Planned Economy and Quick

Define the term international business, and explain how it affects each of us. A: International business is any commercial transaction that crosses the borders of two or more nations. International business involves each of us every day. We consume goods that originate outside our borders or that contain components made abroad. We also consume services, such as a news broadcast or music entertainment, that are sent to us from abroad. Quick Study 2 (p.

36) 1. Q: Define globalization.

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How does denationalization differ from internationalization? A: Globalization is the trend toward greater economic, cultural, political, and technological interdependence among national institutions and economies. It is a trend characterized by denationalization (in which national boundaries are becoming less relevant), and is different from internationalization (which refers to cooperation between national actors). 2. Q: List each benefit a company might obtain from the globalization of markets.

A: Globalization of markets refers to convergence in buyer preferences in markets around the world.

Potential benefits for companies include: (1) reduced costs by standardizing marketing activities, (2) market opportunities abroad if home market is small or saturated, and (3) levels an income stream by letting international sales offset domestic sales for a company selling a global seasonal product. Quick Study 3 (p. 43) 1. Q: What two main forces underlie the expansion of globalization? A: The two forces underlying the expansion of globalization are: (1) falling barriers to trade and investment, and (2) technological innovation. 4.

Q: What factors make some countries more global than others? A: Four factors make a country more global: (1) political engagement, (2) technological connectivity, (3) personal contact, and (4) economic integration. The seven most global countries according to recent data are (beginning with first place): Singapore, Ireland, Switzerland, United States, Netherlands, Canada, and Denmark. CHAPTER 2: CROSS-CULTURAL BUSINESSuick Study Questions Quick Study 1 (p. 77) 1. Q: Define culture.

How does ethnocentricity distort one’s view of other cultures?

A: Culture is the set of values, beliefs, rules, and institutions held by a specific group of people. Ethnocentricity is the belief that one’s own ethnic group or culture is superior to that of others. Ethnocentricity distorts people’s views of other cultures because it views other cultures in terms of their own culture. In doing so, it causes one to overlook important human and environmental differences among cultures. Quick Study 3 (p.

85) 1. Q: How do manners and customs differ? Give examples of each. A: Manners are appropriate ways of behaving, speaking, and dressing in a culture.

Customs are habits or ways of behaving in specific circumstances that are passed down through generations in a culture. The two differ from each other in that manners apply generally in a culture whereas customs apply to specific situations.

An example of good manners is behaving in a modest manner and dressing conservatively in Japan. An example of a custom is the practice of arranging marriages on the behalf of children in India—just as it was a widespread custom across Europe several or more generations ago.

Another custom is the playing of cricket in Britain and its former colonies including India and Australia. 3. Q: Identify the dominant religion in each of the following countries: (a) Brazil, (b) China, (c) India, (d) Ireland, (e) Mexico, (f) Russia, and (g) Thailand.

A: (a) Roman Catholic; (b) Buddhist, Taoist, and Confucian; (c) Hindu; (d) Roman Catholic; (e) Roman Catholic; (f) Eastern Orthodox; and (g) Southern Buddhist CHAPTER 11 INTERNATIONAL STRATEGIES AND ORGANIZATIONuick Study Quick Study 1 (p. 335) 2. Q: Define what is meant by the term core competency.

How does it differ from a skill? A: A core competency is a special company ability that competitors find extremely difficult or impossible to equal. It is not a skill. Individuals possess skills such as the ability to hit 70 home runs in professional baseball.

A core competency refers to multiple skills that are coordinated to form a single technological outcome. Core competencies develop over long periods of time and are difficult to teach or transfer. Quick Study 2 (p. 340) 1. Q: Compare and contrast multinational strategy and global strategy.

When is each appropriate? A: A multinational (multi-domestic) strategy is a strategy of adapting products and their marketing strategies in each national market to suit local preferences.

The main benefit of a multinational strategy is that it allows companies to closely monitor buyer preferences in each local market and respond quickly and effectively as new buyer preferences emerge. The main drawback of a multinational strategy is that it does not allow companies to exploit scale economies in product development, manufacturing, or marketing.

A global strategy is a strategy of offering the same products using the same marketing strategy in all national markets. The main benefit of a global strategy is its cost savings due to product and marketing standardization. The main problem with a global strategy is that it may cause a company to overlook important differences in buyer preferences from one market to another.

