.. Strategic Concerns: Q.
Final ( Chapter 14)
**WHY EXPORTING MAY NOT BE FEASIBLE: Companies may find more advantages by producing in foreign countries rather than by exporting to them
due to a variety of reasons. 1. When production abroad is cheaper than at home. 2. When transportation costs to move good or services internationally are too
expensive. 3. When companies lack domestic capacity. 4. When products and services need to be altered substantially to gain sufficient consumer demand
abroad. 5. When governments inhibit the import of foreign products. 6. When buyers prefer products originating from a particu lar country. **How to make
FDI: Foreign Direct Investment (FDI) ownership takes place by transferring abroad financial, other tangible, or intangible assets. There are 2 ways companies
can use these assets to invest in a foreign country. They can either acquire an interest in an existing operation or construct new facilities an option known as
Greenfield investments.1. Reasons for Buying. Companies may acquire existing operations in order to avoid adding further capacity to the market, to avoid
start-up problems, obtain easier financing, and get an immediate cash flow rather than tying up funds during construction. A company may also save time,
reduce costs, and reduce risks by buying an existing company. 2. Making Greenfield Investments: Companies may choose to build if : a) no suitable company
is available for acquisition, b) acquisition is likely to lead to carry-over problems, and c) acquisition is harder to finance. In addition, local governments may
prevent acquisitions because they want more competitors in the market and fear foreign domination. ** Why companies collaborate (Collaborative
arrangement): General motives for collaborative arrangements: To spread and reduce costs: sometimes it is cheaper to get another company to handle work,
especially: At small volume and when the other company has excess capacity. . To specialize in competencies: . A company may seek to improve its
performance by concentrating on those activities that best fit its competencies. To avoid or counter competition: When markets are not large enough to
accommodate many competitors, companies may band together so as not to compete. To secure vertical and horizontal links: companies may lack competence or
resources to become fully vertically integrated. Horizontal links may provide economies of scope in distribution, such as by having a full line of products to sell
to potential customers. To gain knowledge: to learn about a partners technology, operating methods, or home market so that their own competencies will be
broaden or deepen. International Motives for Collaboration: To gain location-specific assets: Cultural, political, competitive and economic differences among
countries create barriers for firms abroad. Those ill-equipped to handle these differences may seek collaboration with local firms that will help them. To
overcome government constraints: Legal factors may be (1) direct prohibitions against certain operating forms; (2) indirect (regulations affecting profitability).
Protecting assets: Collaboration hinders non-associated companies from pirating the asset. To diversify geographically: For a company wishing to pursue a
geographic diversification strategy, collaborative arrangements offer a faster initial means of entering multiple markets because other companies contribute
resources
International Strategy: 1. Companies adopt the international strategy when they aim to leverage their core competencies by expanding opportunistically into
foreign markets. 2. Ultimate control and decision-making reside at headquarters. 3. International activities are generally secondary to the priorities of the
domestic market. Multidomestic strategy: 1. A strategy in which the company allows each of its foreign country operations to act fairly independent, 2. The
main reason for adopting a multidomestic strategy is that in some cases, cultural, legal-political, and economic conditions may dictate very different optimum
operating practices from one country to another. 3. The polycentric view holds that people who are close to the market both physically and culturally can best
run a business Global Strategy:1. Expansion into foreign operations that champions worldwide consistency, standardization, and cost competitiveness. 2.
