Test 1 Flashcards
4 risks of international business
- Cross-cultural risk
- country risk
- currency (financial) risk
- commercial risk
Cross cultural risk
- cultural differences
- negotiation patterns
- decision making styles
- ethics
Country risk
- harmful or unstable political system
- inadequate or underdeveloped legal system
- government intervention and trade barriers
Currency (financial) risk
- difference in currency
- foreign taxation
- inflation and transfer pricing
Commercial risk
- operational problems
- timing of entry
- competitive intensity
- poor execution of strategy
Drivers of market globalization
- worldwide reduction of barriers to trade and investment
- market liberalization and adoption of free markets
- industrialization, economic development, and modernization
- integration of world financial markets
- advancement of technology
Dimensions of market globalization
- integration and interdependence of national economies
- growth of global investment and financial flows
- convergence of buyer lifestyles and preferences
- globalization of production activities and services
Societal consequences of market globalization
- contagion
- loss of national power
- offshoring and the flight of jobs
- effect on the poor
- effect on the environment
Contagion
Rapid spread of financial or monetary crisis from one country to another
Firm-level consequences of market globalization
- countless new business opportunities
- new risks and intense competition from foreign competitors
- more demand from buyers wanting products or components from abroad
- greater emphasis on proactive internationalization
- internationalization of firm’s value chain
Distributor
- intermediary
- Have title on product and are liable
Agent or broker
- intermediary
- do not have title on product and are not liable
Trading company
- intermediary
- Find smaller business and buy excess products to then sell
Participants in international business
- focal firms
- distribution channel intermediaries
- facilitator
- Governments
Focal firms
Initiator of an international business transaction
- MNE and SME
Distribution channel intermediary
Specialist firm that provides distribution, logistics, and marketing services in the international value chain
Facilitator
A firm that provides special expertise in banking, the law, customs clearance, or market research
Ethnocentric orientation
Using our own culture as the standard for judging other cultures
Polycentric orientation
The person develops a greater affinity for the country in which they work than their home country
Geocentric orientation
A global mindset in which the person is able to understand a business or market without regard to national boundaries
Low context culture
- lots of talking involved
- want to get to know the other person
High context culture
- get straight to the point
- don’t want to talk for a long period of time
Managerial guidelines for cross-cultural success
- acquire factual and interpretive knowledge
- avoid cultural bias
- develop cross cultural skills
Ethics
Moral principles and values that govern the behavior of people, firms, and governments, regarding right and wrong
