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EVA > IB Final > Flashcards

IB Final Flashcards

1
Q

What is Globalization?

A

The widening/deepening of interdependent relationships among people from different nations

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2
Q

What are the 7 main drivers of globalization?

A
  1. Rise in and application of technology
  2. Liberalization of cross-border trade and resource movements
  3. development of services that support IB
  4. Growth of consumer pressures
  5. Increase in global competition
  6. Changes in political situations and government policies
  7. Expansion of cross-national cooperation
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3
Q

What kinds of technology can increase globalization

A

Transportation and communications both improvement

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4
Q

Why have governments reduced trade restrictions (3 reasons)?

A
  1. citizens want greater variety of goods/services at lower prices
  2. competition spurs domestic producers to become more efficient
  3. hope to induce other countries to lower their barriers in turn
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5
Q

What is a born-global company?

A

companies that start with a global focus

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6
Q

Why would a government pursue cross-national cooperation?

A
  1. To gain reciprocal advantages
  2. To attack problems jointly that one country alone can’t solve
  3. To deal with areas of concern that lie outside the territory of any nation (antarctica, oceans, outer space)
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7
Q

3 criticisms of globalization

A
  1. Threats to national sovereignty
  2. Environmental stress
  3. Growing income inequality and personal stress
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8
Q

3 reasons why companies engage in IB (bonus 4th)

A
  1. Sales Expansion
  2. Resource Acquisition
  3. Risk Reduction
  4. Learning
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9
Q

Pursuing international sales usually increases the… (2)

A

potential sales and potential profits

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10
Q

3 reasons company may pursue foreign sales

A

lower costs
new/better products
additional operating knowledge

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11
Q

International operations may reduce risk by (2)…

A

smoothing sales and profits
preventing competitors from gaining advantages

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12
Q

What are the 3 IB operating modes

A

merchandise exports/imports
service exports/imports
investments

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13
Q

most popular IB mode

A

merchandise exports and imports

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14
Q

3 examples of service exports/imports

A
  1. Tourism and transportation
  2. Service performance (i.e. engineering)
  3. Asset use (royalty for logo use, franchising)
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15
Q

2 types of IB investment

A

FDI and Portfolio Investment

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16
Q

2 key components of portfolio investment

A

noncontrolling interest of a foreign operation
extension of loans

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17
Q

What is an MNC

A

a company with foreign direct investments

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18
Q

Why may a company seek markets?

A

large size and economies of scale
lower input costs due to large size
scale economies in shipment, distribution, and promotion
access to low-cost financing

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19
Q

What external factors can affect an IB’s success

A
  1. Physical factors (geography, demography)
  2. Institutional factors (culture, politics, law, economy)
  3. Competitive factors (number/strength of suppliers, customers, and rival firms)
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20
Q

2 types of physical factors in operating environment

A

geographic, demographic

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21
Q

4 types of institutional factors in operating environment

A

political policies, legal policies, behavioral factors, economic forces

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22
Q

3 types of institutional factors in operating environment

A

product strategy, resource base/experience, competitor capability

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23
Q

what is competitive product strategy

A

competing through cost or product differentiation

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24
Q

collaborative arrangements

A

companies working together, such as:
joint venture
licensing agreements
mgmt contracts
minority ownership
long-term contracts

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25
Q

joint venture

A

an operation in which 2 or. more companies share ownership (also non-equity joint ventures

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26
Q

licensing agreement

A

contract where firm allows others to use some assets, such as trademarks, patents, copyrights, or expertise

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27
Q

MNC=MNE?

A

true

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28
Q

reshoring/rightsourcing

A

firms bringing operations back to their home countries from abroad

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29
Q

2 types of operating modes

A

self-conducted operations
collaborative operations

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30
Q

6 criteria for selecting mode of entry

A
  1. Firm’s marketing objectives
  2. Firm’s size
  3. Government encouragement/restrictions
  4. Product quality requirements
  5. Risks: Political or economic
  6. Control needs
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31
Q

2 ways in which geographic distance has shrunk

A
  1. Containerization + Intermodal shipping of containers
  2. Telecommunications revolution
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32
Q

6 Advantages of producing in foreign countries (rather than exporting)

A
  1. Production abroad cheaper than at home
  2. Transportation costs too high for moving goods/services internationally
  3. When companies lack domestic capacity
  4. When products/services need to be altered substantially to gain sufficient consumer demand abroad
  5. When governments inhibit the import of foreign products
  6. When buyers prefer products originating from a specific country
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33
Q

4 equity arrangements with foreign production

A
  1. Wholly owned
  2. Partially owned with remainder widely held
  3. Joint ventures (can be both)
  4. Equity alliances
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34
Q

4 non-equity arrangements

A
  1. licensing
  2. franchising
  3. management contracts
  4. turnkey operations
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35
Q

6 collaborative arrangements + 2 non-collaborative

A

Collaborative:

  • joint ventures
  • equity alliances
  • licensing
  • franchising
  • mgmt contracts
  • turnkey operations

Non-collaborative:

  • wholly owned
  • partially owned w/remainder widely held
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36
Q

4 reasons for a company to make a wholly owned FDI

A

market failure
internalization theory
appropriability theory
freedom to pursue global objectives

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37
Q

why is collaboration appealing as an entry strategy?