Value is created by designing products for a world market and manufacturing and marketing them as effectively and efficiently as possible. 3. Global firms
strive to convert global efficiency into price competitiveness via production and location economies. Transnational strategy: expansion into foreign
operations that exploits location economies, leverages core competencies, and responds to key local conditions. 2. Value is created by the relentless renewal,
enhancement, and exchange of ideas, products, and processes across functions and borders. 3. The causes of interactive global learning and worldwide
information sharing are championed. ** Economic Rationales for Govt. intervention: Prevent Unemployment: By limiting imports, local jobs are retained
as firms and consumers are forced to purchase domestically produced goods and services. Governments must carefully balance the costs of higher prices with
the costs of unemployment and the displaced production that would result from freer trade. Protect Infant Industries: the infant industry argument says that
production becomes more competitive over time because of increased economies of scale and greater worker efficiency. Promote Industrialization: The
development of national industrial output should be supported, even though domestic prices may not be competitive on the world market. Countries seek
protection to promote industrialization because that type of production Brings faster growth than agriculture. Brings in investment funds. Diversifies the
economy. Brings more income than primary products do. Reduces imports and promotes exports. Helps the nation-building process. Improve Relative
Economic Position: Countries may impose trade restrictions to improve their relative competitive positions. Their primary motivations are: balance-of-
payments adjustments. preventing foreign monopoly price. assuring that domestic consumers get low prices. lowering profit margins for foreign
producers raising prices to foreign consumer. price-control objectives. ** Noneconomic Rationales for Government Intervention: 1. Preserving national
identity: To sustain this collective identity that sets their citizens apart from those in other nations, countries limit foreign products and services in certain
sectors. 2. Maintaining essential industries: Essential industry argument: a government applies restrictions to protect essential domestic industries
(particularly defense) so that the country is not dependent on foreign sources of supply. In protecting essential industries, countries must: 1.Determine which
ones are essential.2. Consider costs and alternatives. 3. Consider political consequences. 3. Preventing Shipments to Unfriendly Countries: Considerable
.** Interventionist Theories: Mercantilism holds that a countrys wealth is measured by its holdings of treasure, which usually means its gold. According
to this theory, To amass a surplus (a favorable balance of trade), a country must export more than it imports and then collect gold and other forms of wealth
from countries that run a deficit (an unfavorable balance of trade). Nation-states were emerging during this period, and gold empowered central governments
to raise armies and invest in national institutions so as to solidify the peoples primary allegiance to the new nations. Neomercantilism describes the approach
of countries that try to run favorable balances of trade in an attempt to achieve some social or political objective. A country may aim for increased employment
by setting economic policies that encourage its companies to produce in excess of the demand at home and send the surplus abroad. Or it may attempt to
maintain political influence in an area by sending more merchandise there than it receives from it, such as a government granting aid or loans to a foreign
government to use to purchase.the granting countrys excess production. **Free Trade Theory: ** Theory of Absolute Advantage: The theory of absolute
advantage holds that different countries produce some goods more efficiently than other countries; thus, global efficiency can increase through free trade.
Developed by Adam Smith, the theory of absolute advantage says the real wealth of a country consists of the goods and services available to its citizens. Smith
reasoned that if trade were unrestricted, each country would specialize in those products that gave it a competitive advantage. Each country's resources would
shift to the efficient industries because the country could not compete in the inefficient ones. Through specialization, countries could increase their efficiency
because of three reasons: a. Labor could become more skilled by repeating the same tasks. b. Labor would not lose time in switching from the production of one
kind of product to another. C. Long production runs would provide incentives for the development of more effective working methods. Natural Advantage. A
country may have a natural advantage in the production of particular products because of given climatic conditions, access to particular resources, the
availability of labor, etc. Variations in natural advantages among countries help to explain where particular products can be produced most efficiently.
Acquired Advantage. An acquired advantage represents a distinct advantage in skills, technology, and/or capital assets that yields differentiated product
offerings and/or cost-competitive homogeneous products. Technology, in particular, has created new products, displaced old products, and altered trading-
partner relationships.** Theory of Comparative Advantage: Ricardos theory of comparative advantage holds that a country can maximize its own
economic well-being by specializing in the production of those goods and services it can produce relatively efficiently and enhance global efficiency through its
participation in (unrestricted) free trade. Difference between absolute and comparative : Absolute advantage holds that different countries produce some
goods more efficiently than other countries; thus, global efficiency can increase through free trade. Based on this theory, Adam Smith questioned why the
citizens of any country should have to buy domestically produced goods when they could buy those goods cheaper abroad. But what happens when one
country? can produce all products at an absolute advantage In 1817, David Ricardo examined this question and expanded on Adam Smith's theory of absolute
advantage to develop the theory of comparative advantage. Ricardo reasoned that there may still be global efficiency gains from trade if a country specializes in
**Individualism- primacy of the rights and role of the individual; promotes the rights of the individual over those of society. This proposes that managers
have the right to make economic decisions mostly free of rules and regulations. Shape marketplace with idea of laissez faire. Those that support individualism
also support the idea that government should not interfere in business affairs. Individuals are presumed to be self-regulating in promoting economic prosperity
and growth, acting fairly and justly to maximize personal performance without threatening the welfare of society. Under an individualistic paradigm (e.g., the
United States), political officials and agencies play a limited role in society. The relationship between government and business tends to be adversarial;
government may intervene in the economy to deal with market defects, but generally it promotes marketplace competition. Collectivism- primacy of the
rights and role of the community; encourages the government to interfere to improve the welfare of the group at the expense of the individual. Pertaining to
ethics, collectivism takes a utilitarian approach. For business, this means that the ownership of assets, the structure of industries, the conduct of companies,
and the actions of managers must improve the welfare of society. Group members accept responsibility for making decisions that will benefit everyone.
