Principles of Management, Unit 3

Nov 15th, 2023
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182 test answers
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Ethics
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How we act, live, lead our lives, and treat others
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Normative Ethics
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Refers to the field of ethics concerned with our asking how should and ought we live and act?
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Business Ethics
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Applied to ethics that focuses on real-world situations and the context and environment in which transactions occur- How should we apply our values to the way we conduct business?
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2008 subprime lending crisis
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-economic effects still persistn-revealed widespread corruption of large investment banks and lending institutions internationally
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In the early 2000s, CEOs and top-level leaders from notable corporations such as Enron, Tyco, WorldCom, and others were caught committing outrageously greedy and fraudulent crimes of white-collar theft from their organizations and shareholders.
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The now classic film The Smartest Guys in the Room depict how Enron's leaders during that time, Kenneth Lay (now deceased), Jeff Skilling (still serving prison time), and Andrew Fastow (released from prison in 2011), deceived employees, Wall Street, and shareholders. Enron's crisis took an estimated $67 billion of shareholder wealth out of the U.S. economy.3 These criminal activities ushered in national laws such as the Sarbanes-Oxley Act, which we discuss below.
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Scientific and ethical practices in corporate social responsibility (CSR)
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One way that ethicists, business leaders, and consumers can support moral self-regulation of technologies. Some scientific and technological firms have adopted ethics boards to help safeguard against harmful social uses of AI technologies
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The European Union (EU)
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Has produced policy studies that are forerunners of laws to safeguard against potentially harmful uses of robotics.
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AACSB (Association to Advance Collegiate Schools of Business)
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The accrediting national body of business schools
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NGOs (nongovernmental organizations)
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Emergent groups internationally representing the public's interests and common good, and political action movements are beginning again to give voice to injustices and potentially dangerous ethical as well as fiscal (income inequality), health (the environment), and discriminatory (racism and stereotyping large segments of the society) problems that require stakeholder as well as stockholder actions.
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Kenneth Goodpaster and Laura Nash
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Characterized at least three dimensions or levels of ethics that help explain how individual and group values, norms, and behaviors of different stakeholders interact and respond with the aim of bringing orderly, fair, and just relationships with one another in transactions.
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The Ethics & Compliance Initiative
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Found 22 percent of global workers reported pressure to compromise their standards
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Ethical dilemmas
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Situations and predicaments in which there is not an optimal or desired choice to be made between two options, neither of which solves an issue or delivers an opportunity that is ethicaln-often originate and occur from an unawareness of how to sort out and think through potential consequences of our actions or inaction
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Terminal values
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Desired goals, objectives, or end states that individuals wish to pursuen-Examples of terminal values—at a higher level—are freedom, security, pleasure, social recognition, friendship, accomplishment, comfort, adventure, equality, wisdom, and happiness
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Instrumental values
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Preferred means of behavior used to obtain those goals.n-Examples of instrumental values are being helpful, honest, courageous, independent, polite, responsible, capable, ambitious, loving, self-contained, and forgiving .
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PVA (Personal Values Assessment)
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A helpful assessment for discovering your valuesnnhttps://www.valuescentre.com/our-products/products-individuals/personal-values-assessment-pva.
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Caroucci found that "five ways organizations needlessly provoke good people to make unethical choices"
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1. People feel psychologically unsafe to speak upn2. Excessive pressure to reach unrealistic performance targets compromises people's choicesn3. When individuals face conflicting goals, they feel a sense of unfairness and compromise their reasoningn4. Only talking about ethics when there is a scandaln5. When there is no positive example available, individuals react instead of choose ethical decisions.
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Ethical Principles vs. Values
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Ethical principles are different from values in that the former are considered as rules that are more permanent, universal, and unchanging, whereas values are subjective, even personal, and can change with time. Principles help inform and influence values.
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Utilitarianism: A Consequentialist, "Ends Justifies Means" Approach
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The utilitarianism principle basically holds that an action is morally right if it produces the greatest good for the greatest number of people. n- An action is morally right if the net benefits over costs are greatest for all affected compared with the net benefits of all other possible choices.
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Limits to Utilitarianism
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- it does not consider individualsn-there is no agreement on the definition of "good for all concerned."
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Universalism: A Duty-Based Approach
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Universalism is a principle that considers the welfare and risks of all parties when considering policy decisions and outcomes.n-Also needs of individuals involved in a decision are identified as well as the choices they have and the information they need to protect their welfare.
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Limits to Universalism
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-that using this principle may not always prove realistic or practical in all situationsn-using this principle can require sacrifice of human life—that is, giving one's life to help or save others—which may seem contrary to the principle
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Cooper, Santora, and Sarros wrote
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"Universalism is the outward expression of leadership character and is made manifest by respectfulness for others, fairness, cooperativeness, compassion, spiritual respect, and humility."
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Rights: A Moral and Legal Entitlement-Based Approach
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This principle is grounded in both legal and moral rights.n- Legal rights are entitlements that are limited to a particular legal system and jurisdictionn-Moral (and human) rights, on the other hand, are universal and based on norms in every society, for example, the right not to be enslaved and the right to work.
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Limitations to Rights
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1. it can be used to disguise and manipulate selfish and unjust political interestsn2. it is difficult to determine who deserves what when both parties are "right,"n3. individuals can exaggerate certain entitlements at the expense of others
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Justice: Procedures, Compensation, and Retribution
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This principle has at least four major components that are based on the tenetsn1. all individuals should be treated equallyn2. justice is served when all persons have equal opportunities and advantages (through their positions and offices) to society's opportunities and burdensn3. fair decision practices, procedures, and agreements among parties should be practicedn4. punishment is served to someone who has inflicted harm on another, and compensation is given to those for a past harm or injustice committed against them.
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Simple Summary of Justice
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1. Is it fair?n2. Is it right?n3. Who gets hurt?n4. Who has to pay for the consequences?n5. Do I/we want to assume responsibility for the consequences?
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Virtue Ethics: Character-Based Virtues
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Virtue ethics is based on character traits such as being truthful, practical wisdom, happiness, flourishing, and well-being.n-It focuses on the type of person we ought to be, not on specific actions that should be taken.n- Grounded in good character, motives, and core values, the principle is best exemplified by those whose examples show the virtues to be emulated.n-Related to universalism
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Limitations to Virtue Ethics
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-some individuals may disagree about who is virtuous in different situations and therefore would refuse to use that person's character as a principlen-the issue arises, "Who defines virtuous, especially when a complex act or incident is involved that requires factual information and objective criteria to resolve?"
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The Common Good
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The common good is defined as "the sum of those conditions of social life which allow social groups and their individual members relatively thorough and ready access to their own fulfillment."
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Limitation for Common Good
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Who determines what the common good is in situations where two or more parties differ over whose interests are violated?
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Ethical Relativism: A Self-Interest Approach
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Ethical relativism is really not a "principle" to be followed or modeled. It is an orientation that many use quite frequently.n-Ethical relativism holds that people set their own moral standards for judging their actionsn-Only the individual's self-interest and values are relevant for judging his or her behavior. Moreover, moral standards, according to this principle, vary from one culture to another.n-"When in Rome, do as the Romans do."
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Organizational leadership
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an important first step toward identifying and enacting purpose and ethical values that are central to internal alignment, external market effectiveness, and responsibility toward stakeholders.
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Chester Barnard
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defined a values-based leadership approach in 1939 as one that inspires "cooperative personal decisions by creating faith in common understanding, faith in the probability of success, faith in the ultimate satisfaction of personal motives, and faith in the integrity of common purpose
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Strategic Organizational Alignment
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What business are we in?nWhat is our product or service?nWhat are our core competencies?nWho is our customer?
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Vision
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Who are we?nWho will we become?
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Mission
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What is our strategic purpose for operating?
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Values
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What do we stand for and believe in?nWhat standards can be used to evaluate and judge us?
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Ethisphere
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renowned third think tank dedicated to furthering business ethics and corporate social responsibility
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Five criteria for a Ethics Quotient (EQ)
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1.A company's ethics and compliance program, which accounts for 35% of the EQn2.Whether or not and the extent to which ethics is embedded into a company's culture.n3. Corporate citizenship and responsibility, elements that measure companies' environmental impactn4.Corporate governance—whether a firm's CEO and board chair are held by one or separate people. An increased focus recently emphasized diversity in board and leadership positionsn5.Leadership, innovation, and reputation
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World's Most Ethical Companies Honorees
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3M CompanynAccenturenAflac IncnAllstate Insurance CompanynAlyeska Pipeline Service ConApplied Materials IncnArthur J. Gallagher & ConAvnet IncnBaptist Health South Florida
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Good Ethic Practices
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-Show respect for othersn-Treat all stakeholders fairlyn-Work toward a common goodn-Build communityn-Be honestn-Stewardship & servant leadership styles
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Stewardship
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Concerned with empowering followers to make decisions and gain control over their work.
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Servant leadership
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Involves selflessly working with followers to achieve shared goals that improve collective, rather than individual, welfare
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The stewardship approach
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Instructs leaders to lead without dominating followers. Leaders who practice stewardship sincerely care about their followers and help them develop and accomplish individual as well as organizational goals.
