International business exam 1
Which term describes a collection of techniques and practices that are used to manage and control organizations?
Corporate governance
________ proposes that countries should export only products that use copious factors of production and import only goods that use limited factors of production.
The factor proportions theory
Small and medium-sized enterprise (SME)
a firm with fewer than 500 employees in the United States, or with fewer than 250 employees in the European Union
Polychronic
a flexible, nonlinear orientation to time, whereby the individual takes a long-term perspective and emphasizes human relationships
Geocentric orientation
a global mind-set in which the manager is able to understand a business or market without regard to country boundaries
Polycentric orientation
a host-country mind-set in which the manager develops a strong attachment with the country in which she or he conducts business
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
Corporate social responsibility
a manner of operating a business that meets or exceeds the ethical, legal, commercial, and public expectations of customers, shareholders, employees, and communities
National industrial policy
a proactive economic development plan a government initiates to build or strengthen a particular industry
Ethical dilemma
a problem that involves two or more possible solutions, all of which entail violating moral principles and values.
Monochronic
a rigid, linear orientation to time, in which people are focused on time, punctuality, and view time as a resource.
Critical incident analysis
a useful technique that managers use to analyze awkward situations in cross-cultural incounters
Born Global Firm
a young entrepreneurial company that initiates international business activity very early in its evolution, moving rapidly into foreign markets
State-owned enterprises (SOEs)
account for substantial portion of economic value added in many countries, even rapidly liberalizing emerging markets such as Russia, China, and Brazil.
Facilitator
is a firm or individual with special expertise in banking, legal advice, customs, clearance, or related support services that helps focal firms perform international business transactions.
freight forwarder
is a specialized logistics service provider that arranges international shipping on behalf of exporting firms, much like a travel agent for cargo.
Material productions are ________.
items and technologies that people create to fill some purpose within their environments
Ownership-specific advantages
knowledge, skills, capabilities, relationships, or physical assets that the firm owns and which are the basis of its competitive advantages
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.
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.
Masculine cultures
value competitiveness, assertiveness, ambition, and accumulation of wealth
Common good approach
welfare of the entire community or nation. Respect and compassion for all.
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
Masculiity versus femininity
society's orientation based on traditional male and female values.
More of a way of thinking than a religion, ________ reflects a positive view of human nature and has a strong emphasis on ethical behavior.
Confucianism
Code of conduct
a document that translates the code of ethics into specific rules regarding behaviors and practices that are prohibited or required
Describes procuring money through illegitimate methods and then obscuring that money through legitimate business transfers
Money Laundering
Societal Consequences of Market Globalization
-Contagion: Rapid spread of financial or monetary crises from one country to another -Loss of national sovereignty: MNE activities can interfere with governments' ability to control their own economies. Some firms are bigger than economies of many nations (Walmart, shell) -Offshoring and the flight of jobs: jobs are lost as production is moved abroad -Effect on the poor: globalization usually creates jobs, it can also disrupt local job markets. MNE's may pay low wages, exploit workers and child labor. Ex. Many people in India are losing jobs as hand-woven textiles industry is being gradually automated. -Effect on the natural environment: globalization promotes industrialization which generates pollution, habitat destruction, and other environmental harm. -Effect on national culture: traditional norms, values, and behaviors may homogenize over time. National identity may be lost to 'global' culture.
Stages in Company Internationalization
1. domestic focus 2. pre-export stage 3. experimental involvement 4. active involvement 5. committed involvement
framework for making ethical decisions
1. identify problem: is there something wrong? Ethical dilemma? Situation that could cause harm? 2. examine the facts: Determine nature of the situation. Interview all relevant persons. Determine who has stakes in the outcome. Anyone have greater stake than another? 3. 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. 4. implement course of action: Initiate the best options. 5. evaluate results: how effective was the chosen option? Any additional actions or changes needed?
First phase of globalization
1830-1800s. Introduction of railroads, ocean transport, telegraph, and telephone. Rise of manufacturing cross-border trade of commodities, largely by trading companies.
Second phase of globalization
1900-1930. Rise of electricity and steel production. Emergence and dominance of early MNE in manufacturing, extractive, and agricultural industries.
