exam 1

Question 1

Exporting

Answer 1

Sale of products or services to customers located abroad, from a base in the home country or a third country.

Question 2

FDI

Answer 2

transfer of assets to that country or the acquisition of an asset in that country

Question 3

How does international business differ from domestic business?

Answer 3

International business: Performance of trade and investment activities by firms across national borders where domestic business is performed within country (home country). IB encounters significant complexities that don’t exist in domestic business. Because of these complexities, firms engaging in IB must use unique methods of doing business.

Question 4

What four (4) major risks are encountered when conducting international business?

Answer 4

Cross cultural risk, Country (political) risk, Currency (financial) risk, Commercial (execution) risk.

Question 5

MNE

Answer 5

A large company with substantial resources that performs various business activities through a network of subsidiaries and affiliates located in multiple countries (FDI).

Question 6

SME

Answer 6

companies with 500 or fewer employees (

Question 7

What are some of the key motivations for firms to engage in international business?

Answer 7

Seek opportunities for growth through market diversification.

Earn higher margins and profits.

Gain new ideas about products, services, and business methods.
Better serve key customers that have relocated abroad.

Be closer to supply sources, benefit from global sourcing
advantages, or gain flexibility in the sourcing of products.

Gain access to lower-cost or better-value factors of production.

Develop economies of scale in sourcing, production, marketing, and R&D.

Question 8

Market globalization

Answer 8

is the ongoing economic integration and growing interdependency of countries worldwide. Globalization refers to the interconnectedness of national economies and the growing interdependence of buyers, producers, suppliers, and governments, around the world. Globalization allows firms to view the world as one large marketplace for goods, services, capital, labor, and knowledge.

Question 9

Summarize five (5) notable drivers of globalization.

Answer 9

a. Worldwide reduction of barriers to trade and investment.
b. Market liberalization and adoption of free markets.
c. Industrialization, economic development, and modernization.
d. Integration of world financial markets.
e. Advances in technology.

Question 10

Describe the six (6) dimensions of globalization.

Answer 10

a. Integration and interdependence of national economies
b. Rise of regional economic integration blocs
c. Growth of global investment and financial flows
d. Convergence of buyer lifestyles and preferences
e. Globalization of production activities
f. Globalization of services

Question 11

What are the implications of globalization for company internationalization (hint: think value chain)?

Answer 11

a. Countless new business opportunities for internationalizing firms
b. New risks and intense rivalry from foreign competitors
c. More demanding buyers who source from suppliers worldwide
d. Greater emphasis on proactive internationalization
e. Internationalization of firm’s value chain

Question 12

Identify the four major categories of participants in international business.

Answer 12

focal firms,Distribution channel intermediaries, facilitators, government

Question 13

The value chain

Answer 13

is the complete business system of the focal firm, comprising all the firm’s activities, including Market Research, R&D, Sourcing, Production, Marketing, Distribution, and After Sale Service.

Question 14

focal firm

Answer 14

initiator of an international business transaction; e.g., MNEs and SMEs

d. Governments – active in international business as suppliers, buyers, and regulators.

Question 15

distribution channel intermediary

Answer 15

a specialist firm that provides distribution, logistics,

and marketing services in the international value chain

Question 16

facilitator

Answer 16

a firm that provides special expertise in banking, the law, customs clearance, market research

Question 17

government

Answer 17

active in international business as suppliers, buyers, and regulators.

Question 18

Home distribution Intermediary channel

Answer 18

Trading Company – Is an intermediary that handles imports and exports of various raw materials, parts, and finished products. Typically high-volume, low-margin resellers dealing primarily in commodities such as grains, minerals, coal, and metals. Trading Companies play a particularly significant role in international business with Japanese firms.
Export Management Company (EMC) - Common in the USA and numerous other countries. EMCs acts as an export agent on behalf of the focal firm. An EMC finds export customers, negotiates terms of sale, and arranges for international shipping, typically for smaller exporters. Most specialize in specific industries & geographies.

Question 19

Host distribution intermediary channel

Answer 19

Foreign Distributor - Takes title to the exporter’s goods and performs marketing functions such as sales, promotion, and after-sales service on the exporter’s behalf. Serves as the extension of the focal firm in the foreign market. Also arranges for local transportation and advises focal firms on how to function effectively in the local market.
Agent - Also known as a broker who does not take title to the goods. Works on a commission (usually a % of the sale) basis to bring the buyer and seller together.
Manufacturer’s Representative - Works under contract by the exporter to represent and sell its merchandise. Acts as a contracted salesperson in a designated territory and or for designated product/service lines.

Question 20

Home/Host DIC

Answer 20

Facilitators – Assist the focal firm with specialized services required in international transactions. Examples include logistics service providers, banks, international trade lawyers, freight forwarders, customs brokers, consultants, advertising agencies, market researchers, insurance companies, tax accountants

Question 21

culture

Answer 21

The learned, shared, and enduring orientation patterns in a society.

