ADMN 417 Learning Objectives Lesson 1-9

explain the difference between ethnocentric, geocentric, and polycentric management orientations

A company's willingness and ability to develop the cultural sensitivity needed to compete internationally is directly affected not only by conditions within the foreign culture, but by its own corporate culture—the attitudes of the company and its management. Three main attitudes are described below. Ethnocentric orientation: belief that one's own culture is superior to that of others. A company that subscribes to this orientation believes that policies and procedures it uses in its home country are appropriate for its host country operations. In effect, the company does not make allowances for country-specific differences. Polycentric orientation: "When in Rome, do as the Romans do." A company that holds this view believes that its home country policies and procedures are inappropriate for local conditions, thus the company defers to local host country norms. Geocentric orientation: a hybrid between ethnocentric and polycentric philosophies. A geocentric company typically uses home country procedures and policies as a starting point, and blends them with local cultural norms to achieve a balance between home country demands and host country imperatives.

identify managerial strategies to reduce the downside effect of political risk

ADAPTATION means incorporating risk into business strategies, often with the help of local officials. Companies can incorporate risk by means of four strategies: Partnerships help companies leverage expansion plans Localization entails modifying operations, the product mix, or some other business element—even the company name—to suit local tastes and culture. Development assistance lets an international business assist the host country or region in improving the quality of life for locals Insurance against political risk can be essential to companies entering risky business environments. INFORMATION GATHERING International firms attempt to gather information that will help them predict and manage political risk. Two sources that companies use to conduct accurate political risk forecasting are: Current Employees with Relevant Information Agencies Specializing in Political-Risk Services POLITICAL INFLUENCE . Lobbying is the policy of hiring people to represent a company's views on political matters &bribery

explain the pros and cons of exporting as an entry mode

Advantages: Exporting presents several advantages for firms entering international markets. Financially, it stands out for its low capital investment requirements, making it an accessible option. Moreover, the financial gains from exporting are typically higher than those from licensing agreements. On a non-financial front, exporting allows firms to leverage economies of scale, contributing to enhanced profit margins, provided careful cost management is maintained. Managerially, the time commitment demanded by exporting is minimal compared to alternative international market entry modes, offering operational efficiency and flexibility. Disadvantages: However, exporting is not without its challenges. Financially, the establishment of wholly-owned subsidiaries through exporting can be expensive, and the financial gains are relatively lower compared to wholly-owned subsidiaries. There's also a risk of customer distancing, where exporters may find it challenging to stay closely connected to customer preferences in foreign markets. Furthermore, the reliance on intermediaries in the exporting process introduces managerial complexities, as these intermediaries may not always align with the firm's export development goals. Excessive dependence on intermediaries can create a false sense of security about the success of the firm's internationalization efforts, emphasizing the need for a balanced approach.

evaluate some advantages, disadvantages, and criticisms of international trade

Advantages: broader range of products at lower price yet better quality; allows countries to specialize in a manufacturing, exporting, importing; greater employment and facilitate product- or service-specific innovations through specialization; promotes efficiency among firms worldwide. Disadvantages: inefficient firms must improve upon their own competitiveness or they will become extinct; trade displaces local industries and threatens the local way of life Criticism: it favours only the "rich" countries where they are getting richer at the expense of the poorer countries through economic exploitation such as: plundering natural endowments; irresponsible environment/sustainability policies; hiring workers at ridiculously low wages.

describe regional integration in Europe and its pattern of enlargement

After World War 2, Europe (1) it needed to rebuild itself and avoid further armed conflict, and (2) it needed to increase its industrial strength to stay competitive with an increasingly powerful United States. In response, Belgium, France, West Germany, Italy, Luxembourg, and the Netherlands signed the Treaty of Paris in 1951, establishing the European Coal and Steel Community. This community aimed to eliminate trade barriers in coal, iron, steel, and scrap metal while coordinating production in these industries among the member nations. Subsequently, in 1957, the Treaty of Rome was signed, leading to the creation of the European Economic Community. The Treaty outlined plans for a future common market and sought to implement common transportation and agricultural policies among its members. Over time, the European Community expanded its scope, including additional industries such as atomic energy, and underwent a name change. The Single European Act (SEA) further aimed to remove remaining barriers, enhance harmonization, and boost the competitiveness of European companies. Finally, the Maastricht Treaty, with three primary goals, sought to establish a common currency, set monetary and fiscal targets for participating countries, and promote the political union of member nations. Waves of enlargement occurred in 1973, 1981, 1986, 1995, 2004, and 2007. In 1994 the bloc once again changed its name to the European Union (EU). Today the 27-member European Union has a population of about 500 million people and a GDP of around $15 trillion. For a country to join the European Union (EU), it must meet specific criteria, which include demonstrating stable institutions that ensure democracy, the rule of law, human rights, and the protection of minorities. Additionally, the aspiring member should possess a functioning market econ

summarize the evidence for each main argument in the globalization debate

All parties appear to agree that dislocation in labor markets is a byproduct of globalization. In other words, although globalization eliminates some jobs in a nation, it creates jobs in other sectors of the nation's economy. Yet, while some people lose their jobs and find new employment, it can be very difficult for others to find new work. The real point of difference between the two sides in the debate, it seems, is whether overall gains that (may or may not) accrue to national economies are worth the lost livelihoods that individuals (may or may not) suffer. Those in favor of globalization say individual pain is worth the collective gain, whereas those against globalization say it is not.

characterize regional integration in Asia, and discuss how it differs from regional integration elsewhere.

Association of Southeast Asian Nations (ASEAN): ASEAN, comprising Indonesia, Malaysia, the Philippines, Singapore, and Thailand, was formed with three main objectives: promoting economic, cultural, and social development; safeguarding economic and political stability; and serving as a forum for conflict resolution. Future prospects involve the controversial admission of Cambodia, Laos, and Myanmar, criticized for historical support of communists and human rights violations. Despite criticism, ASEAN sees their inclusion as a strategic move to counter China's rising influence. China, Japan, and South Korea are accelerating efforts to join ASEAN, with China's admission aiming to bridge the economic gap between less and more advanced economies. Asia Pacific Economic Cooperation (APEC): Formed in 1989 among 12 trading partners, APEC aims to strengthen the multilateral trading system and expand the global economy by simplifying and liberalizing trade and investment. Despite successfully halving tariff rates, the Asian financial crisis posed challenges to further liberalization. APEC's unique features include initiatives such as simplified business visas, mutual recognition agreements on professional qualifications, and efforts to harmonize customs procedures across member economies. These measures aim to facilitate business travel, enhance professional mobility, and streamline customs processes, fostering deeper economic integration. Differences from Regional Integration Elsewhere: APEC distinguishes itself by emphasizing practical measures to facilitate economic cooperation beyond tariff reductions. Unlike some regional groupings, APEC is actively addressing non-tariff barriers by simplifying business visas, recognizing professional qualifications, and harmonizing customs procedures. These initiatives go beyond traditional

describe three primary obstacles to conducting international market research

Availability of Data: Obtaining high-quality, untainted, and reliable information is hindered by deliberate misrepresentation, improper collection methods, and analysis techniques. This obstacle arises from challenges in accessing accurate data, particularly when dealing with diverse markets and varied information sources. Comparability of Data: Differences in the definitions of key terms such as poverty, consumption, and literacy across markets create challenges in making accurate comparisons. Varying ways of measuring variables further complicate the comparability of data, making it essential to carefully navigate and interpret information from different sources. Cultural Differences: Cultural nuances pose significant obstacles as companies enter unfamiliar markets. To overcome these challenges, hiring local agencies for market research becomes crucial. Locals understand acceptable practices, appropriate questions to ask, and how to interpret information within the context of cultural nuances, enhancing the reliability and relevance of the research.

