Global Business Ethics Mid Term TCU

The decoupling of world economic order and the move to a multipolar world helps explain why china is now the world's largest recipient of Federal Direct Investment (FDI)

TRUE

The Sarbanes Oxley Act of 2002 (SOX) set green standards for companies

FALSE

Key aspects of globalization include the elimination of barriers to trade and information technology

TRUE

One way international trade benefits consumers is by providing lower living standards

FALSE

Singapore, A regional center for global companies continues to attract sizeable amounts of foreign investment given its strategic location, world class infrastructure, and productive workforce

TRUE

The world economy is quickly shifting away from countries with emerging economies

FALSE

Because Turkey is a Muslim country, the consumption of alcoholic beverages is prohibited there

FALSE

With business becoming increasingly global, its success, fortunately depends only on the domestic environment

FALSE

Hofstede's masculine vs. feminine dimension is the extent to which a society values traditionally masculine attributes (assertiveness, competition) or traditionally feminine ones (modesty, caring for others)

TRUE

Foreign direct investment (FDI) in a country brings funds and business culture from abroad, creates new well paying jobs, introduces innovative technologies, and enhances the skills of domestic workers

TRUE

As part of the World Bank's Strategic Framework, there are five focus areas that accommodate and facilitate the globalization process including its analytical and advisory role supporting national policies to strengthen free market institutions and infrastructure that has provided the potential for creating large gains from trade

TRUE

The foundations of the globalized business world are political—and so are the biggest threats to the system

TRUE

SOX requires that the CEO and the CFO of a publicly traded corporation must certify in each periodic report containing financial statements that the report fully complies with the Securities Exchange Act of 1934 and that the information fairly represents the company's financial condition and results of operations

TRUE

Developed countries often resort to manage trade for reasons of unethical labor practices and violation of basic human rights

TRUE

Of the following statements about trade, which is NOT true

Trade does not influence culture

Of the following, which is NOT true of the Enron financial scandal

The scandal surprised no one because enron was alway regarded as an unethical company

In China, consumers drink soup, which usually contains rice, and do not use a spoon. In Muslim countries, it would be inappropriate to bring a gift for another man's wife. These are examples of cultural_____

Manners and Customs

The world's two largest economies in terms of national income in the early-19th century were _____.

China and India

According to Porter's "diamond" model, the success or competitive advantage of a nation at the global stage depends upon the interaction of all of the following except

A conservative political structure/outlook

Of the following, which is NOT in the geo-political category of managed trade?

Ethics and Safety

The oldest form of trade theory is called

Mercantilism

Of the following, which is NOT true regarding Hofstede's cultural dimensions?

Australia and the United States are high power distance countries

Of the following statements about foreign direct investment, which is not true?

Foreign investors have little faith in high-income economies such as Canada

The color black in the United States indicates mourning, but in Japan white is the color of mourning. Green is an acceptable color in Muslim countries all flags of those countries contain green. These are examples of which of the following?

Aesthetics

An agreement where a large number of developed countries permit duty-free imports of a selected list of products that originate from specific countries is known as

A generalized system of preferences

In India, several politicians are working very hard toward a system of full disclosure and openness that aims to avoid any semblance of corruption and cronyism. These efforts can be described as creating a system focused on _____.

Transparency

Assume that because of soil and climatic conditions, Brazil is more efficient in the production of coffee than the United States. At the same time, the United States is more efficient in the production of apples than Brazil. Each of these countries can be said to have a(n) _____.

Absolute Advantage

Brazilian Juice, a manufacturer of healthy fruit juices in Brazil, sells juice in six different countries including the United States. Brazilian juice is engaging in

Globalization

the branch of philosophy that addresses the values pertaining to human behavior, with regard to the rightness and wrongness of actions and to the goodness and badness of the intent and results of such actions

Ethics

A company's obligations to society, including the welfare of people and places affected by company activities is called _____.

Corporate Social Responsibility (CSR)

_____ infrastructure refers to housing, medical services, and educational institutions.

Social

Which causes most problems associated with computer security

Accidental Errors

The government can force an individual to sell his or her land so that a road can be built for the benefit of the public as a whole. This is an example of the _____ principle.

Utilitarian

All of the following countries can be considered globalization "winners" EXCEPT:

North Korea

According to Hofstede, the United States is considered a(n) ________________.

Highly Individualistic Country

Increasingly, emerging economies are

Innovative and technologically advanced

Of the following statements, which is NOT true about ethics and integrity?

Ethical situations are always black and white

Suppose the United States exports automobiles to Saudi Arabia and agrees to import a corresponding value of oil from Saudi Arabia. This is an example of

Countertrade

When doing business in China, it is important to remember that ___________.

Exchanges are often uneven, working to the advantage of weaker members in the relationship

"Do what produces the greatest good for the greatest number" refers to ___ .

