Cases Int Management Flashcards
What is globalisation?
The widening set of interdependent relationships among people from different parts of a world divided into nations.
What does international business consist of?
All commercial transactions that take place between two or more countries, including sales, investments and transportation
What is leading to increasing globalisation?
TLCCCCS
- Increase in and expansion of technology
- Liberalisation of cross-border trade and resource movements
- Growing consumer pressures (bring that product here too!)
- Increased global competition
- Changing political situation and government policies
- Expanded cross-national cooperation – EU, NAFTA
- Development of services that support international business (agents…)
What are the costs of globalisation?
Threats to national sovereignty
Economic growth and environmental stress (argument for global growth and global cooperation)
Growing income inequality and personal stress (24H work cycle, the rich get richer, the poor get poorer)
How is globalisation a threat to national sovereignty?
Local objectives and policies: companies go elsewhere if conditions aren’t right, e.g. Germany leather industry due to high regulations
Small economies’ overdependence
Cultural homogeneity (McDonalds, H&M, Zara…)
What objectives lead countries to engage in international business?
Expand sales (increase potential market and profits)
Acquiring resources (lower cost, new/better products, additional operating knowledge)
Minimising risk
How does engaging in international business minimise risk?
- Smoothing sales and profits: less dependent on current context through geographical diversification - one economy goes bust, the other is going well.
- Preventing competitors from gaining advantages (competitor cross-subsidising markets to undercut prices)
What modes of operations exist for international business?
- Importing and exporting
- Tourism and transportation
- Asset use: licensing and franchising
- Service performances: turnkey operations and management contracts
- Investments: Foreign direct investment (including joint ventures) and portfolio investment
What is a foreign direct investment?
Investor takes a controlling interest in a foreign company
e.g. Joint Venture
What is a Portfolio Investment?
A non-controlling financial interest in another entity.
E.g. Mutual funds often include international companies.
What are some importing and exporting modes of operations?
Merchandise exports and merchandise imports (for goods) = visible exports and imports
Service exports and service imports
What kinds of collaborative arrangements between companies are there?
- Joint ventures
- Licensing arrangements
- Management contracts
- Minority ownership
- Long-term contractual arrangements
What are the characteristics of a strategic alliance?
- Companies work together, and the agreement is critical to at least one partner
- Agreement does not involve joint ownership.
What are multinational enterprises (MNEs)?
They take a global approach to markets and production or have operations in more than one country.
Also called:
- multinational corporations (MNCs)
- multinational companies (MNCs)
- transnational companies (TNCs)
Why and how companies adapt their typical methods of doing business?
Why: foreign conditions may dictate a particular method (e.g. need to at least assemble there, highly automated/manual)
How: Operating modes may be different from those used domestically
What does culture refer to?
The learned norms based on values, attitudes and beliefs of a group of people.
It affects every business function (e.g. when pay for goods)
What is the advantage of fostering cultural diversity?
Global competitive advantage through people with diverse backgrounds and experiences (so better access to market, broader range of ideas)
What is the disadvantage to cultural diversity?
Cultural collision can occur when:
- A company implements practices that are less effective or
- An employee has difficulty in accepting or adjusting to foreign behaviours
What hinders building cultural awareness?
- No foolproof method to do so
- Most agree cultures differ, but not on what the differences are
- Subconscious reactions to circumstances
- Assumption that all societal subgroups are identical (e.g. many subcultures in Spain, USA, Germany…)
What are the shortcomings of cultural approaches?
- What people say about their own attitudes may be coloured by their culture, which they are trying to explain.
- Specific variations within countries get overlooked when researchers focus on national differences in terms of averages
- Cultures evolve => behaviour reflecting current attitudes may change in the future. E.g. post DDR, particularly younger generations have changed.
What are the advantages and disadvantages of using a nation as a point of reference to delineate cultures?
Pros:
- Similarity is a cause and effect of national borders
- Laws apply primarily along national lines
Cons:
- Not everyone in a country is alike; variation within some countries is great
- Similarities link groups from different countries more than with their own country (e.g. urban people in big cities, Finance workers in Frankfurt and London)
How do cultures form?
- Cultures are transmitted in various ways: from parent to child, teacher to pupil, social leaders to follower, but particularly from peer to peer
- Language as a diffuser (spreader) and stabiliser of culture
- Religion as a cultural stabiliser (many strong values are the result of a dominant religion)
- By age 10, most children have a basic value system that is firmly in place and not easily changed.
E.g. Eritrea – long coast line and starvation, but due to culture don’t eat fish => can only convince children under 10 to eat it.
What are sources of changing a culture
Choice - e.g. decide to move
Imposition - e.g. refugees –> more difficult to change
Why does English travel so well?
Although only 8% have English as a first language, 33% of the world’s output come from countries where English is the primary language.