Ensure diverse voices by creating organizations that employ managers and workers from around the world; Develop closer relations with foreign stakeholders to understand their needs and jointly develop solutions; Train managers in global CSR principles and integrate these into managerial responsibilities; Develop global CSR standards and objectives, and that are communicated and implemented across the firm worldwide.

NGO example 2

CARE is an international non-profit organization dedicated to reducing poverty

Examples of Firm Competitive Advantage 3

Cadbury's capabilities in international marketing and distribution.

Ashley Lumb 5

Challenges Working abroad means stepping outside your comfort zone; May require following a career path that is nontraditional or not clearly defined; Language and culture barriers are ever present.

Terrance Rogers 5

Challenges: Language and cultural barriers should be faced early in your career. Learn from cultural missteps early, so that you can be a better leader tomorrow.

Foxconn

China's electronics factories were poor so Apple and Foxconn took steps to improve the work environment after charges about poor working conditions; a leading supplier to Apple

confront international competitors more effectively or thwart the growth of competition in the home market

Chinese appliance maker Haier established operations in the United States, partly to gain competitive knowledge about Whirlpool, its chief US rivals

Theories of International Trade and Investment: Nation-level Explanations: Why do nations trade?

Classical Theories: Mercantilism; Absolute Advantage Principle; Comparative Advantage Principle; Factor Proportions Theory; International Product Life Cycle Theory; New Trade Theory

Comparative versus Competitive Advantage

Comparative Advantage + Competitive Advantage = National Competitiveness

Philips Electronics (Netherlands)

Consumer electronics; Top innovator of energy-saving appliances and lighting products as well as medical devices for developing economies

Hindustan Unilever (India)

Consumer products; Provided microfinance and training to 65,000 poor women to start their own wholesale firms, doubling their incomes

S C Johnson (United States)

Consumer products; Shifted packaging to lightweight bottles, saving millions of kilograms of consumer waste annually

Free trade is usually best because:

Consumers and firms can buy the products they want; Imported products may be cheaper than domestically produced products; Lower-cost imports help reduce business costs, thereby raising company profits; Lower-cost imports help consumers save money, thereby increasing their living standards; Unrestricted international trade tends to increase the overall prosperity of nations.

Theories of International Trade and Investment: Nation-level Explanations: How can nations enhance their competitive advantage?

Contemporary Theories: Competitive Advantage of Nations; Michael Porter's Diamond Model; National Industrial Policy

Pyramid of Ethical Behavior (top to bottom)

Corporate social responsibility (social); ethical behavior (ethical); complying with laws and regulations (legal)

Which of the following is NOT an example of Cross Cultural Risk Factor?

Cost of Production

Jordan is employed in an American investment firm and is currently working with some Japanese clients on a new project. He uses a lot of hand gestures during meetings which his clients find very distracting and rude. This has also led to many misunderstandings between Jordan and his Japanese clients in the recent past. Which of the following best describes such a situation?

Cross Cultural Risk

Four Risks of International Business

Cross-Cultural Risk, Country Risk, Currency Risk, Commercial Risk

Examples of Firm Competitive Advantage 1

Dell's prowess in the management of its global supply chain.

Indulgence versus restraint example

Denmark, Mexico, and the U.S. score high on indulgence. China, Iraq, and South Korea score high on restraint.

Geography

Different levels - the world, the nation, the region, cities - elicit unique cultural perspectives.

country risk examples 2

Doing business in Russia often requires paying bribes to government officials

Stages in Company Internationalization

Domestic Focus; Pre-export Stage; Experimental Involvement; Active Involvement; Committed Involvement

International Product Life Cycle Theory

Each product and its associated manufacturing technologies go through three stages of evolution: Introduction, maturity, and standardization; In the introduction stage, the inventor country enjoys a monopoly both in manufacturing and exports. Example: The television set.

Integration of world financial markets

Enables firms to raise capital, borrow funds, and engage in foreign currency transactions wherever they go. Banks now provide a range of services that facilitate global transactions.

Two Types of International Collaborative Ventures 1

Equity-based joint ventures result in the formation of a new legal entity. In contrast to the wholly-owned F D I, the firm collaborates with local partner(s) to reduce risk and commitment of capital.

The Value of Ethical Behavior

Ethical behavior is simply the right thing to do; Often prescribed within laws and regulations; Demanded by customers, governments, and the news media. Unethical firms risk attracting unwanted attention; Ethical behavior is good business, leading to enhanced corporate image and selling prospects. The firm with a strong reputation is advantaged in hiring and motivating employees, partnering, and dealing with foreign governments.

Variation in Ethical Standards

Ethical standards vary from country to country; relativism; normativism

As part of opening manufacturing units abroad, a US apparel firm decided to send its apparel production coordinator Chris to Bangladesh. Chris is distressed that people don't come to his meetings on time and finds it disrespectful when his team members stand too close to him. Chris may trigger a cross-cultural risk by an _______________.

Ethnocentric Orientation

Michael Porter's Diamond Model: Sources of National Competitive Advantage (Diamond Model Sources of National Competitive Advantage)

Everything can go to each other: Firm Strategy, Structure, and Rivalry; Demand Conditions; Related and Supporting Industries; Factor Conditions

international trade

Exchange of products and services across national borders, typically through exporting and importing

FDI Based Explanations: Internalization Theory

Explains how the M N E chooses to acquire and retain one or more value-chain activities inside itself; Such "internalization" provides the M N E with greater control over its foreign operations; Internalization avoids the drawbacks of dealing with external partners, such as reduced quality control and the risk of losing proprietary assets to outsiders; this minimizing the disadvantages of dealing with external partners, reducing the risk of partners becoming competitors, and allowing for greater control over foreign operations and their proprietary knowledge.

Javier's Success Factors

Extensive international travel and experience; Independent spirit; Hard work; Management training

Theories of International Trade and Investment: Firm-level Explanations: How can internationalizing gain and sustain competitive advantage?

FDI-Based Explanations: Monopolistic Advantage Theory; Internationalization Theory; Dunning's Eclectic Paradigm

Limitations of Early Trade Theories

Fail to account for international transportation costs; Governments distort normal trade by selectively imposing protectionism (e.g., tariffs) or investing in certain industries (e.g., via subsidies); Services: Some cannot be traded; others can be traded freely via the Internet or global telephony; For many firms, scale economies and superior business strategies provide efficiencies and other advantages. Early trade theories failed to account for this. (e.g., Japan lacks comparative advantages, but its firms succeeded anyway, via superior strategies.)