CHAPTER 12 ANALYZING INTERNATIONAL OPPORTUNITIES 4. Q: Explain why a field trip and competitor analysis are useful in the final stage of the screening process.

A: The final step in the screening process represents the most intensive efforts of assessing remaining potential markets and sites—typically less than a dozen, sometimes just one or two. At this stage of the screening process, managers often want to take trips to each remaining site. The trip gives managers an opportunity to experience the culture, observe in action the workforce that they might soon employ, or make personal contact with potential new customers and distributors. There are also competitive issues managers should analyze in the final step of screening.

Some of these are the number of competitors and their market shares, the customer segment of each competitor and the loyalty of their customers, potential new entrants, and competitors’ control over key inputs. Intensely competitive markets typically put downward pressure on the prices that firms can charge their customers. An intensely competitive site can also increase the cost of doing business at that location. Lower prices and higher costs due to competitive forces must be balanced against the potential benefits offered by each market and site under consideration

Quick Study 3 (p. 371) 1. Q: Identify the benefits associated with conducting international secondary market research.

A: Market research is the collection and analysis of information in order to assist managers in making informed decisions. This definition applies to the assessment of both markets and sites. International market research provides information on national business environments including cultural practices, politics, regulations, the economy, a market’s potential size, buyer behavior, logistics, and distribution systems. Quick Study 4 (p. 373) 1.

Q: How does primary market research differ from secondary market research? A: Primary market research is the process of collecting and analyzing original data and applying the results to current research needs.

It helps complete the broad picture supplied by secondary data. Primary research differs from secondary research in that a company (or an outside agency on behalf of the company) gathers it for the first time. CHAPTER 3 POLITICS, LAW, AND BUSINESS ETHICSQuick Study Question Quick Study 1 (p. 112) 1. Q: What is a political system? Explain the relation between political systems and culture.

A: A political system includes the structures, processes, and activities by which a nation governs itself.

A people’s political system derives from their history and culture. Factors such as current population, age and race composition, and per capita income influence a country’s political system. Quick Study 2 (p. 114) 1. Q: What is democracy? Explain the difference between democracy and totalitarianism. A: Democracy is a political system in which government leaders are elected directly by the wide participation of the people or by their representatives.

In a democracy, the views and opinions of the people are incorporated into the national decision-making process. Democracies, in general, represent more stable business environments than do totalitarian systems because laws protecting individual property rights are enforced. Democracies also tend to have a greater portion of the country’s factors of production under private ownership. Totalitarian systems tend to have a greater portion of the factors of production under government ownership. 3.

Q: How might a democratic government affect business activities in a nation?

A: Democracies maintain stable business environments primarily through laws that protect individual property rights. In theory, commerce prospers when the private sector includes independently owned firms that exist to make profits. Bear in mind that although participative democracy, property rights, and free markets tend to encourage economic growth, they do not always do so. India, for example, is the world’s largest democracy; but it experienced slow economic growth for decades. Meanwhile, some countries achieved rapid economic growth under non-democratic political systems.

Asia’s four tigers—Hong Kong, Singapore, South Korea, and Taiwan—built strong market economies (despite recent economic setbacks) absent of truly democratic practices.

3. Q: Distinguish between confiscation, expropriation, and nationalization. A: Each of these is a form of property seizure. Confiscation is the forced transfer of assets from a company to the government without compensation. Expropriation is the forced transfer of company assets with compensation. Nationalization is government takeover of an entire industry.

Quick Study 5 (p. 128) 1. Q: What are intellectual property rights? What is the significance of such rights?

A: Intellectual property rights are legal rights to resources that result from intellectual abilities and any income these resources generate. Like other types of property, intellectual property can be traded, sold, and licensed in return for fees and/or royalty payments. Intellectual property laws are designed to compensate people whose property rights are violated. 2.

Q: Explain the term industrial property. What are its two types? A: Industrial property includes patents and trademarks. A patent is a right granted to the inventor of a product or process that excludes others from making, using, or selling the invention.

Trademarks are words/symbols distinguishing a product and its manufacturer. 3. Q: What is a copyright? Explain its importance to international business.