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The servant-leadership approach
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Formulated by Robert K. Greenleaf, who believed that leadership is a natural corollary of service
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5 Central Components of Servant Leadership
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1.Placing service before self-interestn2.Listening to others.n3.Inspiring through trust.n4.Working toward feasible goals.n5.Helping others whenever possible
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7 symptoms of the failure of ethical leadership
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1. Ethical blindnessn2. Ethical mutenessn3. Ethical incoherencen4. Ethical Paralysisn5. Ethical hypocrisyn6. Ethical schizophrenian7. Ethical complacency
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Ethical blindness
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They do not perceive ethical issues due to inattention or inability
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Ethical muteness
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They do not have or use ethical language or principles. They "talk the talk" but do not "walk the talk" on values.
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Ethical incoherence
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They are not able to see inconsistencies among values they say they follow; e.g., they say they value responsibility but reward performance based only on numbers
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Ethical paralysis
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They are unable to act on their values from lack of knowledge or fear of the consequences of their actions.
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Ethical hypocrisy
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They are not committed to their espoused values. They delegate things they are unwilling or unable to do themselves.
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Ethical schizophrenia
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They do not have a set of coherent values; they act one way at work and another way at home.
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Ethical complacency
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They believe they can do no wrong because of who they are. They believe they are immune.
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An organization's culture
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Defined by the shared values and meanings its members hold in common and that are articulated and practiced by an organization's leaders
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Ed Schein
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one of the most influential experts on culture
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corporate culture
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a pattern of shared tacit assumptions learned or developed by a group as it solves its problems of external adaptation and internal integration that have worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems
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Culture is transmitted through and by
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1. the values and styles that leaders espouse and practicen2. the heroes and heroines that the company rewards and holds up as modelsn3. the rites and symbols that organizations valuen4.the way that organizational executives and members communicate among themselves and with their stakeholders
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Corporate Social Responsibility
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a business's concern for society's welfare
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A study by Horizon Media's Finger on the Pulse
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81 percent of Millennials expect companies to make a public commitment to good corporate citizenship
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The 2015 Cone Communications Millennial CSR Study
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"[m]ore than nine-in-10 Millennials would switch brands to one associated with a cause (91% vs. 85% U.S. average), and two-thirds use social media to engage around CSR (66% vs. 53% U.S. average)."
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The 3 P's
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profit, people, planet or the "triple bottom line" nTBL or 3BL
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TBL
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incorporates and assists businesses measure accountability in their funding of and support for social, environmental (ecological), and financial benefits to allow for a greater good
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CSR and stakeholder management
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complementary approachesn-Stakeholder theory argues that corporations should treat all their constituencies fairly and that doing so can strengthen companies' reputations, customer relations, and performance in the marketplace
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stakeholder
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any group or individual who can affect or is affected by an organization's strategies, major transactions, and activities. Stakeholders include employees, suppliers, customers, shareholders, the government, media, and others.
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Organizations operating on a global basis
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face particularly tough ethical challenges because of various cultural, political, economic, technological, and market factors
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FCPA (Foreign Corrupt Practices Act)
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prohibits American firms from accepting or offering bribes to foreign government officials. U.S. individuals who cannot defend their actions with regard to the FCPA's antibribery provisions can face harsh penalties.
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Ten principles of the UN Global Compact
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serve as guidelines for international firms doing business in LDCs (least developed countries), and abroadn1. support and respect the protection of internationally proclaimed human rightsn2.ensure that they are not complicit in human rights abusesn3.uphold the freedom of association and the effective recognition of the right to collective bargainingn4. eliminate of all forms of forced and compulsory laborn5.abolish child laborn6.eliminate the discrimination of employment and occupationn7.support a precautionary approach to environmental challengesn8.promote greater environmental responsibility through initiativesn9. encourage the development and diffusion of environmentally friendly technologiesn10. work against corruption, including extortion and bribery.
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five strategic questions that relate to organizational cultural sensitivities when doing business abroad as well as in a home country
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1.What do customers and stakeholders in our market expect from our organization? (Will their standard of living be raised? Will their cultural expectations be violated?)n2.What is our strategy to be successful in this competitive marketplace? (What can we realistically hope to achieve? What results are we willing to commit to?)n3.What are our governing values that define how we will work with stakeholders and with each other?n4.What organizational capabilities do we need in order to achieve these results?n5.What do our work processes, roles, and systems need to do so that we are consistent with all of the above?"
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Predicted trends in ethics, compliance, and corporate social responsibility for Fortune 500 companies, governments, groups, and professionals by Navex Global include
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1.A shift in the 'power of voice in the story of harassment.n2.The "Glassdoor" effect (when people trust online reviews of their companies more than what companies communicate) and the effect of trust when employee messages go viral on social media.n3.Assisting national disasters that suddenly occur causes havoc not only for vulnerable populations but also for unprepared organizationsn4.The acceleration of the need for compliance and ethics programs as economies begin again to grow; "growth without ethics and governance does nobody any favors.n5.Creating a "culture of compliance" in corporations (a culture of integrity and ethics) over one of "vicious compliance" (an overreliance on laws and regulations)n6.An increasing need for compliance's role in prevention and mitigation as cybersecurity evolves.n7.Giving new voice to whistle-blowers is predicted as "regulatory scrutiny is increasing, and the voice of the whistleblower in the [Silicon] Valley is growing louder as well.n8.Managing culture and free speech in the workplace during "polarizing times" continues about "race, gender, sex, sexual orientation, gender identity, national origin, and religion—and people's right to fair treatment, protection, and the rights and benefits enjoyed by others."n9.Data privacy is becoming a larger concern for chief compliance officers in companies as "privacy laws and the environments they regulate, have evolved."n10.The role of the compliance professional evolves and innovates as "old networking models are giving way to online networks that provide new and unprecedented opportunities to share ideas and collaborate."
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globalization
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the worldwide phenomenon whereby the countries of the world are becoming more interconnected and where trade barriers among nations are disappearing
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Globalization Factor 1
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Lowering Trade Barriers
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trade agreements
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government policies through which countries agree to eliminate cross-border barriers to trade and to promote global integration
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Tariffs
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taxes that are added to the price of imported international products.
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World Trade Organization (WTO)
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the only truly global organization that deals with the rules of trade around the world. It was established January 1, 1995, and had 164 country members as of July 2016.
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Globalization Factor 2
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Foreign Direct Investment
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Foreign direct investment (FDI)
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refers to deliberate efforts of a country or company to invest in another country through the form of ownership positions in companies in another country. In 2017, global FDI flows amounted to USD $1.52 trillion.
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Emerging markets
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markets in nondeveloped countries that present tremendous potential for multinationals, have played a critical role in the global business environment for the last decade
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Emerging market multinationals
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influential companies from emerging markets that compete head-on with established multinationals and rewrite the rules of competition by using new business models
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Emerging market multinationals examples
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CEMEX-Mexican cementnShoprite-South African retailernWIPRO and Infosys-India's leading software companies
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Globalization Factor 3
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The Internet
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e-commerce
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the buying and selling of goods over the internet
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immigration
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Movement of individuals into a population
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expatriate
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foreign employee who moves to and works in another country for an extended period of time
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Geert HofstedenDutch social psychologist
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culture is "the collective programming of the mind which distinguishes the member of one group or category of people from another."
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Hofstede's modelnCultural Dimenesion 1
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Power Distance- the degree to which members of a society accept differences in power and authority
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high power distance
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people are more likely to accept that power inequality is good and acceptable.
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low power distance
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tend to consider that all members are equal.
