Ibus Concept Check #1

Contract

a document that specifies the conditions under which an exchange is to occur and details the rights and obligations of the parties involved

Multinational Enterprise (MNE)

a firm that uses foreign direct investment (FDI) to establish or purchase income-generating assets abroad

Legal risk

the likelihood that a trading partner will opportunistically break a contract or expropriate intellectual property rights

Benefits of international business

the long-run monetary benefits of doing business in a country are a function of the size of the market, the present wealth (purchasing power) of consumers in that market, and the likely future wealth of consumers.

Three types of legal systems

common law, civil law, theocratic law

Socialist ideologies split into two broad camps

communists and social democrats

International Business is about managing _________ and __________

complexity and uncertainty - cross-border activity brings new challenges - requires awareness and strategy thinking

contract law

the body of law that governs contract enforcement - The parties to an agreement normally resort to contract law when one party feels the other has violated either the letter or the spirit of an agreement.

Globalization of Markets

to the merging of historically distinct and separate national markets into one huge global marketplace. - Falling barriers to cross-border trade and investment have made it easier to sell internationally. - tastes and preferences of consumers in different nations are beginning to converge on some global norm

Purchasing Power Parity (PPP)

An adjustment in gross domestic product per capita to reflect differences in the cost of living - allows a more direct comparison of living standards in different countries. The base for the adjustment is the cost of living in the United States. The PPP for different countries is then adjusted (up or down) depending on whether the cost of living is lower or higher than in the United States.

Deepening

An increase in the frequency and intensity of state and societal interactions (within that country you are deepening your presence

Late-Mover Disadvantages

handicaps experienced by being a late entrant in a market

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.

BRICS countries

Brazil, Russia, India, China, South Africa - acronym referring to the countries deemed to be developing countries at a similar stage of newly advanced economic development, on their way to becoming developed countries.

uncertainty avoidance

Extent to which cultures socialize members to accept ambiguous situations and to tolerate uncertainty

trademarks

Designs and names, often officially registered, by which merchants or manufacturers designate and differentiate their products

corruption and bribery

Facilitating payments are not uncommon - US has laws against bribery abroad (i.e., the Foreign Corrupt Practices Act) ➢But: how to define bribery, especially where a technical, legal definition is lacking?

'Voice' is big business

In the US in 2017, for instance: - US Chamber of Commerce spent $82.2 million - GE spent $7.18million - Google (Alphabet) spent $18.2 million - The Health Sector spent $558.1 million ➔$1.53 million per day Congress was in session, or: ➔$63thousand per hour

the global environment (the circle slide)

Includes various functional areas of business and global aspects

language

Language is one of the defining characteristics of a culture.

Unspoken language

Many nonverbal cues, however, are culturally bound. A failure to understand the nonverbal cues of another culture can lead to a communication failure. - Many nonverbal cues, however, are culturally bound. A failure to understand the nonverbal cues of another culture can lead to a communication failure.

Regional trade agreements in the GATT and WTO

North American Free Trade Agreement (NAFTA) and the European Union (EU), as well as numerous bilateral agreements, such as a 2012 free trade agreement between the United States and South Korea.

PIIGS countries

Portugal, Italy, Ireland, Greece Spain (all suffering economies)

intellectual property

Products of the mind, ideas (e.g., books, music, computer software, designs, technological know-how). Intellectual property can be protected by patents, copyrights, and trademarks.

Pillars of institutions

Regulative (formal) normative (informal) cognitive (informal)

Change in world output

The US has declined in the percent of world output it accounts for - this change in the US position was not an absolute decline - relative decline, reflecting the faster economic growth of several other economies particularly in Asia - If current trends continue, the Chinese economy could ultimately be larger than that of the United States on a purchasing power parity basis, while the economy of India will approach that of Germany.

broadening

The extension of economic and geographic linkages to encompass virtually all major societies and states (making your reach larger)

Moore's Law

The power of microprocessor technology doubles and its costs of production fall in half every 18 months. (The cost of microprocessors continues to fall, while their power increases)

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.

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 is greater when:

There is a distribution of roles between sexes - Assertive, competitive, decisive

Masculinity is lower when:

There is a sense of modesty and caring for others - Relationships, compromise, and negotiate

The globalization debate

They 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 create jobs in all countries that participate in the global trading system.

Private Action

Violation of property rights through theft, piracy, blackmail, and the like by private individuals or groups.

Globalization of markets - Starbucks example

Which starbucksis different? The one in the middle east because the logo has a crown instead of a naked woman because you cant show women unclothed in the middle east Starbucks from a business perspective is how do they get people to reorder. What can they do to get customers to re order instead of sitting there all day? The busiest (and until a few months ago) the biggest starbucksin the world is in Tokyo They have different options tailored to the taste of that market

Thomas Friedman

Wrote The World Is Flat, which is an examination of the influences such as globalization shaping the world today and competition in a technology-dependent world - the opposite of Ghamawat

Long-term orientation is greater when:

You attach more importance to thrift/ being economical

Short -term orientation is when:

You attach respect for tradition and saving face (you more concerned about doing things for now)

Uncertainty avoidance is higher when:

You feel nervous or tense at work and have an emotional need for rules

The Gods Must Be Crazy: What cultural rules exist in society around him that Xi is unawareof?

You're not allowed to hunt, goats are sacred animals, individualism, being able to own things, Maranda rights, the word guilty, the idea of wearing uniforms and spending time in jail

low context cultures

a culture in which communication is usually taken at face value without much reliance on unspoken context (what they say is what they mean) - Emphasis on verbal cues that should not be subject to multiple interpretations

society

a group of people who share a common set of values and norms - While a society may be equivalent to a country, some countries harbor several societies or subcultures (i.e., they support multiple cultures), and some societies embrace more than one country (e.g., the Scandinavian countries of Denmark, Norway, and Sweden are often viewed as culturally being a part of one society in terms of the business marketplace).

representative democracy

a political system in which citizens periodically elect individuals to represent them in government - These elected representatives then form a government whose function is to make decisions on behalf of the electorate.

The World Values Survey (WVS)

a research project spanning more than 100 countries that explores people's values and norms, how they change over time, and what impact they have in society and business.72 The WVS includes dimensions for support for democracy; tolerance of foreigners and ethnic minorities; support for gender equality; the role of religion and changing levels of religiosity; the impact of globalization; attitudes toward the environment, work, family, politics, national identity, culture, diversity, and insecurity; and subjective well-being.

property

a resource over which an individual or business holds legal title, that is, a resource that it owns

Multinational Enterprise (MNE) (book)

any business that has productive activities in two or more countries

Values

abstract ideas about what a society believes to be good, right, and desirable - They may include a society's attitudes toward such concepts as individual freedom, democracy, truth, justice, honesty, loyalty, social obligations, collective responsibility, the role of women, love, sex, marriage, and so on. Values are not just abstract concepts; they are invested with considerable emotional significance. People argue, fight, and even die over values such as freedom. Values are also often reflected in the political and economic systems of a society.

first-mover advantage

advantages accruing to the first to enter a market

Theocratic law

based on religious teachings

Globalization refers to the _____ and _______ of interactions and interdependences among peoples and countries of the world

broadening and deepening

The shift towards a market-based economic system involves:

deregulation privatization creation of a legal system to safeguard property rights

innovation

development of new products, processes, organizations, management practices, and strategies

Risks due to different systems

different systems have different types of risk - market economy: private ownership - command economy: government planned - mixed economy

Group of Twenty (G-20)

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. - Originally established to formulate a coordinated policy response to financial crises in developing nations, in 2008 and 2009 it became the forum through which major nations attempted to launch a coordinated policy response to the global financial crisis that started in America and then rapidly spread around the world, ushering in the first serious global economic recession since 1981.

the issues of globalization

forces of globalization forces of localization globalization as a cycle

Paris Convention for the Protection of Industrial Property

international agreement to protect intellectual property

Gross National Income (GNI)

measures the total annual income received by residents of a nation - GNI per person figures can be misleading because they don't consider differences in the cost of living.