Countries taking a collectivist orientation hold that government will intervene in market situations to ensure that business practices benefit society. Eg. China
offers clear example of a collectivist orientation in a large society.** A legal system is the mechanism for creating, interpreting, and enforcing the laws in a
specified jurisdiction. Modern legal systems are composed of constitutional law which preserves an open and just political order, criminal law which
safeguards the social order, and civil and commercial laws which promote fairness. Common law originated in the UK and is based upon tradit
ion, judge-made precedent, custom, and usage; therefore, courts play an important role in interpreting the law. Civil law originated with the Romans and is
based upon a detailed set of laws that comprise a code that includes rules for conducting business; therefore, courts play an important role in applying and is
based upon tradition, judge-made precedent, custom, and usage; therefore, courts play an important role in interpreting the law. Civil law based on a
systematic and extensive codification of laws. Such systems often charge political officials with responsibility for specifying accessible and written codes of
law that apply to all citizen. Theocratic law is based upon religious precepts; ultimate legal authority is conferred upon religious leaders who govern society.
The best example is Islamic law, or Sharia, which is based on the Koran. Customary Law: itself in the wisdom of daily experience or great spiritual or
philosophical traditions. Customary law may play a significant role in matters of personal conduct. Mixed System: emerges when two or more legal systems
are used within a single country. Political risk reflects the expectation that the political climate in a country will change in such a way that a firms operating
position or investment value will deteriorate. The following types of political risk range from the least to the most destructive. Systemic Political Risk
** The rule of man: legal rights come from the individual who has the power to impose them & associated with a totalitarian system. The principle places
ultimate power in the hands of one person, making his word and will( and whim) law, no matter how unfair, unjust or nonsensical. The rule of law: Systematic
and objective laws applied by public officials who are held accountable for their administration. Associated with a democratic system. Rule of law prevails in
wealthier, Westernized countries, but the rule of man is in place in many emerging economies. In the past, it was typical for managers to avoid countries where
the rule of man dominated, but slow growth in countries dominated by the rule of law is forcing managers to reconsider this approach. . **IDENTIFICATION
AND DYNAMICS OF CULTURES: 1. The nation as a point of reference: Each nation has certain human, demographic, and behavioral Characteristics
that give it a national identity people share values, language, and race. Laws governing business apply along national lines. Problems using a country-by-
country approach individual differences within a country, similarities link groups from different countries 2. Cultural formation and dynamics: Value
systems set early in life, but may change Values may change due to choice or imposition cultural imperialism IB increases change in cultures and
governments. 3. Language as a cultural stabilizer: Culture spreads rapidly when people from different areas speak the same language Stronger adherence to
a culture if it does not share its language with other peoples English, French, and Spanish are widespread most of IB conducted in English 4. Religion as a
cultural stabilizer : Religion has a strong influence on values Specific beliefs may affect business not all nations that practice the same religion have the
same constraints on business , where rival religions vie for political control, resulting strife may disrupt business. ** Social Stratification Systems : People
fall into social stratification systems according to group memberships that in turn determine a persons degree of access to economic resources, prestige, social
relations and power. Ascribed group : memberships are defined at birth and are based on characteristics such as gender, family, age, caste and ethnic, racial, or
national origin. Acquired group memberships are based on ones choice of affiliations, such as political party, religion and professional organizations. Social
stratification affects both business strategy and operational practices. 1. Role of Competence. Some nations base a persons eligibility for jobs and promotions
primarily on competence, but in others, competence is of secondary importance. 2. Gender based Groups. There are strong country specific differences in
attitudes toward males and females, as well as vast differences in the types of jobs regarded as male or female 3. Age basedGroups. Many cultures assume age
and wisdom are correlated thus, they usually have a seniority based system of advancement. 4. Family based: In societies where there is low trust outside the
family (e.g.,China and southern Italy), small family run companies are generally more successful than large firms. 5. Occupation. In every society certain
occupations are perceived as having greater economic and social prestige than others. ** Motivation : countries differ in how much people are motivated to
work and why :
. ** International Business: International business consists of all commercial transactionsincluding sales, investments, and transportationthat take place
between two or more countries. The goal of private businessis to make profits. Government business may or may not be motivated by profit. Studying
international business is important because 1. Most companies either are international or compete with international companies. 2. Modes of operations may
differ from those used domestically. 3. The best way of conducting business may differ by country. 4. An understanding helps you make better career decisions.
