Exam 1: Chapters 1 - 5 Flashcards
International business Final
A business whose activities are carried out across national borders. This definition includes not only international trade and foreign manufacturing, but also the growing service industry in areas such as transportation, tourism, advertising, construction, retailing, wholesaling, and mass communications
Multi domestic company Final
An organization with multicountry affiliates, each of which formulates its own business strategy based on perceived market differences.
Global company Final
An organization that attempts to standardize and integrate operations worldwide in most or all functional areas.
Explain the difference between controllable and uncontrollable forces.
The external forces are commonly called uncontrollable forces. Management has no direct control over them. External forces consist of the following: Competitive, Distributive, Economic, Socioeconomic, Financial, Legal, Physical, Political, Sociocultural, Labor, And Technological
Controllable Forces-management does have some control are the internal forces-such as the factors of production (capital, raw materials, and people) and the activities of the organization (personnel, finance, production, and marketing)
Define self-reference criterion
Unconscious reference to the manager’s own cultural values, when judging others in a new and different environment
Define economic globalization
The tendency toward an international integration of goods, technology, information, labor, and capital, or the process of making this integration happen.
List the five drivers of globalization. Final
Political-the progressive reduction of barriers to trade and foreign investment by most governments and privatization of much of the industry in formerly communist nations
Technological- vast advancements
Market- become global customers
Cost- globalize product lines to reduce development, production, and inventory costs
Competitive- more competition
Explain how entering foreign markets can increase profits by:
Providing greater revenue:
Firms are able to obtain greater revenue by simultaneously introducing products in foreign markets and in their domestic markets as they move toward greater globalization
Lower the cost of goods sold:
Increasing total sales by exporting not only will reduce research and development costs per unit, but also will make other economies of scale possible. Inducements also help which are reduced taxes or subsidies for R&D
Firms often enter foreign markets to protect markets, profits, and sales. How does this relate to each of the following?
Following customers overseas
Following customers overseas Follow principal accounts overseas to prevent competitors from gaining access to those accounts. Guaranteed customer base
Firms often enter foreign markets to protect markets, profits, and sales. How does this relate to each of the following?
Lack of foreign exchange
First sign is a delay in payment by importers
Firms often enter foreign markets to protect markets, profits, and sales. How does this relate to each of the following?
Protectionism
When a government sees that local industry is threatened by imports, it may erect import barriers to stop or reduce these imports
Firms often enter foreign markets to protect markets, profits, and sales. How does this relate to each of the following?
Acquiring technology
Foreign firms invest in the United States for the acquisition of technology and management know-how
List 4 advantages for a firm to first export to its country’s major trading partners.
The business climate in the importing nation is relatively favorable
Export and import regulations are not insurmountable
There should be not strong cultural objections to buying that nation’s good.
Satisfactory transportation facilities have already been established
Define mercantilism
The accumulation of precious metals as an activity essential to a nation’s welfare.
Explain absolute advantage with an example. Final
The ability to produce goods most efficiently by having either a natural or acquired advantage, Corn from Nebraska and Oil from Saudi Arabia
Explain comparative advantage with an example.
Nations specialize in the production of a few products and trade with others to supply the rest of their needs
Define exchange rate.
To convert from foreign to domestic currency
Describe the resource endowment theory.
Abundance of resources
List the 4 stages of the international product life cycle from a US perspective.
U.S. Exports, Foreign production begins, foreign competition in export markets, Import competition in the United States
List the 3 main advantages to regional clusters.
Advantages associated with pooling of a common labor force so that staffing requirements can be met quickly, even with unexpected fluctuations in demand. -Gains from the development of specialized local suppliers whose operations and skills can be coordinated with the needs of the buyers. -Benefits that result with the geographic regions from the sharing of technological information and corresponding enhancement of the rate of innovation.
List and describe the 4 forces in Porter’s Diamond Model. Final
Demand conditions, Factor conditions, Related and supporting industries, Firm strategy, structure, and rivalry.
Portfolio investment
The purchase of stocks and bonds solely for the purpose of obtaining a return on the funds invested.
Foreign direct investment
Investors participate in the management of the firm in addition to receiving a return on their money
Explain why historically trade precedes FDI.
