D270 Midterm (1)

Offshoring

the relocation of business processes and services to a lower-cost foreign location particularly white-collar, technical, professional, and clerical services

Outsourcing

A decision by a corporation to turn over much of the responsibility for production to independent suppliers.

Turnkey Operation

A company sets a contract with a company abroad, trains local personnel, and then turns the key over to local management for a fee. allows host country to use their trademark, brand

management contract

home country hires a host country to hire, train, manage workers for their work and pays them a fee for dealing with operations overseas. less risk, less costly, less complex

Foreign Direct Investment

investor takes controlling investment in foreign country

joint venture

an agreement between two or more companies to share an FDI

change agent

someone who is a catalyst in helping organizations to deal with old problems in new ways. can also be brands changing culture/brands in a country

opinion leaders

individuals who exert direct or indirect social influence over others. influencers

Reshoring

moves jobs back from foreign to domestic locations

Microprocessor

The central processing unit that is generally made from a single integrated circuit.

Agglomeration

Clumping together of industries for mutual advantage.

licensing agreement

an agreement in which one firm gives another firm the right to produce and market its product in a specific country or region in return for royalties

Royalties

A percentage of actual sales that a licensee pays to a licensor, usually anywhere from 5 to 15 percent

prestige

a high standing achieved through success or influence or wealth etc.

Acquired Group Membership

Defined by choice (political, professional, religion)

civil strife

Civil War

most highly globalized countries are

small, high per capita income, lots of imports

Born Global Company

Founded as international company ex. soundcloud

Criticism of Globalization

1. Threats to national sovereignty

2. Environmental stress

3. Growing income inequality and personal stress

4. Local businesses hurt

5.Poor working conditions

global stars

ex. Cristiano Ronaldo, make so so much money, way more than the average pro player in less popular sports

Pros of Globalization

-increases profits by having more people to sell to
-can use foreign resources which can be cheaper/better
-risks are reduced (when 1 country is doing poorly, another might be ok)
-increases competition
-middle class increased

portfolio investment

a non-controlling financial interest in another entity

collaborative arrangements

Companies work together—in joint ventures, licensing agreements, management contracts, minority ownership, and long-term contractual arrangements

strategic alliance

same as collaborative arrangement, but is an agreement with a critical importance to a partner or does not involve a joint ownership

focus strategy

serve a narrow niche better than other firms

changes in globalization since WWII

-less import restrictions
-more foreign ownership of assets
-more democracies
-more world trade

"have nots" of globalization

Africa, Cuba, North Korea, Iran. have only one (or none) major trade partners

Globalization 1.0

200BC-1700AD, silk road/start of trade between East and West

Globalization 2.0

1500-1945, European colonization, world wars

Globalization 3.0

1950-1998, world war recovery, MNE expansion, democracy expansion

Globalization 4.0

1999-present, anti-globalization movement with financial crises, income inequality, terrorism, new nationalism

Middle Class Asia vs. US

Asia: increased a ton from 1980
US: barely changed, but top 1% gets wealthier

subsidiary

a company that is completely controlled by another company

Green Field Investment

A form of foreign direct investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

Cultural Collision

when divergent cultures come in contact and creates problems

deal-focus culture

people are primarily task-oriented, Ex. US, Britain

relationship focus culture

A culture where people put dealings with friends ahead of business dealings ex. Saudi Arabia

cultural imperialism

Domination of one culture over another

cultural diffusion

The spread of ideas, customs, and technologies from one people to another

Creolization

foreign influences are absorbed and integrated with local meanings

social stratification

a system by which a society ranks categories of people in a hierarchy

Protestant work ethic theory

theory that predominately protestant countries were most economically developed

Ascribed Group Membership

Defined by birth (gender, ethnic, family, nation)

Masculinity

live to work

feminity

work to live

hierarchy of needs

people fulfill lower level needs before higher

power distance

measurement of employee preferences of interactions with superiors/subordinates
HIGH: little consultation with boss/workers
LOW: lots of consultation between boss/workers

Autocracy

rule by one person with unlimited power

Paternalism

the policy or practice of treating or governing people in the manner of a father dealing with his children. supplying their needs

future orientation

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

fatalism

the belief that all events are predetermined and therefore inevitable

low-context culture

a culture in which people are expected to be direct and to say what they mean, not lots of small talk

high-context culture

a culture in which people are taught to speak in an indirect, inexplicit way, likes to know a lot of indirect info. ex. japan

Monochronic

The use of time that emphasizes punctuality, schedules, and completing one task at a time.

Polychronic

the use of time that emphasizes flexible schedules in which multiple tasks are pursued at the same time

Idealism

establish overall principles before resolving small issues

Pragmatism

larger focus on details/abstract principles

silent language

Nonverbal clues that differ from culture to culture, may include color associations, distance during conversation, time or punctuality, body language, and prestige.

cultural distance

the average number of countries they are apart on the dimensions

Polycentrism

company that adjusts to the country they're in

Ethnocentrism

Belief in the superiority of one's nation or ethnic group.

Geocentrism

mix of ethnocentric and polycentric

Interdependence

A relationship between countries in which they rely on one another for resources, goods, or services

cross-national approach

Reasonable Price + Reasonable Product + Customer's Trust = Sale

flawed democracy

A democracy sharing some features of full democracy but marred by voter fraud, uneven enforcement of civil and political rights, patronage politics, and corruption

Hybrid Democracy

A procedural democracy, with elections, but without real competition, and lacking some civil rights and liberties. ex. China

Political Freedom

fair/competitive elections; ability to disagree and express thoughts

Political Risk

Risk associated with political changes that may negatively impact domestic and foreign firms.

Systematic Risk

A risk that influences a large number of assets. Also, market risk.

Procedural Risk

constraints flexibility of local operations, profit reperation, tax discrimination, etc

domestic approach

Rock-Bottom Price + Bell-Ringer Product = Sale

Distributive Risk

A result of the profits generated by foreign companies in the local economy. If the host country questions the distributive justice of the rewards of operating in its market, it may wonder whether, as the business grows more successful, it is receiving its "fair" share of the growing profits. can eliminate local property rights

catastrophic risk

risk of an unpredictable event that causes severe loss to many people at the same time. nationalism, war, civil strike, insurrection

insurrection

rebellion

choice of law clause

A clause in a contract designating the law (such as the law of a particular state or nation) that will govern the contract.

Beijing Consensus

one party system, approved officials protect people and have their consent, authoritarian capitalism guides system, not iron fist, trade is separate from politics

Washington Consensus

Political competition is a right, has political and economic freedom, rule of law, property and human rights are sacred, trade policy used to advance political/human rights

Civil Law

A legal system based on a written code of laws ex. germany, mexico, japan, 150+ others

Floating Subsidiary

lead foreign company; "caught in the middle - can't please everybody"