5. An understanding helps you decide what governmental policies to support. Why companies engage in IB: To expand sales pursuing international sales
increases the potential market and potential profits. To acquire resources may give companies lower costs, new and better products, and additional
operating knowledge. To diversify or reduce risks - international operations may reduce operating risk by smoothing sales and profits, preventing competitors
from gaining advantage.. ** WHY INTERNATIONAL BUSINESS DIFFERS FROM DOMESTIC BUSINESS: Manager in international business must
understand social science disciplines and how they affect all functional business fields. 1. Political Policies: Often determines where and how business can take
place. 2. Legal Policies: Each country has its own laws regulating business. Agreements among countries set international law. 3. Behavioral / Cultural
Factors: The interpersonal norms of a country may necessitate a companys alteration of operations. Exp: The best outcome of a baseball game Japan: tie,
U.S.: win 4. Economic Forces: Economic explain country differences in costs, currency value, and market size 5. Geographical Influences: Natural
conditions affect what can be produced and where. **Globalization refers to the widening set of interdependent relationships among people from different parts
of a world that happens to be divided into nations. The term sometimes refers to the elimination of barriers to international movements of goods, services,
capital, technology, and people that influence the integration of world economies. 7 factors : 1. Increase in and expansion of technology: The advancement in
communication and transportation is also a major factor in increase in and expansion in technology. Total population are more involved in developing product
rather than producing them. 2. Liberalization of cross-border trade and resource movements: To protect its own industries there is restriction across borders for
goods and service. There is an restriction that set limits on IB activities because regulations can change at any time and also contribute to a climate of
uncertainty. 3. Development of services that support international business
To minimize risk exposure: One way to minimize loss from foreign political occurrences is to minimize the base of assets located abroad or share them. **Types
of collaborative arrangements: a) Licensing: Under a licensing agreement, a company (the licensor) grants intangible property rights to another company (the
licensee) to use in a specified geographic are for a specified period. In exchange, the licensee pays a royalty to the licensor. Licensing agreements may be: Exclusive
or nonexclusive and Used for patents, copyrights, trademarks, and other intangible property. B) Franchising: Specialized form of licensing that sells an
independent franchisee the use of intangible property and operationally assists the business. Franchisor and franchiseeact like a vertically integrated company. C)
Management Contracts: Management contracts are used primarily when the foreign company can manage better than the owners. Contracts usually cover 3-5
years, and fixed fees or fees based on volume rather than profits are common. D) Turnkey Operations: Turnkey operations are: Most commonly performed by
industrial-equipment, construction, and consulting companies. Often performed for a governmental agency. Very large contracts. E) Joint Ventures: A joint
venture represents a direct investment in which two or more partners share ownership. Management problems increase with more owners. A partners control of
operations decreases. Appeal to companies new at foreign operations. F) Equity Alliances: An equity alliances is a collaborative arrangement in which at least one
of the companies takes an ownership position. The purpose of the equity ownership is to solidify a collaborating contract. ** Import Restriction: Import
restrictions to create domestic employment May lead to retaliation by other countries. Are less likely retaliated against effectively by small economies. Are less
likely to be met with retaliation if implemented by small economies. May decrease export jobs because of price increases for components. May decrease export
jobs because of lower incomes abroad. **Export Restriction: Export restrictions may: Keep up world prices. Require more controls to prevent smuggling. Lead
to substitution. Keep domestic prices down by increasing domestic supply. Give producers less incentive to increase output. Shift foreign production and sales
**Laissez-Faire :Once countries set economic and political objectives, officials enact policiesincluding trade policiesto achieve desired results. This influences
which countries can produce given products more efficiently and whether countries will permit imports to compete against their domestically produced goods and
services. Some nations take a more laissez-faire approach, one that allows market forces to determine trading relations. Free-trade theories (absolute advantage and
comparative advantage) take a complete laissez-faire approach because they prescribe that governments should not intervene directly to affect trade. At the other
extreme are mercantilism and neomercantilism, which prescribe a great deal of government intervention in trade. Whether taking a laissez-faire or interventionist
approach, countries rely on trade theories to guide policy development.