Global aspects of the global environment

legal distributive competitive physical labor financial technical economic socioeconomic political

Three types of economic systems

market economy, command economy, mixed economy

various functional areas of business

marketing personal finance production

capital markets

most integrated right now 85%. or 60% because there's less money circulating and less

Indulgence vs. Restraint

movement to add this sixth dimension to Hofstede's work - Indulgence refers to a society that allows relatively free gratification of basic and natural human drives related to enjoying life and having fun. Restraint refers to a society that suppresses gratification of needs and regulates it by means of strict social norms.

Risks in International Business

political, economic, legal

Degree pf global market integration

product markets capital markets labor markets technology markets

Localization

refers to the segmentation and contraction of the interactions and interdependences among peoples and countries of the world

Globalization (book)

refers to the shift toward a more integrated and interdependent world economy.

Folkways

routine conventions of everyday life - Generally, folkways are actions of little moral significance. Rather, they are social conventions concerning things such as the appropriate dress code in a particular situation, good social manners, eating with the correct utensils, neighborly behavior, and the like. Although folkways define the way people are expected to behave, violation of them is not normally a serious matter. People who violate folkways may be thought of as eccentric or illmannered, but they are not usually considered to be evil or bad. - A good example of folkways concerns attitudes toward time in different countries. -Folkways also include rituals and symbolic behavior. (Folkways also include rituals and symbolic behavior.)

Product Safety Laws

set certain safety standards to which a product must adhere

Product markets

takes longer for products to ship so globalization is a lot harder during this time but also we still export and import and a lot of things. 30% or 75%

Culture

the collective programing of the mind which distinguishes the members of one group or category of people from another" - Geert Hofstede - Cultural misunderstandings part of the "Liability of foreignness " - Organizational culture is a distinct concept, but is to some, a function of culture

The individual

the individual is the basic building block of social organization. This is reflected not just in the political and economic organization of society but also in the way people perceive themselves and relate to each other in social and business settings. - More and more, individuals are regarded as "independent contractors" even though they belong to and work for a company. These individuals, in essence, build their personal brands by the knowledge, skills, and experience that they have; which often translates to increased salaries and promotions at the current company or another company that believes that it can benefit from that person's capabilities.

Privatization

the sale of state-owned enterprises to private investors

Gross National Income (GNI)

the term used by the World Bank and other international organizations to supersede the GNP term. Like GNP, it means GDP plus (net) income from nonresident, domestically-owned assets minus income from resident, foreign owned assets.

Stock of FDI

the total accumulated value of foreign-owned assets at a given time - The share of the total stock accounted for by U.S. firms declined from about 38 percent in 1980 to 24.4 percent in 2014.

Social democrats

those committed to achieving socialism by democratic means

Individualism is lower when:

•Variety and adventure in the job is important •Job security is important thinking more about the group and team work - low: china, venezuela

Cognitive (both deep seated in tradition)

"In Korea, I found it interesting that it is disrespectful to speak your mind. In contrast, children in the US are encouraged to express their thoughts. However, in Korea, if your thoughts counter ideas of an elder or someone in a higher position than you, it is disrespectful to mention it." "In Turkey, you cannot say - thank you I am full - when you are invited to a dinner. I remember from my childhood as a Turkish girl, you can never sit down when a guest is in the house maybe partly because while the guest is drinking tea, the fruit should be ready and while the fruit is over in their plates, then the nuts must be ready. Guests are considered as God-sent even though it has nothing to do with our religion."

normative (more of a peer pressure type thing)

"Italians only wear shorts at the beach. If you are seen wearing them at any other place you were laughed at." One of my friends got ridiculed by a local woman who followed her inside a cafe to tell her that her shorts were embarrassing the country!

regulative (there are laws), in Singapore they take their laws very seriously.

"My most recent trip abroad was to Singapore. It was definitely nerve wracking to make sure I did not break any laws, which are things that we here in the US do as everyday activities. These laws include no eating or drinking on the train, no chewing gum at all. Singapore is one of the safest, cleanest places because they enforce their laws.I did not want to get fined or offend anyoneby not completely knowing the laws or common courtesies."

representative democracy has a number of safeguards

(1) an individual's right to freedom of expression, opinion, and organization (2) a free media (3) regular elections in which all eligible citizens are allowed to vote (4) universal adult suffrage (5) limited terms for elected representatives (6) a fair court system that is independent from the political system (7) a nonpolitical state bureaucracy (8) a nonpolitical police force and armed service (9) relatively free access to state information.

four reasons managing an international business is different from managing a purely domestic business

(1) countries are different (2) 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 (3) an international business must find ways to work within the limits imposed by government intervention in the international trade and investment system (4) international transactions involve converting money into different currencies.

institutions can be weak or strong

- "Institutional weakness" means incentive structures are absent, arbitrary, or at least non transparent - This translates into unpredictability and thus risk: political risk, legal risk, economic risk - Depends on whether society is rule-based or relationship based (Individualism vs Collectivism) ➢In rule-based settings, institutions are more transparent and predictable (to outsiders) than in relationship-based settings

Globalization of Production - Boing example

- 65% of the 787 is outsourced. Is that a good thing or not? There a pluses and minuses to outsourcing - There are some quality control challenges with outsourcing, so this made Boing late in delivery of outsourcing - But, there are cost savings with outsourcing

Cross-Border integration of markets (Ghamawat)

- A world of nations (complete localization): culture/civilizations, administration/politics, geographical differences, economic differences - the world is flat (complete globalization): technology, openness/liberalization, market opportunity, collective goods and global governance

Civil law

- Based on Roman Law and Napoleonic Code - Judgment based on application of statutes

Common law

- Based on precedents and traditions - Judgment based on interpretation of law

The CAGE Distance Framework (Ghemawat)

- Cultural Distance: Different languages, ethnicities, religions, values, norms - Administrative Distance: Differences in corruption, legal rules, political risk and instability, government policies, colonial ties - Geographic Distance: Physical remoteness, lack of a common border, lack of sea or river access, size of country, weak transportation or communication links, climates - Economic Distance: differences in consumer incomes, costs, and human and natural resources - these all have an impact on why we wouldn't be headed towards globalization according to Ghemawat

What is driving the move towards greater globalization?

