Week 4 Business in a Global Environment.pdf
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- Nations trade to exploit their comparative advantages, focusing on producing what they do best and trading for other goods. - A nation has a comparative advantage when it can produce a good at a lower opportunity cost than other nations. - To evaluate international trade, nations look at their balance of trade (exports - imports) and balance of payments (total inflows and outflows). If exports exceed imports, there is a trade surplus; if imports exceed exports, there is a trade deficit.
Week 4 Business in a Global Environment.pdf
- 1. AGC450 Week 4 Business in a Global Environment Dr. Russell Rodrigo
- 2. How does globalization affect you?
- 3. Why Do Nations Trade? 1.They import those that they need but don’t produce and export those that are needed elsewhere. 2.To understand why certain countries, import or export certain products, you need to realize that not all countries are good at producing or are able to produce the same products. 3.The cost of labor, the availability of natural resources, and the level of know-how vary greatly around the world.
- 4. To explain how countries decide what products to import and export, economists use the concepts of absolute and comparative advantage. 1.A nation has an absolute advantage if it’s the only source of a particular product or can make more of a product with the same amount of or fewer resources than other countries. 2.A comparative advantage exists when a country can produce a product at a lower opportunity cost than other nations.
- 6. How Do We Measure Trade between Nations? • To evaluate the nature and consequences of its international trade, a nation looks at two key indicators. • We determine a country’s balance of trade by subtracting the value of its imports from the value of its exports. • If a country sells more products than it buys, it has a favorable balance, called a trade surplus. • If it buys more than it sells, it has an unfavorable balance, or a trade deficit.
- 7. • Nations trade to exploit their advantages: they benefit from specialization, focusing on what they do best and trading the output to other countries for what they do best. • To evaluate the impact of its international trade, a nation looks at two key indicators: balance of trade and balance of payments.
- 8. We determine a country’s balance of trade by subtracting the value of its imports from the value of its exports. • If a country sells more products than it buys, it has a favorable balance, called a trade surplus. • If it buys more than it sells, it has an unfavorable balance, or a trade deficit.
- 9. The balance of payments is the difference, over a period of time, between the total flow coming into a country and the total flow going out. 1.As in its balance of trade, the biggest factor in a country’s balance of payments is the money that comes in and goes out as a result of exports and imports. 2.But balance of payments includes other cash inflows and outflows, such as cash received from or paid for foreign investment, loans, tourism, military expenditures, and foreign aid.
- 12. Key terms • Importing involves purchasing products from other countries and reselling them in one’s own. • Exporting entails selling products to foreign customers. • Under a franchise agreement, a company grants a foreign company the right to use its brand name and sell its products. • A licensing agreement allows a foreign company to sell a company’s products or use its intellectual property in exchange for royalty fees. • Through international contract manufacturing, or outsourcing, a company has its products manufactured or services provided in other countries.
- 13. Key terms cont. • A strategic alliance is an agreement between two companies to pool talent and resources to achieve business goals that benefit both partners. • A joint venture is a specific type of strategic alliance in which a separate entity funded by the participating companies is formed to manage the alliance. • Foreign direct investment (FDI) refers to the formal establishment of business operations on foreign soil. • Offshoring occurs when a company sets up facilities in a foreign country that replaces U.S. manufacturing facilities to produce goods that will be sent back to the United States for sale. Shifting production to low-wage countries is often criticized as it results in the loss of jobs for U.S. workers. • A common form of FDI is the foreign subsidiary, an independent company owned by a foreign firm. • A company that operates in many countries is called a multinational corporation (MNC).