describe the major legal and ethical issues facing international companies

BRIBERY AND CORRUPTION - In certain countries, bribes are routinely paid to distributors and retailers to push a firm's products through distribution channels. Bribes can mean the difference between obtaining an important contract and being completely shut out of a market. But corruption is detrimental to society and business. Among other things, corruption can send resources toward inefficient uses, hurt economic development, distort public policy, and damage national integrity. LABOR CONDITIONS AND HUMAN RIGHTS - To fulfill their responsibilities to society, companies are monitoring the actions of their own employees and the employees of companies with whom they conduct business. FAIR TRADE PRACTICES - • Fair Prices. Producer groups receive a guaranteed minimum floor price. • Fair Labor Conditions. Farms do not employ children, and workers are given freedom of association, safe working conditions, and a living wage. • Direct Trade. Whenever possible, importers purchase from producer groups to eliminate intermediaries. • Democratic Community Development. Farmers and workers decide how to spend their Fair Trade premiums in social and business development projects. • Environmental Sustainability. Farming methods protect the health of farmers and preserve ecosystems. ENVIRONMENT - Carbon footprint is the environmental impact of greenhouse gases (measured in units of carbon dioxide) that results from human activity. It consists of two components: • Primary Footprint. Direct carbon dioxide emissions from the burning of fossil fuels, including domestic energy consumption and transportation (such as electricity and gasoline). • Secondary Footprint. Indirect carbon dioxide emissions from the whole life cycle of products (from their manufacture to eventual breakdown).

discuss the benefits, drawbacks, and concerns associated with regional economic integration

Benefits - trade creation: The increase in the level of trade between nations that results from regional economic integration greater concensus: The benefit of trying to eliminate trade barriers in smaller groups of countries is that it can be easier to gain consensus from fewer members as opposed to, say, the 153 countries that comprise the WTO. political cooperation: A group of nations can have significantly greater political weight than each nation has individually. employment opportunities: Regional integration can expand employment opportunities by enabling people to move from one country to another to find work or, simply, to earn a higher wage Drawbacks Trade diversion: Diversion of trade away from nations not belonging to a trading bloc and toward member nations. Trade diversion can occur after the formation of a trading bloc because of the lower tariffs charged among member nations. It can actually result in increased trade with a less-efficient producer within the trading bloc and reduced trade with a more efficient, nonmember producer. Shifts in employment: Industries requiring mostly unskilled labor, for example, tend to respond to the formation of a trading bloc by shifting production to a low-wage nation within the bloc. Loss of national sovereignty : Successive levels of integration require that nations surrender more of their national sovereignty. The least amount of sovereignty that must be surrendered to the trading bloc occurs in a free trade area. By contrast, a political union requires nations to give up a high degree of sovereignty in foreign policy. Concerns: sentiment that REI is a vehicle for protectionism. There is also a concern that economic self-interest, not collectivist sentiment, guides the economic conduct of member countries in a regional agreement, which implies that REI might

discuss regional integration in the Americas, and analyze its future prospects.

Central American Free Trade Agreement (CAFTA-DR): CAFTA-DR, established between the United States and six Central American nations, aims to reduce trade barriers, ensuring U.S. companies aren't disadvantaged. Its objectives extend to legal and business reforms promoting competition, investment, intellectual property rights, and transparency. The agreement supports U.S. national security interests through regional integration, peace, and stability. Andean Community (CAN): Initially focused on creating a free trade area, CAN aims for tariff reduction, a common external tariff, and coordinated policies in transportation and industries. Political ideology and mutual distrust among member nations hinder progress, while exceptions in tariff structures impede the implementation of a common market. *Future Prospects:* The Andean Community faces challenges due to member countries' independent actions, signing agreements outside the community framework. Such actions hinder internal progress and impact the community's credibility globally. Latin American Integration Association (ALADI): ALADI calls for preferential tariff agreements between member nations based on their economic development. Southern Common Market (MERCOSUR): Emerging from dissatisfaction with ALADI, MERCOSUR, acting as a customs union, progresses in trade and investment liberalization. It is becoming a dominant trading bloc in Latin America. Future Prospects: Latin America's appeal as a consumer base and low-cost production platform attracts the interest of the European Union and the United States. Caribbean Community and Common Market (CARICOM): CARICOM aims for a Single Market enabling free movement of goods, services, capital, and labor. Challenges include member nations trading more with nonmembers than with each other. Central American Common Market (C

list the main types of legal systems, and explain differences among them

Common law, civil law, and theocratic law represent distinct legal systems with notable differences. Common law relies on tradition, precedent, and usage, allowing for flexibility and adaptability based on specific circumstances. The justice system interprets laws individually for each case, with new interpretations setting precedents that may guide future decisions. While common law systems offer flexibility, the process involves significant time and financial investments in creating clear contracts and seeking legal advice. In contrast, civil law is characterized by a comprehensive legal code, minimizing the need for interpretation as laws are explicit and concise. This system reduces the time and costs associated with legal matters but may overlook unique case circumstances. Theocratic law, rooted in religious teachings, is exemplified by legal systems in Islam, Hinduism, and Judaism. It derives its principles from religious doctrines, making it distinct from secular legal traditions and often leading to a strong influence of religious authorities on legal decisions.

identify the components of culture, and describe their impact on business activities around the world.

Components: aesthetics, values and attitudes, manners and customs, social structure, religion, personal communication, education, and physical and material environments. Aesthetics are important when a company does business in another culture. The selection of appropriate colors for advertising, product packaging, and even work uniforms can improve the odds of success. Ideas, beliefs, and customs to which people are emotionally attached are called values. Values include concepts such as honesty, marital faithfulness, freedom, and responsibility. Values are important to business because they affect a people's work ethic and desire for material possessions. Values influence a people's attitudes toward time, work and achievement, and cultural change. Attitudes are positive or negative evaluations, feelings, and tendencies that individuals harbor toward objects or concepts. Attitudes reflect underlying values learned from role models. Appropriate ways of behaving, speaking, and dressing in a culture are called manners. When habits or ways of behaving in specific circumstances are passed down through generations, they become customs. Customs differ from manners in that they define appropriate habits or behaviors in specific situations. Knowledge of manners and customs is necessary for negotiating, marketing products, and managing operations in other cultures. Social structure embodies a culture's fundamental organization, including its groups and institutions, its system of social positions and their relationships, and the process by which its resources are distributed. Social structure plays a role in many business decisions, including production-site selection, advertising methods, and the costs of doing business in a country. Three important elements of social structure that differ across cultures are social group as

identify the origins of political risk

Conflict and violence - people's resentment toward their own government. arise over territorial disputes between countries disputes among ethnic, racial, and religious groups may erupt in violent conflict. Terrorism and kidnapping -Groups dissatisfied with the current political or social situation sometimes resort to terrorist tactics to force change through fear and destruction Kidnapping and the taking of hostages for ransom may be used to fund a terrorist group's activities. Property seizure - The forced transfer of assets from a company to the government without compensation is called confiscation. The forced transfer of assets from a company to the government with compensation is called expropriation. Whereas expropriation involves one or several companies in an industry, nationalization means government takeover of an entire industry. Policy changes - Government policy changes are the result of a variety of influences, including the ideals of newly empowered political parties, political pressure from special interests, and civil or social unrest. Local content requirements -Laws stipulating that a specified amount of a good or service be supplied by producers in the domestic market are called local content requirements.

discuss the role of countertrade in international business.

