GLOBAL BUSINESS FINAL EXAM

Globalization

refers to the trend towards a more integrated and interdependent world economy

EVERYTHING moves - products, labor, capital, technology, information, cultural memes, etc.

Drivers of globalization

-Decline in barriers to free flow of goods, services, and capital

-Technological change

MNC (multi national corporation)

has facilities and other assets in at least one country other than its home country. Such companies have offices and/or factories in different countries and usually have a centralized head office where they coordinate global management.

MNE (multi national enterprise)

any business that has productive activities in two or more countries

Mini-multinationals

small and medium sized companies that do business outside their country. The rise of internet is lowering the barriers that small firms face in building international sales.

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

-Improve the quality or functionality of the product to compete more effectively

Globalization of markets

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

In many markets today, the tastes and preferences of consumers in different nations are converging upon some global norm

Supra-national organization

An organization that exists in multiple countries. While, theoretically, the term could refer to multinational corporations, the term most often describes an international government or quasi-government organization. Examples include the United Nations and the International Monetary Fund.

foreign direct investment

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

WTO (world trade organization)

primarily responsible for policing the world trading system and making sure nation-states adhere to the rules laid down in trade treaties signed by member states.

GATT (General Agreement on Tariffs and Trade)

successor to the WTO, the IMF, and its sister institution, the World Bank, and the United Nations. All these institutions were created by voluntary agreement between the individual nation states, and their functions are enshrined in international treaties.

IMF (international money fund)

-Promotes order in the international monetary system

-Lender of last resort

NATO (North Atlantic Treaty Organization)

an intergovernmental military alliance between several North American and European countries

Moore's law

predicts the power of microprocessor technology doubles and its cost of productions falls in half every 18 months. As this happens, the cost of global communication plummets, lowering the cost of coordinating and controlling a global organization

Factors of Production

labor energy, land, and capital

CQ

the capability to relate and work effectively in culturally diverse situations.

World Bank

Promotes economic development using low-interest loans

ISO (international organization for standardization)

an international standard-setting body composed of representatives from various national standards organizations. Ensures that products and services are safe, reliable and of good quality. For business, they are strategic tools that reduce costs by minimizing waste and errors and increasing productivity.

International Business

-any firm that engaged in international trade or investment

-Managing international business differs from managing purely domestic business

-International business must vary its practices country by country

International business issues greater in complexity

-Need to understand rules governing international trade and investment

Group of 20

Finance ministers and central bank governors of 19 largest world economies

Represents 90% of global BDP

A forum for a coordinated policy response to the financial crisis of 2008-2009

global institutions

Manage, regulate, and police the global market place

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

political economy

stresses that the political, economic, and legal systems of a country are interdependent, they interact with an influence each other, and in doing so, they affect the level of economic well being.

political system

the system of government within a nation. First degree is collectivism vs individualism. Second degree is democratic or totalitarisn

collectivism

a system that stresses the primacy of collective goals over individual goals

individualism

-suggests individuals should have freedom over their economic and political pursuits

-Can be traced to Aristotle who argued that individual diversity and private ownership are desirable

socialism

Modern socialists trace their roots to Karl Marx

Advocated state ownership of the basic means of production, distribution, and exchange

The state then manages the enterprises for the benefit of society as a whole

communists

socialism could only be achieved though revolution and totalitarian dictatorship

social democracy

committed to achieving socialism by democratic means, turning their backs on violent revolution and dictatorship

privatization

the purchase of all outstanding shares of a publicly traded company by private investors, or the sale of a state-owned enterprise to private investors.

democracy

political system in which government is by the people, exercised either directly or through elected representatives

totalitarianism

form of government in which one person or political party exercises absolute control over all spheres of human life, and opposing political parties are prohibited

communist totalitariatism

advocates achieving socialism through totalitarian dictatorship (China, Vietnam, Laos)

theocratic totalitarianism

political power is monopolized by a party, group, or individual that governs according to religious principles (Iran, Saudi Arabia, Afghanistan)

tribal totalitarianism

a political party that represents the interests of a particular tribe monopolizes power (Zimbabwe, Tanzania, Uganda, Kenya)

right wing totalitarianism

individual economic freedom is allowed but individual political freedom is restricted in the belief that it could lead to communism (Hitler and Mussolini)

market economy

the goods and services that a country produces, and the quantity in which they are produced is determined by supply and demand

command economy

the goods and services that a country produces, the quantity in which they are produced, and the price at which they are sold are all planned by the government

mixed economy

-includes some elements of a market economy and some elements of a command economy

-The government controls or partially controls many goods or services, such as education, courts, roads, hospital care, and postal delivery. It also provides subsidies to agricultural producers, oil companies, financial companies, and utility firms.

legal system

refers to the rules, or laws, that regulate behavior, along with the processes by which the laws of a country are enforced and through which redress for grievances is obtained

-Regulate business practice

-Define the manner in which business transactions are to be executed

Set down the rights and obligations of those involved in business transactions

common law

-based on tradition, precedent, and custom

-Found in most of Great Britain's former colonies, including the United States

civil law

based on detailed set of laws organized into codes

theocratic law system

based on religious teachings

contract

specifies the conditions under which an exchange is to occur and details the rights and obligations of the parties involved

contract law

the body of law that governs contract enforcement

CISG (United Nations Convention on Contracts for the International Sales of Goods)

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 rights

the 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

FCPA (Foreign Corrupt Practices Act)

-limits corruption in the U.S

-It is 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 that it is clear whether a violation of the act has occurred

-Facilitating or expediting payments to secure the performance of routine government actions are permitted

intellectual property

property that is the product of intellectual activity

(patents, copyrights, trademarks)

Kim Jong Un

the supreme leader of North Korea since 2011

private action

theft, piracy, blackmail, and the like by private individuals or groups

public action

public officials extort income or resources from property holders

product safety laws

set certain safety standards to which a product must adhere

product liability

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

gross national income

value of all final goods and services produced in the country in a year.