- Declining trade and investment barriers (overall there tends to be lower trade barriers, there are still some struggles with china) - Technology: internet, communication, supply chain, health issues - More companies are participating in the global commerce: a lot more smaller and medium size companies where in the past there were just these big MCNs - Globalization of markets (convergence of tastes and cultures, prices and wages) - Globalization of production (land, labor, and capital)

Expressive vs. Reserved Communication

- Expressive culture: close physical distance, louder voice volume, seldom use of silence, acceptable conversational overlap, frequent touch behavior, often intense gaze behavior, frequent gestures - Reserved cultures: relatively far apart physical distance, softer voice volume, frequent use of silence, considered rude conversational overlap, less frequent touch behavior, softer gaze behavior, infrequent gestures

Global Institutions

- General Agreement on Tariffs and Trade (GATT) - World Trade Organization (WTO) - International Monetary Fund (IMF) - World Bank - All these institutions were created by voluntary agreement between individual nation-states, and their functions are enshrined in international treaties.

Things companies need to decide when going global

- Global Integration of Value Chain: Should we globally connect our value chain or should we separate it by region/nation? - Adaptation of Product/Marketing: Should we develop and sell a standardized product or should we develop and sell a product adapted to local conditions? - Organizational Centralization/Decentralization: Should we centralize control in global headquarters or decentralize it to local subsidiaries? - Market Entry Decision: How should we exploit global opportunities -- either by gaining global competitive advantages or gaining new market share -- given large national differences in culture and institutions? When should we enter, or avoid, a particular country? - Integrated Non-Market Strategy: Should we follow and adopt global standards of appropriate behavior, or should we allow for local variation in what is considered acceptable organizational behavior?

two additional cultural frameworks

- Global Leadership and Organizational Behavior Effectiveness (GLOBE) - The World Values Survey (WVS)

Internet

- Internet has emerged as an equalizer. It rolls back some of the constraints of location, scale, and time zones. - easier for buyers and sellers to find each other, - expand their global presence at a lower cost than ever before

Economy type and innovation

- It has been argued that the economic freedom associated with a market economy creates greater incentives for innovation and entrepreneurship than either a planned or a mixed economy. - In a planned economy, the state owns all means of production. Consequently, entrepreneurial individuals have few economic incentives to develop valuable new innovations because it is the state, rather than the individual, that captures most of the gains. - Strong legal protection of property rights is another requirement for a business environment to be conducive to innovation, entrepreneurial activity, and hence economic growth.

Monochronic time vs polychromic time

- Low context: very important punctuality, rigid schedules, deadlines, seldom meetings interrupted - High context: less important punctuality, flexible schedules/deadlines, frequently meetings interrupted

cultural differences in time

- Monochronic People: ∙Do one thing at a time ∙Concentrate on the job ∙Take time commitments (deadlines, schedules) seriously ∙Are low-context and need information ∙Are committed to the job ∙Adhere religiously to plans ∙Are concerned about not disturbing others; follow rules of privacy and consideration ∙Show great respect for private property; seldom borrow or lend ∙Emphasize promptness ∙Are accustomed to short term relationships - Polychronic People: ∙Do many things atonce ∙Are highly distractible and subject to interruptions ∙Consider time commitments an objective to be achieved, if possible ∙Are high-context and already have information ∙Are committed to people and relationships ∙Change plans often and easily ∙Are more concerned with those who are closely related (family, friends, close business associates) than with privacy ∙Borrow and lend things often and easily ∙Base promptness on the relationship ∙Have strong tendency to build lifetime relationships

Supporters of globalization

- Supporters of globalization reply that critics of these trends miss the essential point about free trade agreements—the benefits outweigh the costs.45 They argue that free trade will result in countries specializing in the production of those goods and services that they can produce most efficiently, while importing goods and services that they cannot produce as efficiently. - Importing textiles from China leads to lower prices for clothes in the United States, which enables consumers to spend more of their money on other items. At the same time, the increased income generated in China from textile exports increases income levels in that country, which helps the Chinese purchase more products produced in the United States, - free trade benefits all countries that adhere to a free trade regime. - the share of labor in national income has declined. However, detailed analysis suggests the share of national income enjoyed by skilled labor has actually increased, suggesting that the fall in labor's share has been due to a fall in the share taken by unskilled labor. - unskilled labor in sectors that have been exposed to more efficient foreign competition probably has seen its share of national income decline over the past three decades. - does not mean that the living standards of unskilled workers in developed nations have declined. It is possible that economic growth in developed nations has offset the fall in the share of national income enjoyed by unskilled workers, raising their living standards. - while the gap between the poorest and richest segments of society in OECD countries has widened, in most countries real income levels have increased for all, including the poorest segment. - This suggests that a solution to the problem of slow real income growth among the unskilled is to be found not in limiting free trade and globalization but in increasing society's investment in education to reduce the supply of unskilled workers. - Supporters of free trade and greater globalization express doubts about this scenario. They argue that tougher environmental regulations and stricter labor standards go hand in hand with economic progress.56 In general, as countries get richer, they enact tougher environmental and labor regulations. - Supporters of supranational organizations point out that the power of these bodies rests largely on their ability to persuade member states to follow a certain action. If these bodies fail to serve the collective interests of member states, those states will withdraw their support and the supranational organization will quickly collapse. In this view, real power still resides with individual nation-states, not supranational organizations.

Spectrum of high and low context

- Swiss and germans are most direct and just tell it like it is - Japanese are the highest in terms of context and understanding relationships

High and low context cultures

- The degree to which individuals within a culture rely on contextual cues to convey and interpret meaning - High/low context helps us to understand how cultural values are manifested in communication and interaction patterns

Costs of international business

- a company may pushed to pay off politically powerful entities in a country before the government allows it to do business there. - one of the most important variables is the sophistication of a country's economy. It may be more costly to do business in relatively primitive or undeveloped economies because of the lack of infrastructure and supporting businesses. - As for legal factors, it can be more costly to do business in a country where local laws and regulations set strict standards with regard to product safety, safety in the workplace, environmental pollution, and the like (because adhering to such regulations is costly).

Cultural change

- culture is not a constant; it evolves over time.73 Changes in value systems can be slow and painful for a society. ex: American values on the role of women, love, sex, marriage chafed drastically in the 70s - The culture of societies may also change as they become richer because economic progress affects a number of other factors, which in turn influence culture. For example, increased urbanization and improvements in the quality and availability of education are both a function of economic progress, and both can lead to declining emphasis on the traditional values associated with poor rural societies. - The culture of societies may also change as they become richer because economic progress affects a number of other factors, which in turn influence culture. For example, increased urbanization and improvements in the quality and availability of education are both a function of economic progress, and both can lead to declining emphasis on the traditional values associated with poor rural societies. As countries get richer, there seems to be a shift from "traditional" to "secular rational" values, and from "survival values" to "well-being" values.

Function of Institutions

- institutions mean a set of rules that govern both formal (regulatory environment) and informal (norms and cultures) - Institutions provide incentive structures for behavior (rewards for compliance as well as sanctions for violations) - Institutions thus reduce uncertainty and opportunism, keeping transaction costs low

Deal focused vs relationship focused

- low context: more open to outsiders, direct initial contact, deal first for the first meeting, less frequent face to face contact - high context: less open to outsiders, indirect initial contact, relationship first for the first meeting, more frequent face to face contact

Informal vs. Formal

- low context: smaller status differences, more familiar forms of address, simpler protocol rituals - high context: larger status differences, more formal forms of address, more elaborate protocol rituals

Factors of localization

- nationalism: feeling of buying local and supporting your country - Cultural diversity and values - History and tradition - Security concerns: there are certain things you would want to share with other countries

the spread of market based systems

- since the late 1980s, there has been a transformation from centrally planned command economies to market-based economies - command and mixed economies failed to deliver the sustained economic performance achieved by countries that had adopted market-based systems - many countries shifted to a market-based system

Sources of political risk

-embargoes and sanctions (e.g.North Korea, Russia) -boycotts (e.g. Shell / Nigeria) -terrorism (e.g. Belgium, France, U.S. Spain, Iraq,Syria, Pakistan, Afghanistan) -hostage taking (e.g. Colombia, ISIS) -expropriation (seizure of assets by government) (not being able to send you money back from the country you're operating in: xerox not being able to send their money back to the US)

Three reasons for the spread of democracy

1) many totalitarian regimes failed to deliver economic progress to the vast bulk of their populations. 2) new information and communication technologies—including satellite television, desktop publishing, and, most important, the Internet and associated social media—have reduced a state's ability to control access to uncensored information. 3) in many countries, economic advances have led to the emergence of increasingly prosperous middle and working classes that have pushed for democratic reforms.

Level of analysis in International Business

1. Business environment: global, regional, national 2. Strategy: Industry, Market 3. Management: organization, people

Edward Hall: The Hidden Dimension (four key contextual clues)

1. Direct / Indirect Messages & Explicit / Implicit Meanings 2. The Language of Relationships (Deal-Focused vs. Relationship-Oriented; Formal vs.Informal) 3. The Language of Time (monochromatic vs polychromatic) 4. The Language of Space (expressive vs reserved communication; physical space, auditory space)

4 principles of social stratification

1. Social stratification is a trait of society, not simply a reflection of individual differences 2. Social stratification carries over from generation to generation 3. Social stratification is universal but variable 4. Social stratification involves not just inequality but beliefs as well

4 dominating religions

1. christianity 2. islam 3. Hinduism 4. Buddhism

4 forms of totalitarianism

1. communist 2. theocratic 3. tribal 4. right-wing

Hofstede's Dimensions

1. power distance: weaker member's acceptance of inequality 2.Individualism: loose ties between individuals; each responsible for him/herself 3. Masculinity: the degree to which men have different values than women 4. Uncertainty avoidance: a function of how comfortable group members feel with uncertainty 5. Long-term orientation: thrift and perseverance

Two macro factors underlie the trend toward greater globalization

1. the decline in barriers to the free flow of goods, services, and capital 2. technological change

Two noble trends in the demographics of the multinational enterprise

1. the rise of non US multinationals 2. the growth of mini-multinationals - The globalization and growth of the world economy has resulted in a relative reduction in the dominance of U.S. firms in the global marketplace. - many medium-size and small businesses are becoming increasingly involved in international trade and investment. - The rise of the Internet is lowering the barriers that small firms face in building international sales.

Labor markets

20% due to coronavirus because of job loss and companies pulling employees back to domestic country

Power distance is higher when:

A good working relationship with your direct superior is important - it's important that the person at the top is important and what they say you will do and you don't question them - China has a high power distance

Tribal Totalitarianism

A political system in which a party, group, or individual that represents the interests of a particular tribe (ethnic group) monopolizes political power. - has arisen from time to time in African countries such as Zimbabwe, Tanzania, Uganda, and Kenya.

Right-Wing Totalitarianism

A political system in which political power is monopolized by a party, group, or individual that generally permits individual economic freedom but restricts individual political freedom, including free speech, often on the grounds that it would lead to the rise of communism. - A common feature of many right-wing dictatorships is an overt hostility to socialist or communist ideas. - backed by the military, and in some cases, the government may be made up of military officers.

United Nations Convention on Contracts for the International Sale of Goods (CISG)

A set of rules governing certain aspects of the making and performance of commercial contracts between sellers and buyers who have their places of businesses in different nations. - When contract disputes arise in international trade, there is always the question of which country's laws to apply. To resolve this issue, a number of countries, including the United States, have ratified the CISG - The CISG applies automatically to all contracts for the sale of goods between different firms based in countries that have ratified the convention, unless the parties to the contract explicitly opt out. - only 83 nations have ratified the convention - Some of the world's important trading nations, including India and the United Kingdom, have not ratified the CISG. - When firms do not wish to accept the CISG, they often opt for arbitration by a recognized arbitration court to settle contract disputes. The most well known of these courts is the International Court of Arbitration of the International Chamber of Commerce in Paris,

Caste System

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. - the most rigid system of stratification - Often, a caste position carries with it a specific occupation. Members of one caste might be shoemakers, members of another might be butchers, and so on. These occupations are embedded in the caste and passed down through the family to succeeding generations. - india

class consciousness

A tendency for individuals to perceive themselves in terms of their class background. - An antagonistic relationship between management and labor classes, and the resulting lack of cooperation and high level of industrial disruption, tends to raise the costs of production in countries characterized by significant class divisions. In turn, this can make it more difficult for companies based in such countries to establish a competitive advantage in the global economy.

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. - Individuals are involved in families, work groups, social groups, recreational groups, and social media - while groups are found in all societies, some societies differ according to the degree to which the group is viewed as the primary means of social organization.19 In some societies, individual attributes and achievements are viewed as being more important than group membership; in others, the reverse is true. - In contrast to the Western emphasis on the individual, the group is the primary unit of social organization in many other societies. - The primacy of the value of group identification also discourages managers and workers from moving from company to company. - the primacy of the group is not always beneficial. Just as U.S. society is characterized by a great deal of dynamism and entrepreneurship, reflecting the primacy of values associated with individualism, some argue that Japanese society is characterized by a corresponding lack of dynamism and entrepreneurship.

command economy

An economic system where the allocation of resources, including determination of what goods and services should be produced, and in what quantity, is planned by the government. - the government plans the goods and services that a country produces, the quantity in which they are produced, and the prices at which they are sold. - Consistent with the collectivist ideology, the objective of a command economy is for government to allocate resources for "the good of society." - In addition, in a pure command economy, all businesses are state owned, the rationale being that the government can then direct them to make investments that are in the best interests of the nation as a whole rather than in the interests of private individuals. - While the objective of a command economy is to mobilize economic resources for the public good, the opposite often seems to have occurred. In a command economy, state-owned enterprises have little incentive to control costs and be efficient because they cannot go out of business. no incentive for individuals to look for better ways to serve consumer needs; hence, dynamism and innovation are absent from command economies. - Instead of growing and becoming more prosperous, such economies tend to stagnate.

individualism

An emphasis on the importance of guaranteeing individual freedom and self-expression - philosophy that an individual should have freedom in his or her economic and political pursuits - Built on two central tenets: 1) Emphasis on the importance of guaranteeing individual freedom and self-expression. 2) The welfare of society is best served by letting people pursue their own economic self-interest, as opposed to some collective body (such as government) dictating what is in society's best interest.

