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Exams > International Business Chapter 1,2,3, and 5 (EXAM) > Flashcards

International Business Chapter 1,2,3, and 5 (EXAM) Flashcards

1
Q

6 Dimensions of International Business

A
  1. Globalization of Markets
  2. International Trade
  3. International Investment
  4. International Business Risks
  5. Participants
  6. Foreign Market Entry Strategies
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2
Q

Globalization of Markets: Globalization

A

The intense economic, political, and personal interconnectedness among countries, companies, and consumers

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3
Q

Globalization of Markets: International Business

A

Performance of trade and investment activities by FIRMS across national borders

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4
Q

Globalization of Markets

A

Ongoing economic integration and growing interdependency of countries worldwide

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5
Q

International Trade

A

Exchange of products and services across national borders; typically through exporting and importing

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6
Q

International Trade: Exporting

A

Sale of products or services to customers located abroad, from the base in the home country or a third country (Boeing and airbus)

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7
Q

International trade: Importing or Global Sourcing

A

Procurement of products or services from suppliers located abroad for consumption in the home country or a third country (Toyota imports from China when it manufactures in Japan)

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8
Q

International Investment

A

Transfer of assets to another country or the acquisition of assets in that country (AKA FOREIGN DIRECT INVESTMENT [FDI])

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9
Q

International Investment: International Portfolio Investment

A

Passive ownership of foreign securities such as stocks and bonds in order to generate financial returns

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10
Q

International Business Risks (4 major types of risks)

A
  1. Cross Cultural
  2. Country Risk
  3. Currency (financial) risk
  4. Commercial Risk
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11
Q

How does international business differ from domestic business

A
  1. Conducted across national borders
  2. Uses distinctive business methods
  3. is in contact with countries that differ in terms of culture, language, political system, legal system, economic situation, infrastructure, and other factors
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12
Q

Cross cultural risk

A

Cultural differences
Negotiation patterns
Decision-making styles
Ethical policies

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13
Q

Country Risk

A

Government- intervention, protectionism, and barriers to trade and investment (Help business in own country)
Bureaucracy- red tape, administrative delays, corruption
Legal limitations- lack of legal safeguards for intellectual property rights, legislation unfavorable to foreign firms
Economy- economic failures and mismanagement
Social and political unrest- instability

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14
Q

Currency Risk

A

Currency exposure- general risk of unfavorable rate fluctuations
Asset valuation- risk that exchange rate fluctuations will adversely affect the firms assets and liabilities
Foreign taxation- income, sales, and other taxes vary worldwide
Inflation- high inflation complicates business planning and pricing of inputs and finished goods

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15
Q

Commercial risk (THE FIRM)

A

Weak partner
Operational problems
Timing of Entry
Competitive intensity
Poor execution of strategy

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16
Q

Participants

A

Multinational Enterprise (MNE)- large company
Small/medium-sized enterprises (SME)- over 90% of all firms in most countries, 500 or fewer
Born global firm: A young entrepreneurial SME that undertakes substantial international business at or near its founding (short period of time)
Non governmental organizations

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17
Q

Foreign Market entry strategies
(why firms internationalize)

A
  1. seek opportunities for growth
  2. Earn higher margins and profits
  3. Gain new ideas about products, business methods
  4. serve key customers (derived demand)
  5. Be closer to suppliers
  6. Gain access to lower cost or better value factors of production
  7. Develop economies of scale
  8. Confront international competitors
  9. Invest in a potentially rewarding relationship with a foreign partner
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18
Q

Phases of globalization: Phase one

A

Rise of manufacturing: cross-border trade commodities, largely by trading companies

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19
Q

Phases of globalization: Phase two

A

Electricity and steel production
Emergence and dominance of early MNE’s manufacturing, extractive, and agricultural industries

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20
Q

Phases of globalization: phase three

A

Formation of General Agreement on tariff and Trade, conclusion of World War 2, Marshal Plan to reconstruct Europe
focus by industrializing western countries to reduce trade barriers, rise of MNEs from Japan, development of global capital markets, rise of global trade names

