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Business Final Study:

11.1 Company Analysis Techniques

Planning: Planning is the process of identifying and selecting an organization's objectives and deciding how the organization will achieve those objectives.

Strategy: Strategy is the set of planned actions taken by managers to help a company meet its objectives. The key to developing an effective strategy, then, is to define a company's objectives (or goals) clearly and to plan carefully how it will achieve those goals.

Mission Statement: Written statement of why a company exists and what it plans to accomplish.

Value Chain Analysis: the process of dividing a company's activities into primary and support activities and identifying those that create value for customers

11.2 Strategies That Companies use to achieve goals

Multinational (multidomestic) Strategy: a strategy of adapting products and their marketing strategies in each national market to suit local preferences. In other words, a multinational strategy is j ust what its name implies - a separate strategy for each of the multiple nations in which a company markets its products.

Global Strategy: a strategy of offering the same products using the same marketing strategy in all national markets. Companies that follow a global strategy often take advantage of scale and location economies by producing entire inventories of products or components in a few optimal
locations.

Growth Strategy: A growth strategy is designed to increase the scale or scope of a cor poration's operations. Scale refers to the size of a corporation's activities, scope to the kinds of activities it performs.

Retrenchment Strategy: RETRENCHMENT STRATEGY The exact opposite of a growth strategy is a retrenchment strategy-a strategy designed to reduce the scale or scope of a corporation's businesses.

Stability Strategy: A stability strategy is designed to guard against change. Corporations often use a stability strategy when trying to avoid either growth or retrenchment. Such corporations have typically met their stated objectives or are satisfied with what they have already accomplished.

11.3 Key Issues Behind Organization Structure

Organizational Structure: Way in which a company divides its activities among separate units and coordinates activities among those units.

Issue: issue for top managers is determining the degree to which decision making in the organization will be centralized or decentralized. Centralized decision making concentrates decision making at a high organizational level in one location, such as at headquarters. Decentralized decision making disperses decisions to lower organizational levels, such as to international subsidiaries.

Centralized: Centralized decision-making helps coordinate the operations of inter national subsidiaries. This is important for companies that operate in multiple lines of business or in many international markets.eness.)

Decentralized: Decentralized decision making is beneficial when fast-changi ng national business environments put a premium on local responsiveness. Decentralized decisions can result in products that are better suited to the needs and preferences of local buyers because subsidiary managers are in closer contact with the local business environment.

11.4 Various International Organizational Structures and types of work teams

International Divison Structure: Organizational structure that separates domestic from international business activities by creating aseparate international division with its own manager.

International Area Structure: Organizational structure that organizes a company's entire global operations into countries or geographic regions. The greater the number of countries in which a company operates, the greater the likelihood it will organize into regions-say, Asia, Europe, and the Americas-instead of countries.

Global Product Structure: Organizational structure that divides worldwide operations according to a company's product areas.

Global Matrix Structure: Organizational structure that splits the chain of command between product and area divisions.

Self- managed team: Team in which the employees from a single department take on the responsibilities of their former supervisors.

Cross-functional team: Team composed of employees who work at similar levels in differ ent functional departments.

Global Team: Team of top managers from both headquarters and international subsidiaries who meet to develop solutions to company-wide problems.

12.1 Importance of examining basic appeal and national factors.

Importance of Basic Appeal and National Factors: You have to see if a company needs the type of products or wants the type of products you are providing, as well as you must determine if their is resources available like raw materials, that you can obtain.

Screening Process for Potential Markets and Sites (Essay Question #1):
Step 1: Identifying Basic Appeal, like the sustainability of product, as well as if their is access to materials and labor for your business.
Step 2: Assessing the National Business Environment, like seeing the languages and culture of that market or site. As well as the area’s monetary and fiscal policy, and if there is any currency issues. As well as determining the cost of transporting goods, and the country’s image.
Step 3: Measuring the Market Site or Potential: Seeing the sites sales projection possibilities, their income elasticity, as well as the workforces quality and materials and infrastructure.
Step 4: Selecting the Market or Site, going on field trips to places, and making an analysis of your competitors.