Inappropriate Corporate Conduct Abroad: Firms may:

Falsify or misrepresent contracts or official documents; Pay or accept bribes, kickbacks, or inappropriate gifts; Tolerate sweatshop conditions or abuse employees; Do false advertising or other deceptive marketing; Engage in deceptive or discriminatory pricing; Deceive or abuse intermediaries in the channel; activities that harm the natural environment.

A B N A M R O (Netherlands)

Financial services; Finances various socially responsible projects, including biomass fuels and micro enterprises

Theories of International Trade and Investment: Firm-level Explanations: Why and how do firms internationalize?

Firm Internationalization: Internationalization Process of the Firm; Born Globals and International Entrepreneurship

Competitive Advantage

Firm-Specific advantage, or ownership-specific advantage, arises from an abundance in a firm of: Specific knowledge; Specific capabilities; Certain types of skills; Superior strategies; Strong networks; Other assets

an opportunity for global corporate citizenship

Firms must be ethical and socially responsible in their dealings because IB affects numerous constituents, often in unintended ways

Ethnicity

For example, people of African, Indian, and Latino heritage tend to perceive reality differently

Examples of National Comparative Advantage 1

France has a climate and soil superior for producing wine

invest in a potentially rewarding relationship with a foreign partner

French computer firm Groupe Bull partnered with Toshiba in Japan to gain insights for developing information technology

gain new ideas about products, services, and business methods

GM refined its knowledge for making small, fuel-efficient cars in Europe

________________ is the procurement of products or services from independent suppliers or company-owned subsidiaries located abroad for use in the home country or a third country.; Also called global procurement or global purchasing. Relies on contractual relationship. The inbound flow of products is meant. Low control market entry strategy.

Global Sourcing

Effect on the Natural Environment 1

Globalization harms the environment by promoting industrialization and other activities that generate pollution, habitat destruction, and other environmental harm. e.g., As China and India industrialize, air and water pollution have become major hazards; •However, as nations develop their economies, they tend to pass laws that protect the environment. e.g., This happened in Japan from the 1960s to the 1980s. In Mexico, the government is gradually adopting policies to protect the air, water, etc.

Effect on National Culture

Globalization opens the door to foreign firms, global brands, unfamiliar products, and new values. Increasingly, consumers buy similar products, modeled according to Western countries, especially the US. In this way, traditional norms, values, and behaviors may homogenize over time. National identity may be lost to 'global' culture.

country risk (political risk)

Government intervention, protectionism, and barriers to trade and investment; Bureaucracy, red tape, administrative delays, corruption; Lack of legal safeguards for intellectual property rights; Legislation unfavorable to foreign firms; Economic failures and mismanagement; Social and political unrest and instability

Transformation of New Zealand's Economy, 1993 to 2017 2

Government-controlled wages, prices, and interest rates were freed, allowed to fluctuate as per market forces; The banking sector was liberalized, foreign exchange controls were eliminated, and New Zealand dollar was allowed to float according to market forces; Most trade barriers were removed and New Zealand joined several free trade agreements; Agricultural and other subsidies were eliminated; The government worked earnestly with labor unions to reduce wage inflation, helping maintain jobs in New Zealand and not outsourced to lower-wage countries.

Seek opportunities for growth through market diversification

Harley-Davidson, IKEA, and H&M

Examples of Firm Competitive Advantage 4

Herman Miller's design strengths in office furniture (e.g., Aeron chairs).

Effect on the Natural Environment 2

However, as nations develop their economies, they tend to pass laws that protect the environment. e.g., This happened in Japan from the 1960s to the 1980s. In Mexico, the government is gradually adopting policies to protect the air, water, etc.

facilitator of the global economy and interconnectedness

IB brings nations closer together

contributor to national economic well-being

IB fuels economic growth and rising living standards

competitive advantage for the firm

IB provides companies with many benefits, leading to profitability and competitive advantages

framework for making ethical decisions

Identify problem, examine facts, create alternatives, implement course of action, evaluate results

Critical incident analysis 2

Identify situations where you need to be culturally aware to interact effectively with people from another culture; When confronted with "strange" or awkward behavior, discipline yourself to not make judgments; Develop your best interpretation of the foreigner's behavior, and formulate your response; Learn from this process and continuously improve

Ethical Connection

Imagine you are a manager and visit a factory owned by an affiliate in Colombia, and discover the use of child labor in the plant; You are told that without the children's income, their families might go hungry. If the children are dismissed from the plant, they will likely turn to other income sources, including prostitution or street crime; What should you do? Make a fuss about the immorality of child labor, or look the other way?

An Ethical Dilemma (moral dilemmas)

Imagine you are a manager and visit a factory owned by an affiliate in Colombia, and discover the use of child labor in the plant; You are told that without the children's income, their families might go hungry. If the children are dismissed from the plant, they will likely turn to other income sources, including prostitution or street crime; What should you do? Make a fuss about the immorality of child labor, or look the other way?; situations in which there is a choice to be made between two options, neither of which resolves the situation in an ethically acceptable fashion.

Unprecedented growth of international trade

In 1960, global trade was $100 billion per year. Today, world exports amount to some $18 trillion annually!

FDI Based Explanations: Internalization Theory Example

In China, Intel owns much of its value chain, to ensure that Intel knowledge, patents, and other assets are not misused or illicitly obtained by potential rivals.

Variation in Ethical Standards examples

In China, counterfeiters may publish translated versions of imported books without compensating the original publisher or authors; In parts of Africa, accepting expensive gifts from suppliers is acceptable; In the United States, C E O compensation is often 100 times greater than that of low-ranking subordinates; Finland and Sweden ban advertising aimed at children, but the practice is accepted in other parts of Europe.

collectivism

In collectivist societies, ties among individuals are important; business is conducted in a group context; life is a fundamentally cooperative experience; conformity and compromise help maintain harmony. Examples: China, Panama, Japan, South Korea.

individualism

In individualistic societies, each person emphasizes his or her own self-interest; competition for resources is the norm; individuals who compete best are rewarded. Examples: Australia, Britain, Canada, and the U.S.

Effect on the Poor

In poor countries, while globalization usually creates jobs and raises wages, it also tends to disrupt local job markets. MNEs may pay low wages, and many exploit workers or employ child labor. Globalization's benefits are not evenly distributed. (Many people in India are losing jobs as the hand-woven textiles industry is being gradually automated.)

ethical connections 1

In six years, Nigeria increased its telecom infrastructure from just 500,000 phone lines to more than 30 million cellular subscribers.

