INTERNATIONAL%20BUSINESS

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INTERNATIONAL%20BUSINESS

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Title: INTERNATIONAL%20BUSINESS

1
INTERNATIONALBUSINESS
2

Objectives
Define International Business And Describe How It
Differs From Domestic Business.
Explain Why Companies Engage In International
Business And Why Its Growth Has Accelerated.
Introduce Different Modes A Company Can Use To
Accomplish Its Global Objectives.

Illustrate The Role Social Science Disciplines
Play In Understanding The Environment Of
International Business.
Provide An Overview Of The Primary Patterns For
Companies' International Expansion.
Describe The Major Countervailing Forces That
Affect International Business

International Business Involves All Commercial
Transactions-Private And Governmental (Public
)-Between Two Or More Countries.
Global Events And Competition Affect Almost All
Firms, Large Or Small.
However, The International Environment Is More
Complex And Diverse Than A Firm's Domestic
Environment.

Why Companies Engage In International Business
I. Expand Sales. Companies May Increase The
Potential Market For Their Sales By Pursuing
International Consumer And Industrial Markets.
2. Acquire Resources. Foreign-Sourced Goods,
Services, Components, Capital, Technology And
Information Can Make A Firm More Competitive Both
At Home And Abroad.

3. Minimize Risk.
Firms May Pursue Foreign Markets In Order To
Minimize Cyclical Effects On Sales And Profits
They May Also Wish To Counter The Potential
Advantages That Competitors Might Gain
This Is Done By Participating In Foreign Market
Opportunities.

B. Reasons For Recent International Growth-From
Carrier Pigeons To The Internet
1. Expansion Of Technology.
Vast Improvements In Transportation And
Communication Technology Which Have
Significantly Increased The Efficiency Of
International Business Operations.
2. Liberalization Of Cross-Border Movements.
The Reduction Of Trade Barriers Via The General
Agreement Of Tariffs And Trade.

Development Of Supporting Services. Services
Provided By Governments, Banks And Other
Businesses Greatly Facilitate The Conduct And
Reduce The Risks Of Doing Business
Internationally.
4. Consumer Pressures.
Because Of Innovations In Transportation And
Communications Technology, Consumers Are Better
Informed
And Thus Demand Higher-Quality, More
Cost-Competitive Products.

5. Increase In Global Competition.
Companies May Choose To Operate Internationally
In Order To Gain Access To Foreign Opportunities
Improve Their Overall Operational Flexibility And
Competitiveness.

Culture Represents The Specific Learned Norms Of
A Society,
Attitudes Values Beliefs.
Cultural Collision Occur As Firms Implements
Practices That Do Not Reflect Local Customs
Values
Employees Are Incapable Of Accept Or Adjust To
Foreign Behaviors.

Cultural Awareness Exist But Impact Vary
. Widespread Or Exceptional?
Deep-seated Or Superficial?
Easily Discerned Or Difficult To Perceive?
Depends On The Similarities Between Or An
Countries The Types Of Business Operations
Undertaken
Iii. Identification Dynamics Of Cultures
Cultures Are Dynamic They Evolve Over Time.

A. The Nation As A Point Of Reference
Similarity A Cause An Effect Of National
Boundaries
National Identity A Fundamental Link
Rites Symbols
Common Perception Of History.
Subcultures Ethnic Groups May Transcend
National Boundaries.
Similarities May Link Groups Across Different
Nations More Closely Than Certain Groups Within A
Nation.

B. Cultural Formation Dynamics
Culture Is Transmitted In A Variety Of Ways,
Children
Cultural Imperialism Individual Social Values
Customs Change With Economic Social Realities.
Cultural Diffusion Change Outside Culture

C. Language A Cultural Stabilizer
Common Language A Unifying Force Language
Diversity Weakens A Firm' S Ability To Conduct
Business On A National Level.
Language, Tends To Stabilize Cultures. Language
An Integral Part Of Their Cultures
Regulate The Use Inclusion Of Foreign Words.

