International Business - Test 2

TRUE

TRUE

Ethical dilemmas are situations in which none of the available alternatives seems ethically acceptable (TRUE OR FALSE)

the act outlawed the paying of bribes to foreign government officials to gain business

Which observation about the Foreign Corrupt Practices Act is true?

speed money

facilitating payments are also known as

TRUE

the Sullivan principles mandated that GM could operate in South America as long as the company did not comply with and promoted the abolition of apartheid laws (TRUE OR FALSE)

FALSE

The Heckscher-Ohlin theory is considered the best predictor of real-world international trade patterns (TRUE OR FALSE)

It is in a country’s best interests to maintain a trade surplus

What is the main principle or mercantilism?

TRUE

According to Paul Samuselson’s critique, a poor country will rapidly improve its productivity if a rich country enters into a free trade agreement with it (TRUE OR FALSE)

TRUE

Adams Smith’s theory of absolute advantage implies that a laissez-faire stance toward trade is in the best interest of a country (TRUE OR FALSE)

Richardo’s theory of comparative advantage

Country A specializes in the production of copper and produces it more efficiently than any other country. It buys wheat, which it produces less efficiently than copper, from Country B, even though it produces what more efficiently than Country B. Which theory of international trade supports Country A’s decision to buy wheat from Country B?

when the firm needs tight control over a foreign entity

In which situation does the internalization theory recommend FDI as opposed to licensing?

internalization theory

Which branch of economic theory seeks to explain why firms often prefer foreign direct investment over licensing as a strategy for entering foreign markets?

TRUE

Offshore production refers to FDI undertaken to serve the home market (TRUE OR FALSE)

TRUE

John Dunning pioneered the electric paradigm (TRUE OR FALSE)

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

are the accepted principles of right or wrong governing the conduct of businesspeople

ethical strategy

is a strategy, or course of action, that does not violate these accepted principles.

 Employment practices

 Human rights

 Environmental regulations

 Corruption

 The moral obligations of multinational companies

The most common ethical issues in business involve:

basic rights

These rights include freedom of speech, assembly, association, movement, and freedom from political repression.

Foreign Corrupt Practices Act (FCPA)

outlawed the practice of paying bribes to foreign government officials in order to gain business, although facilitating payments are still permitted.

Convention on Combating Bribery of Foreign Public Officials in International Business Transactions

obliges member states and other signatories to make the bribery of foreign officials a criminal offense.

Ethical Dilemmas

are situations in which none of the available alternatives seems ethically acceptable.

 Personal ethics

 Decision-making processes

 Organization culture

 Unrealistic performance expectations

 Leadership

 Societal culture

Roots of Unethical Behavior

The causes of unethical behavior are complex and reflect:

organization culture

refers to the values and norms that are shared among employees of an organization.

straw men

are approaches that are raised by business ethics scholars primarily for the purpose of demonstrating that they offer inappropriate guidelines for ethical decision making in a multinational enterprise. Four such approaches are the Friedman doctrine, cultural relativism, the righteous moralist, and the naïve immoralist.

utilitarian approach to ethics

dates back to philosophers such as David Hume, Jeremy Bentham, and John Stuart Mill. . . . . . . . . . . hold that the moral worth of actions or practices is determined by their consequences. An action is judged to be desirable if it leads to the best possible balance of good consequences over bad consequences.

Kantian ethics

is based on the philosophy of Immanuel Kant (1724–1804). Kantian ethics holds that people should be treated as ends and never purely as means to the ends of others.

rights theories

recognize that human beings have fundamental rights and privileges that transcend national boundaries and culture.

just distribution

is one that is considered fair and equitable. There is no one theory of justice, and several theories of justice conflict with each other in important ways. One important and influential theory of justice was set forth by John Rawls who argued that all economic goods and services should be distributed equally except when an unequal distribution would work to everyone’s advantage.

code of ethics

provides a formal statement of ethical priorities.

corporate social responsibility (CSR)

refers to the idea that businesspeople should consider the social consequences of economic actions when making business decisions and that there should be a presumption in favor of decisions that have both good economic and social consequences.

sustainable strategies

we refer to strategies that not only help the multinational firm make good profits, but that also do so without harming the environment while simultaneously ensuring that the corporation acts in a socially responsible manner with regard to its stakeholders.

