MGMT CH 5

importing

involves buying goods and services from abroad.

elements of the economic enviornment

economic system nature of property ownership natural resources infrastructure

Barriers to International Trade

Underdeveloped infrastructure Lack of wealth

Countries in a market economy

United States, Canada, United Kingdom, France, Japan, Sweden and Germany.

strategies of managing international activity

exporting & importing licensing strategic alliance joint venture direct investment maquiladoras

The Cultural Environment

institutions and other forces that affect society's basic values, perceptions, preferences, and behaviors

GATT

- Negotiated after World War II to prevent trade wars that benefitted rich nations and harmed poorer ones. - Designed to promote international trade by lowering trade barriers and facilitating competition in global markets.

WTO

- Replaced GATT - Comprises 164 member countries and 23 observer nations.

WTO objectives

- To promote trade flow by encouraging nations to adopt nondiscriminatory and predictable trade policies - To reduce remaining trade barriers through multilateral negotiations - To establish impartial procedures for resolving trade disputes among its members

small organizations

- operate locally in the domestic market - require only few specialized managers

The Political-Legal Environment

-government stability -incentives for international trade -controls on international trade -economic communities

individual differences across cultures

-social orientation -power orientation -uncertainty orientation -goal orientation -time orientation

three different elements of the global economy

1. Mature market economies and systems 2. High-potential/high-growth economies 3. Other economies

list the 4 level of international business from lowest level of international activity to the highest level

1. domestic business 2. international business 3. multinational business 4. global business

NAFTA

An agreement between the United States, Canada, and Mexico to trade with one another. NAFTA was replaced by USMCA in 2020.

Power orientation (power respect)

Authority is inherent in one's position within a hierarchy

controls on international trade

Barriers enacted against foreign business to protect domestic business tarriffs quotas export restraint agreement buy national

Potential emerging markets are

Brazil, Vietnam, Argentina, South Africa and Russia.

licensing

An agreement where one company permits another company to manufacture and/or market its products

strategic alliance is common among

airlines and food producers.

multinational business example

cocacola ford

maquiladoras

A concentrated form of direct investment where major corporations establish light assembly plants or factories in Northern Mexico for special tax breaks by the Mexican government.

government stability

A government's ability to maintain power despite opposition from others, The sustainability of government policies towards business, The likelihood of a government to nationalize foreign businesses without warning

USMCA

A new treaty that was signed in 2018 to replace NAFTA.

strategic alliance

A partnership between two or more businesses for mutual gain.

joint venture

A special type of strategic alliance that allows two or more businesses to partner in the creation and ownership of a new enterprise.

power orientation

The appropriateness of power/authority within organizations

joint venture advantages

shared cost and risks of new enterprise; access to raw materials and/or technology; easy market entry by capitalizing on existing strengths of partners.

international business example

starbucks or lowes

tarriffs

tax paid on goods transported across national borders

Private Ownership

the companies that conduct business are directly owned and operated by individuals and organizations.

Public Ownership

the companies that conduct business are directly owned and operated by the government.

time orientation

the extent to which members of a culture adopt a long-term versus a short-term outlook on work, life, and other elements of society

social orientation: collectivism

the interests of the group take precedence

social orientation: individualism

the interests of the individual take precedence

Licensing disadvantages

the licensee can use the proprietary knowledge shared by the licensor to exploit the latter's home market; licensor suffers long-term inflexibility due to limited control of its product in licensee's market.

nature of property ownership

two types: private and public most countries usually have a mix of both types of ownership.

medium-size organizations

typically domestic that import and export, compete with foreign businesses in their domestic markets, may sometimes expand, rely on international specialist

goal orientation: aggressive goal behavior

value material possessions, money, and assertiveness

goal orientation: passive goal behavior

value social relationships, quality of life, and the welfare of others

High-Potential/High-Growth Economies are characterized by

weak currency, weak industries, and relatively poor consumers.

goal orientation

what motivates people to achieve different goals

time orientation: long term outlook

willing to work hard for many years

T OR F: The most favored nation principle (MFN) states that if a country gives another preferential treatment, all other signatories must also receive that treatment.

