BUS613 Study Guide

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Study Guide Structure

In this study guide, the sections in each unit (1a., 1b., etc.) are the learning outcomes of that unit. 

Beneath each learning outcome are:

• questions for you to answer independently;
• a brief summary of the learning outcome topic; and
• and resources related to the learning outcome. 

At the end of each unit, there is also a list of suggested vocabulary words.

How to Use this Study Guide

1. Review the entire course by reading the learning outcome summaries and suggested resources.
2. Test your understanding of the course information by answering questions related to each unit learning outcome and defining and memorizing the vocabulary words at the end of each unit.

By clicking on the gear button on the top right of the screen, you can print the study guide. Then you can make notes, highlight, and underline as you work.

Through reviewing and completing the study guide, you should gain a deeper understanding of each learning outcome in the course and be better prepared for the final exam!

Unit 1: Introduction to International Business and Globalization

1a. Explain the foundational concepts of international business and how cross-border operations have expanded geographically due to technological advances

• Which technological advances have allowed outsourcing to play a pivotal role in the expansion and rapid progression of international business and trade?
• What areas could challenge international businesses as they enter new international markets?

1b. Explain why an organization might aspire to expand beyond its domestic market

• Why would a successful business in a domestic location seek international expansion?
• What type of risks would either be different or more volatile when a business expands internationally?

1c. Predict future trends in the global business environment

• How has technology advanced in allowing companies, and now individuals, to have so much influence on the world?
• Outsourcing was the first major milestone in globalization; what could come next?

1d. Evaluate key arguments for and against globalization

• What are some benefits of globalization, and who benefits?
• What are some negative aspects of globalization, and how can they be overcome?

Unit 1 Vocabulary

• cost savings
• geopolitical risk
• globalization
• human resources
• market share
• multinational corporations
• outsourcing
• subsidiary
• supply chain

Unit 2: Language and Culture

2a. Analyze the role language and culture play in international business conduct 

• What factors do language and culture play in positive or negative outcomes for international businesses?
• How can a global company condition and improve its operations to mitigate cultural risk in new international markets?
  

Language and culture significantly influence how groups from differing backgrounds interact in a business setting. An international company must implement strategies and policies to prepare its key business leaders for meetings with potential new clients or partners to increase the likelihood of success. There are countless examples of successful companies creating mistakes in a new international market due to a lack of cultural understanding. To expand and sustain an international business, a global company must develop processes to mitigate cultural risk.
 
To review, see English, the Universal Language and Other Major Languages.

2b. Describe how companies adapt to cultural practices

• What strategies should a global corporation explore to enhance cultural understanding internally among employees from different regions and customers in a new international market?
• How must companies adapt their cultural practices to operate effectively in new cultural settings?
  

The modern-day global economy has provided a large level of interaction between cultures. Cultural competence, which is the ability to understand other cultures, is an essential aspect of an international business leader. A corporation entering a new market must adapt to many different factors, of which culture is one of the most critical. A company's past success is not indicative of future results. Companies that are successful in new international markets typically have a keen sense that they must first identify cultural differences, strategize how they can adapt, and then implement. Businesses, from small start-ups to large corporations, face similar challenges in this area.
 
To review, see The Effect of Culture on Business and Cultural Competence.
 

2c. Explain how various cultures communicate, think, and negotiate differently and discuss the impacts on new business opportunities 

• How would a company from Japan negotiate and communicate differently than a company from the United States?
• How would a company from Germany negotiate and communicate differently than a company from Brazil?
  

Each culture is the result of a culmination of many different factors. They have different histories, languages, experiences, and mindsets that influence how they interact with each other. The global economy has brought many cultures in close contact and interaction with each other, and cross-cultural challenges are playing out in board rooms and offices daily around the world. It is necessary to identify these differences and prepare yourself for new cultural interactions to be in a good position for success in international business. Companies from different countries must prepare for differences in negotiating style, communication style, and overall perceptions, which can vary from small to major differences depending on the country.
 
