1. The broadening set of interdependent relationships among people from different parts of the world is known as ________. a. globalization b. Offshoring c. international business d. outsourcing 2. The term globalization is sometimes used to mean the ________. a. movement of jobs to low-wage countries b. business being undertaken outside the confines of any nation c. Uneven distribution of resources and their influence on different products and services in different parts of the world d. Integration of world economies through the reduction of barriers to the movement of trade, capital, technology, and people . Show
Which of the following best defines international business? a. It includes all economic flows between two or more countries. b. It includes all private economic flows between two or more countries. c. It includes all business transactions involving two or more countries, whether the transactions are conducted by private or governmental organizations. d. It includes all business transactions in countries other than your home country 4. Which of the following is the most accurate comparison of how private organizations and governments conduct international business? a. The objectives for private organizations and governments are the same. b. The private organization’s objective is profit, whereas a government may or may not seek profit as an objective. c. Governments operate strictly for nonprofit motives, but private organizations seek profits. d. Governments undertake international business for more long-term objectives than private companies do. 5. The televising of sports competitions to viewers in multiple countries is an example of international business conducted to achieve the objective of ________.
a. Acquiring resources b. Minimizing risk . Offshoring d. Sales expansion 6. An example of a U. S. merchandise import is an automobile made in ________ and sold ________. a. The United States by a Japanese company; in the United States b. The United States by a Japanese company; outside the United States c. Japan by a Japanese company: in the United States d. Japan by a U. S. company; outside the United States 7.. An example of a Japanese service export is a visit by a ________. a. Japanese citizen to Disneyland in the United States b. Japanese citizen to the Japan Pavilion at Epcot Center in the United States c. U. S. itizen to the Japan Pavilion at Epcot Center in the United States d. U. S. citizen to Tokyo Disneyland in Japan 8. A foreign direct investment occurs ________. a. Only when a company owns more than 50 percent of a foreign firm b. When a company controls a company abroad c. When foreign ownership is in private rather than government securities d. With the purchase of a foreign firm rather than the establishment of a new company abroad 9. Which of the following is an example of an international portfolio investment? a. Foreign ownership of bonds b. Ownership of patents used by a foreign company . A jointly owned foreign company d. One of a group of several foreign companies wholly owned by the same investor 10. A multinational enterprise (MNE) is one that is ________. a. among the world’s 500 largest companies b. owned and managed by companies whose headquarters are split among different countries c. licensed to operate by the United Nations Transnational Center d. willing to consider market and production locations anywhere in the world 11. A company starting out with a global focus, usually because of the international experience of its founders, is called a ________. . multinational enterprise b. transnational company c. strategically allied company d. born-global company 12. The fact that flower producers from Ecuador, Israel, and New Zealand all compete for sales in the same markets is due primarily to ________. a. the development of new strains of flowers that last longer b. advancements in communications c. advancements in transportation d. cross-national success in fighting insects that move internationally on plants 13. Which of the following is a reason that international business has recently grown at such a rapid pace? . the end of the political schism between the Communist and non-Communist blocs b. stricter government policies on cross-border movements c. decreasing global competition d. None of the above 14. Which of the following is not a reason to study international business? a. Business conducted outside the confines of any one country is on the decline. b. Global events affect almost all companies. c. By approaching operating strategies from an international standpoint, you may be able to better obtain the resources you need. d. Creolization Refers To ________.The physical, social, and competitive conditions differ from country to country. 15. In a(n) ________culture, people tend to regard seemingly peripheral information as pertinent to decision making and infer meanings from things that people say either indirectly or casually. a. pragmatist b. idealist c. fatalistic d. high-context 16. _____ consists of specific learned norms based on attitudes, values, and beliefs of a group of people. a. Ethnology b. Civilization c. Culture d. Doctrine 17. A major problem when cultures collide in international business occurs when ________. . a company’s employees encounter distress because of difficulty in accepting or adjusting to foreign behaviors b. Employees disagree on the style of art for decorating the office c. Local people have no expectation that foreigners should adjust to their culture d. Companies understand and adjust to the national cultures in which they do business 18. A problem of using the nation as a reference point for culture is that ________. a. Nations fail to mediate the different interests within their boundaries b. Self-stereotypes tend to fall along national lines . Such an approach tends to be polycentric d. Variations tend to be great within a country 19. Creolization refers to ________. a. Government efforts to maintain a distinct cultural identity b. The process of mixing elements of an outside culture to a national culture c. The use of stereotypes to describe a culture d. Changes as cultures evolve over time 20. _____ peoples account for the largest percentage of global production. a. English-speaking b. Mandarin-speaking c. French-speaking d. Spanish-speaking Get High-quality Paper
