Chapter 4: Learning Objective

1. Globalization: the Collapse of Time and Distance a. Definitions i. What is globalization? 1. The trend of the world economy to becoming a more interdependent system 2. The process of international integration (global interchange through roads, internet) b. Three important developments concerning Globalization i. Rise of the Global Village/Electronic Commerce 1. The Net is the reason why this is alive. a. 35% of the worlds population are internet users b. $48.2 billion sales in e-commerce in the third quarter of 2011 ii. One Global Market (rather than many national) 1. Refers to the tendency of many nations acting as one economy 2. Negative Effects a. Since the interdependency everyone feels everything. A recession in one nation leads to a recession elsewhere. iii. Rise of Megamergers and Internet-Enabled Minifirms 1. Megamergers a. Ex: Disney & Pixar, Whole Foods & Wild oats 2. Minifirms a. Advantages i. Small companies can be started easily ii. Can maneuver faster because they can move direction faster 2. The Big Picture (International Management) a. Why learn about International Management? i. It takes independence, resourcefulness and entrepreneurships i.e. Same skills to be successful in todays work place ii. International Management: The practice of managing business operations in more than one country. They are familiar with the culture, language, and economic and political environment. b. Multinational Corporation/Organization i. A multinational Corporation is a business firms with Ex: GP Morgan, Chase, or GE ii. A multinational organization is a non profit organization with operations in different nations ex: Red Cross c. Important Terms i. Ethnocentrism: managers who think they know it all (they believe their native country is superior in thoughts and

practices. aka parochialism (narrow view that people only i.e. I know it all ii. Polycentrism: i.e. they know best iii. Geocentrism: i.e. Whats best is what effective. (mix of the two) 3. The Importance of National Culture a. Understanding Culture i. Culture is the behaviors and beliefs characteristic of a particular social, ethnic or age group. ii. National Culture is the shared sets of beliefs or values common to a group of people. b. The GLOBE project i. House examined cross cultural leadership and processes. 9 cultural dimensions were identified. 1. Power Distance: the unequal distribution of powe. Also expresses the degree to which a societys members accept unequal power among people, institutions and organizations 2. Uncertainty avoidance: how much do people rely on social norms to avoid uncertainty 3. Institutional Collectivism: loyalty to the social unit 4. In-group Collectivism: loyalty to family or organization. or the extent to which people should take pride in being members of their family, circle of close friends and their work organization 5. Gender egalitarianism: Gender differences 6. Assertiveness: Dominance in social relationship. Or the cultural dimension that represents the degree to which people are expected to be confrontational and competitive. 7. Future orientation: Planning for the future 8. Performance orientation: reward for improvement and excellence 9. Human orientation: Encourage from being kind and courteous c. Differences in Culture (5 of them) i. Language 1. Chinese Mandarin is one of the most important today yet less than 4% of schools offer this ii. Interpersonal Space 1. How closely people stand and talk to each other iii. Communication 1. Can be verbal and nonverbal iv. Time Orientation 1. Two main times a. Monochronic: people prefer to do things one at a time. i.e. in theUS

v. Religion d. US Managers on Foreign Assignments and Why they Fail i. People who work outside of the US borders (about 6.3 million) are known as expatriats ii. Many people are not culturally flexible of living in another country LEARN SMART MODULES Chapter 4:

b. Polychromic: people prefer to do things multiple things at a time

APEC: a group of 21 Pacific Rim countries whose purpose is to improve economic and political ties Availability of supplies, access to finance capital, lower labor costs, new markets, and avoidance of tariffs and import quotas: are the five reasons companies expand internationally CAFTA-DR, NAFTA, APEC, MERCOSUR, ASEAN, EU: All examples of major trading blocs. A trading bloc is an economic community of nations that have agreed to remove trading barriers from each other Countertrading; the bartering of goods for goods Countertrading: the exchange of goods for goods (bartering) Dumping: the practice of a foreign company exporting products abroad at a lower price than the price in the home market in order to drive down the price of the domestic product Embargo: A complete ban on the import and export of certain products Exchange rate: the current rate at which one countrys currency can be traded for another countrys currency Foreign work experience: commonly demonstrates independence, resourcefulness, and entrepreneurship in people Franchise, Join Venture, License: all examples of foreign enterprises (subsidiary) that are not owned entirely by a parent company Franchising: a form of licensing in which one company allows a foreign company to pay it a fee and a share of the profit in return for using the first companys brand name and a package of materials and services Global Outsourcing: the lowest risk out of any international expansion Higher salary, advantage over peers, and more marketability: are considered advantages that result from having foreign work experience Importing: when a company buys goods outside of its home country and then resells them domestically Inquisitiveness, Independence, Entrepreneurship, Resourcefulness, and Adaptability: are the five skills that demonstrate foreign experience to management recruiters International Monetary Fund, World Trade Organization, World Bank: three principle organizations designed to facilitate international trade

Joint Venture: when a U.S. firm forms a partnership with a foreign company to share the risks and rewards of starting a new enterprise together in a foreign country (aka strategic alliance) Joint ventures: highest risk to investment for the organization when expanding internationally Joint Ventures: the highest risk out of any international expansion/ investment for the organization Licensing: is when a U.S. company allows a foreign company to pay it a fee to make or distribute its products or service, but without requiring a share of its profits Maquiladoras; manufacturing plants that are allowed to operate in Mexico with special privileges in return for employing Mexican citizens Mercosur: is the largest trading bloc in Latin America Negative effects of globalization on the US: Global investment in mortgages contributed to the subprime mortgage meltdown and recession, outsourcing of jobs to cheaper labor overseas, and service as well as manufacturing jobs being moved offshore. Outsourcing: Obtaining goods and services from suppliers outside your company Primary Goal of NAFTA: primary aim of NAFTA was to abolish 99% of the goods traded Skills commonly demonstrated by foreign work experience: Entrepreneurship, Independence, and resourcefulness Three events that Rosabeth Moss Kantor considered to be important factors for the emergence of the global economy: Countries of the pacific rim began to open their economies to foreigh investors, the global trend of governments deregulating their economies, and the end of communism in Easter Europe Trade protectionism: the use of government regulations to limit the import of goods and services Trade Protectionism: the use of government regulations to limit the import of goods and services Wholly-owned subsidiary: a foreign subsidiary that is totally owned and controlled by an organization

Why do countries place tariffs on imported goods or impose import quotas? To protect their own domestic industries