12.2 Describe How Companies Measure and select a market site

(Step 3) Measuring Market Potential: As barriers to trade are reduced worldwide, companies are looking to increase sales in industrialized and emerging markets alike. But businesses can seldom create one marketing plan that will cover every market in which they sell their products. Nations enjoy different levels of economic development that affect what kinds of goods are sold, the manner in which they are sold, and their inherent features.
(Step 3) Measuring Site Potential: In this step of the site-screening process, managers must care fully assess the quality of the locally available resources.

(Step 4) Selecting Market Or Site: - Field Trips. The importance of top managers making a personal visit to each remaining poten tial market or site cannot be overstated. Such trips typically involve attending strings of meet ings and engaging in tough negotiations.
- Competitor Analysis: Number of competitors in each market (domestic and international)
Market share of each competitor
Whether each competitor's product appeals to a small market segment or has mass appeal
Whether each competitor focuses on high quality or low price
Whether competitors tightly control channels of distribution

Income Elasticity: the sensitivity of demand for a product relative to changes in income. The income-elasticity coefficient for a product is calculated by dividing a percentage change in the quantity of a product demanded by a percentage change in income. A coefficient greater than 1.0 conveys an income-elastic product, or one for which demand increases more relative to an increase in income

12.3 Identify the main sources of secondary research data

Secondary Market Research: Process of obtaining information that already exists within the company or that can be obtained from outside sources.
(Main Source of Secondary Research) International Organization : here are excellent sources of free and inexpensive information about product demand in particular countries. For example, the Yearbook published by the United Nations lists the export and import volumes of different products for each country. It also furnishes information on the value of exports and imports on an annual basis for the most recent five-year period. The International Trade Center based in Geneva, Switzerland, also provides current import and export figures for more than 100 countries.
(Main Source of Secondary Research) Government Agencies: Commerce departments and international trade agencies of most countries typically supply infor mation about import and export regulations, quality standards, and the size of various markets.
(Main Source of Secondary Rsearch) Industry and Trade Associations: Companies often join associations composed of firms within their own industry or trade. In particular, companies trying to break into new markets join such associations in order to make con tact with others in their field.
(Main Source of Secondary Research) Service Organizations: Many international service organizations in fields such as banking, insurance, management consulting, and accounting offer information to their clients on cultural, regulatory, and financial conditions in a market.
(Main Source of Secondary Research) Internet: Companies engaged in international business are quickly realizing the wealth of secondaryresearch information available on the Internet and the World Wide Web. These electronic resources are usually user friendly and have vast amounts of information.
12.4 Common Methods used to conduct primary market research

Primary Market Research: Process of collecting and analyzing original data and applying the results to current research needs.

(Method for Primary Research) Trade Show: Exhibition at which members of an industry or group of industries showcase their latest products, study activities of rivals, and examine recent trends and opportunities.

(Method for Primary Research) Trade Mission: International trip by government
officials and businesspeople that is organized by agencies of national or provincial governments for the purpose of exploring international business opportunities.

(Method for Primary Research) Focus Group: Unstructured but in-depth interview of a small group of individuals (8 to 12 people) by a moderator in order to learn the group's attitudes about a company or its product.

(Method for Primary Research) Consumer Panel: Research in which people record in personal diaries information on their attitudes, behaviors, or purchasing habits.

(Method for Primary Research) Survey: Research in which an interviewer asks current or potential buyers to answer written or verbal questions in order to obtain facts, opinions, or attitudes.

(Method for Primary Research) Environmental Scanning: Ongoing process of gathering, analyzing, and dispensing information for tactical or strategic purposes.

13.1 Describe How Companies use exporting, importing, and counter-trade.

(Exporting) Step 1 Identifying a Potential Market: To identify whether demand exists in a par ticular target market, a company should perform market research and interpret the results

(Exporting) Step 2 Match needs to Abilities: The next step is to determine whether the company is capable of satisfying the needs of the market.

(Exporting) Step 3 Initiate Meetings: STEP 3: INITIATE MEETINGS Holding meetings early in the process with potential local distributors, buyers, and others is a must. Initial contact focuses on building tn1st and developing a cooperative climate among all parties.
(Exporting) Step 4 Commit Resources:
After all the meetings ,negotiations, and contract signings ,it is time to put the company's human, financial, and physical resources to work. First, the objectives of the export program must be clearly stated and should extend out at least three to five years
Direct Exporting: Practice by which a company sells its products directly to buyers in a target market.
Indirect Exporting: Practice by which a company sells its products to intermediaries who then resell to buyers in a target market.