- 16. Language: Lost in Translation Table • In Belgium, the translation of the slogan of an American auto-body company, “Body by Fisher,” came out as “Corpse by Fisher.” • Translated into German, the slogan “Come Alive with Pepsi” became “Come out of the Grave with Pepsi.” • A U.S. computer company in Indonesia translated “software” as “underwear.” • A German chocolate product called “Zit” didnʼt sell well in the United States. • An English-speaking car-wash company in Francophone Quebec advertised itself as a “lavement dʼauto” (“car enema”) instead of the correct “lavage dʼauto.” • A proposed new soap called “Dainty” in English came out as “aloof” in Flemish (Belgium), “dimwitted” in Farsi (Iran), and “crazy person” in Korea; the product was shelved. • One false word in a Mexican commercial for an American shirt maker changed “When I used this shirt, I felt good” to “Until I used this shirt, I felt good.” • In the 1970s, GMʼs Chevy Nova didnʼt get on the road in Puerto Rico, in part because Nova in Spanish means “It doesnʼt go.” • A U.S. appliance ad fizzled in the Middle East because it showed a well- stocked refrigerator featuring a large ham, thus offending the sensibilities of Muslim consumers, who donʼt eat pork.
- 18. Intercultural communication • describes communication efforts between different cultural groups or subgroups. Differences between those groups, even if they speak the same language, can create problems and make understanding each other much harder. • As globalization has brought the whole world closer together, business between different cultures happens on a daily basis. • To make things run smoothly, intercultural communication skills are crucial.
- 19. Geert Hofstede • Hofstede refers to culture as “the collective programming of the mind distinguishing the members of one group or category of people from others” (Hofstede, 2013). • Comparing values, behaviors and organization for different nations Hofstede developed five dimensions to classify cultural principles. Each dimension builds up between two poles who describe the idealized extremes of it. • Hofstedes original dimensions included power distance (PDI), individualism vs. collectivism (IDV), masculinity vs. femininity (MAS) and Uncertainty avoidance (UAI) (Hofstede, 2001). A fifth definition, the one of long-term vs. short-term orientation or in other words pragmatic vs. normative, was added by Micheal Bonds research in 1991, followed by the definition of indulgence vs. restraint by Michael Minkov (Hofstede 2013). • In each dimension the lowest possible score is 0 and the highest is 100.
- 20. Power distance • How flat are hierarchies? • How does a culture deal with inequalities? • Is societal influence concentrated in the hands of a few or distributed throughout the population? • How authoritarian is a country’s organization? • Are communication efforts interactive? New Zealand Score: 12 New Zealand’s low score indicates a culture with flat hierarchies and a very low power distance. Communication in organisations is interactive and rather informal. What are the implications of POWER DISTANCE on intercultural communications?
- 21. Individualistic vs. Collectivist culture: 1. Does the interest of the group or the individual matter the most? 2. Are people only looking after themselves and their immediate family? 3. How well are individuals integrated and networked? New Zealand Score: 86 • With the rather high score of 86 New Zealand can be described as a rather individualistic culture with people looking after themselves and their immediate families first. What are the implications of individualism and collectivism on intercultural communications?
- 22. Low vs. High context Communication • Members of cultures with high-context communication send messages in which most of the information is either in the physical context or internalised in the person, while very little is in the coded, explicit, transmitted part of the message. • In contrast, the low-context communication is one in which the mass of the information is vested in the explicit code. The receiver does not have to take a complex context into consideration, when decoding the message. What must be said, will be said.
- 23. Masculinity vs. Femininity • Which values are aimed for? • How strong is a society following material values and success in comparison to the quality of life, interpersonal relationships and the concern for the weak? New Zealand Score: 59 • A score of 59 signalizes masculinity rather then femininity. People strive to be the best they can be in work or school-related settings with the focus on winning, being proud of their achievements and success in life. • What are its implications on intercultural communications?
- 24. Uncertainty Avoidance vs. Taking risks Ø Do members of a society feel threatened by unknown situations? Ø Are there attempts to control the future or do people just let it happen? Ø How high is the willingness to try something new or different? New Zealand Score: 39 • With a score of 39 New Zealand can be described as a pragmatic society that deals with uncertainties in a relaxed and flexible fashion. Originality is valued. People are willing to accept new ideas, give innovative products a try and a not too averse to taking risks. • What are its implications on intercultural communication (business setting)?