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High Power Distance
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-Very centralizedn-Tall hierarchiesn-Managers rely on formal rules to managen-Authoritative managerial stylen-Subordinates expect to be told what to don-Perfect boss is seen as one who is an autocratn-Information sharing constrained by hierarchyn-Wide salary gab between top and bottom of organizationn-Managers often feel underpaid and dissatisfied with careers
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Low Power Distance
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-Flat organizational hierarchiesn-Decentralized structuresn-Dispersed authorityn-Managers rely on personal experiencen-More consultative or collaborativen-Subordinates often expected to be consultedn-Ideal manger is seen as democratic leadern-Openness to sharing informationn-Low salary gap between top and bottom of companyn-Managers feel paid adequately and are satisfied
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Cultural Dimension 2
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Individualism-the degree to which a society focuses on the relationship of the individual to the groupnandnCollectivism-the degree to which a society focuses on the relationship of the group as a whole
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Low Individualism/High collectivism
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-Employees act in the interest of the groupn-Employee commitment to company relatively lown-Employee-employer is almost like family linkn-Hiring and promotion takes in-group into considerationn-Better to reward based on equality rather then equityn-Relatives of employees preferred in hiringn-Training best when focused at group leveln-Belief in collective decisionsn-Treating friends better than others is normaln-Support of teamworkn-Less mobility across occupationsn-Personal relationships very critical in business
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High Individualism/Low Collectivism
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-Employees act in their own self interestsn-Employee commitment highn-Employee-employer relationship based on the marketn-Hiring and promotions based on rulesn-Family relationships unimportant in hiringn-Better reward based on equityn-Training done best individuallyn-Belief in individual decision makingn-Treating friends better than others in the workplace is considered unethicaln-More mobility across occupations within companyn-Tasks and company prevail over personal relationships in business
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Cultural Dimension 3
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Uncertainty Avoidance-degree to which people in a society are comfortable with risk, uncertainty, and unpredictable situations
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Low Uncertainty Avoidance
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-Weal loyalty to companiesn-Average duration of employment shortern-Preference for smaller organizationsn-Superiors optimistic about subordinate ambition and leadership abilitiesn-Top managers usually involved in strategyn-Power of superiors based on relationships and positionn-Transnational leaders preferredn-Innovators feel less constrained by rulesn-Renegade championingn-Tolerance for ambiguity in procedures and structuresn-Innovation welcomed
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high uncertainty avoidance
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-Strong loyalty to employing organizationsn-Employment are long term in durationn-Preference for larger companiesn-Superiors pessimistic about subordinate ambitionn-Top managers often feel less involved in operationsn-Power of superiors based on control of uncertaintiesn-Hierarchical control roles preferredn-Innovators feel constrained by rulesn-Rational championingn-Formalized management structuresnInnovation resisted
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Cultural Dimension 4
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Masculinity-degree to which a society emphasizes traditional masculine qualities such as advancement and earnings
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High Masculinity
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-Live in order to workn-Preference to high payn-Workers look for security, pay and interesting workn-Managers seen as cultural heroesn-Successful managers primarily exhibit male characteristicsn-Managers need to be competitive, firm, aggressive, and decisiven-Managers very ambitiousn-Fewer women in managementn-Managers prepared to move family for career reasonsn-Large pay gap between gendersn-Job applicants oversell their abilitiesn-Absences due to sickness lowern-General preference for larger companiesn-Conflicts resolved through fighting until the "best man wins"
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Low Masculinity
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-Work in order to liven-Preference to low number of work hoursn-Workers look for better working conditions and relationships in workn-Managers are employees like othersn-Successful managers are seen as possessing both male and female characteristicsn-Managers hold fairly modest career ambitionn-More women in managementn-Managers less prepared to uproot family because of career moven-Low salary gap between top and bottomn-Managers feel paid adequately and are satisfiedn-Absences because of sickness highern-Preference for smaller companiesn-Conflicts are resolved through compromise and negotiations
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Global Leadership and Organizational Behavior Effectiveness (GLOBE)
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Second important cultural frameworkn-provides managers with an additional lens through which they can better understand how to perform well in an international environmentn-Developed in the 1990s
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GLOBE researchers uncovered nine cultural dimensions
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1. uncertainty avoidancen2.power distancen3.future orientationn4.assertiveness orientation (masculinity)n5.gender egalitarianism (femininity)n6.institutionaln7. societal collectivism (similar to individualism/collectivism)nThe only two cultural dimensions unique to the GLOBE project are performance orientation (degree to which societies emphasize performance and achievement) and humane orientation (extent to which societies places importance on fairness, altruism, and caring)
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To compare how the different clusters rate different forms of leadership, the GLOBE researchers considered six leadership profiles
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-charismatic type (degree to which the leader can inspire and motivate others)n-team oriented (degree to which the leader can foster a high functioning team),n-participative type (degree to which leaders involve others in decision-making)n-humane-oriented type (degree to which the leader shows compassion and generosity)n-autonomous (degree to which the leader reflects independent and individualistic leadership)n-self-protective (degree to which the leader is self-centered and uses a face-saving approach)
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Positively-Regarded Traits and Behaviors across the World
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-trustworthyn-dependablen-intelligentn-justn-honestn-decisiven-plans aheadn-effective bargainern-encouragingn-win-win problem solvern-positiven-skilled administratorn-dynamicn-communicatorn-motivatorn-informednconfidence buildern-team builder
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Negatively-Regarded Traits and Behaviors across the World
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-lonern-egocentricn-antisocialn-ruthlessn-not cooperativen-dictatorialn-non-explicit
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cultural paradox
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where the insights from an understanding of culture may not necessarily coincide with reality
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Cultural stereotyping
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occurs when one assumes that all people within a culture act, think, and behave the same way.
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A social institution
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"a complex of positions, roles, norms, and values lodged in particular types of social structures and organizing relatively stable patterns of human resources with respect to fundamental problems in . . . sustaining viable societal structures within a given environment."
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Social stratification
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refers to the degree to which "social benefits are unequally distributed and those patterns . . . are perpetuated for life.
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education
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the socializing experiences which prepare individuals to act in society.
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religion
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the shared set of beliefs, activities, and institutions based on faith in supernatural forces
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Christianity
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a faith based on the life, teachings, death, and resurrection of Jesus.
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Islam
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the second largest of the world's religions, is described in the Qur'an as the submission to the will of Allah (God). It has adherents primarily in Africa, the Middle East, China, Malaysia, and the Far East but is growing rapidly in many countries, especially in Europe
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Muslim lives by adhering to the five major pillars of sharia law:
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-Shahada, or confession (believing and professing the message of Allah)n-prayer (must pray five times a day while facing Mecca, the spiritual home of Islam)n-Zakat, or almsgiving (the need to donate a portion of one's income to others to help reduce greed and inequality)n-fasting (the avoidance of eating, including the obligatory fast during the month of Ramadan)n-the hajj, or pilgrimage to Mecca (all Muslims who can make the pilgrimage are expected to do so at least once in their lifetime)
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Hinduism
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represented by all those who honor the ancient scriptures called the Vedas
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Cultural intelligence
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refers to "individuals' capabilities to function and manage effectively in culturally diverse settings.
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cognitive dimension
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focusing on the individual's knowledge of values and practices inherent in the new culture acquired through education and personal experiences
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meta-cognitive dimension
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which reflects an individual's ability to use cross-cultural knowledge to understand and adapt to the cultural environment they are exposed to
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motivational dimension
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which reflects the ability and desire to continuously learn new aspects of cultures and adapt to them
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behavioral dimension
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based on the ability of the individual to exhibit the appropriate forms of verbal and nonverbal behaviors when interacting with people from another culture
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Metacognitive
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-I am conscious of the cultural knowledge I use when interacting with people with different cultural backgrounds.n-I am conscious of the cultural knowledge I apply to cross-cultural interactions
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Cognitive
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-I know the legal and economic systems of other cultures.n-I know the cultural values and religious beliefs of other cultures.
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Motivational
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-I enjoy interacting with people from different cultures.n-I enjoy living in cultures that are unfamiliar to me.
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Behavioral
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-I change my non-verbal behavior when a cross-cultural interaction requires it.n-I alter my facial expressions when a cross-cultural interaction requires it.
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low-rigor training
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in which individuals are exposed to critical information to help them understand the realities of a different culture but are not actively and directly engaged with the culture
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high-rigor
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methods of training, in which participants are actively engaged in the process and can learn some tacit aspects of cross-cultural differences
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predeparture cross-cultural training
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provides individuals with learning opportunities prior to their departure
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postarrival cross-cultural training
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which occurs after an expatriate has arrived in the foreign country and can address issues in "real time."
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global strategy
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whereby all operations and activities are managed fairly similarly worldwiden-based on the assumption that the world is extremely interconnected and that patterns of consumption and production are fairly homogeneous worldwide
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regional strategy
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whereby activities and operations are adapted to regional requirementsn-one in which the company decides that it makes sense to organize its functional activities, such as marketing, finance, etc., around geographical regions that play a critical role in terms of sales
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local strategy
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whereby the company's operations are adapted to fit specific countries.n-one in which a company adapts its products to meet the needs of the local market
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Reasons for Internationalization
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-Trade Facilitationn-Growth Opportunities
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How to go international
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-Exportingn-Strategic alliancesn-Foreign direct investment
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exporting
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whereby a company sends its product to an international market and fills the order just as it fills a domestic order.
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Licensing
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a contractual agreement whereby, in exchange for a royalty or fee, a company gives the right to another company to use a trademark, know-how, or other proprietary technology
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International franchising
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takes licensing up a notch. Rather than simply license some specific aspect of the value chain, a company will license the complete business model
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Disadvantages of Licensing and Franchising
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-risky and capital intensiven-company can create a new competitor
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International strategic alliances
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occur when two or more companies from different countries enter into an agreement to conduct joint business activities
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Disadvantages of Strategic Alliances
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-notorious for high failure ratesn-often present partners with the possibility of acting opportunisticallyn-Alliance partners may also decide to refuse to agree to the original terms of the strategic alliance contractsn-inevitably involve ambiguity and uncertainty
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foreign direct investment (FDI)
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which occurs when a company invests in another country by constructing facilities and buildings in that country
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Disadvantages of FDI
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-While this method gives the company the most control, it is also the most capital intensiven-political risk of a country, the degree to which political decisions can impact a business's ability to survive in that countryn-FDI also involves additional coordination risks and can drain resources from local operations
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Uppsala model
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argues that "as firms learn more about a specific market, they become more committed by investing more resources into that market."n-The Incremental Path to Internationalization
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Psychic distance
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refers to the many differences that exist between countries because of language, cultural characteristics, social institutions, and business practices
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Born globals
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considered key to most countries' economic developmentn-The All-In Approach to Internalizationn-Organisation for Economic Co-operation and Development (OECD), a leading international organization comprising many of the world's leading economies, has argued that born globals were key engines that tackled the economic downturn that occurred after the financial crisis of 2007
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Most U.S. Businesses Are Small
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-80% (approximately 23.8 million) of the nearly 29.7 million businesses have no employees (businesses run by individuals or small groups of partners, such as married couples).n-89% (approximately 5.2 million) of the nearly 5.8 million businesses with employees have fewer than 20 employees.n-99.6% (approximately 5.7 million) of all businesses have 0-99 employees—98% have 0-20 workers.n-Approximately 5.8 million businesses have fewer than 500 employees.n-Only about 19,000 businesses in the United States have more than 500 employees.n-Companies with fewer than 50 employees pay more than 20% of America's payroll.n-Companies with fewer than 500 employees pay more than 41% of America's payroll.n-32.5 million people (1 employee in 4) work for businesses with fewer than 50 employees.n-These businesses also pay tens of millions of owners, not included in employment statistics.