A

a firm may reduce its liability of forgiveness

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38
Q

collaboration only works if… otherwise we should use wholly owned FDI

A

management can find an associate knowledgeable about the host country at acceptable terms, which may be impossible since such companies may be inadequately equipped to deal efficiently with the entry company’s tech, or don’t know enough about entering company

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39
Q

market failure reason for wholly owned FDI

A

failure of market to connect firms as collaborators will entice a company to enter with wholly owned operations only if it perceives having operating advantages to overcome its liability of forgiveness

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40
Q

what is internalization

A

control through self-handling of operations

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41
Q

4 reasons why internalization may reduce costs

A
  • different operating units within the same company are likely to share a common corporate culture, which expedites communications
  • company can use its own managers, who understand and are committed to carrying out its objectives
  • company can avoid protracted negotiations with another company on such matters as partner responsibilities and how each will be compensated for contributions
  • company can avoid possible enforcement problems
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42
Q

appropriability strategy

A

the idea of denying rivals access to resources

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43
Q

Advantages of acquiring an existing operation

A
  • gaining vital resources that are otherwise hard to develop
  • making financing easier at time
  • adding no further capacity to the market
  • avoiding start-up problems
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44
Q

4 reasons why companies may choose greenfield expansion

A
  • host governments discourage acquisitions
  • easier to finance
  • available acquisitions are performing poorly
  • personnel in acquisitions are performing poorly
  • personnel in acquiring/acquired firms may not work well together
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45
Q

5 general motives for collaborative arrangements

A
  • spread and reduce costs
  • enable companies to specialize in their competencies
  • avoid competition
  • secure vertical and horizontal links
  • gain knowledge
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46
Q

4 motives for collaborative arrangements specific to IB

A
  • gain location-specific assets
  • overcome legal constraints
  • diversify geographically
  • minimize exposure in risky environments
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47
Q

2 times it’s cheaper to contract to a specialist

A
  • small volume
  • when the other company has excess capacity
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48
Q

resource-based view of the firm holds that…

A

each company has a unique combination of competencies

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49
Q

Scale alliances

A

aim to provide efficiency for partners by pooling similar operations, such as airlines have done by combining lounges

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50
Q

Link alliances

A

Firms use their partners complementary resources to expand into a new business

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51
Q

Vertical alliance

A

Connects members in a value chain.
I.e. supplier and merchant

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52
Q

Horizontal alliance

A

Enables each partner to extend its product offerings on the same level of the value chain

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53
Q

Coopetition

A

Collaboration while competing

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54
Q

examples of seeking resources

A

ability to access raw materials overseas and shift production oversear

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55
Q

examples of reducing risk by going internationally

A

financial flexibility
ability to shift production overseas

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56
Q

examples of learning by going internationally

A

information advantages
managerial experience and expertise

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57
Q

what are the advantages of multinational corporation (internalization) (7)

A

• Superior technical know-how, e.g.
– Technology, marketing, resource extraction

  • Ability to leverage existing reputation, brand image, goodwill
  • Large size & scale economies
  • Managerial experience & expertise
  • Ability to locate activities elsewhere:
  • Information advantages
  • Risk diversification across countries
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58
Q

Why is large size/scale economies good for an MNC

A

– Increases bargaining power
– Scale helps cover high fixed costs in capital intensive industries
– Lower input costs due to scale
– Logistics, distribution & promotion scale economies
– Lower financing costs and lower credit risk

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59
Q

potential disadvantages of MNC (internationalization)

A
  • Business risks: foreign exchange risk (which may be hedged)
  • Host-country regulations
  • Different legal systems
  • Political risks – major regulatory shift may be greater risk than nationalization, war etc.
  • Operational difficulties e.g. adapting to local business practices
  • Cultural differences
  • Coordination costs
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60
Q

the link between internationalization and performance is:

A

weak

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61
Q

gravity model

A

firms engage in higher volume of business with countries that are close (less distant) from the home country along the various measures of distance

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62
Q

what entry mode has least commitment and lowest degree of control

A

export

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63
Q

what entry mode has most commitment and highest degree of control

A

wholly-owned operation
acquisition vs greenfield

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64
Q

Advantages of exporting

A

– Lower cost – Lower risk

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65
Q

Disadvantages of exporting

A

– May compete with low-cost location
manufacturers.
– Possible high transportation costs.
– Tariff barriers.
– Possible lack of control over marketing reps.

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66
Q

what is licensing

A

collaborative alliance
– granting the right to intangible property
(technology, work methods, patents, copyrights, brand names, or trademarks) to another entity for a specified period of time

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67
Q

2 pros and 3 cons of licensing

A

pros:
- reduces development costs/risks
- overcomes restrictive investment barriers

cons:
- lack of control
- cross-border licensing may be hard
- creating a competitor

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68
Q

what is franchising

A

collaborative alliance
– Similar to licensing but more control
• Reduces costs and risk of establishing
enterprise.
• May prohibit movement of profits from
one country to support operations in
another country.

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69
Q

what is turnkey

A

collaborative alliance
– contractor agrees to handle every detail of the project and then turn the project over to the
purchaser
– No long-term interest in the foreign country.
– May create a competitor.

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70
Q

what is contract manufacturing

A

collaborative alliance
– outsourcing of
manufacturing to other
firms

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71
Q

what is a management contract

A

collaborative alliance
– managerial assistance,
technical expertise in
exchange for monetary
compensation

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72
Q

greenfield vs brownfield

A

both wholly-owned subsidiaries. Green is building new facilities and brownfield is buying existing assets in a foreign countries.

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73
Q

3 advantages of wholly owned subsidiary

A

– No risk of losing technical competence to a competitor.
– Tight control of operations.
– Realize learning curve and location economies.