Utilitarianism

Which financial scandal was associated with the presidency of Warren G. Harding

The Teapot Dome Scandal

The Multilateral Investment Guarantee Agency performs which of the following functions?

Provides political risk coverage for private investments made in developing countries

Someone who believes in the infant industry argument would be MOST likely to support ______ for a new industry.

High Tariffs

The only way workers in industrialized countries can compete with their counterparts in the developing world will be through

Increased productivity by using technologically-intensive manufacturing technologies

How does Porter's model of national competitive advantage differ from the Heckscher-Ohlin theory?

It looks more closely at the quality of factor endowments

Mexican business executives who buy business-to-business products from U.S. suppliers indicate that "knowledge of the Mexican culture" and "enthusiasm" were the most important cultural variables determining from which supplier they purchased. This example of which of the four characteristics of culture which is important for global companies to recognize?

It is the responsibility of the global firm to ascertain the level of importance of various aspects of culture in the foreign markets it serves

Of the following, which is NOT true about managing and marketing in overseas markets?

Only one management style needs to be used

Asking oneself "Would I want others to treat me this way?" is an application of the principle of?

The principle of Respect - "the golden rule"

Which of the following is NOT a main purpose of the International Monetary Fund (IMF)?

Provide long term low interest social sector and infrastructure loans

Global institutions

o World trade organization

o World bank

o IMF (International Monetary Fund)

o United Nations

World Trade Organization

Began trading in 1948 under the General Agreements on Tariffs and Trade (GATT)

· Liberalized trade by lowering and/or removing trade barriers such as tariffs, quotas, and subsidies

Promotes global trade by:

· Administering trade agreements

· Acting as a forum for trade negotiations

· Settling trade disputes

· Reviewing national trade disputes reviewing national trade policies

· Providing developing countries with technical assistance and training programs

· Cooperating with the IMG and the World Bank

World bank

-Initial role was to aid the reconstruction of Europe after World War II

-A resource for companies considering investment and expansion

Current focus areas:

· Global integration through trade liberalization

· Analysis and national trading policy advice

· Agreements supporting international standards in financial systems

· Information and knowledge transfer to developing countries to support sustainable development

· Eradicating communicable diseases

IMF (International Monetary Fund)

Role in global financial stability:

· Provides a forum for cooperation on international monetary problems

· Facilitates international trade that promotes job creation, economic growth, and pverty reduction

· Promotes exchange rate stability and an open system of international payments

· Lends countries forgein exchange to help address balance of payment problems

UN

-15 member UN security council is responsible for the maintenance of international peace and security

-Supports member states implementation of inter-governmentally agreed sustainable development objectives

-System-wide coherence at global, regional, sub-regional, and country levels is crucial for the UN system, to deliver on its mandates effectively

What makes Global institutions effective?

o They do not require you to join but they need members

o They have common goals

o Different ideas and perspectives

o Members

o Roles and responsibilities

o Transparency, so people know what theyre doing

SWOT analysis

o Valued strengths, weaknesses, opportunities, threats

o Strength- something you have

o Opportunities- something you can get (external)

o Threats- (external)

Value chain decision-making

-the string of activities that take you from the beginning of a business idea through to the business activities you have and the product or service after the customer has the product

-a stream of activities from upstream to downstream that add value

Culture

the collective programming of the mind that distinguishes the members of one group or category of people from another

How you notice cultural differences

-Context

-Cluster

-Dimension

-Language, manners and customers, education, religion, social structure

-Culture is a learned behavior; a way of life for one group of people living in a single, related, and independent community

-It is not inherited

CAGE

-Cultural distance

-Administrative distance

-Geographic distance

-Economic distance

Cultural distance

· Attributes:

o Different languages

o Different ethnicities

o Different religions

o Different social norms

Industries products effected by distance:

-Products have high linguistic content

-Products affect cultural or national identity of consumers

-Product features vary in terms of:

--Size

--Standards

--Packaging

--Country specific quantity

Administrative distance

· Attributes:

o Absence of colonial ties

o Absence of shared monetary or political association

o Political hostility

o Government policies

o Institutional weakness

Geographic distance

· Attributes:

o Physical remoteness

o Lack of a common border

o Lack of sea or river access

o Size of country

o Weak transportation or communication links

o Differences in climates

Economic distance

· Attributes:

o Differences in costs and quality of:

§ Natural resources

§ Financial resources

§ Human resources

§ Infrastructure

§ Intermediate inputs

§ Information or knowledge

PESTEL

Political

Economic

Social

Technological

Environmental

Legal

Political

· Government policy

· Political stability

· Corruption

· Foreign trade policy

· Tax policy

· Labor law

· Trade restrictions

Economic

· Economic growth

· Exchange rates

· Interest rates

· Inflation rates

· Disposable income

· Unemployment rates

Social

· Population growth rate

· Age distribution

· Career attitudes

· Safety emphasis

· Health consciousness

· Lifestyle attitudes

· Cultural barriers

Technological

· Technology Incentives

· Level of innovation

· Automation

· R&D activity

· Technological awareness

Environmental

· Weather

· Climate

· Environmental polices

· Climate change

· Pressures from NGO's

Legal

· Discrimination laws

· Antitrust laws

· Employment laws

· Consumer protection laws

· Copyright and patent laws

· Health and safety laws

Context models

The underlying background upon which social interaction takes place

Lower context:

