MARK4700 Test 1

Capital (factor proportions)

Money and means of building infrastructure, man-made goods used to produce other goods, worker’s experience, skills, training, and education

Labor (factor proportions)

employees, infrastructure, machinery

Money vs means

Sometimes financial capital isn’t enough, a country may have the skills and labor force needed. Training and building labor infrastructure takes years and money

Porter’s diamond theory

it argues that a nation’s ability to succeed in global trade edpends on four interconnected determinants within its home country environment. Compeition through resilience of other firms

• Factor conditions

• Demand conditions

• Supporting industries

• Firm structure

Thomas Sowell

specialization is directly connected to knowledge

government try to control through laws, taxes, subsidies, tariffs (sometimes used to block better items to protect internal products)

Overall, knowledge is important and time is limited (knowledge can be exposed, do not settle)

Free trade agreement (levels of economic integration)

Eliminating internal tariffs and quotas on cetain products and services while members keep independent trade policies toward non-members

Custom Union (levels of economic integration)

Common external tariffs

Common market (levels of economic integration)

Free movement of factors of production such as labor, services, capital

Economic Union

free movement of labor, services, capital and fiscal (taxes on gas)

Monetary Union

Same currency, same politics (same constitution)

Power distance index (PDI) Hofstede

Importance of power, authority, and hierarchy for culture

Uncerstainty avoidance index (UAI) Hofstede

how okay you are about uncertainty (like or dislike surprised)

Masculinity vs feminity (MAS) Hofstede

Fastest, best, pushy vs don’t have to be best

Individualism vs collectivism (IDV) Hofstede

Emphasis I vs We

Long term orientation (LTO) Hofstede

Long term wants to plan ahead vs day of

Indulgence vs restraint (IVR) Hofstede

enjoy pleasure for sake of enjoyment vs limit because damages others

Low vs high context (Hall)

Low (words matter) v high (behavior matters)

Monochronic vs polychronic time (Hall)

Monochronic (focus 100%) vs polychronic (multitasking)

Berry’s acculturation

When visiting will you keep your heritage (Yes/No)

When visiting will you adopt cultural behaviors (Yes/No)

Integration (bicultural): Keep heritage, adopt host

Marginalization (Sect, cult): doesn’t adopt host, doesn’t keep heritage

Assimilation: adopt host, does not keep heritage

Separation: keeps heritage, does not adopt host

Economic systems

ownership of means

Social (socialism, owned collectively by society)

Private (capitalism, privately owned by individuals or corp)

Allocation mechanism: planning or market
Market: person with capital gests break or materials for bread

Planning: we determine how much bread consumer gets (everyone gets access). Uses quotas

Social ownership v planning: socialist planned economy

Social ownership v markets: market socialism or informal/shadow economy

Private ownership v planning: state capitalism

Private ownership v market: Dirigisme/”command capitalism” or platform capitalism

Platform economy (different country)

digital infrastructure, rule, and marketplace that allow independent parties to transact. Between producer and customer. Regulated by gov world-wide

Shadow economy

outside of government and product but interact with consumer. Don’t pay fees, taxes. Boosts income because it allows total consumption. Helps economy. Hidden from authorities (cash in hand) (60-80%)

Political stability

determines path, health, behavior of country

Policy changes- when power distance is important and uncertainty avoidance is lesser

Civil unrest- resolution of policy changes causing transition of private assets to public. Gov must be prepared. Balance basic needs, shocks, friction, economic crackdown

Expropriation (political stability)

gov takes ownership of investment, factory, bank account (assets) and gives something in return but never true value

Confiscation (Political stability)

Takes assets but nothing in return. Unannounced

Nationalization (political stability)

subtle. takes 10% then asks 40%, eventuall 100%. Gov takes assets through equity injection (stock purchases or capital restructuring)

Common (faster, subjective)-Legal risks

precedent become law and law becomes precedent

Civil/code (slow demanding)-Legal risks

Used by majority of world. Written rules that are detailed. Every code is a law. Judge will analyze case and match with code. Judge may add new line to code after specific case to create new law or make law more specific

Sharia (subjective)-Legal risks

Where there is a theocracy. Sacred scripture for law. Ruler is connected to religion. They charge fee, not interest. Interpretations of scriptures

Mixed (C+C)-Legal risks

Used by Lousiana in States. Mixture of common and civil law

Exchange rate-Financial risks

will you price out of market because of exchange rate? Find a middle currency that makes trade fair? Exchange in suppliers country or exchange in buyers location? Depends who benefits. Price of one currency expressed in terms another. Constantly changes because of interest rates, inflation, trade balance, stability

Pricing adjustments-Financial risks

Deliberate change in selling price for market conditions, operation costs, inventory levels, deal valuations

Corruption & Bribes-Financial risks

“Corruption isnt bad, if im a part of the ccorruption, I would defend it”- only bad if not a part. Corruption is very common. Levels of enforcement of laws determine price of bribe.