A: Copyrights give creators of original works the right to publish or dispose of them as they choose. A major problem for companies is the sharing of digital files (music, software, etc. ) on the Internet. P. 141 Increased digital communication may pose a threat to intellectual property because technology allows people to create perfect clones of original works.

How do you think the Internet might affect intellectual-property laws?

CHAPTER 4 ECONOMICS AND EMERGINGMARKETS (important)Quick Study Questions Quick Study 1 (p. 148) 1. Q: Define economic system. What is the relation between culture and economics? A: An economic system consists of the structure and processes that a country uses to allocate its resources and conduct its commercial activities. A nation’s economy tends to express individual or group values as reflected in its history and culture. However, no economy is focused entirely on the group at the expense of individuals or vice versa.

2. Q: What is a centrally planned economy?

Describe the link between central planning and communism. A: A centrally planned economy is one in which a nation’s government owns most of the land, factories, and other economic resources and plans nearly all economic activity. Karl Marx popularized the idea of central economic planning in the nineteenth century while promoting his belief in communism. Marx argued that market economies cannot be reformed—governments must be overthrown and economies replaced with more equitable “communist” systems. 3.

Q: Identify several factors that contributed to the decline of centrally planned economies.

A: Factors included: (1) Failure to create economic value, (2) Failure to provide incentives, (3) Failure to achieve rapid growth, and (4) Failure to satisfy customer needs. Quick Study 2 (p. 154) 1. Q: What is a mixed economy? Explain the origin of mixed economies. A: A mixed economy is one in which land, factories, and other economic resources are more equally split between private and government ownership.

Support for mixed economies grew out of the belief that an economic system must protect society from the excesses of unchecked individualism and organizational greed. Quick Study 3 (p. 59) 1. Q: What is meant by the term economic development? Explain the relation between productivity and living standards. A: Economic development is a measure for gauging the economic well-being of one nation’s people, as compared to that of another nation’s people.

Three categories of nations regarding their levels of economic development are developed (e. g. , Germany, Japan, and the United States), newly industrialized (e. g. , India, Mexico, and Taiwan), and developing (e. g.

, Chad, Nicaragua, and Laos). Productivity can increase standards of living by bringing more wealth into a nation.

Some experts argue that information technology (IT) can assist in the improvement of firm, and ultimately national, productivity and result in greater income at all levels. The Productivity Paradox refers to the lag between IT spending and productivity gains, which arise only after firms reorganize themselves around new technologies. 3.

Q: Explain Russia’s experience with economic transition. A: Russia’s experiment with communism lasted nearly 75 years beginning in 1917—a longer period than for any other centrally planned economy. Communism became so ingrained in Russian culture in part because it endured for so many generations.

Also, Russia’s political and economic systems fell apart at the same time. The nation is now struggling to rebuild itself with new institutions.

The political system is rife with corruption and contract killings of major political figures. The economy is in turmoil because of the government’s empty coffers—this being a direct result of its inability to collect taxes because of the very little business actually being done in the “official” economy. Inflation is one force that has hampered more rapid progress. Personal incomes and business profits are eaten away by rising prices and costs

CHAPTER 5 INTERNATIONAL TRADEick Study Questions Quick Study 1 (p. 178) 1. Q: What portion of world trade occurs in: (a) merchandise and (b) services? A: Merchandise (manufactured goods and other physical products) accounts for about 80 percent of worldwide trade; services account for the remaining 20 percent.

Quick Study 3 (p. 184) 2. Q: What is meant by the term comparative advantage? How does it differ from an absolute advantage? A: A comparative advantage is the inability of a nation to produce a good more efficiently than other nations, but an ability to produce that good more efficiently than it does any other well.

This is different from an absolute advantage in that it focuses on production efficiency within nations, not just between nations. [See Chapter 5 (pp.

154-155) for a numerical example of Riceland and Tealand. ] Quick Study 4 (p. 187) 1. Q: What does the factor proportions theory have to say about a nation’s imports and exports? A: Factor proportions theory says countries produce and export goods that require resources that are abundant and import goods that require resources in short supply. Quick Study 5 (p.

191) 2. Q: Describe the national competitive advantage theory. What is meant by an “advanced” factor?