Engaging in foreign trade is typically less costly and less risky than making a direct investment into foreign markets. Can expand the business in small increments rather than through the considerably greater amounts of investment and market size that a foreign production facility requires
List and describe the 3 kinds of advantages of the eclectic theory.
Ownership Specific—extent to which a firm has an advantage through ownership of tangible and intangible that are not availabe to other firms and can be transferred abroad.
Location Specific—must have specific characteristics or an economic, social, or political nature that will permit the firm to profitably exploit its advantages by locating to that marked rather than serving the market through exports.
Internalization—receiving resources or funds from an internal source.
Explain why the UN is considered largely an informal organization.
The UN operates with voluntary agreements which makes it an informal institution.
List and describe the 5 organs of the UN.
The General Assembly acts by adopting resolutions that express the will of the member-nations.
The UN Security Council has responsibility for maintaining international peace and security.
The Economic and Social Council is concerned with economic and social issues, including trade, transport, industrialization, economic development, population growth, children, housing, women’s rights, racial discrimination, illegal drugs, crime, social welfare, youth, the human environment, and food.
The International Court of Justice makes legal decisions involving disputes between national governments and gives advisory opinions.
The Secretariat is the UN’s staff.
Describe the IMF. Final
Establish rules for international monetary policies and their enforcement and the World Bank to lend money for development projects. It helps Nations secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty.
Describe the World Bank.
It functions as a nonprofit cooperative for its member-nations, able to pass on its ability to borrow funds at low rates to developing nations.
Describe the WTO. Final
An organization that intends to supervise and liberalize international trade. The organization deals with regulation of trade between participating countries by providing a framework for negotiating and formalizing trade agreements and a dispute resolution aimed at enforcing participants’ adherence to WTO agreements, which are signed by representatives of member governments
Describe the OED
Group of developed countries (34) dedicated to promoting economic expansion in its member-nations.
Free trade area
Area in which tariffs among members have been eliminated, but members keep their external tariffs.
Customs union
Collaboration that adds common external tariffs to an FTA.
Common market
Customs union that includes mobility of services, people, and capital within the union.
Complete economic integration
Integration on both economic and political levels.
What is NAFTA?
(North American Free Trade Agreement)
Agreement creating a free trade area among Canada, Mexico, and the United States.
List the members of Mercosur.
Argentina, Brazil, Paraguay, and Uruguay.
European Parliament
EU legislative body whose members are popularly elected from member-nations.
Council of the European Union
Group that is the EU’s primary policy-setting institution.
European Commission
European Commission Institution that runs the EU’s day-to-day operations.
European Central Bank
Institution that sets and implements EU monetary policy.
European Court of Justice
Court that rules on issues related to EU policies.
Define culture.
The sum total of the beliefs, rules, techniques, institutions, and artifacts that characterize human populations.
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Individual worldviews, social rules, and interpersonal dynamics characterizing a group of people set in a particular time and place.
Define ethnocentricity.
Belief in the superiority of one’s own ethnic group.
Explain high- and low-context cultures. Final
High Context: communication tends to be implicit and indirect
Low Context: communication tends to be direct and to-the-point.
Describe: Monochronic Final
Having to do with linear time, sequential activities.
Describe: Polychronic Final
Having to do with simultaneous activities; multi-tasking.
Describe these cultural dimensions from Hofstede: Individualism-Collectivism
Measures the degree to which people in the culture are integrated into groups.
Highly collectivistic: strong, cohesive in-groups that look after them in exchange for loyalty.
Highly individualistic: loosely connected and look after themselves and their immediate family.
Describe these cultural dimensions from Hofstede: Power Distance
Extent to which members of a society expect and accept power to be distributed unequally.
Describe these cultural dimensions from Hofstede: Uncertainty Avoidance
A society’s comfort with uncertainty.
“ultimately refers to man’s search for Truth”
Describe these cultural dimensions from Hofstede: Masculinity-Femininity
Describes the distribution of roles between the genders.
“Women’s roles across cultures differ less than do men’s, and that men’s values among countries vary considerably, from very assertive and competitive and maximally different from women’s values on the one side, to modest and caring and similar to women’s values on the other.”
