MGT 201 Ch. 4 Essay

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Globalization
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The extent to which trade and investments, information, ideas, and political cooperation flow between countries
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Global mindset
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The ability to appreciate and influence individuals, groups, organizations, and systems that represent different social, cultural, political, institutional, intellectual, and psychological characteristics
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MNCs
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Typically receives more than 25% of its revenue from operations outside its home country
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Ethnocentric companies
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emphasis on home country
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Polycentric companies
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oriented toward the markets of individual foreign host countries
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Geocentric companies
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Truly world oriented – favor no specific country
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Bottom of pyramid concept
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Proposes that corporations can alleviate poverty and other social ills, as well as make significant profits, by selling to the world’s poor
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Exporting
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Maintain domestic production, sell products in foreign countries
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Global outsourcing
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Engaging in the international division of labor to obtain the cheapest sources of labor and supplies
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Licensing
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A company in one country makes certain resources available to companies in other countries in order to produce and sell abroad
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Franchising
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Form of licensing in which a company provides its foreign franchisees with a complete package of materials and services (e.g. McDonald’s)
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Direct investing
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Organization is directly involved in managing its production facilities in a foreign country
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Joint venture
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Organization shares costs and risks with another firm in a foreign country to build facilities, innovate, produce and sell
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Wholly owned foreign affiliate
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Foreign subsidiary over which an organization has complete control
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Greenfield venture
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Company builds a subsidiary from scratch in a foreign country – most risky form of direct investment
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International management
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managing business operations in one or more countries key environmental factors: – economic – legal/political – sociocultural
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Economic development
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Differs widely among countries and regions – Typically based on per-capita income
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Per-capita income
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income generated by the nation’s production / total population – income per person
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Infrastructure
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country’s physical facilities that support economic activities
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Political risk
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Risk of loss of assets, earning power, or managerial control due to politically based events or actions by host governments
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Political instability
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Includes riots, revolutions, or government upheavals that can affect the operations of an international company
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Ethnocentrism
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A natural tendency of people to regard their own culture as superior and to downgrade or dismiss other cultural values
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Hofstede’s value dimensions
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power distance uncertainty avoidance individualism collectivism masculinity femininity long-term orientation short-term orientation
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Power distance
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High – people accept inequality in power Low – people expect equality in power
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Uncertainty avoidance
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High – members are uncomfortable with uncertainty and ambiguity Low – people have high tolerance for the unstructured, unclear, and unpredictable
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Individualism
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Loose social framework, Individuals are expected to take care of themselves
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Collectivism
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Tightly knit social framework in which individuals look after one another E.g. organizations protect members’ interests
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Masculinity
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Preference for achievement, heroism, assertiveness, work centrality, and material success
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Femininity
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Preference for relationships, cooperation, group decision making, and quality of life
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Long-term orientation
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Reflects a greater concern for the future and a high value on thrift and perseverance
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Short-term orientation
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Concern with the past and present and a high value on meeting current obligations
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High-context culture
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people use communication to build relationships e.g. meaning is derived from context
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Low-context culture
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use communication to exchange facts and information e.g. communication for strictly business
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Changing international landscape
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China – manufacturing – phones, autos, Internet India – service – software, pharmaceuticals, call centers Brazil – growing clout – agricultural, mining, manufacturing, service – 7th largest economy
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GATT – General agreement on tariffs and trade
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1. 23 Nations, 1947 2. Decrease trade restrictions (e.g. tariffs, quotas, other barriers) 3. Called for establishment of WTO (1995)
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WTO
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1. Monitor international trade 2. Legal authority to arbitrate (settle) trade disputes 3. Pros & Cons to its existence (e.g. benefits and backlash of globalization) a. Who is really benefiting?
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EU
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1. 27 Nations 2. Powerful, single market system for Europe a. European Unification b. Euro – a single European currency that has replaced the currencies of 16 EU member nations 3. Global recession created winners and losers which slowed the move toward “European Identity”
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NAFTA
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1. Jan. 1, 1994 2. U.S., Mexico, Canada into single market 3. Spur growth and investment, increase exports, expand jobs 4. Decrease tariffs and trade restrictions

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