United Nations (UN)

An international organization made up of 193 countries headquartered in New York City, formed in 1945 to promote peace, security, and cooperation. - When states become members of the United Nations, they agree to accept the obligations of the UN Charter, an international treaty that establishes basic principles of international relations. - four purposes: to maintain international peace and security, to develop friendly relations among nations, to cooperate in solving international problems and in promoting respect for human rights, and to be a center for harmonizing the actions of nations. - promotion of higher standards of living, full employment, and conditions of economic and social progress and development

World Intellectual Property Organization

An international organization whose members sign treaties to agree to protect intellectual property

The Gods Must Be Crazy: implicit and explicit cultural rules (= institutions)

Animal protection (police), judicial system (in class: implicit - they don't kill people's animals (private property), don't run from authority, sharing, difference between goat being property vs. it coming from nature

implications for the globalization of production

As transportation costs associated with the globalization of production have declined, dispersal of production to geographically separate locations has become more economical. As a result of the technological innovations discussed earlier, the real costs of information processing and communication have fallen dramatically in the past two decades. These developments make it possible for a firm to create and then manage a globally dispersed production system, further facilitating the globalization of production.

Differences in contract law

Because common law tends to be relatively ill specified, contracts drafted under a common law framework tend to be very detailed with all contingencies spelled out. In civil law systems, however, contracts tend to be much shorter and less specific because many of the issues are already covered in a civil code. Thus, it is more expensive to draw up contracts in a common law jurisdiction, and resolving contract disputes can be very adversarial in common law systems. But common law systems have the advantage of greater flexibility and allow judges to interpret a contract dispute in light of the prevailing situation.

Determinants of Culture

Center: culture norms and value system - Religion: very important (she won't ask about differences in religions in concept check) - Political philosophy: democracy or totalitarian - Economic philosophy: mixed market, planned economy - Education: how highly educated is that country - Language: misunderstandings can occur -Social structure: individualistic or collective

Criticisms of Hofstede

First, Hofstede assumes there is a one-to-one correspondence between culture and the nation-state, but as we discussed earlier, many countries have more than one culture. Hofstede's results do not capture this distinction. Second, the research may have been culturally bound. The research team was composed of Europeans and Americans. The questions they asked of IBM employees—and their analysis of the answers—may have been shaped by their own cultural biases and concerns. So it is not surprising that Hofstede's results confirm Western stereotypes because it was Westerners who undertook the research. The later addition of the long-term versus short-term dimension illustrates this point. Third, Hofstede's informants worked not only within a single industry, the computer industry, but also within one company, IBM. At the time, IBM was renowned for its own strong corporate culture and employee selection procedures, making it possible that the employees' values were different in important respects from the values of the cultures from which those employees came. Also, certain social classes (such as unskilled manual workers) were excluded from Hofstede's sample. A final caution is that Hofstede's work is now beginning to look dated. Cultures do not stand still; they evolve, albeit slowly.

Education

Formal education is the medium through which individuals learn many of the language, conceptual, and technical skills that are indispensable in a modern society. - From an international business perspective, one important aspect of education is its role as a determinant of national competitive advantage.60 The availability of a pool of skilled and knowledgeable workers is a major determinant of the likely economic success of a country. - The general education level of a country is also a good index of the kind of products that might sell in a country and of the type of promotional material that should be used.

Patent

Grants the inventor of a new product or process exclusive rights to the manufacture, use, or sale of that invention.

The Gods Must Be Crazy: what cultural rules govern Xi's behavior?

He covers his private parts, politeness (sharing, smiling at people), no one owns anything, eat as much as you need and share the rest, tell the truth

Del Mar Dogs: What are the costs and benefits to outsourcing to the US India and GE

In the US, by outsourcing to other countries like India, there is a lot of times a major cost reduction. This was also a benefit for GE in the sense that they could pay the workers in India a lot less than they were paying their US workers. This is also a benefit for India, because even though companies like GE are paying very little compared to a normal US salary, they are paying a lot for an Indian salary. For example, when Shageesh changed to working for a multinational company, his yearly salary more than doubled, but was still only $7,500. For India, this is bringing in both money and jobs. For GE, this is drastically increasing their ROI. However a big cost to the US is that the US is losing a lot of jobs and a lot of US workers and being laid off. There is also a huge cost for GE to outsource in the issues that arise with communication. This could arguably cost them more than the amount they are saving with outsourcing their workers. A benefit is that when we're asleep, people in India are awake, so essentially GE has extended there work hours because people are always working. One cost to India is that they're going to have a hard time attracting top talent if US companies are coming in and taking the talent away.

factors of production

Inputs into the productive process of a firm, including labor, management, land, capital, and technological know-how.

A unified framework for global business

Institution and resource-based view helping us answer the fundamental question: what determines the success/failure of firms around the globe. - institution-based view: formal and informal rules of the game - resource based view: firm-specific resources and capabilities

International Monetary Fund (IMF)

International institution set up to maintain order in the international monetary system - often seen as the lender of last resort to nation states whose economies are in turmoil and whose currencies are losing value against those of other nations.

World Bank

International institution set up to promote general economic development in the world's poorer nations - focused on making low-interest loans to cash-strapped governments in poor nations that wish to undertake significant infrastructure investments (such as building dams or roads). - Less controversial than the IMF

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

Black economy or shadow economy

Large amounts of economic activity may be in the form of unrecorded cash transactions or barter agreements. People engage in such transactions to avoid paying taxes, and although the share of total economic activity accounted for by such transactions may be small in developed economies such as the United States, in some countries (India being an example), they are reportedly very significant.

implications for the globalization of markets

Low-cost global communications networks, including those built on top of the Internet, are helping create electronic global marketplaces.

Pseudo-Democracies

Many of the world's nations are neither pure democracies nor iron-clad totalitarian states. Rather they lie between pure democracies and complete totalitarian systems of government. They might be described as imperfect or pseudo-democracies, where authoritarian elements have captured some or much of the machinery of state and use this in an attempt to deny basic political and civil liberties.

Deregulation

Removal of government restrictions concerning the conduct of a business. - in command economies: involve removing price controls, thereby allowing prices to be set by the interplay between demand and supply; abolishing laws regulating the establishment and operation of private enterprises; and relaxing or removing restrictions on direct investment by foreign enterprises and international trade. - in mixed economies: deregulation has involved the same kind of initiatives that we have seen in former command economies, although the transformation has been easier because these countries often had a vibrant private sector.

Pankaj Ghemawat

Said we are only semi globalized and very strongly feels we are not headed towards globalization. he asked, what percent are actually globalized. Purple is what we actually (very low) are and green is what people think we are ( a lot higher)

Individualism is greater when:

Sufficient time for your personal or family life is important - high is US, Aus, and UK

political system

System of government in a nation. - Assessed according to 1) the degree to which the country emphasizes collectivism as opposed to individualism and 2) the degree to which the country is democratic or totalitarian.

Why is globalization starting to take place?

We are moving toward a world in which barriers to cross-border trade and investment are declining; perceived distance is shrinking due to advances in transportation and telecommunications technology; material culture is starting to look similar the world over; and national economies are merging into an interdependent, integrated global economic system.