T

The political-legal environment is characterized by which of the following? A. government stability, exports and imports, controls on international trade, and economic communities. B. government stability, incentives on trade, controls on international trade, and economic communities. C. government stability, property ownership, controls on international trade, and economic communities. D. government stability, business ownership, controls on international trade, and economic communities.

B

Economic Communities

Describes groups of countries that have agreed to significantly reduce or eliminate trade barriers among themselves. These economic communities include The European Union (EU) USCMA (United States-Mexico-Canada Agreement) The Latin American Integration Association The Caribbean Common Market

Cuba economy

Experts believe Cuba could join the ranks of the market economies and its proximity with Florida could make it an important business center.

exporting

involves producing goods and services locally in one country and selling it abroad.

international business

is headquartered in one country but obtains a sizable portion of its resources and/or earnings from other countries

joint venture disadvantages

limited control due to shared ownership; risk of political interference from government in partner country.

domestic business example

local restaurants and retailers, and small service firms such as dry cleaners.

market economy. allocation of resource is determined by....

market forces

incentives for international trade

measures put into place to attract foreign business, include tax incentives, reduced interest rates on loans, construction subsidies etc.

domestic business

obtains all of its resources and markets all of its goods and services within one country.

time orientation: short term outlook

prefer more immediate rewards

T OR F: The four basic management functions are planning and decision-making, organizing, leading, and strategizing.

F

natural resources

The availability of natural resources for each country varies. The level of access to these resources and how they are used is important.

direct investment

The establishment of facilities or subsidiaries of a firm in a a foreign country

EU

The first and most important international market system established to systematically remove trade barriers.

infrastructure

The level of a country's infrastructural development determines the ease with which international firms can set up and invest in the country. Can be highly or poorly developed.

Disney theme parks are a form of... a.Direct Investment b.Joint Venture c.Strategic Alliance d.Maquiladora

a

Ilham Kadri is the CEO of Solvay, a Belgian chemical company. The company is serious about sustainability - on her first day as CEO, Ms. Kadri started to work on a ten-year sustainability roadmap designed to phase out Solvay's use of coal and to cut their freshwater intake by 25 percent. When Ms. Kadri was working on her roadmap for the company, she was engaged in which of the following management functions? a. planning b. leading

a

In which aspect of management is a broad understanding of environmental and competitive issues important? a. Planning and decision making b. Organizing c. Leading d. Controlling

a

Solvay has continued to push for sustainability by creating Solvay One Planet, which includes ten measurable commitments for a sustainable future in the categories of climate, resources, and a better life. These targets are designed to dramatically reduce the full carbon footprint of Solvay. As Ms. Kadri says, "Now we will take this commitment a step further by joining with customers, suppliers, and all other companies that are setting emissions reduction targets in line with what climate science says is necessary." One of Solvay's key goals in the "Better Life" area is "Embedding diversity and inclusion." They are comitted to achieving gender parity for mid- and senior-level management by 2035, and they are striving for a work environment that welcomes diversity of any kind. Suppose you are a first-line manager who is working to support this goal. Your employees are six chemists who are working to produce a new form of rubber for aerospace solutions. Which of the following goals would be most appropriate for you to set? a. Ensure that each of the six chemists who report to me receive training about how to handle unconscious bias in the next six months. b. Ensure that the Rubber Divisi

a

multinational corporation (MNC)

adopt a global approach, move resources across markets, answer to central authority, require senior executives

things that can be licensed

brand name, technology, patent, trademark, copyright and other assets of the other company.

A joint venture is a type of ... a. Direct investment b. Licensing c. Strategic Alliance d. Maquiladoras

c

direct investment advantages

complete managerial control; profits are not shared.

global business

crosses national boundaries and is not tied to a single home country

Which of the following fall(s) under a market system? a. European Union b. NAFTA c. Pacific Asia d. All of the above e. None of the above

d

High-Potential/High-Growth Economies are undergoing rapid...

development and growth.

direct investment example

disney theme parks

World War II caused devastation in many industrialized countries except the Unites States. While these war-torn countries had to rebuild from scratch, the United States....

dominated the global markets

multinational business

has a global marketplace where it can buy raw materials, borrow money, manufacture products, and sell them

infrastructure examples

highways, power plants, hospitals, schools, airfields, communication systems, and commercial distribution systems.

direct investment disadvantages

increased complexity in managing company in foreign country.

what country is emerging as a major force in the global economy for high potiential/ high growth

india

power orientation (power tolerance)

individuals asses authority in view of its perceived rightness or their own personal interest

High-Potential/High-Growth Economies are considered...

relatively underdeveloped and immature compared to the mature market economies.