Comparative Advantage Principle Example 3

In this way, Japan makes maximal use of its resources, and the world gets great cars.

foreign taxation

Income, sales, and other taxes vary widely worldwide, with implications for company performance and profitability.

Benefits of Corporate Governance

Increased employee commitment; Increased customer loyalty and sales; Improved reputation and brand image; Reduced likelihood of government intervention; Reduced business costs; Improved financial performance.

Focal Firm

Initiator of international business

Critical Role of Innovation in National Economic Success

Innovation is a key source of competitive advantage; The firm innovates in four major ways; Many innovative firms in a nation leads to national competitive advantage

FDI Based Explanations: Dunning's Eclectic Paradigm Condition 3

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

Piracy and Counterfeiting Affect

International trade; Direct investment; Company performance; Innovation; Tax revenues; Criminal activity; The natural environment; National prosperity and wellbeing

Terrance Rogers 2

Internships during college: Deutsche Bank Jobs held since graduating: All at Deutsche Bank, Business Analyst, Management Associate, Executive Management Rotation, in New York. Most recently, Executive Management Associate at Deutsche Bank, London.

Role of Religion in Islamic Societies 1

Islam is the basis for government, legal and social systems. As Muslims view God's will as the source of all outcomes, they are relatively fatalistic and reactive; Islam's holy book, the Qur'an, prohibits drinking alcohol, gambling, usury, and "immodest" exposure. The prohibitions affect firms dealing in various goods.

Not inherited

It derives from the social environment. We are not born with a shared set of values and beliefs; we acquire them as we grow up.

Not about individual behavior

It is about groups. It is a collective phenomenon of shared values and meanings.

not right or wrong

It is relative. There is no cultural absolute. Different nationalities simply perceive the world differently.

Which of the following reflects the major contribution of GATT to globalization?

It reduced barriers to international trade and investment.

Firm strategy, structure, and rivalry example

Italy has many top firms in design industries such as textiles, furniture, lighting, and fashion. Vigorous competitive rivalry puts these firms under constant pressure to innovate, which has propelled Italy to a leading position in design, worldwide.

Early multinationals from the third phase of globalization originated in ________.

Japan

Demand conditions at home example

Japan is a densely populated, hot, and humid country with very demanding consumers. These conditions led Japan to become one of the leading producers of superior, compact air conditioners

Javier Estrada 1

Javier got his undergraduate degree in business from a state university; Javier has worked for both government agencies and private companies since graduation, all with an international dimension.

What's Ahead for Javier?

Javier is concerned about poverty in Latin America; Javier went on to earn a master's degree in social policy and planning; He plans to work in business and development

Offshoring and the Flight of Jobs

Jobs are lost as firms shift production of goods and services abroad, in order to cut costs and obtain other advantages. Firms benefit, communities and industries are disrupted.

Supporters of neomercantilism include:

Labor unions (who want to protect domestic jobs); Farmers (who want to keep crop prices high); Some manufacturers (that rely on exports).

Which of the following situations illustrate a polychronic perspective?

Latin Americans have a flexible perception of time and may not arrive exactly at the pre-determined time for appointments.

Rosa Suarez reported on her analysis of cross-cultural risks involved with establishing the plant in Country C. each was discussed except?

Level of national debt

Comparative Advantage

Location-specific advantage arises from an abundance in a country of: Valuable natural resources (e.g. Brazil); Strategic locaiton (e.g. Hong Kong); Favorable climate (e.g. Spain); Low-cost labor (e.g. Indonesia); Skilled labor (e.g. Singapore); Inexpensive capital (e.g. China)

FDI Based Explanations: Dunning's Eclectic Paradigm Condition 2

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

Loss of National Sovereignty

MNE activities can interfere with governments' ability to control of their own economies and social-political systems. Some firms are bigger than the economies of many nations (e.g., Walmart, Shell);

ethical connections 4

MNE telecom investment in Africa allows firms to fulfill social responsibilities and improve the lives of millions of poor people

decision-making styles

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

In Business, Culture Affects

Managing employees; Communicating and dealing with distributors and other business partners; Negotiating and structuring business ventures; Developing products and services; Preparing advertising and promotional materials; Preparing for international trade fairs; Interacting with current and potential customers.

highest relative efficiency

Maximal use of resources with minimum expense.

Sustainability

Meeting humanity's needs without harming future generations. The sustainable firm pursues three types of interests: Economic interests, Social interests, and Environmental interests

Gender

Men and women often experience the world differently

Examples of National Industrial Policy 4

New Zealand's government, starting in 1984, transformed the country from an agrarian, protectionist, regulated economy to an industrialized, free-market economy that today competes globally.

Transformation of New Zealand's Economy, 1993 to 2017 1

New Zealand's success resulted from: Implemented pro-business policies - fiscal, monetary, tax; investment in education; Emphasized high-value industries such as I T and pharmaceuticals that greatly grew G D P and reduced unemployment.

Nike's Foreign Factories

Nike has 100s of factories in Asia, Latin America, and elsewhere; Nike has been criticized for paying low wages and operating sweatshop conditions; Labor exploitation and sweatshop conditions are genuine concerns in many developing economies; However, consideration must be given to the other choices available to people in those countries; Nike and numerous other MNEs are making efforts to improve working conditions in their foreign plants.

Role of Religion in Islamic Societies examples

Nokia launched a mobile phone that shows Muslims the direction towards Mecca, Islam's holiest site; Heineken rolled out the non-alcoholic malt drink Fayrouz.

Theories of International Trade and Investment: Firm-level Explanations: How can internationalizing gain and sustain competitive advantage?

Non-FDI-Based Explanations: International Collaborative Ventures; Networks and Relational Assets

FDI Based Explanations: Monopolistic Advantage Theory Example

Novartis earns substantial profits by marketing various patent medications through its subsidiaries worldwide.

Earn higher margins and profits

Often, foreign markets are more profitable

Norsk Hydro (Norway)

Oil and gas; Cut greenhouse gas emissions by 32 percent; consistently measures the social and environmental impact of its projects

Corporate social responsibility (CSR)

Operating a business to meet or exceed the ethical, legal, commercial, and public expectations of customers, shareholders, employees, and communities; Helps recruit and keep good employees; Can help differentiate the firm and enhance its brands; Cuts costs, as when the firm reduces packaging, recycles, cuts energy usage, and minimizes waste in operations; Helps the firm avoid increased taxation, regulation, or other legal actions by local government authorities.

