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Polycentric, Ethnocentric, and Geocentric Approach to International Management

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    What is the difference between a polycentric, ethnocentric, and geocentric approach to international management? What key factors should a firm consider before adopting one of these approaches? Polycentric approach to international management is the policy involved hiring and promoting employees who are citizens of the country that host and operates the company. The polycentric approach is best used in order to maintain low hiring costs. Communication is easier and companies run smoother due to the fact the employees are all related in their geographic location.

    Ethnocentric approach is a staffing policy that is used in companies that has primarily international strategic orientation. While polycentric maintains employees from the same area, ethnocentric is generally adopted by headquarters by sending employees from the home or parent countries to the host country. Ethnocentric approach is best used when teams from a certain home country are sent to a new location to help direct and assist due to their experience. Geocentric staffing approach is used when companies implement a transnational orientation.

    In such an approach, rather than maintaining the same groups of people or transferring people, employees are selected regardless where they come from. The geocentric approach recruits the best of the best; this approach is consisting with building a strong unifying management network. A firm should take into consideration one, the immigration policy and whether or not they are able to recruit from certain countries, two, if the area they wish to be located in has workers who are capable for the job.

    Location and laws are key factors in the approach to international management. Contrast common law, civil law, customary law, and theocratic law. Explain their relevance to managers In common law systems, the law continuously evolves in addition to being amended by laws passed by the legislation. Common law systems are used in England, which was where it originated.

    In common law systems, the decision made by a high court cannot be overridden by a lower court, the decision of the higher court is a binding precedent; where as in Civil law, there is no such thing as binding precedent. A civil law country provides the ability to view a law in each individual case rather then the higher courts decision. A customary law system reflects the wisdom of daily experience or more elegantly spiritual legacies and philosophical traditions. Customary law anchors the law in many indigenous communities defining the rights and responsibilities of members.

    Customary law prevails in many developing countries rather then being the oldest followed custom like Civil law. Theocratic law on the other hand, relies on religious doctrine rather then courts. Precepts and beliefs rule, ultimate authority is given to religious leaders. Iran, Saudi Arabia, Sudan, Yemen, Afghanistan, United Arab Emirates, Pakistan, Malaysia, and Mauritania are Islamic theocracies. The Vatican City is the only Christian theocracy, although its laws are still limited to the secular laws of Italy.

    Most theocracies are usually authoritarian in nature and often jail religious and political dissidents. When it comes to managing, these systems of laws are relevant because they help to dictate a company. Managers are the head of the companies and they decide how to “govern” so to say, their company. Whether it’s “their way or the highway,” or they allow input from lower authority i. e. workers. What is meant by the idea of economic freedom? What factors are used in the Economic Freedom Index? For managers, what role does the Economic Freedom Index play in analyzing the potential of a country? Economic freedom is the key to greater opportunity and an improved quality of life. It’s the freedom to choose how to produce, sell and use your own resources without restriction. Economic freedom is what make’s this world function and is it’s backbone to maintain a sense of strength and diversity.

    The Economic Freedom Index is a series of 10 economic measurements created by “The Heritage Foundation. ” Its goal is to measure the degree of economic freedom. Factors that are used in measuring economic freedom for the index are, property rights, government spending, business freedom, labor freedom, financial freedom, trade freedom; each freedom is scored from 0-100; 100 being the most free. For managers, analyzing and researching a countries economic freedom is imperative in choosing a geographic location for a company/business.

    A nation with low economic freedom for instance, will entail more of a struggle to produce and function as a self-owned company while a country like Singapore for instance that hold a great amount of freedom, a company can prosper in it’s own way because there are far less restrictions. Countries with a greater amount of freedom usually will be happier because they are not being held back or refused, businesses can prosper in such a country.

    What is the Foreign Corrupt Practices Act?

    How has this law affected ethical behavior among international businesses? The Foreign Corrupt Practice Act is a federal law created in 1977, which prohibits companies from paying bribes to foreign government officials and political figures for the purpose of obtaining business. The act hold two provisions, one that addresses accounting transparency requirements and another concerning bribery of foreign officials. The Foreign Corrupt Practices Act has affected ethical behavior among international businesses because any form of bribery or unreasonable “trade” can result in the loss of ones company or severe consequences.

    Nations need to be in the same understanding in order to complete a deal. “On Tuesday, the New York Times reported on Wal-Mart de Mexico’s alleged bribery of low-level Mexican officials, in a quest to open as many as 19 new stores. The DOJ and the SEC are currently investigating whether this violated the Foreign Corrupt Practices Act, which bars companies that operate in America from bribing “foreign officials” for business. ” With such a large chain like Wal-Mart, company communicators need to be more alert of the laws. Bribing to produce more stores is not only illegal, its ethically immoral. What is the difference between the free trade theories of absolute advantage and comparative advantage? How can free trade improve global efficiency? Absolute advantage and comparative advantage both deal with production, goods and services. Absolute advantage is a condition in which a country can produce particular goods at a lower cost in comparison to another country.

    On the other hand, comparative advantage is a condition in which a country produces particular goods at a lower opportunity cost in comparison to other countries. Comparative advantage generally compares the output of production of the same type of goods or services between two countries. A country will have an absolute advantage over another when it produces the highest number of goods after the same resources are supplied to both of them. Comparative advantage looks at the overall picture; it examines the production of the services or goods within a time frame. Comparative advantage and free trade are closely connected.

    Today’s global economy has a number of free trade partnerships established by countries seeking to do business together, comparative advantage and free trade allow people to produce goods more efficiently, which in the end increases profits. Trade improves global efficiency in supply distribution. A glass of water may be of little value to someone living near the river but is priceless to a person crossing the Sahara. Trade delivers goods and services to those who value them most.


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    2. http://www. internationalbusinesslawadvisor. com/2010/05/articles/international-litigation/international-basics-whats-the-difference-between-common-law-and-civil-law/ TEXTBOOK CITATION!
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