Third phase of globalization
1948-1970s. Formation of General Agreement on Tariffs and Trade (GATT); conclusion of WW2; Marshall plan to reconstruct. Focus by industrializing western countries to reduce trade barriers; rise of MNEs from Japan, development of global capital markets; rise of global trade names.
Fourth phase of globalization
1980s-2006. 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.
Fifth phase of globalization
2007-present. Rise of digital technologies, and other new technologies, which are boosting manufacturing productivity and the efficiency of international trade in services. Leveraging technology to facilitate trade and local production; rising trade in digitally enabled services but slowing growth of trade in merchandise goods.
World Trade Organization (WTO)
A multilateral governing body that aims to regulate and ensure fairness and efficiency in global trade and investment.
Industrial cluster
A concentration of businesses, suppliers, and supporting firms in the same industry at a particular location, characterized by a critical mass of human talent, capital, or other factor endowments.
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
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
Distribution channel intermediary
A specialist firm that provides various logistics and marketing services for focal firms as part of international supply chains, both in the home country and abroad
Which principle or theory advocates that a country should produce only the goods that use the least amount of resources?
Absolute advantage principle
One of the most noteworthy influences on globalization has been ________.
Advances in technology, including communications, data, and engineering
Internationalization theory
An explanation of the process by which firms acquire and retain one or more value-chain activities inside the firm, minimizing the disadvantages of dealing with external partners and allowing for greater control over foreign operations.
Idiom
An expression whose symbolic meaning is different from its actual or literal meaning.
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.
Which term refers to unconscious judgments, often not based on logical facts, about what is good, acceptable, important, and normal?
Attitudes
The board of directors of XYZ, Inc. realized that by purchasing electronic components from ABC Electronics in India, XYZ was implicitly approving ABC's practice of hiring only speakers of the country's primary language, Hindi. ABC refuses to hire workers who speak minority languages, such as Tamil, which is spoken only in southern India. By breaking off relationships with ABC, XYZ was ________
Avoiding workplace discrimination
A motivation for international expansion
Being closer to supply sources
When an individual offers money or favors to someone for personal gain or in order to persuade that person to participate in some form of corruption, it is called ________.
Bribery
Which religion is composed of the Four Noble Truths and encourages harmony, internal happiness, and peaceful interactions with others?
Buddhism
Which stage in the internationalization process of a firm is characterized by targeting numerous foreign markets via foreign direct investment?
Committed involvement
Comparative versus competitive advantage
Comparative advantage: location specific advantages arises from an abundance in a country of valuable resources, buildable land, favorable climate, low-cost labor, skilled labor + 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 = National competitiveness: in that particular industry, for example mining in Brazil, forest products in Canada, tourism in Spain, automobiles in China
Which of the following terms represents unique traditions that serve as guides for interpreting attitudes, values, and behaviors?
Cultural metaphor
Which element in Porter's diamond model describes a nation's position in terms of labor, natural resources, wealth, technology, entrepreneurship, and know-how?
Factor conditions
Deal versus Relationship Orientation
Deal oriented cultures focus on the task at hand, are impersonal, typically use contracts, and want to get down to business, ex. North America. Relationship oriented cultures value affiliations with people, rapport, and getting to know the other part in business interactions. Relationships are more important than individual deals, trust is highly valued, ex. China, Japan.
Which determinant of national competitiveness focuses on the need for certain products and services domestically?
Demand conditions
What motivator involves expanding overseas in order to grow the customer base and increase the amount of products being manufactured?
Developing economies of scale
What is the first stage in the internationalization process of a firm, where the firm is primarily preoocupied with business at home?
Domestic focus
International product life cycle theory
Each product and its associated manufacturing technologies go through three stages of evolution: introduction, maturity, and standardization. Introduction: the inventor country enjoys a monopoly in both manufacturing and exports. Maturity: the product's manufacturing becomes relatively standardized, other countries start producing and exporting the product. Standardization: manufacturing ceases in the original innovator country, and it becomes the net importer of the product
________ involve a company's concern with wages, taxes, public works, and disadvantaged communities.
Economic interests
________ occurs when an employee purposely mismanages or even steals money belonging to an employer.
Embezzlement
Minimizing the creation of contaminants and working to improve the natural surrounding is the primary focus of ________.
Environmental CSR
The ________ in the internationalization process model involves commencing limited international activities by way of simple exporting.
