International business exam 2

Cross-cultural literacy

Understanding how the culture of a country affects the way business is practiced.

Culture

A system of values and norms shared among a group of people that together constitute a design for living.

Society

A community of people who share a common culture.

Values

Provide the context within which a society's norms are established and justified.

Norms

Social expectations that guide behavior.

Folkways

Routine conventions of everyday life.

Mores

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

Determinants of Culture

Factors such as religion, political philosophy, economic philosophy, education, language, and social structure that influence culture.

Social stratification

A system by which a society ranks categories of people in a hierarchy.

Social Mobility

Movement of individuals or groups from one position in a society's stratification system to another.

Caste System

A social structure where an individual's position is determined by the family into which they are born.

Class System

A social structure that allows for mobility based on achievement or luck.

Class Consciousness

The perception of individuals based on their class background.

Religion

A system of shared beliefs and rituals concerned with the sacred.

Ethical System

A set of moral principles or values guiding behavior.

Christianity

The most widely practiced religion, seen as a driving force of capitalism.

Islam

The most widely practiced religion of Muslims, associated with significant social upheaval.

Hinduism

The world's oldest religion, emphasizing reincarnation, karma, and Dharma responsibilities.

Buddhism

A religion stressing spiritual growth and the afterlife rather than worldly achievements.

Confucianism

The official ethical system of China emphasizing high moral conduct and loyalty.

Hofstede's Cultural Dimensions

Framework for understanding cultural differences: power distance, individualism, masculinity, uncertainty avoidance, long-term orientation.

Power Distance

The degree to which society accepts inequalities in power.

Individualism

Prioritizing personal goals over group goals.

Uncertainty Avoidance

The degree to which a society tolerates uncertainty and risk.

Masculinity

The extent to which a culture favors traditional male roles and values associated with achievement.

Long-term Orientation

An emphasis on the future, thrift, and persistence in a culture.

Ethnocentric Behavior

Belief in the superiority of one's own culture.

Free Trade

International trade left to its natural course without tariffs and restrictions.

Mercantilism

The belief that it's in a country's best interest to maintain a trade surplus.

Zero-sum Game

A situation where one country's gain is exactly balanced by another's loss.

Absolute Advantage

When a country can produce a product more efficiently than any other country.

A. Smith

Known for the idea of absolute advantage in trade.

Production Possibility Frontier

A graph showing the combinations of output that an economy can produce with available resources.

D. Ricardo

Formulated the theory of comparative advantage.

Theory of Comparative Advantage

Specialization and free trade benefits all trading parties.

Constant Returns to Specialization

Assumption that resource input remains constant along the production possibility frontier.

Heckscher-Ohlin Theory

Comparative advantage arises from differences in national factor endowments.

Factor Endowments

Resources such as land, labor, and capital that a country possesses.

Leontief Paradox

Findings that contradicted the predictions of the Heckscher-Ohlin theory regarding U.S. trade.

R. Vernon

Proposed the product life cycle theory.

Product Life Cycle

The concept that sales and optimal production locations change as products mature.

New Trade Theory

As products mature, sales and production locations change, affecting trade flows.

Economies of Scale

Cost advantages gained by increasing the level of production.

First-mover Advantage

Benefits gained by being the first to enter a market.

Strategic Trade

Government policy that promotes certain industries through subsidies.

Porter's Diamond

Framework outlining four factors affecting national competitiveness.

Tariff

A tax imposed on imported goods.

Specific Tariff

A fixed charge per unit of a good imported.

Ad velorem tariff

A tax levied as a proportion of the value of an imported good.

Subsidy

Government payment to encourage or protect a specific economic activity.

Import Quota

A direct limit on the quantity of a good that can be imported.

Voluntary Export Restraint (VER)

A trade quota imposed by the exporting country at the importing country's request.

Local Content Requirement

Demands that a specific fraction of a good be produced domestically.

Administrative Trade Policies

Rules designed to make it difficult for imports to enter a country.

Antidumping Policies

Prevent goods from being sold below cost or fair market value.

The Infant Industry Argument

Industries should be protected until they can compete internationally.

Strategic Trade Policy

Government actions to enhance first-mover advantages domestically.

GATT

Multilateral agreement aimed at liberalizing trade.

IMF

Organization that provides loans to poor countries.

World Bank

An international bank offering low-interest loans and advice to developing nations.

WTO

International body regulating trade rules and reducing tariffs.

Smoot-Hawley Tariff Act

1930 legislation imposing high tariffs that led to retaliatory tariffs.

International Business

Firms that engage in international trade or investment.

Multinational Enterprise

A firm that operates on a global scale without ties to any specific country.

Types of Globalization

Market and production globalization.

Factors of Production

Land, labor, capital, and entrepreneurship.

GDP per capita

A broad measure of economic wellbeing adjusted for purchasing power parity.

Cost of Living

The average cost of basic necessities such as housing and food.

Democracy vs. Totalitarianism

Democracy allows representation; totalitarianism has absolute control by one leader.

Command Economy

An economic system where the government controls the economy.

Mixed Economy

An economic system combining private and public enterprise.

Free Market Economy

An economic system based on capitalism and supply and demand.

Common Law

A legal system based on precedent and customs.

Civil Law

A legal system based on a written code of laws.

FCPA

U.S. law regulating the conduct of international business regarding bribery.

Hernando de Soto

Advocates for property rights protection in a capitalistic society.

Naive Moralist

Believes a manager should follow ethical norms of host nations.

Utilitarianism

The ethical approach of maximizing the greatest good for the greatest number.

Righteous Moralist

Believes home-country ethical standards are the basis for foreign operations.

Strawman

Misrepresenting an argument to make it easier to attack.