BUSINESS.MANAGEMENT
Why is it important to import and export
products?
Why do we trade with other countries?
How are companies impacted by our global
economy?
How does global trade affect me?
NOTE GLOBE!
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GLOBALIZATION (INTERNATIONAL BUSINESS)
Globalization:
•Is the flow of goods and services,
capital, and knowledge across
country borders
Advantages:
•Enhances economic
interdependence among countries
and organizations
•Allows both small and large firms
from developed and less developed
economies to compete
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WHAT IS INTERNATIONAL BUSINESS?
International Business: all
business activities needed to
create, ship, and sell goods and
services across national
boarders. Also called: global
business, international trade,
and foreign trade.
Domestic Business: making,
buying, and selling goods within
a country
INTERNATIONAL TRADE
Exchange of goods and
services by different
countries
We purchase chocolate
from Belgium and Blue
jeans from China
WHY WE TRADE
One country might not be
able to produce a good it
wants
Some countries have an
advantage over other
countries in producing
particular goods and
services
E.g. France cannot
produce oil because it
has no oil fields
ADVANTAGES
Absolute Advantage
Ability to produce more
of a good than another
producer with the same
quantity of inputs
Different countries are
endowed with different
resources
Comparative Advantage
Producers should produce
goods they are most
efficient at producing
Purchase from others
goods they are less
efficient at producing
COUNTRY’S INSTITUTIONAL ENVIRONMENT:
ECONOMIC DIMENSION
Economies are classified as either:
•Developed economies
–Larger economies with effective
capital markets
•Emerging economies
–Rapidly growing with underdeveloped
capital markets
•Developing economies
–Weak economies with little capital
available for growth
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COUNTRY’S CULTURE
• Culture
–Learned set of assumptions,
values, and behaviors
–Accepted as successful
–Passed on to newcomers
• Begins when a group of people
faces a set of challenges
• Evolves and changes with time
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CULTURAL DIMENSIONS
Power
Distance
Gender
Focus
Cultural
Dimensions
Uncertainty
Avoidance
Individualism/
Collectivism
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CULTURAL DIMENSIONS: POWER
DISTANCE
Extent to which people
accept power and
authority differences
among people
Power
Distance
Cultural
Dimensions
High power distance =
people accept power
differences
Low power distance =
people like to regard
themselves as more or
less equal
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CULTURAL DIMENSIONS: UNCERTAINTY
AVOIDANCE
Extent to which people can accept uncertainty or ambiguity
Cultural
Dimensions
Uncertainty
Avoidance
High uncertainty avoidance = prefer clear norms that govern behavior (i.e.,
avoid uncertainty)
Low uncertainty avoidance = have fewer rules and are comfortable in
ambiguous situations (i.e., can accept uncertainty)
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CULTURAL DIMENSIONS:
INDIVIDUALISM/COLLECTIVISM
Individualism:
Collectivism:
Extent to which people’s
identities are selforiented; people take
care of themselves and
immediate family
Extent to which a
people’s identities are a
function of the group(s)
to which they belong
(family firm, community,
etc.)
High emotional
independence
Cultural
Dimensions
Emotional dependence
on institutions
Emphasize and reward
individual achievement
Individualism/
Collectivism
Emphasize group
membership
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CULTURAL DIMENSIONS: GENDER FOCUS
Extent to which people in a country value masculine or feminine traits
Gender
Focus
Cultural
Dimensions
Masculine = activities leading to success, money, possessions
Feminine = activities showing caring of others and enhancing quality of life
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CULTURAL VALUES AND SCORES
Country
Power
Distance
Uncertainty
Avoidance
Individualism/
Collectivism
Gender
Focus
(a)
(b)
(c)
(d)
Brazil
5.33
3.60
3.83
3.31
Canada
4.82
4.58
4.38
3.70
China
5.04
4.94
4.77
3.05
England
5.15
4.65
4.27
3.67
France
5.28
4.43
3.93
3.64
India
5.47
4.15
4.38
2.90
(a)
(b)
(c)
(d)
Higher scores indicate higher power distance
Higher scores suggest more uncertainty avoidance
Higher scores indicate greater collectivism
Higher scores suggest greater gender equality; lower scores indicate
male domination
Adapted from Exhibit 3.215
CULTURAL VALUES AND SCORES (CONT.)
Country
Power
Distance
Uncertainty
Avoidance
Individualism/
Collectivism
Gender
Focus
(a)
(b)
(c)
(d)
Japan
5.11
4.07
5.19
3.19
Mexico
5.22
4.18
4.06
3.64
Netherlands
4.11
4.70
4.46
3.50
Poland
5.10
3.62
4.53
4.02
Russia
5.52
2.88
4.50
4.07
United States
4.88
4.15
4.20
3.34
(a)
(b)
(c)
(d)
Higher scores indicate higher power distance
Higher scores suggest more uncertainty avoidance
Higher scores indicate greater collectivism
Higher scores suggest greater gender equality; lower scores indicate
male domination
Adapted from Exhibit 3.216
HOW CULTURE
IMPACTS…ASSIGNMENT
LIZZIE’S MORNING STORY
 Read Individually
BASED ON THE CULTURE VALUE AND
SCORES TABLE ABOVE, GET IN PARTNER
PAIRS AND PICK ONE OF THE 12 COUNTRIES
LOCATE 2 POPULAR PRODUCTS IN THAT
COUNTRY CURRENTLY
BASED ON YOUR RESEARCH, CONNECT WHY
THIS PRODUCT IS SUCCESSFUL TO THEIR
SCORES ON THE VALUES TABLE.