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74
Q

main disadvantage of wholly owned subsidiary

A

bear full cost/risk

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75
Q

3 advantages of greenfield strategy

A

– selection of site
– modern facilities
– clean slate (no debt • no outmoded equipment • labour problems)

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76
Q

4 disadvantages of greenfield strategy

A

– time
– land may not be available
– local constructions
– recruitment of locals

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77
Q

what is a strategic alliance

A

– Cooperative arrangement with potential or actual competitor (s)

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78
Q

3 advantages of strategic alliances

A

– Share fixed costs.
– Bring together skills and assets that neither company has or can develop.
– Establish industry technology standards.

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79
Q

Main disadvantage of strategic alliance

A

– Competitors get low cost route to technology and markets.

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80
Q

3 advantages of joint ventures

A

– Benefit from partner’s knowledge.
– Shared costs/risks with partner.
– Reduced political risk.

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81
Q

3 disadvantages of joint ventures

A

– Risk giving control of technology to partner.
– May not realize experience curve or
location economies.
– Shared ownership can lead to conflict.

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82
Q

how can you reduce opportunism by a partner in a joint venture (4)

A
  • walling off critical technology
  • establishing contractual safeguards
  • agreeing to swap valuable skills and technologies
  • seeking credible commitments
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83
Q

advantages of being a first-mover

A

– Preempt rivals and capture demand.
– Build sales volume.
– Move down experience curve before rivals and achieve cost advantage.
– Create switching costs

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84
Q

disadvantages of being a first-mover

A

– pioneering costs
– Changes in government policy.

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85
Q

biggest barrier to entering foreign markets

A

lack of understanding of foreign customers

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86
Q

licensing agreements may be used for…

A

patents, copyrights, trademarks, and other intangible property

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87
Q

t or f: Licensing agreements may be exclusive or non-exclusive

A

t

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88
Q

licensing often has an _____ motive

A

economic

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89
Q

why is licensing to subsidiaries common?

A

b/c of parent and subsidiary legal separation and the potential effect on taxes

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90
Q

dilemma of franchising

A
  • inadequacy of local supplies may hamper global product uniformity
  • the more global standardization, the less acceptance in the foreign countries
  • the more adjustment to the foreign country, the less the franchisor is needed
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91
Q

foreign management contracts are used primarily when…

A

the foreign company can manage better than the owners

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92
Q

turnkey operations are most commonly performed by _______

A

industrial-equipment, construction, and consulting companies

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93
Q

turnkey operations are most commonly performed for _______

A

government agencies

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94
Q

turnkey operations generally differ from IB collaborations because they (3)

A
  • may. beso large
  • depend on top-level governmental contacts
  • are often in very remote areas
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95
Q

2 companies from the same country joining together in a foreign market is an example of

A

joint ventures

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96
Q

a foreign company joining with a local company is an example of

A

joint venture

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97
Q

companies from 2 or more countries collaborating to create in a 3rd country is an example of

A

joint venture

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98
Q

can a private company and local government form a joint venture?

A

yes

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99
Q

what is an equity alliance

A

a collaborative arrangement in which at least 1 of the companies takes an ownership position (almost always minority) in the other(s). help solidify collaboration

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100
Q

5 factors for strain on collaborative arrangements

A
  • relative importance to partners
  • divergent objectives
  • control problems
  • comparative contributions and appropriations
  • differences in culture
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101
Q

2 types of culture clashes

A

country and company

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102
Q

6 ways to help collaborative operations succeed

A
  • fitting modes to country differences (pick right market)
  • finding and evaluating partners
  • negotiating agreements (the question of secrecy)
  • controlling through contracts and trust
  • evaluating continuously
  • adjusting the internal organizations
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103
Q

which arrangement minimizes commitment

A

non-equity arrangement

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104
Q

Pressures necessitating organizational adjustments when collaborating (2)

A
  • learning and its applications
  • pressures from shifting collaborative modes
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105
Q

what is culture

A

System of values and norms that are
shared among a group of people

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106
Q

Core vs peripheral values

A

core: non negotiable, peripheral are flexible

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107
Q

cultural collision

A

when contact among divergent cultures creates problems

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108
Q

what are values

A

what a group believes to be good, right desirable
central to the functioning of society

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109
Q

deal-focus culture

A

people are primarily task oriented

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110
Q

relationship-focus culture

A

less compulsion to wrap things up than deal-focus, dealing with friends>dealing with business

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111
Q

3 shortcomings in interpreting cultural research

A
  1. Responses to questions about their culture may be over/understated, clouded by sarcasm etc.
  2. People rely on averages when there are variations (cultural looseness/tightness)
  3. People overlook changes (cultures evolve)
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112
Q

2 sources of change

A
  1. Choice (social and economic situations present people with new alternatives - ex: farm worker -> factory job)
  2. Imposition (cultural imperialism) -> westernization etc
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113
Q

2 reasons language may not be a unifying force

A
  • many countries have multiple language groups
  • many countries depend on a regional lingua Franca (not unique)
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114
Q

2 reasons why English has become the ‘international language of business’

A
  1. Native English language countries account for so much of world production
  2. It’s the world’s most important second language
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115
Q

Why has religion been a cultural stabilizer?