Delmar Dog Butler Differences between US and India

The first difference between India and the US is the currency. Indian rupees have a much lower value compared to the US dollar. Another difference is marriage. In India, a lot of marriages are arranged and the wife and husband will be in the same professional field. Salary is comparatively much less in India, making it very easy for the US to outsource workers because they don't have to pay Indian workers nearly as much as American workers. However because of this, Indian workers have to spend more time in the office than American workers because they are getting paid what they consider to be a high salary. In India, there is a much higher work ethic than in America.

four stylized facts describing the demographics of the global economy

The first was U.S. dominance in the world economy and world trade picture. The second was U.S. dominance in world foreign direct investment. Related to this, the third fact was the dominance of large, multinational U.S. firms on the international business scene. The fourth was that roughly half the globe—the centrally planned economies of the communist world—was off-limits to Western international businesses. - all four of these qualities either have changed or are now changing rapidly

Spoken language

The language of a society can direct the attention of its members to certain features of the world rather than others. The classic illustration of this phenomenon is that whereas the English language has but one word for snow, the language of the Inuit (Eskimos) lacks a general term for it. Instead, because distinguishing different forms of snow is so important in the lives of the Inuit, they have 24 words that describe different types of snow - Countries with more than one language often have more than one culture.

Important analyzations on world trade

The larger the difference between the growth rates of world trade and world production, the greater the extent of globalization and the more important it becomes to understand international business. The fact that the volume of world trade has been growing faster than world GDP implies several things. First, more firms are doing what Boeing does with the 777 and 787: dispersing parts of their production process to different locations around the globe to drive down production costs and increase product quality. Second, the economies of the world's nation-states are becoming ever more intertwined. the world has become significantly wealthier since 1990. The implication is that rising trade is the engine that has helped pull the global economy along.

economic risk

The likelihood that events, including economic mismanagement, will cause drastic changes in a country's business environment that adversely affect the profit and other goals of a particular business enterprise. - not independent of political risk - economic management may give rise to significant social unrest and, hence, political risk

political risk

The likelihood that political forces will cause drastic changes in a country's business environment that will adversely affect the profit and other goals of a particular business enterprise. - greater in countries experiencing social unrest and disorder or in countries where the underlying nature of a society increases the likelihood of social unrest..

Which markets are the most global?

The most global of markets are not typically markets for consumer products—where national differences in tastes and preferences can still be important enough to act as a brake on globalization—but markets for industrial goods and materials that serve universal needs the world over. - markets for commodities such as aluminum, oil, and wheat; for industrial products such as microprocessors, DRAMs (computer memory chips), and commercial jet aircraft; for computer software; and for financial assets from U.S. Treasury bills to Eurobonds and futures on the Nikkei index or the euro.

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. - primarily responsible for policing the world trading system and making sure nation-states adhere to the rules laid down in trade treaties signed by WTO member states. - sought to create a more open global business system unencumbered by barriers to trade and investment between countries.

Individualism vs. 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.

Masculinity versus femininity

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.

Nation state vs society

There is not a strict one-to-one correspondence between a society and a nation-state. Nation-states are political creations. While these nation-states are often studied for their "national identity," "national character," and even "competitive advantage of nations," in reality they may contain a single culture or several cultures.

Big Mac Index

Tool for calculating purchasing power parity (PPP) that compares prices of a Big Mac throughout the world. - start with the big mac, it's 0 in the US, and it's overvalued in the UK and you'd wanna buy one in ukraine

Globalization of Production

Trend by individual firms to disperse parts of their productive processes to different locations around the globe to take advantage of differences in cost and quality of factors of production.

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. - United States passed the Foreign Corrupt Practices Act (FCPA) following revelations that U.S. companies had bribed government officials in foreign countries in an attempt to win lucrative contracts. This law makes it illegal to bribe a foreign government official to obtain or maintain business over which that foreign official has authority, and it requires all publicly traded companies (whether or not they are involved in international trade) to keep detailed records that would reveal whether a violation of the act has occurred. - allows exceptions known as facilitating or expediting payments (also called grease payments or speed money), the purpose of which is to expedite or to secure the performance of a routine governmental action. - while grease payments are, technically, bribes, they are distinguishable from (and, apparently, less offensive than) bribes used to obtain or maintain business because they merely facilitate performance of duties that the recipients are already obligated to perform.

What would have made Uber's entry strategy better?

Uber might have done even better internationally if it had adapted its entry strategy to take local differences in regulations, culture, and political realities into account.

Firms have two basic strategies to exert pressure on politicians

Voice and exit - Voice: typically means lobbying, but can also be collective bargaining - Exit: means relocating value-adding activities offshore (or at least the threat) (threatening to the leave the country or actually leaving)

Theocratic Totalitarianism

a political system in which political power is monopolized by a party, group, or individual that governs according to religious principles - Islam: limit freedom of political and religious expression with laws based on Islamic principles.

Collectivism

a political system that emphasizes collective goals as opposed to individual goals - needs of society as a whole are generally viewed as being more important than individual freedoms. - "the common good"

ethical system

a set of moral principles, or values, that are used to guide and shape behavior - Most of the world's ethical systems are the product of religions. Thus, we can talk about Christian ethics and Islamic ethics. However, there is a major exception to the principle that ethical systems are grounded in religion. Confucianism and Confucian ethics influence behavior and shape culture in parts of Asia, yet it is incorrect to characterize Confucianism as a religion.

Civil Law

a system of law based on a very detailed set of written laws and codes - less adversarial than a common law system because the judges rely on detailed legal codes rather than interpreting tradition, precedent, and custom. - less flexibility - power only to apply the law

Theocratic Law System

a system of law based on religious teachings - Islamic law is the most widely practiced theocratic legal system in the modern world, - primarily a moral rather than a commercial law and is intended to govern all aspects of life.

Religion

a system of shared beliefs and rituals that are concerned with the realm of the sacred - Some scholars have theorized that the most important business implications of religion center on the extent to which different religions shape attitudes toward work and entrepreneurship and the degree to which the religious ethics affects the costs of doing business in a country. However, it is hazardous to make sweeping generalizations about the nature of the relationship between religion and ethical systems and business practice. - While some professionals argue that there is a relationship between religious and ethical systems and business practice in a society, in a world where nations with Catholic, Protestant, Muslim, Hindu, and Buddhist majorities all show evidence of entrepreneurial activity and sustainable economic growth, it is important to view such proposed relationships with a degree of skepticism. The proposed relationships may exist, but their impact may be small compared with the impact of economic policy. On the other hand, research by economists Robert Barro and Rachel McCleary does suggest that strong religious beliefs, particularly beliefs in heaven, hell, and an afterlife, have a positive impact on economic growth rates, irrespective of the particular religion in question. Barro and McCleary looked at religious beliefs and economic growth rates in 59 countries. Their conjecture was that higher religious beliefs stimulate economic growth because they help sustain aspects of individual behavior that lead to higher productivity.

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 - less rigid - Individuals born into a class at the bottom of the hierarchy can work their way up; conversely, individuals born into a class at the top of the hierarchy can slip down. - While many societies have class systems, social mobility within a class system varies from society to society. For example, some sociologists have argued that Britain has a more rigid class structure than certain other Western societies, such as the United States. - class membership in the US is determined to a much greater degree by individual economic achievements, as opposed to background and schooling like in Britain

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

Communist Totalitarianism

a version of collectivism advocating that socialism can be achieved only through a totalitarian dictatorship

liability of foreignness

additional costs of doing business in an unfamiliar cultural and economic environment, and of coordinating across geographic distances - The disadvantage means higher transaction costs and greater risk of experiencing opportunistic behavior

Pure Democracy

all citizens should be directly involved in decision making

Florence Kluckhohn and Fred Strodtbeck's values orientation theory

all culture definitions must answer a limited number of universal problems, that the value-based solutions are limited in number and universally known, and that different cultures have different preferences among them.

