International business sammendrag PDF

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Summary

Chapter 1  International business is about (1) firms engaging in international economic activities and (2) the activity of doing business abroad.  Most important actors in IB are multinational enterprises (MNEs). Firms that engage in foreign direct investment (FDI).  Emerging economies: economies...

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Chapter 1-4

Chapter 1 

International business is about (1) firms engaging in international economic activities and (2) the activity of doing business abroad.

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Most important actors in IB are multinational enterprises (MNEs). Firms that engage in foreign direct investment (FDI).

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Emerging economies: economies that only recently established institutional frameworks that facilitate international trade and investment.

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BRIC: Brazil, Russia, India, China.

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PPP between two countries is the rate at which the currency of one country needs to be converted into that of a second country to ensure that a given amount of the first country’s currency will purchase at the same volume of goods and services in the second country. S = p1/p2.

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Institution based view: success and failure of firms are enabled and constrained by the environment.

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Liability of outsidership: inherent disadvantage that outsiders experience in a new environment because of their lack of familiarity.

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Waves of globalization: the pattern of globalization arising from a combination of long-term trends and pendulum swings.

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Base of the pyramid: vast majority of humanity, about 4 billion people, who makes less than 1500 euros.

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The Triad refers to the three centres dominating the world economy until the late 1990's: the United States (US), the European Union (EU) and Japan (JP).

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Base of global economic pyramid earns less than 2000 a year.

Chapter 2 

Institutions (Douglas North): the humanly devised constraints that structure human interaction.

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The institutional framework is made up of formal and informal institutions governing individual and firm behavior.

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The success and failure of firms are to a large extent determined by firms ability to understand and take advantage of the different rules of the game.

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Max weber: religions influence on economic growth.

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Walter Eucken: the role of the state is to set the rules or legal framework, which ensures that the market economy functions without the major distortions.

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Ronald Coase and Oliver Williamson: (transaction costs) argues that it is costly to organize transaction using the market mechanism, and as a consequence economic actor organize themselves in less costly ways, notably by establishing firms.

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Formal institutions include law, regulations and rules that are set by the authorized bodies.

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Richard Scott: the three pillars 1. Regulatory pillar: reflects the coercive power of governments and largely corresponds to formal institutions. 2. Normative pillar: refers to how the norms, values, beliefs and actions of other relevant players influence behavior of focal individuals and firms. 3. Cognitive pillar: refers to the internalized, taken for granted assumptions of how the world works that guide individual and firm behavior.

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Institution’s key role is to reduce uncertainty.

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Opportunistic behavior: seeking self-interest with guile.

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Institutional transition: fundamental and comprehensive change introduced to the formal and informal rules of the game that affect organizations as players.

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Institution-based view core propositions: 1. Managers and firms rationally pursue their interests and make choices within the formal and informal constrains in a given institutional framework. 2. Although formal and informal institutions combine to govern firm behavior, in situations where formal constraints are unclear or fail, informal constraint will play a larger role in reducing uncertainty and providing constancy to managers and firms.

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A political system refers to the rules of the game on how a country is governed politically.

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Business interacts with political only indirectly, yet businesspeople need to understand the political system because it shapes the commercial rules and regulations for business.

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Proportional representation: election system that allocates seats in parliament in proportion to the votes received by each party (usually subject to minimum threshold).

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First past the post system: election system by which in each constituency the candidate with the relative majority of votes gets the seat.

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Direct election of government: directly election of a president with executive power who then appoints government ministers.

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Indirect election of government: voters elect their representatives in parliament, who on their behalf elect and monitor the government ant the most powerful official in the country, normally the prime minister.

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Political systems determine who sets the rules and whose interest may be reflected in the rules.

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In a direct democracy, interest groups and lobbyist may appeal directly to electorate, which opens opportunities for those with major financial resources.

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Political systems also determine where and how businesses may be able to influence legislative processes through lobbying or corruption.

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Political systems vary in how frequently the rules of game for business are changed. Political risk.

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Economic system: rules of the game on how the country is governed economically.

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Pure market economy: characterized by the ‘invisible hand’ of market forces. The government only performs functions the private sector cannot perform.

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Pure command economy: an economy which all factors of production are government or state owned and controlled and all supply and demand and pricing are planned by the government.

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How markets and other mechanisms coordinate economic activity: -

Liberal market economy: coordination happens predominantly by companies reacting to price signals of the market.