A

Because centuries of religious influence continue to shape cultural values even in those societies where the practice of religion has been declining

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116
Q

Example of religious adjustments in IB

A

McDonalds limits sales of beef/pork in India to not offend muslims and Hindus

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117
Q

2 factors that determine social stratification

A
  1. Individuals achievements/talents (meritocracy(
  2. Their group memberships
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118
Q

What is social stratification

A

Culture’s way of ranking people that creates hierarchies and influences a persons class, status, and financial rewards within that culture

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119
Q

Ascribed group memberships

A

an individual affiliation Determined by birth I.e. gender, race, caste etc

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120
Q

Acquired group memberships

A

an individual affiliation not determined by birth, such as Religion, political affiliation, educational place etc

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121
Q

Country by country attitudes vary toward (5)

A

Social connections
Race and ethnicity
Male and female roles
Rules and expectations based on age
Family ties

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122
Q

4 examples of work motivations

A

Performance and achievement
Hierarchies of needs
Expectation of success and reward
Materialism

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123
Q

Masculinity-femininity index

A

Measures attitudes toward achievement
High masculinity: live to work
High femininity: work to live

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124
Q

The hierarchy of needs theory of motivation

A

People try to fulfill lower level needs before moving on to higher level ones

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125
Q

Power distance

A

A measurement of employee preferences of interaction between superiors and subordinates

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126
Q

High power distance

A

People prefer little consultation between bosses and subordinates. They also prefer management styles that are either autocratic (ruling with unlimited authority), or paternalistic (regulating subordinates’ conduct by supplying their needs)

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127
Q

Low power distance

A

Prefer ‘consultative; management styles

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128
Q

High individualism

A

Preference to fulfill leisure time, build friendships, and improve skills independently of the organization
People w/ high individualism prefer to receive direct monetary compensation as opposed to fringe benefits, and prefer to engage in personal decision-making and on-the-job challenges.

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129
Q

‘Safe’ work environments motivate _______. Challenges motivate ________

A

Collectivists, individualists

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130
Q

High collectivism

A

Employees dependence on the organization through training, satisfactory workplace conditions, and good benefits.
Fulfilling security needs.
US is an example

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131
Q

4 types of risk-taking behavior

A

Uncertainty avoidance
Trust
Future orientation
Fatalism

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132
Q

Uncertainty avoidance

A

Being uncomfortable with ambiguity; people prefer following set rules. Also prefer staying with current employers for a long time.

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133
Q

Future orientation

A

Denotes a willingness to delay gratification in order to reap more in the future. I.e. retirement plans

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134
Q

Fatalism

A

If people are fatalistic, they’re less likely to accept the basic cause-and-effect relationship between work and reward (que sera sera)

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135
Q

Differences in perception of cues may result from (2)

A

Genetics and language

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136
Q

Low context cultures

A

US is an example
People generally regard information as relevant when it bears directly on the subject at hand
‘Get to the point’

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137
Q

High context culture

A

I.e. Japan
People understand/regard indirect information as important (understand indirect instructions)

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138
Q

Managers are helped by knowing whether cultures favour (4)

A

Focused or broad information
A particular way of classifying information
Sequential or simultaneous handling of situations
Handling principles vs. Small issues first

139
Q

_________ _________ can improve a persons awareness and sensitivity

A

Cultural research

140
Q

Monochronic cultures

A

People prefer to work sequentially
I.e. finish with 1 customer before moving on to the next

141
Q

Polychronic

A

People comfortable multitasking

142
Q

Idealism

A

Establishing overall principles before small issures

143
Q

Pragmatic cultures

A

Focus on details more than abstract principles
I.e. US

144
Q

Main problems in communicating across cultures 3

A

Translation of spoken and written language
Differences in word meanings
Silent language

145
Q

Some ways to ensure proper translations

A

Get references for people who will be translators
Back translations (French to English to French)
Tone and words fit
Simple vocabulary
Avoid slang

146
Q

Silent language and 5 examples

A

Host of spoken and nonspoken cues
Colour association, sense of appropriate distance, concept of time/punctuality, body language, and prestige cues

147
Q

4 issues that affect degrees of successful adjustment

A
  1. The extent to which a culture is willing to accept the intro of anything foreign
  2. Whether key cultural differences are small/great
  3. The ability of individuals to adjust to what they find in foreign cultures
  4. The general management orientation of the company involved
148
Q

T of F: Host cultures always expect foreigners to adjust to them

A

F

149
Q

When doing business in a similar culture, companies usually have to make ________ adjustments, may _________ subtle differences

A

Fewer, overlook/ignore

150
Q

Cultural distance

A

The average number of countries societies are apart on cultural dimensions
Culturally close: US and Canada
Culturally far: Canada and Thailand

151
Q

Culture shock

A

The frustration that results from having to absorb a vast array of new cultural cues and expectations

152
Q

Reverse culture shock

A

When people come home from a different country and are culture shocked from their own country

153
Q

Change agents

A

People or processes that intentionally cause/accelerate social, cultural, or behavioural change)

154
Q

8 approaches to successful change

A
  • value systems
  • resistance to too much change
  • participation
  • reward sharing
  • opinion leadership
  • biculturals as mediators
  • timing
  • learning abroad
155
Q

Value systems implications

A

If something contradicts core values, it will likely not be accepted

156
Q

One way to avoid problems is to discuss proposed changes with stakeholders ___ ________

A

In advance

157
Q

Opinion leaders

A

Chanels of influence, people listen to them

158
Q

civil law

A

a body of rules that delineate private rights and remedies, and govern disputes between individuals in areas like contracts, property, and family

159
Q

commercial law

A

the area of law that governs the broad areas of business, commerce and consumer transactions

160
Q

collectivism

A

perspective that the needs of the group take precedence over the needs of the individual, encourages dependence on the organization

161
Q

common law system

A

a legal system based on tradicion, precedent, and custom and usage, in which the courts interpret the law based on those conventions; found in the UK and former british colonies

162
Q

constitutional law

A

law that is created and changed by the people

163
Q

country of origin

A

where products/services are created, which affects trade in that consumers may prefer to buy goods produced in one country rather than another usually because of quality perceptions or because of nationalism

164
Q

criminal law

A

body of laws dealing with crimes against the public and members of the public

165
Q

customary law system

A

a legal system anchored in the wisdom of daily experience or great spiritual/philosophical traditions

166
Q

democracy

A

a political system that relies on citizens’ participation in the decision-making process

167
Q

individualism

A

a construct comparing people’s preference to fulfill leisure time, build friendships, and improve skills independently and outside the organization as opposed to collectively and within the organization

168
Q

intellectual property (IP) property

A

property in the form of patents, trademarks, service marks, trade names, trade secrets, and copyrights

169
Q

intellectual property right (IPR)

A

ownership rights to intangible assets, such as patents, trademarks, copyrights, and know-how.