- 25. Long-term vs. Short-term Orientation (Pragmatic vs. Normative): ØHow are individuals subordinating themselves for longer term purposes? ØHow are the tendencies towards short-term spending and long-term savings, perseverance and quick results? New Zealand Score: 28 • New Zealand is shown to be a normative country with a normative way of thinking. Motivation to save for the future is rather low, therefore the focus on quick results is high.
- 26. Indulgence vs. Constraint ØHow freely are hedonist drives as gratifications towards enjoying life and having fun tolerated and allowed? ØIs the gratification of needs restricted by strong social norms? New Zealand Score: 75 A rather high score of 75 pictures New Zealand’s society indulgent. With it, people tend to possess a positive attitude and a tendency towards optimism. Leisure time is regarded as important, also the ability to spend money as one likes and and to follow desires and needs to enjoy life and have fun.
- 27. Perception of Time (Chronemics) Monochronic vs Polychronic Study of the use of time and the way that time is perceived and valued by individuals and cultures. What are its implications on intercultural communication?
- 28. Discussion 1. What can you say about your nation’s culture? 2. How would you classify it in terms of Hofstede’s model? 3. How do you evaluate New Zealand’s scores? Do you agree? 4. Have a look online to compare your estimation with your country’s scores! 5. Compare with other countries you know.
- 29. How Does Culture Affect Communication? • Instant communications and an ever- expanding internet have made the world a much smaller place, presenting both barriers and opportunities as we interact across borders with people of different cultures. • In this new, complex world of communication, cultural differences stand out as one of our biggest challenges. • Different cultures affect how individuals participate in groups and how they work within communities.
- 30. New Challenges With the Way We Communicate Different styles of communicating
- 31. Verbal Communication Styles by Gudykunst and Ting-Toomey Direct Style • The direct-indirect style refers to the way of expressing the speaker’s true intention in terms of his needs, wants and desires. • Members of individualistic, low- context cultures tend to use the direct style, which corresponds best to the value orientations (honesty, openness, individual worth) of such cultures. Indirect Style • Members of collectivistic, high- context cultures prefer to use the indirect verbal style. • Speakers of such cultures often use imprecise and even ambiguous words to communicate their message. By doing so, they “emphasise listener’s abilities to infer speaker’s intentions.
- 32. According to Weggel, ʻyesʼ carries various meanings in cultures using the indirect style. The problem is how to interpret the term in the right way.
- 33. • The use of direct speech in individualistic, low context cultures, asserts self-face need and self-face concern whereas in collectivistic, high-context cultures, the indirect speech is preferred in order to keep up group harmony and to preserve mutual-face need. • Assumptions on values and a “set of deep-rooted historical-political logics” are decisive elements for the choice of one of these two dimensions.
- 34. Elaborate vs. Exacting vs. Succinct Style • The elaborate style distinguishes itself by a rich, expressive language, which uses a large number of adjectives describing a noun, exaggerations, idiomatic expressions, proverbs and metaphors. This style is mainly used in cultures of the Middle East such as Iran, Egypt, Lebanon and Saudi-Arabia which are moderate on Hofstede’s uncertainty avoidance dimensions and are high- context cultures. • The exacting style can be found in low-context cultures which are low to moderate on Hofstede’s uncertainty avoidance dimension. These are mainly North American and North European cultures. It says that neither more nor less information is required to communicate a message. The speaker just uses those words, which describe exactly the speakers’ intention.
- 35. Elaborate vs. Exacting vs. Succinct Style Cont. • Finally, the succinct style refers to the use of understatements, pauses and silences. • This style is used in cultures high in uncertainty avoidance and high- context.