governmental interference in international trade is motivated by: a) political rather than economic concerns, b) maintaining domestic supplies of essential goods. , c)
preventing potential enemies from gaining goods that would help them achieve their objectives. 4.Maintaining or extending spheres of influence: a) Governments
give aid and credits to, and encourage imports from, countries that join a political alliance or vote a preferred way within international bodies.b) A countrys trade
restrictions may coerce governments to follow certain political actions or punish companies. , ** Protecting Infant Industry: theory holds that a government
should shield an emerging industry from foreign competition by guaranteeing it a large share of the domestic market until it is able to compete on its own.
Government protects these industries through subsidies. The govt protects infant industries where the country has either comparative or competitive advantage. So
the companies of those industries will become major exporters. They become strong in the home market also. Govt needs to protect its potential stars. The infant
industry argument presumes that the initial output costs for a small scale industry in given country may be so high as to make its output non competitive in world
markets. Once the infant industry becomes globally competitive, the government can then recoup the costs of trade protection through benefits like higher domestic
employment, lower social costs and higher tax revenues.It is reasonable to expect production costs to decrease over time, but they may never fall enough to create
internationally competitive products. So there are two risks for protecting an infant industry.a) Governments must identify those industries that have a high
probability of success. B) Even if policy makers can determine those infant industries likely to succeed, it does not necessarily follow that companies in those
industries should receive governmental assistanceUltimately the validity of the infant industry argument rests on the expectation that the future benefits of an
internationally competitive industry will exceed the costs of the associated protectionism. . ** Modes of operations in international Business: 1. Importing and
exporting, : 1. Exporting and importing are the most popular modes of international business, especially among smaller companies. 2. Merchandise exports are
tangible products goods that are sent out of a country, and merchandise imports are goods brought into a country. 2. Tourism and transportation: are important
sources of revenue for airlines, shipping companies, travel agencies and hotels. The economies of some countries depend haeavily on revenue from these sectors.
3. Licensing and franchising : when one company allows another to use its assets, such as trademarks, patents, copyrights under contracts known as licensing . for
example: sports team license foreign companies to print their logos on shirts and caps. Franchising : is a mode of business in which one party (the franchisor) allows
another party ( the franchisee) to use a trademark as an essential asset of the franchisee business. 4. Turnkey Operations : On an international level for example,
companies pay fees for engineering services rendered as so called turnkey operations, which are often construction projects performed under contract and
transferred to owner when they are operational.. 5, Management contracts: agreement in which one company provides personnel to perform general or specialized
management functions for another. For example: Disney recives such feees from managing theme parks in France and Japan 6. Direct and portfolio investment:
In FDI-the investor takes a controlling interest in a foreign company . For example: Nintendos CEO bought the Seattle Mariners, the basketball team became a
Japanese FDI in the US. Portfolio investment: is a noncontrolling interest in a company or ownership of a loan made to another party. Financial benefits e.g loans.
products that it can produce more efficiently than other productsregardless of whether other countries can produce those same products even more efficiently..
** PLCstates that the location of production of certain kinds of products shifts as they go through their life cycles which consist Of 4 stages: Introduction: The
introduction stage is marked by: 1. Innovation in response to observed need, 2. Exporting by the innovative country, 3. Evolving products characteristics.
Growth: Growth is characterized by 1. Increases in exports by the innovating country, 2. More competition, 3. Increased capital intensity, 4. Some foreign
production. Maturity: is characterized by: 1. A decline in exports from the innovating country, 2. More products standardization, 3. More capital intensity, 4.