International business refers to the trade of goods, services, technology, capital and/or knowledge across national borders and at a global or transnational scale. It involves cross-border transactions of goods and services between two or more countries. Transactions of economic resources include capital, skills, and people for the purpose of the international production of physical goods and services such as finance, banking, insurance, and construction. International business is also known as globalization. To conduct business overseas, multinational companies need to bridge separate national markets into one global marketplace. There are two macro-scale factors that underline the trend of greater globalization. The first consists of eliminating barriers to make cross-border trade easier (e.g. free flow of goods and services, and capital, referred to as "free trade"). The second is technological change, particularly developments in communication, information processing, and transportation technologies. Overview"International business" is also defined as the study of the internationalization process of multinational enterprises. A multinational enterprise (MNE) is a company that has a worldwide approach to markets, production and/or operations in several countries. Well-known MNEs include fast-food companies such as: McDonald's (MCD), YUM (YUM), Starbucks Coffee Company (SBUX), etc. Other industrial MNEs leaders include vehicle manufacturers such as: Ford Motor Company, and General Motors (GMC). Some consumer electronics producers such as Samsung, LG and Sony, and energy companies such as Exxon Mobil, and British Petroleum (BP) are also multinational enterprises. Multinational enterprises range from any kind of business activity or market, from consumer goods to machinery manufacture; a company can become an international business. Therefore, to conduct business overseas, companies should be aware of all the factors that might affect any business activities, including, but not limited to: difference in legal systems, political systems, economic policy, language, accounting standards, labor standards, living standards, environmental standards, local cultures, corporate cultures, foreign-exchange markets, tariffs, import and export regulations, trade agreements, climate, and education. Each of these factors may require changes in how companies operate from one country to another. Each factor makes a difference and a connection. One of the first scholars to engage in developing a theory of multinational companies was Canadian economist Stephen Hymer.[1] Throughout his academic life, he developed theories that sought to explain foreign direct investment (FDI) and why firms become multinational. There were three phases of internationalization according to Hymer's work. The first phase of Hymer's work was his dissertation in 1960 called the International Operations of National Firms.[2] In this thesis, the author departs from neoclassical theory and opens up a new area of international production. At first, Hymer started analyzing neoclassical theory and financial investment, where the main reason for capital movement is the difference in interest rates. After this analysis, Hymer analyzed the characteristics of foreign investment by large companies for production and direct business purposes, calling this Foreign Direct Investment (FDI). By analyzing the two types of investments, Hymer distinguished financial investment from direct investment. The main distinguishing feature was control. Portfolio investment is a more passive approach, and the main purpose is financial gain, whereas in foreign direct investment a firm has control over the operations abroad. So, the traditional theory of investment based on differential interest rates does not explain the motivations for FDI. According to Hymer, there are two main determinants of FDI; where an imperfect market structure is the key element. The first is the firm-specific advantages which are developed at the specific companies home country and, profitably, used in the foreign country. The second determinant is the removal of control where Hymer wrote: "When firms are interconnected, they compete in selling in the same market or one of the firms may sell to the other," and because of this "it may be profitable to substitute centralized decision-making for decentralized decision-making". Hymer's second phase is his neoclassical article in 1968 that includes a theory of internationalization and explains the direction of growth of the international expansion of firms. In a later stage, Hymer went to a more Marxist approach where he explains that MNC as agents of an international capitalist system causing conflict and contradictions, causing among other things inequality and poverty in the world. Hymer is the "father of the theory of MNEs", and explains the motivations for companies doing direct business abroad. Among modern economic theories of multinationals and foreign direct investment are internalization theory and John Dunning's OLI paradigm (standing for ownership, location and internationalization). Dunning was widely known for his research in economics of international direct investment and the multinational enterprise. His OLI paradigm, in particular, remains as the predominant theoretical contribution to study international business topics. Hymer and Dunning are considered founders of international business as a specialist field of study. Physical and social factors of competitive business and social environmentThe conduct of international operations depends on a company's objectives and the means with which they carry them out. The operations affect and are affected by the physical and societal factors and the competitive environment. OperationsAll firms that want to go international have one goal in common; the desire to increase their respective economic values when engaging in international trade transactions. To accomplish this goal, each firm must develop its individual strategy and approach to maximize value, lower costs, and increase profits. A firm's value creation is the difference between V (the value of the product being sold) and C (the cost of production per each product sold).[3] Value creation can be categorized as: primary activities (research and development, production, marketing and sales, customer service) and as support activities (information systems, logistics, human resources).