Chapter 1: The Challenging Context of International Business Flashcards
denotes the operations of a company outside its home or domestic market.
foreign business
business carried out across national borders (any time you’re operating in more than one country).
international business
If you’re based in France and you do business in England, what type of business is this?
foreign/international business
a company with operations in multiple nations.
international company
Internal/external environments are the environments you CAN control.
Internal
Give 3 examples of internal environment forces you can control.
- Production
- Employees
- Wages
Internal/external environments are the environments you CANNOT control.
external
What are the 11 forces of an external environment that you can’t control?
- Competitive
- Distributive
- Economic
- Socioeconomic
- Financial
- Legal
- Physical
- Political
- Sociocultural
- Labor
- Technological
What type of markets deal with both external and internal environments?
Domestic markets
What type of markets deal with external, internal, and international environments?
International markets
T or F: International environments are more complicated than internal/external environments.
If true, why?
True, because it is a part of the external environment, meaning you can’t control it. You’re dealing with different languages, cultures, exchange rates, legal systems, etc.
What environment is this describing: All the uncontrollable forces originating in the home country that surround and influence the life and development of the firm.
Domestic Environment
What environment is this describing: All the uncontrollable forces originating outside the home country that surround and influence the firm. (difficult because you have to deal with people that are very different like their values).
International Environment
On an international level, you are dealing with many different people with different backgrounds, cultures, etc. This is important because _______ is everything.
perception
T or F: Decision making is easier in an international environment compared to decision making in a domestic environment.
False; it is harder!
Unconscious reference to your own cultural values (we’re all a product of our environment) when judging behaviors of others in a new and different environment.
self-reference criterion
The self-reference criterion adds _______ to doing business in foreign environments.
complexity
T or F: In international business, you have to be flexible.
True
International managers have three choices in deciding what to do with a concept/ technique employed in domestic operations:
- Transfer it intact (keep exactly as is)
- Adapt it to local conditions
- Not use it overseas
T or F: international business is a new phenomenon.
False; it’s been going on for thousands of years.
The time in the 17th/18th centuries when the power of nations depended directly on the sponsorship and control of merchant capital operating internationally.
Age of Mercantilism
Multinational companies started as early as the _______. Give an example of a company.
1800s; Ford Motor Company
While most multinational companies are based in _______ nations, there has been a recent surge in the number arising in _______ economies.
developed; emerging
The rapid _________ of populations combined with _________ in the emerging markets is quickly shifting the world’s economic center of gravity from Europe and the Americas back to _____.
urbanization; industrialization; Asia
an enterprise made up of entities in more than one nation, operating under a decision-making system that allows a common strategy and coherent policies.
transnational corporations
T or F: The governments of transnational corporation entities treat the world as one in terms of marketing/decision-making.
True
Transnational corporations account for more than ______ of world trade and ____% of world gross domestic product.
half; 10%
What are the 2 types of foreign investments?
- Portfolio Investment
- Foreign Direct Investment (FDI)
when you invest for the primary purpose of making money (ex: if you invest in a company in France, your purpose is to make money, not run the operations)
portfolio investment
investing to CONTROL the operation; does not include mere foreign investment in stock markets.
foreign direct investment (FDI)
when you bring stuff into your country of origin.
import
when you send merchandise outside your country of origin.
export
There are many issues with imports/exports. What is one issue?
Exchange rates
Five major kinds of drivers, all based on change, are leading international firms to internationalize their operations:
- Political
- Technological
- Market
- Cost
- Competitive
Which of the five major kinds of drivers for the internationalization of business does this describe?
- makes international business change on the daily
- trend toward the unification and socialization of the global economy. (a country agreeing on economic stuff)
political
T or F: advances in technology has made international business a lot easier.
True
Why is going abroad very popular for multinational corporations?
Because they’re able to penetrate new markets, which increases sales significantly
People know what’s available in other countries; in a way, the market has become smaller/larger.
smaller
T or F: costs are significantly more nowadays (going abroad increases the cost of goods sold)
False; costs are significantly LESS nowadays (going abroad LOWERS the cost of goods sold)
T or F: the world has become a lot more competitive
True
The tendency toward an international integration and interdependency of goods, technology, information, labor and capital, or the process of making this integration happen.
economic globalization
What is one pro and one con of economic globalization?
Pro: outsourcing enables you to focus on other things where you have a competitive advantage.
Con: In the US, we have lost many jobs to overseas markets.
What are 3 concerns with economic globalization?
- has produced uneven results across nations and people (rich get richer, poor get poorer)
- has had harmful effects on labor and labor standards (globalization causes longer hours and not strict rules in some countries on child labor)
- has contributed to decline in environmental and health conditions (pollution)
What are 2 arguments supporting economic globalization?
- free trade enhances socioeconomic development
- free trade promotes more and better jobs.
T or F: An international company (IC) is a company headquartered in another nation.
False
T or F: The term environment means all the forces influencing the life and development of the firm.
True
T or F: Lobbyists who advocate for new laws that will affect the production standards of a business are an example of an internal force.
False
T or F: Britain was the world’s leading manufacturing country for about 1,800 years, until it was replaced by the United States in the 1800s.
False
What is an example of an internal force that can affect a company’s environment?
a. economic downturn
b. availability of natural resources
c. human resources
d. international competitors
c. human resources
Gabriel Industries is located near a port city which allows it to ship products easily overseas to its international customers. The geographic location of the company is an example of a(n):
a. internal force
b. external force
c. sociocultural commodity
d. labor standard
external force
Which of the environments associated with a company refers to the uncontrollable forces originating outside their home country?
a. domestic
b. foreign
c. international
d. national
c. international
