International Business Exam 1

Globalization

• Definition: Globalization is the process of increasing interconnectedness and interdependence among countries, economies, and cultures.

• Benefits: Increased economic growth, access to new markets, cultural exchange, and technological advancements.

• Challenges: Income inequality, loss of jobs in certain sectors, cultural homogenization, and environmental degradation.

• Examples: Multinational corporations, global supply chains, international organizations (e.g., World Trade Organization), and global communication networks.

• Criticisms: Exploitation of labor, erosion of national sovereignty, and unequal distribution of benefits.

• Future trends: Continued integration of economies, rise of digital globalization, and increased focus on sustainability.

One advancement that has lowered the barriers many small firms face when building international sales is

The Internet

What is implied by the fact that in today’s marketplace, the volume of world trade has been growing faster than world GDP?

The economies of the world’s nation-states are becoming more intertwined.

The Uruguay Round extended GATT to cover services as well as manufactured goods.

True

Moore's law helps determine the most appropriate transportation method for a produced good.

False

Ivory Piano is headquartered in Michigan and has production plants in Mexico and Indonesia. Ivory Piano is an example of

A multinational enterprise.

Which statement reflects the changing demographics of the global economy?

U.S. dominance in export markets has waned as Japan, Germany, and a number of newly industrialized countries have taken a larger share of world exports.

UN-sponsored talks concerning the reduction of carbon dioxide emissions has resulted in

Little success in achieving goals for reducing carbon emissions.

Which of these companies is taking advantage of the globalization of production?

Seamless Fabrics, an American textile manufacturer, buys fabric from France and exports it to India for garment production.

Countries that receive loans from the IMF are required to

Adopt specific economic policies to attain stabilization.

As a result of globalization, international businesses can avoid the haggle of currency exchanges during cross-border transactions.

False

When compared to the past, the gap between rich and poor nations today has

Gotten bigger.

Which religion was founded in the sixth century B.C. by Siddhartha Gautama, who renounced his wealth to pursue an ascetic lifestyle and spiritual perfection?

Buddhism

When a Murabaha contract is used in Islamic banking, a company essentially pays the bank to purchase equipment, supplies, and other needs on behalf of the company.

True

An Asian country has seen a shift from a universal following of traditional values to a society in which the younger generation is adopting more Western values and methods of conducting business. This is known as the adaptation hypothesis.

True

A country emphasizes individual performance and achievements in every sphere of society. How might this affect the business environment in this country?

The employees in this country may lack loyalty and commitment to a company.

When a visiting member to Dalia’s book club started repeating conspiracy theories about the book’s author without any proof, the members of the club redirected the discussion and told her that wasn’t fair to the author, who wasn’t there to defend herself. This demonstrates the book club’s

Values

Hofstede’s research has been criticized as

Being culturally bound.

A woman recently quit her job in a bank because her religion considers the payment or receipt of interest as exploitative and unjust. According to this information, she is a follower of

Islam

A Mudarabah contract might be categorized as a(n) __________ in the United States.

Profit-sharing scheme

Confucianism is not concerned with the supernatural and has little to say about the concept of a supreme being or an afterlife.

True

Hofstede added a fifth dimension to his study on how culture relates to values in the workplace known as long-term versus short-term orientation, which was inspired by

Confucianism

Children tend to become a member of the social category to which their parents belong.

True

According to Islamic beliefs, private property is considered

A favor from Allah.

Which of Hofstede's dimensions focused on how a society deals with the fact that people are unequal in physical and intellectual capabilities?

Power distance

Confucianism is based on the idea that personal salvation can be achieved through

Right action

In a society, actions of people directed toward one another are governed by a set of social rules called

Norms

What world event ended the "first age of globalization"?

WW1

What is one example from the video that exemplifies the boom of the U.S. economy in the 1920s?

The stock market

What are the two main contradicting ideas presented in the "Commanding Heights" video?

