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Summary - International Business
1 Globalising business
What is International Business?1. A business that engages in international (cross-border) economic activities
2. The action of doing business abroad
What is an MNE?Multinational Enterprise. A firm that engages in foreign direct investments and operates in multiple countries.
What is FDI?Foreign Direct Investment. Investments in, controlling and managing value-added activities in other countries.
What are emerging economies?Economies that only recently established institutional frameworks that facilitate international trade and investment, typically with low or middle level income and above average economic growth.
What are the BRIC countries?Brazil, Russia, India and China. They are an example of emerging economies
What is the GDP?The Gross Domestic Product. It is the sum of value added by resident firms, households and governments operating in an economy.
What is PPP?Purchasing Power Parity. A conversion that determines the equivalent amount of goods and services different currencies can purchase.
What are expatriate assignments?Temporary jobs abroad with a multinational company.
What is the GNP/GNI?Gross National Product or Income. It is the gross domestic product plus income from non-resident sources abroad.
What is liability of outsidership?The inherent disadvantage that outsiders experience in a new environment because of their lack of familiarity.
What are the advantages and disadvantages of globalisation?+ Contribution to economic growth and standards of living
+ Sharing of technologies
+ Extensive cultural exchange
- Undermines wages in rich countries
- Exploits workers in poor countries
- Gives MNEs too much power
What are the 4 most general views of globalisation?1. The accelerated pace at which technologies spread around the globe (internet etc.)
2. The rising power of MNEs and growing inequality in the world
3. Fundamentally positive effects, but finetuning would ban out the inequality
4. A force that makes us more similar and eliminates distinctiveness of national cultures and identities
What is globalisation?A process leading to greater interdependence and mutual awareness among economic, political and social units in the world, and among actors in general.
What is liberalisation?The removal of regulatory restrictions on business. This happened in the 19th century, and paired with the inventions of the railways etc. led to rapid economic growth
What are the waves of globalisation?The pattern of globalisation arising from a combination of long-term trends and pendulum swings.
What is the global economic pyramid?A pyramid made up of 3 layers.
1. Top tier - per capita GDP/GNI > €15000, appr. 1 billion people
2. Second tier - per capita GDP/GNI €1500 - 15000, appr. 1 billion people
3. Base of pyramid - per capita GDP/GNI < 1500, appr. 4 billion people
What is risk management?The identification, assessment and management of risks.
What are NGOs?Non-governmental organisations, such as environmentalists, human rights activists and consumer groups that are not affiliated with governments.
What are cosmopolitans?The people embracing cultural diversity and the opportunities of globalisation
What are the characteristics of globalisation 1.0 and 2.0?1. Technological changes and trade liberalisation (1880-1930)
2. Mne's, trade liberalisation, raise of emerging economies (1979 - ...)
What is an absolute advantage?The ability of one country to produce a commodity more efficiently than another country.
What is a comparative advantage?The advantage in the production of a product enjoyed by country A over country B when that product can be produced at a lower opportunity cost in country A than it could be in country B
What does the law of comparative advantage say?That a nation should specialise in producing and exporting those commodities which it can produce at a relatively lower (opportunity) cost, and it should import those goods for which it is a relatively high-cost producer.
When is the home location advantage strong? The diamond model?1. Factor conditions
2. Demand conditions
3. Strategy, structure and rivalry
4. Related & supporting industries
What are the 2 types of factor conditions?1. Created factor conditions - infrastructure, skilled labour, etc.
2. Natural factor conditions - may be disadvantageous, as firms become complacent
What are demand conditions?Home location advantage is strong if domestic demand (market size) is large and sophisticated, as it forces firms to innovate. There may be demand heterogeneity though
What does the Gini index measure?The inequality in a country. The higher the number, the more inequality there is
What are the good and bad aspects of globalisation from an economic perspective?+ local producers can sell their products with same ease and speed abroad as in home country
+ Money flows easily across local and national borders
+ Easy access to external capital (credit) and rising leverage
- New risks due to high degree of integration of domestic/local markets (unpredictable demand etc.)
- Intensification of competition
- High degree of imitation
- Price and profit swings business and product destruction
What is a foreign subsidiary?An MNE unit located in a host country
What are firm structure, strategy and rivalry?Home location advantage is strong if managerial practices fit with the requirements of the industry.
What are related and supporting industries?Presence of related and supporting industries leads to more innovation
What are the origins of liability of outsidership?1. Distant origins
2. Lack of local experience
3. Lack of nearby experience
1. Lack of familiarity, networks and legitimacy in the local context
liability of outsidership
What is ethnocentrism?Self-centred mentality by a group of people who perceive their own culture, ethics, and norms as natural, rational and morally right
What are the 3 approaches to national culture?1. Context approach - Underlying background upon which which interaction takes place (low vs. high-context cultures)
2. Cluster approach - groups countries into clusters
3. Dimension approach - describing national cultures along various dimensions
What are Hofstede's dimensions?1. Power distance
2. Individualism vs collectivism
3. Masculinity vs femininity
4. Uncertainty avoidance
5. Long-term orientation vs short-term orientation
Latest added flashcards
2. Rising levels of population, poverty and inequality
3. NGOs as monitors and enforcers of social standards
2. Motivation to react to an attack
3. Capability to fight back
2. Difficult for companies in poorer countries to compete with rivals in richer countries
2. Business contracts should include provisions for all imaginable risks
3. Assistance of competent lawyers is essential