Question 22

cross-culture risk

Answer 22

occurs in a situation or event where a cultural miscommunication puts some human value at stake often due to unfamiliar languages and unique value systems, beliefs, and behaviors.

Question 23

acculturation

Answer 23

the process of adjusting and adapting to a culture other than one’s own; commonly experienced by expatriate workers.

Question 24

socialization

Answer 24

The process of learning the rules and behavioral patterns appropriate to one’s society.

Question 25

polychronic

Answer 25

A flexible, non-linear orientation to time in which the individual takes a long-term perspective; time is elastic, long delays are tolerated before taking action. Punctuality is relatively unimportant. Relationships are valued. Examples: Africa, Latin America, Asia.

Question 26

monochronic

Answer 26

A rigid orientation to time in which the individual is focused on schedules, punctuality, time as a resource, time is linear, “time is money”. For example, people in the U.S. are hurried and impatient.

Question 27

individualism vs collectivism

Answer 27

refers to whether a person primarily functions as an individual or within a group. In individualistic societies, each person emphasizes his or her own self-interest; competition for resources is the norm; individuals who compete best are rewarded. Examples: Australia, Britain, Canada, and the U.S. In collectivist societies, ties among individuals are important; business is conducted in a group context; life is a fundamentally cooperative experience; conformity and compromise help maintain harmony. Examples: China, Panama, Japan, South Korea.

Question 28

power distance

Answer 28

describes how a society deals with inequalities in power that exist among people. High power distance societies exhibit big gaps between the weak and powerful; in firms, top management tends to be autocratic, giving little autonomy to lower-level employees. Examples: Guatemala, Malaysia, Philippines, and several Middle East countries. Low power distance societies have small gaps between the weak and powerful. Firms tend toward flat organizational structures, with relatively equal relations between managers and workers. For example, Scandinavian countries instituted various systems to ensure socioeconomic equality.

Question 29

uncertainty avoidance

Answer 29

refers to the extent to which people can tolerate risk and uncertainty in their lives. High uncertainty avoidance societies create institutions to minimize risk and ensure security. Firms emphasize stable careers and regulate worker actions. Decisions are made slowly. Examples: Belgium, France, Japan. In low uncertainty avoidance societies, managers are relatively entrepreneurial and comfortable with risk. Firms make decisions quickly. People are comfortable changing jobs. Examples: Ireland, Jamaica, U.S.

Question 30

masculinity vs feminity

Answer 30

refers to a society’s orientation based on traditional male and female values. Masculine cultures value competitiveness, ambition, assertiveness, and the accumulation of wealth. Both men and women are assertive, focused on career and earning money. Examples: Australia, Japan. Feminine cultures emphasize nurturing roles, interdependence among people, and caring for less fortunate people – for both men and women. Examples: Scandinavian countries where welfare systems are highly developed, and education is subsidized.

Question 31

short term vs long term

Answer 31

describes the degree to which people and organizations defer gratification to achieve long-term success. Long-term orientation emphasizes the long view in planning and living, focusing on years and decades. Examples: traditional Asian cultures, such as China, Japan, and Singapore. Short-term orientation places greater emphasis on the near term and is typical in the United States and most other Western countries.

Question 32

cultural metaphors

Answer 32

refer to a distinctive tradition or institution strongly associated with a society; a guide to deciphering attitudes, values, and behaviors (US culture uses football and war as metaphors for business).

Question 33

cultural idioms

Answer 33

is an expression whose symbolic meaning differs from its literal meaning (e.g., “the nail that stands out gets hammered.”).

Question 34

intellectual property

Answer 34

refers to ideas or works created by individuals or firms and includes a variety of proprietary, intangible assets: discoveries and inventions; artistic, musical, and literary works; and words, phrases, symbols, and designs.

Question 35

normativism

Answer 35

s a belief that ethical behavioral standards are universal, and firms and individuals should seek to uphold them consistently around the world.

Question 36

relativism

Answer 36

is the belief that ethical truths are not absolute but differ from group to group. According to this perspective, a good rule is “when in Rome, do as the Romans do.”

Question 37

Corporate Social Responsibility

Answer 37

Manner of operating a business that meets or exceeds the ethical, legal, commercial, and public expectations of customers, shareholders, employees, and communities. Thus, CSR goes beyond ethics and embraces the concept of striving to exceed established acceptable standards and expectations.

Question 38

What are five (5) steps the firm can take to develop its orientation to CSR and sustainability in international business?

Answer 38

1. Develop closer relations with foreign stakeholders to understand their needs and jointly develop solutions. 2. Build capabilities to enhance the firm’s contribution to the local community and global environment. 3. Ensure diverse voices by creating organizations that employ managers and workers from around the world. 4. Develop global CSR standards and objectives that are communicated and implemented across the firm worldwide. 5. Train managers in global CSR principles and formally integrate these into managerial responsibilities.