Command Economy vs. Market Economy

In the video, what is defined as the "Commanding Heights" of the economy?

Steel, railroads, coal, and other heavy industries.

A composer can protect an original musical score from being copied and sold by someone else by acquiring a(n)

Copyright

Plato equated collectivism with equality.

False

A political system that promotes activity “for the good of society” is based on

Collectivism

All of the books in a library have a __________, which shows the exclusive legal rights of the author of the book.

Copyright

Theocratic law systems are based on

Religious teachings

In a totalitarian country, all the constitutional guarantees on which representative democracies are built—an individual's right to freedom of expression and organization, a free media, and regular elections—are denied to the citizens.

True

Right-wing totalitarianism restricts political freedom to inhibit the rise of

Communism

A textbook author would apply for a trademark to obtain the exclusive legal rights associated with their written piece.

False

Which of these items can be protected by a copyright?

Music composed by a composer

The distinctive Nike logo can only be used on sports equipment produced by Nike. What protects the Nike logo from being used by another manufacturer?

Trademark

Two facets of globalization

• Globalization of markets

• Globalization of production

Globalization of Markets

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

• In many markets, tastes and preferences of consumers in different nations are converging on some global norm, creating a global market.

Globalization of Production

• 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 (labor, energy, land, and capital).

• Lower overall cost structure

Impediments to globalization:

• Formal and informal trade barriers.

• Barriers to foreign direct investment.

• Transportation costs.

• Economic and political risk.

• Managerial challenge for coordinating a globally dispersed supply chain.

Global Institutions:

• Manage, regulate, and police the global marketplace.

• Promote the establishment of
  multinational treaties to govern the global business system.

• Created by voluntary agreement between individual nation-states.

World Trade Organization(WTO)

• Polices world trading system and ensures nation-states adhere to the rules established in WTO treaties.

• 164 member nations accounted for 98 percent of world trade (2020).

World Bank

• Promotes development using low-interest loans.

• Seen as less controversial than IMF.

United Nations (UN)

Committed to maintaining international peace and security on basis of UN Charter:
•Develops friendly relations among nations.
• Promotes cooperation in solving international problems.
• Promotes respect for human rights.
• A center for harmonizing the actions of nations.
• Includes 193 member countries.

Group of Twenty (G20)

Comprised of finance ministers and central bank governors of the 19 largest world economies plus the EU and European Central Bank.
• Represents 90 percent of global GDP.
• Became a forum for a coordinated policy response to the financial crisis of 2008 and 2009.

Two Macro Factors Toward Greater Globalization

1. Decline in barriers to free flow of goods, services, and capital.
2. Technological change.

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.

Role of Technological Change

• Communications

• Moore’s Law

• The Internet

• Transportation Technology

Ethnocentrism

• Judging other people’s behavior by one’s own values.

• Ethnocentrism is the view of things in which one’s own group is the center of everything, and all others are scaled and rated with reference to it.

Cultural relativism

• Suggests that the only way to understand the behavior of others is in the context of their cultures.

• Behaviors must be understood relative to the cultural background of which they arise.

Cross-cultural literacy

An understanding of how cultural differences across and within nations can affect the way in which is practiced.

Culture

A learned set of shared interpretations about beliefs, values, norms, and social practices, which affect behaviors of a relatively large of people.

Values

Are the commonly held standards of what is acceptable or unacceptable, important or unimportant, right or wrong, workable or unworkable, etc., in a community or society.

Norms

Are the social rules that govern the actions of people toward one another.

Folkways

The routine conventions of everyday life.

Mores

Norms that are seen as central to the functioning of a society and to its social life.

Nation

A political term referring to a government and a set of formal and legal mechanisms that regulate the political behavior of its people.

Subculture

Is used to refer to racial and ethnic minorities groups that share both a common nation with other cultures and some aspects of the larger culture.

Ethnicity

Used to refer to a wide variety of groups who might share a language, historical origins, religion, national-state, or cultural system.