Comparative Advantage Principle Example 2

Other countries, such as China and Finland, focus on making cell phones.

Examples of National Comparative Advantage 4

Over time, India has acquired a superior base of I T workers for producing computer software.

Examples of National Comparative Advantage 3

Over time, Japan has acquired a superior base of knowledge and experience for producing cars.

Worldwide reduction of barriers to trade and investment

Over time, national governments have greatly reduced trade and investment barriers. The trend is partly facilitated by the World Trade Organization (WTO), an organization of some 150 member nations

Example of the Eclectic Paradigm: Sony in China

Ownership specific advantages; Location specific advantages; Internationalization advantages

FDI Based Explanations: Dunning's Eclectic Paradigm Condition 1

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

International business

Performance of trade and investment activities by firms across national borders

Occupation

Perspectives differ among blue collar workers, professionals, or artists

GlaxoSmithKline (United Kingdom)

Pharmaceuticals; Devotes substantial R & D to poor-country ailments, such as malaria and tuberculosis; was first to offer A I D S medication at cost

Comparative Advantage Principle 1

Produce the product, which results the lowest opportunity cost and the highest relative efficiency; Also known as country-specific advantage, comparative advantage includes inherited resources, such as labor, climate, arable land, and petroleum reserves, such as those enjoyed by the Gulf nations. Other types of comparative advantages are acquired over time, such as entrepreneurial orientation, availability of venture capital, and innovative capacity; It is beneficial for two countries to trade even if one has absolute advantage in the production of all products; what matters is not the absolute cost of production but the relative efficiency with which it can produce the product.

Critical Role of Productivity in National Economic Success

Productivity is the value of the output produced by a unit of labor or capital; It is a key source of competitive advantage for firms; The greater the productivity of the firm, the more efficiently it uses its resources; The productive the firms in a nation, the more efficiently the nation uses its resources; Aggregate productivity is a key determinant of the nation's standard of living

Two Types of International Collaborative Ventures 2

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

Factor conditions

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

Ashley Lumb 2

Reasons for pursuing career in international business: Adventure, perspective, career growth, and the opportunity to learn foreign languages.

Advances in technology

Reduces the cost of doing business internationally by allowing firms to interact cheaply with suppliers, distributors, and customers worldwide. Facilitates the internationalization of companies, including countless small firms.

Guanxi: Important in Business in China

Refers to social connections and relationships based on mutual benefits; Emphasizes reciprocal exchange of favors as well as mutual obligations; Rooted in ancient Confucian philosophy, which values social hierarchy and reciprocity; Engenders trust, thereby serving as a form of insurance in a potentially risky business environment.

Manufacturing and Transportation Technologies

Revolutionary developments permit manufacturing that is low-scale and low cost, via computer-aided-design of products (CAD), robotics, and IT-managed production lines; In transportation, key advances include fuel-efficient jumbo jets, giant ocean-going freighters, and containerized shipping. The cost of international transportation has declined substantially, spurring rapid growth in global trade; Collectively, technological advances have greatly reduced the costs of doing business internationally

cultural differences

Risk arising from differences in language, lifestyle, attitudes, customs, and religion, where a cultural miscommunication jeopardizes a culturally-valued mindset or behavior

exporting

Sale of products or services to customers located abroad, from a base in the home country or a third country. Boeing and Airbus export billions in commercial aircraft every year

Examples of Firm Competitive Advantage 2

Samsung's technological leadership in flat-panel televisions.

Examples of National Comparative Advantage 2

Saudi Arabia has a natural abundance of oil, for the production of petroleum products.

Why firms participate in IB?

Seek opportunities for growth through market diversification, Earn higher margins and profits, gain new ideas about products, services, and business methods, serve key customers that have relocated abroad, be closer to supply sources, benefit from global sourcing advantages, or gain flexibility in the sourcing of products, gain access to lower-cost or better-value factors of production, develop economies of scale in sourcing, production, marketing, and R&R, confront international competitors more effectively or thwart the growth of competition in the home market, and invest in a potentially rewarding relationship with a foreign partner

Age

Seniors, baby boomers, teenagers, and children perceive their worlds differently

industrial cluster examples

Silicon Valley; pharmaceutical cluster in Switzerland; footwear industry in Pusan, South Korea; IT industry in Bangalore, India; fashion cluster in northern Italy; and Silicon Valley North near Ottawa, Canada.

How Firms Gain and Sustain International Competitive Advantage

Since the MNE was traditionally the major player in international business, scholars have offered numerous explanations of what makes these firms pursue, and succeed in, internationalization; Because FDI has been MNEs' main strategy in international expansion, theoretical explanations have tended to emphasize it.

Examples of National Industrial Policy 2

Singapore adopted probusiness, pro-investment, export-oriented policies, combined with state-directed investments in strategic corporations. The approach stimulated economic growth that averaged 8 percent annually from 1960 to 1999.

Location specific advantages

Sony desires to manufacture in China, to take advantage of China's low-cost, highly knowledgeable labor.

gain access to lower-cost or better-value factors of production

Sony does much manufacturing in China

Ownership specific advantages

Sony possesses a huge stock of knowledge and patents in the consumer electronics industry, as represented by products like the Playstation and Bravia TV.

Internationalization advantages

Sony wants to maintain control over its knowledge, patents, manufacturing processes, and quality of its products. Thus, Sony entered China via F D I

Terrance Rogers 4

Success Factors: (a) work on projects that expose you to people in different regions across the globe; (b) mention your interest in working abroad early and bring it up in your annual review; (c) find a way to impress the people who can make the decision. It becomes easier to make the move when the "right people" know you can deliver.

Nokia (Finland)

Telecommunications; Makes telephones for low-income consumers; has been a leader in environmental practices such as phasing out toxic materials

Terrance Rogers 3

Terrance's Advice for an International Career: Early exposure at his university to international business and study abroad

Language as a Key Dimension of Culture

The "mirror" or expression of culture; essential for communications; provides insights into culture; Linguistic proficiency is a great asset in international business; Language has both verbal and nonverbal (unspoken, facial expressions and gestures); There are nearly 7,000 active languages, including over 2,000 in each of Africa and Asia.

NGO example 1

The Bill and Melinda Gates Foundation and the British Wellcome Trust both support health and educational initiatives.