Export/Import Blunder Avoidance (Freight Forwarder): To better ensure that it will not make embarrassing blunders, an inexperienced exporter might
also want to engage the services of a freight forwarder -a specialist in export-related activities such as customs clearing, tariff schedules, and shipping and insurance fees.

Countertrade: Selling goods or services that are paid for, in whole or in part, with other goods or services iscalled countertrade. Although countertrade often requires an extensive net,vork of international contacts, even smaller companies can take advantage of its benefits

Types of Countertrade: Barter: is the exchange of goods or services directly for other goods or services without the use of money. It is the oldest known form of countertrade. Counter purchase: the sale of goods or services to a country by a company that promises to make a future purchase of a specific product from that country.
Counter purchase: the sale of goods or services to a country by a company that promises to make a future purchase of a specific product from that country. This type of agreement is designed to allow the country to earn back some of the currency that it paid for the original imports.
Buyback: Export of industrial equipment in return for products produced by that equipment.

13.2 Explain the various methods of export/import financing.

(Most Important) Advance Payment: Export/import financing in which an importer pays an exporter for merchandise before it is shipped.
(Most Important) Letter of Credit: Export/import financing in which the importer's bank issues a letter
pledging to pay the exporter when the exporter fulfills the terms listed in the letter.

Documentary collection: Export/import financing in which a bank acts as an intermediary without accepting financial risk.

Draft (bill of exchange): Document ordering an importer to pay an exporter a specified sum of money at a specified time.

Bill of lading: Contract between an exporter and a shipper that specifies merchandise destination and shipping costs.

Open account: Export/import financing in which an exporter ships merchandise and later bills the importer for its value.

13.3 Describe the different types of contractual entry modes

Licensing: Practice by which one company owning intangible property {the licensor) grants another firm {the license) the right to use that property for a specified period of time.

Cross Licensing: Practice by which companies use licensing agreements to exchange intangible property with one another.

Franchising: Practice by which one company (the franchiser) supplies another (the franchisee) with intangible property and other assistance over an extended period.

Management Contracts: Practice by which one company supplies another with managerial expertise for a specific period of time.

Turnkey (build-operate-transfer) project: Practice by which one company designs, constructs, and tests a production facility for a client firm.

13.4 Describe the various kinds of investment entry modes:

Wholly owned Subsidiary: Facility entirely owned and controlled by a single parent company.

Joint Venture: Separate company that is created and jointly owned by two or more independent entities to achieve a common business objective.

Strategic Alliance: Relationship whereby two or more entities cooperate (but do not form a separate company) to achieve the strategic goals of each.

13.5 Outline key strategic factors in selecting an entry mode

Selecting Partners for Cooperation: Every company's goals and strategies are influenced by both its competitive strengths and the challenges it faces in the market place. Because the goals and strategies of any two companies are never exactly alike, cooperation can be difficult. Moreover, ventures and alliances often last many years, perhaps indefinitely. Therefore, partner selection is a crucial ingredient for success.
Cultural Environment: the dimensions of culture- values, beliefs, customs, languages, religions - c an differ greatly from one nation to another. In such cases, managers can be less confident in their ability to manage operations in the host country.
Political and Legal Environments: As mentioned earlier in this chapter, political instability in a target market increases the risk expo sure of investments. Significant political differences and levels of instability cause companies to avoid large investments and to favor entry modes that shelter assets.
Market Size: The size of a potential market also influences the choice of entry mode. For example, rising incomes in a market encourage investment entry modes because investment allows a firm to prepare for expanding market demand and to increase its understanding of the target market.
Production and Shipping Costs: By helping to control total costs, low-cost production and shipping can give a company an advan tage. Accordingly, setting up production in a market is desirable when the total cost ofproduction there is lower than in the home market.

International Experience: Most companies enter the international marketplace through exporting. As companies gai n inter national experience, they tend to select entry modes that require deeper involvement.

