MGMT 450 Exam 2 Mahajan
Education
U.S. allows anybody to go to college, but UK only allows upper class to go
Self-reference Criteria
Unconscious use of one's own culture to help assess to knew surroundings
Cross-cultural Literacy
Understanding how cultural differences can affect the way business is conducted
Goal Orientation
-Aggressive Goal Behavior: Place high value on material possessions -Passive Goal Behavior: Place higher value on relationships and quality of life
Factor Conditions
-All input factors it takes to make a product -Expands Hecksher-Ohlin by adding infrastructure, education, etc.
Time
-Arab cultures find it normal for meetings to start late and be interrupted
Bad Gifts in China
-Clocks and Knifes
Gold Standard
-Countries agree to buy and sell paper currencies in exchange for gold -Allow free export of gold bullion and coins -Created fixed exchange rate
Mercantilism
-Country's wealth is determined by its holdings of gold and silver -Discourage imports and encourage exports
Maturing Product Stage
-Demand and exports peaks and innovative firm expands -Competition begins in other industrialized countries
Gift-Giving and Hospitality
-Different gift giving etiquettes -Hospitality customs differ -Communicating bad news -Business cards
World Bank
-Est. in 1944 -Original goal was to help finance reconstruction of war-torn western Europe -Later decided to build economies of developing countries
World Bank
-Est. in D.C. -189 Members -U.S. has largest voting bloc -Give loans for PRODUCTIVE PURPOSES (Ex: Roads and infrastructure, not debt)
International Monetary System
-Est. rules which countries value and exchange currencies -Provides mechanism for correcting imbalances between country's international payments and receipts
Non-verbal Communication
-Facial expressions -Hand gestures -Intonation -Eye contact -Body Positioning -Body Posture
Heckscher and Ohlin Relative Factor Endowments
-Factor endowments vary among countries -Goods differ according to the types of factors used to produce them
Ricardo's Comparative Advantage
Country should produce things which it has a relative advantage in producing
Adaptive Culture
Culture can change in response to external forces in the environment
Nixon's 1971 Speech
Ended the second gold standard
EU Central Bank
European Central Bank
Time Orientation
Extent to which culture have long-term or short-term outlooks
Nuclear Family
Father, mother, and children living together
U.S. Central Bank
Federal Reserve
Krugman's New Trade Theory
-Firms play cat-and-mouse by trying to attain economies of scale and sustain competitive advantage -Do this by owning intellectual property rights, investing in R&D, achieving economies of scope, and exploiting the experience curve
Early Country Based Theories
-Focus on individual country -Useful for describing trade in commodities -Price is important
Porter's National Competitive Advantage Theory
-Hybrid of country and firm based theories -Says combination of factor conditions, demand conditions, related and supporting industries, and firm strategy, structure, and rivalry give firm competitive advantage
Social Orientation
-Individualism: cultural belief the individual comes first -Collectivism: cultural belief the group comes first
Shared Culture
-Individuals who share a culture are members of a specific society -Those who do not share the same culture are considered not part of that society
New Product Stage
-Innovating country develops innovative product -Produce locally and minimize costs because unsure of demand -Sell locally and minimal exports
World Bank Group
-International Development Association -International Finance Corporation -MIGA
Translation Disasters
-KFC and Jolly Green Giant
European Monetary System
-Manages currency relationships between EU members -ERM pledged to maintain fixed exchange rates +-2.25% par -ERM also maintains floating exchange rate between USD
Standardized Product Stage
-Market stabilizes and product becomes commodity -Firms forced to produce product in developing countries to lower costs -Innovative firm now imports and developing country exports product
Hospitality Differences
-Never vertically jab chopsticks into food -Slurping and Burping is okay -Boss usually faces door -China woo's in private dining room
IMF
-Oversees functioning of the International Monetary System -Gives loans whenever a country's BOP is imbalanced
Power Orientation
-Power Respect: people respect authority because of hierarchical significance -Power Tolerance: People more willing to question authority and their decisions
Balance of Payment Accounting System
-Records international transactions -Supplies info of health of natl. economy -Supplies info of changes in fiscal and monetary policies
Hofstede's 5 Dimensions of Culture
-Social Orientation -Power Orientation -Uncertainty Orientation -Goal Orientation -Time Orientation
Age
-The U.S. spends time on the youth and will promote them -Asian countries will only make older people managers
Inter-Industry Trade
-Trade with other industries -Undifferentiated goods (coal or sugar)
Intra-Industry Trade
-Trade within the same industry -Differentiated goods (cars or computers)
G5
-U.S -Japan -UK -Germany -France
Bretton Woods System
-U.S. Dollar-based Gold Standard -U.S. pledged to redeem $35/1oz gold -Fixed exchange rate system (+-1%)
Status
-U.S. it's achieved by hard work -Japan by the group you're in -India by your caste
Leontief Paradox
-U.S. should export things high in capital and import things high in labor -This wasn't the case because failed to consider land, human capital, and technology
Uncertainty Orientation
