GMS 522 Lecture 2 PDF

GMS 522 Lecture 2 Culture - Culture is defined as an integrated system of learned behavior patterns that are distinguishing characteristics of the members of any given society Egocentricity - Ethnocentricity is the belief that one’s own ethnic group or culture is superior to that of others....

GMS 522 Lecture 2 Culture - Culture is defined as an integrated system of learned behavior patterns that are distinguishing characteristics of the members of any given society Egocentricity - Ethnocentricity is the belief that one’s own ethnic group or culture is superior to that of others. ➔ Consumer Ethnocentric Tendencies Scale ( CETSCALE ) ➔ Dual Ethnocentricity - Immigrant consumers may have an allegiance to both countries, their host and home country. Economic nationalism - which is defined as an individual’s readiness to support his/her government’s economic policy. Economic nationalists believe their country to be superior, and that it should be dominant in the world order. Government policies should be protectionist, domestic firms should not engage in IJVs and domestic consumers should boycott foreign products. Economic patriotism - which refers to an individual’s positive feelings towards his/her country. Patriotic individuals, however, do not believe that their country should exercise power to dominate other countries. Animosity ➔ Nationalism could eventually lead to animosity ➔ Defined as hostility towards a country that stems from political, diplomatic, economic or military events. Cultural Literacy - detailed knowledge about a culture that allows the manager to function effectively within it. ➔ The Elements of Culture ➔ Language ◆ Verbal/non-verbal Best for companies to use Translation-Back-Translation to minimize these problems. Non-verbal - conveyed by body language, gestures, and eye contact. ( eg ok signs, winking, raised crossed fingers) ➔ Religion ➔ Values & Attitudes ➔ Manners & Customs ➔ Material Elements ➔ Aesthetics ➔ Education, and ➔ Social Institutions Cultural Classifications ➔ High context or low context High context - meaning of individual behavior and speech changes depending on the situation or context. Nonverbal messages are full of important and intended meanings. When words are spoken “reading between the lines” is important. ➔ Found in European countries, some Latin American countries , japan. Low context - intentions are expressed verbally. A person’s meaning should be explicit not taken for granted. Propositions have to be justified and opinions defended openly. ➔ Found in the U.S, Russia. Australia and New Zealand HofstedeFramework ➔ Classifies culture into four dimensions Measuring Cultural Distance ➔ Measure cultural distance using Hofstede’s dimension and the method developed by Kogut and Singh (1988) Kluckhohn-Strodtbeck Framework ➔ Compares cultures along six dimensions ◆ Do people believe that their environment controls them or that they control their environments ◆ Do people focus on past events, the present, or the future implications of their actions ◆ Can people be trusted to act freely and responsibly? ◆ Do people desire accomplishments in life, a carefree life, or a spiritual life? ◆ Do people believe that individuals or groups are responsible for each person's welfare ◆ Do people prefer to conduct activities in private or public places? Gannons metaphors ➔ suggested the use of descriptive metaphors for different cultures. Suggestive analogs which characterize cultures in such a way as to help managers anticipate what people’s reactions might be in different situation ◆ Eg American Football - competitive and individualistic  ◆ German symphony - strict discipline, precise, skilled individuals, well-oiled machine Lecture 3 Exports - Goods manufactured in the home country and sold in a foreign country. Imports - Goods produced in a foreign country and sold in the home country USMCA - United States - Mexico- Canada agreement signed on nov 30, 2018 replaces the North American Free Trade Agreement (NAFTA). ➔ Canada last to approve came in effect on July 1 2020 ➔ NAFTA was signed in 1994 USMCA provisions ➔ Gives America access to Canada's 19$ billion dairy market. ➔ Cars and trucks with 75% of their parts made in the US, Canada or Mexico can be sold with zero tariffs. ➔ Non-Market economy clause - member country must inform the other two parties if it intends to negotiate a trade deal with a non-market economy. Parties also have the right to review the full text of the proposed agreement in order to decide if they wish to withdraw from the USMCA. The Thucydides trap ➔ A trade war to military conflict ➔ Rising power challenges established power, majority of the time results in military conflict National governments ➔ Responsible for setting domestic international trade policies and monitoring imports and exports. Protectionism ➔ Measures adopted by national governments to unduly restrict trade and foreign investments. ◆ Protectionist measure include ◆ Tariffs ◆ Quotas ◆ Voluntary export restrictions ◆ Quality standards ◆ Ip protection ◆ Investment restrictions Tariffs - a tax imposed by a domestic government on an internationally traded product ➔ Export tariff - imposed on a product that is being exported from a country. ➔ Transit tariff – imposed on a product that is being trans-shipped from one country to another ➔ Import tariff – levied on imports Tariff calculation ➔ Ad valorem - a percentage of the market value of the imported product. ➔ Specific - a specific dollar amount on each unit of the product that enters, leaves or is transshipped through the country. ➔ Compound - both