International Buis Exam 1

Globalization

the shift toward a more integrated and interdependent world economy

globalization of markets

merging of historically distinct and separate national markets into one huge global marketplace

globalization of production

the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production

factors of production

labor, energy, land, and capital

General Agreement on Tariffs and Trade (GATT)

International treaty that committed signatories to lowering barriers to the free flow of goods across national borders and led to the WTO

World Trade Organization (WTO)

primarily responsible for policing the world trading system and making sure nation-states adhere to the rules laid down in trade treaties signed by WTO member states

International Monetary Fund (IMF)

institution set up to maintain order in the international monetary system

World Bank

International institution set up to promote general economic development in the world’s poorer nations

United Nations (UN)

International organization made up of 193 countries headquartered in New York City, formed in 1945 to promote peace, security, and cooperation

Group of Twenty (G20)

International organization, established in 1999, that comprises the finance ministers and central bank governors of the 19 largest economies in the world, plus representatives from the European Union and the European Central Bank

International trade

occurs when a firm exports goods or services to consumers in another country

Foreign direct investment (FDI)

occurs when a firm invests resources in business activities outside its home country

multinational enterprise (MNE)

any

business that has productive activities in two

or more countries

Collectivism

a system that stresses the primacy of collective

goals over individual goals, needs of the society as

whole are generally viewed as being more important than

individual freedoms

Socialists

believes in social or collective ownership of the means of production (such as factories, land, energy, and transport) rather than private, corporate ownership

communists

socialism can only be achieved through violent revolution and

totalitarian dictatorship

Social democrats

socialism is achieved through democratic means

Individualism

refers to philosophy that an individual should

have freedom in his own economic and political pursuits

Democracy

based on the belief that citizens should be

directly involved in decision making

representative democracy

elected

representatives vote on behalf of constituents

Totalitarianism

form of government in which one person or political party

exercises absolute control over all spheres of human life, and opposing

political parties are prohibited

Communist totalitarianism

found in states where the

communist party monopolizes power

Theocratic totalitarianism

found in states where political

power is monopolized by a party, group, or individual that

governs according to religious principles

Tribal totalitarianism

found in states where a political party

that represents the interests of a particular tribe monopolizes

power

Right-wing totalitarianism

permits some individual

economic freedom, but restricts individual political freedom

market economy

all productive activities are privately

owned and production is determined by the interaction of

supply and demand

command economy

the government plans the goods and services that a

country produces, the quantity that is produced, and the prices as which they

are sold

mixed economy

certain sectors of the economy are left to

private ownership and free market mechanisms while other

sectors have significant state ownership and government

planning

legal system

refers to the rules, or laws, that regulate

behavior, along with the processes by which the laws of a country are

enforced and through which redress for grievances is obtained

Common law

based on tradition, precedent, and custom

Civil law

based on a very detailed set of laws organized into

codes

Theocratic law

based on religious teachings

contract

a document that specifies the conditions

under which an exchange is to occur and details the

rights and obligations of the parties involved

Contract law

he body of law that governs contract

enforcement

Property rights

the legal rights over the use to which a

resource is put and over the use made of any income

that may be derived from that resource

Private action

theft, piracy, blackmail, and the like by

private individuals or groups

Public action

public officials extort income or resources

from property holders, Excessive taxation, requiring expensive licenses

or permits from property holders, or taking assets

into state ownership without compensating the

owners

Foreign Corrupt Practices Act

makes it

illegal for U.S. companies to bribe foreign

government officials to obtain or maintain

business over which that foreign official has

authority

Patents

give the inventor exclusive rights to the

manufacture, use, or sale of that invention

Copyrights

exclusive legal rights of authors, composers,

playwrights, artists, and publishers to publish and dispose

of their work as they see fit

Trademarks

designs and names, often officially

registered, by which merchants or manufacturers

designate and differentiate their products

Paris Convention for the Protection of Industrial

Property

agreement signed by over 180 countries to

protect intellectual property rights

Trade Related Aspects of Intellectual Property Rights

requires WTO members to grant and enforce

patents lasting at least 20 years and copyrights lasting

50 years

Cross-cultural literacy

an understanding of how

cultural differences across and within nations can

affect the way in which business is practiced

Social mobility

the extent to which individuals

can move out of the strata into which they are

born

Caste system

social position is determined

by the family into which a person is born,

and change in that position is unlikely

Class system

the position a person has by

birth can be changed through achievement

or luck

Ethical systems

a set of moral principles, or

values, that are used to guide and shape

behavior

Unspoken language

nonverbal cues, Examples include facial expressions and

hand gestures

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

Hofstede added Confucian dynamism

aptures attitudes towards time,

persistence, ordering by status, protection of face, respect for tradition,

and reciprocation of gifts and favors

Long-Term Orientation

use resources sparingly

Create large savings to invest in the future

Be persistent when results are slow

Respect what is virtuous

Short-Term Orientation

Keep up with the Joneses

Save little money for investing

Expect quick results

Seek what is true

High context

Likely to be subtle, indirect

Low context

Likely to be unambiguous (blunt), direct

Gross national income (GNI)

includes income you obtained abroad

purchasing power parity (PPP)

adjustment provides a more direct comparison of living standards in different countries

