Mgmt 425 TOMA exam 2

Culture

set of values, beliefs, rules, and institutions held by a specific group of people

Subculture

a group of people who share a unique way of life within a larger, dominant culture

Ethnocentric

the belief that one's own culture is superior to that of others

cultural literacy

detailed knowledge about a culture that enables a person to work happily and effectively within it

values

ideas, beliefs, and customs to which people are emotionally attached

Attitudes

positive or negative evaluations, feelings, and tendencies that individuals harbor toward objects or concepts

aesthetics

what a culture considers "good taste" in the arts, the imagery evoked by certain expressions, and the symbolism of certain colors

manners

appropriate ways of behaving, speaking, and dressing in a culture

customs

habits or ways of behaving in specific circumstances that are passed down through generations in a culture

folk customs

behavior, often dating back several generations, that is practiced by a homogeneous group of people

popular customs

behavior shared by a heterogeneous group or by several groups

social structure

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 group

collection of two or more people who identify and interact with each other

social stratification

process of ranking people into social layers or classes

social mobility

ease with which individuals can move up or down a culture's "social ladder"

Caste System

A system of social stratification in which people are born into a social ranking or caste with no opportunity for social mobility

class system

a system of social stratification in which personal ability and actions determine social status and mobility

Brain Drain

departure of highly educated people from one profession, geographic region, or nation to another

religious beliefs

human values often originate from _______________ ________________

Communication

system of conveying thoughts, feelings, knowledge, and information through speech, writing, and actions

lingua franca

third or "link" language understood by 2 parties who speak different native languages

body language

language communicated through unspoken cues, including hand gestures, facial expressions, physical greetings, eye contact, and the manipulation of personal space

material culture

all the technology used in a culture to manufacture goods and provide services

cultural trait

anything that represents a culture's way of life, including gestures, material objects, traditions, and concepts

cultural diffusion

process whereby cultural traits spread from one culture to another

cultural imperialism

replacement of one culture's traditions, folk heroes, and artifacts with substitutes from another

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

Kluckhohn-Strodtbeck framework

framework for studying cultural differences along six dimensions, such as focus on past or future events and belief in individual or group responsibility for personal well-being

Hofstede framework

framework for studying cultural differences along five dimensions, such as individualism versus collectivism and equality versus inequality

Kluckhohn-Strodtbeck framework 6 questions

1. Do people believe that their environment controls them, or that they control the environment, or that they are part of nature?

2. Do people focus on past events, on the present, or on the future implications of their actions?

3. Are people easily controlled and not to be trusted, or can they be trusted to act freely and responsibly?

4. Do people desire accomplishments in life, carefree lives, or spiritual and contemplative lives?

5. Do people believe that individuals or groups are responsible for each person's welfare?

6. Do people prefer to conduct most activities in private or in public?

Hofstede framework 6 dimensions

1. Individualism vs collectivism

2. Power distance

3. Uncertainty Avoidance

4. Masculinity vs Femininity

5. Long term orientation

6. Indulgence vs Restraint

International Trade Theory (ITT)

Purchase, sale, or exchange of goods and services across national borders

Mercantilism theory

trade theory that nations should accumulate financial wealth, usually in the form of gold, by encouraging exports and discouraging imports

- this theory also states other measures of well-being is irrelevant

trade surplus

condition that results when the value of a nation's exports is greater than the value of its imports

trade deficit

condition that results when the value of a country's imports is greater than the value of its exports

International trade theory (ITT) deals with

free flow of trade (exports and imports) and investments

absolute advantage theory

the ability of a nation to produce a good more efficiently than any other nation

-this theory also states that a nation can produce a greater output of a good/service than other nations using the same amount of or fewer resources

- each country should specialize in the production and export of the product which it produces most efficiently that is with lowest cost

comparative advantage theory

theory that states inability of a nation to produce a good more efficiently than other nations but an ability to produce that good more efficiently than it does any other good

