Review for Midterm Exam - International Business | INTB 200, Study notes of International Business

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Review of Mid-term CH1 What’s global biz? - International biz: business that engages in international economic activities or the action of doing business aroad. - Global biz: business around the globe including both international activities and domestic biz activities Coca-cola, McDonald’s - Multinational enterprise (MNE): firm that engages in foreign direct investment (buying a Co. from another country) - Foreign direct investment (FDI): investments in, controlling, and managing value-added activities in other countries. - Emerging economies: a term that has gradually replaced the term “developing countries” since the 1900s Brazil China India Colombia - Gross national product(GNP): measure as the sum of value added by resident firms, households, and government operating in an economy even foreign firms - Gross domestic product (GDP): total market value of all final goods and services produced within a country in a given period of time usually a calendar year - Gross national income(GNI): GDP plus income from nonresident sources abroad- the term used by the World Bank and other international organizations to supersede the GNP term - Purchasing power parity (ppp): adjustment made to the GDP to reflect differences in the cost of living Emerging economies key terms - Traid: North America, Western Europe and Japan development countries - BRIC: acronym for the emerging economies of Brazil, Russia, India and China - Group of 20: leaders of 19 major countries + EU who meet on biannual basis to discuss global economic issues Viewing of the global economy - Base of pyramid: vast majority of humanity, about 4 billion ppl, live at the base of the pyramid and make less than $2,000 a year - The “Bottom Billion”: concentrated in Africa and Central Asia- 58 small countries, stuck at the bottom in terms of growth, incomes, and human development Working in a global firm - Expatriate manager: a manager who worked abroad, or “expat” - International premium: significant compensation “package” when working overseas First core perspective: an institution-based view Success and failure of firms are constrained by institutions: - Formal rules: requirements that treat domestic and foreign firms as equals enhance the potential odds for foreign firms’ success or those that discriminate against foreign firms, would undermine the chances for foreign entrants - Informal rules: cultures, ethics, and norms play an important part in shaping the success and failure of firms around the globe Second core perspective: a resource-based view - Liability of foreignness: inherent disadvantage that foreign firms experience in host countries because of their nonnative status What is globalization - Globalization: close economic integration of countries and peoples of the worlds - semiglobalization: strategy that suggests that barriers to market integration at borders are high but not high enough to completely insulate countries from each other. Three views of globalization - a new force in recent times - a long-running historical evolution - a pendulum swinging between extremes - risk management: the identification and assessment of risks and the preparation to minimize the impact of high-risk, unfortunate events - scenario planning: a technique to prepare and plan for multiple scenarios Nongovernment organization - advocacy: environmentalists, human rights activities, consumers, etc. that raise awareness, acceptance and knowledge by lobbying, press work and activist events - operational: design and implementation of development-related projects that my stress service delivery or participation; where religious or secular; whether more public or private- oriented- can be community-based, national or international CH3 Informal institutions Come from: - Culture - Ethics - Norms Ethnocentrism To perceive one’s own cluture, ethics, and norms as “natural, rational, and morally right.” Culture The collective programming of the mind which distinguishes the members of one group or category of people from another Language English is the dominant language in global business Recent globalization has called for the use of one common language Lingua franca: a global biz language Religion Religion is another major manifestation of culture Knowledge about religions is crucial even for nonreligious managers Social structure and education Social stratification: the hierarchical arrangement of individuals into social categories such as classes castes, or divisions within a society Education can be used to maintain social stratification or to break down social barriers Social mobility: the degree to which members from a lower social category can rise to a higher status Cultural differences - Context: the underlying background upon which social interaction takes place - Low-context culture: communication is usually taken at face value without much reliance on unspoken context. North European America German - High-context culture: communication relist a lot on the underlying unspoken context, which is as important as the words used Chinese Korea Japan The cluster approach - Cluster: countries that share similar cultures - Ronen and Shenkar clusters: influential set of clusters proposed by management Arabic Latin America - Globe clusters: influential set of clusters named after the global leadership and organizational behavior effectiveness project led by management professor Robert House Latin Europe Huntingtion’s cluster approach - Huntington civilizations: influential set of clusters popularized by political scientist Samuel Huntington - Civilization: highest cultural grouping of people and the broadest level of cultural identity people have Dimentsion approach - Power distance: extent to which less powerful members within a country expect and accept that power is distributed unequally. - Individualism: idea that an individual’s identity is fundamentally his or her own - Collectivism: idea that individual’s identity is fundamentally tied to the identity of his or her collective group - Masculinity: dimension of sex role differentiation - femininity dimension of sex role differentiation - uncertainty avoidance: extent to which members in a culture accept or avoid ambiguous situations and uncertainty - long-term orientation: how much emphasis is placed on perseverance and savings for future betterment Ethics - ethics: the principles, standards, and norms of conduct that govern individual and firm behavior - code of conduct: a set of guidelines for making ethical decision - ethical relativism: follows the cliché: “When in Rome, do as the Romans.” Ethics key terms - refers to the absolute belief that “there is only one set of ethics, and we have it.” - Corruption: the abuse of public power for private benefits, usually in the form of briberty Ethics and corruption - Foreign Corrupt Practices Act (FCPA): a US law enacted in 1977 that bans bribery of foreign officials Norms and ethical challenges - Norms: the prevailing practices of relevant players - In-group: individuals and firms regarded as a part of their own collective - Out-group: individuals and firms not regarded as a part of “us” Informal institutions - Cultural intelligence: an individual’s ability to understand and adjust to new cultures CH 5 Trading internationally - Exporting: selling abroad - Importing: buying from abroad - Merchandise: tangible products being traded - Service: intangible services being traded International trade - Trade deficit: when a nation imports more than it exports - Trade surplus: when a nation exports more than it imports - Balance of trade: whether a country has a trade surplus or deficit Realities of international trade - Tariff barrier: means of discouraging imports by placing a tariff on imported goods - Import tariff: tax imposed a good brought in from another country - Deadweight cost: net losses that occur when import tariffs are imposed Nontariff barriers - Discourages imports using means other than taxes on imported goods - Import quota: restriction on the quantity of a good that can be brought into a country - Voluntary export restraint: exporting countries voluntarily agree to restrict their exports - Local content requirement: rules stipulating that a certain proportion of the value of the goods made in one country must originate from that country - Administrative policy: bureaucratic rules that make it harder to import foreign goods - Antidumping duty: costs levied on imports that have been “dumped” drive domestic firms out of business Arguments against free trade - Infant industry argument: young domestic firms need government protection because they stand no chance of surviving and will be crushed by mature foreign rivals. - Trade embarge: politically motivated trade sanctions against foreign countries to signal displeasure