14.1 Describe the factors to consider in developing international product strategies.

Laws and Regulations: Companies must often adapt their products to satisfy laws and regulations in a target market. People's tastes also vary across market. The fact that many developing countries have fewer consumer protection laws creates anethical issue for some companies. Ironically, lower levels of education and less buying experience mean that consumers in developing countries are more likely to need protection. However, many governments impose fewer regulations in order to hold down production costs and consumer prices. Unfortunately, this can be an invitation for international distributors to withhold full infor mation about products and their potential dangers.

Cultural Differences: Companies also adapt their products to suit local buyers' product preferences, which are rooted in culture.

Brand and Product Names: is the name of one or more items in a product line that identifies the source or character of the items. When we see a product labeled with a particular brand name, we assign to that product a certain value based on our past experiences with that brand. That is why a brand name is central to a product's personality and the image that it presents to buyers.

National Image: National Image The value customers obtain from a product is heavily influenced by the image of the country in which it is designed, manufactured, or assembled. Because it affects buyers' perceptions ofquality and reliability, national image is an important element of product policy.

Counterfeit Goods and Black Markets: Counterfeiting is common among highly visible brand-name consumer goods, includingwatches, perfumes, clothing, movies, music, and computer software. Counterfeit products are typically sold to consumers on what is called the black market-a marketplace of underground transactions that typically appears because a product is either illegal (such as counterfeits) or tightly regulated.
(Important) Shortened Product Life Cycle:
Companies traditionally managed to extend a product's life by introducing it into different markets consecutively. They did this by introducing products in industrialized countries and only later marketing them in developing and emerging markets. Thus, while a product's sales are declining in one market, they might be growing in another.

14.2 Outline the international promotional strategies and methods available to firms

(Essay Question) Push and Pull Strategy: A promotional strategy designed to create buyer demand that will encourage distribution channel members to stock a company's product is called a pull strategy. In other words, buyer demand is generated in order to "pull" products through distribution channels to end users. Creating consumer demand through direct marketing techniques is a common example of a pull strategy.
By contrast, a push strategy is a promotional strategy designed to pressure distribution chan nel members to carry a product and promote it to final users. Manufacn1rers of products commonly sold through department and grocery stores often use a push strategy. For example, manufacturer's sales representatives are constantly calling on Walmart to encourage it to stock the manufacturer's product and give it good visibility. Push strategies are also used for office products, including computers and office furniture. A company's international sales force is the key to successfully implementing a push strategy abroad.

Promotion Mix: Efforts by a company to reach distribution channels and to target customers through communications, such as personal selling, advertising, public relations, and direct marketing.

International Advertising: International advertising differs a great deal from advertising in domestic markets. Managers must rely on their knowledge of a market to decide whether an ad is suitable for the company's inter national promotional efforts. Cultural similarities can mean that ads need only slight modification for different nations, whereas cultural differences may mean that entirely new ads must be created.
Standardizing: Advertising your product the same way in every market.
Differentiation Advertising: Changes their advertising of their product depending on the country, or market.
Marketing Communication: Process of sending promotional messages about products to target markets.
Marketing Communication Process:

The company with an idea it wishes to communicate is the source of the communication.

First Step: Coming up with message to put out about product.
Step 2: Putting out a promotional message to the media.
Step 3: Audience encodes and understands your message, and how it will affect them if they buy it.
Step 4: Feedback is given, which the company wants to receive and listen to.

14.3 Explain the factors to consider when designing international distribution strategies.

(Factor to Consider in International Distribution) Degree of Exposure: Inpromotingitsproducttothegreatestnumberofpotentialcustomers, a marketer must determine the amount of exposure needed. An exclusive channel is one in which a manufacturer grants the right to sell its product to only one or a limited number of resellers. An exclusive channel gives producers a great deal of control over the sale of their product by wholesalers and retailers.
(Factor to Consider in International Distribution) Channel Length and Cost: Channel length refers to the number of intermediaries between the producer and the buyer. In a zero-level channel-which is also called direct marketing-pro ducers sell directly to final buyers. A one-level channel places only one intermediary between the producer and the buyer. Two intermediaries make up a two-level channel, and so forth. In general, the greater the number of intermediaries in a channel, the more costly it becomes.
Intensive Channel: Distribution channel in which a producer grants the right to sell its product to many resellers.

