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Chapter 4 Notes

by: Carmyn L Watkins

Chapter 4 Notes BUSN 3304

Carmyn L Watkins
Ivy Tech Community College
GPA 3.0

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About this Document

These notes cover chapter 4 and which is about Globalization.
global business
Brandon Houston
Class Notes
business, International Business; Globalization
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This 8 page Class Notes was uploaded by Carmyn L Watkins on Tuesday September 13, 2016. The Class Notes belongs to BUSN 3304 at Ivy Tech Community College taught by Brandon Houston in Fall 2016. Since its upload, it has received 13 views. For similar materials see global business in Business Administration at Ivy Tech Community College.

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Date Created: 09/13/16
Chapter 4 Notes, Business 101 September 12, 2016 Top five trade partners 1. Canada- Oil, Soy, other agricultural products 2. China 3. Mexico 4. Japan 5. Germany Japan dominates the market they are in, the pacific area. The reason China would never call us on our debt is because, they don’t have enough of food to feed everyone in their country. We import to them most of their wheat and grain. They call us on our debt they will starve. Top Exports 1. Machines and Engines 2. Technology/Electronics 3. Aircraft, there are only two companies that manufacture planes, ours is Boewing. 4. Vehicles, fiat strategic alliance, buyout not a merger. 5. Oil, we refine it. And we do actually have resources of oil; our oil is located under our communities or in the ocean. Oil producing countries of the Middle East can produce oil more efficiently, but not the only country. Medical supplies are not in our top 5 exports but are one of our top exports. Top 3 Imports 1. Electronics 2. Machinery 3. Vehicles Steel is one of our top imports but not nearly as much as we used to; toys as well. The contemporary Global Economy Globalization- process by which the world economy is becoming a single interdependent system Import- products made or grown abroad but sold domestically Export- products made or grown domestically but shipped and sold abroad You can buy everything online, talking to someone in another country, wired payments  Governments and businesses are more aware of the benefits of globalization to businesses and shareholders.  New technologies have made international travel, communication, and commerce faster and cheaper than ever.  Sometimes a firm must expand into foreign markets simply to keep up with competitors. You can find things online, order from another country, and a foreign vendor may be more reliable than one domestically. Globalization ups our standard of living. Is globalization a good thing or a bad thing for a small business owner? Making sure the profit margin is lower than theirs, competition is increasing, may not always be a good thing for the business owner. Great for the consumer not as much for the business owner. Distinctions based on wealth- Higher Income countries-11K or more Upper-middle-income countries- 4k-11k Lower-middle-income countries 1k-4K 1k or less North American Free Trade Agreement- agreement to gradually eliminate tariffs and other trade barriers among the United States, Canada, and Mexico. Came with Bill Clinton. What has happened instead we’ve made it easier for companies where they can do cheaper labor, no tariffs. European Union- agreement among major European nations to eliminate or make uniform most trade barriers affecting group members; BREXIT what did it mean and why did Great Britain want to leave? Countries that did not have the euro before the EU was Great Britain, France with the Franc, and the German Deutsche mark Association of Southeast Asian Nations- organization for economic, political, social and cultural cooperation among Southeast Asia. China and Japan not included, may be why it isn’t as significant. General Agreement on Tariffs and Trade- 1947 international trade agreement to encourage the multilateral reduction or elimination of trade barriers. World Trade Organization- Organization through which member nations negotiate trade agreements and resolve disputes about trade policies and practices. Lobby and argue for different policies, but all members have to agree to them. Goals of the WTO  Promote trade by encouraging members to adopt fair trade practices  Reduce trade barriers by promoting multilateral negotiations  Establish fair procedures for resolving disputes among members Balance of Trade- economic value of all products a country that is imports and exports on a balance of negative or positive We have a negative balance of trade TABLE 4.1 in your book gives good examples of what the balance of trade is in the world Trade Deficit- when imports exceed exports Trade Surplus- exporting more that we are importing. Balance of Payment- flow of all money into or out of the country Exchange Rate- rate at which the currency of one nation can be exchanged for the currency of another nation Euro- a common currency shared among most of the member of the members of the EU (Excluding Denmark, Sweden, and the UK) Absolute advantage- the ability to produce something more efficiently that any other country. Example, coffee beans in Columbia, they have a cultural advantage. Comparative Advantage- the ability to produce some products more efficiently than others. National Competitive Advantage- International competition advantage stemming from a combination of factor conditions, demand conditions, related and supporting industries, and firm strategies, structures, and rivalries. Ghana If their currency declines in value what effect does that