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International Business Management > Chapter 1 - Principles of international business > Flashcards

Chapter 1 - Principles of international business Flashcards

1
Q

Definition of Globalization of markets

A

continuous economic integration and growing interdependence of countries worldwide

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2
Q

Definition of Firm internationalization

A

tendency of companies to systematically increase the international dimension of their business activities

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3
Q

Globalization implies…

A

the relationships between people & organizations that used to occur locally now have a broader scope

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4
Q

Globalization indicators at country level

A
  1. foreign trade flows - exports and imports
  2. foreign investment flows - issued and received
  3. social indicators (frequency and ease of traveling, % population speaking foreign languages, entrance of tourists)
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5
Q

Determinant Factors of globalization

A
  1. worldwide reduction of barriers to trade & investment
  2. market liberation and adoption of free markets
  3. industrialization, economic development and modernization
  4. integration of world financial markets: makes it possible for internationally active firms to raise capital, borrow funds, pay suppliers, engage in foreign currency transactions
  5. advances in technology
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6
Q

Dimensions of globalization

A
  1. integration & interdependence of national economies
  2. rise of regional economic integration blocks
  3. growth of global investment & financial flows
  4. convergence of buyer lifestyle and preferences
  5. globalization of production activities
  6. globalization of services
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7
Q

Definition of Regional Economic Integration Blocks

A

refers to the growing interdependence that results between 2 or more countries when they form an alliance aimed at reducing barriers to trade

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8
Q

Objective of regional integration

A

expand market, achieve economies of scale, enhance productivity

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9
Q

Leading economic blocks

A

EU, NAFTA (North American Free Trade Agreement), MERCOSUR (Mercado Común del Sur)

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10
Q

Consequences of globalization

A
  1. contagion: rapid spread of financial or monetary crises
  2. loss of national sovereignty
  3. offshoring and the flight of jobs
  4. effect on the poor
  5. effect on the natural environment
  6. effect on the national culture
  7. internationalization of the firm’s value chain
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11
Q

Definition of International Business

A

performance of trade and investment activities by firms across national borders

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12
Q

International investments are

A
  • International portfolio investment: passive ownership of foreign securities such as stocks & bonds for the purpose of financial returns. Does not entail active management of these assets.
  • Foreign direct investment: establish a physical presence abroad through acquisitions of productive assets (capital, technology, plant, etc.)
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13
Q

Who participates in international business?

A
  • Multinationals enterprise (MNE)
  • Small and medium-sized enterprises (SMEs)
  • Nongovernmental organizations (NGOs): foundations (arts, education, research, etc.)
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14
Q

Motives for internationalization:

A
  1. Push motives: difficulties in local markets. The company is internationalized because it has no development possibilities in its home market.
  2. Pull motives: proactive vision of the company’s direction to internationalization, exploiting opportunities in international markets.
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15
Q

Risks of internationalization:

A
  1. cross cultural risk: differences in languages, lifestyles, mind-sets, religion
  2. country or political risk: political, legal, economic environment
  3. currency or financial rush: fluctuations in exchange rates, inflation
  4. commercial risk: loss or failure from poorly developed strategy
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16
Q

Definition of internationalization from an economic perspective

A

analysis of international operations of the multinational enterprise and more specifically, of its direct investment activities

  • monopolistic advantage theory
  • internationalization theory
  • dunning’s eclectic paradigm
17
Q

Definition of internationalization from a process perspective

A

internationalization as a process of incremental learning commitment based on accumulation of knowledge

  • Uppsala School
  • Innovation approach
  • Vernon product life cycle
18
Q

Definition of Network theory

A

internationalization process as a logical development of interorganizational and social network of companies

19
Q

Definition of Born global

A

international companies of recent creation (follow a global approach since its creation or within 2 years of life)

20
Q

monopolistic advantage theory definition

A
  • existence of imperfections in the markets of factors or products allows companies to internationalize
  • for companies to succeed, they must have exclusive competitive advantage
  • the advantage has a monopolistic nature
21
Q

internationalization theory definition

A
  • when markets are perfectly competitive, no control mechanism is necessary since the threat of being replaced by another company eliminates the possibility of developing opportunistic behavior
  • when the number of suppliers decreases, the company has less chance of replacing them => transaction costs increase
22
Q

Dunning’s eclectic paradigm definition

A
  • the extension, the form and the pattern of international production of a company are based on the juxtaposition of the specific advantages of the company
  • the decision to enter foreign markets is therefore made in a rational matter, based on analysis of costs and advantages
23
Q

OLI paradigm

A

relates to internationalization of markets

Ownership - firm characteristics: technology, resources, providers

Locational - industry characteristics: market size, entry barriers, comparative advantage

Internationalisation - strategic decisions: costs VS benefits, risks VS control

24
Q

Uppsala model

A
  • predicts the firm will gradually increase its committed resources
  • development of the activity abroad would take place along a series of successive stages that would represent an increasing degree of involvement by the firm
  • basic hypothesis: lack of knowledge about foreign markets is a major obstacle to the development of international operations
  • the accumulated experience is shown in 2 complementary ways:

1) changes in the knowledge acquired
2) changes in the skills to use the knowledge

25
Q

Innovation approach

A
  • internationalization is a process of business innovation
  • this trend focuses on the study of export activity as a basic internationalization method for small and medium enterprises
26
Q

Vernon Product life cycle

A
  • combines notions of international trade with a perspective based on individual behavior, so
  • eliminates the lack of realism by introducing aspects that have implications in international business such as product innovation
  • the different stages through which these new products go through will determine the decisions on the location of the production of the firms
27
Q

Network theory

A
  • entry into foreign markets is a function of the continuous interorganizational interactions between local companies and their networks
  • the opportunities of the foreign markets reach the local company through the members of the network
  • the possibility of taking advantage of business opportunities depends on the size of the network and its diversity
28
Q

Born global companies 3 important factors

A

1) new market conditions (specialization and niches)
2) technological developments in areas such as production, transportation, etc
3) most developed capacities of people, including the entrepreneur who founded the born global firm

29
Q

Definition of ethics

A
  • study of morality and standard of conduct
  • ethical behavior often varies from one country to another
  • ethics manifests itself in the ways societies address issues such as employment conditions, human rights, corruption
  • there is currently no universally adopted standard of what constitutes acceptable behavior
30
Q

Ethical theories:

A

1) Kantian - individuals have responsibilities based on moral principles that go beyond self-interest
2) Aristotelian virtue ethics - focus on core, individual behaviors and how they express and form individual character
3) Utilitarianism - greatest good for the greatest number of people under a given set of constraints
4) Eastern philosophy - view the individual as part of, rather than separate from, nature

31
Q

dillemas that arise from conflicts between ethical standards of a country and business ethics, or the moral code guiding business behavior, are most evident in:

A
  • employment and business practices
  • recognition of human rights
  • women’s rights and gender equity in the workplace
  • corruption
32
Q

Glass ceiling

A

it is difficult for women to reach upper management positions

33
Q

what to do about ethics?

A
  • MNCs adhere to a code of ethical conduct while doing business around the world yet make adjustments to respond to local norms and values
34
Q

definition of corporate social responsibility (CSR)

A

the actions of a firm to benefit society beyond legal requirements and the direct interests of firms

35
Q

on sustainability

A

governments and corporations are increasingly collaborating to provide assistance to communities around the world through global partnerships

International Business Management (6 decks)

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