Exam 4 Chapters 17-18 and FINAL Flashcards
Describe the population trends in developing and developed countries.
An aging population in most of the developed countries has implications for labor force size and skill; for policies regarding immigration; for economic growth; and for a range of political issues related to pension plans, health care, and other key social, economic, and political factors in those nations.
Describe global trends in urbanization.
1) Although the level of urbanization is higher in developed countries, the rate of urbanization was four times faster in developing countries from 1975 to 2009 as these nations experienced rapid increases in population as well as increasing economic development.
2) As populations migrate from rural areas to urban areas, particularly within developing nations, they also move from agriculturally based employment to employment in industry and service sectors.
Define Brain drain
When skilled workers migrate from developing economies
Define Reverse Brain Drain
The return home of highly skilled immigrants who have made significant contributions in their adopted country is a trend related to the growth of outsourcing and a willingness of the federal government to allow “controversial” scientists to move to other countries.
Define these hiring practices: Ethnocentric
i. In this approach, most decisions are made at headquarters, using the home country’s frame of reference. International companies (ICs) utilize citizens of their own countries, or PCNs, in key foreign management and technical positions.
ii. G: evaluating other peoples and cultures according to the standards of one’s own culture.
Define these hiring practices: Polycentric
i. Polycentric staffing involves human resource policies that are created at the local level for the specific context of the local operations. Companies primarily hire HCNs for subsidiaries and PCNs for headquarters’ positions; movement from the local subsidiaries to headquarters’ positions is uncommon.
ii. G: having more than one center (as of development or control): as. a : having several centromeres.
Define these hiring practices: Geocentric
i. Companies with a transnational strategic orientation, driven simultaneously by high pressures for cost reduction and high pressures for local responsiveness, follow a geocentric staffing policy. These organizations select the best person for each job without considering national origin and can therefore capitalize on the advantages of each staffing policy.
Define: Home country national
i. Many multinationals try to solve the business technique problem by hiring host- country students upon their graduation from home-country business schools.
ii. G: Also known as host-country nationals, these employees are hired for jobs in their own country. For example, a United Kingdom citizen who is employed at Coca Cola’s U.K. subsidiary is a local national.
Define: Host country national
i. Because the number of host-country citizens graduating from home-country universities is limited, multinationals must also recruit locally for their management positions.
Define: Third country national
i. Hiring personnel who are citizens of neither the home country nor the host country is often advantageous. TCNs may accept lower wages and benefits than will employees from the home country, and they may come from a culture similar to that of the host country.
ii. G: Third Country National (TCN) is a term often used in the context of migration, referring to individuals who are in transit and/or applying for visas in countries that are not their country of origin (i.e. country of transit), in order to go to destination countries that is likewise not their country of origin.
Give an advantage of each of the following staffing policies: Ethnocentric
i. An advantage to using home-country citizens abroad is to expand their experience in preparation for becoming high-level managers at headquarters.
Give an advantage of each of the following staffing policies: Polycentric
i. When HCNs are employed at the subsidiary level, there is no problem of their being unfamiliar with local customs, culture, and language. Furthermore, the first costs of employing them are generally lower (compared with the costs of employing home-country nationals and paying to move them and their families to the host country), although considerable training costs are sometimes necessary.
Give an advantage of each of the following staffing policies: Geocentric
i. With a geocentric staffing policy, HRM strategy tends to be consistent across all subsidiaries, borrowing best practices from wherever they may be found across the company’s worldwide network of operations rather than showing preference only to the practices used at headquarters within a local context.
Define expatriate.
i. G: A person who has citizenship in at least one country, but who is living in another country. Most expatriates only stay in the foreign country for a certain period of time, and plan to return to their home country eventually, although there are some who never return to their country of citizenship.
ii. G: a person who lives outside their native country.
Define culture shock.
i. One important cause of expatriate performance problems is culture shock, which is the anxiety people often experience when they move from a culture that they are familiar with to one that is entirely different.
List the 3 dimensions of cross-cultural adjustment.
1) Work Context – extent of job clarity, inherent conflict in the person’s role and amount of discretion associated with completing the job tasks.
2) Reacting to differences in housing, food, education, health, safety, and transportation.
3) Interaction with local nationals, involves adjusting to differences in behavioral norms, ways of dealing with conflict, communication patterns, and other relationship issues that can produce anger or frustration.
List 3 allowances commonly given to expatriates.
1) Housing Allowances
2) Cost of living Allowances
3) Allowances for Tax Differentials
4) Education Allowances
5) Moving and Orientation Allowances
Define: Current rate method
i. Assets and liabilities are translated at the rate in effect the day the balance sheet is produced.
Define: Temporal method
i. Monetary items such as cash, receivables, and payables are translated at the current exchange rate.
Compare American and German firms along the dimension of transparency and optimism.
1) The dimension of secrecy–transparency measures the degree to which companies disclose information to the public. Germany, Japan, and Switzerland tend to value secrecy or privacy over transparency.
2) In the United Kingdom and the United States, there is more disclosure and less privacy. The dimension of optimism–conservatism measures the degree to which a company is cautious in its valuing of assets and measuring of income.
3) Accounting reports in countries with more conservative asset-valuing approaches tend to understate assets and income, while those in countries whose asset-valuing approach is more optimistic tend toward overstatement. In France, Germany, and Japan, public companies’ capital structure tends to depend more on debt rather than equity, with banks being a major source of the debt. Banks are concerned with liquidity.
Describe the international accounting standards’ convergence process and its importance to international firms.
1) The IFRS has greater reliance on principles, a normative institution, with compliance based on social obligation. Shared principles suggest the need for reasoned judgment because they allow for interpretations, unlike the application of rules, so accountants with GAAP approaches will have to get used to a new way of thinking. At this point, the United States is the only major nation that follows GAAP.
2) With convergence, financial markets around the world will become more integrated because the statements will be directly comparable. Investors and other interested parties will be able to see company performance across borders, companies will no longer have to restate their financials, and the complex process of consolidation will be much less so. These features of standardization mean substantial cost reductions for companies and better information for everyone.
Define American depository receipts.
1) These receipts represent shares that are held by a custodian, usually an American bank, in the stock’s home market. They are denominated in dollars and traded on the U.S. exchange, eliminating the need to have a broker in the country of issue and the need for currency exchange.
Define offshore financial center.
1) Locations that specialize in financing by nonresidents, where the taxation levels are low and the banking regulations are slim. Switzerland, the Cayman Islands, Hong Kong, and the Bahamas are examples of offshore financial centers.
Describe multilateral netting.
1) This is a centralized approach in which subsidiaries transfer their net cash flows within the company to a cash center that disperses cash to net
2) receivers. A single transaction to or from each member settles the net result of all cash flows. The structure is essentially the wheel-and-spoke model.
Explain: Transaction exposure
i. Occurs when the firm has transactions denominated in a foreign currency. The exposure is due to currency exchange rate fluctuations between the time the commitment is made and the time it is payable
Explain: Translation exposure
i. Occurs when subsidiary financial statements are consolidated at the corporate level for the companywide financial reports. Because the foreign subsidiaries operate in non-dollar currencies, there is a need to translate subsidiary financial reports to the parent company’s currency during the corporate consolidation process.
Explain: Economic exposure
i. Occurs at the operations level and results from exchange rate changes on projected cash flows. Unlike transaction exposure, which addresses the individual transaction, economic exposure is firm-wide and long term.