have on their balance of trade? I’m in brazil going to buy less imports, balance of trade is going to become positive, can’t import as much because you can’t afford it. Exporters- Makes products in one country to distribute and sell in others. Importers- buys products in foreign markets and brings them home for resale. International Firm- firm that conducts a significant portion of its busi9ness in foreign countries. Multinational Firms- firm that design, produces, and markets in many countries. Diversifies. Independent Agent- sales rep, foreign individual or organization that agrees to represent cooperation’s Licensing Arrangement- arrangement in which firms choose foreign individuals or organizations to manufacture or market their products in another country Strategic Alliance- arrangement in which a company finds a foreign partner to contribute half of its resources needed to establish and operate a new business in the partner’s country, also called a joint venture. Quota- restriction on the number of products of a certain type that can be imported into a country. protect domestic markets. Embargo- government order banning exportation and/or importation of a particular product or all products from a particular country, example Cuba. Human rights violations, has since been lifted. Tariff- tax levied on imported products Subsidy- government payment to help a domestic business compete with foreign firms. Oil, we give subsidies for oil countries in the US. Protectionism- the practice of protecting domestic business at the expanse of free market competition. -critics charge that protectionism drives up prices by reducing competition. Consumer does not come out ahead. Local Content Law- law requiring that products sold in a particular country be at least partly made there. have to use Puerto Rican cement, violates the constitution Business Practice Law- law or regulation governing business practices in given countries. Cartel- association of producers whose purpose is to control supply and prices, examples, OPEC and drugs, negative connotation Dumping- practice of selling a product abroad for less than the cost of production, want to flood your market with my product, slowly raise the price and rule the market. A business needs to understand a countries culture before starting a business there. This includes for basic aspects that guide their behavior • Values • Symbols • Beliefs • Language Countries with similar cultures and beliefs usually have no issues in businesses, for ex. The U.S. and England have very similar cultures. But someone from Japan and Germany may have very different cultures and have issues in business. -Cultural differences can have a direct impact on businesses. For example people in the Islamic communities practice that they should not capitalize on other people’s misfortunes. -Like a towing service who capitalizes on someone’s misfortune of their car breaking down. -Therefore someone who wanted to start a towing business would make no money in an Islamic country because of this cultural fact. Companies also profit from cultural differences as well. Like how Dunkin Donuts sells different products depending on the culture on National Donut Day, June 3rd. • Boston, obviously the Boston crème donut • China, dried pork and seaweed donuts • Korea, Grapefruit Coolata • Lebanon, Mango Chocolate Celebrating cultural differences in companies helps strengthen their international presence in those countries. One of the biggest issues with business across cultures is language. There will always be a mistranslation or issue in text when it comes to businesses. Originally Coca-Cola translated into Chinese as, “bite the wax tadpole.” While Pepsi’s jingle, “Pepsi comes alive,” translated to “brings your ancestors from their burial place.” Some forms of non-verbal communication are normal in some societies while in other they are considered offensive or can be misconstrued. In the United State three fingers means, “okay.” While in Japan is means money, worthlessness to the France, male homosexuals to the Maltese, and vulgar to many countries in Eastern Europe. Another example is the thumbs up, to the US, it means, “good job.” While in Bangladesh it is considered an insult and in the middle east it is considered highly offensive. Hofstede’s Five Dimensions of Culture- Dr. Geert Hofstede- Groningen University • Social Orientation- Collectivism vs Individualism, is the culture more centered around a group of people or the individual. Example- United States is an individualism country while, Pakistan is a collectivism country. • Power Orientation- the beliefs of a culture that power and superiority are accepted solely based on their position in a hierarchy. Example, Japan or Mexico • Uncertainty Orientation- the feeling people have regarding uncertain situations. People have either uncertainty acceptance or uncertainty avoidance. People with acceptance, like change and new ideas, example United States or Sweden. While countries with avoidance, do not like change and avoid it whenever possible. Example, Israel or Japan. • Goal Orientation- How motivated are people to work towards their goals. Most people from Germany and Italy are aggressive, while people from Norway and other Scandinavian countries are relatively passive. • Time Orientation- Having a short term versus a long term outlook on things like a job or life. Taiwan is usually long term while West Africa is usually short-term. And other studies have shown that the United States tends to have an intermediate time orientation. The study module and quiz will ask you the dimensions by number so there is an order to them.


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