- even if 1 country was most efficient in producing 2 products it must be relatively more efficient in the production of 1 of the 2 products it must then specialize in production and export of that product in exchange for importation of other products

Factor Proportions Theory

trade theory stating that countries produce and export goods that require resources (factors) that are abundant and import goods that require resources in short supply

- country that is relatively labor abundant should specialize in production and export of that product that require labor intensive work

international product life cycle theory

theory stating that a company will begin by exporting its product and later undertake foreign direct investment as the product moves through its life cycle

- country that innovates and passes market advantages in production and export of a product will lose its advantages in time as this products technology and manufacturing matures and spreads to other countries which can now make this product more efficient

New Trade Theory

trade theory stating that

(1) there are gains to be made from specialization and increasing economies of scale

(2) the companies first to market can create barriers to entry

(3) government may play a role in assisting its home companies

national competitive advantage theory

trade theory stating that a nation's competitiveness in an industry depends on the capacity of the industry to innovate and upgrade

Free Trade

international trade free of government interference

Free Trade is in the

best economic interest of every country because it works well do to its

1. leads to improve standards of living in country

2. fasters competition in economy - companies competitiveness goes up leading to better products

3. makes economy efficient by capitalizes on strengths - starts bulk production in companies

Protectism

the theory or practice of shielding a country's domestic industries from foreign competition by taxing imports.

Protectism has

some justified trade restrictions for certain times, under certain conditions, and for a limited time

Central Planned Economy

economic system in which the central government makes all decisions on the production and consumption of goods and services

ex - communism

mixed economy

economic system in which land, factories, and other economic resources are rather equally split between private and government ownership

ex - socialism

note: most economies are moving toward this system because it has the good parts of other systems

Privatization

policy of selling government-owned economic resources to private operators

market economy

economic system in which most of a nations land, factories, and other economic resources are privately owned, either by individuals or businesses

ex- capitalism (USA)

4 reasons why central planning economic system declined (be able to list them and know definition of them)

1. failure to create economic value - failed to see that commercial activities succeed when they create economic value for customers

2. failure to provide incentives - few incentives to create new technologies, new products, and new production methods

3. failure to achieve rapid growth - economic system based on private ownership fosters growth much better than owned by government

4. failure to satisfy consumer needs - failed to provide basic necessities such as adequate food, housing, and medical care

what 3 things does a market economy require

1. Free Choice

2. Free Enterprise

3. Price Flexibility

Free Choice

gives individuals access to alternative purchase options

free enterprise

gives companies the ability to decide which goods and services to produce and the markets in which they compete

price flexibilty

allows most prices to rise and fall to reflect the forces of supply and demand

Government's Role in a Market Economy (4 important roles)

1. Enforcing Antitrust Laws

2. Preserving Property Rights

3. Providing a Stable Fiscal and Monetary Environment

4. Preserving Political Stability

Antitrust laws

laws designed to prevent companies from fixing prices, sharing markets, and gaining unfair monopoly advantages

developed country

country that is highly industrialized and highly efficient, and whose people enjoy a high quality of life

ex - Australia, Canada, USA, and Japan

Economic Development

increase in the economic well-being, quality of life, and general welfare of a nation's people

newly industrialized country (NIC)

country that has recently increased the portion of its national production and exports derived from industrial operations

ex - Asia and Latin America countries

developing country

Nation that has a poor infrastructure and extremely low personal incomes. Also called less-developed countries.

ex - nations in Africa, the middle east, and a few Eastern Europe and Asia nations

emerging markets

newly industrialized countries plus those with the potential to become newly industrialized

technological dualism

use of the latest technologies in some sectors of the economy coupled with the use of outdated technologies in other sectors

purchasing power

value of goods and services that can be purchased with one unit of a country's currency

Purchasing Power Parity (PPP)

Relative ability of two countries' currencies to buy the same "basket" of goods in those two countries