170
Q

legal system

A

the rules that regulate behavior, the processes that enforce the laws of a country, and the procedures used to resolve grievances

171
Q

mixed legal system

A

a legal system that emerges when 2 or more legal systems function in a country

172
Q

political freedom

A

the right to participate freely in the political process

173
Q

political ideology

A

the body of complex ideas, theories, and aims that constitute a sociopolitical program

174
Q

political risk

A

potential changes in political conditions that may cause a company’s operating positions to deteriorate

175
Q

political spectrum

A

a conceptual structure that specifies and organizes various types of political ideologies

176
Q

political system

A

the system designed to integrate a society into a viable, functioning unit

177
Q

rule of law

A

the principle that every member of a society must follow the same laws

178
Q

rule of man

A

notion that the word and whim of the ruler, no matter how arbitrary, are law

179
Q

theocratic law

A

a situation whereby a nation’s legal system is based on whatever religious text the ruling religion abides by

180
Q

third wave of democratization

A

expression to capture the collective set of nations that moved from nondemocratic to democratic political systems during the 1970s through the 1990s

181
Q

totalitarian system

A

a political system characterized by the absence of widespread participation in decision making and suppression of political/civil freedoms

182
Q

bicultural

A

someone who has internalized 2 different national cultures

183
Q

core values

A

values so strong that they are non negotiable

184
Q

cultural imperialism

A

the imposition of certain elements of an alien culture

185
Q

multicultural

A

description of someone who has internalized more than 2 national culture

186
Q

why must managers study political and legal environments in foreign countries

A

to fit activities to local circumstances

187
Q

goal and test of the political system

A

goal: integrating the diverse elements of a society
test: uniting society in the face of divisive viewpoints

188
Q

_________ champions the primacy of the rights and role of the individual over the group

A

individualism

189
Q

_________ advocates the primacy of the rights and role of the group over the individual

A

collectivism

190
Q

a ______ _____ encapsulate the doctrine of political behavior and change. It outlines the procedures for converting ideas into actions

A

political ideology

191
Q

Relationship between democracy and individualism

A

democracy and individualism are intrinsically related and mutually reinforcing; individualism legitimates principles of democracy and democracy supports standards of individualism

192
Q

business implications of a democracy

A

in a democracy, MNEs have the freedom to invest and operate based on economic, not political, standards. Managers/consumers do what they want as long as it promotes commerce/trade

193
Q

4 prominent types of democracies

A

representative
multiparty
parliamentary
social

194
Q

4 types of totalitarianism

A

authoritarianism
fascism
secularism
theocracy

195
Q

relationship between totalitarianism and collectivism

A

totalitarianism and collectivism are intrinsically related and mutually reinforcing; collectivism legitimates principles of totalitarianism and totalitarianism supports standards of collectivism.

196
Q

business implication of totalitarianism

A

private enterprise, if allowed, supports state control of the economy. State is the majority owner of many companies.

197
Q

3 types of political systems identified by Freedom House

A

free: open political competition, respect for civil liberties, independent civic life, and independent media. I.e. US

partly free: limited political rights and civil liberties. Corruption, wear rule of law. I.e. Guatemala

not free: few to no political rights and civil liberties. I.e. China

198
Q

3 forces that powered past the third wave of democratization

A
  • failure of totalitarian regimes to deliver prosperity
  • improving communication technology
  • economic dividends of political freedom
199
Q

4 types of political systems according to the economist intelligence unit

A 
full democracy (australia) 
flawed democracy (brazil) 
hybrid regime (cambodia) 
authoritarian regime (russia)
200
Q

4 factors powering the resurgence of totalitarianism

A
  • strong states support strong performance (political economy of growth)
  • gaps in the principles and practices of democracy (rhetoric vs reality)
  • economic insecurity following slowing growth
  • escalating debate of the meaning of democracy
201
Q

4 primary types of political risk, from least to most disruptive

A
  • systemic
  • procedural
  • distributive
  • catastrophic
202
Q

systemic political risks

A

influence the macro business environment, affect the operation of all firms

203
Q

procedural political risks

A

institutes impediments that constrain the flexibility of local operations. Micro risk. Can be managed by MNEs through monitoring industry developments, minding the relative contribution of their firms to the local economy, and promoting solid citizenship.

204
Q

Distributive political risk

A

gradually eliminate the local property rights of foreign companies. Companies have to be vigilant and make sure they’re not TOO valuable

205
Q

catastrophic political risk

A

devastates the business environment for all companies

206
Q

3 components of modern legal systems

A
  • constitutional law
  • criminal law
  • civil/commercial law
207
Q

5 types of legal systems in the world today

A
  • common law
  • civil law
  • theocratic law
  • customary law
  • mixed
208
Q

4 operational concerns that managers face worldwide

A

starting a business
entering/enforcing contracts
hiring/firing workers
closing a business

209
Q

T or F: The type of legal system in the country directly influences the standards of acceptable contracts

A

T

210
Q

5 strategic concerns that managers face worldwide

A
  • product origin and local content
  • marketplace behavior
  • legal jurisdiction
  • product safety and liability
  • intellectual property protection
211
Q

the addition of a ____ __ ___ clause to contracts between different parties in different countries is an effective legal safeguard

A

choice of law

212
Q

local content regulations

A

require that a certain % of intermediate goods used in the production process come from domestic suppliers

213
Q

richer countries typically regulate business activities ____. Poorer countries typically regulate ____

A

less, more

214
Q

T or F: Countries that observe the rule of law, as opposed to the rule of man, protect intellectual property less.