To review, see Negotiation Style and Cultural Norms, Values, and Beliefs.
 

2d. Identify common or universal cultural gestures, body language, and communication styles 

• What common or universal gestures can you consider appropriate in international business?
• How could using certain body language or communication styles that are acceptable in the United States be interpreted negatively in other parts of the world?
  

We often don't realize the level of communication conveyed without speaking through universal gestures or body language. We may find ourselves in a situation where a gesture or aspect of body language is appropriate in the United States but may be perceived very differently in other parts of the world. Why would this be a factor in the outcome of an international business meeting? This area should be closely analyzed when entering a new or foreign environment where you are conducting business.
 
To review, see Communication Styles.
 

2e. Evaluate approaches to international negotiations that respond to differences in culture 

• In the U.S., we are very direct, which would be less appropriate in the Philippines. How would an American successfully navigate negotiations in the Philippines to adapt to local cultural practices?
• How would you evaluate your negotiation style, and what areas would need to be adapted to succeed in particular cultural settings worldwide?
  

Even in America, people have different negotiation styles and may communicate differently based on personality. However, Americans generally communicate similarly in terms of being more direct than certain other cultures and the speed at which they conduct business and bypass relationship building, which is critical in some other cultures. As you prepare for this section, continuously evaluate your communication and negotiation style to develop an awareness of what areas would need to be adapted in various cultural settings around the world. Hofstede's Cultural Framework is an effective tool for assessing certain aspects of culture and understanding cultural interaction.
 
To review, see Cultural Competence and Cultural Norms, Values, and Beliefs.
 

2f. Explain the difference between high-context and low-context cultures 

• What basic elements make a low-context culture and a high-context culture?
• Why would the United States be considered a low-context culture, and what differences between American culture make the Chinese culture a high-context culture?
  

It is important to classify low-context cultures, which communicate more directly, and high-context cultures, which tend to be less direct. It is important to identify and group different countries to better understand how some might act similarly or differently. If you have experience conducting business in China, you might find it easier to apply similar aspects to conducting business in Japan than in Sweden. Classifying and identifying will assist you in building upon your experience and application in new international settings.
 
To review, see Communication Styles, Negotiation Styles, and Cultural Competence.
 

Unit 2 Vocabulary

This vocabulary list includes terms you will need to know to successfully complete the final exam.

• cultural competence
• high-context culture
• Hofstede's Cultural Framework
• low-context culture

Unit 3: International Trade

3a. Assess how country specific infrastructure and partnerships support international trade 

• What specific advantages do countries with good or modern infrastructure have over developing countries with less advanced infrastructure systems?
• How can a partnership between companies, countries, or organizations from different parts of the world play a part in supporting international trade?
• What role do trade agreements play in providing certain positive and negative impacts to the parties involved?
  

Infrastructure is vital for a country to advance and grow its economy. Wealthier nations have played a role in financing international organizations that provide loans or grants to developing nations to update their infrastructure. It can play a positive role in enhancing international trade for everyone. Trade barriers have decreased over the past few decades, and the ease with which international commerce is conducted online has created a very connected global economy. National competitive advantage plays a major role in a free market system in which countries trade with others in industries where they have an advantage in producing or operating. As international trade expands, it creates some winners and losers, which can result in protectionism in certain countries as citizens begin to lose jobs and politicians seek to shelter this constituency.
 
To review, see Ports and Shipping, Trade Agreements, and Trade Capacity.
 

3b. Examine International Trade Theory and interpret the various elements of it

• What role would understanding National Competitive Advantage play in an economic advisor drafting a new trade policy?
• What comparative advantages does the United States have over much of the world? How valuable is this for future and sustainable economic growth?
  

Several prominent trade theories were established generations ago. However, they are still very relevant in our global economy today. Mercantilism, which is the belief in profitable trade, has existed for centuries. Countries must have a realistic view of why they are competitive in certain areas and lack in others to effectively create trade partnerships that put their nation in the best possible position. Comparative advantage is when a country can produce at a lower cost than others, while absolute advantage is a country that can produce an economic activity much more efficiently than others, such as Saudi Arabia with oil. You must understand why certain advantages exist for countries and what efforts can be placed to overcome challenges when disadvantages are present.
 