· Communication:

o Specific

o Detailed

o Precise

· Poorer at decoding:

o Unspoken message

o Body language

· Examples:

o US, UK, Canada, Germany

High context:

· Communication:

o Less direct

· Emphasis on:

o Human relations

· More sensitivity to:

o Non-verbals

o Feelings of others

· Examples:

o China, Japan, France, Saudi Arabia

Hofstede’s 6 dimensions

§ Power distance

· High score means hierarchical society and subordinates expect to be told what to do

§ Individualism

· High score more "I" than "we"

§ Masculinity

· High score society will be driven by competition, achievement and success; low-score dominate values are caring for others and quality of life

§ Long term vs. short term

· Scoring high would show a more traditional and short-term focus. Low score would have a long-term and futuristic focus

§ Indulgence

· "the extent to which people try to control their desires and impulses." If score is high people exhibit a willingness to fulfill impulses and desires- placing a high importance on leisure time

o Who surveyed the IBM and countries around the world

§ Hofstede

o 5 frameworks

§ 1. Recognize an ethical issue

§ 2. Get the facts

§ 3. Evaluate alternative actions

§ 4. Make a decision and test it

§ 5. Act and reflect on the outcome

- The fraud triangle

o 1. Opportunity

o 2. Pressure & Motivation

o 3. Rationalization

Strategies for expanding abroad

o Equity vs. nonequity

o Equity- investing in another company more risky, more return

o Nonequity- doing something with your own company (import/ export business) you don't have an equity stake but a contractual relationship,-- less risky, less return

o Low risk modes of entry:

§ Export- import business

§ Licensing:

§ Franchising:

§ Export- import business

· Penetrating foreign markets by exporting or importing merchandise at competitive process for domestic consumption

§ Licensing:

· Providing a foreign partner with the rights and/or technology to manufacture and sell products or services in a target country for an annual license fee

§ Franchising:

· A franchisor provides specialized equipment, service, and/or startup costs to a franchisee in return for an annual fee to manufacture /sell its products

o Strategies that share financial risks:

§ Strategic alliances:

§ International joint ventures:

§ High risk high return:

§ Strategic alliances:

· An agreement between two or more firms do not involve the creation of a separate entity with joint ownership and in which the firms stand to gain revenues and maximize profits through cooperation for a given period of time

§ International joint ventures:

· A business jointly owned and operated by two or more firms (one local host country and one foreign) that pool their resources to penetrate the host country's markets, share in profits, and share commercial risk

§ High risk high return:

· Foreign acquisitions

· Wholly owned foreign subsidiaries

- Foreign Direct Investment

o Not a matter of buying goods from another country, it's a long term investment in assets or resources in that country, with active management of the assets or resources

o Investing in something in a different country

Benefits of Foreign Direct Investment

§ Generation of significant financial inflows

§ Creation of new jobs

§ Access to new technologies

§ Facilitation of the transfer of management and employee skills

§ Increased domestic competition and choice

§ Generates tax revenues for economic development

Downsides of Foreign Direct Investment

§ Environmental pollution that results from exploitation of natural resources MNEs (multinational enterprise)

§ Exploitation of the host country labor force reduces human capital development

§ MNE's lack of corporate social responsibility for the social consequences of their decisions

§ Political interference by MNE's in the host countrys affiars

- Foreign Exchange

o The process of changing one currency into another currency for variety of reasons, usually for commerce, trading, or tourism

o No central market place for foreign exchange

o Components of the forging exchange market:

§ Forex markets

· Sport market

· Forward market

· Futures market

o Legal systems:

§ Civil law

§ Common law

§ Theocratic law

§ Civil law

· Based on a comprehensive listing of legal rules in sets of written codes of law

§ Common law

· Legislative bodies enact less specific legal rules giving judges/ courts considerable authority in interpreting these rules based on precedent and other factors (united states)

§ Theocratic law

· Based on a religious document and religious teachings

o Economic systems

§ Rules of the game on how a country is governed economically

§ Market economy

§ Command economy

§ Mixed economy

§ Market economy

· An economy that is charaterised by the "invisable hand" of market forces

§ Command economy

· An economy that is characterized by government ownership and control of factors of production

§ Mixed economy

· An economy that has elements of both a market economy and a command economy

o Political systems

§ Democracy

§ Athenian democracy

§ Representative democracy

§ totalitarian government