Countertrade in international business involves a scenario where a firm acquires goods and services using other goods or services, rather than making a financial payment. In cases where developing countries face restrictions on foreign exchange transactions imposed by their governments, countertrade provides an alternative avenue for international trade. This approach allows firms in such countries to engage in international transactions with minimal or no foreign exchange, enabling them to purchase goods and services internationally by offering their own goods and services in return. Conceptually akin to business-to-business (B2B) transactions, countertrade serves as a practical solution for entities facing limitations in conventional financial payments for international trade.

describe the differences between direct and indirect forms of exports

Direct exporting occurs when a company sells its products directly to buyers in a target market through local sales representatives or distributors. Indirect exporting occurs when a company sells its products to intermediaries (agents, export management companies, and export trading companies) who then resell to buyers in a target market.

evaluate the pros and cons of three staffing practices—home-country nationals, host-country nationals, and third-country nationals—as they relate to the ethnocentric, polycentric, and geocentric staffing policies

Ethnocentric Staffing is advantageous when locally qualified individuals are scarce, leading to a highly competitive local labor market. It is often employed to replicate local operations, with the belief that managers from the home country will safeguard the company's interests more diligently than host-country natives. However, this approach has drawbacks, such as the expensive relocation of managers from the home country, increased wage costs, potential cultural clashes, and the creation of barriers in the host-country office. Additionally, the presence of home-country managers may contribute to a "foreign" image of the business, and lower-level employees might perceive a lack of understanding from managers of their cultural needs. Polycentric Staffing is beneficial as managers familiar with local business practices can interpret both verbal and nonverbal cues effectively. They do not face cultural barriers as outsiders and generally have a better understanding of the needs of employees, customers, and suppliers. The elimination of high costs associated with relocating expatriate managers and their families is another advantage. On the downside, polycentric staffing may lead to losing control of the host-country operation, potentially creating a collection of distinct national businesses. While suitable for firms adopting a strategy of treating each national market differently, it may hinder companies pursuing global strategies, impacting performance if integration, knowledge sharing, and a common image are lacking. Geocentric Staffing is valuable for developing global managers adaptable to any business environment. Managers with a global perspective are better equipped to identify opportunities that might be overlooked otherwise. However, geocentric staffing can be costly due to the high demand for global manager

identify the world's main regional trading blocs

European Union (EU) European Free Trade Association (EFTA) North American Free Trade Agreement (NAFTA) Central American Free Trade Agreement (CAFTA-DR) Andean Community (CAN) (Andean) Latin American Integration Association (ALADI) Southern Common Market (MERCOSUR) Caribbean Community and Common Market (CARICOM) Central American Common Market (CACM) Free Trade Area of the Americas (FTAA) Association of Southeast Asian Nations (ASEAN) Asia Pacific Economic Cooperation (APEC) Closer Economic Relations Agreement Gulf Cooperation Council (GCC) Economic Community of West African States (ECOWAS) African Union (AU)

explain why and how companies use exporting, importing, and countertrade

Exporting helps a company to expand sales, diversify sales, or gain experience and represents a low-cost, low-risk way of getting started in international business. A successful export strategy involves (1) identifying a potential market, (2) matching needs to abilities, (3) initiating meetings, and (4) committing resources. There are two types of exporting direct exporting when a company sells its products directly to buyers in a target market using sales representative or distributors. Another form is indirect exporting when a company sells its products to intermediaries who then resell to buyers in a target market using agents, export management companies, export trading companies, Companies often import products in order to obtain less expensive goods or those that are simply unavailable in the domestic market. Countertrade is selling goods or services that are paid for with other goods or services; it can take the form of (1) barter—Exchange of goods or services directly for other goods or services without the use of money (2) counter purchase—the sale of goods or services to a country by a company that promises to make a future purchase of a specific product from that country, (3) offset—an agreement that a company will offset a hard-currency sale to a nation by making a hard-currency purchase of an unspecified product from that nation in the future, (4) switch trading— countertrade whereby one company sells to another its obligation to make a purchase in a given country (5) buyback-Export of industrial equipment in return for products produced by that equipment.

evaluate the appeal (or lack of appeal) of FDI from the perspective of national governments, shareholders, corporate managers, and consumers

FDI appeals to: national governments - jobs are created faster by FDI than by local firms; foreign firms pay their workers more than national average wages; these firms typically spend heavily on research and development, often transferring valuable technology, and are more export-oriented than their domestic counterparts; augments investing firms' sales and enhances their competitive skills as a result of competing in a foreign market shareholders - increasing a firm's income stream and improving its competencies mean higher shareholder value FDI's lack of appeal to: corporate managers - need to ask whether their firms have undertaken FDI based on sound economic logic, and whether the host country regulatory regime is conducive to in-bound FDI; factors such as corruption and red tape may hinder FDI in a country; corporate strategists need to think carefully through a number of financial as well as non-financial issues that are tied to their FDI decisions consumers - individuals with access to goods and services that are, relative to those currently available, either more competitively priced, or of a better quality, or both stakeholders - ask questions about how FDI will disrupt the local way of life and contribute to the demise of local businesses, how significant the impacts of FDI will be on the host country's national agenda and objectives, and whether the FDI is environmentally responsible. Negative answers to such questions can reduce the appeal of FDI to concerned stakeholders.

define foreign direct investment (FDI) and foreign portfolio investment (FPI), and explain the difference between them.

FDI- Purchase of physical assets or a significant amount of the ownership (stock) of a company in another country to gain a measure of management control. FPI - an investment that does not involve obtaining a degree of control in a company is called a portfolio investment. FDI as opposed to FPI gives the investing firm a controlling interest in the foreign company

discuss major factors that shape national cultures

Factors that contribute to the evolution of national cultures include national heritage, history, geography, economic prosperity, political ideology and cultural exposure. National cultures still exist due to the preservation of institutional (national) heritages that are supported by national governments and history Geography - cultural differences can be attributed to geographical differences such as the hard-work" culture of northern Thailand versus the "laid-back" culture of southern Thailand Economic prosperity - well-off economies and emerging economies that have claimed to be "Western" in conduct have been catalysts for further interaction between these economies Developed countries whose "Western" lifestyle have become more affordable and more acceptable to an economically progressive consumer base Political ideology - established and implemented for social and economic infrastructure Cultural exposure - occurs through widespread internet, market expansion of nondomestic firms and globalization

describe three key factors that determine political risk

Firm-level factors include a company's political connections (few/many, weak/strong); ownership structure (foreign/domestic/mixed); size (large/small); relative bargaining power (low/high); and so on. In general, the more "favourable" a company's position, the lesser its vulnerability to political risk (and vice versa). The perception of greater "foreignness" often exposes a company to more political risk. Industry-level factors include the type of industry in which a company operates (consumer-goods/capital-goods); the industry's contribution to a country's economy (low/high); and so on. In general, the more a political regime values an industry, the less political risk exists for firms operating within that industry. Macro-level factors include political stability (low/high); differences in political ideologies between a host country and a company's home country (significant/insignificant); a country's need to attract foreign investment (low/high); economic appeal and size of local markets (low/high); and so on. In general, the higher a country's need for foreign investment or its attractiveness, the lower the political risk to firms operating in that country.

