International Business 1-5 – Flashcards
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What are the elements/ dimensions of international business
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-globalization of markets -foreign market entry strategies -international business risks -international investment -international trade -Participants (Firms/intermediaries/facilitators/governments)
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International Business
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performance of trade and investment activities by firms across national borders
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Globalization of markets
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ongoing economic integration and growing interdependency of countries worldwide
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International Trade
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exchange of products and services across national borders; typically through exporting and importing
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Exporting
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sale of products or services to customers located abroad, from a base in the home country/third country
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Importing/Global sourcing
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obtaining products or services from suppliers located abroad for consumption in the home country or a third country
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International Investment (FDI)
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Transfer of assets to another country or the acquisition of assets in that country.
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International Portfolio Investment
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Passive ownership of foreign securities such as stocks and bonds in order to generate financial returns
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Chain of Value
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Market research>R&D>Sourcing>Production>Marketing>Distribution>After Sales Service
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What are the two types of firms we talked about
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1) Company who grow up in own country and then become an internationalized firm 2) Born Global-immediately start as an international firm more likely to be successful and have lower costs
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What are the four risks of international business
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-Cross cultural risk -Commercial Risk -Country risk -Currency (Financial)risk
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Cross cultural risk
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occurs when a cultural misunderstanding puts some human value at stake EX:different languages/customs.lifestyles/religion
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Country risk (also called political risk)
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effects on company operations caused by developments in the political legal, and economic environment in a foreign conuntry
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Currency risk
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risk of adverse fluctuations in exchange rates
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Commercial Risk
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refers to the firm's potential loss or failure from poorly developed or executed business strategies, tactics, or procedures
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Multinational Enterprise (MNEs)
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large company with substantial resources that preforms various business activities through a network of subsidiaries and affiliates located in multiple countries
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Country that hosts the greatest number of MNEs
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united states
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Why do firms internationalize
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-seek opportunities for growth through market diversification -earn higher margins and profits -Gain new ideas about products, services and business methods -better serve key customers that have relocated abroad -be closer to supplies
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what is the first phase of globalization
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Transportation: introduction of railroads and ocean transport
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what is the second phase of globalization
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Electricity/Energy: rise of electricity and steel productions
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what is the third phase of globalization
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End of WWII: rebuilding; information of GATT
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what is the fourth phase of globalization
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communication and liberalization of markets: end of cold war;fall of Berlin wall;growth of emerging markets
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Drives of globalization
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openness; falling barriers;government quotas, tariff, regulations;techonolgical advances;communication costs'transportation costs
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Globalization
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-openness to international flows, inter-connectedness and interdependence -more openness>spurs growth
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What are the upstreams of the Value Chain
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Market research R&D sourcing
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what are the downstreams of the Value Chain
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Production Marketing Distribution
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Value chain
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the sequence of value-adding activities performed by the firm in the process of developing, producing, and marketing a product or a service
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Contagion
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the tendency of a financial or monetary crisis in one country to spread rapidly to other countries, due to the ongoing integration of national economies
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Offshoring
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is the relocation of manufacturing and other value chain activities to cost-effective locations abroad
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What are the four participants in International Business
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-Focal Firm -Distribution channel intermediary -facilitator -governments
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Focal Firm
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Initiator of international business. Primarily large MNE. conceives, designs, and produces offerings intended for consumption by customers worldwide
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Foreign market entry strategies of Focal firms
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FDI: The transfer of assets to another country or the acquisition of assets in that country International collaborative venture:Partners pool their resources and share the cost and risks of a new venture exporting:Sale of products or services to customers located abroad, from a base in home -Importing/sourcing -Licensing:granting certain intellectual property in exchange for money -Franchising: granting the right to a foreign partner to use an entire business system in exchange for fee
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Distribution Channel intermediary
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Specialist firm that provides distribution, logistics, and marketing services in the international value chain
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Facilitator
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a firm that provides special expertise in banking, the law, customs clearance, market research, or other
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Governments
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are active in the international business as suppliers, buyers, and regulators
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Turnkey contrators
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focal firms that plan, finance, organize, manage, and implement all phases of a project and then hand it over to a foreign customer after training local personnel
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Distribution Channel Intermediaries
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-Deliver products and services in the home country and abroad -Connects the focal firm with the end user in the foreign market
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Intermediaries in the Foreign market
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-Foreign distributor -Agent -manufacturers rep
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Foreign distributor
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takes the title to the exporter's goods and performs marketing functions such as sales, promotion, and after sales service on the exporter's behalf
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Agent
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Also known as a broker. Does not take title to the goods. Works on a commission basis to bring the buyer and seller together
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Manufacturer's Representative
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Works under contract by the exporter to represent and sell its merchandise in designated territories. Acts as a contracted salesperson in a designated territory.