A

F

215
Q

Capability

A

A distinct type of resource that improves the productivity of related resources owned by the firm

216
Q

Concentrated configuration

A

The design of a value chain whereby a particular activity is performed in one geographic location and serves the world from it

217
Q

Configuration

A

To set up, arrange, and disperse value activities to the ideal locations around the world so that the company can start and sustain operations

218
Q

Core Competency

A

A special outlook, skill, capability or technology that runs through the firm’s operations, weaving together disparate value activities into an integrated value chain; Managers bundle resources and capabilities to create core competency

219
Q

Dispersed configuration

A

The design of a value chain whereby a particular activity is performed in many geographic locations and serves the world market from any to all of its units

220
Q

Global integration

A

The unification of distinct national economic systems into one global market

221
Q

Global strategy

A

A strategy that increases profitability by achieving cost reductions from experience curves and location economies

222
Q

Great by choice

A

The principle that managers’ choices are the basis of building and sustaining a high-performance enterprise in unpredictable, tumultuous, and fast-moving times.

223
Q

Industry structure

A

The makeup of an industry: its number of sellers and their size distribution, the nature of the product, and the extent of barriers to entry

224
Q

Integration-responsiveness (IR) grid

A

Schema that helps managers measure the global and local pressures that influence the configuration and coordination of value chains

225
Q

International strategy

A

The effort of managers to create value by transferring core competencies from the home market to foreign markets in which local competitors lack those competencies

226
Q

Liability of forgiveness

A

Foreign companies’ lower survival rate in comparison to local companies for many years after they begin operations

227
Q

Location advantages

A

Cost advantages arising from performing a value activity in the optimal location

228
Q

Location economies

A

Cost advantages arising from performing a value in the optimal location
Same as location advantage

229
Q

Local responsiveness

A

The process of disaggregating a standardized whole into differentiated parts to improve responsiveness to local market circumstances

230
Q

Localization strategy

A

An approach that emphasized responsiveness to the unique conditions prevailing in different national markets

231
Q

Mission

A

Statement that defines the business, its objectives, and its approach to achieve them

232
Q

Primary activities

A

The line activities that compose the value chain. Specifically, inbound logistics, operations, outbound logistics, marketing, and service

233
Q

Strategy

A

An integrated and coordinated set of commitments of actions that reflects the company’s present situation, identifies the direction it should go, and determines how it’ll get there

234
Q

Support activities

A

The general infrastructure of the firm that anchors the day-to-day execution of the primary activities of the value chain

235
Q

Transnational strategy

A

Configuring a value chain to exploit location economies as well as coordinate activities to leverage core competencies while simultaneously responding to local pressures

236
Q

Value

A

A measure of a firm’s capability to sell what it makes for more than the costs incurred to make it; the ultimate purpose of strategy

237
Q

Vision

A

The idealization of what an MNE firm wants to be. It expresses, in broad terms, its ultimate goal.

238
Q

Sense making

A

A collaborative process to promote a shared understanding

239
Q

The idea of industry structure represents the interdependent relationships among (5)

A

Suppliers of inputs
Buyers of outputs
Substitute products
Potential new entrants
Rivalry among competing firms

240
Q

Firm conduct

A

The choices a company makes regarding research, manufacturing, marketing, distribution, and the like that influence its profitability

241
Q

T or F: Some firms find ways to exploit market imperfections to sustain success in spite of industry conditions

A

T

242
Q

Managers bundle ________ and __________ to create a core competency

A

Resources, capabilities

243
Q

Risks of cost leadership strategy (3)

A
  • disruptive technologies change efficiency standards
  • customers needs change
  • cheaper, better products from rivals
244
Q

4 risks of the differentiation strategy

A
  • customers’ expectations change
  • customers no longer see sufficient value to justify the price premium
  • a rival introduces a newer, cooler, higher-performing alternative
  • counterfeits that offer a cheaper imitation
245
Q

Integrated cost leadership/differentiation strategy

A

Provides customers w. Relatively lower cost products that also have differentiated features

246
Q

Key threat to the integrated cost leadership/differentiation strategy

A

Getting ‘caught in the middle’

247
Q

What is the value chain made up of? 2

A

Primary activities that design, make, sell, and deliver the product
Support activities that implement the primary activities

248
Q

5 Primary activities

A

Product design
Operations
Outbound logistics
Marketing
Services

249
Q

4 Support activities

A

Materials and equipment
Firm infrastructure
Human Resources
Systems and solutions

250
Q

Factors that influence the configuration of a value chain include

A

Business costs
Digitization
Economies of scale
Innovation context
Logistics
Resource costs
Robotics

251
Q

Managers rely on ________ _______ to anticipate reconfiguring the value chain to changes in customers, industries, institutions, and environments

A

Scenario planning

252
Q

Global integration vs local responsiveness

A

Global integration: standardize processes
Local responsiveness: tailor to each market

253
Q

Motivations for global integration

A

Standardize products/processes to maximize scale, experience, and learning effects
Maximize productivity of resources, capabilities, and competencies
Exploit location effects
Capitalize on converging consumer preferences and universal needs
Build global image w/ universal message

