Chapters 1, 2, 3, 4, 5, 6 Study Guide

International Business

What is globalization?

a shift toward a more integrated and interdependent world economy

What are the two key facets of globalization?

Globalization of markets & globalization of production

globalization of markets refers to

the merging of distinct national markets into one global marketplace

which of the following is an example of a global brand

coca cola, mcdonalds, ikea, starbucks, apple

which of the following is an example of an industrial good

aluminum, oil, wheat, microprocessors

globalization of production involves

sourcing goods/ services globally to exploit cost and quality differences

which is an impediment to globalization?

formal and informal trade barriers, transportation costs, economic and political risk

what is global institution?

manage, regulate, and police the global marketplace

where is WTO headquarters?

Geneva, Switzerland

What is international Monetary Fund (IMF)

lender of last resort, requires nation states to adopt specific economic policies in return for loans, maintains order in the international monetary system

what is the world bank

seen as less controversial than IMF, promotes economic development using low interest loans

what is the United Nations (UN)

Maintains international peace and security, includes 193 member countries

where is UN Headquarters

New York, NY

Which global institution polices the world trading system

WTO

The G20 represents approximately what percent of global GDP

90%

drivers of globalization

decline in barriers to free flow of goods, services and capital; technological change

international trade

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

foreign direct investment

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

implications of fast paced volume of world trade

world becoming significantly wealthier

moores law

as costs of microprocessors fall their power increases

containerization

controlled chaos

role of technological change

reduced cultural distance

in the early 1960s the US accounted for what percent of world manufacturing output

38%

by 2018

US accounts for only 15.8%; rapid economic growth now in countries like Brazil, Russia, India and China

a multinational enterprise is

a firm with productive activities in two or more countries

globalization debate for experts

believe globalization promotes greater prosperity in the global economy, more jobs and lower prices for goods and services

globalization debate for others

feel that globalization is not beneficial, detrimental effects on living standards, wages and the environment

managing international business differs from domestic business because

practices vary country by country

political economy refers to

political, economic and legal systems

political economy

these systems are interdependent, they influence each other

political system

the system of government in a nation

political system assessed by two dimensions

the degree that is required to emphasize collectivism as opposed to individualism, degree to which they are democratic or totalitarian

collectivism

emphasizes collective goals over individual goals

socialism

public ownership of the means of production for the common good

individualism

an individual should have freedom in economic and political pursuits

two tenets of individualism

guarantee of individual freedom and self expression, welfare of society is best served by letting people pursue their own economic interest

democracy

government is by the people exercised either directly or through elected representatives; citizens periodically elect individuals to represent them

totalitarianism

one person or political party exercises absolute control over all spheres of human life and prohibits opposing political parties

communist totalitarianism

socialism can be achieved only through a totalitarian dictatorship

theocratic totalitarianism

monopolized by a party, group or individual that governs according to religious principles

pseudo democracies

lie between pure democracies and complete totalitarianism systems

market economy

all productive activities are privately owned, production is determined by the interaction of supply and demand, role of government is to encourage vigorous free and fair competition

command economy

government plans the goods and services, quantity and price, then allocates them for “the good of society”, all businesses are state owned, no incentive for individuals to look for better ways to serve consumer needs

mixed economy

some sectors are privately owned and some are government owned, government may aid troubled firms whose operations are vital to national interests

legal systems

rules or laws that regulate behavior, process through which laws are enforced, process through which redress for grievances is obtained, legal system is influenced by the prevailing political system

common law

based on tradition, precedent and custom

civil law

based on detailed laws organized into codes

theocratic law

based on religious teachings

contract law

specifies conditions under which an exchange is to occur and details the rights and obligations of parties involved, contracts are very detailed with all contingencies spelled out

civil law

contracts tend to be much shorter and less specific

contracts for the international sale of goods (CISG)

establishes a uniform set of rules governing certain aspects of the making and performance of everyday commercial contracts between sellers and buyers who have their places of business in different nations

property

a resource that an individual or business holds a legal title

property rights

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 and blackmail by private individuals or groups

public action and corruption

public officials extort income, resources or property

can be done legally

levying excessive taxation, requiring licenses or permits from property holders

can be done illegally

corruption demanding bribes

intellectual property

property that is the product of intellectual activity such as computer software a screenplay and a music score

patent

inventors exclusive rights for a defined period

copyright

exclusive legal rights of authors composers playwrights artists and publishes

trademarks

officially registered designs and names used to differentiate products

world intellectual property organization

international organization whose members sign treaties to protect intellectual property

product liability

involves holding a firm and its officers responsible when a product causes injury death or damage

GDP measures

total value of goods/services produced within a country

PPP adjusts GDP to

compare living standards

GDP and PPP are

Static

Amartya Sen argues development requires removing

poverty, tyranny, deprivation, poor opportunities

HDI includes

life expectancy, education, income

weak property rights reduce

innovation

totalitarian states

limit freedom and suppress development

economic growth often leads to

democracy

nations investing in education experience

higher growth

larger populations increase

innovation

since 2005 many nations have shifted toward

authoritarianism

a market based shift requires

deregulation, privatization, legal systems

deregulation involves

removing legal restrictions on markets

privatization transfers

state property to private individuals

overall attractiveness of a country depends on

benefits, costs and risks

cross cultural literacy is

understanding how cultural differences affect business

culture is

a system of shared values and norms

values are

ideas about what is good right and desirable

norms are

social rules for appropriate behavior

moores have

high moral significance

nation states are

political creations

companies should group countries by

cultural aligned business regions

western societies emphasize

individual achievement

social strata are based on

family background occupation income

a caste system is

closed

the most widely spoken language in the world is

english

english is becoming the language of

international business

hofstedes dimensions include

power distance individualism uncertainty avoidance masculinity long term orientation

hofstedes research was criticized because

it focused on a single industry

culture changes over time shown by

women in management becoming accepted

business ethics are

principles of right/ wrong for businesspeople

an ethical dilemma occurs when

no option is fully acceptable

ethical norms may be

different across countries

tragedy of the commons occurs when

shared resources are overused

global tragedy of the commons occurs when firms

move production to countries with lax environmental rules

there is no universal agreement on

ethical principles

determinants of ethical behavior include

personal ethics decision making organizational culture unrealistic goals leadership societal cultural