chapter 4: globalization

globalization

the process by which businesses or other organizations develop international influence or start operating on an international scale.

dichotomy

huge firms will become bigger

global village

refers to the "shrinking" of time and space as air travel and the electronic media have made it easier for the people around the globe to communicate with one another

global economy

the interconnected economies of the nations of the world

multinational corporation

a large business that operates in many countries

multinational organization

nonprofit organization with operations in several countries

managerial challenge in globalization

economic, legal-political, and sociocultural forces

ethnocentric

believing in the superiority of one's own ethnic and cultural group, and having a corresponding disdain for all other groups

parochialism

a narrow view in which people see things solely through their own perspective

polycentric

take the view that native managers in the foreign offices best understand native personnel and practices, and so the home office should leave them alone

geocentric

accept differences and similarities between home and foreign personnel and practices and use most effective ones

reasons to expand globally

availability of suppliers, new markets, lower labor costs, access to finance capital, and avoidance of tariffs and import quotas

ways to expand

global outsourcing, importing/exporting/counter trading, licensing/franchising, joint ventures, and wholly-owned subsidiaries

global outsourcing

using suppliers outside the US to provide labor, goods, or services (least risk and investment)

importing

a company buys goods outside the country and resells them domestically

exporting

selling domestically produced products to buyers in other countries

counter trading

a complex form of bartering in which several countries may be involved, each trading goods for goods or services for services

licensing

the legal process whereby a licensor allows another firm to use its manufacturing process, trademarks, patents, trade secrets, or other proprietary knowledge

franchising

selling to a foreign organization the rights to use a brand name and operating know-how in return for a lump-sum payment and a share of the profits

joint venture

an agreement between two or more companies to share a business project

wholly-owned subsidiary

a fully operational, independent entity that a firm sets up in a foreign country to conduct business in that market (highest risk and investment)

trade

the business of buying and selling or exchanging items

comparitive advantage

the ability to produce a good at a lower opportunity cost than another producer

barriers to international trade

tariffs, import quotas, and embargos

tariffs

taxes on imported goods

import quotas

limitations set by a government on the amount of a product allowed to enter or leave a country

embargos

an official ban on trade or other commercial activity with a particular country

foreign direct investment (FDI)

the buying of permanent property and businesses in foreign nations

global institutions

help manage, regulate, and police the global marketplace

world trade organization (WTO)

a permanent global institution to promote international trade and to settle international trade disputes

international monetary fund (IMF)

international institution set up to maintain order in the international monetary system

world bank

an international bank that offers low-interest loans, advice, and information to developing nations

changing world order

the collapse of communism in eastern europe, economic development in china, free market reforms and democracy in latin america

global GDP

• total economic output of all countries combined

• Asia is growing

• America is declining

NAFTA/USMCA

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

European Union (EU)

a free trade zone encompassing 27 European countries

APEC

group of 21 Pacific Rim countries

ASEAN

group of 11 countries in Asia

Mercosur

an organization that promotes trade and economic cooperation among the southern and eastern countries of South America

CAFTA

The Central American Free Trade Agreement (otherwise known as DR-CAFTA) is a pending agreement that has been negotiated between the United States, five Central American countries and possibly the Dominican Republic

RCEP

group of 15 countries in Asia Pacific

high context culture

a culture in which people are taught to speak in an indirect, inexplicit way

low context culture

a culture in which people are expected to be direct and to say what they mean

hofstedes model

• dimensions of culture

• power distance; individualism; masculinity/ femininity; uncertainty avoidance

individualism/collectivism

the degree to which a society emphasizes individuals and their self-interests

power distance

degree to which societies accept the idea that inequalities in the power and well-being of their citizens are due to differences in individuals' physical and intellectual capabilities and heritage

uncertainty avoidance

the degree to which societies are willing to tolerate uncertainty and risk

masculinity/femininity

the degree to which a society values performance (male) and relationships (female)

GLOBE

9 cultural dimensions

institutional collectivism

how much should leaders encourage and reward loyalty to the social unit

in-group collectivism

how much pride and loyalty should people have for their family or organization

gender egalitarianism

how much should society maximize gender role differences

assertiveness

how confrontational and dominant companies be

future orientation

how much should people delay gratification by planning and saving for the future

performance orientation

how much should people be rewarded for improvement and excellence

humane orientation

how much should society encourage and reward people for being kind, fair, friendly, and generous

cultural variations

language, interpersonal space, communication, time orientation, religion, and law/political stability

trends in regulations

liberalization/promotion, restriction/regulation, and neutral/indeterminate