To review, see National Competitive Advantage, Absolute and Comparative Advantage, and Free Trade vs. Mercantilism.
 

3c. Explain why some nations develop trade surpluses or deficits with other countries and evaluate whether the outcome is positive or negative for each country 

• What is a trade surplus, and how is that generally viewed in the greater context of an economy's health and competitiveness in the global economy?
• Why might a trade deficit be unavoidable and not necessarily a negative?
  

Nations with an economy that relies on commodities such as oil will generally benefit and find large trade surpluses when those commodities are valued high in the world market. Meanwhile, other nations may need access to resources and materials to produce, creating trade deficits. A country may develop a trade surplus, in which they are exporting more than importing, or a trade deficit, in which they are importing at a higher value than the level they export. Understanding how these situations develop through trade among nations and analyzing how the data can identify positive and negative points about a nation's economy is critical.
 
To review, see Competition and Strategic Rivalries and Mercantilism.
 

Unit 3 Vocabulary

This vocabulary list includes terms you will need to know to successfully complete the final exam.

• absolute advantage
• comparative advantage
• mercantilism
• national competitive advantage
• protectionism
• trade deficit
• trade surplus

Unit 4: The Global Financial System

4a. Categorize components of the international financial system based on their functionality and specialized areas of service 

• What is the concept of balance of payments, and how might that assist you in understanding how the flow of goods and services influences the international financial system?
• What international financial institutions make it possible to transact between businesses in different countries?
  

Companies, organizations, and individuals can easily transact with each other in today's modern global financial system due to the networks in place that have been supported and developed over the years with international financial institutions. It is much easier to track trade statistics due to the flow of currency that is recorded and transferred across borders due to technological advances.
 
The letter of credit, which provides terms and conditions while mitigating risks for both the buyer and the seller, has played a pivotal role in international transactions. The balance of payments summarizes all transactions of an economy with all other nations. It provides a good framework for understanding how well a country produces and trades with others. Foreign direct investment is used by countries to attract outside investment and increase their foreign exchange reserves.
 
To review, see Balance of Payments.
 

4b. Describe how the global financial market works and how transactions are made between companies in other countries with different currencies 

• How do currency exchange fluctuations impact purchase decisions when they occur across borders? How can exchange risk be mitigated, and what options do buyers and sellers have?
• What role does a Letter of Credit have in promoting international trade, and why has it succeeded?
  

Currencies are continuously fluctuating when transacted between each other through the foreign exchange market. It is important to understand why this occurs and what options are available to mitigate risk when transacting between currencies. The global financial system has made it relatively easy to transact across borders. Still, it does come with some risk, and an international business leader needs to understand what information to analyze to make the best decisions. An exchange rate, the value of one currency transferred into another, is a foundational concept present in all international trade and transactions.
 
To review, see Foreign Exchange Markets, International Financial Markets, International Financial Transactions and SWIFT, and Letters of Credit.
 

4c. Analyze the effects that political institutions like central banks have on exchange and interest rates 

• What role do central banks play in influencing the trajectory of an economy?
• What impact might you expect on the economy when interest rates are raised and lowered?
• How do the decisions made by central banks influence foreign exchange markets?
  

Central banks such as the Federal Reserve, European Central Bank, and many others have a tremendous impact on how economic policy, which in turn influences the value of a currency and what rate it is when traded with other currencies. Interest rates are set by these banks, which declare the cost associated with borrowing. These factors create conditions in which international businesses must plan, analyze and transact daily. As international business leaders, it is critical to closely pay attention to the political winds in major economies worldwide and assess how that will impact decisions made by their central banks.
 
To review, see The Influence of Central Banks and The European Central Bank.
 

Unit 4 Vocabulary

This vocabulary list includes terms you will need to know to successfully complete the final exam.

