Global Dimensions of Business Chapter 1, 13, 2, 3, 4

its objectives and its means to achieve them

what 2 factors do the conduct of an organization’s international operations depend on?

physical / social and competitive factors

what factors is an organization’s international operations affected by?

globalization

widening and deepening of interdependent relationships among people from different nations

international business

all commercial transactions between two or more countries

make profits / not motivated by profit

what is the IB goal of a private business vs government?

domestically; about 25%

are most of the world’s goods and services still sold domestically or internationally?

1. rise in and application of technology

2. liberalization of cross-border trade movements

3. development of services that support IB

4. growth of consumer pressures

5. increase in global competition

6. changes in political situations and government policies

7. expansion of cross-national cooperation

what factors have contributed to the growth of globalization?

born-global company

a company that starts out with a global focus because of their founders’ international experience

to gain reciprocal advantages, to attack problems jointly that one country acting alone cannot solve, and to deal with the areas of concern that lie outside the territory of any nation

what are the 3 reasons governments are willing to pursue treaty policies with other countries?

threats to national sovereignty, environmental stress, and growing income inequality and personal stress

3 critics of globalization

sovereignty

the freedom to “act locally” without externally imposed restrictions

offshoring

the dependence on production in a foreign country

sales expansion, resource acquisition, and risk reduction

why do companies engage in IB?

merchandise exports and imports - mode of operation

tangible products that are respectively sent out and brought into a country

service exports and imports - mode of operation

service export occurs when a company receives payment for a service, while a service import occurs when the home country pays for a service

turnkey operations

contracted construction projects transferred to owners when they’re operational

management contracts

arrangements in which they provide personnel to perform management functions for another, such as Disney’s management of theme parks in France and Japan

licensing agreements

they allow others to use some assets—such as trademarks, patents, copyrights, or expertise

royalties

payments made to an individual or company for the use of their property

franchising

a contract in which a company assists another on a continuous basis and allows use of its trademark

direct and portfolio

waht are the two forms of foreign investment?

foreign investment

ownership of foreign property in exchange for a financial return

foreign direct investment (FDI)

the investor takes a controlling interest in a foreign company

joint venture

When two or more companies share ownership of an FDI

portfolio investment

non-controlling financial interest in another entity

collaborative arrangements

companies working together

strategic alliance

either an agreement that is of critical importance to a partner or one that does not involve joint ownership

multinational enterprise (MNE)

any company with foreign direct investment

multinational corporation or company (MNC) or transnational company (TNC)

what are the two other synonyms of multinational enterprise (MNE) or any company with FDI

it can affect where different goods and services and be produced

how can physical factors (geography) affect a business?

institutions

systems of established and prevalent social rules that structure social interactions

the location of sales and production, the sequence for entering different countries, the portion of resources to allocate to each country

what do companies need to factor in when choosing countries to expand in with limited resources?

scanning

gathering and analyzing information about external and internal factors that could affect an organization's future

“yes” or “no” questions, direct statistics, indirect indicators, and qualitative assessment

scanning utilizes

on-site visits to inspect facilities and visit distributors

what is after the scanning process for companies to decide which country to expand to?

escalation of commitment

the tendency to continue investing in a decision or course of action even when it's not working out

gender equality / egalitarianism or motivation towards achievement and success

masculinity factor of Hofstede’s 6 cultural dimensions new name

labor, infrastructure, external connections, and government incentives

factors affecting sub-costs that are company or industry -specific in a company

countries that share the same language, have similar institutions, and are located nearby

what countries are companies most attracted to?

spillover effect

an unintended consequence of an event or action that has a broader impact than originally intended

oligopolistic reaction

a company’s location decision is made on the basis of a competitor’s action rather than on location-based characteristics such as the cost of labor or market size and growth

Agglomeration by nationality

firms from the same home country, regardless of industry, cluster in a location

first-mover advantage

being first into a country enables a firm to more easily gain the best partners, best locations, and best suppliers

diversification strategy

company’s rapid movement into many foreign markets, gradually increasing its commitment within each one

concentration strategy

the company will first move to only one or a few foreign countries, not going elsewhere until it develops a very strong involvement and competitive position

harvesting or divesting

companies reduce commitments in some countries because they have poorer performance prospects than do others

go-no-go decisions

examining one opportunity at a time and pursuing it if it meets some threshold criteria instead of entering several commitments at once

cultural distance

the degree of difference between the norms, values, and customs of one country compared to another