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Coordinated market economy: economic actors such as businesses, governments, trade unions and industry associations coordinate their actions through a variety of mechanisms. They are not purely relying on market signals.

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Apprenticeship system: vocational training system for crafts and professions.

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Uk, Canada, and united kingdom are examples of liberal market economy.

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Legal systems: the rules of the game on how a country’s laws are enacted and enforced.

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When you are doing busines abroad, you are subject to the law of the country in which you operate.

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Civil law: a legal tradition that uses comprehensive statutes and codes as primary means to form legal judgements.

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Common law: a legal tradition that is shaped by precedents and traditions from previous judicial decisions.

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Case law: rules of law that have been created by precedents of cases in court.

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Common law may provide business with greater freedom to set their own rules, example writing contracts.

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Property right: the legal rights to use an economic property and to derive income and benefits from it.

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Intellectual property rights: rights associated with the ownership of intellectual property.

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Counterfeiting: the production of copied products.

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Patents: legal rights awarded by government authorities to investors of new technological ideas, who are given exclusive monopoly rights to derive income from such inventions.

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Copyrights: exclusive legal rights of authors and publishers to publish and disseminate their work.

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Trademarks: exclusive legal rights of firms to use specific names, brands and designs to differentiate their products from others. Length of protection may differ from country to country. Example: Denmark and Britain.

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The three primary ip are trademark, copyright and patents.

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Corporate governance: rules by which shareholders and other interested parties control corporate decision-makers (typically managers).

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The rule specifies the distribution of rights and responsibilities among different participants in the corporation, such as the board, mangers, shareholders and other stakeholders, and spell out the rules and procedures for making decisions on corporate affairs. It is important to ensure that managers act in the best interests of the firm, rather than their personal interest.

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Variations in corporate governance around the world are closely associated with variations in economic and legal systems. -

Common law systems: strong protection to financial investors. Shareholders are in the center. Common law countries often qualify as LMEs.

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Civil law systems: less protection to outside shareholders, and hence we see more family and state ownership in these countries. CME.

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Political risk: risk associated with political changes that may negatively impact on domestic and foreign firms.

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POLCON: focuses on the identifiable and measurable number of veto points in a political system few of those indicates highly unpredictable political change and therefor a lot of risk.

Chapter 3 

Informal institutions: rules that are not formalized but exist in for example norms, values and ethics.

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When formal institutions are not securing the effective functioning of the economy, then informal institutions may substitute them, or set up competing systems of economic order.

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Informal ins are socially transmitted withing societies and are part of the heritage that we call culture.

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Artefacts of culture: physical objects that represent the visible surface of culture.

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Culture: the collective programming of the mind that distinguishes the members of one group or category of people from another.

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Culture is embedded in daily routines and some aspects are encoded in language.

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Victor Barnouw: a way of life of a group of people.

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Geert Hofstede: Culture is collective phenomenon that is shared with people.

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Cluster: countries that share similar cultures together.

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Civilization: the highest cultural grouping of people and the broadest level of cultural identity people have.

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Western culture: an aggregate term for European, north American, Australian and New Zealand cultures. (can cause confusion)

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Hunting civilization – 8 clusters, Ronen and Shenkar – 11 clusters, Globe – 10 clusters.

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Cluster approach has relatively little to offer regarding differences between countries within one cluster.

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Culture dimensions provide a more fine-grained picture by focusing on multiple dimensions of cultural differences both within and across clusters.

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Geert Hofstede identified five dimensions by which cultural norms vary across countries.

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Power distance: the extent to which less powerful members within a country expect and accept the power is distributed unequally.

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High power distance tends to be associated with high income inequality. The opposite for low power countries.

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High power distance countries have a greater penchant for centralized authority. More formal interaction.

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Solicitation of subordinate feedback and participation is a daily routine in low power distance Nordic countries.

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Individualism: the perspective that the identity of an individual is fundamentally his or her own. Individuals are relatively loose, and individual achievement and freedom are highly valued.

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Collectivism: the idea that the identity of an individual is primarily based on the identity of his or her collective group. Individuals are close, and collective accomplishments are often sought after.

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Masculinity: values traditionally associated with male role, such as assertive, decisive, and aggressive. Also focus on career progression and material rewards.