BE PREPARED TO PRESENT IN CLASS
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Brazilian Flag with Coffee
Beans…WHY?
Notes Flag!
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US/Cuba Embargo
Article
Brief discussion
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GLOBAL AND INTERNATIONAL PRODUCT
DECISIONS
Global Product: a standardized item offered in
the same form in all countries in which it is
sold (e.g. cameras, film, home appliances)
International Product: product that is customized
or adapted to the culture, tastes, and social
trends of a country
INTERNATIONAL MARKET ENTRY STRATEGIES
Exporting
Less Risk
Licensing
Strategic Alliances
Cross-Border Acquisitions
Wholly-Owned Subsidiaries
More Risk
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Exporting
Manufacturing products
in a firm’s home country
and shipping them to a
foreign market.
Advantages:
Low cost
Low risk to licensor
Disadvantages:
Potential trade barriers
Establishment of marketing
and distributing systems in
foreign market
Transportation costs
Smaller returns
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Licensing
Arrangements that
allow a
local firm in the new
market
to manufacture and
distribute a firm’s
product.
Advantages:
 Less capital investment
 Least amount of risk
Disadvantages:
 Licensor has little
control over product
and use of brand
 Smaller returns
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Strategic Alliances
Advantages:
Cooperative arrangements
between two firms in which
they agree to share resources
to accomplish a mutually
desirable goal.
 Share costs and risks between partners
 Access to resources not previously
available
 Learn capabilities from partner
Disadvantages:
 Management disagreement
 Share profits
New types of alliances:
 Outsourcing
 Offshoring
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Cross-Border Acquisitions
Acquisitions of local firms
made by foreign firms to
enter a new international
market.
Advantages:
 Fast way to enter foreign market
 Can start operations
immediately
Disadvantages:
 Can cause controversy in local
public
 Integrating two previously
independent companies can be
challenging
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Wholly-Owned Subsidiaries
Advantages:
 Maximum control over
operations
Direct investments to
establish a business in a
foreign market in which the
business is 100% owned and
controlled by the focal firm;
also called Greenfield
Venture.
 Buffer assets from competitors
in the market
Disadvantages:
 Complex, risky and expensive to
launch
 Must establish relationships
with suppliers, buyers, etc.
 Must learn about culture and
institutional environment on
your own
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LOW- AND HIGH-CONTEXT CULTURES
Cultural context: degree to which a situation influences behavior or perception of
“appropriateness”
HIGH-CONTEXT
LOW-CONTEXT
People pay close
Situation may or may
attention to the
not make a difference
situation and its
in what is considered
various elements in
appropriate behavior
assessing appropriate
Neither high- nor low-context cultures are right or wrong, just different
behavior
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LOW- AND HIGH-CONTEXT CULTURES
EXAMPLES
HIGH-CONTEXT
LOW-CONTEXT
American
Canadian
German
Swiss
Scandinavian
English
Vietnamese
Chinese
Japanese
Korean
Arab
Greek
Adapted from Exhibit 3.328
MANAGING MULTI-CULTURAL TEAMS
Challenges to managing multicultural teams:
• Dependence on electronic
communication (virtual
teams)
• Basic communication issues
• Building trust among team
members with different
values (swift trust: rapid
development of trust in
teams about task activities)
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DEVELOPING A GLOBAL MINDSET
Global mindset: cognitive
attributes that allow an
individual to influence
individuals, groups, and
organizations from diverse
socio-cultural and institutional
environments
Not being ethnocentric!!!
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MANAGING GLOBALIZATION
Arguments FOR globalization:
• Creates a more peaceful
society
• Promotes interest in local
traditions and history
• Facilitates development of
cultural sensitivity and
understanding
• Cultural change = gain and
creativity
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MANAGING GLOBALIZATION
Arguments AGAINST
globalization:
Promotes homogeneity of
cultures
Encourages one bland,
uniformed identity for all
cultures
Cultural change = loss and
destruction
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HOW THE GOVERNMENT DISCOURAGES
INTERNATIONAL BUSINESS
Tariffs: a tax placed on products that are traded
internationally
Quotas: limit on the quantity, or monetary amount of a
product that can be imported from a given country
Embargos: total ban on the import of a good from a
particular country (e.g. US embargo on Cuba)
Licensing Requirements: controlling imports by requiring
that certain countries have a government import license
HOW THE GOVERNMENT ENCOURAGES
INTERNATIONAL BUSINESS




Free trade zone: designated area, usually around a
where products can be imported duty-free, and then
stored, assembled, and then used during
manufacturing. Only when the product leaves the zone
does the importer pay duty.
Most favored nation: allows a country to export into the
granting country under the lowest country duty rates.
Free trade agreements: member countries agree to
eliminate duties and trade barriers on products traded
among members.
Common markets: members eliminate duties and
other trade barriers, allow companies to invest freely in
each member’s country, and allow countries to move
freely across borders.
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