• balance of payments
• central bank
• exchange rate
• foreign direct investment
• foreign exchange market
• interest rate
• letter of credit

Unit 5: International Institutions and the Geopolitics of Emerging Markets

5a. Distinguish between the major international institutions and understand their influence over the world economy 

• What significance does the World Trade Organization (WTO) play in international trade? Do you believe all countries have equal influence over the organization?
• Can you distinguish between the World Bank and the International Monetary Fund (IMF)? What are the main differences in their role as an international institution?
  

International institutions play a significant role in the development, sustainability, and growth of the global economy. The World Trade Organization (WTO) has played a pivotal role in expanding trade among nations. The World Bank is primarily involved with reducing poverty and providing financing to developing countries, while the International Monetary Fund (IMF) manages the stability of the world's monetary system.
 
To review, see World Trade Organization, World Bank, and International Monetary Fund.
 

5b. Assess the level of political risk in selected countries or regions 

• How impactful are political risks on a global business' profitability in a new region? Are there ways to mitigate this risk?
• Why would a country decide to enter an emerging market? Is it possible to avoid political risk in these countries?
  

Political risks should be assessed in every international business when exploring the possibility of entering a new foreign market. Companies that are unaware of these risks or downplay the influence they might have over their business operations will typically suffer consequences at some point in time. Emerging markets present greater risks, but as developing markets, they also bring potentially greater returns for investors and companies.
 
To review, see Political Risks and Emerging Markets.
 

5c. Explain how international institutions and political partnerships can support the expansion of international business 

• Alliances are typically associated with national security partnerships, but they also benefit other areas. How can an alliance help the economic interests of the countries involved?
• How does a bilateral trade agreement work? Who is involved?
• How does a multilateral trade agreement differ from a bilateral trade agreement? What are some pros and cons of the two?
  

Political partnerships and countries that have developed friendly relations can support trade between the two economies. As free trade advanced over the past 50 years, it brought unprecedented cooperation among nations in the same region or on a global scale. Countries often find common ground over several years and formally agree to a partnership.
 
Regional trade blocs integrate nearby countries into an economic zone to remove trade barriers and increase the flow of trade and services. A bilateral trade agreement is established between two countries, whereas a multilateral trade agreement is between more than two nations. They each bring certain advantages and disadvantages.
 
To review, see Multilateral and Bilateral Trade Agreements, The Benefits of Multilateral Trade, and Alliances.
 

5d. Perform a country risk analysis to determine areas where risk can be reduced or mitigated 

• Is it wise to enter a country with a high level of economic risk? Why or why not?
• Is it possible to mitigate economic risks as efficiently as political risks?
  

International companies must assess the level of risks associated with any given country. Those companies' decision-makers must analyze whether the benefits outweigh the costs associated with those risks. As you complete studying this chapter, you will be able to discuss the economic, political, and operational risks that are involved with a country's risk analysis and what decision-makers should factor into whether they enter or avoid certain countries.
 
Companies seeking higher returns must often take on greater risks by entering a country. It is possible to mitigate these risks through sophisticated monitoring and analysis, which can positively influence decision-makers.
 
To review, see Economic Risks.
 

5e. describe the factors that influence exchange rate movement and the implications 

• What factors influence the exchange rates between countries?
• Do countries with high trade deficits have lower-valued currencies?
• How can a company hedge against currency risk when transacting across borders?
  

Exchange rates are the culmination of many different factors. As you study this chapter, pay close attention to how a country’s economic and political strengths are tied to currency value and how they can influence business decisions when companies enter new international markets. Exchange rates between certain countries can stay relatively stable over a long-term period, while others could have a much more volatile movement, yet countries from around the world trade with each other.
 
To review, see Political Risks and Economic Risks.
 

Unit 5 Vocabulary

This vocabulary list includes terms you will need to know to successfully complete the final exam.