A: National competitive advantage theory states that a nation’s competitiveness in an industry depends on the capacity of the industry to innovate and upgrade. An “advanced” factor is indicative of factors such as skill levels of workers and the quality of technology in a nation. CHAPTER 6 BUSINESS-GOVERNMENT TRADE RELATIONSuick Study Questions Quick Study 1 (p.

202) 1. Q: What are some political reasons why governments intervene in trade? Explain the role of national security concerns. A: (1) Practically every government restricts imports when they threaten jobs in the domestic economy. 2) Governments restricting certain imports for national security reasons because the nation must have access to a domestic supply of certain items (such as weapons, fuel, and air, land, and sea transportation) in the event that war could restrict their availability. Agriculture is also typically protected for national security reasons because a nation importing its food supplies could face starvation in times of war. (3) A government often threatens to restrict imports coming from a nation that is restricting its own imports—thus responding to what it considers “unfair” trade practices.

4) The world’s largest nations may become involved in trade to gain influence over smaller nations. For example, Japan has influence among many Asian nations because they rely on Japan for a large amount of their imports and exports. (5) For reasons of national security, nations restrict exports containing high-technology components and those considered as having “dual uses. ” They also restrict imports for the reasons already mentioned—protection of domestic supplies in case of war. Quick Study 2 (p. 206) 1.

Q: How do governments use subsidies to promote trade?

Identify the drawbacks of subsidies. A: Governments employ the use of subsidies to assist domestic companies in fending off international competitors. One drawback of subsidies is that they can cause companies to become complacent about increasing efficiency and cutting costs. This can cause companies to overuse resources—an especially difficult problem in developing and emerging countries. Because subsidies are generally funded through tax revenues earned from sales and income taxes, critics charge that they amount to corporate welfare on behalf of consumers. Quick Study 4 (p.

214) 1.

Q: What was the General Agreement on Tariffs and Trade (GATT)? List its main accomplishments. A: The General Agreement on Tariffs and Trade (GATT) was a treaty designed to promote free trade by reducing both tariff and nontariff barriers to international trade. GATT was formed in 1947 by 23 nations and success in its early years began to wane in the 1980s. The GATT was highly successful throughout its early years and has had many significant accomplishments. Between 1947 and 1988, it helped to reduce average tariffs from 40 percent to 5 percent and multiply the volume of international trade by 20 times.

But by the middle to late 1980s, rising nationalism worldwide and trade conflicts led to a nearly 50 percent increase in nontariff barriers to trade. Also, services (not covered by the original GATT) had become increasingly important—accounting for between 25 and 30 percent of total world trade. It was clear that a revision of the treaty was necessary, and in 1994 a new round of trade talks were concluded. CHAPTER 7 FOREIGN DIRECT INVESTMENTuick Study Questions Quick Study 1 (p. 225) 1. Q: What is the difference between foreign direct investment and portfolio investment?

A: Foreign direct investment is the purchase of physical assets or a significant amount of the ownership (stock) of a company in another country to gain a measure of management control.

It differs from portfolio investment—an investment that does not involve obtaining a degree of control in a company. 2. Q: What factors influence global flows of foreign direct investment? A: Three main reasons for the large increases in FDI flows over the past couple of decades are: (1) globalization, (2) mergers and acquisitions, and (3) increasing FDI on the part of entrepreneurs and small businesses. 3.

Q: Identify the main destinations of foreign direct investment. Is a shift in the pattern taking place? A: Highly industrialized countries are the destination for most FDI inflows, with the EU, U.

S. , and Japan attracting the vast majority of world FDI inflows. But highly developed nations are attracting a declining share of global FDI. Developed countries account for about 65% of global FDI inflows and developing countries account for about 29% of global FDI inflows. For developing nations, China attracted the most FDI in Asia and India also attracted a fair amount on the subcontinent.

Newly industrialized and emerging markets (particularly in Asia) are also a growing source of FDI. Quick Study 2 (p. 227) 4. Q: How does the theory of market power explain the occurrence of FDI? A: The market power theory states that a firm tries to establish a dominant market presence in an industry by undertaking foreign direct investment. The benefit of market power is greater profit because the firm is far better able to dictate the cost of its inputs and/or the price of its output.

Quick Study 4 (p. 236) 1. Q: What is a country’s balance of payments? Briefly explain its usefulness.