Experimental involvement stage
Recently Ravi got a phone call from what he thought was his bank asking him to verify some personal information such as his Social Security number and bank card numbers. He later found suspicious charges on his bank statement from an unknown source. He contacted his bank, which informed him that it never contacted him. Ravi was most likely a victim of ________.
Fraud
Which statement about masculine and feminine cultures is correct?
Gender roles typically overlap in feminine cultures
Which one of the following is considered an important measure of economic development of a country that often characterizes lower levels of globalization?
Gross national income per person
________ is a religion that is not associated with one particular prophet. It is an open-hearted faith that fully accepts other faiths and is inspired by central concepts called dharma and karma.
Hinduism
Applying a chosen plan and ensuring that the plan is carried out appropriately is which step in the framework for making ethical decisions?
Implementing a course of action
Why act sustainably even though it may cost more?
Implementing corporate citizenship efforts
Which of the following statements regarding information technology is accurate?
Information technology has created a competitive advantage for firms by allowing them more opportunities to outdo their competitors.
An example of ________ is creating or obtaining pirated or counterfeit materials from various questionable sources.
Intellectual property infringement
Piracy and counterfeiting affect
International trade - exports of legitimate products must compete with trade in counterfeit goods. Direct Investment - firms avoid countries known for widespread intellectual property violations. Company performance - sales, profits, and strategies are harmed. Innovation - companies avoid doing research and development where piracy is common. Tax revenues - pirates usually don't pay taxes. Criminal activity - often linked to organized crime. The natural environment - intellectual property violators disregard environmental standards. National prosperity and wellbeing - ultimately, job prospects, prosperity, and moral standards in affected nations are harmed.
Tamika believes that business contracts should be very exactly worded. Because of bad experiences, she does not trust agreements based on assumptions, handshakes, or unspoken understandings. Tamika trusts extensive verbal explanations and spoken words more than relationships. She is from a ________ culture.
Low-context
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".
non-governmental organization (NGO)
Many of these non-profit organizations conduct cross-border activities. They pursue special causes and serve as advocated for social issues, education, politics, and research.
________ involves a corporation's dealings with its consumers, competitors, suppliers, and distributors and includes an emphasis on appropriate and ethical behavior for suppliers and distributors to follow.
Marketplace CSR
________ is the part of the framework for making ethical decisions that involves analyzing the plan after it has been implemented to determine its effectiveness.
Measuring results
Which of the following focuses on the resources a corporation possesses compared with others, and recommends that corporations that utilize internationalization strategies own or control certain resources that are not readily accessible to competitors?
Monopolistic advantage theory
Which of the following is a contemporary perspective that aids in explaining the emergence of a country's competitive advantage?
National industrial policy
Which principle or theory advocates exporting and attaining access to a larger global market with the purpose of increasing economies of scale?
New trade theory
When a company transfers its value-chain activities by launching a subsidiary in a foreign country, it is called ________.
Offshoring
In international business, ________ primarily relates to whether a firm is centralized, decentralized, bureaucratic, or entrepreneurial.
Organizational structure
________ attempts to identify possible plans of action and examines each to determine the best decision available.
Producing alternatives
Which of the following is NOT an example of corporate social responsibility (CSR) values?
Promoting workplace cleanliness
Town Boutique, a local clothing store, recently switched suppliers due to rumors that its supplier in Bangladesh was employing underage workers in its factories. By no longer doing business with the supplier in Bangladesh, Town Boutique was upholding which CSR value?
Reducing child labor
Economic interests
Refer to the firm's economic impact on the localities where it does business, such as regarding job creation, wages and public works.
Which of the following is an example of a sustainable practice?
Rotating farm crops
Exporting
Sale of products or services to customers located abroad, from a base in the home country or a third country
Following charges that some of its Indian subcontractors were using forced child labor, GAP withdrew a line of children's wear from its clothing stores worldwide. GAP's action exemplifies that it is pursuing ________.
Social interests
Normativism
The belief that ethical behavioral standards are universal, and firms and individuals should seek to uphold them around the world.
Focal firm
The initiator of an international business transaction, which conceives, designs, and produces offerings intended for consumption by customers worldwide. Focal firms are primarily MNEs and SMEs.