discuss the broad economic implications of foreign direct investment and foreign portfolio investment

Foreign Direct Investment (FDI) Implications: FDI is characterized by its relative permanency, providing a level of economic stability to the host country. This stability acts as a catalyst for growth, insulating the country from the adverse impacts of macroeconomic shocks. Beyond direct economic benefits, FDI indirectly enhances the host country's economic prosperity by reducing unemployment and mitigating the social unrest and financial burdens associated with government-funded social assistance programs. Foreign Portfolio Investment (FPI) Implications: In contrast to FDI, FPI lacks stability as financial investments can be easily redirected to more financially attractive countries with short notice. This makes portfolio investments more motivated by short-term financial gains rather than long-term commitments. Host country governments face challenges persuading profit-seeking firms engaged in portfolio investments to maintain their commitments when more promising financial opportunities arise elsewhere.

define the term globalization

Globalization is the trend toward greater economic, cultural, political, and technological interdependence among national institutions and economies.

list and explain the methods governments use to restrict international trade.

Governments employ various methods to restrict international trade Tariffs, are government taxes on imported or exported products, directly increase the price of imported goods, diminishing their appeal to buyers. Tariffs can be categorized into export tariffs, applied by the exporting country; transit tariffs, imposed by countries products pass through; and import tariffs, the most common type today. Subcategories include ad valorem tariffs (percentage of the product's price), specific tariffs (fee per unit), and compound tariffs (combination of percentage and specific fee). Nontariff barriers, another form of restriction, limit the availability of imported products, indirectly raising prices and reducing attractiveness. Quotas, restrictions on the quantity of goods traded, protect domestic producers or influence global prices. Embargoes involve a complete trade ban with a specific country, Local content requirements mandate a specified portion of goods or services be produced domestically. Administrative delays, regulatory controls, and bureaucratic rules can hinder trade Currency controls restrict currency convertibility, adding to the array of measures governments employ to regulate international commerce.

explain why governments intervene in the free flow of FDI

Governments intervene in the free flow of Foreign Direct Investment (FDI) for various reasons. Host nations initially benefit from a balance-of-payments boost and increased exports generated by FDI; however, concerns arise when profits are repatriated to the home country, leading to a decrease in the host nation's balance of payments. On the positive side, FDI in technology can bring in managerial expertise that enhances local skills, productivity, and competitiveness. Conversely, home countries intervene in FDI outflows as they can negatively impact the balance of payments, although profits repatriated from assets abroad contribute positively to the balance of payments. Additionally, FDI outflows may replace domestic jobs based on exports to the host country, potentially harming the home nation's balance of payments if they lead to a reduction in previous export levels.

explain how companies compensate managers and workers in international markets

In compensating managers and workers in international markets, companies must design policies that align with local cultures, laws, and practices. Key considerations include base pay, bonuses, and fringe benefits. Managerial compensation packages may require adjustments to reflect the local cost of living, and in some cases, cover education expenses. Additional bonuses or hardship pay may be necessary to incentivize managers to accept international assignments. Nonmanagerial compensation levels are often influenced by wage rates prevalent in the specific countries where the company operates. Crafting an effective compensation strategy that is sensitive to these factors is crucial for attracting and retaining talent in diverse international markets.

discuss the business and social implications of "strategic" trade

In general, "strategic" ("managed") trade refers to situations where governments are motivated by rationales other than economic efficiency to intervene in trade. At the business level, strategic trade condones inefficiency and allows uncompetitive firms to coexist with those operating more efficiently. At the social level, strategic trade has monetary implications, in that it is usually the taxpayer who has to fund such governmental support.

describe five dimensions of internationalization that will increase a company's need for cultural awareness

In general, a company's need for cultural awareness increases as its international exposure increases. The degree of cultural awareness the company requires depends on the dimensions of internationalization listed below. As a rule, when a company broadens the scope of any one of the following dimensions, or traverses multiple dimensions simultaneously, the need for the company to increase its cultural awareness becomes more imperative. The 5 Dimensions: Impetus for embarking on international business - conscious internationalization with another country requires cultural awareness of the country the company wants to engage with Scope of company operations outside its home country - increasing involvement of other companies for tactical and strategic operations requires cultural awareness of the country the company wants to engage with The way a company handles its foreign operations - The more involved a company is in another country, the greater its need for cultural awareness of that country. For example, a company that has a wholly-owned subsidiary in another country needs to know more about that country's culture. Similarity between home and host country - when dealing with a country whose economic or cultural profile is different from that of its own country, the company is required to increase cultural awareness of the country the company wants to engage with Number of countries in which a company operates its business - The bigger the portfolio of countries in which a company operates, the greater its need for cultural savvy. For example, a company whose operations span five countries needs be more culturally savvy than its counterpart who operates in only two of these five countries.

discuss principal reasons for the recent growth of international business

International business has grown as a result of traditional factors like technological advances, but other contemporary factors, such as the collapse and rise of nation-states in Eastern Europe and the evolution of introvert political and economic ideologies, have also driven this growth. The demise of the former Soviet Union, for instance, has given rise to sovereign nations that conduct international business for themselves. Inward-looking political and economic ideologies have also increased their focus on international business, as is demonstrated in the case of many emerging markets in Asia (e.g., China, India, and Vietnam) and elsewhere (e.g., Russia). Although it is difficult to prove, some people believe international business has also grown because of the internationalization of corporate executives, many of whom travel to exotic destinations for their vacations.

define international business and discuss its scope

International business involves any commercial transaction crossing borders, encompassing the import and export of goods and services. While large companies from wealthy nations traditionally dominated this arena, emerging market firms, particularly from Brazil, China, India, and South Africa, vigorously compete due to technological advances. Multinational corporations (MNCs) play a pivotal role, generating jobs, investments, and tax revenue globally. Born global firms, characterized by innovation and knowledge-based capabilities, become international competitors in under three years, often with technological assistance. Technology also aids small firms in global communication and offers alternatives like electronic distribution and e-commerce. The lesson notes highlight the dynamic and complex nature of the current economic environment, with the transformation of international business involving pervasive cross-border activities, the growth of small and medium-sized firms, and the significance of emerging markets.

explain how international relations affect international business activities

International relations significantly impact international business activities in various ways. Favorable political relations between nations foster stable business environments by promoting international cooperation. This stability, backed by a robust legal system for dispute resolution, leads to increased business opportunities and lower risks for companies operating across borders. Multilateral agreements, such as treaties among several nations, play a crucial role in generating stability for international businesses, as they commit nations to adhere to agreed-upon terms even during periods of tension. Organizations like the UN Conference on Trade and Development (UNCTAD) contribute to international economic development and trade cooperation. Conversely, doing business in totalitarian countries can be risky due to vague or nonexistent laws, subjective interpretation by powerful officials, and restrictions on entrepreneurial behavior. Companies operating in such nations may face criticism for supporting oppressive policies. On the other hand, democracies provide a stable business environment through laws protecting individual property rights, encouraging entrepreneurial activity, and promoting economic growth. Despite variations in political systems, the legal and political landscape significantly influences the success and ethical considerations of international business ventures.