administrative distance

the level of political and legal differences between two countries, including factors like their government systems, laws, regulations

geographic distance

the physical distance between two locations on the Earth's surface

economic distance

the degree of difference between two economies, measured by factors like GDP per capita, income levels, economic structure, and access to technology

geographic diversification

holding securities from different countries. you don't want all of your money in a single country or region

geographic concentration

developing a business in one region before expanding

core values

a company’s fundamental principles and ethics that guide their actions and decision making

peripheral values

non dominant and more pliable values

multicultural

someone has internalized more than one national culture because of having dual or multiple citizenships, parents or spouses from another country, or lived abroad at an impressionable age

cultural collision

when contact among divergent cultures creates problems,

ineffective business practices and personal distress

cultural collision may cause

deal-focus (DF) culture

people are primarily task-oriented

relationship-focus (RF) culture

values interpersonal relationships and the social bonds that connect people within a group

incorrect responses to questions, relying on averages when there are variations, and overlooking outdated research

shortcomings in cultural research include

social stratification

the process of categorizing people into groups based on socioeconomic factors, such as wealth, income, education

individuals’ achievements and talents (meritocracy) and their group identifications

social stratification is determined by

rewards for success are high relative to failure and there is some uncertainty of success

people are more eager to work if

masculinity-feminity index

measures attitudes toward achievement rather than physical attributes of males and females

live to work; high admiration for success, no sympathy

high masculinity culture

work to live; quality of life

high femininity culture

hierarchy of needs theory

people try to fulfill lower-level needs before moving on to higher-level ones

comfort in handling uncertainties, degree of trust among people, future orientation, attitudes of self-determination versus fatalism

risk taking behavior differs among nationalities because of their

future orientation

willingness to delay gratification in order to reap more in the future

fatalistic

believing that events are predetermined and inevitable

genetics and language

differences in perception of cues are a result of

high-context cultures

people tend to understand and regard indirect information as pertinent; how was your day questions

low-context cultures

Businesspeople spend little time on small talk before getting to the point

monochronic culture

people normally prefer to work sequentially, such as finishing transactions with one customer before dealing with another

polychronic culture

people are more comfortable working simultaneously on a variety of tasks (multitasking), such as dealing simultaneously with multiple customers who need service

color associations, sense of appropriate distance, concept of time, body language, and prestige cues

examples of silent language

polycentric organization / management

a company that believes it should act abroad similar to the countries there

they might be so overwhelmed by national differences that it won’t introduce workable changes

issues with polycentric management

ethnocentrism

the conviction that one’s own practices are superior to those of other countries

geocentrism

integrates home- and host-country practices as well as introducing some entirely new ones

operational and strategic issues

what issues are regarded in a political environment?

political system

the structural dimensions and power dynamics of the government that specify institutions, organizations, and interest groups and define the norms and rules that govern political activities

laisez-faire

letting business affairs take their own course, free from government interference

multi party democracy

System whereby three or more parties govern, either separately or as part of a coalition. One party negotiates with opposition parties to legislate policy

canada, germany, mexico

multiparty democracy example

parliamentary democracy

Citizens exercise political power by electing representatives to a legislative branch, the Parliament. It is the basis of legitimacy for the various ministers who then direct the executive branch

australia, india, UK

examples of parliamentary democracy

representative democracy

Originates in a constitution that protects individual freedoms and liberties. Elected representatives, while ultimately autonomous, act in the people’s interest

japan, US

representative democracy examples

social democracy

Applies democratic means to transition from capitalism to socialism. The government promotes egalitarianism while also regulating capitalism’s tendency toward opportunism

Denmark, Finland, Sweden

social democracy examples

totalitarianism

consolidates power in a single agent who then controls political, economic, and social activities

authoritarian totalitarianism

Tolerates no deviation from state ideology. Day-to-day life reflects submission to state authority; resistance incurs punishment. Officials control politics, but pay less attention to the economic and social structure of society

North Korea, Chad

examples of totalitarianism

fascist totalitarianism

Advocates a single-party state that controls, through force and indoctrination, people’s minds, souls, and daily existence

italy, germany

examples of fascist totalitarianism

secular totalitarianism

A single party controls elections, tolerates dissent if it does not challenge the state, and suppresses other ideologies. It grants an individual some economic and civil freedoms provided one does not contest state authority or disrupt social harmony

china, vietnam

secular totalitarianism examples

theocratic totalitarianism

Government is an expression of the favored deity. Leaders profess to represent its interests on earth. The State applies ancient dogma in place of modern principles