Human Development Index (HDI)

an attempt by the UN to assess the impact of a number of factors on the quality of human life in a country - based on three measures: 1) life expectancy at birth (a function of health care) 2) educational attainment (measured by a combination of the adult literacy rate and enrollment in primary, secondary, and tertiary education) 3) whether average incomes, based on PPP estimates, are sufficient to meet the basic needs of life in a country (adequate food, shelter, and health care). - scaled from 0 to 1. Countries scoring less than 0.5 are classified as having low human development (the quality of life is poor); those scoring from 0.5 to 0.8 are classified as having medium human development; and those that score above 0.8 are classified as having high human development.

market economy

an economic system in which the interaction of supply and demand determines the quantity in which goods and services are produced - all productive activities are privately owned, as opposed to being owned by the state. - The goods and services that a country produces are not planned by anyone. - Production is determined by the interaction of supply and demand and signaled to producers through the price system. - If demand for a product exceeds supply, prices will rise, signaling producers to produce more. - If supply exceeds demand, prices will fall, signaling producers to produce less. - In this system, consumers are sovereign. - The purchasing patterns of consumers, as signaled to producers through the mechanism of the price system, determine what is produced and in what quantity. - Given the dangers inherent in monopoly, one role of government in a market economy is to encourage vigorous free and fair competition between private producers. Governments do this by banning restrictive business practices designed to monopolize a market - Private ownership ensures that entrepreneurs have a right to the profits generated by their own efforts. - In turn, the constant improvement in product and process that results from such an incentive has been argued to have a major positive impact on economic growth and development.

International Business

any firm that engages in international trade or investment - A firm does not have to become a multinational enterprise, investing directly in operations in other countries, to engage in international business, although multinational enterprises are international businesses. All a firm has to do is export or import products from other countries. - Differences among countries require that an international business vary its practices country by country. - A further way in which international business differs from domestic business is the greater complexity of managing an international business. - Managers in an international business must also deal with government restrictions on international trade and investment.

The overall attractiveness of a country as a potential market and/or investment site for an international business depends on

balancing the benefits, costs, and risks associated with doing business in that country - benefits: size of the economy, likely economic growth - costs: corruption lack of infrastructure - risks: political (social unrest/antibusiness trends), economic (economic mismanagement), legal (failure to safeguard property rights)

Common law

based on tradition, precedent, and custom. - Tradition refers to a country's legal history - precedent to cases that have come before the courts in the past - custom to the ways in which laws are applied in specific situations. - degree of flexibility that other systems lack. - Judges in a common law system have the power to interpret the law so that it applies to the unique circumstances of an individual case. - each new interpretation sets a precedent that may be followed in future cases. - As new precedents arise, laws may be altered, clarified, or amended to deal with new situations.

property rights

bundle of legal rights over the use to which a resource is put and over the use made of any income that may be derived from that resource - Property rights can be violated in two ways: through private action and through public action.

What is international business

business (or an individual firm) that engages in international (cross-border) economic activity (or the action of doing business abroad)

Mixed economies

can be found between market and command economies. In a mixed economy, certain sectors of the economy are left to private ownership and free market mechanisms, while other sectors have significant state ownership and government planning. - In mixed economies, governments also tend to take into state ownership troubled firms whose continued operation is thought to be vital to national interests.

high-context culture

culture in which communication relies a lot on the unspoken word - Emphasis is on no verbal cues and understanding of the context

Global Leadership and Organizational Behavior Effectiveness (GLOBE)

designed to address the notion that a leader's effectiveness is contextual.71 It is embedded in the societal and organizational norms, values, and beliefs of the people being led. The initial GLOBE findings from 62 societies involving 17,300 middle managers from 951 organizations build on findings by Hofstede and other culture researchers. The GLOBE research established nine cultural dimensions: power distance, uncertainty avoidance, humane orientation, institutional collectivism, in-group collectivism, assertiveness, gender egalitarianism, future orientation, and performance orientation.

Microprocessor

enabled the explosive growth of high-power, low-cost computing, vastly increasing the amount of information that can be processed by individuals and firms.

Totalitarianism

form of government in which one person or political party exercises absolute control over all spheres of human life and opposing political parties are prohibited - all the constitutional guarantees on which representative democracies are built—an individual's right to freedom of expression and organization, a free media, and regular elections—are denied to the citizens.

impediments to globalization of production

formal and informal barriers to trade between countries, barriers to foreign direct investment, transportation costs, issues associated with economic and political risk, and the sheer managerial challenge of coordinating a globally dispersed supply chain

Technology markets

heavy integration because of coronavirus. medical community working together to solve this, communication technologies, etc. 90%

Social Strata

hierarchical social categories often based on family background, occupation, and income - Individuals are born into a particular stratum. They become a member of the social category to which their parents belong. Individuals born into a stratum toward the top of the social hierarchy tend to have better life chances than those born into a stratum toward the bottom of the hierarchy. They are likely to have better education, health, standard of living, and work opportunities.

Benefits of emphasis on individual performance in many Western societies

high level of entrepreneurial activity in the United States and other Western societies. Entrepreneurial individuals in the United States have created many new products and new ways of doing business (e.g., personal computers, photocopiers, computer software, biotechnology, supermarkets, and discount retail stores). One can argue that the dynamism of the U.S. economy owes much to the philosophy of individualism. - Highly individualistic societies are often synonymous with people who are capable and have the capacity to constantly innovate by their creative ideas for products and services.

corruption

into state ownership without compensating the owners, or redistributing assets without compensating the prior owners. It can also be done through illegal means, or corruption, by demanding bribes from businesses in return for the rights to operate in a country, industry, or location. - Economic evidence suggests that high levels of corruption significantly reduce the foreign direct investment, level of international trade, and economic growth rate in a country.

product liability

involves holding a firm and its officers responsible when a product causes injury, death, or damage - Civil laws call for payment and monetary damages. Criminal liability laws result in fines or imprisonment. Both civil and criminal liability laws are probably more extensive in the United States than in any other country, - Liability laws are typically the least extensive in less developed nations. - Many business executives argue that the high costs of liability insurance make American businesses less competitive in the global marketplace. - firms have been known to take advantage of lax safety and liability laws to do business in a manner that would not be allowed at home.

