Concept Check #1 Flashcards
International Business
business (or an individual firm) that engages in international (cross-border) economic activities (or the action of doing business abroad)
A Multinational Enterprise (MNE)
a firm that uses foreign direct investment (FDI) to establish or purchase income-generating assets abroad
Globaliztion ( leta def)
refers to the broadening and deepening of interactions and interdependences among peoples and countries of the world
Localization
refers to the segmentation and contraction of the interactions and interdependences among peoples and countries of the world
Gross domestic product (GDP)
total market value of all final goods and services produced within a country in a given period of time, usually a calendar year
Gross national income (GNI)
the term used by the World Bank and other international organizations to supersede the GNP term. Like GNP, it means GDP plus (net) income from nonresident, domestically-owned assets
broadening
the extension of economic and geographic linkages to encompass virtually all major societies and states
deepening
an increase in the frequency and intensity of state and social interaction
what is driving the move towards a greater globalization?
Declining trade and investment barriers
Technological change- more companies participating in global commerce
Globalization of markets (convergence of tastes and cultures, prices and wages)
Starbucks around the world
Globalization of production
takes a world to build a Dreamliner
segemention
find it
contraction
find it
The cage distance Framework (Ghemwat)
Cultural distance: different languages, ethnicities, religion
administrative distance: difference in corruption, legal rules
geographical distance: physical remoteness, lack of a common border
economic distance: differences in consumer income, cots, and human and natural resources
Glocalization
means that both forces of globalization and localization are taking place at the same time
This tension is the fundamental source of uncertainty in international business, as the world is neither completely globalized nor completely localized
Institution
means rules, both formal(regulatory environment) and informal (norms and culture). They provide incentive structure for behaviors
An institution based-view
when you enter a new environment either as a manager or as an MNE- you face the disadvantage that comes from know “THE RULES” known as “liability of foreignness”
Pillars of institutions
regulative, normative, cognitive
regulative(formal)
rules and regulations
normative (informal)
don’t do drugs, don’t double dip, don’t wear uggs with a miniskirt
cognitive(informal)
world is divided between east and west, democracy is the best form of government
institutional weakness= risk
incentive structures are absent, arbitrary, or at least non-transparent
translates into unpredictability and thus risk: political risk, legal risk, financial risk
ambiguous institution, unenforced institution, institution al differences,
AI= uncertainty (got fake money ended up in jail) UI= uncertainty (driving rules, intellectual property)
Risks due to different systems
Civil-
Common
Theocratic- vatican city
Firms have two basic strategies to exert pressure on politicians: Voice and Exit
voice= lobbying, having their voice heard exit= firm/company leaving country
Culture
norms, values, it’s whats below the surface
“The collective programming of the mind which distinguishes the members of one group or category of people from another” – Geert Hofstede
determinants of culture
religion, economics, education, language, political philosophy
Low-context cultures
culture in which communication is usually taken at face value (english) swiss german
High-context cultures
culture in which communication relies a lot on the underlying unspoken context (asian/ south american) japan, china arab, greece
four key contextual cues (edward hall)
- direct/indirect messages,
- The Language of Relationships
- The Language of Time
- The Language of Space
Direct/indirect
Direct / Explicit Language Cultures:
- Germany, German-Switzerland (very direct)
- N. America, Australia/New Zealand, N. Europe, Britain, Flemish Belgium
Less Direct / Explicit Cultures:
-France, Belgium, Southern Europe, Russia, East-Central Europe, Hong Kong, Singapore
Indirect / Implicit Language Cultures:
-Most of Asia, Arab world, Mediterranean region, Latin America, most of Africa
Language of relationship
deal focused vs relationship focused
Low context= open to outsiders more, deal focused, face to face= less frequent
high context= less open to outsiders, relationship focused, face to face= more frequent
informal vs formal (relationship)
low context= status difference smaller, forms of address more familiar, protocol rituals simpler
high context= status difference larger, forms of address more formal, protocol rituals more elaborate
Less Formal Business Cultures:
Australia, Norway, Denmark, Iceland, USA, Canada, New Zealand
More Formal Business Cultures:
Most of Europe, Mediterranean region, Latin America, Africa, Asia
cultural difference in time
mono: do one thing at a time, low context
poly: do multiple things, high context, easily distracted
Hofestedes dimensions: power distance
Power distance is higher when:A good working relationship with your direct superior is important
Power Distance is lower when: you are ok with an organizational structure in which certain subordinates have two bosses
Indiviualism
Individualism is greater when: Sufficient time for your personal or family life is important
Individualism is lower when: Variety and adventure in the job is important & job security is important
Masculinity
Masculinity is greater when:There is a distribution of roles between the sexes & assertive, competitive, decisive
Masculinity is lower when:
There is a sense of modesty and caring for others
relationships, compromise and negotiate
uncertainty avoidance
Uncertainty avoidance is higher when:you feel nervous or tense at work and have & an emotional need for rules
Uncertainty avoidance is lower when:
you have a dislike of rules and want a less formalized and standardized work environment
Orientation
Long-term orientation is greater when:
you attach more importance to thrift / being economical
Short -term orientation is when:
you attach respect for tradition and ‘saving face’