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entrepreneurs
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people with vision, drive, and creativity, who are willing to take the risk of starting and managing a business to make a profit
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Statistics for Minority-Owned Businesses
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-The number of Hispanic-owned businesses almost tripled between 1997 (1.2 million) and 2012 (3.3 million).n-The percentage of U.S. businesses with 1 to 50 employees owned by African Americans increased by 50% between 1996 and 2015.n-Almost a million firms with employees are minority owned: 53% are Asian American owned, 11% are African American owned, and almost a third are Hispanic owned.n-19% of all companies with employees are owned by women.
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Types of Entrepreneurs
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classic entrepreneursnmultipreneursnintrapreneurs
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Classic Entrepreneurs
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risk-takers who start their own companies based on innovative ideasn-Some classic entrepreneurs are micropreneurs who start small and plan to stay smalln-growth-oriented entrepreneurs want their business to grow into a major corporation. Most high-tech companies are formed by growth-oriented entrepreneurs.
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Multipreneurs
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entrepreneurs who start a series of companies. They thrive on the challenge of building a business and watching it grow
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Intrapreneurs
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these employees enjoy the freedom to nurture their ideas and develop new products, while their employers provide regular salaries and financial backing
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The Entrepreneurial Personality
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-ambitiousn-independentn-self-confidentn-risk-takersn-visionaryn-creativen-energeticn-passionaten-committed
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Snapshot of Small-Business Owners
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-Start-up activity has risen sharply over the last three years, from an all-time low of minus 0.87% in 2013 to positive 0.48% in 2016.n-Between 1996 and 2011, the rate of business ownership dropped for both men and women; however, business ownership has increased every year since 2014.n-The Kauffman Index of Startup Activity, an early indicator of new entrepreneurship in the United States, rose again slightly in 2016 following sharp increases two years in a row.n-New entrepreneurs who started businesses to pursue opportunity rather than from necessity reached 86.3%, more than 12 percentage points higher than in 2009 at the height of the Great Recession.n-For the first time, Main Street entrepreneurship activity was higher in 2016 than before the onset of the Great Recession. This increase was driven by a jump in business survival rates, which reached a three-decade high of 48.7%. Nearly half of new businesses are making it to their fifth year of operation.n-47% of U.S. businesses have been in business for 11 or more years.n-In 2016, about 25% of all employing firms had revenues over $1 million, but 2% had revenues under $10,000.
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The Kauffman Index series consists of three in-depth studies
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Start-up ActivitynMain Street EntrepreneurshipnGrowth Entrepreneurship.
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The Kauffman Index
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-The Kauffman Index of Startup Activity is an early indicator of new entrepreneurship in the United States. It focuses on new business creation activity and people engaging in business start-up activity, using three components: the rate of new entrepreneurs, the opportunity share of new entrepreneurs, and start-up density.n-The Kauffman Index of Main Street Entrepreneurship measures established small-business activity—focusing on U.S. businesses more than five years old with less than 50 employees from 1997 to 2016. Established in 2015, it takes into account three components of local, small-business activity: the rate of businesses owners in the economy, the five-year survival rate of businesses, and the established small-business density.n-The Kauffman Growth Entrepreneurship Index is a composite measure of entrepreneurial business growth in the United States that captures growth entrepreneurship in all industries and measures business growth from both revenue and job perspectives. Established in 2016, it includes three component measures of business growth: rate of start-up growth, share of scale-ups, and high-growth company density
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Checklist for Starting a Business
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Identify your reasonsnSelf-analysisnPersonal skills and experiencenFinding a nichenConduct market researchnPlan your start-up: write a business plannFinances: how to fund your business
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Philip Kimmey, 27
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Kimmey's dog-sitting and dog-walking network, Rover.com, raised almost $100 million in venture capital and was valued at $300 million in 2017.
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Max Mankin, 27
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Mankin cofounded Modern Electron and raised $10 million in venture capital to create "advanced thermionic energy converters" that will generate "cheap, scalable, and reliable electricity." Modern Electron will turn every home into a power station
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Alexandra Cristin White, 28
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In her early 20s, White founded Glam Seamless, which sells tape-in hair extensions. In 2016, her self-funded company grossed $2.5 million
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Steph Korey, 29; Jen Rubio, 29
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Korey and Rubio founded Away, selling "first-class luggage at a coach price" in 2015. They raised $31 million in funding and grossed $12 million in sales in 2016
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Allen Gannet, 26
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Gannet founded TrackMaven, a web-marketing analytics company, in 2012; by 2016, his company was grossing $6.7 million a year
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Jake Kassan, 25; Kramer LaPlante, 25
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Kassan and Kramer launched their company, MVMT, through Indiegogo, raising $300,000, and in 2016 grossed $60 million, selling primarily watches and sunglasses
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Brian Streem, 29
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Streem's company, Aerobo, provides drone services to the film industry, selling "professional aerial filming and drone cinematography." Aerobo grossed $1 million in 2016, its first full year of business
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Natalya Bailey, 30; Louis Perna, 29
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Accion Systems began in 2014, raised $10 million in venture funding, and grossed $4.5 million in 2016, making tiny propulsion systems for satellites.
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Jessy Dover, 29
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Dover is the cofounder of Dagne Dover, a company making storage-efficient handbags for professional women. She and her cofounders grossed $4.5 million in 2016 and debuted on Nordstrom.com in 2017
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business plan
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is one of the most important steps in starting a business. It can help to attract appropriate loan financing, minimize the risks involved, and be a critical determinant in whether a firm succeeds or fails
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Key Elements of a Business Plan
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Executive summarynVision and mission statementnCompany overviewnProduct and/or service plannMarketing plannManagement plannOperating plannFinancial plannAppendix of supporting documents
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Executive summary
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provides an overview of the total business plan. Written after the other sections are completed, it highlights significant points and, ideally, creates enough excitement to motivate the reader to continue reading.
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Vision and mission statement
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concisely describe the intended strategy and business philosophy for making the vision happen. Company values can also be included in this section
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Company overview
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explains the type of company, such as manufacturing, retail, or service; provides background information on the company if it already exists; and describes the proposed form of organization—sole proprietorship, partnership, or corporation
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Product and/or service plan
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describes the product and/or service and points out any unique features, as well as explains why people will buy the product or service.
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Marketing plan
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shows who the firm's customers will be and what type of competition it will face; outlines the marketing strategy and specifies the firm's competitive edge; and describes the strengths, weaknesses, opportunities, and threats of the business
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Management plan
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identifies the key players—active investors, management team, board members, and advisors— citing the experience and competence they possess
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Operating plan
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explains the type of manufacturing or operating system to be used and describes the facilities, labor, raw materials, and product-processing requirements
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Financial plan
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specifies financial needs and contemplated sources of financing, as well as presents projections of revenues, costs, and profits.
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Appendix of supporting documents
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provides materials supplementary to the plan. This section should offer the following descriptions: management team biographies; the company's values; information about the company culture (if it's unique and contributes to employee retention); and any other important data that support the information in the business plan, such as detailed competitive analysis, customer testimonials, and research summaries.
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debt
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borrowed funds that must be repaid with interest over a stated time period
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equity
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funds raised through the sale of stock (i.e., ownership) in the business
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Angel investors
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are individual investors or groups of experienced investors who provide financing for start-up businesses by investing their own money, often referred to as "seed capital."
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Making a Heavenly Deal
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-Show them something they understand, ideally a business from an industry they've been associated with.n-Know your business details: Information important to potential investors includes annual sales, gross profit, profit margin, and expenses.n-Be able to describe your business—what it does and who it sells to—in less than a minute. Limit PowerPoint presentations to 10 slides.n-Angels can always leave their money in the bank, so an investment must interest them. It should be something they're passionate about. And timing is important—knowing when to reach out to an angel can make a huge difference.n-They need to see management they trust, respect, and like. Present a competent management team with a strong, experienced leader who can explain the business and answer questions from potential investors with specifics.n-Angels prefer something they can bring added value to. Those who invest could be involved with your company for a long time or perhaps take a seat on your board of directors.n-They are more partial to deals that don't require huge sums of money or additional infusions of angel cash.n-Emphasize the likely exits for investors and know who the competition is, why your solution is better, and how you are going to gain market share with an infusion of cash.
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Venture capital
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financing obtained from venture capitalists, investment firms that specialize in financing small, high-growth companies
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Small Business Administration (SBA)
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The SBA's mission is to speak on behalf of small business, and through its national network of local offices it helps people start and manage small businesses, advises them in the areas of finance and management, and helps them win federal contracts
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The SBA also offers free management consulting through two volunteer groups
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the Service Corps of Retired Executives (SCORE), and the Active Corps of Executives (ACE)
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Ethics
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How we act, live, lead our lives, and treat others
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Normative Ethics
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Refers to the field of ethics concerned with our asking how should and ought we live and act?