254
Q

Motivations for local responsiveness

A

Customize products and process to local customer preferences to optimize scale, experience, and learning effects
Satisfy host government requirements and regulations
Tailor marketing messages to local ideals
Respond to historical or geographic imperatives
Tap local resources, capabilities, and competencies

255
Q

t or f: increasing standardization supports concentrating value chains

A

T

256
Q

Key advantage of international strategy

A

Works well when an MNE’s products or processes speak to a universal customer preference

257
Q

Key disadvantage of international strategy

A

Centralized decision making in the home country can misread local innovations

258
Q

Key advantage of localization strategy

A

Tailors to unique features of consumer preferences etc. In a national market

259
Q

Key disadvantage of localization strategy

A

By encouraging organizational overlap, it increases overhead expenses

260
Q

Money has 3 inalienable features: it is

A

Difficult to acquire
Transient (quickly used)
Scarce

261
Q

Key advantage of global strategy

A

Exploits economies of scale, learning effects, and location economies in order to translate theMNEs resources and capabilities into core competences that support cost leadership worldwide

262
Q

Key disadvantage of global strategy

A

cost sensitivity - mnes have little latitude to customize processes/products to local conditions; each change reduces efficiency

263
Q

Key advantage of transnational strategy

A

Best suited to respond to the emerging requirements of the global business environment

264
Q

Key limitation of transnational strategy

A

Difficult to implement in practice, given the challenges of complicated agendas, high costs, and cognitive limits

265
Q
A
266
Q
A
267
Q

boundaries (2 definitions)

A

in terms of political environments, an official or perceived point of separation that defines the boundary of a nation.
in terms of organization structure, horizontal constraints that follow from having specific employees only do specific jobs in specific units as well as the vertical constraints that separate employees into specific levels of a precisely stipulated command-and-control hierarchy

268
Q

boundarylessness

A

state whereby companies build organizations that eliminate the vertical, horizontal, and external boundaries that impede information flows and hinder developing relationships

269
Q

bureaucratic control

A

system whereby an organization uses centralized authority to install rules and procedures to govern activities.

270
Q

Centralization

A

the degree to which high-level managers, usually above the country level, make strategic decisions and delegate them to lower levels for implementation

271
Q

control systems

A

process by which managers compare performance to plans, identify differences, and, where found, assess the basis for the gap and implement corrective action; ensure that activities are completed in ways that support the company’s strategy

272
Q

coordination by mutual adjustment

A

system whereby managers interact extensively with counterparts in setting common goals

273
Q

coordination by plan

A

system that relies on general goals and detailed objectives to coordinate activities

274
Q

coordination by standardization

A

system whereby rules and procedures apply to units worldwide, thereby enforcing consistency in the performance of activities in geographically dispersed units

275
Q

coordination systems

A

systems that synchronize the work responsibilities of the value chain so that the company uses its resources efficiently and makes decisions effectively

276
Q

decentralization

A

the degree to which lower-level managers, usually at/below the country level, make and implement strategic decisions

277
Q

divisional structures

A

an organization that contains separate divisions based around individual product lines or based on the geographic areas of the markets served

278
Q

functional structure

A

an organization that is structured according to functional areas of busness

279
Q

globality

A

the state of affairs where one competes with everyone, from everywhere, for everything

280
Q

Market control

A

system whereby an MNE uses external market mechanisms to establish internal performance benchmarks and standards

281
Q

matrix structure

A

a structure in which foreign units report (by product, function, or area) to more than one group, each of which shares responsibility over the foreign unit

282
Q

mixed structure

A

a structure that integrates various aspects of classical structures

283
Q

neoclassical structure

A

applies different devices to resolve the shortcomings, such as conformity, rigidity, bureaucracy, and authoritarianism, often found in the classical formats of functional and divisional structures

284
Q

network structure

A

neoclassical structure whereby a small core organization outsources value activities tolinked firms whose core competencies support greater innovation

285
Q

organizational culture

A

the shared meaning and beliefs that shape how employees interpret information, make decisions, and implement actions

286
Q

organization structure

A

the formal arrangement of roles, responsibilities, and relationships within an organization

287
Q

organization

A

the specification of the framework for work, development of the systems that coordinate and control what work is done, and the cultivation of a common workplace culture among employees

288
Q

unity-of-command principle

A

an unbroken chain of command and communication should flow from the CEO to the entry-level worker

289
Q

vertical differentiation

A

the specification of the degrees of centralization and decentralization of decision-making in an organization

290
Q

virtual organization

A

a form of company that acquires strategic capabilities by creating a temporary network of independent companies, suppliers, customers, and even rivals.

291
Q

decisions made above the subsidiary level signify (centralization/decentralization)

A

centralization

292
Q

decisions made below the subsidiary level signify (centralization/decentralization)

A

decentralization

293
Q

in principle, decision-making should occur at the level of those who (2)

A
  1. are most likely affected by its outcome
  2. have the most direct knowledge of the situation
294
Q

horizontally differentiating on the basis of product or geography installs a ______ structure

A

divisional

295
Q

horizontally differentiating on the basis of business activity anchors the _______ structure

A

functional

296
Q

limit of functional structure

A

constrains the development of cross-functional knowledge-generating and decision-making relationships.