-Uncertainty Acceptance: Individuals stimulated by change and thrive on new opportunities -Uncertainty Avoidance: Individuals dislike ambiguity and avoid it at all costs
Collapse of Gold Standard
-WWI -Great Depression -Competitive Devaluations -Beggar-Thy-Neighbor Policies -WWII
Color meanings in China and India
-White is bad and used for funerals and symbolizes death -Red is good and used for weddings and symbolizes marriage
4 Characteristics of Culture
1) Learned behavior 2) Interrelated 3)Adaptive 4)Shared
Vernon's Product Life Cycle Theory
1) New Product Stage 2) Maturing Product Stage 3) Standardized Product Stage
Acculturation
Adjusting and adapting to another persons culture
Adam Smith's Absolute Advantage
Advocates free trade among countries by producing the things in which you have an absolute advantage in
Language
-3,000+ -More than one indicates diversity of cultures
Numbers in China
-4 is unlucky -8 is lucky/prosperity
Bretton Woods Era
-44 countries met in New Hampshire 1944 -Goal was to create economic environment and promote world peace -Renewed gold standard -Created World Bank and IMF
Lingua Franca
-A common language understood by 2 people who speak 2 different languages -Most common is english
Sterling Based Gold Standard
1821-WWI British pound sterling was strongest currency because they had the most gold. People trusted they would get gold if they used the pound
Islam
2nd largest following and pray 5 times a day
Adjustable Peg
Atlering pegs under extraordinary circumstances
Economies of Scale
Average cost of producing a good decreases the more the output of the good increases (the more its sold typically because fixed costs)
Achieving Economies of Scope
Average costs decrease as as the number of different products produced increases (It's cheaper to make a new product line if you already produce similar things as opposed to starting from scratch)
Intra-generationally
Behaviors learned from peers or people of similar age
Inter-generationally
Behaviors passed down from parents and grandparents
Ethnocentrism
Belief that ones own culture is superior to others
Hinduism
Caste system
Cultural Cluster Approach
Clustering countries together by similar cultures (mostly languages)
Culture
Collection of values, beliefs, behaviors, customs, and attitudes that distinguish one society from another
Bowing
Depth and duration mean different things in Japan
Beggar-Thy-Neighbor Policies
Devaluing ones currency after wwI to make your goods cheaper than another country in order to export
Brady Plan 1989
Focussed on writing off parts of the debts or providing funding for debtors to buy back loans below face value
G7
G5 + Italy and Canada
Investing in R&D
Gives firms first-mover advantage because these products and markets are typically too expensive to enter for most countries
Joint Family
Grandparents living with kids and grandkids
Backtranslation
Having one person translate a message, then having a second person translate the message back into the first language to see if it still makes sense
Lower Stratification
High social mobility
Disadvantages of Mercantilism
Hurts citizens the most because gov. subsidizes commodities in the from of taxes on the people
Demand Conditions
If the consumers in the market for which the product is entering have demand for the product
Triffin Paradox
If there is only one reserve currency required by each country to keep in their reserves, it will be the very one that comes under scrutiny
Body Positioning
In Saudi Arabi its 9-10 inches but in U.S. its 20 inches
Linder's Country Similarity Theory
International trade of manufactured goods should occur between consumers in same stage of economic development AND countries with similar per capita incomes
Interrelated Culture
Japan is very group oriented and hierarchical. The U.S is very independent oriented and everyone is seen as equal
Higher Stratification
Low social mobility
Hall's Low-Context, High-Context Approach
Low-context: Words explicitly convey speakers message High-context: Conversation and culture cues are just as important as the words
Ramadan
Month of fasting from sunrise to sunset
International Finance Corporation
Offers loans to entrepreneurs ($35 million to help build plant)
International Development Association
Offers soft loans to developing countries ($25 million given to Guinea to reduce water pollution)
Par Value
Official price or value of currency
Owning Intellectual Property Rights
Owning trademarks, brand names, etc. gives a firm a competitive advantage
Hard Loan
Pay back in currency that retains value, has interest, and within a time period
Fixed Exchange Rate
Price of one currency does not change relative to another currency (pegged)
Exchange Rate
Price of one currency in terms of a second currency
Exploiting the Experience Curve
Producing a product so much that each time you get better and more efficient at producing it, lowering the cost of production
Multilateral Investment Guarantee Agency
Provides insurance of political risk for companies to do business in developing countries
Caterpillar Fundamental English
Simplified english of 800 words for workers to understand
Baker Plan 1985
Stressed importance of debt rescheduling, tight IMF monetary policies, and continued lending to debtor nations
Convertible Currencies
Strong currencies exchanged without legal restrictions
Sole of the shoe to Middle Eastern cultures
Symbolizes the worst form of disrespect if shown to another person
International Trade
Trade between residents of 2 countries
SDR's
Used to settle transactions within the IMF
Trade
Voluntary exchange of goods, services, assets, or money between one person or org and another