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Intermediaries Based in Home Country
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-Trading Company -Export Management Company (EMC) -Online Intermediaries -Facilitators and governments
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Trading Compnay
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handles imports/exports/finished products
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Export Management Company (EMC)
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Acts as an export agent on behalf of the focal firm. Finds export customers, negotiates terms of sale, and arranges for international shipping, typically for smaller exporters.
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Online Intermediaries
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'Disintermediation' - bypassing traditional intermediaries - is made possible by the Internet. Examples include Amazon, Dell, eBay
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Sovereign wealth funds
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a state owned investment fund that undertakes systematic, global investment activities
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Ethnocentric orientation
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using our own culture as the standard for judging other cultures
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Polycentric orientation
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mindset in which the manager develops greater affinity for the country in which he/she works, than for the home country.
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Geocentric Orientation
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global mindset in which the manager is able to understand a business/ market w/out regard to national boundaries
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Socialization
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the process of learning the rules and behavioral patterns appropriate to ones' society
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Acculturation
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process of adjusting and adapting to a culture other than one's own
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the top of the ice berg is..
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high culture; deals with visible culture
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the middle of the ice berg is...
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folk culture; we are aware of it
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the bottom and biggest part of the ice berg is..
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deep culture; we are unaware of it
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national culture
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nationality, ethnicity, gender, religion
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professional culture
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academe, business, banking, engineering, computer programming
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national culture and professional culture deal with
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corporate culture
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Deal orientated cultures
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managers focus on the task at hand, are impersonal, typically use contracts and want to get down to business EX: US, Australia
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in relation oriented cultures
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managers value affliations with people rapport, and getting to know each other party in business
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Monochronic
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a rigid orientation to time in which the individual is focused on schedules/punctuality/time as a resource, linear, and money
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Polychronic
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a flexible non-linear orientation to time in which the individual takes a long term perspective; time is elastic long delays are tolerated before taking action. punctuality is unimportant.
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Low context cultures
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rely on explicit explanations with emphasis on spoken words, such cultures emphasize clear, efficient logical delivery of verbal messages communication is direct
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high context cultures
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NONVERBAL direct language, communication aims to promote harmonious relationship "face-saving"
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country examples of low context culture
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US, German, Swiss
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Country example of high context culture
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Japan, Chinese, Korean
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Individualism high number
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more individualistic; function independently Ex: US. Australia, Britain, Canada
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individualism low number
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group oriented, functions as a group Ex: China, Panama, Japan, South Korea
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POwer distance high number
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Wider gap of how societies deal with inequalities eX: Guatemala, Malaysia, Phillippiness
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Power distance, low number
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lower gap between society inequality Ex:Scandinavian countries
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uncertainty avoidance, high number
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not comfortable taking risks. need to control future Ex: Belgium, France, japan
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uncertainty avoidance, low number
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comfortable taking risks. isnt scared of future change Ex: Ireland, jamaica, US
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masculinity, high number
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driven by competition and success
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masculinity, low number
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more nurturing roles and society
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long term orientations
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long view in planning and living. focuses on years and decades Ex: Japan, China, Singapore
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Short term orientations
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typical in the US and western countries
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In Japan
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regular meetings build harmony and team spirit -develop and maintain lifetime relations with customers is the norm in many industries
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in Hong Kong
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the whole family works ceaselessly to make it success
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in US
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friends put up their money for the entrepreneur
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in Turkey
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friends will ask the entrepreneur to hire their sons and nephews
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in India
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administrative system will impose monumental red tape
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Ethics are
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moral principles and values that govern the behavior of people, firms, and governments, regarding right and wrong
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intellectual property
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refers to the ideas or works created by individuals or firms and includes a variety of proprietary intangible assets discoveries and inventions
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IPR
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legal claim through which proprietary assets and protected from unauthorized use by other parties via trademarks, copyrights and patents
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relativism
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belief that ethical truths are not absolute but diff from group to group; according to this perspective, a good rule is "When in Rome, do as Romans do"
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normstivism
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belief that ethical behavioral standards are universal and firms and individuals should seek to uphold them consistently around the world
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Corporate social responsibility
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manner of operating a business that meets or exceeds the ethical, legal, commercial and public expectations of customers, shareholders, employees and communities
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what is the pyramid of ethical behavior
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corporate social responsibility>ethical behavior> compliance with laws and regulations
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Framework for the right thing to do
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-ID the problem - Gather and examine the facts - create alternatives -decide and implement -evaluate
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Utilitarian
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do the most good, get least harm
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right approach
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which action respects the rights of everyone involved
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Fairness approach
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assume whats more fair for everyone else
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common good approach
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contribute the most good to those whose life is affected
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virtue approach
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whatever you value the most
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make or buy. MAKE
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do it yourself, within the company=Can make it at home or abroad (FDI or offshoring)
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make or buy. BUY
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hire another company, contract it out. can buy it at home (outsourcing) or abroad (offshoring)