[4] All of these activities must be managed effectively and be consistent with the firm strategy. However, the success of firms that extend internationally depends on the goods or services sold and on the firm's core competencies (Skills within the firm that competitors cannot easily match or imitate). For a firm to be successful, the firm's strategy must be consistent with the environment in which the firm operates. Therefore, the firm needs to change its organizational structure to reflect changes in the setting in which they are operating and the strategy they are pursuing. Once a firm decides to enter a foreign market, it must decide on a mode of entry. There are six different modes to enter a foreign market, and each mode has pros and cons that are associated with it. The firm must decide which mode is most appropriately aligned with the company's goals and objectives. The six different modes of entry are exporting,[5] turnkey projects, licensing, franchising, establishing joint ventures with a host-country firm, or setting up a new wholly owned subsidiary in the host country.[6] The first entry mode is exporting. Exporting is the sale of a product in a different national market than a centralized hub of manufacturing. In this way, a firm may realize a substantial scale of economies from its global sales revenue. As an example, many Japanese automakers made inroads into the U.S. market through exporting. There are two primary advantages to exporting: avoiding high costs of establishing manufacturing in a host country (when these are higher) and gaining an experience curve. Some possible disadvantages to exporting are high transport costs and high tariff barriers.[7] The second entry mode is a turnkey project. In a turnkey project, an independent contractor is hired by the company to oversee all of the preparation for entering a foreign market. Once the preparation is complete and the end of the contract is reached, the plant is turned over to the company fully ready for operation.[8] Licensing and franchising are two additional entry modes that are similar in operation. Licensing allows a licensor to grant the rights to an intangible property to the licensee for a specified period of time for a royalty fee. Franchising, on the other hand, is a specialized form of licensing in which the "franchisor" sells the intangible property to the franchisee, and also requires the franchisee operate as dictated by the franchisor.[9] Lastly, a joint venture and wholly owned subsidiary are two more entry modes in international business. A joint venture is when a firm created is jointly owned by two or more companies (Most joint venture are 50-50 partnerships). This is in contrast with a wholly owned subsidiary, when a firm owns 100 percent of the stock of a company in a foreign country because it has either set up a new operation or acquires an established firm in that country.[10] Types of operationsExports and import
Top imports and exports in the worldData is from the CIA World Factbook, compiled in 2017:[13]
Choice of entry mode in international businessStrategic variables affect the choice of entry mode for multinational corporation expansion beyond their domestic markets. These variables are global concentration, global synergies, and global strategic motivations of MNC.
Means of businesses
Physical and social factors
Risks
To achieve success in penetrating a foreign market and remaining profitable, efforts must be directed towards the planning and execution of Phase I. The use of conventional SWOT analysis, market research, and cultural research, will give a firm appropriate tools to reduce risk of failure abroad. Risks that arise from poor planning include: large expenses in marketing, administration and product development (with no sales); disadvantages derived from local or federal laws of a foreign country, lack of popularity because of a saturated market, vandalism of physical property due to instability of country; etc. There are also cultural risks when entering a foreign market. Lack of research and understanding of local customs can lead to alienation of locals and brand dissociation.[17] Strategic risks can be defined as the uncertainties and untapped opportunities embedded in your strategic intent and how well they are executed. As such, they are key matters for the board and impinge on the whole business, rather than just an isolated unit.[18]
A company has to be conscious about the production costs to not waste time and money. If the expenditures and costs are controlled, it will create an efficient production and help the internationalization.[17] Operational risk is the prospect of loss resulting from inadequate or failed procedures, systems or policies; employee errors, systems failure, fraud or other criminal activity, or any event that disrupts business processes.[19]
How a government governs a country (governance) can affect the operations of a firm. The government might be corrupt, hostile, or totalitarian; and may have a negative image around the globe. A firm's reputation can change if it operates in a country controlled by that type of government.[17] Also, an unstable political situation can be a risk for multinational firms. Elections or any unexpected political event can change a country's situation and put a firm in an awkward position.[20] Political risks are the likelihood that political forces will cause drastic changes in a country's business environment that hurt the profit and other goals of a business enterprise. Political risk tends to be greater in countries experiencing social unrest. When political risk is high, there is a high probability that a change will occur in the country's political environment that will endanger foreign firms there. Corrupt foreign governments may also take over the company without warning, as seen in Venezuela.[21]
Technological improvements bring many benefits, but some disadvantages as well. Some of these risks include "lack of security in electronic transactions, the cost of developing new technology ... the fact that this new technology may fail, and, when all of these are coupled with the outdated existing technology, [the fact that] the result may create a dangerous effect in doing business in the international arena."[17]
