Module 2

• Culture


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


  Explains how we behave toward each other and with other groups. Culture defines our values and attitudes and the way we perceive the meaning of life
• Cultural risk arises from a situation or event in which a cultural misunderstanding puts some human value at stake
• Values and attitudes


  person’s judgments about what is good or bad, acceptable or unacceptable, important or unimportant, and normal or abnormal.
• Social Structure


  Characterized by individuals, family, and groups as well as by social stratification and mobility
• Monochronic Cultures


  Exhibit a rigid orientation to time in which the individual is focused on schedules, punctuality, and time as a resource
• Polychronic Cultures


  Have a flexible, nonlinear orientation to time in which the individual takes a long-term perspective
• Low-context cultures


  Rely on elaborated verbal explanations, putting much emphasis on spoken words
• High-context cultures


  Emphasize nonverbal communications and a more holistic approach to communication that promotes harmonious relationships
• Managerial Orientations


  • Ethnocentric
  • Polycentric
  • Geocentric
• Ethics


  The moral principles and values that govern the behavior of people, firms, and governments
• Relativism


  The belief that ethical truths are not absolute but differ from group to group
• Normativism


  Holds that ethical standards are universal, and firms and individuals should uphold them consistently around the world
• Ethical dilemma


  A predicament involving major conflicts among different interests
• Ethical Challenges in International Business

  • Bribery
  • Embezzlement
  • Fraud
  • Extortion and blackmail
  • Money laundering
• Corporate Social Responsibility (CSR)


  Operating a business in a manner that meets or exceeds the ethical, legal, commercial, and public expectations of stakeholders
• Types of CSR

  • Workplace CSR
  • Marketplace CSR
  • Environmental CSR
  • Community CSR
• Sustainability


  Meeting humanity's needs without harming future generations
• Corporate Governance


  The system of procedures and processes by which corporations are managed, directed, and controlled
• Scholars have devised a five-step framework for making ethical decisions

  
• Each nation specializes in producing certain goods and services and then trades with other nations to acquire those goods and services in which it is not specialized
• Classic explanations of international trade began with mercantilism, which argued that nations should seek to maximize their wealth by exporting more than they import
• Porter's determinants of national competitive advantage

  • Demand conditions
  • Firm strategy, structure, and rivalry
  • Factor conditions
  • Related and supporting industries
• Industrial cluster


  A concentration of companies in the same industry in a given location that interact closely with one another, gaining mutual competitive advantage
• National industrial policy


  Government's' efforts to direct national resources to developing expertise in specific industries
• Internationalization process model


  Describes how companies expand into international business gradually, usually progressing from simple exporting to the most committed stage, FDI

  
• Born global firms


  Internationalize at or near their founding and are part of the emergent field of international entrepreneurship
• Monopolistic Advantage


  Describes how companies succeed internationally by developing resources and capabilities that few other firms possess
• Internalization Theory


  Explains the tendency of MNEs to internalize value-chain stages when it is to their advantage
• International Collaborative Ventures


  Inter-firm partnerships that give them access to assets and other advantages foreign partners hold
• Eclectic Paradigm (Dunning's)


  Specifies that the international firm should possess certain internal competitive advantages
• Country risk


  Exposure to potential loss or to adverse effects on company operations and profitability caused by developments in national political and legal environments
• Political system


  A set of formal institutions that constitute a government
• Legal system


  A system for interpreting and enforcing laws
• Types of political systems

  • Democracy
  • Socialism
  • Totalitarianism
• Types of legal systems

  • Common law
  • Civil law
  • Religious law
  • Mixed systems
• Rule of law

  A legal system in which laws are clear, understood, respected, and fairly enforced
• Participants in the Political and Legal Systems

  • Special interest groups (labor unions, environmental organizations, consumers)
  • Governments
• Types of Country Risk Produced by Political Systems

  • Constraints on corporate operating methods
  • Boycotts
• Types of Country Risk Produced by Legal Systems

  • Extraterritoriality
  • Transparency