A: A country’s balance of payments is a national accounting system that records all payments to entities in other countries and all receipts coming into the nation. The balance of payments helps a country monitor the flows of goods, services, income, and transfer of assets between itself and other nations. The balance of payments position sends warning signals about trade deficits with other nations.

The main question surrounding the persistent U. S. trade deficit is whether the deficit is borrowing to finance consumption or borrowing to purchase equipment that will have productivity payoffs . Q: Explain the difference between the current account and the capital account. A: The current account is a national account that records transactions that involve the import and export of goods and services, income receipts on assets abroad, and income payments on foreign assets inside the country. The capital account is a national account that records transactions that involve the purchase or sale of assets.

These assets include financial assets such as stocks and bonds and physical assets such as investments in plants and equipment.

CHAPTER 13 SELECTING ANDMANAGING ENTRYMODESick Study Questions Quick Study 1 (p. 384) 1. Q: Briefly describe each of the four steps involved in building an export strategy. A: Companies should not simply respond to international requests for their products, but develop a detailed export strategy.

First, they should identify a potential market. In order to identify clearly whether demand exists in a particular target market, market research should be performed and results interpreted. Second, they should match the needs of the market to their abilities to satisfy the needs of the market.

Third, they should initiate meetings. Early meetings with potential distributors, buyers, and others are a must.

Initial contact should focus on building trust and a cooperative climate among all parties. Beyond building trust, successive meetings are designed to estimate the potential success of any agreement if interest is shown on both sides. Fourth, they must be willing to commit the resources needed to get the job done. After all the meetings, negotiations, and contract signings, it is time to put the company’s human, financial, and physical resources to work. 2.

Q: How does direct exporting differ from indirect exporting? A: Direct exporting occurs when a company sells its products directly to buyers in a target market. Direct exporters need not sell directly to end-users. Typically, they rely on either local sales representatives or distributors. Indirect exporting, on the other hand, occurs when a company sells its products to intermediaries who then resell to buyers in a target market. Indirect exporters can use several different types of intermediaries including agents, export management companies, and export trading companies. Quick Study 2 (p.

89) 2. Q: What are the four main methods of export/import financing? A: Advance payment is export/import financing in which an importer pays an exporter for merchandise before it is shipped. It is common when two parties are unfamiliar with each other, the transaction is relatively small, or the buyer is unable to obtain credit due to poor credit rating at banks. Documentary collection is export/import financing in which a bank acts as an intermediary without accepting financial risk. This method is common when there is an ongoing business relationship between two parties.

Letter of credit is export/import financing in which the importer’s bank issues a document stating that the bank will pay the exporter when the exporter fulfills the terms of the document.

Types of letters of credit are: 1) an irrevocable letter of credit, 2) a revocable letter of credit, and 3) a confirmed letter of credit. Open account is export/import financing in which an exporter ships merchandise and later bills the importer for its value. This payment method is often used for sales between two subsidiaries within an international company and when the parties are very familiar with each other.

Quick Study 3 (p. 395) 2. Q: Describe how franchising differs from licensing.

What are its main benefits and drawbacks? A: Franchising is a contractual entry mode in which one company (the franchiser) supplies another (the franchisee) with intangible property and other assistance over an extended period of time. Franchising differs from licensing in at least three important ways. First, franchising gives a company greater control over the sale of its product in a target market. Second, although licensing is fairly common in manufacturing industries, franchising is primarily used in the service sector.

Third, although licensing normally involves a one-time transfer of property, franchising requires ongoing assistance from the franchiser. Advantages of franchising include: (1) low-cost, low-risk market entry mode; (2) maintains consistency of products and theme; (3) allows for rapid geographic expansion; (4) franchisers can benefit from cultural knowledge and know-how of local managers.

Disadvantages include: (1) possible control problems with many locations; and (2) franchisees can experience loss of strategic and tactical flexibility. Quick Study 4 (p. 402) 1. Q: What is a wholly owned subsidiary?

Identify its advantages and disadvantages. A: A wholly owned subsidiary is a facility entirely owned and controlled by a single parent company.

Companies can establish a wholly owned subsidiary by purchasing an existing company or by forming a new company from the ground up. There are several advantages: (1) Managers have complete control over day-to-day operations in the target market and over access to valuable technologies, processes, and other intangible properties within the subsidiary; and (2) A wholly owned subsidiary is a good mode of entry when a company wants to coordinate the activities of all its national subsidiaries.