Companies that establish a subsidiary or factory abroad need to be conscious about the externalizations they will produce, as some may have negative effects such as noise or pollution. This may cause aggravation to the people living there, which in turn can lead to a conflict. People want to live in a clean and quiet environment, without pollution or unnecessary noise. If a conflict arises, this may lead to a negative change in customer's perception of the company. Actual or potential threat of adverse effects on living organisms and environment by effluents, emissions, wastes, resource depletion, etc., arising out of an organization's activities is considered to be risks of the environment. As new business leaders come to fruition in their careers, it will be increasingly important to curb business activities and externalizations that may hurt the environment.[22]
These are the economic risks explained by Professor Okolo: "This comes from the inability of a country to meet its financial obligations. The changing of foreign-investment or/and domestic fiscal or monetary policies. The effect of exchange-rate and interest rate make it difficult to conduct international business."[17] Moreover, it can be a risk for a company to operate in a country and they may experience an unexpected economic crisis after establishing the subsidiary.[20] Economic risks is the likelihood that economic management will cause drastic changes in a country's business environment that hurt the profit and other goals of a business enterprise. In practice, the biggest problem arising from economic mismanagement has been inflation. Historically many governments have expanded their domestic money supplying misguided attempts to stimulate economic activity.[21]
According to Professor Okolo: "This area is affected by the currency exchange rate, government flexibility in allowing the firms to repatriate profits or funds outside the country. The devaluation and inflation will also affect the firm's ability to operate at an efficient capacity and still be stable."[17] Furthermore, the taxes that a company has to pay might be advantageous or not. It might be higher or lower in the host countries. Then "the risk that a government will indiscriminately change the laws, regulations, or contracts governing an investment—or will fail to enforce them—in a way that reduces an investor's financial returns is what we call 'policy risk.'"[20] Exchange rates can fluctuate rapidly for a variety of reasons, including economic instability and diplomatic issues. [23]
Terrorism is a voluntary act of violence towards a group(s) of people. In most cases, acts of terrorism is derived from hatred of religious, political and cultural beliefs. An example was the infamous 9/11 attacks, labeled as terrorism due to the massive damages inflicted on American society and the global economy stemming from the animosity towards Western culture by some radical Islamic groups. Terrorism not only affects civilians, but it also damages corporations and other businesses. These effects may include: physical vandalism or destruction of property, sales declining due to frightened consumers and governments issuing public safety restrictions. Firms engaging in international business will find it difficult to operate in a country that has an uncertain assurance of safety from these attacks.[17]
Bribery is the act of receiving or soliciting of any items or services of value to influence the actions of a party with public or legal obligations. This is considered to an unethical form of practicing business and can have legal repercussions. Firm that want to operate legally should instruct employees to not involve themselves or the company in such activities. Companies should avoid doing business in countries where unstable forms of government exist as it could bring unfair advantages against domestic business and/or harm the social fabric of the citizens. Factors towards globalizationThere has been growth in globalization in recent decades due to the following factors.
Importance of international business education
Managers in international business must understand social science disciplines and how they affect different functional business fields. To maintain and achieve successful business operations in foreign nations, persons must understand how variations in culture and traditions across nations affect business practices. This idea is known as cultural literacy. Without knowledge of a host country's culture, corporate strategizing is more difficult and error-prone when entering foreign markets compared with the home country's market and culture. This can create a "blind spot" during the decision making process and result in ethnocentrism. Education about international business introduces the student to new concepts that can be applicable in international strategy in topics such as marketing and operations. Importance of language and cultural studiesA considerable advantage in international business is gained through the knowledge and use of language, thereby mitigating a language barrier. Advantages of being an international businessperson who is fluent in the local language include the following:
In many cases, it plays a crucial role. It is truly impossible to gain an understanding of a culture's buying habits without first taking the time to understand the culture. Examples of the benefit of understanding local culture include the following:
Importance of studying international businessThe international business standards focus on the following:
By focusing on these, students will gain a better understanding of Political economy. These are tools that would help future business people bridge the economic and political gap between countries. There is an increasing amount of demand for business people with an education in international business. A survey conducted by Thomas Patrick from University of Notre Dame concluded that bachelor's degree and master's degree holders felt that the training received through education were very practical in the working environment. Increasingly, companies are sourcing their human resource requirement globally. For example, at Sony Corporation, only fifty percent of its employees are Japanese.[24] Business people with an education in international business also had a significantly higher chance of being sent abroad to work under the international operations of a firm. The following table provides descriptions of higher education in international business and its benefits.
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