Uncertainty Orientation: uncertainty acceptance

positive response to change and new opportunities

Uncertainty Orientation: uncertainty avoidance

prefer structure and a consistent routine

"Buy national:

preference given to domestic producers through content or price restrictions. For e.g., Brazilian companies must buy only Brazilian-made computers.

disadvantages of importing and exporting

products are subject to tariffs, taxes, and higher transportation costs; restrictions on some products; products may not fulfill market needs or desires.

Licensing Advantages

profitability and extended profitability.

Social Orientation

relative importance of the interests of the individual vs. the interests of the group

economic system

Freedom of choice in an economic system allows firms to choose the products and services they will provide. consumers to purchase the products they prefer. Ultimately, supply and demand will determine the products and firms in the market.

Quotas

a form of trade restriction that limits the value or number of foreign goods that can be traded in the local market.

advantages of importing and exporting

a small outlay of capital is sufficient to enter market minimal risk not necessary to customize products to each market.

Which of the following describe a market economy. Check all that apply. a. an economy characterized by private business ownership b. an economy where allocation of resources is determined by the government c. an economy where allocation of resources is determined by the market forces d. An economy characterized by national business ownership

a, c

Uncertainty Orientation

an emotional response to uncertainty and change

Export Restraint Agreement

an intergovernmental agreement to set voluntary limits on the value or volume of imports and exports from their participating countries.

Middle east economy

are extremely wealthy due to their large crude oil reserve, they exhibit tremendous cultural differences and are politically unstable

According to Geert Hofstede, the five dimensions that influence individual behaviors and attitudes are ... a. Uncertainty orientation, power orientation, time orientation, goal orientation, and cultural orientation b. Uncertainty orientation, power orientation, time orientation, goal orientation, and social orientation c. Uncertainty orientation, power orientation, time orientation, goal orientation, and religious orientation

b.

Ilham Kadri is the CEO of Solvay, a Belgian chemical company. The company is serious about sustainability - on her first day as CEO, Ms. Kadri started to work on a ten-year sustainability roadmap designed to phase out Solvay's use of coal and to cut their freshwater intake by 25 percent. Suppose that Ms. Kadri came to you and said "I want to assume an interpersonal role as CEO of Solvay." Which of the following actions would you recommend that she take? a. Present a keynote address at the American Cleaning Institute (ACI) conference on the Solvay philosophy that "Sustainability is Profitability". b. Meet with other CEOs at the ACI conference to serve as a liason between Solvay and other companies.

b.

All of the following DO NOT require a company to pay sales-based royalty except... a. Export and Imports b. Strategic Alliance c. Licensing d. Direct Investment

c

The economic environment includes all of the following except... a. economic system b. nature of property ownership c. economic community d. natural resources e. infrastructure

c

Which of these three environmental challenges do managers functioning in a global context face? a. Economic, political-legal, and social b. Economic, political-legal, and religion c. Economic, political-legal, and cultural

c

market economy

characterized by private business ownership whose business strategy is determined by market factors such as supply and demand.

Mainstreet Collection is a producer and wholesaler of gift items and soft goods. Located in Washington, NC, it sells its goods to more than 100 retailers in the United States. To keep the price of goods low, manufacturing is outsourced to facilities in China. What level of international activity best describes Mainstreet Collection? a. Multinational business b. Global business c. Domestic business d. International business

d

Which of the following includes the most favored principle in its agreement? a. World Trade Organization (WTO) D. European Union (EU) c. North American Free Trade Agreement (NAFTA) d. General Agreement on Trade and Tariffs (GATT)

d