D. Religion As A Cultural Stabilizer
Religion Source Of Both Cultural Imperatives
Taboos.
Not All Nations That Practice The Same Basic
Religion Place Identical Constraints On Business.
History Proves That Violence Among Religious
Groups Has Disrupted Local International
Business Activities In Both Home Host Country
Firms.

Behavioral Practices Affecting Business
A. Social Stratification Systems
Ascribed Group Memberships Inborn Characteristics
Such As Gender, Family, Age, Caste Ethnic,
Racial, Or National Origin.
Acquired Group Memberships Choice Of
Affiliations, Political Party, Religion
Professional Organizations.
Affects Both Business Strategy Operational
Practices.

1. Role Of Competence. Some Nations Base A
Person's Eligibility For Jobs Promotions
Primarily On Competence
Others, Competence Is Of Secondary Importance.
Egalitarian (Equal Rights) Societies, Group
Membership Is Less Important,
Closed Societies, Group Membership Decide One's
Access To Education, Employment, Etc.

2. Gender-based Groups.
Attitudes Toward Males Females,
Job Barriers Easing In Many Parts Of The World.
3. Age-based Groups.
Many Cultures Assume Age Wisdom Are
Correlated A Complex, Dynamic Issue.
Few Professions Have Seniority-based System Of
Advancement.
Others Emphasis On Young Blood

4. Family-based Groups. Low Trust Outside The
Family ( E.G., China Southern Italy)
Small Family- Run Companies Are Generally More
Successful Than Large Firms.
Impedes The Economic Development Of The Country
In Case Large-scale Operations Are Necessary To
Compete Globally

Occupation.
Some Jobs Greater Economic Social Prestige Than
Others.
Work As An Entrepreneur Rather Than As An
Organizational Employee.
Motivation
Motivated Employees Work Longer, Harder Are
More Productive
A Positive Effect On Economic Development
National Competitiveness
Desire For Achievement

Western Societies, People Desire Less Leisure
Time Workaholics
Most Asian Nations Productivity Will Likely Be
Taken In The Form Of Leisure, Rather Than Income.
Probabilities Of Success Vary
Different Rewards For Success
Different Consequences For Failure,
Belief That It Is Better To Live To Work Than To
Work To Live

A Preference For Promotion Profitability Over
Quality Of Life Environment,
Maslow's Hierarchy Of Needs
C. Relationship Preferences
Social Stratification Systems, Not Everyone Is
Necessarily An Equal.
Strong Or Weak Pressures For Conformity Within
One's Group. These Influence Management Style
Marketing Behavior.

Power Distance.
Expresses The Relationship Between Superiors
Subordinates.
High Power Distance , The Management Style Is
Generally Distant, I.E., Autocratic Or
Paternalistic Malaysians Typically Exhibit High
Power Distance,
Power Distance Low, Managers Tend To Interact
With Consult Subordinates As Part Of The
Decision-making Process. Austrians Typically
Exhibit Low Power Distance.

2. Individualism Vs. Collectivism.
Self- Actualization Shows A Persons Desire For
Personal Freedom, Time Challenge.
Low Dependence On The Organization.
Collectivism Indicates A Person' S Desire For
Training, Collaboration Shared Rewards,

D. Risk-taking Behavior
Nationalities Differ In Their Attitudes Toward
Risk-taking.
1. Uncertainty Avoidance.
Acceptance Of Risk. When The Score Is High,
People Need Precise Directions Long-term
Assurances
When The Score Is Low, People Are Willing To
Accept The Risk Of Trying New Products Or Moving
To New Jobs.

2. Trust.
Belief In The Reliability Honesty Of Another.
Where Trust Is High, There Tends To Be A Lower
Cost Of Doing Business. Norwegians Have High
Degree Of Trust, Brazilians Are Hesitant.
3. Fatalism.
Belief That Events Are Predestined.

