Global Insights Exam 1/Eppley

Globalization

The process by which national economies are increasingly woven together worldwide

World Trade Organization (WTO)

-A negotiating forum (e.g., the Doha round) for agreements related to regulation of the flow of trade and commerce among its members. 64 members ( as of 2016).

- Is successor to GATT.

- Requires members to "harmonize" tariffs and business laws with WTO guidelines.

- Conducts negotiations ("rounds") to set major agreements among members.

Tariff

A government-imposed tax on imports.

International CEO's top 10 threats

1) Over-regulation

2)Increased international competition

3)Currency fluctuations

Foreign Direct Investment (FDI)

Capital and managerial knowledge that flows into a country from outside its borders.

BRIC countries

Brazil, Russia, India, and China—emerging economic powers.

The Triad

Traditional economic powerhouses—the United States, the European Union (EU), and Japan.

Gross Domestic Product (GDP)

Is the total value of economic activity in a country.

NAFTA and USMCA

A trade agreement between Canada, the United States and Mexico that encourages free trade between these North American countries.

Free Trade Area of the Americas (FTAA)

Proposed free-trade zone covering 800 million people in 34 countries in the Western hemisphere.

Central American-Dominican Republic- United States Free Trade Agreement (CAFTA-DR)

Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and the U.S.

Regional Trade Agreements in the Americas

Removed tariffs and other barriers to make trade easier and cheaper.

Maastricht Treaty

Provided the basis for formation of the EU—a single, integrated economic market using one currency (euro) and guided by a central bank.

EU Challenges

-Power differences and other disputes (movement of labor, corporate tax rates, farm reform) in its complex governance structure.

- Economic growth and development disparities among members exacerbated by global economic slowdown.

Multinational Enterprise (MNE)

are enterprises that engage in FDI and own or control value-adding activities in more than one country

MNE's typically

1.Have multiple facilities around the globe. A firm must own a majority stake in plants in the three key regions of North America, Europe, and the Pacific Rim

2.Derive a "substantial" portion of revenues from foreign operations

3.Run subsidiaries that possess a common strategic vision and draw from a common pool of resources

4.Place foreign nationals or expatriates at the board level and/or in senior management posts

Civil/Code Law

Uses pre-existing codes and is the most frequently used legal system in the world

Common Law

Relies on the balance of previous cases or precedent to resolve legal disputes.

Islamic Law

Relies upon religious stipulations in the Quran—also known as Sharia (or God's rules).

Communist Law

Based on ideology

Based on bureaucracy

Minimal private rights

Sub-Saharan African Law

-community oriented

-based on custom

-group based

outcomes

Asian Law

-social order/harmony stressed

-low use of legal mechanisms

-bureaucratized

Legal Protection against discrimination in the US

- Civil Rights Act of 1964 (and the 1990/91 amendment)

- Forbids U.S. firms from discriminating against employees at home and in foreign countries

- Foreign multinationals are also subject to the Civil Rights Act while operating in the United States

General Agreement on Tariffs and Trade (GATT)

- Purpose was to extend fair and similar trading and tariff policies to all other GATT members.

- Membership conferred "most-favored-nation" status

Political Risk

The extent to which actions of a country or its people may affect the viability of a firm.

Types of Political Risks

-changes in the political/economic environment

-changes in prevailing domestic economic conditions

-changes in external economic relations

Nationalization

Occurs when a government forces the transfer of ownership from private to state control

Expropriation

Occurs when a government compensates a company after nationalizing its assets

sovereign immunity

The principle that no nation has the right to challenge the internal actions of another state, if that state has proceeded justly

Confiscation

When nationalization of foreign firms occurs with little or no compensation offered

Tariffs

Fees paid by an exporter to the country of import that increase the price of a foreign product or service relative to the domestic counterpart

Export Controls

Restrictions imposed by governments on what can be exported from a country

Sanctions

Sets of specific restraints imposed by governments on international trade

Embargo

Government-imposed unilateral prohibition of trade with another country

Diversion

Using an export license to provide materials to a third party not included on the license

Boycott

Collaborative effort among countries to prohibit international trade with another nation

Piracy and Counterfitting

Patents, Trademarks, Copyrighs

Ethical Values

Individuals' moral judgments about what is right or wrong.

Universalism

Perspective that widespread and objective sets of ethical guidelines exist across countries.

cultural relativism

Perspective that ethical behavior in a country is determined by its own unique culture, laws, and business practices.

Corporate Social Responsibility (CSR)

a business's concern for society's welfare

Corruption

An exchange between two partners, the "demander" and the "supplier" which has an influence on the allocation of resources either immediatley or in the future and invloves the use or absue of public or collective responsibilty for private ends

Corruption is proposed to come from two key factors

Developing or transitional economies that have weak infrastructure, weak legal systems, and inadequate enforcement. A high level of government involvement with industry and business and a low public sector payment amount

Tpes of International Business Corruption

Smuggling, money laundering, piracy, bribery

Foreign Corrupt Practices Act (FCPA)

makes corruption and corrupt practices illegal in the United States.

Culture

The collective programming of the mind that distinguishes one group or category of people from another.

Cultural frameworks

Tools for analyzing the pattern of norms, behaviors and customs that are common in a given society.

Ronen and Shenkars Coutry Clusters

Countries are grouped by patterns of similarity in employees' attitudes toward work and how well it met their needs.

Individualism/Collectivism

Whether people tend to view themselves primarily as individuals or as members of a group

Masculinity/Femininity

Whether success and assertive acquisition or people and relationships are more highly valued

Power Distance

The extent to which people can accept large differences in power between individuals or groups

uncertainty avoidance

The extent to which people tolerate uncertain or ambiguous events

Long- versus short-term orientation

distinguishes between cultures that have a forward looking perspective on life and those that are more concerned with the past and present

indulgence/ self restraint

Distinguishes between cultures that are free to enjoy life and have fun vs. cultures with strict social norms

Outer-Directed

People who tend to accommodate their behavior to their situation in life.

Inner-Directed

People who tend to believe they control their own destinies.

Work Centrality

Is how important work is in the lives of employees.

Cultural Convergence

Is the view that people around the world are increasingly thinking and acting alike.

Perception

The selective mental processes that enable us to interpret and understand our surroundings.

nonverbal behavior

The subtle cues used to communicate within and across cultures, including facial expressions, appearance, and body movements.

Personal Space

The distance we have between ourselves and others when we talk and interact; different spaces are preferred by different cultures.

Context

Background information—other than what is said or written—that helps one understand and perceive others.

High Context vs Low Context

High-context cultures put great weight on background information whereas low-context cultures view it as extraneous.

Clock time

In Western cultures, time is perceived as a commodity; time schedules people.

Event time

In Eastern cultures, time is seen as more flexible and fluid; events schedule people.

Pace of time

A person who perceives time differently also perceives other business factors (e.g., profit) differently.

Monochronic time cultures

Prefer paying attention to one thing at a time.

Polychronic time cultures

Prefer to do msny things at once

attribution theory

A model of how we come to perceive others' behavior as internally or externally caused.

Self-serving Attribution Bias

The tendency to take credit (internal attribution) for success but to blame failure on other causes (external attribution).

self-effacing behavior

The tendency among some cultures to be modest in taking credit for success but accepting responsibility for failure.