Disadvantages include: (1) They can be expensive undertakings—making it difficult for many small and medium-size firms; and (2) Risk exposure is high because a wholly owned subsidiary requires substantial company resources. Chapter 14 Developing and Marketing Products Quick Study 1 (p. 415) 1.

Q: How is globalization affecting international marketing activities? A: U. S. researcher Theodore Levitt argued that because the world is becoming standardized and homogeneous, companies should market the same products in the same way in all countries. Technology, claimed Levitt, causes needs and preferences to converge throughout the world.

Others say that standardization is just one of many strategies to enter the international marketplace successfully. They argue that standardization is not always the best strategy and advise smaller companies to adapt to local cultures while exploiting their unique images to gain local market share.

Quick Study 2 (p. 422) 1. Q: Identify several factors that influence the choice between a push and a pull strategy. A: A pull strategy is a promotional strategy designed to create buyer demand that will encourage channel members to stock a company’s product.

A push strategy is a promotional strategy designed to pressure channel members to carry a product and promote it to final users.

Push and pull strategies in a given marketing environment depend on such things as the characteristics of the distribution system itself, degree of access to mass media, and the type of product. Quick Study 4 (p. 426) 1. Q: What is the difference between worldwide pricing and dual pricing? A: Worldwide pricing is a pricing policy in which one selling price is established for all international markets.

Dual pricing is a pricing policy in which a product has a different selling price (typically higher) in export markets than it has in the home market.

It is typically the result of price escalation resulting from exporting costs and currency fluctuations. p. 428 Suppose that the product preferences of cultures and people around the world continue to converge. Identify 2 products that will be likely be affected and 2 products that will likely not be affected by this convergence. For each product, how will the changes influence the marketing manager’s job? CHAPTER 15 MANAGING INTERNATIONAL OPERATIONSQuick Study Questions

Quick Study 1 (p. 438) 1.

Q: Explain why capacity planning is important when formulating production strategy. A: Capacity planning is the process of assessing a company’s ability to produce enough output to satisfy market demand. If capacity is inadequate to fulfill forecasted demand, capacity must be expanded, and vice-versa. This affects production strategy. Quick Study 2 (p. 441) 1.

Q: List the main reasons why a company might decide to either make or buy a component. A: The make-or-buy decision entails deciding whether to make a component or buy it from another company.

Companies often decide to make a product rather than buy it in order to reduce total costs. In general, companies will undertake in-house production when they can produce for less cost than they can buy on the open market. Also, making rather than buying can give managers greater control over raw materials, product design, and the production process itself—all of which are important factors in product quality. Companies often undertake in-house production when persuading a supplier to make special modifications to a product on their behalf is difficult.

Companies also make rather than buy when buying from a supplier requires providing them with a key technology. Quick Study 3 (p. 444) 1. Q: How do TQM and ISO 9000 help companies to improve quality and control costs? A: Companies strive toward quality improvement for two reasons. First, quality products help keep production costs low because they reduce waste in valuable outputs, reduce the cost of retrieving defective products from buyers, and reduce disposal costs due to defective products.

Second, some minimum level of acceptable quality is an aspect of every product today.

Total quality management is an emphasis on continuous quality improvement to meet or exceed customer expectations. Total quality management stresses a company-wide commitment to quality-enhancing processes. The International Standards Organization (ISO) 9000 is an international certification that companies get when they meet the highest quality standards in their industries. To become certified, companies must demonstrate the reliability and soundness of all business processes affecting the quality of their products. 2.

Q: Explain how shipping and inventory costs influence a firm’s international logistics decisions.

What is just-in-time (JIT) manufacturing? A: Shipping costs can have a dramatic effect on the cost of getting materials and components to the location of production facilities. Then, shipping and inventory costs will heavily influence moving materials and components into and through the company. Companies manage the physical flow of raw materials and finished products to minimize the cost of logistics. Just-in-time (JIT) manufacturing is a production technique in which inventory is kept to a minimum and inputs to the production process arrive exactly when they are needed.

It has become popular because the cost of storing inventory can be very high.

