Exam 1 Vocab

Management

The process of completing activities with and through other people.

International Management

The process of applying management concepts to a multinational environment and adapting management practices to different economic, political, and cultural contexts.

Multinational Corporation (MNC)

A firm that has operations in more than one country, international sales, and a mix of nationalities among managers and owners

Globalization

The social, political, economic, cultural, and technological integration among countries around the world; the vision of creating one world unit, a single market entity

Internationalization

The process of a business crossing national and cultural borders, essentially expansion

Outsourcing

Using suppliers outside the company/country to provide goods and services

Offshoring

The practice of basing some of a company's processes or services overseas, so as to take advantage of lower costs; a firm can engage in this without any external partners

Pros of Globalization

Cheaper, greater availability of goods, better jobs and tech

Cons of Globalization

Countries avoid regulation, environmental impacts, bribery and corruption

Regional Comprehensive Economic Partnership

The largest international trade agreement

The BRICS Coalition

Trade agreement between Brazil, Russia, India, China, South Africa; Countries with largest economic power

Foreign Direct Investment (FDI)

Investment made by a company or individual in one country in business interests in another country.

Market Economy

Exists when a private enterprise reserves the right to own property and monitor the production and distribution of goods and services; State simply supports competition and efficient practices

Command Economy

Comparable to monopoly; State has explicit control over the price and supply of a good or service

Mixed Economy

Combination of Market and Command Economies

Some sectors reflect private ownership and the freedom/flexibility of the law of the demand

Other sectors are subject government planning

Individualism

“People should be free to pursue economic and political endeavors without constraint.”

Focus on the singular, people free politically and economically without social constraint

Collectivism

A view that the needs and the goals of society at large as more imprtant than individual desires

Socialism

Moderate form of collectivism in which there is government ownership of institutions, and profit is not the ultimate goal.

Communism

A form of socialism that abolishes private ownership; completely government controlled

Totalitarianism

One representative party that exhibits control over every facet of political and human life

Power is often maintained by the suppression of the opposition, which can be violent

Media censorship, political repression, and denial of rights and civil liberties are dominant ideals

Democracy

The government established and controlled by the citizens either directly or through elections

At least two parties are required

Governing party ensures individual freedom

Individual freedoms, such as freedom of speech, are secured legally

Keiretsu

A network of interlocking corporate affiliates invested in each other

Horizontal Keiretsu

Cross-shareholding relationships with other companies

Vertical Keiretsu

Companies in different industries own shares in same manufacturers and supplies

Four Foundations for Law Systems

Islamic, Socialist, Common, Civil/Code

Islamic Law

Derived from interpretations of Qur’an and teaches of Prophet Muhammed

Found in many Middle East and Central Asian countriees (Ex: Saudi Ariabia, Pakistan, Maldives); Application of this system varies across countries

There are “schools” of thought behind these law systems - differences based on interpretation

For businesses, this could include different conditions and expectations (E.g. Interest (Riba) is banned - focus shifts to arrangements such as profit sharing)

Socialist Law

Rooted in Marxist socialist system

Influences regulations in many nations

Examples: Former communist nations of the Soviet Union, China, North Korea

Most property will be owned by the state (or state-owned enterprises); Poses a risky proposition to MNCs

Socialist legality replaces “rule of law”

Common Law

Foundation built on English Law (origin can be traced to middle ages)

Foundation of the legal system of many nation - including USA

Stare decisis - To stand by things decided; Legal precedent matters

Consideration for firms

• - A sense of “predictability”

• - A relative degree of flexibility over time (consider impact on innovation)

Civil/Code Law

Derived from Roman Law systems

Most popular legal system - over 60% of the world

Examples: Continental Europe, Central and South America, Asia (eg. Indonesia and Japan), Parts of Africa including Egypt

Many countries have “mixed systems”

What this means for businesses:

• - A highly codified system

• - A strong emphasis on terms and documentation for interpretation

Six Principles of International Law

principle of sovereignty, nationality principle, territory principle, protective principle, doctrine of comity, act of state doctrine

Ethics

The study of morality and standards of conduct

Corporate Social Responsibility (CSR)

Actions taken by a firm that are pre-intended to benefit society beyond requirements of the law and the interests of the firm

Teleological Ethical Theories

Morality of an act is based on its consequences

Utilitarianism

Greatest good for the greatest number of people

Deontological Ethical Theories

Actions are right or wrong in themselves; Uses rules to determine right and wrong

Kantianism

Individuals (and organizations) have responsibilities based on moral principles that go beyond self-interest

Categorical Imperative

Universality is key (based on Kant)

There are no “ifs” or similar conditional grounds

E.g. we ought to treat customers with respect

Ethical Convergence

To follow the same rules in managing ethical behavior and social responsibility

Ethical Relativism

Each society’s view of ethics must be considered legitimate and ethical

Ethical Universalism

Basic moral principles that transcend cultural and national boundaries

Hofstede's 6 Dimensions

invididualism/collectivism

power distance index

uncertainty avoidance index

masculinity/femeninity

long term orientation

indulgence vs restraint

Performance Orientation

The degree to which the society encourages societal members to innovate, improve their performance, and strive for excellence

Humane Orientation

The extent to which people are expected to be fair, caring, generous; Need for belonging and affiliation is emphasized more than material possessions, self-fulfillment, and pleasure

7 Cultural Dimensions

1. universalism vs particularism

2. collectivism vs individualism

3. neutral vs affective

4. diffuse vs specific

5. achievement vs ascription

6. time

7. nature

Universalism vs Particularism

the importance of rules versus relationships

Neutral vs. Affective

withholding emotion vs. expressing emotion

Specific vs. Diffuse

how much business and work is incorporated into personal lives

Achievement vs Ascription

status given based on accomplishments or associations

Cultural Paradoxes

When individual situations seem to contradict cultural prescriptions

Stereotyping

Assumes that all people within one culture behave, believe, feel, and act the same

Ethnocentrism

People from one culture believe that theirs are the only correct norms, values, and beliefs

Ethnocentric Predisposition

When values and interests of the parent company guide strategic decisions

Polycentric Predisposition

Decisions tailored to suit cultures where MNCs operate

Regiocentric Predisposition

Firm tries to blend its own interests with those of its subsidiaries on a regional basis

Geocentric Predisposition

The company tries to integrate a global systems approach to decision making

Economies of Scale

When increasing production lowers the average cost per unit, giving firms a cost advantage as they grow.

Principle of Sovereignty

Governments have a right to rule as they see fit

Nationality Principle

Every country has jurisdiction over its citizens (no matter where they are located)

Territory Principle

Every nation has the right of jurisdiction within its legal territory

Protective Principle

Every country has jurisdiction over behavior that adversely affects its national security, even if that conduct occurred outside that country

Doctrine of Comity

Holds there must be mutual respect for the laws, institutions, and governments of other countries in the matter of jurisdiction over their own citizens

Act of State Doctrine

Holds that all acts of other governments are considered to be valid by U.S. courts, even if such acts are illegal or inappropriate under U.S. law