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Femininity: values traditionally associated with female role, such as compassion, care and quality of life. Manager in feminine societies is less visible, intuitive rather than decisive and accustomed to building consensus.

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High masculine societies (led by japan) typically maintain a sharp role differentiation along gender lines, with most leadership positions taken by men.

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Uncertainty avoidance refers to the extent to which members in different cultures accept ambiguous situations and tolerate uncertainty. Members if high uncertainty avoidance cultures (led by Greece) place a premium on job security and retirement benefits.

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Low uncertainty avoidance cultures (led by Singapore) are characterized by a greater willingness to take risks and less resistance to change.

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Long term orientation emphasizes perseverance and focus on long term objectives.

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Members of a short-term orientation (led by Pakistan) prefer quick results and instant gratification.

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In culture with a long-term orientation, firms are more likely to nurture long-term ambitions.

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Low-context culture: a culture in which communication is usually taken at face value without much reliance on unspoken context.

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High-context culture: a culture in which communication relies a lot on the underlying unspoken context, which is as important as the words used. (Edward Hall)

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Stereotype: a set of simplistic often inaccurate generalizations about a group that allows others to categorize them.

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Successful businesspeople look beyond stereotypes to develop deeper understanding of each individual.

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Language: a system of shared meaning that enables people to effectively communicate.

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Language barriers: communication barriers between people who speak a different mother tongues and lack a shared language in which all are fluent.

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Corporate language: the language used for communication between entities of the same MNE in different countries.

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Lingua Franca: the dominance of one global language as a global business language.

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Individuals and team leaders can reduce language barriers by adapting how they communicate.

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Ethics: the principles, standards and norms of conduct governing individual and firm behavior. They are also reflected in formal laws and regulations.

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Code of conduct: written policies and standards for corporate conduct and ethics.

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Ethical relativism: a perspective that suggests that all ethical standards are relative. When in Rome do as the romans do.

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Ethical imperialism: the absolute belief that there is only one set of ethics and we have it.

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Many companies choose a blended approach, with three elements. First, respect for human dignity and basic rights, second, respect for local traditions suggest sensitivity. And third respect for institutional context calls for a careful understanding of local institutions.

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Subcultures: groups within a nation sharing a culture that substantially varies from the national average.

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Cultural convergence: the idea that cultures around the world are becoming more similar.

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Organizational culture: culture shared by people working in the organization.

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In-group: individuals and firms regarded as part of us.

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Out-group: individuals and firms not regarded as part of us.

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Guanxi – relationship.

Chapter 1-4

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Cultural intelligence: an individual’s ability to understand and adjust new cultures.

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Preparing for cultural differences: 1. Develop cultural intelligence, 2. Beware of subtle shifts in informal rules, 3. Respect cultural differences.

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Five profiles of cultural intelligence: -

The local: works well with people from similar background but not effectively with people from different cultural backgrounds.

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The analyst: observes and learns from others and plans strategy for interacting.

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The natural: relies on intuition when interacting with people from different cultural background.

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The mimic: creates comfort zone by adopting their general posture and communication style.

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The chameleon: person who may be mistaken for a native of the foreign country,

Chapter 4 

Resource based view: a leading perspective in global business that posits that firm performance is fundamentally driven by firm-specific resources. To make the best decision you need to understand the inside of the firm: which resources add value to firm and how can you systematically assess them.

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VRIO framework: value, rarity, imitability, organization.

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Basic proposition of the resource-based view is that firm consists of a bundle of productive resources.

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Competitive advantage: the ability of a firm to outperform its rivals.

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Primary resources: tangible and intangible assets as well as the human resources that a firm uses to implement its strategies. They can principally be purchased on open markets and customized for use. Individually they are insufficient to provide an advantage over competitors.

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Capability: firm-specific abilities to use resources to achieve organizational objectives.

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Primary resources and capability are often hard to distinguish, we thus use the simpler term ‘resources’ to refer to them all.

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Strategic advice begins with analyzing a firm’s resources.

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Tangible assets: items that are observable and quantifiable. They are normally reported in two categories: financial assets and physical assets.

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Intangible assets: assets that are hard to observe and difficult to quantify. Example technological and reputational resources, goodwill and intellectual property.

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Technological resources: patents, licenses, copyrights, trade secrets and databases.

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Reputational resources: the value of the reputation of a firm as a provider of quality goods and services, renowned as an attractive employer and a socially responsible corporate citizen.

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Good...