PPP (Purchasing Power Parity)

adjustment in GDP per capita to reflect differences in cost of living between 2 countries

it allows us to compare countries easier

Human Development Index (HDI)

measure of the extent to which a government equitably provides its people with a long and healthy life, an education, and a decent standard of living

economic transition

process by which a nation changes its fundamental economic organization and creates new free-market institutions

problems facing economic development (4) know them and a little bit about them

1. managerial expertise - manager for central planning countries didn't have to make big decision switching over managers have to be higher quality in transition countries

2. shortage of capital - economic transition and development is expensive undertaking

3. cultural differences - transition usually make deep cultural impressions on a nations people and some countries not open for changing

4. sustainability - countries in transition often suffer periods during which negative effects of market economy due to lack of health and increase of diseases

Entry Mode

institutional arrangement by which a firm gets its products, technologies, human skills, or other resources into a market

direct exporting

practice by which a company sells its products directly to buyers in a target market

direct exporting relies on

either local sale representatives or distributors

indirect exporting

practice by which a company sells its products to intermediaries who then resell to buyers in a target market

Agents

individuals or organizations that represent one or more indirect exporters in a target market

sales representative

represents only its own company's products, not those of other companies

distributors

takes ownership of merchandise when products enters the country

Name 3 types of intermediaries

1. Agents

2. EMC (Export Management Company)

3. ETC (Export Trading Company)

Export Management Company (EMC)

company that exports products on behalf of indirect exporters

Export Trading Company (ETC)

company that provides services to indirect exporters in addition to activities related directly to clients' exporting activities

what are the 2 blunders of export and import

1. businesses fail to conduct adequate market research before exporting

2. fail to obtain adequate export advice

freight forwarder

specialist in export-related activities such as customs clearing, tariff schedules, and shipping and insurance fees

Countertrade

practice of selling goods or services that are paid for, in whole or in part, with other goods or services

5 types of countertrade

1. Barter

2. Counterpurchase

3. Switch trading

4. Offset

5. Buyback

Barter

exchange of goods/services directly for other goods/services without the use of money

- direct exchange without money

Counterpurchase

sale of good or services to a country by a company that promises to make a future purchase of a specific product from the country

- promise future purchase of specified product

offset

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

- promise future purchase of unspecified products

switch trading

practice in which one company sells to another its obligation to make a purchase in a given country

- 1 company sells other company its benefits to make a purchase from another company

Buyback

export of industrial equipment in return for products produced by that equipment

- company 1 sells company 2 industrial equipment which company 1 pays company 1 with produce products from equipment

export/import financing methods designed to reduce these once payment is made for shipment. NAME the 4 methods

1. advance payment

2. documentary collection

3. letter of credit

4 open account

advance payment

export/import financing in which an importer pays an exporter for merchandise before it is shipped

- note usually in form of wire transfer

advance payment is common when (3 things)

1. when 2 parties are unfamiliar with each other

2. when transaction is relatively small

3. buyer is unable to obtain credit because of poor credit rating at bank

documentary collection

export/import financing in which a bank acts as an intermediary without accepting financial risk

- note payment usually broken down into 3 main stages and 9 smaller stages

documentary collection is common when

it is an ongoing business relationship between 2 parties

draft (bill of exchange)

document ordering an importer to pay an exporter a specified sum of money at a specified time

sight draft

a type of bill of exchange that requires the importer to pay exporter when goods are delivered

time draft

type of bill of exchange that extends period of time (typically 30, 60, or 90 days) following delivery by which importer must pay for the goods

bill of lading

contract between an exporter and a shipper that specifies merchandise destination and shipping costs

letter of credit

export/import financing in which the importer's bank issues a document stating that the bank will pay the exporter when the exporter fulfills the terms of the document

letter of credit is common when (4)

1. parties to transaction aren't familiar with each other

2. importers credit ranking is unknown or questionable

3. exporter needs letter of credit to obtain its own financing for shipment

4. markets own regulations require it

irrevocable letter of credit

most common type of letter of credit which allows the bank issuing the letter to modify its terms only after obtaining the approval of both exporter and importer