Firm strategy, structure, and rivalry
The nature of domestic rivalry, and conditions that determine how a nation's firms are created, organized, and managed
Socialization
The process of learning the rules and behavioral patterns appropriate to one's society.
Contagion
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
Negotiation patterns
These discussions are required in many types of business transactions. Ex, Mexicans are friendly and emphasize social relations, Americans are assertive and get down to business quickly.
Samantha is an accountant at LM Accounting. Every once in a while, when Samantha has a particularly difficult client, she tends to charge a bit more for services even if she did not actually work the extra time. She knows for a fact that other employees do the same thing, so she feels justified in her actions. Samantha's actions are an illustration of _________.
Unethical behavior
The greatest significance of globalization is reflected directly in a company's ________.
Value chain
Which cultural dimension forms the basis for personal motivations and behaviors?
Values
Culture
Values, beliefs, customs, arts, and other products of human thought that characterize the people of a given society. It is not right or wrong, it is relative. Derives from the social environment
What is one of the most significant expressions of a culture that provides cultural insight?
Verbal language
Darron Alvarez needs to decide whether to close down a plant located in a country where the factory is a major employer. According to the accounting department, closing the plant makes financial sense, but Darron does not have the heart to fire the workers. Based on his own personal values and his affection for the employees, Darron decides to try harder to find ways to make the plant viable. Darron's ethical standard is BEST described as the ________ approach.
Virtue
Which corporate social responsibility (CSR) setting emphasizes a firm's practices in relation to employee diversity, staffing, income, safety, and working conditions?
Workplace CSR
Cultural metaphor
a distinctive tradition or institution strongly associated with a particular society
Code of ethics
a document that describes the values and expectations that guide decision making by all employees in the firm
Foreign direct investment (FDI)
an internationalization strategy in which the firm establishes a physical presence abroad through acquisition of productive assets such as capital, technology, labor, land, plant, and equipment
Factor proportions theory
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
Competitive advantage
assets or capabilities of a firm that are difficult for competitors to imitate. They are typically derived from specific knowledge, competencies, skills, or superior strategies.
Relativism
belief that ethical truths are not absolute but differ from group to group
Rights approach
best protects and respects the moral rights of everyone
Internationalization advantages
control derived from internalizing foreign-based manufacturing, distribution, or other value chain activities
High uncertainty avoidance societies
create institutions to minimize risk and ensure security. Firms emphasize stable careers and regulate worker actions. Decisions are made slowly
Power distance
describes how a society deals with the inequalities in power that exist among people
Information technology
describes the knowledge and process of creating and utilizing informational resources.
Individualism versus collectivism
describes whether a person functions primarily as an individual or as part of a group
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.
A clothing factory agrees to pay for public road improvements in the area surrounding the factory. This is an example of a sustainable business pursuing ________ interests.
economic
Feminine cultures
emphasize nurturing roles, interdependence among people, and caring for less fortunate people- for both men and women
Fairness approach
everyone should be treated equally and fairly
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.
Commercial risk
firm's potential loss or failure from poorly developed or executed business strategies, tactics, or procedures
In the pre-export stage of the internationalization process, ________.
firms receive unsolicited product orders from abroad
Low power distance societies
have 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.
Virtue approach
ideal virtues that provide for the full development of our humanity.
Intellectual property
ideas or works created by individuals or firms, including discoveries and inventions; artistic, musical, and literary works; and words, phrases, symbols, and designs
Sustainability
meeting humanity's needs without harming future generations
Ethics
moral principles and values that govern the behavior of people, firms, and governments regarding right and wrong.
Cross-cultural risk
occurs when a cultural misunderstanding puts some human value at stake. These risks arise from differences in languages, life-styles, mindsets, customs, and religion.
Globalization of Markets
ongoing economic integration and growing interdependency of countries worldwide
International portfolio investment
passive ownership of foreign securities such as stocks and bonds for the purpose of generating financial returns
Currency risk (also know as financial risk)
potential threat to a firm's operations in a country due to fluctuations in the local currency's exchange rate
Country risk (also known as political risk)
potentially adverse effects on company operations and profitability caused by developments in the political, legal, and economic environment in a foreign country. Includes the possibility of foreign government intervention in a firms' business activities.