PPP (purchasing power parity)

adjustment provides a more direct comparison of living standards in different countries

HDI (human development index)

based on life expectancy, education attainment, and whether average incomes are sufficient to meet the basic needs of life in a country

Innovation

new products, new processes, new organizations, new management practices, and new strategies

Entrepreneurs

first commercialize innovative new products and processes

deregulation

Removing legal restrictions to the free play of markets

Establishment of private enterprises

Removing price controls

first mover advantages

advantages that accrue to early entrants into a market

late mover disadvantages

handicaps that late entrants might suffer

political risk

the likelihood that political forces will cause drastic changes in a country's business environment that adversely affects the profit and other goals of a business enterprise

economic risk

the likelihood that economic mismanagement will cause drastic changes in a country's business environment that adversely affects the profit and other goals of a business enterprise

legal risk

the likelihood that a trading partner will opportunistically break a contract or expropriate property rights

IQ-EQ-CQ

intellignet quotient, emotional quotient, curiosity quotient

cross cultural literacy

an understanding of how cultural differences across and within nations can affect the way business is practiced

culture

a system of values and norms that are shared among a group of people and that when taken together constitute a design for living

values

abstract ideas about what a group believes to be good, right, and desireable

morals

a person's standards of behavior or beliefs concerning what is and is not acceptable for them to do.

norms

the social rules and guidelines that prescribe the appropriate behavior in particular situations

society

a group of people sharing a common set of values and norms

folkways

routing conventions of everyday life . Generally, actions of little moral significance. Such as appropriate dress code, eating with the correct utensils, neighborly behavior, etc..

mores

refers to norms that are more widely observed, have greater moral significances than other norms, and are central to the functioning of a society and its social life. Violating these can bring serious retribution. Examples include theft, adultery, incest, etc...

social structure

basic social organization, and this social organization is both emergent from and determinant of the behaviors of individuals. Two basic dimensions: individual to the group and the degree to which a society is stratified into classes or castes.

group

an association of two or more individuals who have a shared sense of identity and who interact with each other in structured ways on the basis of a common set of expectations about each other's behavior.

sub culture

a cultural group within a larger culture, often having beliefs or interests at variance with those of the larger culture.

cultural diffusion

the spread of cultural beliefs and social activities from one group of people to another. ... The mixing of world cultures through different ethnicities, religions, and nationalities has only increased with advanced communication, transportation, and technology.

supra national culture

largest level of culture that the globe shares ?

social strata

all societies are split on a hierarchical basis into social categories. These levels are typically defined on the basis of socioeconomic characteristics such as family background, occupation, or income

social mobility

the extent to which individuals can move out of the strata to which they are born

caste system

closed system of stratification in which social position is determined by the family into which a person is born, and change in that position is usually not possible during an individual's lifetime

class system

a less rigid form of social stratification in which social mobility is possible

class consciousness

the condition by which people tend to perceive themselves in terms of their class background and this shapes their relationships with the members of other classes

Religion (5 major ones)

A system of shared beliefs and rituals that are concerned with the realm of the sacred. (christianity, islam, hinduism buddhism, confuscianism not technically a religion)

ethical system

a set of moral principles, or values, that are used to guide and shape behavior

power distance

dimension focused on how a society deals with the fact that people are unequal in physical and intellectual capabilities. Lower power distance means that societies tried to play down such inequalities.

individualism vs collectivism

dimension focused on the relationship between the individual and his or her fellows.

uncertainty avoidance

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

masculinity vs femininity

looks at the relationship between gender and work roles. Sex roles can be sharply differentiated.

long term vs. 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. It captures attitudes toward time, persistence, ordering by status, protection of face, respect for tradition, and reciprocation of gifts and favors.

ethnocentrism

belief in the superiority of one's own ethnic group or culture.

United Nations

Maintains international peace and security

Develops friendly relations among nations

193 member countries

Promotes respect for human rights

Is a center for harmonizing the actions of nations

Ethics

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

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

ethical strategy

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

Leon Sullivan

-baptist pastor and civil rights leader who was appointed to the board of directors of GM

Leon Sullivan's code of conduct

-Non-segregation of the races in all eating, comfort, and work facilities.

-Equal and fair employment practices for all employees.

-Equal pay for equal work.

-Training programs to prepare blacks and other nonwhites for supervisory, administrative, clerical, and technical jobs.

-Increase the number of blacks and other nonwhites in management and supervisory positions.

-Improve the quality of life for blacks and other nonwhites in such areas as housing, transportation, school, recreation, and health facilities.

-Work to eliminate laws and customs that impede social, economic, and political justice

foreign corrupt practices act

-convention on combating bribery of foreign public officials in international business transactions (facilitating payments/speed money excluded)

-signed by President Jimmy Carter in 1977 after SEC found that 400 US companies had made illegal payments in excess of 300 million to foreign government officials

-makes it unlawful for a US person to make a payment to a foreign official for the purpose of obtaining or retaining business

Milton Friedman

-the twentieth century's most prominent advocate of free markets

-an American economist who received the 1976 Nobel Memorial Prize in Economic Sciences for his research on consumption analysis, monetary history and theory, and the complexity of stabilization policy.

Friedman doctrine

the only social responsibility of business is to increase profits, so long as the company stays within the rules of law

-companies should do only what is mandated by law and what is required to run a business efficiently