CHAPTER 16 HIRING AND MANAGING EMPLOYEESuick Study Questions Quick Study 1 (p. 459) 1. Q: List several ways in which human resource management differs in the international versus domestic environment. A: International HRM differs considerably from domestic HRM due to differences in culture, politics, law, and economics. Hiring practices in some nations need not be non-discriminatory. Training and development often needs tailoring to local practices.

For example, Germany and Japan have numerous vocational-training schools that turn out highly skilled graduates. Many companies go abroad in the first place to take advantage of a lower pay scale in another country. Companies must determine how to compensate expatriate employees on job assignments that could last several years. 2. Q: What are the three different types of international staffing policies that companies can implement? A: In ethnocentric staffing, operations outside the home country are managed by individuals from the home country.

This policy tends to appeal to companies that want to maintain tight controls over the decision making of branch offices abroad.

In polycentric staffing, operations outside the home country are managed by individuals from the host country. This policy does not mean that host-country managers are left to run operations in any way they see fit. Large international companies usually conduct extensive training programs in which host-country managers visit home offices for extended periods. In geocentric staffing, operations outside the home country are managed by the best qualified individuals, regardless of nationality.

This policy is typically reserved for top-level managers. 3.

Q: Identify the advantages and disadvantages of each type of international staffing policy. A: Ethnocentric staffing: First, locally qualified people are not always available. Second, companies use ethnocentric staffing to re-create local operations in the image of home-country operations. Third, some companies feel that managers sent from the home country will look out for the company’s interests more earnestly than will host-country natives.

There are two main disadvantages of ethnocentric staffing.

First, relocating managers from the home country is expensive. Second, an ethnocentric policy can create barriers for the host-country office. Polycentric staffing: First, it can eliminate the high cost of relocating expatriate managers and their families. Second, it places managerial responsibility in the hands of people intimately familiar with the local business environment. The one major drawback of this policy is the potential for losing control over the host-country operation.

Geocentric staffing: This staffing policy helps a company develop global managers who can adjust easily to any business environment, particularly to cultural differences.

The main disadvantage of this policy is that it is expensive. The combination of a high demand for people with these special skills and their short supply has inflated their salaries. Quick Study 2 (p. 463) 1. Q: Why is human resources planning important? Identify its three phases. A: Human resource planning is important in order for the firm to forecast its human resource needs and supply.

The process involves three stages: (1) Taking an inventory of the company’s human resources; (2) Estimating the company’s future needs for human resources; and (3) Developing a plan for recruiting and selecting human resources. 2. Q: What are the main sources from which companies recruit their international managers? A: Companies recruit their employees internally or through external sources. Likely candidates within the company (current employees) are those managers who were involved in previous stages of an international project.

Companies also recruit from among recent college graduates who have come from other countries to attend college in the firm’s home country.

Hiring local managerial talent is common when cultural understanding is a key job requirement. In some cases, a government forces a company to recruit local managers so that the nation can develop its own internal pool of managerial talent. Companies typically recruit locally for non-managerial workers because there is often little need for highly specialized skills or training. Quick Study 3 (p. 467) 1.

Q: Identify the types of training and development used for: (a) international managers and (b) non-managerial workers.

A: For managers, the goal is often to create informed, open-minded, and flexible employees with cultural training appropriate to their duties. Environmental briefings typically include information on local housing, health care, transportation, schools, and climate. Cultural orientations offer insight into social, political, legal, and economic institutions. Cultural assimilation teaches the culture’s values, attitudes, manners, and customs.

Sensitivity training teaches people to be considerate and understanding of other peoples’ feelings and emotions.

In-depth language training gets a trainee “into the mind” of local people to learn why people behave as they do. Field experience means visiting the culture, and becoming absorbed by it for a short period of time. Non-managers also have a need for training and development, especially in developing countries where basic educational opportunities are limited and industrial experience may be new. In many countries, national governments cooperate with businesses to train non-managerial workers.

Japan and Germany lead the world in vocational training and apprenticeship programs for non-managerial workers. Quick Study 4 (p.

468) 1. Q: What is meant by the term labor–management relations? A: Labor-management relations are the positive or negative condition of relations between company management and its workers. Positive relations between labor and management can give a firm a competitive advantage. Because labor-management relations are human relations, they are rooted in culture and are often influenced by political movements in a market.