Summary MGT 302 STUDY GUIDE EXAM 2

MGT 302 STUDY GUIDE EXAM 2 MGT 302 Exam 2 Study Guide Fall 2015 Terms and Concepts: ● Culture Everything people have (material possessions), think (ideas, values, attitudes) and do (expected patterns of behavior) ● Values abstract ideas about what a group believes to be good, right or desirable ● Attitudes ● Norms social rule and guidelines that prescribe behaviour ● Folkways routine conventions of everyday life (dress code, manners) ● Mores norms that are seen as a central to the functioning of a society ● Cultural Determinism ● Enculturation ● The Iceberg Model of Culture Surface is a small amount seen, unspoken rules and unconscious rules are hard to see and can take awhile to learn ● Ethnocentrism belief in the superiority of one's own ethnic group or culture ● Cultural Distance the degree of distance between two cultures ● Cultural Frameworks is a tool for measuring cultural distance. It provides a guess for how to interact with someone and should be used as a compass rather than a map ● Hofstede’s Value Survey Model size of survey was extremely large and his results of data was replicated in another research later, used average responses that was not designed to test culture so there are potential cultural biases and is dated (including the 5 dimensions and the strengths and weaknesses of the model’s development) a) power distance- the society’s tolerance for inequalities b) individualism vs collectivism- the relationship between the individual and his/her fellows c) uncertainty avoidance- the extent to which culture accepts ambiguous situations and tolerates uncertainty d) masculinity vs femininity- the degree to which people in a culture espouse traditional Western gender roles (value family over money or visa versa) e) time orientation/confucian dynamism - attitudes toward time, persistence and respect for tradition ● Phases of Cultural Adjustment Honeymoon (initial introduction into culture), Culture Shock (being completely submerged), Adjustment (time that it take to get adjusted to a culture) , Mastery (can take about 7+ years to get to) ● Preparing for Culture Shock Have realistic expectations, cultural training, language training, practical training ● Parent-Country The company uses employees from the home country to use in foreign countries ● Host-Country The company uses people from the country they are in to run operations ● Third-Country Nationals it doesn’t matter who you pick to work for you because most of your operations are international ● Ethnocentric An ethnocentric staffing policy is one in which all key management positions are filled by parent-country nationals.(Page 572) ● Polycentric A polycentric staffing policy requires host-country nationals to be recruited to manage subsidiaries, while parent-country nationals occupy key positions at corporate headquarters. ● Geocentric Staffing Approaches A geocentric staffing policy seeks the best people for key jobs throughout the organization, regardless of nationality. This policy has a number of advantages. First, it enables the firm to make the best use of its human resources. Second, and perhaps more important, a geocentric policy enables the firm to build a cadre of international executives who feel at home working in a number of cultures. ● Expatriates A person who lives outside of their native country ● Expatriate Failure Expatriate failure represents a failure of the firm’s selection policies to identify individuals who will not thrive abroad The consequences include premature return from a foreign posting and high resignation rates, with expatriates leaving their company at about twice the rate of domestic managers. (Page 576) ● Effective Expatriate Selection Page 577 1) Self-orientation 2)Others-orientation 3) Perceptual Ability 4) Cultural toughness ● Global Mind-Set Some researchers suggest that a global mind-set, one characterized by cognitive complexity and a cosmopolitan outlook, is the fundamental attribute of a global manager. P. 579 ● Training for Expatriate Managers cultural training (history, religion, social and business practices), language training(can improve effectiveness and efficiency), and practical training(day to day life, establish routine) reduce failure in the field ● Repatriation of Expatriates preparing them for reentry into their home-country. they come home to a company that does not know exactly what they did in the foreign country. the company does not use the skills and capabilities of the firm's investment of sending that person to a foreign country ● Expatriate Compensation Packages giving the expatriate the same purchasing power across countries so employees can enjoy the same living standards. they get a base salary but incentives for living in an unfamiliar country. allowances are also given to expatriate (hardships, housing, education and cost of living) ● Foreign Exchange Market ● Exchange Rate the rate at which one currency is converted into another ● Foreign Exchange Risk the gain or loss that occurs as a result of unanticipated exchange rate changes a)transaction risk is the extent to which the income from individual transactions is affected by fluctuations in foreign exchange values b) translation risk is the impact of exchange rate changes on a firm's consolidated financial statements c)economic risk is the extent to which a firm's future international earning power is affected by changes in exchange rates ● Currency Appreciation increases in value compared to another currency because of market forces of supply and demand, can purchase more foreign currency units now than it could in the past ● Currency Depreciation declines in value compared to another currency because of market forces of supply and demand, can purchase fewer foreign currency units now than it could in the past ● Currency Devaluation Deliberate downward adjustment in the exchange rate by government actions by buying and selling foreign exchange reserves ● Currency Revaluation upward change in a currency’s value by government actions by buying and selling foreign exchange reserves ● Micro and macro implications of exchange rate changes ● Arbitrage the purchase of a product in one market for the immediate resale in a second market in order to profit from a price discrepancy ● Currency Speculation short-term movement of funds from one currency to another in the hope of profiting from shifts in exchange rates ● Carry Trade a kind of speculation that has become more common in recent years. involves borrowing in one currency where interest rates are low and then using the proceeds to invest in another currency where interest rates are high ● Spot Exchange Rates the exchange rate at which a foreign exchange dealer would convert one currency into another currency on that day ● Forward Exchange Rates the exchange rate at which a foreign exchange dealer will agree to convert one currency into another currency on a specific date in the future ● Selling at a Premium foreign exchange dealers expect a currency to appreciate over time, a currency could buy less foreign currency today than in the future at a forward rate