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INTB 200 MIDTERM REVIEW CURRENTLY TESTING WITH COMPLETE SOLUTIONS
GRADED A+
International Business business activities of public and private enterprises that involve the movement of goods, services or resources across national boundaries (raw materials, capital, and people) Foreign Business the operations of a firm outside of its domestic or home market International Company a company with operations in more than one nation Factors that Influence Globalization
- Political Climate
- Technology
- Markets
- Cost
- Competition Political Climate
- increased in DFI
- a rise in NGOs
- lowering of protectionism Corporate Culture rules and regulations that proscribe and prescribe how employees are to behave/act in a particular company's environment Values abstract ideas about what a group believes to be good, right, and desirable Norms social rules and guidelines that prescribe appropriate behavior in a particular situation Culture is...
- learned, not innate
- shared amongst people Ethnocentrism belief in the superiority of your own ethnic group/culture
Foreign Corrupt Practices Act (FCPA) forbids bridery Social Structure
- social mobility Social Mobility the extent to which individuals can move out of the status in which they were born
- caste system: born into a position and can't get out of it
- class system: born into it but you can climb out with hard work and luck Religion shared beliefs and rituals concerned with the realm of the sacred tells:
- what ethical system is based on
- attitudes and beliefs
- moral principles/values Material Culture what products do people own/what would they like to own
- economic variables: income level and distribution of income
- technology (how do people make things)
- economic (who makes what and why)
- looking at all human made object of the culture
- PPP Purchasing Power Parity (PPP) "Big Mac Index" Technology
- is the investment going to be worthwhile?
- are the raw materials available?
- is energy available?
- state of transportation/infrastructure
- technological dualism Technological Dualism side by side existence of technologically advanced and primitive systems of productions Education
- be suspect of published literacy rate (what level?)
- trends (educating women, do wealthy educate their children domestic or abroad)
Aspects of Corporate Culture
- formality: US is casual, overseas use titles
- status: US is equality, overseas can be hierarchical, authoritarian, or vertical
- dignity: show respect and be polite
- humility: most people won't brag/boast about their accomplishments
- priority: social obligations often take precedent over business
- image: dress, speak, and act like a professional Types of Risk
- country: political and legal elements
- currency: economic
- company: market/credit Political Economy comprised of political and legal elements as well as economic Macropolitical affects all industry in a country ie. civil wars Micropolitical only specific countries or industries are affected
ie. new contracts/policy Political System system of government in a nation extremes:
- totalitarian v. democratic
- individualistic v. collectivist Types of Government
- communism
- capitalism
- socialism Communism Karl Marx' idea of a classless society
- central planning
- gov. owns means of production
- gov. decides what is to be produced
- gov. decides how much is to be distributed
- violent overthrow must happen to put socialism back in place Capitalism
- what businesses do the gov. own?
- how nationalistic is the country?
- how stable is the gov.
- traditional hostilities
- terrorism Risks due to types of businesses the gov. owns a. how am I going to be viewed by the gov.? (help of hindrance to the economy) b. dealing in the public or private sector? (competition) c. does the gov. rely on free market or government controls? (allocation of resources) Risks due to the Level of Nationality of the Country concerns for or attachment to a particular country's interests or culture
- nationalization (expropriation or confiscation) Nationalization government takes private property and makes it public expropriation- gov. pays confiscation- gov. doesn't pay Terrorism unlawful acts of violence to achieve a variety of objectives
ex. bombing, cyber crimes, hijacking Legal System the rules that regulate behavior, along with the processes by which the laws of a country are enforced and through which redress for grievances is obtained Rule of Law certain that a country is governed by the legal system in place Types of Law
- Common Law
- Civil Law (Code Law)
- Religious Law (Theocratic)
- Bureaucratic
- Tribal or Traditional Law
- International Law Common Law Decisions are based on characteristics of the case and cumulative wisdom of judge's decision on individual cases (they create legal precedent)
- Judge is charged with interpreting the law in light of the particular case that's being handled
- Statutory Laws
- Reduction in transportation costs through containerization and air freight Containerization paying to ship by container rather than individual products Air Freight costs decrease: quick travel causes interest rates to decrease because the company gets a quicker return Markets markets open up and companies can enter new ones and as the companies globalize, they become global customers
- advertise, pay taxes, hire nationals, build factory, or open office
- creation of new middle classes = new customers who have a disposable income Why would a company branch out to global markets?
- home market is saturated
- retaliation, foreign co. enters your home market
- seasonal differences (ie. fruit) Cost Economies of Scale (bring costs down)
- standardized product
- improve company's competitive advantage
- invest overseas
- access to foreign markets that are close by
- building global awareness of your product
- building worldwide distribution DFI direct foreign investment Competition Increases in intensity
- find new buyers for your products
- product is obsolete Marketing Task performing business activities that will direct the flow of a company's goods or services to consumers or users in other nations Types of Barriers to Trade
- tariff barriers
- monetary barriers
Blocked Currency no trade/deals in this currency (country won't accept others) Differential Exchange Rate higher rates for less favored products Governmental Approval government must grant permit for trade Types of Market Barriers
- quotas
- embargo
- economies of scale
- documentation
- anti-dumping laws International Environment interaction between domestic and foreign environmental forces or between sets of foreign environmental forces
Self-Reference Criterion reference to ones own cultural values when judging how others will behave in new and different environments Direct Foreign Investment goes beyond merely investing in foreign stock markets: activities outside of home country
- investment in equipment, structures, organizations (becoming part of that country's economy
- investment at levels sufficient for management to obtain significant control Marketing Mix options for the products in a new international market:
- standardization
- product is the same
- product is adapted
- dual adaptation
- product invention Standardization product and communication are the same around the world
- offers lower costs
- easier to control
- easier to coordinate from HQ
advertise
- direct or indirect
- comparison
- humor
- gender roles
- level of satisfaction
- popular v. traditional culture
- information (content or fluff) Culture sum total of beliefs, rules, techniques, institutes, and artifacts that characterize a human population Bureaucratic Law used in dictatorships
- legal system in place BUT the law is whatever the bureaucrats say it is
- contracts broken at a whim
- lack of consistency, lack of predictability, and no appeal process International Law
- COGSA (Carriage of Goods by Sea Act): protects shippers, carriers, and consignees
- CISG (Convention on the International Sale of Goods): contracts
- Incoterms (International Commercial Terminology): terms of sale
- UCP-600: uniforms customs and practices
Contracts document that specifies conditions under which the exchange of goods or services
- details the rights and obligations of the parties involved Ways to Solve Problems Between Companies
- litigation: court
- mediation: hire middleman
- negotiation: between buyer and seller
- arbitration: outside party decision is binding on all What to Consider About the Labor Market in International Business
- laws may require employee consultation or participation in management decisions
- legal restraints on employee dismissal
- acquiring a foreign company (do you acquire the labor requirements or the liabilities and assets?)
- cultural requirements to hire
- labor laws Co-Determination employees participate in company decisions