ad valorem and specific components. Quotas - A quota is a quantitative restriction on the volume of a product that can be imported into a country over a specified time period ➔ Form of non-tariff barrier Types of quotas ➔ Absolute quotas - place a strict limit on the volume of imports coming into a country. ➔ Voluntary Export Restraints (VERs) – a promise by one country to limit exports of a product to some pre-specified volume or pre-specified percentage of the overall size of the foreign market. Exchange Controls - limit the amount of foreign exchange importers can purchase and thereby impedes their ability to transact with foreign exporters Keiretsu system - The keiretsu system involves tightly knit corporate and cultural relationships between Japanese manufacturers, wholesalers and retailers Product standards - National governments may impose product quality or testing standards on foreign goods entering a country. Lack of IP Protection - Governments may also discourage imports and protect local industries by their failure to offer intellectual property protection to foreign forms. Investment barriers - Governments restrict foreign ownership in certain sectors Arguments for protection Infant industry argument - Firms need to be shielded from direct foreign competition in order for them to grow and develop ➔ Argument attributed to Alexander Hamilton, first US Treasury Secretary (1789 -1795). Employment argument - Views the protection of domestic industry from the standpoint of maintaining employment levels in key sectors. National Security Argument - Very effective since 9/11 , used to restrict trade and investment Trade theories - Heckscher Ohlin ➔ Country relative factor endowment- labor and capital ➔ Different products have different factor intensities ➔ Different factor endowments and factor intensities result in price differences between countries. This makes trade possible. ➔ A country will export the products that use the most intensely its most abundant factor in production ➔ A country will import those products which are used most intensely by its least abundant factor of production. Vernon's plc Trade organizations ➔ WTO ( World trade organization) ◆ 1995 ◆ 164 members ◆ gatt formed in 1947 ( set rules for settlement of trade disputes.) ➔ World Bank ◆ 1944 ◆ One of two Bretton woods institutions ◆ Major role in developing market economies in eastern Europe ➔ International monetary fund (IMF) ◆ Role in ensuring the stability and smooth operation of the global monetary system i.e. the system of international payments and exchange rates which allows countries to engage in international trade ◆ A Breton woods institution ◆ Policy advice on macroeconomics Lecture 4 The economic environment ➔ Uncontrollable variable for the global marketer ◆ Interest rates ◆ Inflation ◆ Exchange rates Affects the demand for imported products and country’s relative attractiveness for foreign investment Impact on ➔ The sections of countries for foreign market entry ➔ The firms local market strategy in the foreign country ➔ Deciding which foreign countries to allocate resources to on the ongoing basis ➔ Deciding whether it is time to exit the market Market size ➔ Population is an indicator of market potential. Demand for imported products is linked to population size. Income levels ➔ Represents purchasing power and is a good indicator of market potential for most products Exchange rates ➔ The exchange rate is also important as it impacts the demand for imported goods and services. Inflation ➔ Is essentially too much money chasing too few goods and is typically measured at the comer level cpi or the producer level ppi BOP - Bottom of the pyramid Engels law - Suggests that as a family's income increases, the percentage spent on food decreases, even though the total amount of food expenditure increases. The Great Recession - 2008 a banking crisis that morphed into an economic crisis Covid 19 - a public health crisis that morphed into an economic crisis The financial crisis - ➔ characterized by massive layoffs in both developed and developing countries ➔ Low savings rate ➔ Job insecurity ➔ Low levels of consumer confidence ➔ Increased pressures on the government Causes ➔ Financial innovation in developed countries - securitization and lax regulation ➔ Huge surplus and high saving rates in China and middle east mirrored by deficits ➔ Negative savings rates in the us and developed world ➔ Expansionary monetary policies Economic integration - Motivated by the need to use the country’s resources more efficiently and provide a larger and more attractive market opportunities for member states Forms ➔ Free trade area ➔ Customs union ➔ Common market ➔ Economic union Free trade area ➔ Eliminates tariff and quotas barriers among member countries ➔ Each country is free to set it own tariff and quota barrier Customs union ➔ Removal of barriers to trade among members Common market ➔ Same features as the customs union but includes free movement of k and l Economic union ➔ Same feature as common market but with harmonization economic policies ➔ Lecture 5 POLITICAL AND LEGAL Home country Need to examine ➔ Embargoes and sanctions ◆ Refer to governmental actions that distort the free flow of trade in goods, services, or ideas for decidedly adversarial and political, rather than strictly economic ➔ Export controls ➔ Import controls ➔ Boycotts ➔ Regulation of firms' international behavior Sanctions - are applied by the un security council under chapter 7 Export control systems - designed to deny or at least delay the acquisition of strategically important goods by adversaries