Exclusive Channel: Distribution channel in which a manufacturer grants the right to sell its product to only one or a lim ited number of resellers.

Channel Length: Number of intermediaries between the producer and the buyer.

Zero-level channel: producers sell directly to buyers, no intermediaries.

Value Density: The value ofa product relative to its weight and volume is called its value density. Value density is an important variable in formulating distribution strategies. As a rule, the lower a product's value density, the more localized the distribution system.

14.4 Describe the two main international strategies and factors to consider.

Worldwide Pricing: A pricing policy in which one selling price is established for all international markets is called ,vorldwide pricing. In practice, a worldwide pricing policy is very difficult to achieve. First, production costs differ from one nation to another. Keeping production costs the same is not possible for a company that has production bases within each market it serves. As a result, selling prices often reflect these different costs of production.

Dual Pricing: Because of the problems associated with worldwide pricing, another pricing policy is often used in international markets. A pricing policy in which a product has a different selling price in export markets than it has in the home market is called dual pricing. When a product has a higher selling price in the target market than it does in the home market (or the country where production takes place), it is called price escalation. It is commonly the result of the reasons just discussed exporting costs and currency fluctuations

15.1 Describe the elements to consider when formulating production strategies.

Capacity Planning: The process of assessing a company's ability to produce enough output to satisfy market demand is called capacity planning. Companies must estimate global demand for their products as accu rately as possible. lf the capacity being used is greater than the expected market demand, a com pany may need to scale back production by perhaps reducing the number of employees or work shifts at some faci lities. Yet, countries have different laws regulating the ability of employers to eliminate jobs.
Facilities location planning: Selecting the location for production facilities is called facilities location planning. Companies often have many potential locations around the world from which to choose a site for production, R&D, or some other activity.

Location economies: Economic benefits derived from locating production activities in optimal locations.

Centralization: Centralized production refers to the concentration of production facilities in one location.
Decentralization: With decentralized production, facilities are spread over several locations and could even mean having one facility for each national business environment in which the company markets its products-a common policy for companies that follow a multinational strategy.

15.2 Outline the issues to consider when acquiring physical resources.

Make-or-buy Decision: Deciding whether to make a component or to buy it from another company.

Reasons to make: Vertical integration is the process by which a company extends its control over additional stages of production-either inputs or outputs. When a company decides to make a product rather than buy it, it engages in "upstream" activities (production activities that come before a company's current bus iness operations).
Buying: Lower risk than making it on your own.

Fixed asset: Company assets such as production facilities, inventory warehouses, retail outlets, and production and office equipment.

15.3 Identify the key production matters that concern managers

Total Quality Management:
Company-wide commitment to meet or exceed customer expectations through continuous quality improvement efforts and processes is called total quality management (TQM). TQM also places a great deal of responsibility on each individual to be focused on the quality of his or her own output- regardless of whether the employee's activities
are based in the factory, in administration, or in management.
ISO 9000: The ISO 9000 is an international certification that companies get when they meet the highest quality standards in their industries. Firms in the European Union are leading the way inquality certification. But both European and non-European companies alike are working toward certification in order to ensure access to the European marketplace. To become certified, compa nies must demonstrate the reliability and soundness ofall business processes that affect the quality of their products. Many companies also seek ISO 9000 certification because of the message of quality that certification sends to prospective customers. For information on how companies can blend TQM principles and the drive toward ISO 9000 certification, see the Manager's Briefcase,
titled "World-Class Standards."

Shipping and Inventory Costs: Shipping costs can have a dramatic effect on the cost of getting materials and components to the location of production facilities. When the cost of getting inputs into the production process is a large portion of the product's total cost, producers tend to locate close to the source of those inputs.

Just-in-time manufacturing: Production technique in which inventory is kept to a minimum and inputs to the production pro cess arrive exactly when they are
needed.