• bilateral trade agreement
• emerging market
• International Monetary Fund (IMF)
• multilateral trade agreement
• regional trade bloc
• World Bank
• World Trade Organization (WTO)

Unit 6: International Market Entry Strategy

6a. Compare and contrast strategies for entering a new international market, such as direct exporting, mergers and acquisitions, and establishing business partnerships 

• What are some advantages of using direct exporting versus other market entry strategies? What are some of the downsides?
• What areas should you analyze when considering an international business partnership?
  

Several popular market entry strategies, such as direct exporting, joint ventures, and mergers and acquisitions, are used to expand into new international markets. They each bring a certain level of risk, reward, and advantages over other options. You should be able to identify what type of companies pursue certain international market entry strategies and how they can assist the company in getting their product into the new market efficiently.
 
To review, see Foreign Agents or Distributors and Partnering Agreements.
 

6b. Select international market entry strategies and apply them in a real-world scenario 

• In what situations would you select these market entry strategies to benefit your business? Direct exporting, mergers and acquisitions, and foreign agents/distributors?
• Why would a company select a foreign agent/distributor instead of a partnering agreement with a foreign firm? What elements would make each more advantageous?
• What elements differ between a joint venture and a partnering agreement?
  

It is important to understand why each market entry strategy is selected and how each would be applied in a real-world scenario. There are reasons a business would select a partnering agreement instead of a distributor of their products or go through a foreign agent instead of directly exporting to the consumer. Each company must assess its strengths and weaknesses and its level of resources when entering a new international market. They may have the resources and product recognition in that market to do direct exporting. In contrast, another company that has limited exposure to consumers in that market may opt for a distributor agreement to benefit from a local company's resources and networks.
 
To review, see Foreign Retailers, Direct Purchasing, and Joint Ventures.
 

6c. Differentiate trends that are more common in certain industries, such as direct exporting or partnering, and explain why they occur 

• What type of business would prefer direct exporting as opposed to other international market entry strategies?
• Why are joint ventures popular among large corporations?
• Why do companies need foreign business partnering arrangements in new markets?
  

Certain industries and types of businesses will prefer international market entry strategies that are more beneficial to their situation. A large company with many resources will not need a joint venture with another company that is structured the same way, as they would each need to bring something unique to strengthen the partnership to make it work.
 
To review, see New Industries and Markets.
 

6d. Analyze a plan for a merger and acquisition 

• Why would a company invest money that can be invested elsewhere into a merger or acquisition? What are the main motivating factors?
• Why do some mergers and acquisitions fail?
  

Mergers and acquisitions on paper may seem straightforward, but implementation and the transition period can be challenging. As you study this section, you should come out of it with a very good understanding of why a company would invest their money into a merger and acquisition instead of placing their money elsewhere. For example, a company may have cash on hand to invest and seek to expand their access to new markets, therefore purchasing a company in that new industry. This could result in new markets, supply, and diversified revenue.
 
To review, see Mergers and Acquisitions
 

6e. Analyze the increasing interdependence of global supply chains and markets 

• How could a natural disaster in Asia affect supply chain management in the United States?
• Why would a war in the Middle East affect the price of oil in Europe?
  

The interdependence of the global supply chain affects everyday life for most people worldwide. It affects the price of electronics, what you pay at the gas pump, and how much your avocados cost at the grocery store. As the world has become more connected through globalization, supply chain interruptions in one part of the world can have a ripple effect around the globe and affect billions of people. We have recently experienced supply chain disruptions due to several different factors, which have highlighted the importance of diversifying suppliers and channels of distribution.
 
To review, see New Industries and Markets.
 

Unit 6 Vocabulary

This vocabulary list includes terms you will need to know to successfully complete the final exam.

• direct exporting
• distributor
• foreign agent
• joint venture
• merger and acquisition
• partnering agreement

Unit 7: Social Responsibility and Ethics

7a. Analyze how businesses can operate internationally with a focus on social responsibility and ethics 

• What does corporate social responsibility mean, and how can it be implemented?
• What challenges might a company face in terms of social responsibility and ethics when they start operating in a new country and culture?
  