297
Q

headquarters
production marketing
prod EUR, prod ASIA. mark EUR, mark ASIA

A

functional

298
Q

3 characteristics of divisional structure

A
  • divide employees based on the product type, customer segment, or geographical location
  • duplicate functions and resources among divisions
  • fit the organizational demands of the MNE that manages conventionally differentiated activities
299
Q

international division

A
  • preferred when international activities represent a small share of its total activity
  • international division is a separate unit with different country subsidiaries
300
Q

limit of international divisions

A

can fan us vs them tensions

301
Q

worldwide product divisional structure

A
  • centralizes decision-making authority
  • splits into products, then countries in each product
302
Q

worldwide area division

A
  • sales not dominated by a single country/region
  • just split from headquarters to different areas
303
Q

limits of worldwide product division

A

autonomy of each product division means that different subsidiaries from different product divisions within the same foreign country often report to different executives.
COORDINATION PROBLEMS CAN CAUSE INEFFICIENCIES

304
Q

global matrix structure looks like

A

a matrix

305
Q

5 things each MNE’s structure reflects

A
  • market circumstances
  • strategic choice
  • value chain configuration
  • administrative legacy
  • executive preferences
306
Q

classical structures emphasize the principles of _____ and _______.
Neoclassical structures emphasize the principles of _______ and ________

A
  1. command, control
  2. coordinate, cultivate
307
Q

t or f: a virtual organization emphasizes boundaries

A

false. deemphasizes

308
Q

challenge of coordination by standardization

A

differences in industry conduct and host-government attitudes complicate coordination by standardization

309
Q

coordination by mutual adjustment depends on

A

managers interacting extensively w counterparts

310
Q

3 types of control mechanisms

A

reports
visiting subsidiaries
information systems

311
Q

clan control

A

uses shared values and ideals to moderate employee behavior

312
Q

5 key features of a company’s organization culture

A
  • values and principles of management
  • work climate and atmosphere
  • patterns of ‘how we do things around here’
  • traditions
  • ethical standards
313
Q

deontological approach

A

an approach which asserts that moral reasoning occurs independent of consequences

314
Q

foreign corrupt practices act (FCPA)

A

a law that criminalizes certain types of payments by US companies, such as bribes to foreign government officials

315
Q

normativism

A

a theory stating that universal standards of behavior (based on people’s own values) exist that all cultures should follow, making nonintervention unethical

316
Q

relativism

A

a theory stating that ethical truths depend on the groups holding them, making intervention by outsiders unethical. The belief that behavior has meaning and can be judged only in its specific cultural context.

317
Q

stakeholders

A

the collection of groups, including stockholders, employees, customers, and society at large, that a company must satisfy to be successful

318
Q

sustainability

A

the ability to meet the needs of the present without compromising the ability of future generations to meet their own needs, while taking into account what is best for the people and the environment

319
Q

teleological approach

A

an approach based on the idea that decisions are made based on the consequences of the action

320
Q

utilitarianism

A

a consequences-based approach to moral reasoning that judges an action to be right if it does the most good to the most people

321
Q

Equation for analyzing the effect of FDI on a host country’s BOP

A

B = (m-m1) + (x-x1) + (c-c1) Where B = bop effect M = import displacement M1 = import stimulus X = export stimulus X1 = export reduction C = capital inflow for other than import and export payment C1 = capital outflow for other than import and export payment

322
Q

On the import side, the BOP is positive if the FDI results in

A

A substitution for imports

323
Q

On the import side, the BOP is negative if the FDI results in

A

Increase in imports

324
Q

The BOP effects in terms of capital flows for FDI

A

POSITIVE for the host country initially and NEGATIVE for the home country NEGATIVE for host country and POSITIVE for the home country later

325
Q

Why are growth and employment effects not a zero-sum game

A

B/c MNEs may use resources that were unemployed and underemployed

326
Q

3 levels of moral development

A

Preconventional Conventional Post conventional/autonomous/principled

327
Q

4 Dimensions of a code of conduct

A
  • setting a global policy that must be complied with wherever the company operates - communicating the code to employees, suppliers, and subcontractors - ensuring that policies are carried out - reporting results to external shareholders
328
Q

Franchising

A

A contract in which a company assists another on a continuous basis and allows use of its trademark

329
Q

Institutions

A

Systems of established and prevalent social rules that structure social interactions, such as languages, money, law etc

330
Q

Licensing agreements

A

Contracts whereby firms allow others to use some assets, such as trademarks, patents, copyrights, or expertise

331
Q

Management contracts

A

Arrangements in which a company provides personnel to perform management functions for mother organization

332
Q

Offshoring

A

The dependence on production in a foreign country, usually by shifting from a domestic source

333
Q

Reshoring

A

Firms bringing back operations to home countries (sometimes called rightshoring)

334
Q

Royalties

A

Payments for the use of some assets, such as trademarks, patents, copyrights, or expertise

335
Q

Turnkey operations

A

Construction projects performed under contract and transferred to owners when they’re operational

336
Q

Consortium

A

An organization owned by more than 2 firms

337
Q

Cross licensing

A

An arrangement we are by companies exchange technology or other and tangible property rather than compete with each other on every product and every market

338
Q

Depencencia theory

A

A theory holding that emerging economies have practically no power in their dealings with MNEs

339
Q

Ethnocentrism

A

Reflects the idea that conviction that one’s owns practises are superior to those of other countries

340
Q

Polycentrism

A

Polycentric organization believes it should act abroad like companies there

341
Q

Geocentrism

A

Integrates home and host country practises as well as introduces some entirely new ones Hybrid of host and home

342
Q

Three company and management orientations

A

Polycentrism Ethnocentrism Geocentrism

343
Q

6 hofstede dimensions

A
  1. Individualism vs. Collectivism 2. Power distance (low vs high) 3. Masculinity vs. Femininity 4. Uncertainty avoidance 5. Long-term orientation vs. Short-term orientation 6. Indulgence vs. Restriction

EVA (8 decks)

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