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Business Ethics
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Applied to ethics that focuses on real-world situations and the context and environment in which transactions occur- How should we apply our values to the way we conduct business?
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2008 subprime lending crisis
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-economic effects still persistn-revealed widespread corruption of large investment banks and lending institutions internationally
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In the early 2000s, CEOs and top-level leaders from notable corporations such as Enron, Tyco, WorldCom, and others were caught committing outrageously greedy and fraudulent crimes of white-collar theft from their organizations and shareholders.
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The now classic film The Smartest Guys in the Room depict how Enron's leaders during that time, Kenneth Lay (now deceased), Jeff Skilling (still serving prison time), and Andrew Fastow (released from prison in 2011), deceived employees, Wall Street, and shareholders. Enron's crisis took an estimated $67 billion of shareholder wealth out of the U.S. economy.3 These criminal activities ushered in national laws such as the Sarbanes-Oxley Act, which we discuss below.
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Scientific and ethical practices in corporate social responsibility (CSR)
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One way that ethicists, business leaders, and consumers can support moral self-regulation of technologies. Some scientific and technological firms have adopted ethics boards to help safeguard against harmful social uses of AI technologies
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The European Union (EU)
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Has produced policy studies that are forerunners of laws to safeguard against potentially harmful uses of robotics.
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AACSB (Association to Advance Collegiate Schools of Business)
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The accrediting national body of business schools
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NGOs (nongovernmental organizations)
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Emergent groups internationally representing the public's interests and common good, and political action movements are beginning again to give voice to injustices and potentially dangerous ethical as well as fiscal (income inequality), health (the environment), and discriminatory (racism and stereotyping large segments of the society) problems that require stakeholder as well as stockholder actions.
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Kenneth Goodpaster and Laura Nash
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Characterized at least three dimensions or levels of ethics that help explain how individual and group values, norms, and behaviors of different stakeholders interact and respond with the aim of bringing orderly, fair, and just relationships with one another in transactions.
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The Ethics & Compliance Initiative
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Found 22 percent of global workers reported pressure to compromise their standards
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Ethical dilemmas
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Situations and predicaments in which there is not an optimal or desired choice to be made between two options, neither of which solves an issue or delivers an opportunity that is ethicaln-often originate and occur from an unawareness of how to sort out and think through potential consequences of our actions or inaction
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Terminal values
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Desired goals, objectives, or end states that individuals wish to pursuen-Examples of terminal values—at a higher level—are freedom, security, pleasure, social recognition, friendship, accomplishment, comfort, adventure, equality, wisdom, and happiness
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Instrumental values
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Preferred means of behavior used to obtain those goals.n-Examples of instrumental values are being helpful, honest, courageous, independent, polite, responsible, capable, ambitious, loving, self-contained, and forgiving .
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PVA (Personal Values Assessment)
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A helpful assessment for discovering your valuesnnhttps://www.valuescentre.com/our-products/products-individuals/personal-values-assessment-pva.
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Caroucci found that "five ways organizations needlessly provoke good people to make unethical choices"
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1. People feel psychologically unsafe to speak upn2. Excessive pressure to reach unrealistic performance targets compromises people's choicesn3. When individuals face conflicting goals, they feel a sense of unfairness and compromise their reasoningn4. Only talking about ethics when there is a scandaln5. When there is no positive example available, individuals react instead of choose ethical decisions.
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Ethical Principles vs. Values
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Ethical principles are different from values in that the former are considered as rules that are more permanent, universal, and unchanging, whereas values are subjective, even personal, and can change with time. Principles help inform and influence values.
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Utilitarianism: A Consequentialist, "Ends Justifies Means" Approach
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The utilitarianism principle basically holds that an action is morally right if it produces the greatest good for the greatest number of people. n- An action is morally right if the net benefits over costs are greatest for all affected compared with the net benefits of all other possible choices.
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Limits to Utilitarianism
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- it does not consider individualsn-there is no agreement on the definition of "good for all concerned."
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Universalism: A Duty-Based Approach
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Universalism is a principle that considers the welfare and risks of all parties when considering policy decisions and outcomes.n-Also needs of individuals involved in a decision are identified as well as the choices they have and the information they need to protect their welfare.
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Limits to Universalism
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-that using this principle may not always prove realistic or practical in all situationsn-using this principle can require sacrifice of human life—that is, giving one's life to help or save others—which may seem contrary to the principle
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Cooper, Santora, and Sarros wrote
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"Universalism is the outward expression of leadership character and is made manifest by respectfulness for others, fairness, cooperativeness, compassion, spiritual respect, and humility."
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Rights: A Moral and Legal Entitlement-Based Approach
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This principle is grounded in both legal and moral rights.n- Legal rights are entitlements that are limited to a particular legal system and jurisdictionn-Moral (and human) rights, on the other hand, are universal and based on norms in every society, for example, the right not to be enslaved and the right to work.
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Limitations to Rights
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1. it can be used to disguise and manipulate selfish and unjust political interestsn2. it is difficult to determine who deserves what when both parties are "right,"n3. individuals can exaggerate certain entitlements at the expense of others
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Justice: Procedures, Compensation, and Retribution
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This principle has at least four major components that are based on the tenetsn1. all individuals should be treated equallyn2. justice is served when all persons have equal opportunities and advantages (through their positions and offices) to society's opportunities and burdensn3. fair decision practices, procedures, and agreements among parties should be practicedn4. punishment is served to someone who has inflicted harm on another, and compensation is given to those for a past harm or injustice committed against them.
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Simple Summary of Justice
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1. Is it fair?n2. Is it right?n3. Who gets hurt?n4. Who has to pay for the consequences?n5. Do I/we want to assume responsibility for the consequences?
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Virtue Ethics: Character-Based Virtues
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Virtue ethics is based on character traits such as being truthful, practical wisdom, happiness, flourishing, and well-being.n-It focuses on the type of person we ought to be, not on specific actions that should be taken.n- Grounded in good character, motives, and core values, the principle is best exemplified by those whose examples show the virtues to be emulated.n-Related to universalism
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Limitations to Virtue Ethics
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-some individuals may disagree about who is virtuous in different situations and therefore would refuse to use that person's character as a principlen-the issue arises, "Who defines virtuous, especially when a complex act or incident is involved that requires factual information and objective criteria to resolve?"
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The Common Good
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The common good is defined as "the sum of those conditions of social life which allow social groups and their individual members relatively thorough and ready access to their own fulfillment."
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Limitation for Common Good
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Who determines what the common good is in situations where two or more parties differ over whose interests are violated?
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Ethical Relativism: A Self-Interest Approach
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Ethical relativism is really not a "principle" to be followed or modeled. It is an orientation that many use quite frequently.n-Ethical relativism holds that people set their own moral standards for judging their actionsn-Only the individual's self-interest and values are relevant for judging his or her behavior. Moreover, moral standards, according to this principle, vary from one culture to another.n-"When in Rome, do as the Romans do."
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Organizational leadership
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an important first step toward identifying and enacting purpose and ethical values that are central to internal alignment, external market effectiveness, and responsibility toward stakeholders.
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Chester Barnard
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defined a values-based leadership approach in 1939 as one that inspires "cooperative personal decisions by creating faith in common understanding, faith in the probability of success, faith in the ultimate satisfaction of personal motives, and faith in the integrity of common purpose
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Strategic Organizational Alignment
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What business are we in?nWhat is our product or service?nWhat are our core competencies?nWho is our customer?
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Vision
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Who are we?nWho will we become?
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Mission
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What is our strategic purpose for operating?
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Values
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What do we stand for and believe in?nWhat standards can be used to evaluate and judge us?
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Ethisphere
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renowned third think tank dedicated to furthering business ethics and corporate social responsibility
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Five criteria for a Ethics Quotient (EQ)
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1.A company's ethics and compliance program, which accounts for 35% of the EQn2.Whether or not and the extent to which ethics is embedded into a company's culture.n3. Corporate citizenship and responsibility, elements that measure companies' environmental impactn4.Corporate governance—whether a firm's CEO and board chair are held by one or separate people. An increased focus recently emphasized diversity in board and leadership positionsn5.Leadership, innovation, and reputation
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World's Most Ethical Companies Honorees
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3M CompanynAccenturenAflac IncnAllstate Insurance CompanynAlyeska Pipeline Service ConApplied Materials IncnArthur J. Gallagher & ConAvnet IncnBaptist Health South Florida
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Good Ethic Practices
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-Show respect for othersn-Treat all stakeholders fairlyn-Work toward a common goodn-Build communityn-Be honestn-Stewardship & servant leadership styles
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Stewardship
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Concerned with empowering followers to make decisions and gain control over their work.
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Servant leadership
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Involves selflessly working with followers to achieve shared goals that improve collective, rather than individual, welfare
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The stewardship approach
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Instructs leaders to lead without dominating followers. Leaders who practice stewardship sincerely care about their followers and help them develop and accomplish individual as well as organizational goals.
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The servant-leadership approach
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Formulated by Robert K. Greenleaf, who believed that leadership is a natural corollary of service
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5 Central Components of Servant Leadership
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1.Placing service before self-interestn2.Listening to others.n3.Inspiring through trust.n4.Working toward feasible goals.n5.Helping others whenever possible
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7 symptoms of the failure of ethical leadership
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1. Ethical blindnessn2. Ethical mutenessn3. Ethical incoherencen4. Ethical Paralysisn5. Ethical hypocrisyn6. Ethical schizophrenian7. Ethical complacency
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Ethical blindness
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They do not perceive ethical issues due to inattention or inability
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Ethical muteness
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They do not have or use ethical language or principles. They "talk the talk" but do not "walk the talk" on values.
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Ethical incoherence
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They are not able to see inconsistencies among values they say they follow; e.g., they say they value responsibility but reward performance based only on numbers
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Ethical paralysis
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They are unable to act on their values from lack of knowledge or fear of the consequences of their actions.
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Ethical hypocrisy
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They are not committed to their espoused values. They delegate things they are unwilling or unable to do themselves.
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Ethical schizophrenia
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They do not have a set of coherent values; they act one way at work and another way at home.
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Ethical complacency
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They believe they can do no wrong because of who they are. They believe they are immune.
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An organization's culture
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Defined by the shared values and meanings its members hold in common and that are articulated and practiced by an organization's leaders
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Ed Schein
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one of the most influential experts on culture
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corporate culture
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a pattern of shared tacit assumptions learned or developed by a group as it solves its problems of external adaptation and internal integration that have worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems
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Culture is transmitted through and by
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1. the values and styles that leaders espouse and practicen2. the heroes and heroines that the company rewards and holds up as modelsn3. the rites and symbols that organizations valuen4.the way that organizational executives and members communicate among themselves and with their stakeholders
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Corporate Social Responsibility
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a business's concern for society's welfare
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A study by Horizon Media's Finger on the Pulse
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81 percent of Millennials expect companies to make a public commitment to good corporate citizenship
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The 2015 Cone Communications Millennial CSR Study
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"[m]ore than nine-in-10 Millennials would switch brands to one associated with a cause (91% vs. 85% U.S. average), and two-thirds use social media to engage around CSR (66% vs. 53% U.S. average)."
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The 3 P's
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profit, people, planet or the "triple bottom line" nTBL or 3BL
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TBL
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incorporates and assists businesses measure accountability in their funding of and support for social, environmental (ecological), and financial benefits to allow for a greater good
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CSR and stakeholder management
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complementary approachesn-Stakeholder theory argues that corporations should treat all their constituencies fairly and that doing so can strengthen companies' reputations, customer relations, and performance in the marketplace
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stakeholder
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any group or individual who can affect or is affected by an organization's strategies, major transactions, and activities. Stakeholders include employees, suppliers, customers, shareholders, the government, media, and others.
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Organizations operating on a global basis
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face particularly tough ethical challenges because of various cultural, political, economic, technological, and market factors
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FCPA (Foreign Corrupt Practices Act)
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prohibits American firms from accepting or offering bribes to foreign government officials. U.S. individuals who cannot defend their actions with regard to the FCPA's antibribery provisions can face harsh penalties.
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Ten principles of the UN Global Compact
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serve as guidelines for international firms doing business in LDCs (least developed countries), and abroadn1. support and respect the protection of internationally proclaimed human rightsn2.ensure that they are not complicit in human rights abusesn3.uphold the freedom of association and the effective recognition of the right to collective bargainingn4. eliminate of all forms of forced and compulsory laborn5.abolish child laborn6.eliminate the discrimination of employment and occupationn7.support a precautionary approach to environmental challengesn8.promote greater environmental responsibility through initiativesn9. encourage the development and diffusion of environmentally friendly technologiesn10. work against corruption, including extortion and bribery.
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five strategic questions that relate to organizational cultural sensitivities when doing business abroad as well as in a home country
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1.What do customers and stakeholders in our market expect from our organization? (Will their standard of living be raised? Will their cultural expectations be violated?)n2.What is our strategy to be successful in this competitive marketplace? (What can we realistically hope to achieve? What results are we willing to commit to?)n3.What are our governing values that define how we will work with stakeholders and with each other?n4.What organizational capabilities do we need in order to achieve these results?n5.What do our work processes, roles, and systems need to do so that we are consistent with all of the above?"
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Predicted trends in ethics, compliance, and corporate social responsibility for Fortune 500 companies, governments, groups, and professionals by Navex Global include
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1.A shift in the 'power of voice in the story of harassment.n2.The "Glassdoor" effect (when people trust online reviews of their companies more than what companies communicate) and the effect of trust when employee messages go viral on social media.n3.Assisting national disasters that suddenly occur causes havoc not only for vulnerable populations but also for unprepared organizationsn4.The acceleration of the need for compliance and ethics programs as economies begin again to grow; "growth without ethics and governance does nobody any favors.n5.Creating a "culture of compliance" in corporations (a culture of integrity and ethics) over one of "vicious compliance" (an overreliance on laws and regulations)n6.An increasing need for compliance's role in prevention and mitigation as cybersecurity evolves.n7.Giving new voice to whistle-blowers is predicted as "regulatory scrutiny is increasing, and the voice of the whistleblower in the [Silicon] Valley is growing louder as well.n8.Managing culture and free speech in the workplace during "polarizing times" continues about "race, gender, sex, sexual orientation, gender identity, national origin, and religion—and people's right to fair treatment, protection, and the rights and benefits enjoyed by others."n9.Data privacy is becoming a larger concern for chief compliance officers in companies as "privacy laws and the environments they regulate, have evolved."n10.The role of the compliance professional evolves and innovates as "old networking models are giving way to online networks that provide new and unprecedented opportunities to share ideas and collaborate."
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globalization
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the worldwide phenomenon whereby the countries of the world are becoming more interconnected and where trade barriers among nations are disappearing
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Globalization Factor 1
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Lowering Trade Barriers
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trade agreements
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government policies through which countries agree to eliminate cross-border barriers to trade and to promote global integration
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Tariffs
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taxes that are added to the price of imported international products.
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World Trade Organization (WTO)
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the only truly global organization that deals with the rules of trade around the world. It was established January 1, 1995, and had 164 country members as of July 2016.
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Globalization Factor 2
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Foreign Direct Investment
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Foreign direct investment (FDI)
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refers to deliberate efforts of a country or company to invest in another country through the form of ownership positions in companies in another country. In 2017, global FDI flows amounted to USD $1.52 trillion.
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Emerging markets
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markets in nondeveloped countries that present tremendous potential for multinationals, have played a critical role in the global business environment for the last decade
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Emerging market multinationals
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influential companies from emerging markets that compete head-on with established multinationals and rewrite the rules of competition by using new business models
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Emerging market multinationals examples
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CEMEX-Mexican cementnShoprite-South African retailernWIPRO and Infosys-India's leading software companies
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Globalization Factor 3
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The Internet
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e-commerce
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the buying and selling of goods over the internet
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immigration
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Movement of individuals into a population
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expatriate
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foreign employee who moves to and works in another country for an extended period of time
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Geert HofstedenDutch social psychologist
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culture is "the collective programming of the mind which distinguishes the member of one group or category of people from another."
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Hofstede's modelnCultural Dimenesion 1
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Power Distance- the degree to which members of a society accept differences in power and authority
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high power distance
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people are more likely to accept that power inequality is good and acceptable.
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low power distance
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tend to consider that all members are equal.