NGO example 3

The British Wellcome Trust funds nongovernmental organizations (NGOs) and research initiatives to work in collaboration with private businesses to develop remedies for diseases in Africa and other less developed areas

Examples of National Industrial Policy 3

The Czech government in the 1990s created a business-friendly legal and regulatory environment. The country privatized state-owned companies. Government F D I incentives attracted numerous M N E s, such as Daewoo, I N G, Siemens, and Toyota.

Currency Risk example 1

The Japanese yen has fluctuated a lot since 2000

Related and supporting industries example

The Silicon Valley in California is a great place to launch a computer software firm, because it is home to thousands of knowledgeable firms and workers in the software industry.

Currency Risk example 2

The U.S. has relatively high corporate income taxes

Free Trade

The absence of restrictions to the flow of goods and services among nations

New Trade Theory Example

The commercial aircraft industry has very high fixed costs that necessitate high-volume sales to achieve profitability.

Comparative Advantage (country)

The foundation concept of international trade, which answers the question of how nations can achieve and sustain economic success and prosperity; It refers to the superior features of a country that provide it with unique benefits in global competition; Comparative advantages are derived either from natural endowments or from deliberate national policies.

Transformation of New Zealand's Economy, 1993 to 2017 3

The government initiated programs to encourage development of a knowledge economy. New Zealanders continuously upgraded skills and knowledge, providing a supply of scientists, engineers, and trained managers; Personal and corporate income tax rates were cut. Tax base was diversified to stabilize government revenues. This helped foster entrepreneurship, boosted consumer spending, and attracted FDI into New Zealand; The government cut spending and borrowing, leading to lower interest rates and stimulating the economy; State-owned enterprises - such as the national airline, telecom, and other utilities - were privatized.

Market liberalization and adoption of free markets

The launch of free market reforms in China and the former Soviet Union marked the opening of roughly one-third of the world to freer trade.

Opportunity cost

The loss of a potential gain from other alternatives when one alternative is chosen.

Company Internationalization and the Value Chain

The most significant implication of market globalization for companies is that a purely domestic focus is no longer viable in most cases; Market globalization compels firms to internationalize their value chain, and access the benefits of international business; Globalization allows the firm to internationalize its value chain, leading to various advantages.

Firm strategy, structure, and rivalry

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

Comparative Advantage Principle 3

The principle applies to all goods. It reveals how countries use scarce resources more efficiently.

Acculturation

The process of adjusting and adapting to a culture other than one's own; commonly experienced by expatriate workers

Socialization

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

Some risks are extremely challenging

The recent global financial crisis generated many commercial, currency, and country risks, affecting banks and other firms worldwide. This leads to steep declines in national stock markets and normal business activities.

Corporate Governance

The system of procedures and processes by which corporations are managed, directed, and controlled; Provides the means through which firms undertake ethical behaviors, C S R, and sustainability; Implementing appropriate conduct is challenging for M N E s, especially when operating in many countries; A complicating factor is the use of third-party suppliers and contractors, some of whom may behave badly; More firms incorporate ethics and C S R into their mission, planning, strategy and everyday operations.

Self-reference criterion

The tendency to view other cultures through the lens of one's own culture- understanding this is the first step

Internationalization of the Firm's Value Chain

The truly international firm configures its sourcing, manufacturing, marketing, and other value-adding activities on a global scale.

culture

The values, beliefs, customs, arts, and other products of human thought and work that characterize the people of a given society

utilitarian approach

This approach argues the best ethical action is the one that provides the most good or the least harm. It produces the greatest balance of good over harm to customers, employees, shareholders, the community, and the natural environment.

ethical connections 2

This led to a big rise in productivity and commerce, which has helped improve living standards.

FDI Based Explanations: Dunning's Eclectic Paradigm

Three conditions determine whether or not a company will enter a given foreign country via FDI

Perceptions of time

Time dictates expectations about planning, scheduling, profit streams, and what constitutes tardiness in arriving for work and meetings

Personality Traits for Cross-Cultural Proficiency

Tolerance for ambiguity; Perceptiveness; Valuing personal relationships; Flexibility and adaptability

Improper Ethical Behavior May Result When:

Top management sets goals and incentives aimed at promoting good outcomes (e.g., profits) that instead encourage bad behaviors; Employees overlook unethical behavior in others because of peer pressure or self-interest; Managers tolerate lower ethical standards in value-chain activities performed by suppliers or third-party firms; Unethical practices are allowed to accumulate in the firm slowly over time.

International investment

Transfer of assets to another country or the acquisition of assets in that country. Also known as 'foreign direct investment' (FDI), we will focus on this type of investment

Small and medium-sized enterprise (SME)

Typically, companies with 500 or fewer employees, comprising over 90% of all firms in most countries. SMEs increasingly engage in international business.

Ethical Standards for Corporate Governance

Utilitarian approach, rights approach, fairness approach, common good approach, virtue approach

values example

Values common to Japan, North America, and Northern Europe include hard work, punctuality, and wealth acquisition.

country risk examples 3

Venezuela's government has interfered much with the operations of foreign firms

Examples of National Industrial Policy 1

Vietnam's government in the 1990s privatized state enterprises and modernized the economy, emphasizing competitive, export-driven industries. Vietnam became one of the fastest-growing economies, averaging around 8 percent annual GDP growth.

Counterfeit commodities (United States Borders)

Wearing Apparel/Accessories (20%), Consumer Electronics (16%), Footwear (12%), Watches/Jewelry (11%), Handbags/Wallets (10%), Pharmaceuticals/Personal Care (8%), Optical media (3%), Computers/Accessories (2%), Labels/Tags (2%), Automotive/Aerospace (2%)

Comparative Advantage Principle 2

While Germany can make both items cheaper than France, it is still beneficial for Germany to trade with France; The key is the ratio of production costs. In the exhibit, Germany is comparatively more efficient at producing cloth than wheat: it can produce three times as much cloth as France (30/10), but only two times as much wheat (40/20); Germany should specialize in producing cloth and import all the wheat it needs from France. France should specialize in producing wheat and import all its cloth from Germany; Each country benefits by specializing in the product in which it has a comparative advantage and importing the other product.

Over time, the GATT evolved into which of the following?