Free trade

refers to a situation where a government does not attempt to influence through quotas or duties what its citizens can buy from another country or what they can produce and sell to another country.

International trade

allows a country to specialize in the manufacture and export of products that it can produce efficiently and import products that can be produced more efficiently in other countries.

Smith, Ricardo, and Heckscher-Ohlin

who promotes unrestricted free trade?

New trade theory and Porter’s theory of national competitive advantage

justify limited and selective government intervention to support the development of certain export-oriented industries.

Mercantilism

suggests that it is in a country’s best interest to maintain a trade surplus—to export more than it imports, and advocates government intervention to achieve a surplus in the balance of trade.

zero-sum game

one in which a gain by one country results in a loss by another.

absolute advantage

Adam Smith argued that countries differed in their ability to produce goods efficiently, and should specialize in the production of the goods they can produce the most efficiently. Thus, a country has an . . . .

Ricardo’s theory of comparative advantage

suggests that countries should specialize in the production of those goods they produce most efficiently and buy goods that they produce less efficiently from other countries, even if this means buying goods from other countries that they could produce more efficiently at home.

The Heckscher–Ohlin theory

predicts that countries will export those goods that make intensive use of factors of production which are locally abundant, while importing goods that make intensive use of factors that are locally scarce. It focuses on differences in relative factor endowments rather than differences in relative productivity.

The Product-Life Cycle Theory

Raymond Vernon suggested that as products mature, both the location of sales and the optimal production location will change, affecting the direction and flow of imports and exports. Globalization weakens this theory.

New Trade Theory

suggests that because of economies of scale and increasing returns to specialization, in some industries there are likely to be only a few profitable firms. Firms with first-mover advantages will develop economies of scale and create barriers to entry for other firms

first-mover advantages

economic and strategic advantages that accrue to early entrants into an industry

Michael Porter

hypothesizes that a nation's competitiveness depends on the capacity of its industry to innovate and upgrade.

factor endowments

the nation’s relative position in factors of production. They are divided into basic and advanced.

demand conditions

refer to the nature of home demand for the product or service, and influences the development of production capabilities. Sophisticated and demanding customers pressure firms to be competitive.

related and supporting industries

refer to the presence in a nation of supplier industries and related industries that are internationally competitive, and can spill over and contribute to other industries.

firm strategy, structure, and rivalry

refer to the conditions in the nation governing how companies are created, organized, and managed, and how the nature of domestic rivalry impacts firms' competitiveness. Firms that face strong domestic competition will be better able to face competitors from other firms.

location implications, first-mover implications, government policy implications, and the implications

There are at least four main implications of the material discussed in this chapter for international businesses:

Foreign direct investment (FDI)

occurs when a firm invests directly in new facilities to produce and/or market in a foreign country.

oligopolistic industries

industries composed of a limited number of large firms

Location-specific advantages

that arise from using resource endowments or assets that are tied to a particular location and that a firm finds valuable to combine with its own unique assets.

Externalities

knowledge spillovers that occur when companies in the same industry locate in the same area.

The Radical View

argues that the MNE is an instrument of imperialist domination and a tool for exploiting host countries to the exclusive benefit of their capitalist-imperialist home countries.

The Free Market View

According to the . . . . . . . , international production should be distributed among countries according to the theory of comparative advantage.

Pragmatic Nationalism

suggests that FDI has both benefits, such as inflows of capital, technology, skills and jobs, and costs, such as repatriation of profits to the home country and a negative balance of payments effect.

resource transfer effects; employment effects; balance of payments effects, and effects on competition and

growth.

There are four main benefits of inward FDI for host countries: