Mgmt 370 Chapter 5

gross domestic product (GDP)

the market value of a nation's total output of goods and services for a given period

quota

the maximum number of units a particular product that may be imported into a country

Levels of Organizational Involvement in Global Business

-exporting/importing -trading companies -licensing and franchising -contract manufacturing -joint venture/strategic alliance -direct investment

World Bank

-formally- International Bank for Reconstruction and Development -established and supported by the industrialized nations in 1946 to loan money to underdeveloped/developing nations

the economic enviornment

-gdp (US, China, India, Japan) -country's infrastructure -exchange rate

sociocultural enviornment

-language -body language -local customs -time perceptions -religious considerations

GLOBE project

-project to build on Hofstede's study -studied humane orientation, assertiveness, performance orientation, gender, future orientation

political-legal enviornment

-tariffs -tax rate -trade restrictions -stability of countries -laws

Hofstede's cultural dimensions theory

-what we use to analyze sociocultural effect, used to predict -Outlined 5 major cultural dimensions that profoundly impact the global business environment: 1. individualism/collectivism- approach as a team or individual 2. power distance- how much percieved power between managers and employees 3. masculinity/femininity-emotional values in a culture 4. uncertainty avoidance- how a culture handles uncertain situations 5. long-term orientation-how they perceive time

International Trade Facilitators

1. World Trade Org 2. World Bank 3. International Monetary Fund 4. Organization for Economic Cooperation and Development - free trade zones and loans

The global business environment: global management:

1. economic 2. legal 3. sociocultural 4. political

International Monetary Fund

Basic mission is to oversee the international monetary system and help ensure stable currencies and exchange rates throughout the world

NAFTA

Jan 1, 1994 -merged Canada, US, Mexico into one market of 400 million customers by eliminating most tariffs and trade restrictions on ag and manufactured products among the three countries

multinational corporation

a corp like IBM, ExxonMobil, Nestle, that operates on a worldwide scale, without significant ties to any one nation or region

franchising

a form of licensing in which a company- the franchiser- agrees to provide a franchisee a name, logo, method of operation, advertising, products and other elements in return for a financial commitment and the agreement to conduct business in accordance with the franchiser's standard of operation

strategic alliance

a partnership formed to create competitive advantage on worldwide basis

global business (globalization)

a strategy in which organizations treat the entire world or major regions of it as the domain for conducting business

trading company

acquires goods in one country and sells them to buyers in another country

UK Bribery Act

all organizations with business operations in the UK can be held liable for bribery, even if the bribery did not occur within the UK

Webb-Pomerene Export Trade Act

allows selected american firms desiring international trade to form monopolies in order to compete with foreign cartels

European Union (EU)

an economic and political union of 28 members nations that are located in Europe

self reference criterion

an unconscious referencing to the way things are done in one's own culture and experiences in making global business decisions

Association of Southeast Asian Nations (ASEAN)

comprised of ten Southeast Asian countries with the goal to promote economic growth and overall progress in the area via trade and security

countertraded agreements

exporting that involves bartering products for other products instead of currency

World Trade Org

global association of member countries that promotes free trade

cartel

group of firms or nations that agree to act as a monopoly and not compete with each other

Organization of Economic Cooperation and Development

international economic org comprised of 30 countries that accept the basic principles of free market economies and representative democracy -recommends and promotes policies to improve the well-being of consumers and societies around the world

outsourcing

involves transferring manufacturing or other functions to countries where labor and supplies are less expensive

contract manufacturing

occurs when a company hires a foreign company to produce a specified volume of the firm's product to specification; the final product carries the domestic firm;s name

dumping

occurs when a country or business firms sells prodcuts at less than what it costs to produce them

Foreign Corrupt Practices Act

outlaws direct payoffs to and bribes of foreign governments or business officials by American companies

Southern Common Market (MERCOSUR)

political and economic agreement among Bolivia, Argentina, Brazil, Venezuela, Urguay and Paraguay

importing

purchase of goods and service from foreign sources

exchange controls

restrictions on the amount of a particular currency that may be bought or sold

exporting

sale of goods and services to foreign markets

import tariff

tax levied by a nation on goods bought outside its borders and imported into the country

international business

the buying, selling and trading of goods and services across boundaries

infrastructure

the physical facilities that support its economic activities, such as railroads, highways, ports, airfields, utilities and power plants, schools, etc

direct investment

the purchase of overseas production and marketing facilities; a company my control the facilities outright or it may be the majority stockholder in the company that controls the faciltieis

exchange rates

the ratio at which one nation;s currency can be exchanged for another nation;s currency or for gold

embargo

the suspension of trade in a particular product by the government

licensing

trade arrangement in which one company- the licencor- allows the other company-the licensee- to use its company name, products, patents, brands, trademarks, raw materials, and/or production processes in exchange for a fee or royalty

joint venture

when a company that wants to do business in another country finds a local partner to share the costs and operation of the business (usually the other country)