Global Dimensions of Bus Midterm 2

4, 6, 7

Cross Cultural Literacy

an understanding of how cultural differences across and within nations can affect the way in which business is practiced.

culture

a system of values and norms that are shared among a group of people and that when taken together constitute a design for living

Values

abstract ideas about what a group believes to be good, right, and desirable

Norms

are the social rules and guidelines that prescribe appropriate behavior in particular situations.

Society

a group of people who share a common set of values and norms.

folkways (a norm)

the routine conventions of everyday life

mores ( a norm)

that are seen as central to the functioning of a society and to its social life.

social structure

a society’s basic social organization

Group

is an association of two or more people who have a shared sense of identity and who interact with each other in structured ways on the basis of a common set of expectations about each other’s behavior

Social stratification (social strata)

all societies are stratified on a hierarchical basis into social categories

Four basic principles of social stratification

1. Trait of society

2. Carriers over into next generation

3. Generally universal but variable

4. Involves not just inequality but also beliefs

Social Mobility

the extents to which individuals can move out of the strata into which they are born

Caste system

closed system of stratification in which social positions is determined by the family into which a person is born.

• change is usually not possible during an individual lifetime

Class system

form of open social stratification

• position a person has by birth can be changed through achievement or luck

class consciousness

a condition where people tend to perceive themselves in terms of their class background, and this shapes their relationships with others

Religion

a system of shared beliefs and rituals that are concerned with the realm of sacred

Dominating religions

1. Christianity

2. Islam

3. Hinduism

4. Buddhism

5. Confucianism (important in influencing behavior and culture in many parts of Asia).

Ethical systems

• Set of moral principles or values that are used ot guide and shape behavior

Christianity

• Largest religion

• Praises the protestant work ethic (Max Weber)

  • Hard work, wealth creation, and frugality is the driving force of capitalism.

Islam

• 2nd largest religion dating to 610 AD

• Teaches peace, justice, tolerance

• People do not own property and only work as stewards for god

• supportive of business, but the way business is practiced is prescribed

Hinduism

• Focusses on importance of achieving spiritual growth and development which may require material and physical self-denial

• Promotion and adding new religions might not be important or feasible due to employees case.

Budghism

• stresses spiritual growth and the afterlife rather than achievement in this world.

• Does not emphasize wealth creation or entrepreneurial behavior

• Individuals have some mobility and can work with other classes.

Confucianism

• Mainly practiced in China

• Teaches the importance of attaining personal salvation through the right action

• High morals, ethics, and loyalty are stressed.

• 3 key teachings

  • loyalty

  • reciprocal obligations

  • honest.

Power distance

How a society deals with the fact that people are unequal in physical and intellectual capabilities

Uncertainty avoidance

the extent to which different cultures socialize their members into accepting ambiguous situations and tolerating ambiguity

Individualism versus colllectivism

the realtionship between an indivudal and his or her fellows

masculinity versus feminity

the relationship between ender and work roles

Hofstede dimensions of culture

1. Power distance

2. Uncertainty avoidance

3. Individualism versus collectivism

4. Masculinity versus feminity

5. Later included: Confucian dynamism

Confucian dynamism

• captures attitudes toward time, persistence, ordering by status, protection of face, respect for tradition, and reciprocation of gifts and favors.

Social Turmoil

an inevitable outcome of cultural change

ethnocentrism

a belief in the superiority of one’s own ethnic group or culture

Free trade

A situation where a government does not attempt to influence through quotas or duties what its citizens can buy from another country or what they can produce and sell to another country

• Dates to late 18th-century work of Adam Smith and Dave Ricardo

Gains from trade

Trade allows countries to specialize in the production (and export) of goods and services that they can produce most efficiently from other nations.

new trade theory

suggests that the ability of firms to gain economies of scale (unit cost reductions associated with a large scale of output) can have important implications for international trade.

• emerged in 1980s

• Paul Krugman (novel prize winner)

mercantilism

suggests that it is in a country’s best interest to maintain a trade surplus to export more than it imports

• advocated government intervention to achieve a surplus in the balance of trade

• views as a zero-sum

• game, one in which a gain by one country results in a loss by another

• 16th century

Zero sum game

One in which a gain by one country results in a loss by another.

absolute advantage

• Adam Smith

• Argued that a country has an absolute advantage in the production of a product when it is more efficient than any other country in producing it.

• countries should specialize in the production of goods for which they have an absolute advantage and then trade these goods for goods produced by other countries

Hecksher Ohlin Theory

Eli Heckscher and Bertil Ohlin's comparative advantage arises from differences in national factor endowments.

Factor Endowments

The extent to which a country is endowed with resources like land, labor, and capital

Economies of Scale

Unit cost reductions associated with a large scale of output

first mover advantages

• the economic and strategic advantages that accrue to early entrants into an industry

Tariffs

taxes levied on imports that effectively raise the cost of imported products relative to domestic products

specific tariffs

Levied as a fixed charge for each unit of a good imported

Ad Valorem Tariffs

Levied as a proportion of the value of the imported good

How do governments intervene in markes

• Tariffs

• Subsidies

• Import Quotas

• Voluntary Export Restraints

• Local Content Requirements

• Administrative Policies

• Antidumping Policies

Subsidies

Forms of:

• Cash grants

• Low-interest loans

• Tax breaks

• Government equity participation in the company

Import Quotas

Restrict the quantity of some good that may be imported into a country

Tariff rate quotas

a hybrid of a quota and a tariff where a lower tariff is applied to imports within the quota than to those over the quota

Quota Rent

The extra profit that producers make when supply is artificially limited by an import quota

Voluntary Export Restraints

Quotas on trade imposed by the exporting country, typically at the request of the importing country’s government

• Benefit domestic producers

• Raise the prices of imported goods

Local Content Requirements

Demand that some specific fraction of a good be produced domestically

• Benefit domestic producers

• Consumers face higher prices

Administrative policies

Bureaucratic rules designed to make it difficult for imports to enter a country

• Policies hurt consumers by limiting choice

Antidumping Policies

• Objective is to protect domestic producers from unfair foreign competition

• Domestic producers can file a petition with the Commerce Department and the International Trade Commission (ITC)

Dumping

Enables firms to unload excess production in foreign markets

May be result of predatory behavior

• Firms use low prices to drive competitors out and then raise prices and earn more profit

Why do Government intervene in markets: Political

concerned with protecting the interests of certain groups within a nation (normally producers), often at the expense of other grups (Normally consumers)

• Protecting jobs

• Protecting Industries

• Retaliation for Unfair Foreign Competition

• Protecting consumers from “dangerous products”

• Furthering foreign policy objectives

• Protecting human rights

Why do Government intervene in markets: Economic Arguments

concerned with boosting the overall wealth of a nation - benefits both producers and consumers

• Infant industry argument (Alexander Hamilton)

• Strategic Trade Policy - First mover advantages

  • (New trade theory)

Infant Industry Arguments

An industry should be protected until it can develop and be viable and competitive internationally.

• accepted as a justification for temporary trade restrictions under WTO.

Infant Industry Arguments Criticisms

• Protection does no good unless protection helps make industry more efficient

• Assumes firms are unable to make efficient long term investments by borrowing money from the domestic or international capital market

Multilateral or bilateral trade agreemens

which are reciprocal trade agreements between two or more partners