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Chapter 5 ● ● ● ● ● ● ●

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Political Environmental Social (socio - cultural) Economic Legal Tech & environment The global business environment ○ Managers considering international business must research a country’s sociocultural, political-legal, and economic environments before choosing an appropriate level of involvement and operating strategies. Figure 5.1 plus tech and environment The sociocultural environment ○ The sociocultural environment includes culture, language, body language, local customs, time perception, religious considerations, and more. ○ The Hofstede framework and the GLOBE project are two common frameworks for evaluating a country’s culture. Table 5.1 cultural variation among countries Table 5.2 five major cultural dimensions The political-legal environment ○ Political considerations affect international business daily as governments enact tariffs or other types of trade restrictions in response to political events. ○ Managers engaged in international trade must consider the relative stability of the countries in which they wish to do business. ○ A firm that decides to enter the international marketplace must contend with the laws of its own nation, international laws, and the laws of the nation with which it will be trading. Table 5.3 corporate tax rates among different countries The economic environment ○ When considering doing business in another country, managers must look at the other country’s level of economic development, which is commonly measured through gross domestic product (GDP).

○ They also look at the other country’s infrastructure (the physical facilities that support the country’s economic activities). ○ The exchange rate (the ratio at which one nation’s currency can be exchanged for another nation’s currency or for gold) is also a factor to consider. ● Table 5.4 percentage of household spending on food ● Table 5.5 comparative analysis of selected countries ● International trade facilitators ○ Trade facilitators such as the World Trade Organization, the World Bank, the International Monetary Fund, and the Organization of Economic Cooperation and Development foster global business by working to reduce trade restrictions and loaning money to developing nations. ○ Individual countries may offer incentives to promote import and export trade, such as loans and free trade zones. ○ Levels of organizational involvement in global business ■ A company may be involved in international trade at several levels, each requiring a greater commitment of resources and effort. ■ Exporting is the sale of goods and services to foreign markets; importing is the purchase of goods and services from a foreign source. ■ Countertrade agreements involve bartering products for other products instead of currency. ■ A trading company links buyers and sellers in different countries to facilitate trade. ■ }In licensing, one company agrees to allow a foreign company the use of its company name, products, patents, brands, trademarks, raw materials, and production processes, in exchange for a flat fee or a royalty. ■ }Franchising is a form of licensing in which a franchiser agrees to provide a franchisee with a name, logo, methods of operation, advertising, products, and other elements associated with the

franchiser’s business, in return for a financial commitment and the agreement to conduct business in accordance with the franchiser’s standard of operations. ■ }Contract manufacturing occurs when a company hires a foreign company to produce a specified volume of the firm’s product to specification; the final product carries the domestic firm’s name. ■ }A joint venture is a partnership in which companies from different countries agree to share the costs and operation of the business. ■ }A strategic alliance is a partnership formed to create competitive advantage on a worldwide basis. ■ }The purchase of overseas production and marketing facilities is direct investment. ■ }Outsourcing, a form of direct investment, involves transferring manufacturing or other tasks to countries where labor and supplies are less expensive. ■ }A multinational corporation is one that operates on a worldwide scale, without significant ties to any one nation or region. ○ Regional trade alliances and agreements ■ }Various regional trade alliances and specific markets have created both difficulties and opportunities for organizations engaging in global business. ■ }These include the North American Free Trade Agreement (NAFTA), the European Union (EU), the Association of Southeast Asian Nations (ASEAN), and the Southern Common Market (Mercosur). ○ Managing global business ■ }Competing in an increasingly global economy provides both opportunities and challenges for today’s managers and affects how they engage in planning, organizing, leading, and controlling.

■ }Global managers must guard against the self-reference criterion, which involves an often unconscious referencing to the way things are done in one’s own culture and experiences in making global business decisions. ■ ● Table 5.6 levels of organizational involvement in global business ● Table 5.7 leading purchasers of US exports ● Table 5.8 countries of the european union...