E. Information Task Processing
People From Different Cultures Obtain, Perceive,
Process Information In Different Ways Thus,
They May Also Reach Different Conclusions.
1. Perception Of Cues. Identify Things By Means
Of Their Senses.

In A High-context Culture,
Dem On Peripheral Information
Meaning From Things Communicated Indirectly
Relationships Are Very Important.
While Germany Is Considered To Be A Low-context
Culture, Saudi Arabia Is Considered To Be A High-
Context Culture.

Information Processing. All Cultures Categorize,
Plan Quantify,
Monochronic Cultures (E.G., Northern Europeans)
People Work In Sequence.
Polychronic Cultures ( E.G., Southern European)
A. Work On Multiple Tasks At One Time.
B. In Some Cultures People Focus First On The
Whole Then On The Parts
Idealistic Cultures- Principles To Be Understood
Before Attempt To Resolve Issues,
Pragmatic Cultures -Details Than Principles.

V. Strategies For Dealing With Cul Tural
Differences
A. Making Little Or No Adjustment
Countries Similar In Language, Religion,
Geographical Location, Ethnicity /Or Level Of
Economic Development.
Products Operations Do Not Contradict Or Defy
Attitudes
The Host Country Compromises On Foreign Customs
As A Trade-off For Other Advantages,
Fewer Adjustments When Moving Within A Culturally
Similar Cluster Than When It Moves From One
Distinct Cultural Cluster To Another .

B. Communications
Spoken Written Language.
Translating One Language Into Another, Difficult
(A) Some Words Do Translate Directly,
(B) The Common Meaning Of Words Is Constantly
Evolving,
( C ) Words May Mean Different Things In
Different Contexts
( D) A Slight Misuse Of Vocabulary Or Word
Placement May Change Meanings Substantially.

2. Silent Language.
Nonverbal Cues Messages Are Sent-intentionally Or
Unintentionally.
Color Associations,
The Distance Between People During Conversations,
Proxemics.
The Perception Of Time Punctuality,
A Person's Perceived Status
Kinesics (Body Language). Misunderstandings In
Any Of These Areas Can Have A Very Negative
Impact.

C. Culture Shock
Culture Shock Trauma Experienced In A New
Different Culture
Adjustment To New Cues Expectations.
Reverse Culture Shock Occurs When People Return
Home, Adjustment To Cultural Changes During
Their Absence.

D. Company Management Orientations
The Policies Of The Company The Attitudes Of
Its Managers
1. Polycentrism Managerial Approach Of Autonomy
To Be Responsive To The Uniqueness Of Local
Cultures Other Conditions.
2. Ethnocentrism. Belief That One's Own Culture
Is Superior To Others
What Works At Home Should Work Abroad.
Excessive Ethnocentrism Leads To Costly Business
Failures.
3. Geocentrism. Managerial Approach Where
Foreign Operations Based On An Informed Knowledge
Of Both Home Host Country Needs, Capabilities
Constraints.

E. Strategies For Instituting Change
Need To Transfer New Products /Or Operating
Methods From One Country To Another
To Gain Or Maintain A Competitive Advantage.
To Maximize The Potential Benefits
Treat Learning As A Two-way Process
Transfer Knowledge From Host Countries Back Home
As Well As From Home To Host Countries.
1. Value System. Changes Acceptable When They Do
Not Interfere With Deep-seated Customs.
2. Cost Benefit Of Change. Some Adjustments To
Foreign Cultures Are Costly To Undertake, But
Their Benefits Are Only Marginal.
The Expected Cost-benefit Of Any Change Must Be
Carefully Considered.

3. Resistance To Too Much Change.
Resistance To Change May Be Reduced If Only A Few
Demands Are Made At One Time
Additional Changes May Be Phased In
Incrementally.
4. Participation. A Proposed Change Should Be
Discussed With Stakeholders In Advance
Helps Ease Fears Of Adverse Consequences
5. Reward Sharing. Firms Choose To Provide
Benefits For All The Stakeholders Affected By A
Proposed Change In Order To Gain Support For It.

