I BUS 300 Concept Check 1 - Textbook

Facets of globalization

1. Market (sell international) - SMEs can also benefit

2. Production

Most global markets are for

Industrial goods & materials that serve universal needs

• Commodities (aluminum, oil, wheat)

• Industrial products (micro-processors, commercial jet aircrafts)

• Computer software

• Financial assets (US T-bills, Eurobonds)

Benefits of outsourcing abroad

1. Lower cost & higher quality factors of production → more productive

2. Suppliers are best in the world at their particular activity

3. Increase chance of winning significant orders from major players in that market (eg. Boeing manufacture in Japan → major airlines buy from them)

4. Time zone advantages

Downsides of outsourcing abroad

1. Difficult to coordinate

2. Lose internal expertise

Major global institutions

1. General Agreement on Tariffs & Trade (GATT) → World Trade Organization (WTO)

2. International Monetary Fund (IMF) & World Bank (sister institutions)

3. United Nations (UN)

Responsibilities of 4 major global institutions

1. WTO: Police world trading system, facilitate establishment of new agreements

   1. Goal: Reduce barriers to cross-border trade & investment

2. IMF: Maintain order in intl monetary system, lender of last resort when currencies depreciate too much

3. World Bank: Promote economic development thru low-interest loans

4. UN: Peacekeeping

Trade in goods/services has been growing ___ than world output

faster

Containerization

Method of transporting goods in standardized containers (simplified transshipment from one mode of transport to another)

Most important innovation since WWII for communication

Microprocessor: Enabled growth of high-power, low-cost computing

Many of tomorrow’s economic opportunities may be found in

the developing nations

Many Japanese firms invested in North America & Europe as a hedge against

Unfavorable currency mvmts & possible imposition of trade barriers

eg. Toyota believed strengthening yen → Japanese auto exports too expensive in foreign mkts, so producing in those important mkts made more sense

Outward stock of FDI

Total value of FDI by firms domiciled in nations outside of that country

eg. Apple invest in Europe branch → increase US outward stock of FDI

Anti-globalization arguments

1. Unskilled worker job loss

   1. Trade → comparative advantage

   2. Econ growth > fall in share of national income from unskilled workers

   3. Tech has bigger impact

   4. Wage gap btwn developoing & developed nations is closing

2. Environmental degradation

   1. Hump-shaped relationship btwn income & pollution (except CO2, which rises w/ income)

3. Cultural imperialism

4. Econ power in supranational orgs w/o elected officials (lose national sovereignty)

5. Poorer nations held back by large debt burdens, not getting advantages from globalization

“Black Swan” events

Low-probability, high-impact events w/ large negative consequences (eg. Ukraine invasion, COVID)

Communist vs social democrats

Communist: Socialism only achieved thru violent revolution & dictatorship

Social democrat: Socialism thru democracy

Types of totalitarianism

1. Communist

2. Theocratic

3. Tribal (represent interests of particular tribe)

4. Right-wing (some individual econ freedom but not political, overt hostility to socialist ideas)

Pseudo-democracy

Authoritarian elements have captured much of state & use this to deny basic liberties

eg. Russia still has elections & independent press, but Putin still limiting liberties

Supply restriction occurs when

Single firm monopolizes market → restrict output so prices rise

Common law is based on

• Tradition: Legal history

• Precedent

• Custom: ways in which laws apply to specific situations

Contracts in common vs civil law

Common law more detailed & expensive

Uniform set of rules governing certain aspects of everyday commercial contracts

United Nations Convention on Contracts for the International Sale of Goods (CISG)

When firms don’t accept CISG, opt for arbitration thru courts like

International Court of Arbitration of the International Chamber of Commerce (in Paris)

Private action

Violating property rights thru things like theft, piracy, & blackmail

Public action

Violating property rights when public officials extort income, resources, or property from their holders

US law and OECD convention allow for exceptions called

facilitating/expediting/grease payments: to expedite/secure performance of routine gov action

GDP can be misleading bc

Doesn’t consider differences in cost of living

Black/shadow economy

Transactions in cash & therefore not tracked

Measure quality of life in diff nations thru

Human Development Index (HDI):

1. Life expectancy at birth

2. Educational attainment

3. Whether avg income enough to meet basic needs

Primary engines of long-run econ growth

Innovation & entrepreneurial activity

Deregulation

Removing legal restrictions to free play of mkts, establishment of priv enterprises, & manner in which priv enterprises operate

eg. remove price controls & restrictions on FDI

For privatization to work, must also be accompanied by

More general deregulation & opening of economy

Types of norms

Folkways: Routine conventions of everyday life (eg. dress code, attitude towards time, rituals & symbolic behavior like bowing when handing business card)

Mores: Greater moral significance & central to society’s function (eg. consumption of alcohol)

Dimensions of social structure

• Basic unit of social org is individual vs group/company

• Degree to which society is stratified into classes/castes

  • diff in mobility btwn strata & significance attached to social strata in business contexts

Implications of high individualism

High level of entre activity & degree of managerial mobility btwn companies

Caste vs class system

Caste system is closed, class is less rigid (mobility is possible)

Class consciousness

Ppl perceive themselves in terms of their class background & shapes relationship w members of other classes

Convergence hypothesis

Universally accepted values & norms being established