- 36. Elaborate vs. Exacting vs. Succinct Style • The exacting style can be found in low-context cultures which are low to moderate on Hofstede’s uncertainty avoidance dimension. • These are mainly North American and North European cultures. • It says that neither more nor less information is required to communicate a message. The speaker just uses those words, which describe exactly the speakers’ intention.
- 37. Personal vs. Contextual style • Individualistic. Low-context cultures tend to see every individual as equal which is also reflected in their language. North Americans for example prefer a first name basis and direct address. Using titles and honorifics is avoided. Differences of age, status and sex are no reasons to use different language styles. • Collectivistic, high-context cultures find themselves during a conversation in certain roles which can depend on the status of the interlocutors. • In the Korean language for example, exist different vocabularies for different sexes, for different degrees of social status or intimacy. Using the right language style in a conversation is a sure sign for a learned person.
- 38. Instrumental vs. Affective style • The instrumental style is goal-oriented in verbal exchange and employs a sender- oriented language. Speaker and listener are clearly differentiated. Dominant in individualistic, low-context cultures. • Affective style is process-oriented in verbal exchange and uses a receiver-oriented language. The roles of speaker and listener are rather integrated than differentiated and are interdependent. The speaker is not only expected to transmit his or her message, but at the same time to be ”considerate about other’s feelings. Dominant in collectivistic, high-context cultures.
- 39. Silence • Bruneau stated that "Silence is to speech as the white of this paper is to this print. Physiologically, silence appears to be the mirror image of the shape of discernible sound for each person. Speech signs, created by necessity or will, appear to be mentally imposed grounds of silence. • Mind creates both. (...) • Hence, silence destroys continuity which is necessary in order to lend clarity to speech. Only by the destruction of continuity we can consider a thought or an emotion as finished.
- 41. Economic Development • A country’s level of economic development can be evaluated by estimating the annual income earned per citizen. The World Bank, which lends money for improvements in underdeveloped nations, divides countries into four income categories (World Bank Group, 2011): • High income—$12,276 or higher (United States, Germany, Japan) • Upper-middle income—$3,976 to $12,275 (China, South Africa, Mexico) • Lower-middle income—$1,006 to $3,975 (Vietnam, Philippines, India) • Low income—$1,005 or less (Kenya, Bangladesh, Haiti)
- 42. Currency Valuations and Exchange Rates • In dealing with countries whose currency is different from yours, you have to be aware of the impact that fluctuations in exchange rates will have on your profits. • If a foreign currency goes up relative to the U.S. dollar, Americans must pay more for goods and services purchased from sellers in the country issuing the currency (foreign products are more expensive). This is bad for exporters who have to pay more for the foreign-made goods they buy to bring back to the United States to sell. • If a foreign currency goes down relative to the U.S. dollar, Americans pay less for products from the country issuing the currency (foreign products are cheaper).
- 43. Foreign Corrupt Practices Act Corruptibility Around the World, 2010 Rank Country CPI Score* 1 Denmark 9.3 1 New Zealand 9.3 1 Singapore 9.3 4 Finland 9.2 4 Sweden 9.2 6 Canada 8.9 15 Germany 7.9 17 Japan 7.8 20 United Kingdom 7.6 22 United States 7.1 98 Mexico 3.1 175 Iraq 1.6 176 Afghanistan 1.4 178 Somalia 1.1 *A score of 10 means that a country is squeaky clean. Anything under 3 means that corruption is rampant. http://www.transparency.org/policy_research/surveys_indices/cpi/2010/results
- 44. To prepare for a global career, you might want to consider doing some of the following while a student: 1.Major in international business. 2.Develop your knowledge of international politics, economics, and culture. 3.Study a foreign language. 4.Take advantage of study-abroad opportunities. 5.Interact with fellow students from other cultures.
- 45. Week 4 Discussion • If you had an opportunity to spend a summer working as an intern in a foreign country, which country would you select? Why? In what ways would the internship be valuable to your future career in business? How would you prepare for the internship?