Importing or global sourcing
procurement of products or services from suppliers located abroad for consumption in the home country or a third country
Factor conditions
quality and quantity of labor, natural resources, capital, technology, know-how, entrepreneurship, and other factors of production
Social interests
refer to how the firm performs relative to social justice, such as avoiding the use of child labor, sweatshops, as well as providing employee benefits
Environmental interests
refer to the extent of the firm's impact and harm to the natural environment.
International business
refers to the performance of trade and investment activities by firms across national borders
International investment
refers to the transfer of assets to another country or the acquisition of assets in that country.
Free trade
relative absence of restrictions to the flow of goods and services between nations
Low-context culture
rely heavily on spoken words and detailed verbal explanations. Europeans and North Americans tend to follow this with traditions of writing and speech making.
Equity-based joint ventures
result in the formation of a new legal entity. In contrast to the wholly-owned FDI, the firm collaborates with local partner(s) to reduce risk and commitment of capital.
Leontief paradox
revealed that countries can successfully export products that use less abundant resources
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
High-context culture
such as China and Japan, emphasize nonverbal messages and view communication as a means to promote, smooth, harmonious relationships. They prefer an indirect and polite style that emphasize mutual respect and care for one another.
Comparative advantage
superior features of a country that provide unique benefits in global competition, typically derived from either natural endowments or deliberate national policies. climate, land, etc.
Mercantilism
the belief that national prosperity is the result of a positive balance of trade, achieved by maximizing exports and minimizing imports.
Long-term versus short-term orientation
the degree to which people and organizations defer pleasure or gratification to achieve long term success.
International trade
the exchange of products (merchandise) and services (intangibles) across national borders.
Uncertainty avoidance
the extent to which people can tolerate risk and uncertainty in their lives
Indulgence versus restraint
the extent to which people try to control their desires and impulses
Absolute advantage principle
the idea that a country benefits by producing only those products it can produce using fewer resources
Intellectual property rights
the legal claim through which the proprietary assets of firms and individuals are protected from unauthorized use by other parties
Utilitarian approach
the most good or the least harm
Corruption
the practice of obtaining power, personal gain, or influence through illegitimate means, usually at others' expense
Related and supporting idustries
the presence of suppliers, competitors, and complementary firms that excel within a given industry.
Acculturation
the process of adjusting and adapting to a culture other than one's own
Value chain
the sequence of value-adding activities performed by the firm in the course of developing, producing, marketing, and servicing a product
Demand conditions at home
the strengths and sophistication of customer demand
Corporate governance
the system of procedures and processes by which corporations are managed, directed, and controlled
Internationalization
the tendency of companies to deepen their international business activities systematically
Self-reference criterion
the tendency to view other cultures through the lens of ones own culture
Ethnocentric orientation
using our own culture as the standard for judging other cultures
Dimensions of Market Globalization
• Integration and interdependence of national economies: governments contribute by lowering trade and investment barriers • Rise of regional economic integration blocs: free trade areas are formed by two or more countries to reduce or eliminate barriers to trade and investment, such as the EU, NAFTA, and MERCOSUR. • Growth of global investment and financial flows: associated with rapid growth in FDI, currency trading, and global capital markets. • Convergence of buyer lifestyles and preferences: facilitated by global media, which emphasizes lifestyles found in the U.S., Europe, or elsewhere. Firms market standardized products. • Globalization of production activities: to cut costs, firms manufacture in low labor-cost locations such as Mexico and Eastern Europe. Firms also source services from abroad. • Globalization of services: firms outsource business processes and other services in the value chain to vendors overseas. And, in a new trend many people fo abroad to take advantage of low-cost services. (banking, hospitality, retailing, and other service industries are rapidly internationalizing)
Driving forces of Market Globalization
• Worldwide reduction of barriers to trade and investment: this trend is partly facilitated by WTO, an org with 150 member nations. • Market liberalization and adoption of free trade: free market reforms opened up about 1/3 of the world to freer trade. • Industrialization, economic development, and modernization: many developing countries have transformed from producers of low-value to higher-value goods, such as electronics and computers. Rising living standards have made such countries more attractive as target markets for sales and investment. • Integration of world financial markets: enables firms to raise capital, borrow funds, and engage in foreign currency transactions wherever they go. • Advances in technology: allows firms to interact cheaply.