describe the various types of investment (equity-based) entry modes that are available to companies, and explain the advantages and disadvantages of each mode

Investment entry modes for companies involve direct investment in plant and equipment, with each mode offering distinct advantages and disadvantages. Wholly owned subsidiaries provide complete control over operations and coordination in global strategies, making them suitable for technology-based companies and those pursuing global strategies. However, they are expensive and expose companies to high-risk exposure. Joint ventures, involving shared ownership with independent entities, offer risk reduction, entry into restricted markets, access to distribution networks, and defensive strategies against government interference. Yet, conflicts between partners and loss of control in government partnerships can pose challenges. Strategic alliances is a relationship in which two or more entities cooperate (but do not form a separate company). They facilitate cost-sharing, leveraging competitors' strengths, accessing distribution channels, and risk reduction, but they may create future competitors and face challenges of conflict and cooperation undermining.

describe the different contractual (non-equity based) entry modes that are available to companies, and explain the advantages and disadvantages of each mode

Licensing is a contractual entry mode in which a company that owns intangible property (the licensor) grants another firm (the licensee) the right to use that property for a specified period of time. Advantages of Licensing: Financial Support: Licensees contribute equipment and investment financing, serving as a means for licensors to finance international expansion. Reduced Risk: Licensing is a less risky method of expansion, shielding licensors from increased risk in politically unstable or challenging markets. Market Access: Quick revenue generation is possible without significant capital and managerial investments, facilitating faster market entry. Anti-Black Market Measures: Licensing local companies can counter bootleg versions by offering products at competitive prices, reducing the likelihood of black-market appearances. Technology Upgrades: Licensees can upgrade production technologies, as seen in D&L Industries licensing materials technology from Nippon Pigment. Disadvantages of Licensing: Restriction on Future Activities: Exclusive licenses can restrict a licensor's future activities, hindering the ability to sell directly or contract with another licensee. Inconsistent Global Branding: Licensing may compromise the global consistency of product quality and marketing efforts, making it challenging to develop a coherent global brand image. Lending Strategic Property: Licensing involves lending strategically important property to future competitors, posing risks when competitive advantages rely on licensed assets. Enforcement Challenges: Enforcement of restrictions on future competition in licensing contracts may be challenging, especially with substantial improvements made by former licensees. Franchising is a contractual entry mode in which one company (the franchiser) supplies another (the franchisee) with i

discuss the difference between low context and high context cultures

Low context cultures are those wherein a speaker's words explicitly convey the speaker's intended message to the listener. There is little, if any, weight attached to the broader context in which the message is being delivered. Thus, people from low context cultures predominantly concentrate on the spoken word and are direct in their communication. They consider it wasteful to spend time making small talk or discussing non-business issues. In their business communications, they prefer to get right to the business at hand. Most Western countries are deemed to possess a low context culture. In high context cultures, the broader context in which the spoken conversation occurs is at least as important as the words that are actually spoken. There is considerable importance attached to non-verbal communications such as body language. Thus, in high context cultures, people are sensitive to the unspoken and cultural cues when deciphering the speaker's intended message. In business dealings, people from high context cultures infer meaning from unspoken or indirect communications and this information can influence their business decisions. Most Asian and Latin American countries are deemed to possess high context cultures. Problems can arise when managers from both backgrounds collaborate in business dealings as those with low context backgrounds feels that those with high context backgrounds are wasting time and those with high context backgrounds feels that those with low-context backgrounds are too aggressive to trust

discuss important strategic factors that must be considered when selecting an entry mode

Managers are typically less confident in their ability to manage operations in unfamiliar cultures and may avoid investment entry modes in favor of exporting or a contractual mode. Large political differences and high levels of instability cause companies to avoid large investments and favor entry modes that shelter assets. Rising incomes encourage investment entry because investment allows a firm to prepare for expanding market demand and to increase its understanding of the target market. Producing locally is desirable when the total cost of production in a market is lower than in the home market and when shipping costs are high. Companies tend to make their initial foray into international markets using exporting and select entry modes that require deeper involvement as they gain international experience.

explain the main concepts, principal assumptions, and limitations of the following trade theories: mercantalism absolute advantage comparative advantage factor proportions international product life-cycle new trade theory national competitive advantage

Mercantilism: Mercantilism, a trade theory prevalent from the 1500s to the late 1700s, advocates that nations should amass financial wealth by fostering exports and limiting imports. It rests on three key pillars: a trade surplus, where exports exceed imports; government intervention to maintain this surplus; and colonialism, where nations acquire territories to secure inexpensive raw materials and markets for finished goods. The assumption underlying mercantilism is that the accumulation of wealth depends on increasing a nation's trade surplus, treating international trade as a zero-sum game. However, this theory has limitations. If all nations were to restrict imports and focus solely on exports, international trade would be severely restricted, potentially ceasing for nonessential goods. Moreover, exploitative practices, such as paying colonies minimal amounts for exports while charging high prices for imports, hinder the economic development of the colonies. Absolute Advantage: Contrasting with mercantilism, the concept of absolute advantage highlights a nation's ability to produce a good more efficiently than any other nation. It suggests that international trade should not be restricted and, instead, allowed to flow according to market forces. Unlike the zero-sum game of mercantilism, absolute advantage views international trade as a positive-sum game, emphasizing gains for both parties involved. This theory measures wealth by the living standards of a nation's population. Nonetheless, there are limitations to absolute advantage. Governments may intervene in international trade out of concern for workers or consumers, introducing complexities to the theory. With over 180 countries and countless products involved in international trade, managing its complexity becomes a significant challenge. Comparative Advantage

identify processes that facilitate companies' internationalization

Passive to Active Internationalization: Companies engaging in internationalization can adopt either a proactive or passive approach. Proactive internationalization involves actively seeking international opportunities, while passive internationalization occurs when favorable conditions naturally support growth. For instance, a company may experience passive growth by responding to requests from overseas customers or distributors. External to Internal Handling of Operations: The handling of international activities can vary from external to internal management. External handling allows other firms to oversee a company's international operations, while internal management strengthens a company's claim to being truly international. The decision between external and internal handling depends on various factors, including strategic goals and the complexity of international operations. Deepening Mode of Organizational Commitment: The level of organizational commitment in internationalization depends on the nature of economic activities undertaken overseas. Internationalization can take a weak form, involving gradual growth through exports, or a strong form, where a company establishes wholly-owned subsidiaries in foreign markets. This distinction reflects the depth of a company's commitment to international expansion. Diversity Between Home Country and Host Country: Firms can navigate internationalization by considering the level of diversity between their home country and potential host countries. Initially targeting countries similar economically or culturally to the home country may serve as a weak starting point. However, as firms gain international experience, they may choose to pursue opportunities in less similar countries, which becomes a stronger rationale for internationalization. Number of Countries Operated In: O

discuss country-level and firm-level implications of political risk

Political risk has implications both for countries and the firms operating within them. At the country level, political risk jeopardizes a country's attractiveness for companies who may be considering investing there (e.g., by building manufacturing facilities). In turn, this limits the country's opportunities for promoting its own economic growth through investment by non-domestic firms. Similarly, political risk in a country can strain its relations with its neighbors, thereby contributing to a general decline in the economic attractiveness of the entire region. All of this can hinder a country's geo-political clout and international standing. At the firm level, political risk in a country can jeopardize the economic value of companies' investment in that country. Political risk creates uncertainty for corporate decision-makers and hinders the formulation and/or implementation of corporate strategies for that country; thus, political risk increases companies' costs of doing business in a particular country. This may result in companies shying away from committing their resources to politically risky countries.