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High Power Distance
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-Very centralizedn-Tall hierarchiesn-Managers rely on formal rules to managen-Authoritative managerial stylen-Subordinates expect to be told what to don-Perfect boss is seen as one who is an autocratn-Information sharing constrained by hierarchyn-Wide salary gab between top and bottom of organizationn-Managers often feel underpaid and dissatisfied with careers
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Low Power Distance
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-Flat organizational hierarchiesn-Decentralized structuresn-Dispersed authorityn-Managers rely on personal experiencen-More consultative or collaborativen-Subordinates often expected to be consultedn-Ideal manger is seen as democratic leadern-Openness to sharing informationn-Low salary gap between top and bottom of companyn-Managers feel paid adequately and are satisfied
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Cultural Dimension 2
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Individualism-the degree to which a society focuses on the relationship of the individual to the groupnandnCollectivism-the degree to which a society focuses on the relationship of the group as a whole
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Low Individualism/High collectivism
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-Employees act in the interest of the groupn-Employee commitment to company relatively lown-Employee-employer is almost like family linkn-Hiring and promotion takes in-group into considerationn-Better to reward based on equality rather then equityn-Relatives of employees preferred in hiringn-Training best when focused at group leveln-Belief in collective decisionsn-Treating friends better than others is normaln-Support of teamworkn-Less mobility across occupationsn-Personal relationships very critical in business
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High Individualism/Low Collectivism
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-Employees act in their own self interestsn-Employee commitment highn-Employee-employer relationship based on the marketn-Hiring and promotions based on rulesn-Family relationships unimportant in hiringn-Better reward based on equityn-Training done best individuallyn-Belief in individual decision makingn-Treating friends better than others in the workplace is considered unethicaln-More mobility across occupations within companyn-Tasks and company prevail over personal relationships in business
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Cultural Dimension 3
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Uncertainty Avoidance-degree to which people in a society are comfortable with risk, uncertainty, and unpredictable situations
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Low Uncertainty Avoidance
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-Weal loyalty to companiesn-Average duration of employment shortern-Preference for smaller organizationsn-Superiors optimistic about subordinate ambition and leadership abilitiesn-Top managers usually involved in strategyn-Power of superiors based on relationships and positionn-Transnational leaders preferredn-Innovators feel less constrained by rulesn-Renegade championingn-Tolerance for ambiguity in procedures and structuresn-Innovation welcomed
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high uncertainty avoidance
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-Strong loyalty to employing organizationsn-Employment are long term in durationn-Preference for larger companiesn-Superiors pessimistic about subordinate ambitionn-Top managers often feel less involved in operationsn-Power of superiors based on control of uncertaintiesn-Hierarchical control roles preferredn-Innovators feel constrained by rulesn-Rational championingn-Formalized management structuresnInnovation resisted
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Cultural Dimension 4
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Masculinity-degree to which a society emphasizes traditional masculine qualities such as advancement and earnings
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High Masculinity
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-Live in order to workn-Preference to high payn-Workers look for security, pay and interesting workn-Managers seen as cultural heroesn-Successful managers primarily exhibit male characteristicsn-Managers need to be competitive, firm, aggressive, and decisiven-Managers very ambitiousn-Fewer women in managementn-Managers prepared to move family for career reasonsn-Large pay gap between gendersn-Job applicants oversell their abilitiesn-Absences due to sickness lowern-General preference for larger companiesn-Conflicts resolved through fighting until the "best man wins"
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Low Masculinity
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-Work in order to liven-Preference to low number of work hoursn-Workers look for better working conditions and relationships in workn-Managers are employees like othersn-Successful managers are seen as possessing both male and female characteristicsn-Managers hold fairly modest career ambitionn-More women in managementn-Managers less prepared to uproot family because of career moven-Low salary gap between top and bottomn-Managers feel paid adequately and are satisfiedn-Absences because of sickness highern-Preference for smaller companiesn-Conflicts are resolved through compromise and negotiations
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Global Leadership and Organizational Behavior Effectiveness (GLOBE)
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Second important cultural frameworkn-provides managers with an additional lens through which they can better understand how to perform well in an international environmentn-Developed in the 1990s
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GLOBE researchers uncovered nine cultural dimensions
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1. uncertainty avoidancen2.power distancen3.future orientationn4.assertiveness orientation (masculinity)n5.gender egalitarianism (femininity)n6.institutionaln7. societal collectivism (similar to individualism/collectivism)nThe only two cultural dimensions unique to the GLOBE project are performance orientation (degree to which societies emphasize performance and achievement) and humane orientation (extent to which societies places importance on fairness, altruism, and caring)
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To compare how the different clusters rate different forms of leadership, the GLOBE researchers considered six leadership profiles
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-charismatic type (degree to which the leader can inspire and motivate others)n-team oriented (degree to which the leader can foster a high functioning team),n-participative type (degree to which leaders involve others in decision-making)n-humane-oriented type (degree to which the leader shows compassion and generosity)n-autonomous (degree to which the leader reflects independent and individualistic leadership)n-self-protective (degree to which the leader is self-centered and uses a face-saving approach)
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Positively-Regarded Traits and Behaviors across the World
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-trustworthyn-dependablen-intelligentn-justn-honestn-decisiven-plans aheadn-effective bargainern-encouragingn-win-win problem solvern-positiven-skilled administratorn-dynamicn-communicatorn-motivatorn-informednconfidence buildern-team builder
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Negatively-Regarded Traits and Behaviors across the World
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-lonern-egocentricn-antisocialn-ruthlessn-not cooperativen-dictatorialn-non-explicit
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cultural paradox
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where the insights from an understanding of culture may not necessarily coincide with reality
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Cultural stereotyping
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occurs when one assumes that all people within a culture act, think, and behave the same way.
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A social institution
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"a complex of positions, roles, norms, and values lodged in particular types of social structures and organizing relatively stable patterns of human resources with respect to fundamental problems in . . . sustaining viable societal structures within a given environment."
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Social stratification
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refers to the degree to which "social benefits are unequally distributed and those patterns . . . are perpetuated for life.
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education
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the socializing experiences which prepare individuals to act in society.
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religion
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the shared set of beliefs, activities, and institutions based on faith in supernatural forces
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Christianity
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a faith based on the life, teachings, death, and resurrection of Jesus.
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Islam
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the second largest of the world's religions, is described in the Qur'an as the submission to the will of Allah (God). It has adherents primarily in Africa, the Middle East, China, Malaysia, and the Far East but is growing rapidly in many countries, especially in Europe
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Muslim lives by adhering to the five major pillars of sharia law:
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-Shahada, or confession (believing and professing the message of Allah)n-prayer (must pray five times a day while facing Mecca, the spiritual home of Islam)n-Zakat, or almsgiving (the need to donate a portion of one's income to others to help reduce greed and inequality)n-fasting (the avoidance of eating, including the obligatory fast during the month of Ramadan)n-the hajj, or pilgrimage to Mecca (all Muslims who can make the pilgrimage are expected to do so at least once in their lifetime)
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Hinduism
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represented by all those who honor the ancient scriptures called the Vedas
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Cultural intelligence
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refers to "individuals' capabilities to function and manage effectively in culturally diverse settings.
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cognitive dimension
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focusing on the individual's knowledge of values and practices inherent in the new culture acquired through education and personal experiences
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meta-cognitive dimension
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which reflects an individual's ability to use cross-cultural knowledge to understand and adapt to the cultural environment they are exposed to
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motivational dimension
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which reflects the ability and desire to continuously learn new aspects of cultures and adapt to them
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behavioral dimension
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based on the ability of the individual to exhibit the appropriate forms of verbal and nonverbal behaviors when interacting with people from another culture
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Metacognitive
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-I am conscious of the cultural knowledge I use when interacting with people with different cultural backgrounds.n-I am conscious of the cultural knowledge I apply to cross-cultural interactions
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Cognitive
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-I know the legal and economic systems of other cultures.n-I know the cultural values and religious beliefs of other cultures.
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Motivational
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-I enjoy interacting with people from different cultures.n-I enjoy living in cultures that are unfamiliar to me.
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Behavioral
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-I change my non-verbal behavior when a cross-cultural interaction requires it.n-I alter my facial expressions when a cross-cultural interaction requires it.
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low-rigor training
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in which individuals are exposed to critical information to help them understand the realities of a different culture but are not actively and directly engaged with the culture
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high-rigor
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methods of training, in which participants are actively engaged in the process and can learn some tacit aspects of cross-cultural differences
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predeparture cross-cultural training
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provides individuals with learning opportunities prior to their departure
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postarrival cross-cultural training
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which occurs after an expatriate has arrived in the foreign country and can address issues in "real time."
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global strategy
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whereby all operations and activities are managed fairly similarly worldwiden-based on the assumption that the world is extremely interconnected and that patterns of consumption and production are fairly homogeneous worldwide
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regional strategy
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whereby activities and operations are adapted to regional requirementsn-one in which the company decides that it makes sense to organize its functional activities, such as marketing, finance, etc., around geographical regions that play a critical role in terms of sales
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local strategy
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whereby the company's operations are adapted to fit specific countries.n-one in which a company adapts its products to meet the needs of the local market
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Reasons for Internationalization
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-Trade Facilitationn-Growth Opportunities
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How to go international
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-Exportingn-Strategic alliancesn-Foreign direct investment
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exporting
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whereby a company sends its product to an international market and fills the order just as it fills a domestic order.
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Licensing
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a contractual agreement whereby, in exchange for a royalty or fee, a company gives the right to another company to use a trademark, know-how, or other proprietary technology
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International franchising
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takes licensing up a notch. Rather than simply license some specific aspect of the value chain, a company will license the complete business model
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Disadvantages of Licensing and Franchising
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-risky and capital intensiven-company can create a new competitor
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International strategic alliances
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occur when two or more companies from different countries enter into an agreement to conduct joint business activities
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Disadvantages of Strategic Alliances
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-notorious for high failure ratesn-often present partners with the possibility of acting opportunisticallyn-Alliance partners may also decide to refuse to agree to the original terms of the strategic alliance contractsn-inevitably involve ambiguity and uncertainty
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foreign direct investment (FDI)
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which occurs when a company invests in another country by constructing facilities and buildings in that country
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Disadvantages of FDI
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-While this method gives the company the most control, it is also the most capital intensiven-political risk of a country, the degree to which political decisions can impact a business's ability to survive in that countryn-FDI also involves additional coordination risks and can drain resources from local operations
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Uppsala model
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argues that "as firms learn more about a specific market, they become more committed by investing more resources into that market."n-The Incremental Path to Internationalization
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Psychic distance
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refers to the many differences that exist between countries because of language, cultural characteristics, social institutions, and business practices
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Born globals
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considered key to most countries' economic developmentn-The All-In Approach to Internalizationn-Organisation for Economic Co-operation and Development (OECD), a leading international organization comprising many of the world's leading economies, has argued that born globals were key engines that tackled the economic downturn that occurred after the financial crisis of 2007
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Most U.S. Businesses Are Small
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-80% (approximately 23.8 million) of the nearly 29.7 million businesses have no employees (businesses run by individuals or small groups of partners, such as married couples).n-89% (approximately 5.2 million) of the nearly 5.8 million businesses with employees have fewer than 20 employees.n-99.6% (approximately 5.7 million) of all businesses have 0-99 employees—98% have 0-20 workers.n-Approximately 5.8 million businesses have fewer than 500 employees.n-Only about 19,000 businesses in the United States have more than 500 employees.n-Companies with fewer than 50 employees pay more than 20% of America's payroll.n-Companies with fewer than 500 employees pay more than 41% of America's payroll.n-32.5 million people (1 employee in 4) work for businesses with fewer than 50 employees.n-These businesses also pay tens of millions of owners, not included in employment statistics.