Reinvestment versus Divestment: companies maintain the current level of operations when no new opportunities are foreseen. Yet, changing conditions in the competitive global marketplace often force managers to choose between reinvesting in operations and divesting them. between reinvesting in operations and divesting them.
- Reinvest: Companies often reinvest profits in markets that require long payback periods as long as the Jong-term outlook is good. This is often the case in developing countries and large emergingmarkets. For example, corruption, red tape, distribution problems, and a vague legal systempresent challenges for non-Chinese companies. But because long-term returns on their investments are expected, Western companies reinvest heavi ly in China despite what are sometimes uncertain
Divestment: Companies scale back their international operations when it becomes apparent that making operations profitable will take longer than expected. Again, China serves as a good example. Some companies were lured to China by the possibilities for growth offered by 1.2 billion consumers;

15.4 Explain the potential ways to finance business operations

Borrowing: International companies (like domestic companies) try to get the lowest interest rates possible on bor rowed funds. However, this objective is more complex on a global scale. Difficulties include exchange rate risk, restrictions on currency convertibility, and restrictions on the international flow of capital.
Back-to-back Loan: This is sometimes the case when a subsidiary is new to the mar ket and has not yet built a reputation with local lenders. In such cases, a parent firm can help a subsidiary acquire financing through a so-called back-to-back loan- a loan in which a parent company deposits money with a host-country bank, which then lends the money to a subsidiary located in the host country.
Issuing Equity: Companies issue such stock primarily to access pools of investors with funds that are unavailable domestically. Yet, getting shares listed on another country's stock exchange can be a complex process. For one thing, complying with all the rules and regulations governing the operation of a particular stock exchange costs a great deal of time and money. Only large companies, therefore, tend to list shares on multiple exchanges.
(Issuing Equity) American Depository Receipt: Certificate that trades in the United States and that represents a spe cific number of shares in a non-UScompany.
(Issuing Equity) Venture capital: Financing obtained from investors who believe that the borrower will experience rapid growth and who receive equity (part ownership) in return.
(Issuing Equity) Emerging Stock Markets: s. First, emerging stock markets commonly experience extreme volatility. An important contributing factor is that investments into emerging stock markets are often so called hot nwney-money that can be quickly withdrawn in times of crisis.
Internal Funding: Ongoing international business activities and new investments can also be financed internally, whether with funds supplied by the parent company or by its international subsidiaries.
(Internal Funding) Internal Equity Debt, and Fees: Spin-off companies and new subsidiaries typically require a period of time before they become financially independent. During this period, they often obtain internal financing from parent companies.
(Internal Funding) Revenue From not publicly traded. In fact, equity is often purchased solely by the parent company, which obvOperations: Money earned from the sale of goods and services is called revenue. This source of capital is the lifeblood of international companies and their subsidiaries .If a company is. to succeed in the long term, it must at some point generate sufficient internal revenue to sustain day-to-day operations. At that point, outside financing is required only to expand operations or to survive lean periods- say, during seasonal sales fluctuations.
Capital Structure: Mix of equity, debt, and internally generated funds used to finance a company's activities.

16.1 Explain the three types of staffing policy

ethnocentric staffing: Staffing policy in which individuals from the home country manage operations abroad. Firms pursue this policy for several reasons. First, locally qualified people are not always available. In developing and newly industrialized countries, there is often a shortage of qualified personnel that creates a highly competitive local labor market.

Polycentric staffing: n polycentric staffing, individuals from the host country manage operations abroad. Companies can implement a polycentric approach for top- and mid-level managers, for lower-level staff, or for non managerial workers. It is well suited to companies who want to give national units a degree of autonomy in decision making.

Geocentric staffing: ln geocentric staffing, the best-qualified individuals, regardless of nationality, manage operations abroad. The local operation may choose managers from the host country, from the home country, or from a third country. The choice depends on the operation's specific needs. This policy is typi cally reserved for top-level managers.

16.2 Describe the key human resource recruitment and selection issues

Human resource planning: Recruiting and selecting managers and workers requires human resource (HR) planning- the process of forecasting a company's human resource needs and its supply. The first phase of HR planning involves taking an inventory of a company's current human resources-that is, collect ing data on every employee, including educational background, special job skills, previous jobs, language skills, and experience living abroad.

Recruitment Human Resources: The process of identifying and attracting a qualified pool of applicants for vacant positions is called recruitment. Companies can recruit internally from among their current employees or look to external sources. Current Employees, Recent College Graduates, Local Managerial Talent, Non-managerial Workers.