World Trade Organization (WTO)

Drivers of Market Globalization

Worldwide reduction of barriers to trade and investment; Market liberalization and adoption of free markets; Industrialization, economic development, and modernization; Integration of world financial markets; Advances in technology

Normativism

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

For example, Brazil recently has endured

a drought of historic proportions, and some experts believe loss of Amazon rain forest is an important cause.

Sweatshops

a factory or workshop, especially in the clothing industry, where manual workers are employed at very low wages for long hours and under poor conditions.

Multinational Enterprise (MNE)

a large company with substantial resources that performs various business activities through a network of subsidiaries and affiliates located in multiple countries (e.g. Caterpillar, Samsung, Unilever, Vodafone, Disney)

Windscreen

a screen that protects against the wind (U.S.); automobile windshield (British)

Unethical management practices

a significant factor at the level of individual firms, especially in countries that lack adequate regulation and professional standards.

Masculinity versus femininity

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

Scheme

a somewhat devious plan (U.S.); a plan (British)

Managers at the most sophisticated firms follow

a systematic approach to resolving ethical dilemmas.

Born global firm

a young, entrepreneurial SME that undertakes substantial international business at or near its founding; a young entrepreneurial company that initiates international business activity very early in its evolution, moving rapidly into foreign markets

Community CSR

accounts for the firm's activities aimed at benefiting the community and society. It includes employee volunteering programs and philanthropy. Indeed, research reveals that companies which support employee volunteer programs, such as charity work and community service, tend to increase employee engagement, loyalty, skills, and personal growth.

Acculturation is defined as the process of ________.

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

Members of indulgent societies

allow relatively free gratification of their basic and natural human desires related to having fun and generally enjoying life.

General Agreement on Tariff and Trade (GATT)

an international treaty on trade & created WTO, reduce barriers

Attitudes and preferences

are developed based on values, and are similar to opinions, except that attitudes are often unconsciously held and may not have a rational basis

material productions

artifacts, objects, and technological systems that people construct to function in their environments

growth of global investment and financial flows

associated with rapid growth in foreign direct investment (FDI), currency trading, and global capital markets

A five-step framework for arriving at ethical decisions helps arrive

at appropriate solutions to ethical dilemmas.

Relativism

belief that ethical truths are not absolute but differ from group to group; according to this perspective, a good rule is, "When in Rome, do as the Romans do"

Restrained societies

believe that such gratification should be curbed and regulated by strict norms.

Language

both reflects, and is reflected by, cultural differences.

Four risk are always present

but manageable

Many countries endure

chronic water shortages, and industrial activity pollutes clean water supplies.

Bribery

common and may take the form of grease payments, small inducements intended to expedite decisions and transactions, or gain favors; the offering, giving, soliciting, or receiving of any item of value as a means of influencing the actions of an individual holding a public or legal duty

innovation

companies avoid doing research and development where piracy is common

Firms with high power distance are most likely to be characterized by ________.

concentrated power among executives and little autonomy for subordinates

Low-context cultures tend to ________.

conduct negotiations as efficiently as possible

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

contagion

Firms consume vast quantities of water resources,

contributing to the creation or expansion of deserts (desertification) and loss of important ecosystems around the world.

Which of the following grants protections to the creators of art, music, books, software, movies, and TV shows?

copyright

Internationalization of the Firm's Value Chain: Rationale:

cost savings; increase efficiency, productivity, and flexibility of value chain activities; access customers, inputs, labor, or technology; benefit from foreign partner capabilities

Firm-level consequences of market globalization: internationalization of the Firm's value chain

countless new business opportunities for internationalizing firms; new risks and intense rivalry from foreign competitors; more demanding buyers who source from suppliers worldwide; greater emphasis on proactive internationalization; internationalization of firm's value chain

High uncertainty avoidance societies

create institutions to minimize risk and ensure security. Firms emphasize stable careers and regulate worker actions. Decisions are made slowly. Examples: Belgium, France, Japan

Which of the following would NOT be considered an example of foreign direct investment (FDI)?

cross-border purchase of stocks

cross-country risk

cultural differences, negotiation patterns, decision-making styles, and ethical practices

Currency Risk (Financial Risk)

currency exposure, asset valuation, foreign taxation, and inflation

Fluctuating exchange rates are an example of which of the following?

currency risk

internationalization

deepening of international business systemically: difference of product, technology, knowledge

The pace with which resources and raw materials are

depleted should not exceed their rate of regeneration.

Long-term vs. short-term orientation

describes the degree to which people and organizations defer gratification to achieve long-term success

Indulgence versus restraint

describes the degree to which people in a society attempt to control their impulses and desires.

examine the facts

determine nature of the situation, interview all relevant persons; determine who has stakes in the outcome; anyone have a greater stake than another?

create alternatives

develop alternative courses of action, confirm legal compliance with host and home country laws; confirm compliance with company code of conduct; determine strengths and weaknesses of each; evaluate each option using the five ethical standards

Competitive advantage refers to the ________.

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

death of distance 3

early 1900s to today; motor vehicles (75 miles per hour); propeller airplanes (300-400 miles per hour); jet aircraft (500-700 miles per hour)

contagion

economic crisis spreads rapidly between countries; Beginning in late 2008, the world economy experienced a severe financial crisis and global recession, the worst in decades. The crisis emerged when pricing bubbles occurred in housing and commodities markets worldwide. As bubbles in real estate markets burst, home values crashed and many homeowners could not repay their debts. Meanwhile, thousands of mortgages had been securitized, and their values plunged or became uncertain.

Feminine cultures

emphasize nurturing roles, interdependence among people, and caring for less fortunate people - for both men and women. Examples: Scandinavian countries, where welfare systems are highly developed, and education is subsidized.

market CSR

emphasizes company interactions with customers, competitors, suppliers, and distributors. It implies appropriate behavior regarding product development, marketing, and advertising as well as approaches that suppliers and distributors follow.

Long-term orientation

emphasizes the long view in planning and living, focusing on years and decades. Examples: Traditional Asian cultures, such as China, Japan, and Singapore, which base these values on the teachings of the Chinese philosopher Confucius (500 B.C.), who espoused long-term orientation, discipline, hard work, education, and emotional maturity.

