Stuvia.com Module 1: NATURE AND CULTURE OF GLOBAL BUSINESS LEARNING OBJECTIVES After completing this chapter, one will be able to do the following: ✓ Understand the nature of global business. ✓ Explain the definition and importance of a global business. ✓ Identify the functions of global business. ✓ Describe the society and culture in relation to global business ✓ Identify the elements of culture and its impact ✓ Explain the trends towards a global business environment. ✓ Distinguish transport exposure from economic exposure. ✓ Describe the ethical behavior and the environmental issues of global business SALIENT POINTS FOR DISCUSSION This module provides an introduction in international business, its nature as well as its culture for analyzing a country’s international business and their economic implications. It discusses functions and trends towards an international business environment including the ethical behavior and the environmental issues. • Globalization is the word that used to describe the growing interdependence of the world’s economies, cultures, and populations, brought about by cross -border trade in goods and services, technology, and flows of investment, people, and information. It is the process by which the world, previously isolated through physical and technological distance, becomes increasingly interconnected and manifested by the increase in interaction between people around the world that involves the sharing of ideas, cultures, goods, services and investment. • Globalization is about the interconnectedness of people and businesses across the world that eventually leads to global cultural, political, and economic integration. It is the ability to move and communicate easily with o thers all over the world to conduct business internationally. • Globalization is also used to describe both international trade and the act of a company doing business in more than one area of the world. Some examples of a Stuvia.com well-known global businesses include Google , Apple, and eBay. These companies were founded in America but have expanded to other areas of the world. • Globalization gained popularity after the Cold War in the early 1990s, as these cooperative arrangements shaped modern everyday life. The wide -ranging effects are complex and politically charged. As with major technological advances, globalization benefits society, while harming certain groups. Understanding the relative costs and benefits can pave the way for alleviating problems while sustaining the wider payoffs. • Countries have built economic partnerships to facilitate these movements over many centuries. But the term gained popularity after the Cold War in the early 1990s, as these cooperative arrangements shaped modern everyday life. • With the advent of globalization , global business practices and international business have become common phenomena . Large companies and MNCs often operate in more than one country. Managing such cross -border operations requires a thorough understanding of local cultures , practices, laws and business environments . International managers, thus, must play several important roles in their businesses. • The primary benefit of expanding business operations beyond borders comes down to numbers. Operating in more countries means access to more customers, more revenue and profit. Selling goods accompanied by higher volumes can reduce costs. In the services sector, the opportunity to hire more talent can bring in new ideas and can open even more opportunities. • Operating in global markets is a good way to reduce risks and to leverage new opportunities. If there is a change in the market like a new product or service or a competitor pulling out, there is already a foothold and can be move quickly to take advantage of that change. • While there are certainly risks in opening the company to new markets with different cultures, languages and buying habits, these risks are not too different than when a company opened its doors in the firs t market. Otherwise, once there is an expansion, it requires a lot of research and development of new management skills. • Exploring global markets can expand the potential for profit. However, there is much more to manage. Take, for example, the issue of foreign currency and exchange. Making sales in a foreign currency, shipping inventory to different countries and Stuvia.com • There are lots of different reasons to study global business, but there is one primary reason that stands out among all of the others: business has become globalized . Economies and marketplaces around the world are interconnected and more interdependent than ever before. Thanks, in part, to the internet, the transfer of capital, goods, and services knows almost no boundaries. Even the smallest companies are shipping goods from one country to another. This level of integration requires professionals who are knowledgeable about multiple cultures and able to apply this knowl edge to selling products and promoting services around the world maintaining bank accounts in different currencies can increase or decrease profits from four different exposure risks, each of which need to manage: □ Transaction exposure : Converting foreign money can be a benefit or a detriment depending on exchange rates. □ Economic exposure : Changes in the economies of different countries can cause changes in currency exchange rates. □ Translation exposure : Depending on when you translate foreign currency to your home currency, your profits could go up as well as your tax liability. □ Tax exposure : Tax obligations can increase due to income from foreign • In the classic movie The Wizard of Oz , a magically misplaced Midwest farm girl takes a moment to survey the bizarre landscape of Oz and then comments to her little dog, “I don’t think we’re in Kansas anymore, Toto.” That sentiment probably echoes the reaction of many businesspeople who find themselves in the midst of international ventures for the first time. The differences between the foreign landscape and the one with which they’re f amiliar are often huge and multifaceted. Some are quite obvious, such as differences in language, currency, and everyday habits (say, using chopsticks instead of silverware). But others are subtle, complex, and sometimes even hidden. Success in internation al business means understanding a wide range of cultural, economic, legal, and political differences between countries. Let’s look at some of the more important of these differences. • Even when two people from the same country communicate, there is always a possibility of misunderstanding. When people from different countries get together, that possibility increases substantially. Differences in communication styles reflect differences in culture: the system of shared beliefs, values, customs, and be haviors that govern the interactions of members of a society. Cultural differences create challenges to successful international business dealings. Stuvia.com