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entrepreneurs
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people with vision, drive, and creativity, who are willing to take the risk of starting and managing a business to make a profit
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Statistics for Minority-Owned Businesses
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-The number of Hispanic-owned businesses almost tripled between 1997 (1.2 million) and 2012 (3.3 million).n-The percentage of U.S. businesses with 1 to 50 employees owned by African Americans increased by 50% between 1996 and 2015.n-Almost a million firms with employees are minority owned: 53% are Asian American owned, 11% are African American owned, and almost a third are Hispanic owned.n-19% of all companies with employees are owned by women.
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Types of Entrepreneurs
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classic entrepreneursnmultipreneursnintrapreneurs
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Classic Entrepreneurs
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risk-takers who start their own companies based on innovative ideasn-Some classic entrepreneurs are micropreneurs who start small and plan to stay smalln-growth-oriented entrepreneurs want their business to grow into a major corporation. Most high-tech companies are formed by growth-oriented entrepreneurs.
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Multipreneurs
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entrepreneurs who start a series of companies. They thrive on the challenge of building a business and watching it grow
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Intrapreneurs
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these employees enjoy the freedom to nurture their ideas and develop new products, while their employers provide regular salaries and financial backing
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The Entrepreneurial Personality
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-ambitiousn-independentn-self-confidentn-risk-takersn-visionaryn-creativen-energeticn-passionaten-committed
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Snapshot of Small-Business Owners
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-Start-up activity has risen sharply over the last three years, from an all-time low of minus 0.87% in 2013 to positive 0.48% in 2016.n-Between 1996 and 2011, the rate of business ownership dropped for both men and women; however, business ownership has increased every year since 2014.n-The Kauffman Index of Startup Activity, an early indicator of new entrepreneurship in the United States, rose again slightly in 2016 following sharp increases two years in a row.n-New entrepreneurs who started businesses to pursue opportunity rather than from necessity reached 86.3%, more than 12 percentage points higher than in 2009 at the height of the Great Recession.n-For the first time, Main Street entrepreneurship activity was higher in 2016 than before the onset of the Great Recession. This increase was driven by a jump in business survival rates, which reached a three-decade high of 48.7%. Nearly half of new businesses are making it to their fifth year of operation.n-47% of U.S. businesses have been in business for 11 or more years.n-In 2016, about 25% of all employing firms had revenues over $1 million, but 2% had revenues under $10,000.
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The Kauffman Index series consists of three in-depth studies
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Start-up ActivitynMain Street EntrepreneurshipnGrowth Entrepreneurship.
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The Kauffman Index
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-The Kauffman Index of Startup Activity is an early indicator of new entrepreneurship in the United States. It focuses on new business creation activity and people engaging in business start-up activity, using three components: the rate of new entrepreneurs, the opportunity share of new entrepreneurs, and start-up density.n-The Kauffman Index of Main Street Entrepreneurship measures established small-business activity—focusing on U.S. businesses more than five years old with less than 50 employees from 1997 to 2016. Established in 2015, it takes into account three components of local, small-business activity: the rate of businesses owners in the economy, the five-year survival rate of businesses, and the established small-business density.n-The Kauffman Growth Entrepreneurship Index is a composite measure of entrepreneurial business growth in the United States that captures growth entrepreneurship in all industries and measures business growth from both revenue and job perspectives. Established in 2016, it includes three component measures of business growth: rate of start-up growth, share of scale-ups, and high-growth company density
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Checklist for Starting a Business
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Identify your reasonsnSelf-analysisnPersonal skills and experiencenFinding a nichenConduct market researchnPlan your start-up: write a business plannFinances: how to fund your business
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Philip Kimmey, 27
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Kimmey's dog-sitting and dog-walking network, Rover.com, raised almost $100 million in venture capital and was valued at $300 million in 2017.
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Max Mankin, 27
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Mankin cofounded Modern Electron and raised $10 million in venture capital to create "advanced thermionic energy converters" that will generate "cheap, scalable, and reliable electricity." Modern Electron will turn every home into a power station
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Alexandra Cristin White, 28
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In her early 20s, White founded Glam Seamless, which sells tape-in hair extensions. In 2016, her self-funded company grossed $2.5 million
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Steph Korey, 29; Jen Rubio, 29
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Korey and Rubio founded Away, selling "first-class luggage at a coach price" in 2015. They raised $31 million in funding and grossed $12 million in sales in 2016
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Allen Gannet, 26
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Gannet founded TrackMaven, a web-marketing analytics company, in 2012; by 2016, his company was grossing $6.7 million a year
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Jake Kassan, 25; Kramer LaPlante, 25
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Kassan and Kramer launched their company, MVMT, through Indiegogo, raising $300,000, and in 2016 grossed $60 million, selling primarily watches and sunglasses
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Brian Streem, 29
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Streem's company, Aerobo, provides drone services to the film industry, selling "professional aerial filming and drone cinematography." Aerobo grossed $1 million in 2016, its first full year of business
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Natalya Bailey, 30; Louis Perna, 29
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Accion Systems began in 2014, raised $10 million in venture funding, and grossed $4.5 million in 2016, making tiny propulsion systems for satellites.
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Jessy Dover, 29
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Dover is the cofounder of Dagne Dover, a company making storage-efficient handbags for professional women. She and her cofounders grossed $4.5 million in 2016 and debuted on Nordstrom.com in 2017
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business plan
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is one of the most important steps in starting a business. It can help to attract appropriate loan financing, minimize the risks involved, and be a critical determinant in whether a firm succeeds or fails
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Key Elements of a Business Plan
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Executive summarynVision and mission statementnCompany overviewnProduct and/or service plannMarketing plannManagement plannOperating plannFinancial plannAppendix of supporting documents
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Executive summary
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provides an overview of the total business plan. Written after the other sections are completed, it highlights significant points and, ideally, creates enough excitement to motivate the reader to continue reading.
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Vision and mission statement
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concisely describe the intended strategy and business philosophy for making the vision happen. Company values can also be included in this section
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Company overview
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explains the type of company, such as manufacturing, retail, or service; provides background information on the company if it already exists; and describes the proposed form of organization—sole proprietorship, partnership, or corporation
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Product and/or service plan
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describes the product and/or service and points out any unique features, as well as explains why people will buy the product or service.
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Marketing plan
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shows who the firm's customers will be and what type of competition it will face; outlines the marketing strategy and specifies the firm's competitive edge; and describes the strengths, weaknesses, opportunities, and threats of the business
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Management plan
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identifies the key players—active investors, management team, board members, and advisors— citing the experience and competence they possess
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Operating plan
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explains the type of manufacturing or operating system to be used and describes the facilities, labor, raw materials, and product-processing requirements
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Financial plan
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specifies financial needs and contemplated sources of financing, as well as presents projections of revenues, costs, and profits.
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Appendix of supporting documents
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provides materials supplementary to the plan. This section should offer the following descriptions: management team biographies; the company's values; information about the company culture (if it's unique and contributes to employee retention); and any other important data that support the information in the business plan, such as detailed competitive analysis, customer testimonials, and research summaries.
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debt
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borrowed funds that must be repaid with interest over a stated time period
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equity
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funds raised through the sale of stock (i.e., ownership) in the business
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Angel investors
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are individual investors or groups of experienced investors who provide financing for start-up businesses by investing their own money, often referred to as "seed capital."
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Making a Heavenly Deal
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-Show them something they understand, ideally a business from an industry they've been associated with.n-Know your business details: Information important to potential investors includes annual sales, gross profit, profit margin, and expenses.n-Be able to describe your business—what it does and who it sells to—in less than a minute. Limit PowerPoint presentations to 10 slides.n-Angels can always leave their money in the bank, so an investment must interest them. It should be something they're passionate about. And timing is important—knowing when to reach out to an angel can make a huge difference.n-They need to see management they trust, respect, and like. Present a competent management team with a strong, experienced leader who can explain the business and answer questions from potential investors with specifics.n-Angels prefer something they can bring added value to. Those who invest could be involved with your company for a long time or perhaps take a seat on your board of directors.n-They are more partial to deals that don't require huge sums of money or additional infusions of angel cash.n-Emphasize the likely exits for investors and know who the competition is, why your solution is better, and how you are going to gain market share with an infusion of cash.
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Venture capital
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financing obtained from venture capitalists, investment firms that specialize in financing small, high-growth companies
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Small Business Administration (SBA)
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The SBA's mission is to speak on behalf of small business, and through its national network of local offices it helps people start and manage small businesses, advises them in the areas of finance and management, and helps them win federal contracts
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The SBA also offers free management consulting through two volunteer groups
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the Service Corps of Retired Executives (SCORE), and the Active Corps of Executives (ACE)