Digitalization

enabling business operations by leveraging digital technology & data

Which of the following is a comparative advantage?

ethical orientation; entrepreneurial culture in the country

According to relativists

ethical truths differ from group to group

Using one's own culture as a standard for judging other cultures is known as ________.

ethnocentric orientation

Managerial Orientations

ethnocentric orientation; polycentric orientation; geocentric orientation

High power distance societies

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

international trade

exports of legitimate products must compete with trade in counterfeit goods

convergence of consumer lifestyles and preferences

facilitated by global media, which emphasize lifestyles found in the U.S., Europe, or elsewhere. Firms market standardized products

Why study international business?

facilitator of the global economy and interconnectedness, contributor to national economic well-being, competitive advantage for the firm, a competitive advantage for you, and an opportunity for global corporate citizenship

Foreign Direct Investment

firm establishes a physical presence; also known as international investment

direct investment

firms avoid countries known for widespread intellectual property violations

Businesses that directly initiate international business transactions are known as _____.

focal firms

Workplace CSR

focuses on the firm's employees and implies a thoughtful approach to diversity, recruitment, salary, safety, health, and working conditions.

(First) 1st Phase of Globalization

from 1830-late 1800s, peaked at 1880, triggers: introduction of railroads and ocean transport, Key characteristics: Rise of manufacturing: cross-border trade of commodities, largely by trading companies; growth of railroads

currency exposure

general risk of unfavorable exchange rate fluctuations

Culture is linked with particular groups based on various factors, including:

geography; ethnicity; gender; age; language; occupation

Ashley Lumb 1

got her undergraduate degree from a state university a few years ago Ashley's majors: Marketing and International business.

Globalization and technological advances

have altered the international business landscape more than any other trends

inflation

high inflation, common to many countries, complicates business planning, and the pricing of inputs and finished goods

evaluate results

how effective was the chosen option?; any additional actions or changes needed?

power distance

how society deals with class gaps

Social Interests

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

In the fashion industry,

hundreds of factory workers die annually from dangerous working conditions

National Competitiveness

in that particular industry, For example: Mining in Brazil; Forest products in Canada; Exporting/importing in Hong Kong; Tourism in Spain; Home appliances in Indonesia; Biotechnology in Singapore; Automobiles in China

Hofstede's Typology of National Culture

individual/collective, male centered/ female centered, power distance, long/short, restraint/ indulgence

Reversing environmental damage requires

industrialized countries to reduce their emissions of pollutants substantially.

implement course of action

initiate the best options

Dimensions of Market Globalization

integration and interdependence of national economies; rise of regional economic integration blocs; growth of global investment and financial flows; convergence of consumer lifestyles and preferences; globalization of production; globalization of services

the natural environment

intellectual property violators disregard environmental standards

identify problem

is there something wrong?; Ethical dilemma?; situation that could cause harm?

Residential and industrial activity results in

land loss and the destruction of ecosystems needed for healthy natural environments.

symbol

letters, figures, colors, or other characters that communicate a meaning. Examples include flags, anthems, seals, monuments, and even historical myths.

Terrance Rogers 1

majors: Finance and International Business Objectives: Exploration, international perspective, self-awareness, career growth, learning about foreign markets

low uncertainty avoidance societies

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

In deal-oriented cultures

managers focus on the task at hand, are impersonal, typically use contracts, and want to just "get down to business." Examples: Australia, Northern Europe, and North America.

In relationship-oriented cultures

managers value affiliations with people, rapport, and getting to know the other party in business interactions. Relationships are more important than individual deals; Trust is much valued in business agreements. Examples: China, Japan, Latin American countries. It took nine years for Volkswagen to negotiate a car factory in China.

language ranking (1 to last)

mandarin chinese (china & singapore); spanish (argentina, mexico, & spain); english (australia, canada, united kingdom, & united states); hindi (india); arabic (egypt, saudi arabia, & united arab emirates); portuguese (brazil & protugal); bengali (bangladesh & india); russian (russia, kazakhstan, & ukraine); japanese (japan); punjabi (india & pakistan); german (germany & austria); javanese (indonesia); korean (south korea); french (french, canada, belgium, & algeria); tamil (india & sri lanka)

standardization stage

manufacturing ceases in the original innovator country, and it becomes a net importer of the product. Today under globalization, for many products, the cycle occurs quickly.

non-governmental organization (NGO)

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

Long-term, successful business performance

necessitates healthy ecosystems.

negotiation patterns

negotiations are required in many types of business transactions (e.g. where Mexicans are friendly and emphasize social relations, Americans are assertive and get down to business quickly

Today, some argue for

neomercantilism

high context

non verbal; emphasize nonverbal or indirect language. Communication aims to promote smooth, harmonious relationships. Such cultures prefer a polite, "face-saving" style that emphasizes a mutual sense of care and respect for others. Care is taken not to embarrass or offend others

The rate of waste production should

not exceed the environment's ability to absorb it.

Culture is

not right or wrong, not about individual behavior, not inherited

criminal activity

often linked to organized crime

globalization allows firms to view the world as

one large marketplace for goods, services, capital, labor, and knowledge

globalization of markets

ongoing economic integration and growing interdependency of countries worldwide

International Portfolio

passive ownership of foreign securities such as stocks and bonds, in order to generate financial returns

Tax revenues

pirates usually don't pay taxes

Country risk is also referred to as which of the following?

political risk

adhering to corporate social responsibility principles implies a ________ approach to ethical behavior.

proactive

Global Sourcing

procurement of products from suppliers abroad

Importing or global sourcing

procurement of products or services from suppliers located abroad for consumption in the home country or a third country. Toyota imports many parts from China when it manufactures cars in Japan

A corporate culture that advocates

profit over sustainability and human welfare can lead to employee abuse, harmful procedures, and other unsustainable practices.

information and communication technology (ICT)

profound advances have occurred in computers, digital technologies, telephony, and the Internet; MNEs leverage ICTs to optimize their performance, managing operations around the world; ICTs opened the global marketplace to firms that historically lacked the resources to internationalize.

Regional Economic Integration Boc

promotes trade: eliminates tariffs, one currency; free trade areas are formed by two or more countries to reduce or eliminate barriers to trade and investment, such as EU, NAFTA, and MERCOSUR

Cultural Metaphors

refer to a distinctive tradition or institution strongly associated with a society; a guide to deciphering attitudes, values, and behaviors

Intellectual Property (IP)

refers to ideas or works created by individuals or firms and includes a variety of proprietary, intangible assets: discoveries and inventions; artistic, musical, and literary works; and words, phrases, symbols, and designs.

Environmental CSR

refers to the firm's activities to minimize or eliminate the creation of pollutants as well as efforts to improve the natural environment.

