IB 320F/350F Exam 1 (ch. 1-5)

Naive 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

Righteous Moralist

Claims that a multinational’s home country standards of ethics are the appropriate ones for companies to follow in foreign countries

Cultural Relatavism

• Belief that ethics are nothing more than the reflection of a culture

• All ethics are culturally determined-

• And that accordingly a firm should adopt the ethics of culture in which it is opening

Friedman doctrine

• Milton Friedman, New York Times, 1970

• Social responsibility of business is to increase profits so as the company strays within the rules of the law

Straw Men

Inappropriate guidelines for ethical decision-making in a multinational enterprise

• Four approaches to business ethics are commonly discussed:

  • Friedman doctrine

  • cultural relativism

  • righteous moralist

  • naive immoralist

Ethical Dilemmas

Situations in which none of the available alternatives seems ethically acceptable

Global Tragedy of the Commons

Economic problem where the individual consumes a resource at the expense of society

Ethical strategy

A strategy or course of action that does not violate these accepted principles

Business ethics

The accepted principles of right or wrong governing the conduct of business people

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

Cultural Avoidance

Problems don’t exist

Cultural Compromise

• lose-lose

Cultural Synergy

• Ideal situation

• win-win

• Both have something of value and committed to

Long-term versus Short-term orientation

Refers to the extent to which a culture programs its citizens to accept delayed gratification of their material, social, and emotional needs

Masculinity versus femininity

Relationship between gender and work roles

• masculine: differentiated gender roles

• Feminine: less distinguished gender roles

Uncertainty Avoidance

Measured the extent to which different cultures socialized their members into accepting ambiguous situations and tolerating uncertainty

• High: rules and regulations, job security, career patterns, retirement benefits

• Low: readiness to take risks and less emotional resistance to change

Individuals versus Collectivism

Focused on the relationship between the individual and his or her fellows

• Individualistic: individual achievement and freedom

• Collectivist: tight ties between individuals

Power Distance

Focused on how a society deals with the fact that people are unequal in physical and intellectual capabilities

• High: strict, elders, superiors

• Low: Egalitarian

Geert Hoftstede

• leading expert on cross-cultural differences and management

• linked national culture to behavioral differences at IBM

• country profiles

• created 5 dimensions: power distance, uncertainty avoidance, individualism vs collectivism, and masculinity versus femininity, long-term vs short term

Edward Hall

• created first cultural frameworks for business

• introduced cultural dimensions

Society

A group of people sharing common set of values and norms

Norms

Social Rules and Guidelines that prescribe appropriate behavior in particular situations

Values

Ideas about what a group believes to be good, right, and desirable

• shared assumptions

Culture

A system of values and norms that are shared among a group of people

Organization for Economic Co-Operation and Development (OECD)

• Extension of FCPA

• 34 largest major economies adopted the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions

Grease Payment

A payment made to speed up a process that was already going to be completed

Slush Funds

• large accounts with no record of imbursement

• sum of money to be used as block fund

Indirect payments

Payments made through a foreign agent (plausible deniability)

Foreign Corrupt Practices Act (FCPA)

• 1977

• Nothing existed before it

• illegal to bribe foreign officials/political parties (direct/indirect)

International Institute for Harmonization of Private Law (UNIDROIT)

• Quasi Governmental

• identify differences in law and develop guidelines

United Nations Convention on Contracts for the International Sale

• set rules for buying and selling goods abroad

• not binding

Contract law

Body of law that governs contract enforcement

Theocratic law

law based on religious teaching

Common Law

• Tradition, precedent, and custom

• flexible

• elaborate contracts

• power of courts/lawyers

• greater litigation

Legal System

The rules, or laws, that regulate behavior along with the processes by which laws are enforced

Civil law

Based on a detailed set of laws organized into code

• low ambiguity

• fewer disputes

• limited contracts

• more bureaucracy

• more equal power

Mixed Economy

Found between market and command economies

Command Economy

• Government plans the goods and services the country produces

• “good of society”

Market economy

• All productive activities are privately owned

• supply/demand

Right-wing totalitarianism

Permits some individual economic freedom but restricts individual political freedom

Tribal totalitarianism

A political party that represents the interests of a particular tribe

Theocratic totalitariansm

God rules through representatives

Communist totalitarianism

• most widespread until recently

• the people rule though a group

Totalitarianism

A form of government in which one person or political party exercises absolute control

Democracy

A political system where government is by the people through representatives

Individualism

An individual should have freedom in his or her economic and political pursuits

Social democracy

Achieving socialism by democratic means

Communism

Socialism could be achieved only though violent revolution and totalitarian dictatorship

Socialism

• Karl Marx (few benefit at the expense of the many in capitalism

• Goal: Manage state-owned enterprise to benefit society as a whole, rather than individual capitalists

Collectivism

A political system that stresses the primacy of collective goals over individual goals

• good of society

• the common good

Political Systems

System of government in a nation

Foreign Direct Investment

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

• Trade came before

• WTO led to Growth

Political Economy

Political, economic, and legal systems of a country are interdependent

International Trade

Occurs when a firm exports goods or services

Historical Patterns in Trade

• 1950-58

  • robust growth

• 1984- 88

  • Trade increases 3x than GDP

• 2001

  • 9/11

  • economic shake up = fear

  • dot com bubble

    • inflated until pop

• 2008

  • global financial crisis

• 2009

  • global GDP contracted for developed and developing

• 2012

  • EU problems

  • BRIC weakend

Group of Twenty (G20)

Established in 1999, comprises the finance ministers and central bank governors of the 19 largest economies in the world

United Nations

• Established October 24, 1945 by 51 countries committed to preserving peace through international cooperation and collective security

Standardization and Automation

• Get to market as soon as possible.

• 3 modes of travel: air, land, sea

World Bank

• Less Controversial

• focused on making low-interest loans to cash-strapped governments in poor nations to undertake significant infrastructure investments

International Monetary Fund

• Maintain order in the international monetary system

• Easier job of giving money

  • Loans require nation-states to adopt economic policies set by WTO

  • usurp soverignty of nation states

International Monetary Fund and the World Bank

• Created in 1944 by 44 nations that met at Bretton Woods, NH

• Twins

World Trade Organization

• successor to GATT

• created for dispute settlement system

  • hold accountable

• 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

Uruguay Round

• most recent GATT negotiations that were finalized in December 1993

• reduced trade barriers

• extended GATT to cover services and manufactured goods

• provided enhanced protection for patents, trademarks, and copyrights

• established World Trade Organization

General Agreement on Tariffs and Trade (GATT)

• 1940s

• Goal: reduce barriers to the free flow of goods, services, and capital among nations

• lasted 50 years

Factors of Production

Labor, Energy, Land, and Capital

Globalization of Production

Sourcing of goods and services from locations around the globe to take advantage of national differences

Globalization of Markets

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