6. Opinion Leaders.
By Discovering The Local Channels Of Influence
An International Firm May Seek The Support Of
Opinion Leaders To Help Speed The Acceptance Of
Change.
7. Timing. Many Good Business Changes Fail
Because They Are Wrongly Timed. Attitudes
Needs Change Slowly
But A Crisis May Stimulate The Acceptance Of
Change.

8. Learning Abroad. Capitalize On Diverse
Capabilities
Transferring Learning Among All The Countries In
Which A Firm Operates.

Multinational Enterprise are setup In Countries
With Different Political And Legal Environments,
Success depends on
Corporate Policies
Political And Legal Conditions Of Host Countries

II. The Political Environment
Combines different Parts Of Its Society Into A
Viable, Functioning entirety.
Influences The Extent To Which Government
Intervenes In Business
Controls Business Domestically And
Internationally
III. Basic Political Ideologies
A Political Ideology Is The Body Of Constructs,
Theories And Aims That Constitute A
Sociopolitical Program ( E.G., Liberalism Or
Conservatism)..

Pluralism Coexistence Of different Ideologies
Within A given Society.
The Fundamental Assessment Of Any Political
System Is Its capability To Hold A Society
Together.
Shared Ideologies Create Bonds Within And Among
Countries
Differing Ideologies Tend To Split Societies
Apart

A. The Impact Of Ideological Differences On
National Boundaries
History, Culture, Politics And Geography bind
National Boundaries.
Collapse, of political System leads to Smaller
Sociopolitical Groups.
Essentaial For Managers To Understand Feelings
That Could Cause Political Tension And
Instability within host countries

B. The Political Spectrum
MNEs May Be Able To Operate Effectively In Both
Democratic And Totalitarian Regimes
, But Democracies Usually Offer Greater Economic
Freedom And Enact More Legal Statutes Designed To
Safeguard Individual And Corporate Rights.
1. Democracy. Citizens Participate In The
Decision-Making
Governance Process Either Directly Or Through
representatives.
Contemporary Democracies Freedom Of Opinion,
Expression And The Press

Freedom To Organize
Free Elections
Independent And Fair Court System
Nonpolitical Bureaucracy And Defense
Infrastructure
Decentralized Democracies ( E.G., Canada And The
USA) Companies might Face Different And
Sometimes Even Conflicting Laws From One State Or
Province To Another .

B. Stability In Democracies. Many Democracies
That Have Emerged Since The Early 19705 Are
Fragile And Unstable.
Confidence In Politicians And Government Has
Generally Declined In Many Of The More Mature
Democracies.

2. Totalitarianism. Totalitarianism Represents A
Political System In Which Citizens Seldom If Ever
Participate In The Decision-Making And Governance
Process
Power Is Monopolized
Opposition Is Neither Recognized Nor Tolerated.

Theocratic Totalitarianism, Religious Leaders Are
Also The Political Leaders.
Secular Totalitarianism, The Government controls
through Military Power.
Variants Of Totalitarianism Include Fascism,
Authoritarianism
And Communism

The Impact Of The Political System On Management
Decisions
A. Political Risk
Political Risk Reflects Change in The Political
Climate In host Country might cause A Firms
Operating Position to Deteriorate.
1. Types And Causes Of Political Risk.
Government Takeovers Of Property
Operational Restrictions And Damage To Property
Or Personnel.
Civil Unrest And Disorder
Antagonistic External Relations

2 Micro Political Risks-
Aimed At Specific Foreign Investments -A
Particular MNE
Macro Political Risks All Foreign Investors.
B. Government Intervention In The Economy
Individualistic Paradigm Minimal Interference
May Intervene To Deal With Market Defects
Generally encourages Marketplace Competition.
.

Communitarian Paradigm, Government Defines
Economic Needs
Priorities
Partners
V. Formulating And Implementing Global Strategies
Formulating Global Strategies May Be More
difficult than Competitive Marketplace
Strategies.