Increased competitiveness of price, 5. Production start-ups in emerging economics. Decline: is characterized by : 1. A concentration of production in developing
countries 2. An innovating country becoming a net importers. ** Theories of Specialization: Full employment: When countries have many unemployed or
unused resources, they may seek to restrict imports to employ or use idle resources. Economic efficiency: Countries may pursue objectives other than output
efficiency. They may avoid overspecialization because of the vulnerability created by changes in technology. .Division of gains: If a country perceives a trading
partner is gaining too large a share of benefits, it may forgo absolute gains for itself so as to prevent relative losses. Two countries, two commodities: Two
countries trading only two commodities is unrealistic. .Transport costs: If it costs more to transport the goods than is saved through specialization, then the
advantages of trade are negated. Statics and dynamics: The relative conditions that give countries advantages or disadvantages in the production of given
products are dynamic, not static, as the theories view countries' advantages. Services: An increasing portion of world trade is in services, and the theories deal
with commodities. Production networks: Specialization may take place by function or by component as well as by final product. Mobility: The assumption
that resources can move domestically from the production of one good to another, and at no cost, is not completely valid. **Factor Mobility Theory: Factor
mobility concerns the free movement of factors of production, such as labor and capital, across national borders. While capital is the most internationally
mobile factor, short-term capital is the most mobile of all. Capital is primarily transferred because of differences in expected returns, but firms may also
respond to government incentives. People transfer internationally in order to work abroad, either on a temporary or on a permanent basis. . Substitution: the
inability to gain sufficient access to foreign production factors may stimulate efficient methods of domestic substitution, such as the development of
alternatives for traditional production methods . Complementarity: factor mobility via foreign direct investment may stimulate foreign trade because of the
need for equipment, components, and/or complementary products in the destination country While immigrants add to the base of a countrys skills, thus
enabling competition in new areas, inflows of capital can be used to develop infrastructure and natural and other acquired advantages, thus enabling increased
participation in the international trade arena.
creates risks that affect all firms because of a change in public policy. However, such changes do not necessarily reduce potential profits. Procedural Political
Risk refers to the risk evolving from the daily movement of people, products, and funds from point to point in the global market. Each move creates a procedural
transaction between the units involved, whether units of a company or units of a country. Political actions sometimes create frictions th at interfere with these
transactions. Distributive Political Risk: result of the profits generated by foreign companies in the local economy. If the host country questions the distributive
justice of the rewards of operating in its market, it may wonder whether, as the business grows more successful, it is receiving its fair share of the growing
profits. Catastrophic Political Risk. : includes those random political developments that adversely affect the operations of all firms in a country. Typically, it
arises from specific flash points, such as ethnic discord, illegal regime changes. ** Legal Issues in International Business: ** Operational Concerns:
operational concerns that face manager worldwide include: Starting a business, entering and enforcing contacts, Hiring and firing local worker and closing down
the business. The Task of Compliance: Countries regulate the day to day operations of business under jurisdiction. Getting Started: This task begins with
starting up a business. Some countries jurisdiction is relatively easier then others. For example : setting up business in Canada require two registration procedures
in contract with Chad ( African Nation) require 20 procedural requirements. Making and enforcing contracts: once you are up and running, you can start
worrying about entering and enforcing contracts with buyers and sellers. Hiring and Firing: No matter where you are operating you will probably have to hire and
when necessary fire local workers. Hiring should be relatively easy and firing extremely taxing. Going under and getting out: finally, many companies fail and as
if that is not traumatic enough, some countries make the task of closing down quite difficult. General relationships. ** Strategic concern: Many legal issues
affect the process of value creation. The following legal contingencies often shape an international competitors strategic plans. Product Safety and Liability:
Often products must be customized in order to comply with local standards, which may be higher than those found in a firms h ome market. While product
liability laws are very stringent in markets such as the United States, they are spotty, absent, and at times even arbitrary in many less developed countries.
Marketplace Behavior: National laws determine permissible practices in pricing, distribution, advertising, and the promotion of products, and they vary widely
from one country to another. Product Origin: Local content is important to all nations, and most countries push foreign firms to add value locally. In addition,
product origin determines applicable fees and may be subject to quantitative restrictions as well. Legal Jurisdiction: Every country specifies which law should
apply and where litigation should occur when agents are involvedwhether they are legal residents of the same or different countries. Arbitration: Most
arbitration is governed by the New York Convention, a protocol specified in 1958 that allows parties to choose their own mediators and resolve disputes on
neutral ground.