Describe these cultural dimensions from Trompenaars: Universalism vs. Particularism
Universalism: Condition in which concepts apply to all.
Particularism: Condition in which context determines what concepts apply.
Describe these cultural dimensions from Trompenaars: Neutral vs. Affective
Describes the culture’s rules for display of emotions. People in neutral cultures tend to withhold emotional expressions, while people in affective cultures are much more expressive.
(unemotional vs. emotional)
Describe these cultural dimensions from Trompenaars: Specific vs. Diffuse
Life divided into public and private vs. life undifferentiated.
Describe these cultural dimensions from Trompenaars: Achievement vs. Ascription
Basis of social status and reward, with status being related to either who a person is or what a person does.
Achievement cultures are meritocracies that reward what you do.
Ascription consider who a person is by family lineage or age, or other attributes.
List the 5 major world religions.
Christianity, Islam, Buddhism, Hinduism, and Judaism.
What is nonverbal communication? Give an example.
Nonverbal communication: the unspoken language, can often tell businesspeople something that the spoken language does not—if they can understand it.
Gestures are a common form of cross-cultural communication. An example is the thumbs-up gesture. Although this sign is a positive gesture, in some countries it has a negative/vulgar connotation.
List unconventional sources of oil.
Oil sands, oil-bearing shale, coal, heavy oil, and natural gas.
What are the main advantages and disadvantages of nuclear power?
Advantages: Generate little pollution in normal operation Low carbon emissions Contributes to energy self-sufficiency Disadvantages: Waste material Accidents Radiation
What is the Kyoto Protocol? Final
The Kyoto Protocol, the United Nations Framework Convention on Climate Change, calls for nations to work together to reduce global warming by reducing their emissions of the gasses that contribute to it, carbon dioxide first among them. To date, the United States is the only industrialized country that has signed and not ratified the Kyoto Protocol.
Define environmental sustainability.
Environmental sustainability rests on the commitment of business to operate without reducing the capacity of the environment to provide for future generations.
Define stakeholder theory.
It calls for managers to identify and consider the network of tensions caused by competing demands within which any business exists.
Stakeholder theory forces a business to address underlying values and principles. It “pushes managers to be clear about how they want to do business, specifically, what kind of relationships they want and need to create with their stakeholders to deliver on their purpose
Define triple-bottom-line accounting.
Here, the company measures its social and environmental performance in addition to its traditional economic performance.
Explain the difference between renewable and non renewable energy sources.
Nonrenewable energy resources, like coal, nuclear, oil, and natural gas, are available in limited supplies. This is usually due to the long time it takes for them to be replenished. Renewable resources are replenished naturally and over relatively short periods of time.
Historically, how have waterways been important to business?
Historically, navigable waterways with connections to the ocean have been important because they have permitted the low-cost transportation of goods and people from a country’s coast to its interior, and today they are the only means of access from the coasts of many developing nations.
Significant because it provides inexpensive access to interior markets. Before the construction of railways, water transport was the only economically practical carrier for bulk goods moving over long distances. Water transport increased even after the building of railroads
Explain how mountains and deserts have affected business.
Mountains are barriers that tend to separate and impede exchange and interaction, whereas level areas (plains and plateaus) facilitate exchange and interaction, unless climate makes exchange unlikely, as in the Sahara and Gobi Deserts. The extent to which mountains serve as barriers depends on their massiveness, ruggedness, and transecting valleys.
What problems are created when a country has regions that speak different languages. FINAL
Spaniards - Catalan - This creates the wide range of problems that are found wherever there are language differences. In Catalonia and the Basque country, Spanish-speaking managers do not attain the empathy with their local employees that they do in other parts of Spain, and sales representatives who speak the local language are more effective. These language differences increase promotional costs if, to be more effective, companies choose to prepare their material in Euskara, Catalan, and Spanish.
Explain how population density affects business.
International managers know that in more densely populated nations, marketing and distributing their products costs less because population centers are closer, communication systems are better, and more people are available for employment. They are aware that the populations in Canada, Australia, and Brazil are highly concentrated in a relatively small area, because of deserts, tropical rain forests, and, in Canada’s case, the shield.