Human

Development Index (HDI)

shows opportunities and possibilities people can go through a country

3 things HDI is based off

• Life expectancy at birth

• Educational attainment

• Whether average incomes are sufficient to meet the basic needs of life in a country

Deregulation

involves removing legal restrictions on

the free play of markets, the establishment of private

enterprises, and the manner in which private enterprises

operate

Examples of deregulation

Removing price controls

 Abolishing laws limiting private enterprise

 Removing restrictions on foreign investment and

trade

Privatization

transfers the ownership of state

property into the hands of private investors

first mover advantages

advantages that

accrue to early entrants into a market

Political costs

include the cost of paying bribes or

lobbying for favorable or fair treatment

Economic costs

relate primarily to the

sophistication of the economic system, including the

infrastructure and supporting businesses

Legal costs

can be higher in countries with

dramatically different product, workplace, and

pollution standards, or where there is poor legal

protection for property rights

Political risk

likelihood that political forces will

cause drastic changes in a country's business

environment that adversely affects the profit and other

goals of a business enterprise

Economic risk

likelihood that economic

mismanagement will cause drastic changes in a

country's business environment that adversely affects

the profit and other goals of a business enterprise

Legal risk

the likelihood that a trading partner will

opportunistically break a contract or expropriate

property rights

Ethics

refers to accepted principles of right or

wrong that govern the conduct of a person, the

members of a profession, or the actions of an

organization

Business ethics

he accepted principles of

right or wrong governing the conduct of

business people

Ethical strategy

a strategy, or course of

action, that does not violate these accepted

principles

tragedy of the commons

occurs when a

resource held in common by all, but owned by

no one, is overused by individuals, resulting in

its degradation

Foreign Corrupt Practices Act

outlawed the practice of paying bribes to

foreign government officials in order to gain

business

Convention on Combating Bribery of

Foreign Public Officials in International

Business Transactions

adopted by the

Organization for Economic Cooperation and

Development (OECD), obliges member states

to make the bribery of foreign public officials a

criminal offense

Social responsibility

refers to the idea that business people

should take the social consequences of economic actions

into account when making business decisions, and that

there should be a presumption in favor of decisions that

have both good economic and good social consequences

noblesse oblige

honorable and benevolent behavior that is

the responsibility of successful companies

Ethical dilemmas

situations in which

none of the available alternatives seems

ethically acceptable

Personal ethics

the generally accepted

principles of right and wrong governing the

conduct of individuals

Organization culture

refers to the values

and norms that are shared among

employees of an organization

Straw men

approaches offer inappropriate guidelines for ethical decision making in a multinational enterprise

Friedman doctrine

suggests that the only social responsibility

of business is to increase profits, so long as the company stays

within the rules of law

Cultural relativism

argues that ethics are culturally determined and

that firms should adopt the ethics of the cultures in which they

operate, or in other words, when in Rome, do as the Romans do

righteous moralist

approach claims that a multinational
s

home country standards of ethics should be followed in foreign

countries

naïve immoralist

asserts that if a manager of a multinational

sees that firms from other nations are not following ethical norms in

a host nation, that manager should not either

Utilitarian

approaches to ethics hold that the moral worth

of actions or practices is determined by their consequences

Kantian

beleif that people should be treated as ends

and never purely as means to the ends of others

Universal Declaration of Human Rights

specifies the basic principles that should

always be adhered to irrespective of the

culture in which one is doing business

veil of ignorance

everyone is imagined to be

ignorant of all his or her particular characteristics

code

of ethics

a formal statement of the ethical priorities a

business adheres to

Internal stakeholders

people who work for or who own

the business such as employees, the board of directors, and

stockholders

External stakeholders

individuals or groups who have

some claim on a firm such as customers, suppliers, and

unions

moral intent

the

business must resolves to place moral concerns

ahead of other concerns in cases where either the

fundamental rights of stakeholders or key moral

principles have been violated

Ethnocentrism

Belief that your own culture is superior

   Enculteration

The socialization process we go through to learn culture

Holistic

The attempt to view things in the broadest possible context

Cultural Relativism

Because cultures are unique, they can be evaluated only according to their own standards and values

Proxemics

Space

Kinesics

Body Language/Gestures