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21
Q

Phases of globalization: phase four

A

Privatization of state enterprises in transition economies, revolution in information, communication and transportation technologies; remarkable growth of emerging markets, former communist countries opening up to the world buying products

rapid growth in cross border trade of products, services, and capital, rise of internationally active SMEs and services firms, rising prosperity of emerging markets

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22
Q

Phases of globalization: phase five

A

rise of digital technologies, and other new technologies, which are boosting manufacturing productivity and the efficiency of international trade in services

leveraging technology to facilitate trade and local production, rising trade in digitally enables services but slowing growth of trade in merchandised goods

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23
Q

Globalization framework (4 key components)

A
  1. drivers
  2. dimensions (characteristics)
  3. Firm-level consequences
  4. Societal consequences
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24
Q

Drivers

A

reduction of barriers
transition to market-based economies (market liberalization/free trade)
industrialization
integration of world financial markets
advances in technology

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25
Q

Advances in technology

A

> easier communication and collaboration
low scale and low cost manufacturing
Better and cheaper transportation
2 bins:
< IT
< Digitization

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26
Q

I.T.

A

Science and process of creating and using info resources

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27
Q

Digitization

A

enabling or transforming business functions, operations, or activities by leveraging digital tech. or digitization of data

28
Q

Dimensions (characteristics)

A

> Integration or interdependence of economies
Rise of regional economic integration blocs (ex: NAFTA)
Growth in global investment
convergence of buyer lifestyles allowing for standardized products
Globalization of production activities and services (Nike outsourcing from China)

29
Q

Firm Level consequences

A

a purely domestic focus is no longer possible
>opportunities to internationalize firms value chain and realize international business benefits (cost savings, better value chain activities, access customers, labor, input, or technology, benefit from foreign partner capabilities)<

30
Q

Value chain

A

Sequence of value adding activities the firm performs while it goes through the process of developing, producing, marketing, and servicing a product

research and development –> Sourcing/procurement–> manufacturing –>Marketing –> distribution –> sales and service

31
Q

offshoring

A

own it but not in the country

32
Q

Societal consequences

A

Contagion
Loss of national sovereignty
offshoring and the flight of jobs
impact on the poor
impact on natural environment
impact on national culture

33
Q

contagion

A

rapid spread of crises in one country to another

34
Q

Essential Elements of culture (6 reasons)

A
  1. Cross- cultural risk
  2. dimensions of culture
  3. language
  4. religion
  5. models of culture
  6. cultural competency
35
Q

Cross cultural risk

A

a situation or event where a cultural miscommunication puts some human value at stake. it arises in environments comprised of unfamiliar languages and unique values, beliefs, and behaviors:

cultural differences
negotiation patterns
decision making styles
ethical practices

36
Q

culture

A

values, beliefs, customs, arts, and other products of human thought and work that characterize the people of a given society

37
Q

socialization

A

learning rules and behavior for a given society

38
Q

acculturation

A

adjusting and adapting to a culture other than your own

39
Q

dimensions of culture

A

Iceberg:
High culture- art, drama, literature, classical music (visible)
folk culture- humor, religion, cooking, dress, etc. (aware of/ seen)
deep culture- greeting rituals, gender roles, family relationships, concepts of beauty, etc. (Unaware of/unseen)

40
Q

Dimensions

A

> values
attitudes
manners and customs
perceptions of space
symbolic and material productions (ex: flag)
education
social structure

41
Q

Language

A

Verbal language:
-translation
-idioms
-jargon (terms embedded in culture)
Nonverbal language:
- facial expressions, hand gestures, eye contact, posture, etc.

42
Q

Religion

A

a system of common beliefs or attitudes regarding a being or system of thought that people consider sacred, divine, or the highest truth; and the associated moral values, traditions, and rituals
Religions: Christianity, Islam, Hinduism, Buddhism

43
Q

Models of cultures

A

Hofstede study (things are on a spectrum):
> high and low context
>individualism and collectivism
> power distance
> uncertainty avoidance
> masculinity and femininity
> long term vs short term
> deal versus relationship orientation

44
Q

Cultural competency

A

Cultural levels: National, professional, corporate
Cultural orientation:
>ethnocentric- home country mindset
> polycentric- love host country
> geocentric- enjoy all country culture

45
Q

Building your cultural intelligence (CQ)