Antiglobalization protests

job losses in industries under attack from foreign competitors, downward pressure on the wage rates of unskilled workers, environmental degradation, and the cultural imperialism of global media and multinational enterprises, which was seen as being dominated by what some protesters called the "culturally impoverished" interests and values of the United States. - while the rich citizens of the developed world may have the luxury of mourning the fact that they can now see McDonald's restaurants and Starbucks coffeehouses on their vacations to exotic locations such as Thailand, fewer complaints are heard from the citizens of those countries, who welcome the higher living standards that progress brings. - One concern frequently voiced by globalization opponents is that falling barriers to international trade destroy manufacturing jobs in wealthy advanced economies such as the United States and western Europe. - this enormous expansion in the global labor force, when coupled with expanding international trade, would have depressed wages in developed nations. - "exporting jobs" to low-wage nations and contributing to higher unemployment and lower living standards in their home nations - A second source of concern is that free trade encourages firms from advanced nations to move manufacturing facilities to less developed countries that lack adequate regulations to protect labor and the environment from abuse by the unscrupulous. - we might expect free trade to lead to an increase in pollution and result in firms from advanced nations exploiting the labor of less developed nations. - Supporters of free trade and greater globalization express doubts about this scenario. They argue that tougher environmental regulations and stricter labor standards go hand in hand with economic progress.56 In general, as countries get richer, they enact tougher environmental and labor regulations. - Critics of globalization argue that despite the supposed benefits associated with free trade and investment, over the past 100 years or so the gap between the rich and poor nations of the world has gotten wider. Critics argue that if globalization is such a positive development, this divergence between the rich and poor should not have occurred. Many of the world's poorest countries have suffered from totalitarian governments, economic policies that destroyed wealth rather than facilitated its creation, endemic corruption, scant protection for property rights, and prolonged civil war. A complicating factor is the rapidly expanding populations in many of these countries. Promoters of free trade argue that the best way for these countries to improve their lot is to lower their barriers to free trade and investment and to implement economic policies based on free market economics.

Glocalization

means that both forces of globalization and localization are taking place at the same time - This tension is the fundamental source of uncertainty in international business, as the world is neither completely globalized nor completely localized - we're somewhere along that specrtum, but you see because of covid, you see how connected we are

Mores

norms seen as central to the functioning of a society and to its social life - more widely observed, have greater moral significance than other norms, and are central to the functioning of a society and to its social life. - violating mores can bring serious retribution, ill will, and collapse of any business deal in the making. - Mores include such factors as indictments against theft, adultery, incest, and cannibalism. In many societies, certain mores have been enacted into law. Specifically, all advanced societies have laws against theft, incest, and cannibalism. However, there are also many differences among cultures. In the United States, for example, drinking alcohol is widely accepted, whereas in Saudi Arabia the consumption of alcohol is viewed as violating important social mores and is punishable by imprisonment

international trade

occurs when a firm exports goods or services to consumers in another country

Foreign Direct Investment (FDI)

occurs when a firm invests resources in business activities outside its home country

Democracy

political system in which government is by the people, exercised either directly or through elected representatives - democratic-totalitarian dimension is not independent of the individualism-collectivism dimension. Democracy and individualism go hand in hand, as do the communist version of collectivism and totalitarianism. However, gray areas exist; it is possible to have a democratic state in which collective values predominate, and it is possible to have a totalitarian state that is hostile to collectivism and in which some degree of individualism

Cognitive

related to deep-seated assumptions and often hard to explain - "winning is the most important thing" - "Government intervention is bad" - "Everyone deserves a fair chance."

Normative

related to peer pressure / social expectations - "You should maintain eye contact when greeting your superior." - "You should take off your shoes when entering a home." - "You should not put your elbows on the dinner table."

containerization

simplifies transshipment from one mode of transport to another. - Containerization has revolutionized the transportation business, significantly lowering the costs of shipping goods over long distances.

Norms

social rules and guidelines that prescribe appropriate behavior in particular situations - Norms are the social rules that govern people's actions toward one another. Norms can be subdivided further into two major categories: folkways and mores.

legal system

system of rules that regulate behavior and the processes by which the laws of a country are enforced and through which redress of grievances is obtained - differences in legal systems can affect the attractiveness of a country as an investment site or market.

social structure

the basic social organization of a society - two dimensions are particularly important when explaining differences among cultures. The first is the degree to which the basic unit of a social organization is the individual, as opposed to the group. In general, Western societies tend to emphasize the importance of the individual, whereas groups tend to figure much larger in many other societies. The second dimension is the degree to which a society is stratified into classes or castes. Some societies are characterized by a relatively high degree of social stratification and relatively low mobility between strata (e.g., Indian); other societies are characterized by a low degree of social stratification and high mobility between strata (America)

Hofstede's definition of culture

the collective programming of the mind distinguishing the members of one group from another. Culture in this sense includes systems of values; and values are among the building blocks of culture

Copyrights

the exclusive legal rights of authors, composers, playwrights, artists, and publishers to publish and disperse their work as they see fit

social mobility

the extent to which individuals can move out of the social strata into which they are born - varies significantly from society to society.

Public Action

the extortion of income or resources of property holders by public officials, such as politicians and government bureaucrats - can be done through legal mechanisms such as levying excessive taxation, requiring expensive licenses or permits from property holders, taking assets into state ownership without compensating the owners, or redistributing assets without compensating the prior owners. It can also be done through illegal means, or corruption, by demanding bribes from businesses in return for the rights to operate in a country, industry, or location.

Political economy

the political, economic, and legal systems of a country - to stress that the political, economic, and legal systems of a country are interdependent; they interact with and influence each other, and in doing so, they affect the level of economic well-being.

Gross Domestic Product (GDP)

the total market value of all final goods and services produced in a country for a given time period, usually a calendar year

Socialism

those who believe in public ownership of the means of production for the common good of society - the few benefit at the expense of the many in a capitalist society where individual freedoms are not restricted. - manage state-owned enterprise to benefit society as a whole, rather than individual capitalists.

communists

those who believe socialism can be achieved only through revolution and totalitarian dictatorship

Entrepreneurs

those who first commercialize innovations - entrepreneurial activity provides much of the dynamism in an economy

privatization

transfers the ownership of state property into the hands of private investors, frequently by the sale of state assets through an auction. - simply selling state owned assets to private investors is not enough to guarantee economic growth - fails to deliver predicted benefits if the newly privatized firms continue to receive subsidies from the state and if they are protected from foreign competition by barriers to international trade and foreign direct investment.34 - In such cases, the newly privatized firms are sheltered from competition and continue acting like state monopolies.

Cross-cultural literacy

understanding how the culture of a country affects the way business is practiced - business success in a variety of countries requires crosscultural literacy. - Underneath the veneer of modernism and globalization, deep cultural differences often remain. - it is important for foreign businesses to gain an understanding of the culture that prevails in those countries where they do business and that success requires a foreign enterprise to adapt to the culture of its host country. - a relationship may exist between culture and the cost of doing business in a country or region. Different cultures are more or less supportive of the capitalist mode of production and may increase or lower the costs of doing business. - Culture is not static. It can and does evolve, although the rate at which culture can change is the subject of some dispute. Generally, culture evolves as behaviors of people become ingrained in their values and norms. This means that after some time, when a person has behaved a certain way for a while, that person (and perhaps those around the person) adopts a cultural value mindset consistent with the type of behavior illustrated by the person's actions. - Culture in society evolves when large population segments in a country or region adopt cultural values based on common ways of behaving.

Euro Area Periphery - 10 year Generic bond spreads

various european bond rates - if you want a high return you can get a greek bond - gives you an idea that maybe it's not just the country, but really the region

If trade is such a strong thing, why is there not more trade?

we are 30% of world GDP, but if there was total globalization, we'd be headed towards the dotted line. the answer is, because there are barriers to accessing goods and markets

Power Distance is lower when:

you are ok with an organizational structure in which there is more participation amongst different levels of employees. - it's more team based decision making and you will challenge authority - Lower power distance

Uncertainty avoidance is lower when:

you have a dislike of rules and want a less formalized and standardized work environment