describe the political, economic, and cultural motivations behind governmental intervention in trade

Political: main political motives behind government intervention in trade include protecting jobs, preserving national security, responding to other nations' unfair trade practices, and gaining influence over other nations Industries considered essential to national security often receive government-sponsored protection. This is true for both imports and exports. Governments often threaten to close their ports to another nation's ships or to impose extremely high tariffs on its goods if the other nation does not concede on some trade issue that is seen as being unfair. Gain influence - Governments of the world's largest nations may become involved in trade to gain influence over smaller nations. Economic: The most common economic reasons for nations' attempts to influence international trade are the protection of young industries from competition and the promotion of a strategic trade policy. infant industry argument, a country's emerging industries need protection from international competition during their development phase until they become sufficiently competitive internationally. government intervention can help companies take advantage of economies of scale and be the first movers in their industries. Cultural: the most common being protection of national identity.

critically evaluate popular arguments for and against the North American Free Trade Agreement (NAFTA; now the United States-Mexico-Canada Agreement, USMCA)

Popular arguments for NAFTA: It creates a large (regional) market for American, Canadian, and Mexican firms. It provides an opportunity for American and Canadian firms to shift their goods and service production to Mexico to take advantage of the country's lower labour costs. It enables American and Canadian firms to concentrate their efforts onhigh-technology-oriented industries. Increasing investment in Mexico ultimately raises the standard of living there, which will fuel demands for American and Canadian goods and services. This demand will stimulate local industries, creating employment opportunities in the United States and Canada. American and Canadian consumers will benefit from lower prices of goods produced in Mexico, where labour costs are relatively low. Popular arguments against NAFTA: It could lead to a significant loss of American and Canadian jobs as companies shift their operations to Mexico to benefit from that country's lower wages and less stringent labour and environmental laws. Exposure of Mexican firms to their more efficient American and Canadian competitors will lead to painful restructuring and unemployment in Mexico. Mexico's less stringent environmental and labour laws will result in increased disregard for the environment, and may even result in human rights violations. American and Canadian firms will unfairly exploit Mexico, using it as a base for low-cost assembly operations; these firms will keep lucrative, high-skilled jobs in their own countries. Even as a sovereign nation, Mexico will be dominated by American and Canadian economic interests.

discuss the public policy instruments that governments use to promote and restrict FDI.

Reasons to Restrict FDI in Host Countries: Governments employ ownership restrictions, prohibiting non-domestic companies from investing in specific industries or owning certain businesses. Performance demands are also utilized, influencing the operations of international companies in the host nation by requiring local content in products, specifying export quotas, or mandating the transfer of certain technologies to local businesses. Reasons to Restrict FDI in Home Countries: Differential tax rates are imposed to tax income from foreign earnings at a higher rate than domestic earnings, discouraging outward FDI. Sanctions can also be employed to prohibit domestic firms from making investments in specific nations. Reasons to Promote FDI in Host Countries: Governments use various incentives to promote FDI in host countries. These include tax incentives such as lower rates or tax waivers on local profits for a specified period, low-interest loans, and infrastructure improvements. Infrastructure enhancements, such as improved seaports, roads, and telecommunication systems, bring lasting benefits to communities surrounding the investment location. Reasons to Promote FDI in Home Countries: To encourage inward FDI, governments offer insurance covering risks associated with foreign investments, including protection against asset expropriation, losses from armed conflict, kidnappings, and terrorist attacks. Loans are provided to firms looking to expand their overseas investments, along with tax breaks on profits earned abroad or negotiated tax treaties. Political pressure may also be applied to other nations to relax restrictions on inbound investments, fostering a favorable environment for home country businesses.

describe recruitment and selection issues facing international companies

Recruitment and selection pose distinctive challenges for international companies. Larger corporations commonly fill international managerial positions from their existing employee pool. In contrast, smaller companies may need to seek external hires for such roles. International students who have completed their education abroad can be recruited, trained locally, and deployed in their home countries. This approach helps leverage individuals with an international perspective. Additionally, companies engaging significantly in manufacturing or marketing abroad may opt to recruit local managerial talent in the host country. This strategy ensures a workforce with a nuanced understanding of the local culture and political dynamics, enhancing the company's ability to navigate complex international markets.

identify the main sources of secondary international data, and explain their usefulness

Secondary international data can be sourced from various avenues. International organizations such as the World Bank and the International Monetary Fund offer free or inexpensive information about product demand in specific countries. Government agencies, including commerce departments and international trade agencies, provide details on import-export regulations, quality standards, and market sizes. Industry and trade associations publish reports to keep managers informed about industry-specific issues and opportunities. Additionally, international service organizations in fields like banking, insurance, management consulting, and accounting offer valuable insights into a market's cultural, regulatory, and financial conditions.

explain the three different staffing policies—ethnocentric, polycentric, and geocentric—that are used by international companies.

Staffing policy is the customary means by which a company staff its offices Ethnocentric staffing means staffing operations outside the home country with home-country nationals; it can give a company tight control over subsidiary decision making. Polycentric staffing means staffing operations with host-country natives; it can give subsidiaries some autonomy in decision making Geocentric staffing means staffing operations with the best-qualified individuals, regardless of nationality; it is typically reserved for top-level managers.

explain each of the four steps in the process of market and site screening

Step 1 - Identifying Basic Appeal: The initial step involves evaluating the fundamental appeal of potential markets, considering factors like product demand and the availability of production resources such as raw materials, labor, and capital. Step 2 - Examining Local Factors: In the second step, a thorough examination of local culture, political and legal forces, and economic variables takes place. This includes assessing government bureaucracy, political stability, fiscal and monetary policies, and other elements crucial for successful market entry. Step 3 - Measuring Market Potential: The third step focuses on measuring the potential of each market or assessing the suitability of a site for operations. This involves evaluating market size, growth, and potential indicators, along with factors like the availability of workers, managers, raw materials, and infrastructure. Step 4 - Visiting Locations for Final Decision: The final step includes visiting each remaining location to make a conclusive decision. This step involves competitor analysis, financial evaluation, and other assessments to ensure a well-informed and strategic choice for market entry or site selection.

describe Hofstede's framework for classifying cultures, and explain its social and business implications