Consumers increasingly place a greater value on social responsibility and make purchases from companies that develop a good reputation. Corporate social responsibility, which is essentially self-regulation by internal policy that aims to place the company's image and good reputation based upon philanthropy and responsible environmental activities. Environmental sustainability has become an increasingly important virtue for large corporations, as they have adjusted outdated procedures to support environmentally responsible policies. Corporations face many challenges in maintaining these principles as they enter new international markets, which may not regulate certain behavior or perhaps place less emphasis on these areas.
 
To review, see Corporate Social Responsibility.
 

7b. Examine the risks involved with a global company in terms of preserving ethical behavior 

• What risks do a company encounter when trying to preserve ethical behavior and maintain certain compliance measures when they enter new international markets?
• How can a company mitigate and overcome these risks?
  

Global companies experience many risks when entering a new international market, from operational and financial risks to other things outside their control. However, they all face risks associated with preserving ethical behavior domestically and abroad. For example, companies may encounter bribery expectations in certain countries in order to attain licenses or access to new business opportunities. Fair trade is a mechanism designed to assist producers in developing countries with standards of labor payment and environmental sustainability practices that certify these for purchasers in other nations, commonly in developed countries.
 
To review, see Business Ethics over Time and Corruption, Bribery and the Foreign Corrupt Practices Act (FCPA).
 

7c. Explain global sustainability and understand how to pursue these opportunities in the international market 

• Is it possible to have economic sustainability while having environmental sustainability? What challenges are present in balancing these two areas?
• What areas of environmentally friendly business ventures can turn a profit and create growth-oriented corporations?
  

Environmental issues regarding corporate responsibility have increasingly been a major topic for consumers in the global market. As consumers have placed a higher value on this in regard to their purchase decisions, companies have been forced to prioritize this among other areas in the business that may have previously been better funded and received greater focus. New industries have developed to fulfill this sustainability need, such as solar, wind, and hydroelectric power projects.
 
To review, see Business and Environment, Economic Sustainability, and Environmental Sustainability.
 

7d. Compare and contrast return on investment (ROI) models for corporate social responsibility, such as those including community involvement and public perception 

• How can a company that has invested money into maintaining a good image and reputation for corporate social responsibility turn that into a return on investment (ROI)?
• Are there companies with a bad reputation for social responsibility still performing well?
  

Companies today are investing large sums of money in creating and maintaining a good image for social responsibility. Publicly-traded companies need to justify this investment and tie it to certain financial goals. Companies have established new career opportunities to analyze and manage this business area. Some companies invest large sums of money in this area and turn it into a profit. We have seen this occur in certain industries, such as an oil and gas company that invests a large sum into renewable energy projects and creates an image of an environmentally friendly corporation.
 
To review, see Corporate Social Responsibility.
 

7e. Explain how the rule of law applies to maintaining social responsibility and codes of ethics, as well as business challenges related to the rule of law 

• Are all ethical issues also legal issues?
• When can the law be involved when an ethical expectation has been violated?
• Do companies still operate unethically and never experience legal consequences?
  

Companies often encounter the same moral questions as individuals: if something is unethical but not illegal, then how important is it to me? Consumers over recent decades have answered this question and may voice their support or displeasure with a company based on their behavior through their purchase decisions. For example, in the past, a company may have outsourced its manufacturing to a country with limited or no labor protection laws to attain the lowest cost. However, today, they should analyze how their consumer base would perceive this practice. This has forced some companies to implement and monitor the labor conditions of all their subcontractor facilities in overseas locations.
 
The Foreign Corrupt Practices Act (FCPA) is a law in the United States that can be applied and enforced against all American companies and individuals regarding actions outside of the U.S. regarding bribery, corruption, and other similar areas of conduct. American multinational corporations must emphasize compliance in this area to avoid large penalties and fines.
 
To review, see Business Ethics over Time and Corruption, Bribery and the Foreign Corrupt Practices Act (FCPA).
 

Unit 7 Vocabulary

This vocabulary list includes terms you will need to know to successfully complete the final exam.

• corporate social responsibility
• environmental sustainability
• fair trade
• Foreign Corrupt Practices Act (FCPA)