Perceptions of space

reflects each culture's orientation about personal space and conversational distance

Reduction in trade barriers is associated with the emergence of which of the following?

regional economic integration blocs

Thus, firms increasingly seek ways to employ

renewable resources and minimize pollutants in their operations.

Redundant

repetitive(U.S.); fired or laid off (British)

values

represent a person's judgments about what is good or bad, acceptable or unacceptable, important or unimportant, and normal or abnormal.

integration and interdependence of national economies

results from firm's collective international activities. Governments contribute by lowering trade and investment barriers

asset valuation

risk that exchange rate fluctuations will adversely affect the value of the firm's assets and liabilities

company performance

sales, profits, and strategies are harmed

The _____ phase of globalization began around 1900 and was associated with the rise of electricity and steel production.

second

Because of their size, MNEs are among the most important stewards of the environment through

skillful use of innovative technologies, improved water productivity, management of shortages in vulnerable areas, and planning that incorporates sustainability practices

low power distance societies

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

Sharp

smart, clever (U.S.); conniving, unethical (British)

ethical practices

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

Trade between nations, accompanied by

substantial flows of capital, technology, and knowledge

illegal in Europe and the United States,

such production methods are still widely used in low-income countries, from where the jeans are then distributed to affluent consumers worldwide

development of sophisticated global financial systems and mechanisms

that facilitate the cross-border flow of products, money, technology, and knowledge

country risk examples 1

the US imposes tariffs on imports of sugar and other agricultural products

Sovereignty

the ability of a nation to govern its own affairs, is a fundamental principle that underlies global relations. One country's laws cannot be applied or enforced in another country. Globalization can threaten national sovereignty in various ways. MNE activities can interfere with the sovereign ability of governments to control their own economies, social structures, and political systems

It might be useful to enlist

the aid of local colleagues familiar with the situation to provide insights and help generate options.

The goal is to arrive at

the best decision or most appropriate course of action.

Environmental interests

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

Economic interests

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

neomercantilism

the idea that the nation should run a trade surplus

Each of the following has contributed to the rapid growth of trade among nations EXCEPT _____.

the increase in trade barriers

globalization

the interconnectedness of national economies and the growing interdependence of buyers, producers, suppliers, and governments around the world

introduction stage

the inventor country enjoys a monopoly both in manufacturing and exports. Example: The television set.

Intellectual property rights

the legal claim through which proprietary assets are protected from unauthorized use by other parties, via trademarks, copyrights, and patents.

Ethics

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

social structure

the pattern of social arrangements and organized relationships that characterize a society. Society is organized as: Individuals; Family; Reference groups; Social stratification; Social mobility

Assess the consequences of each action from

the perspective of all parties who will be affected by it.

Corruption

the practice of obtaining power, personal gain, or influence through illegitimate means, usually at others' expense; a major or severe concern in the global activities of a large proportion of MNEs.

Related and supporting industries

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

maturity stage

the product's manufacturing becomes relatively standardized, other countries start producing and exporting the product

Value Chain

the sequence of value adding activities while developing & marketing a product; The sequence of value-adding activities performed by the firm in the process of developing, producing, and marketing a product or a service

Demand conditions at home

the strengths and sophistication of customer demand

GDP

the total value of products and services produced in a country over the course of a year

Industrialization, economic development, and modernization

these trends transformed many developing economies from producers of low-value to higher-value goods, such as electronics and computers. Simultaneously, rising living standards have made such countries more attractive as target markets for sales and investment

in the production of faded denim jeans,

thousands of garment workers develop deadly lung diseases from constant exposure to crystalline silica used to sandblast jeans to give them the worn, vintage look

greater collaboration among nations

through multilateral regulatory agencies such as the World Trade Organization (WTO) and the International Monetary Fund (IMF)

polychronic

time is not valuable, relationships are (A flexible, non-linear orientation to time in which the individual takes a long-term perspective; time is elastic, long delays are tolerated before taking action. Punctuality is relatively unimportant. Relationships are valued. Examples: Africa, Latin America, Asia.)

monochronic

time is valuable (A rigid orientation to time in which the individual is focused on schedules, punctuality, time as a resource, time is linear, "time is money". For example, people in the U.S. are hurried and impatient.)

globalization of production

to cut costs, firms manufacture in low labor-cost locations such as Mexico and Eastern Europe. Firms also source services from abroad

To bomb

to fail miserably (U.S.); to succeed grandly (British)

To table

to put an issue on hold (U.S.); to take up an issue (British)

Uncertainty avoidance

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

Manners and customs

to ways of behaving and conducting oneself in public and business situations. They are present in eating habits, mealtimes, work hours and holidays, drinking and toasting, appropriate behavior at social gatherings (kissing, handshaking, bowing), gift-giving (complex), the role of women, and much more

International business is defined as the performance of _______ activities by firms across national borders.

trade and investment

`Entrepot Economics

trade surpasses GDP = buy low & sell high

International Investment

transfer of (factors of production) to another country( also known as FDI)

Short-term orientation

typical in the United States and most other Western countries.

national prosperity and wellbeing

ultimately, job prospects, prosperity, and moral standards in affected nations are harmed

Managers need to

understand, anticipate, and take proactive action to reduce their effects

An individual who believes in ethical normativism is most likely to view ethical behavioral standards as ________

universal

The most direct implication of market globalization is on the firm's _______.

value chain

Masculine cultures

value competitiveness, ambition, assertiveness, and the accumulation of wealth. Both men and women are assertive, focused on career and earning money. Examples: Australia, Japan.

key dimension of culture

values & attitudes and preferences

low context

very verbal; rely on explicit explanations, with emphasis on spoken words. Such cultures emphasize clear, efficient, logical delivery of verbal messages. Communication is direct. Agreements are concluded with specific, legal contracts

Ethnocentrism

viewing a culture through the lens of one's own culture

Commercial Risk

weak partner, operational problems, timing of entry, competitive intensity, poor execution of strategy; general commercial risks such as these lead to sub-optimal formulation and implementation of the firm's international value-chain activities

serve key customers that have relocated abroad

when Toyota launched its operations in Britain, many of its suppliers followed suit

Individualism versus collectivism

whether a person primarily functions as an individual or within a group

Any decision should be tested by asking

whether you would feel comfortable explaining it to your mother, a colleague you respect, or a valued mentor.

a competitive advantage for you

working internationally offers a range of enlightening experiences, new knowledge, and other benefits that enhance careers, and it's exciting

Settings for CSR

workplace, marketplace, environment, and community