The Hofstede framework compares cultures along five dimensions. Individualism versus Collectivism highlights how societies prioritize personal achievements in individualist cultures, fostering competitiveness, while collectivist cultures prioritize group harmony, leading to strong family ties and group loyalty. In business, individualist cultures may encourage innovation and entrepreneurship but face higher employee turnover, whereas collectivist cultures value teamwork and shared responsibility, promoting stability but potentially limiting individual creativity. Power Distance examines societal structures, where large power distance cultures exhibit clear hierarchies and distinctions between superiors and subordinates, while small power distance cultures emphasize equality and accessibility between individuals. In business, large power distance cultures may have strict hierarchies with leaders enjoying special privileges, while smaller power distance cultures adopt more egalitarian approaches, enhancing communication and cooperation. Uncertainty Avoidance focuses on preferences for stability or change, with high uncertainty avoidance societies favoring stability and conformity, leading to structured social systems, and low uncertainty avoidance cultures being more open to change, fostering innovation and adaptability. In business, high uncertainty avoidance cultures may implement rigid rules but struggle to adapt to change, while low uncertainty avoidance cultures embrace change but face higher employee turnover. The dimension of Achievement versus Nurturing explores societal values regarding individual success and material gain versus relationships and a relaxed lifestyle. In high-achievement cultures, businesses may prioritize competition and wealth accumulation, whereas in low-achievement cultures, emphasis on rela

describe the Kluckhohn-Strodtbeck framework for classifying cultures, and explain its practical use

The Kluckhohn-Strodtbeck framework compares cultures along six dimensions, such as focus on past or future events and belief in individual or group responsibility for personal well-being. It studies a given culture by asking seeking answers to questions on topics including a people's (1) relation to the environment; (2) focus on past, present, or future; (3) trustworthiness; (4) desire for accomplishment; (5) group-individual responsibility; and (6) public versus private nature.

explain the difference between macro risk and micro risk

The following two scenarios help to illustrate the differences between macro and micro risks: An instructor prepares a "hard" final examination and administers this examination to all individuals in the class. An instructor prepares two versions of the final examination and administers the "easy" version to most students and the "hard" version to a few known "troublemakers" in the class. Given the above, scenario 1 would be an example of macro risk—risk that is the same for all students, regardless of their in-class conduct. In contrast, scenario 2 would be an example of micro risk—risk that is less for some students and greater for others, depending upon their in-class conduct.

describe the process of globalization and how it affects markets and production

The greater interdependence that globalization is causing means an increasingly freer flow of goods, services, money, people, and ideas across national borders. Two areas of business in which globalization is having profound effects are the globalization of markets and production. Globalization of production refers to the dispersal of production activities to locations that help a company achieve its cost-minimization or quality-maximization objectives for a good or service Globalization of markets refers to convergence in buyer preferences in markets around the world. Markets: it reduces market costs, creates new market opportunities, levels uneven income Production: access lower cost workers, access technical expertise, access production outputs.

describe the main methods used to conduct primary international research.

The main methods used for conducting primary international research involve the collection and analysis of original data to address current research needs. Trade shows serve as exhibitions where industries showcase products, monitor competitors, and stay abreast of trends. Trade missions, organized by government agencies, facilitate international exploration of business opportunities. Interviews offer a direct method for assessing potential buyers' emotions, attitudes, and cultural beliefs. Focus groups, involving in-depth interviews with a small group moderated by an expert, delve into attitudes about a company or its products. Surveys, whether written or verbal, gather facts, opinions, or attitudes from current or potential buyers. Lastly, environmental scanning entails the ongoing collection, analysis, and dissemination of information for tactical or strategic purposes, providing a comprehensive approach to primary international research.

define regional economic integration, and identify its five levels.

The process whereby countries in a geographic region cooperate to reduce or eliminate barriers to the international flow of products, people, or capital. 1.(lowest) free trade area - Economic integration whereby countries seek to remove all barriers to trade among themselves, but each country determines its own barriers against nonmembers 2. customs union - Economic integration whereby countries remove all barriers to trade among themselves, but erect a common trade policy against nonmembers 3. common market - Economic integration whereby countries remove all barriers to trade and the movement of labor and capital among themselves, but erect a common trade policy against nonmembers, 4. Economic union - Economic integration whereby countries remove barriers to trade and the movement of labor and capital among members, erect a common trade policy against nonmembers, and coordinate their economic policies 5. (highest) political union - Economic and political integration whereby countries coordinate aspects of their economic and political systems

discuss economic and non-economic motivations for companies' international business activities

The recent growth of international business can be attributed to a wide array of motivating factors, both economic and non-economic. While it is true that many firms internationalize for economic reasons (to increase sales, acquire resources, and minimize risk), many firms are motivated by non-economic factors as well. For example, some firms internationalize because of the ambitions of their founders—Starbucks and Amazon.com have gone global because of their founders' "strategic intent." Another example is the Swedish furniture retailer IKEA, whose successful business model and the philosophies of its founders motivated its global growth. Competitive pressures and a fear of being "left behind" have spurred the internationalization efforts of many other firms.

evaluate reasons why expatriates succeed or fail in their international assignments

The success of expatriates in their international assignments is influenced by a range of factors encompassing individual, firm-specific, and context-specific elements. Key contributors to success include aspects like family situation, adaptability, job knowledge, relational skills, cultural openness, language fluency, and prior international experience. Additionally, the level of personal adjustment to the expatriate role and the support provided by the organization play crucial roles. Factors such as realistic information about the country, adequate cross-cultural training, and organizational backing contribute significantly to expatriate success. Conversely, expatriate failures can be attributed to various reasons ranked in descending order of importance. The inability of the manager's spouse to adapt to a different environment is considered the most critical factor, followed by the manager's own challenges in adjusting to a new physical or cultural setting. Other family-related issues, the manager's personality or emotional immaturity, inability to cope with responsibilities, lack of technical competence, and insufficient motivation for overseas work are also listed as potential reasons for expatriate failures. Recognizing and addressing these factors are crucial for companies seeking to enhance the success rates of their international assignments.

discuss the role of World Trade Organization (WTO) in promoting free trade.

The three main goals of the WTO (www.wto.org) are to help the free flow of trade, to help negotiate further opening of markets, and to settle trade disputes among its members. One key component of the WTO that was carried over from the General Agreement on Tariffs and Trade (GATT) is the principle of nondiscrimination called normal trade relations (formerly called "most favored nation status")—a requirement that WTO members extend the same favorable terms of trade to all members that they extend to any single member

describe ways for increasing managerial awareness of national cultures

There are many ways in which managers can increase their awareness of other national cultures. Print-based media, such as the Culture Shock! book series by Graphic Arts Center Publishing Company, are easy to access and provide considerable insights into a given country's culture. Additionally, travel magazines and government- or tourist authority-sponsored websites often provide useful information about the cultures they represent. Travel-related lectures, usually hosted by local libraries, are also valuable sources of information—particularly since such presentations often highlight the narrator's personal cultural experiences. Similarly, conversations with individuals from other countries can yield first-hand information about their culture. Such low-level methods can be supplemented with more interactive learning formats, such as foreign films and videos. Likewise, managers can engage in more formal methods of increasing their cultural awareness by enrolling in case-study based courses (generally offered at the university level) or foreign language courses, although such courses provide limited "general" cultural information. Large companies often mount formal "culture assimilation" initiatives that can yield significant insights into a foreign culture. Perhaps the best way to learn about a foreign culture is to experience it personally. For example, high-level learning mechanisms such as country-specific simulations and business/vacation travel provide valuable opportunities to discover more about other countries. To obtain maximum benefit from such visits, it would be useful to adopt a "traveler" mentality and ignore its "tourist" counterpart. You can plan your vacations with the help of travel guides (like Lonely Planet) that contain useful cultural (and other) information.