Selecting Human Resources: The process of screening and hiring the best-qualified applicants with the greatest performance potential is called selection. The process for international assignments includes measuring a person's ability to bridge cultural differences. Expatriate managers must be able to adapt to a new way of life in the host country. Conversely, native host-country managers must be able to work effectively with superiors who have different cultural backgrounds.

Culture Shock: Selecting managers comfortable traveling to and living in unfamiliar cultures, therefore, is an extremely important factor when recruiting for international posts. Set down in the midst of new cultures, many expatriates experience culture shock- a psychological process affecting people living abroad that is characterized by homesick ness, irritability, confusion, aggravation, and depression. In other words, they have trouble adjusting to the new environment in which they find themselves.

Reverse Culture Shock: Ironically, expatriates who successfully adapt to new cultures often undergo an experience called reverse culture shock-the psychological process of readapting to one's home culture.Because values and behavior that once seemed natural now seem strange, reverse culture shock may be even more disturbing than culture shock. Returning managers often find that either no position or merely a "standby'' position awaits them in the home office.

16.3 Summarize the main training and development programs that firms use.

Cultural Training: Ideally, everyone involved in business should be culturally literate and prepared to go anywhere in the world at a moment's notice. Realistically, many employees and many companies do not need or cannot afford to be entirely literate in another culture. The extent of a company's international involvement demands a corresponding level of cultural knowledge from its employees. Compa nies whose activities are highly international need employees with language fluency and in-depth experience in other countries. Meanwhile, small companies or those new to international business can begin with some basic cultural training. As a company increases its international involvement and cross-cultural contact, employees' cultural knowledge must keep pace.
Compiling a cultural profile: Cultural profiles can be quite helpful in deciding whether to accept an international assignment. The following are some excellent sources for constructing a cultural profile: Information can also be obtai ned by contacting the embassies of other countries in your home nation. People with firsthand knowledge and specific books and films are also good sources of information. After you are inside a country, you'll find your home country's embassy a good source of further cultural advice. Embassies maintain networks of home-nation professionals who work in the local culture, some with many years of experience on which you can draw.
Non-managerial Worker Training: Nonmanagerial workers also have training and development needs. This is especially true in some developing and newly industrialized countries where people have not even completed primary school. Even if the workforce is fairly well educated, workers may Jack experience working in industry. In such cases, companies that do business abroad can train local workers in how to work on an assembly line or to cultivate business leads to make sales. The need for such basic-skills training continues to grow as companies increasingly explore opportunities in emerging markets.

16.4 Explain how companies compensate managers and workers

(Managers) Bonus and Tax Incentives: Companies commonly offer managers inducements to accept international postings. The most common is a financial bonus. This bonus can be in the form of a one-time payment or an add-on to regular pay-generally 15 to 20 percent. Bonuses for managers who are asked to go into a particularly unstable country or one with a very low standard of living often receive hardship pay.
(Managers) Cultural and Social Contributors to cost: Culture also plays an important rolein the compensation of expatriate managers. Some nations offer more paid holidays than others.
Many offer free medical care to everyone living and working there. Granted, the quality of locally available medical care is not always good. Many companies, therefore, have plans to take seriously
ill expatriates and family members home or to nearby countries where medical care is equal to that avai lable in the home country.
(Non Managers) Two main factors influence the wages of nonmanagerial workers. First, their compensation is strongly influenced by increased cross-border business investment. Employers can relocate fairly easily to nations where wages are lower. In the home country, meanwhile, workers must often accept lower wages when an employer gives them a choice of accepting the reduction or watching their jobs move abroad. This situation is causing a trend toward greater equality in workers ' pay around the world. This equalizing effect encourages economic development and improvement in workers' lives in some nations at the expense of workers in other nations. econd, the greater mobility of labor today affects wages. Although labor laws in Europe are still more stringent than in the United States, the countries of the European Union (EU) are abolishing the requirement that workers from one EU nation must obtai n visas to work in another. If workers in Spain cannot find work at home or if they feel that their current pay is inadequate, they are free to move to another EU country where unemployment is lower (say, Great Britain). A problem that plagues some European countries today is that they seem to be creating a group
of people who are permanently unemployed.

16.5 Describe the importance of Labor-management relations