Determinants of Culture

Religion, social structure, language, education, economic & political philosophy

Social structure

A society’s basic social organization.

Social stratification

All societies are stratified on a hierarchical basis into social categories, or social strata.

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.

Two forms of language

• Spoken

• Unspoken: nonverbal cues

Hofstede’s cultural dimensions

• Power Distance: The extent to which less powerful members of a society accept and expect power to be distributed unequally.

• Individualism vs. Collectivism: The degree to which individuals prioritize their own interests over the interests of the group.

• Masculinity vs. Femininity: The extent to which a society values assertiveness, achievement, and material success versus nurturing, quality of life, and cooperation.

• Uncertainty Avoidance: The level of tolerance for ambiguity and uncertainty within a society.

• Long-term Orientation vs. Short-term Orientation: The extent to which a society values long-term planning, perseverance, and tradition versus short-term results and adaptability.

• Indulgence vs restraint: Extent societies allow relatively free gratification or suppressed gratification.

High-context cultures

Most of the meaning is either implied or assumed.

Low-context cultures

The majority of the information is vested in explicit code.

Collectivism

System that stresses the primacy of
collective goals over individual goals:
• Traced to Greek philosopher Plato
• Society should be stratified into classes
• Property should be owned in common

Socialism

1. Definition: Economic and political system by Karl Marx where the means of production are owned and controlled by the community as a whole.

2. Redistribution of Wealth: Aims to reduce income inequality by redistributing wealth and resources more equitably.

3. Public Ownership: Emphasizes public ownership of industries, utilities, and natural resources.

4. Social Welfare: Focuses on providing social services, such as healthcare, education, and housing, to all members of society.

5. Central Planning: Advocates for central planning to coordinate economic activities and allocate resources.

6. Criticisms: Criticized for potentially stifling innovation, limiting individual freedoms, and creating dependency on the state.

Communists

Socialism could only be achieved though violent revolution and totalitarian dictatorship.

Individualism

Suggests individuals should have freedom over economic and political pursuits:
• Traced to Aristotle, who argued that individual diversity and private ownership is desirable.
• Refined in work of David Hume, Adam Smith, and John Stuart Mill
Individualism stresses:
• Individual freedom and self-expression
• Letting people pursue self-interests to achieve the best overall good for society
• Democratic systems and free markets

Market economy

Goods and services a country produces and the quantity in which they are produced is determined by supply and demand:
• Government encourages free and fair competition between private producers
• Constant incentive to improve products and processes

Commanded economy

Goods and services a country produces, the quantity in which they are produced, and the price at which they are sold are planned by government:
• All businesses are state-owned and have little incentive to control costs and be efficient
• Because there is no private ownership, there is little incentive to better serve consumer needs
• Dynamism and innovation are absent

Mixed economy

Includes some elements of market economies and some elements of command economies.

Legal system

Refers to rules, or laws, that regulate behavior, along with processes by which laws are enforced and through which redress for grievances is obtained:
• Regulate business practice
• Define manner in which business transactions are executed
• Set rights and obligations of those involved in business transactions

Common law

Based on tradition, precedent, and custom

Civil law

Based on detailed set of laws organized into codes

United Nations Convention on Contracts for the International Sales 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 places of business in different nations.

Property rights

Legal rights over use to which a resource is put and overuse made of any income 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.

Foreign Corrupt Practices Act

• Makes it illegal to bribe a foreign government official in order to obtain or maintain business over which the foreign official has authority.

• All publicly traded companies must keep detailed records, so it is clear whether a violation has occurred.

• Facilitating or expediting payments to secure performance of routine government actions are permitted.

Intellectual property

Property that is the product of intellectual activity

Patents

Give 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.

Public safety laws

Set certain safety standards to which a product must adhere.

Product liability

Holds a firm and its officers responsible when a product causes injury, death, or damage.