Materialism and leisure : countries differ in emphasis on materialism, Protestant ethicwork a means to salvation. Most people consider economic
achievement to be commendable, regardless of culture. Expectation of success and reward people are more eager to work if: rewards for success are high :
Same tasks performed in different countries may have different rewards for success and consequences of failure. There is some uncertainty of success : same
task performed in different countries may have different probabilities of success. *Masculinity indexdegree of admiration for success, sympathy for
unfortunate, preference for being better than others High masculinity cultures: roles differentiated by gender, men should dominate. Low masculinity
culture: need for smooth social relationships, employee and social welfare has higher priority than growth and Efficiency * Need hierarchylower-order
needs must be fulfilled prior to higher-order needs Workers in poor countries motivated by lower-order needs People from different countries may rank needs
differently. ** Risk Taking Behaviors: Uncertainty avoidance describes ones acceptance of risk.When the score is high, people need precise directions and
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. Trust represents ones
belief in the reliability and honesty of another. Where trust is high, there tends to be a lower cost of doing business. 3. Fatalism. Fatalism represents the belief
that events are predestined. Such a belief may discourage people from working hard to achieve an outcome or accepting responsibility. 4. Future orientation: is
more pronounced in Canada than in Russia. **Orientation : Polycentrism represents a managerial approach in which foreign operations are granted a
significant degree of autonomy in order to be responsive to the uniqueness of local cultures and other conditions. 2. Ethnocentrism represents a belief that ones
own culture is superior to others, and that what works at home should work abroad. Excessive ethnocentrism may lead to costly business failures.3.
Geocentrism represents a managerial approach in which foreign operations are based on an informed knowledge of both home and host country needs,
capabilitiesand constraints.
: Countries have now developed a variety of services that facilitate conduct of international business. Some are :Bank credit agreements. and Insurance that
covers risks such as damages. 4. Growth of consumer pressures: Consumer now a days are more aware about the products and services that are available
within and outside their domestic territory. Today consumers want new and better products that are finely differentiated. 5. Increase in global competition:
The pressures both present and potential of increased foreign competition can persuade companies to buy or sell abroad. Firms have to become more global
to compete in todays business environment and failure of this can be very harmful. 6. Changes in political situations and government policies: Government
is supporting programs favorable to international trade. They are now providing an array of services to help domestic companies sell abroad and vice versa.
7. Expansion of cross-national cooperation: Increasingly governments have come to realize that their own interests can be addressed through international
cooperation by means of treaties, agreements and consultation **Limitation on Globalization: Threat to national sovereignty: Sovereignty is freedom
from external control .As international difference diminish, countries can no longer maintain the traditional ways of life that help unify generation and
people within their community and therefore they lose their ability to act according their local best interest Economic Growth and environmental stress:
Unless the positive consequences of globalization keep up with negative costs from growth, the sustainability of economic improvement will be problematic
in the future. Growing Income Inequality: The shift of job speeds up the process by which India narrows its economic gap with US. The process of shifting
production to a foreign country is called off shoring. For example :- Case of sports industry where globalization enabled European Teams to lure Brazilian
sports soccer, Brazilian gain nothing economically . STRATEGIES FOR DEALING WITH CULTURAL DIFFERENCES : Once a company identifies
cultural differences in the foreign countries in which it operates, must it alter its customary practices? A. Making Little or No Adjustment : Host cultures
do not always expect foreigners to adjust to them Less adjustment necessary when moving to a country with a similar culture B. Communications :
Problems in communications may arise when moving from one country to another, even though both countries share the same official language, as well as
when moving from one language to another. Spoken and written language: Difficult to directly translate one language into another. Silent language:
Color associations, sense of appropriate distance, time and status cues, and body language (kinesics). C. Cultural shock: Culture shock represents the
trauma one experiences in a new and different culture because of having to learn to cope with a vast array of new cues and expectations. Reverse culture
shock occurs when people return home, having accepted the culture encountered abroad and discovering that things at home have changed during their
absence.