A

three guidelines:
1. acquire factual knowledge about the other culture and try to speak the language
2. avoid cultural bias
>self reference criterion
> critical incident analysis
3. develop cross cultural skills
>tolerance for ambiguity, perceptiveness, valuing personal relationships, and flexibility and adaptability

46
Q

Comparative Advantage

A

superior features of a nation that provide unique benefits in global competition. COUNTRY-SPECIFIC ADVANTAGE

47
Q

Competitive advantage

A

Assets or capabilities of a firm that are difficult for competitors to imitate allowing for above average profits to be generated. FIRM SPECIFIC ADVANTAGE

48
Q

Why do NATIONS trade (6 classical theories)

A
  1. mercantilism
  2. absolute advantage principal
  3. Comparative advantage principal
  4. factor proportions theory and leontief paradox
  5. International product life cycle theory
  6. New trade theory
49
Q

Mercantilism

A

A belief in the 16th century that national prosperity results from maximizing exports and minimizing imports

neo mercantilism- the nation should run a trade surplus

harms importers and consumers

50
Q

Free trade

A

The absence of restrictions to the flow of goods and services among nations (PHASE III)

leads to:
>more and better choices for consumers and firms
>lower prices for consumers and firms
> higher profits and better work wages
> higher living standards for consumers (costs are lower)
> Greater prosperity in poor countries

51
Q

absolute advantage principal

A

a country should produce only those products in which it has absolute advantage or can produce using fewer resources than another country

52
Q

Comparative advantage

A

foundation concept of international trade:
beneficial for two countries to trade even if one had absolute advantage in the production of all products; what matters is not the absolute cost of production but the relative efficiency with which it can produce the product

53
Q

Factors of production (land, labor, capital)

A

AKA factor endowments theory; argues that each country should produce and export products that intensively use relatively abundant factors of production, and import goods that intensively use relatively scarce factors of production

54
Q

Leontief paradox

A

countries can successfully export products that use less abundant resources (Ex: US exports labor-intensive goods)

Implies international trade is complex and cannot be explained by a single theory

55
Q

International product life cycle

A

Each product and its associated manufacturing technologies go through three stages of evolution: Introduction, Maturity, and standardization

56
Q

Introductory stage

A

inventor country enjoys a monopoly both in manufacturing and exports

57
Q

Maturity stage

A

the product’s manufacturing becomes relatively standardized and other countries start producing and exporting the product

58
Q

standardization stage

A

manufacturing ceases in the original innovator country, and it becomes a net importer of the product

59
Q

new trade theory

A

Argues that economies of scale are an important factor in some industries for superior international performance, even in the absence superior comparative advantages

60
Q

How can nations enhance their competitive advantage?

A
  1. Competitive advantage
    >determinants of national competitiveness
  2. National industrial policy
    >practices

Comparative advantage + Competitive advantage = National competitiveness

61
Q

Michael porter’s diamond model

A

top: Firm strategy, structure, and rivalry
Right: Demand conditions
Bottom: related and supporting industries
Left: Factor conditions

62
Q

National industrial policy

A

a proactive economic development plan employed by the government to nurture or support promising industry sectors with potential for regional or global dominance
Initiatives:
> tax incentives
> monetary and fiscal policies
> rigorous educational system
> investment in national infrastructure
> strong legal and regulatory systems

63
Q

Why and how do firms internationalize?

A

Stages in company internationalization:
1. domestic focus
2. pre-export stage
3. experimental involvement
4. active involvement
5. committed involvement

64
Q

Modes of entry

A

look at worksheet

65
Q

How can internationalizing firms gain and sustain competitive advantage

A

MNE focused:
> FDI
-monopolistic advantage theory
-internationalization theory
-dunnings eclectic paradigm
>Non FDI explanations
-international collaborative ventures
+equity-based joint ventures
+ project- based alliances

66
Q

Globalization pros and cons (firm/society)

A

Firm Pro: new markets, standardization of product, cost savings, economies of scale, benefits of having foreign partners
Firm Con: increased competition, increased complexity
Society Pro: advancements in technology, interconnectedness (ease of access to products), interdependence, better standard of living
Society Con: loss of domestic jobs, offshoring, contagion, deculturalization

Exams (10 decks)

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