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
Threats to national sovereignty
Environmental stress
Growing income inequality and personal stress
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"