discuss the importance of training and development programs, especially cultural training

Training and development programs play a crucial role in preparing employees for international assignments, with cultural training taking center stage. Culture shock, characterized by psychological challenges like homesickness, irritability, and confusion when living in an unfamiliar culture, can significantly impact an individual's well-being. To mitigate the effects of culture shock and its counterpart, reverse culture shock upon returning home, cultural training becomes paramount. This training includes environmental briefings and cultural orientations, offering insights into local aspects such as housing, healthcare, and socio-political institutions. Moreover, cultural assimilation and sensitivity training delve into local values, attitudes, and customs, emphasizing the importance of understanding local emotions. Language training equips employees with practical language skills, facilitating effective communication in the local language. Field experience, involving brief visits to the culture, aids individuals in gradually acclimating to their new environment, fostering a smoother transition during international assignments.

identify the key drivers of globalization

Two main forces underlie the globalization of markets and production: falling barriers to trade and investment and technological innovation.

discuss the important management issues in the FDI decision.

When investing abroad, companies may face the necessity of hiring local managers or exporting all locally produced goods, even if their preference is to exert control over local market activities. The acquisition of an existing business is often favored, especially when it comes with updated equipment, positive relations with workers, and a strategic location. In cases where suitable facilities are unavailable, companies might opt for greenfield investments. Establishing a local market presence not only facilitates control but also provides valuable insights into local buyer behavior. Additionally, firms frequently engage in Foreign Direct Investment (FDI) when proximity to client firms and competitors offers strategic advantages.

describe cultural change, and explain how companies and culture affect each other

cultural traits which is anything that represents a culture's way of life, including gestures, material objects, traditions, and concepts plays a role in cultural change cultural diffusion is the process whereby cultural traits spread from one culture to another. As new traits are accepted and absorbed into a culture, cultural change occurs. International companies are often agents of cultural change. As trade and investment barriers fall, for example, U.S. consumer-goods and entertainment companies are moving into untapped markets. Critics in some of these places charge that, in exporting the products of such firms, the United States is practicing cultural imperialism—the replacement of one culture's traditions, folk heroes, and artifacts with substitutes from another. Culture often forces companies to adjust their business policies and practices. Managers from the United States, for example, often encounter cultural differences that force changes in how they motivate employees in other countries. Managers sometimes use situational management—a system in which a supervisor walks an employee through every step of an assignment or task and monitors the results at each stage. Although time-consuming, this technique helps employees fully understand the scope of their jobs and clarifies the boundaries of their responsibilities.

describe culture, and explain the significance of both national culture and subcultures

culture - Set of values, beliefs, rules, and institutions held by a specific group of people Nation-states support and promote the concept of national culture by building museums and monuments to preserve the legacies of important events and people. Nation-states also intervene in business to preserve national culture. A group of people who share a unique way of life within a larger, dominant culture is called a subculture. A subculture can differ from the dominant culture in language, race, lifestyle, values, attitudes, or other characteristics.

describe the worldwide patterns of FDI and the reasons for these patterns

globalization - As countries lowered their trade barriers, companies realized that they could now produce in the most efficient and productive locations and simply export to their markets worldwide. This set off another wave of FDI flows into low-cost, newly industrialized nations and emerging markets. mergers and acquisitions - Many cross-border M&A deals are driven by the desire of companies to: Get a foothold in a new geographic market Increase a firm's global competitiveness Fill gaps in companies' product lines in a global industry Reduce costs of R&D, production, distribution, and so forth

identify countries in each of the following regions: i) North America, ii) South America, iii) Europe, iv) Asia, v) Africa, and vi) Oceania

i) North America - Alaska, Canada, Greenland, United States, Mexico ii) South America - Ecuador, Colombia, Venezuela, Brazil, Peru, Bolivia, Paraguay, Chile Uruguay, Argentina iii) Europe - Spain, France, Italy, Romania, Ukraine, Sweden, Norway, Finland, Portugal, Bulgaria, Poland, Belarus, Serbia, Greece iv) Asia - Russia, Mongolia, China, India, Malaysia, Thailand, Iran, Iraq v) Africa - Algeria, Libya, Egypt, Sudan, Somalia, Zimbabwe, Namibia, Mali, Chad, Niger, Nigeria, Morocco, South Africa vi) Oceania - Indonesia, Papua New Guinea, Australia, Tasmania, New Zealand

describe each of the theories that attempt to explain why FDI occurs

international product lifecycle theory - a company will begin by exporting its product and later undertake foreign direct investment as a product moves through its life cycle market imperfections theory - when an imperfection in the market makes a transaction less efficient than it could be, a company will undertake foreign direct investment to internalize the transaction and thereby remove the imperfection. two market imperfections are relevant to this discussion—trade barriers and specialized knowledge eclectic theory - firms undertake foreign direct investment when the features of a particular location combine with ownership and internalization advantages to make a location appealing for investment market power theory - that a firm tries to establish a dominant market presence in an industry by undertaking foreign direct investment

describe regional integration in the Middle East and Africa, and explain why progress there has been slow

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define political risk, and describe its four principal characteristics

political risk—the likelihood that a society will undergo political changes that negatively affect local business activity. The risk is unanticipated. The risk originates in the political environment. The risk has a significant impact on a company. The risk negatively impacts company profitability and/or overall operations. The four principal characteristics of political risk: Conflict and Violence: Local conflicts can deter international investments due to disruptions in manufacturing, distribution, and talent recruitment. Violence poses threats to a company's physical assets and the safety of its employees. Conflict triggers include resentment towards governments, territorial disputes, and ethnic, racial, and religious tensions. Terrorism and Kidnapping: Terrorism serves as a means of making political statements, with dissatisfied groups resorting to fear and destruction for change. Executives of large international companies are prime targets for kidnapping, aiming to secure large ransoms to fund terrorist activities. Property Seizure: Governments may seize assets through confiscation, expropriation, or nationalization, affecting industries crucial for national security or generating significant revenues. Compensation for expropriation is determined by the government, often below market value, and there may be no legal recourse. Policy Changes: Government policy changes result from various influences, including newly empowered political parties and civil unrest. Policies may restrict ownership to domestic companies or limit non-domestic firms to minority stakes, impacting cross-border investments.

list and explain the methods governments use to promote international trade.

subsidy - Financial assistance to domestic producers in the form of cash payments, low-interest loans, tax breaks, product price supports, or other forms export financing - Governments often promote exports by helping companies finance their export activities. foreign trade zone - Most countries promote trade with other nations by creating what is called a foreign trade zone (FTZ)—a designated geographic region through which merchandise is allowed to pass with lower customs duties (taxes) and/or fewer customs procedures The governments of most nations have special agencies responsible for promoting exports. Such agencies can be particularly helpful to small and medium-sized businesses that have limited financial resources.

describe each of the main types of political systems

totalitarianism—the belief that every aspect of people's lives must be controlled for a nation's political system to be effective anarchism—the belief that only individuals and private groups should control a nation's political activities. pluralism—the belief that both private and public groups play important roles in a nation's political activities. democracy-political system in which government leaders are elected directly by the wide participation of the people or their representatives