Studied by 2 peoplecr: allie_rodusky32
globalization of markets
merging of historically distinct and separate national markets into one huge global marketplace
globalization of production
sourcing of goods and services from locations around the globe to take advantage of national differences in cost and quality of factors of production
- hope to lower overall cost structure/improve quality or functioning of product offering
World Trade Organization (WTO)
policing the world trading system and making sure nation-states adhere to rules laid down in treaties signed by the WTO states
- facilitating the establishment of multinational agreements among WTO states
International Monetary Fund (IMF)
maintain order in international monetary system, seen as lender of last-resort to nation-states who are in economic turmoil and currencies are losing value
World Bank
set up to promote economic development, focused on making low-interest loans to cash-strapped governments in poor nations that want to invest in infrastructure
United Nations (UN)
promote peace, security, cooperation
- maintain international peace and security
- develop friendly relations among nations
- cooperate in solving international problems and in promoting respect for human rights
- be a center for harmonizing actions of nations
- promoting high standards of living, full employment, conditions of economic and social progress/development
Group of Twenty (G20)
finance ministers and central bank governors of 19 largest economies in the world and representatives from the EU and European Central Bank
- coordinated response to financial crises in developing nations
foreign direct investment
when a firm invests in resources in business activities outside its home country
facilitator of international trade
- lowering barriers to international trade, investment
- increased number of trade agreements
world trade increasing faster than GDP
- dispersing production process to different locations
- economies more intertwined, becoming dependent on each other
- world has become wealthier
role of technological change
communications, internet, transportation technology
implications for globalization of markets
- low-cost global communication networks creating electronic global marketplaces
- more economical to ship around the world
- mass movement of people between countries reduces cultural distances
implications for globalization of production
- more economical to send products to different geographic locations
- costs of information processing and communication have fallen
consequences of changes in FDI
- invest more outside our home country
- growth in cross-border flows of FDI
- increasing importance of developing nations as a destination of FDI
multinational enterprise
any business that has productive activities in two or more countries
antiglobalization protests
- protest job loss, wage rates, etc.
- negative impact on living standards, wages, environment
- loss of time and distance
globalization, jobs and income
- concern that international trade ruined jobs in wealthy economics and causing increased unemployment rates with lower standards of living in their home country
- can be refuted because benefits outweigh the costs
globalization, labor policies and the environment
- argue that following labor and environmental regulations will increase the cost of manufacturing enterprises
- by improving economic wealth, will strengthen environmental and labor laws and decrease pollution
economic stagnation
- usually totalitarian government
- economic policies destroyed wealth instead of creating it
- little protection for property rights
- endemic corruption
- prolonged civil war
- debt burdens leave little left to invest in other important projects
debt relief movement
- allows chance to restructure economies
- relief must be matched by investment in public projects that boost economic growth and adoption of economic policies that facilitate investment and trade
- rich nations can reduce barriers to importation of products from poor nations so the poor nations can export more agricultural production
international business differences
- countries are different
- range of problems that are more complex
- find ways to work within the limits imposed by government intervention in international trade and investments
- international transactions involves converting currencies
collectivism
collective goals over individual goals
- needs of a society more important
socialism
public ownership of means of production for common good of society
- if state owned the means of production, state could ensure that workers were fully compensated for their labor
communism
socialism only achieved only through violent revolution and totalitarian dictatorship
social democrats
achieving socialism by democratic means
individualism
individual should have freedom in their own economic and political pursuits
- interests of individual over collective good
- emphasis on importance of guaranteeing individual freedom and self-expression
- welfare of society is best served by letting people pursue own economic self-interest
democracy
a political system in which government is by the people
totalitarianism
one person or party exercises complete control over all aspects of life and prohibits opposing parties
- all constitutional guarantees that representative democracy has are denied
- political repression, no free/fair elections, censored media, no basic civil liberties, unable to question rulers
communist totalitarianism
version of collectivism advocating that socialism can be achieved only through totalitarian dictatorship
theocratic totalitarianism
political power monopolized by a party, group or individual that governs according to religious principles
- Islamic states limiting freedom of political and religious expression with laws based on Islamic principles
tribal totalitarianism
party, group or individual that represents the interests of a certain tribe monopolizes political power
- politicians from a certain tribe dominating political system in Kenya
right-wing totalitarianism
political power monopolized by a party, group or individual that permits economic freedom but restricts individual political freedom on the grounds that it would lead to communism
- usually backed by military
pseudo-democracies
nations between pure democracies and complete totalitarian systems
- authoritarian elements captured some/all of machinery of state and use it in an attempt to deny basic political and civil liberties
market economy
all productive activities are privately owned
- production determined by interaction of supply and demand
- supply cannot be restricted
- government to encourage free and fair competition between private producers (ban restrictive business practices designed to monopolize a market)
command economy
government plans goods and services produced, quantity and prices
- collectivist, for good of society
- all businesses are state-owned so government can direct them
- intent to mobilize economic resources for public good but has had opposite effect
- state-owned enterprises have little incentive to control costs and be efficient because they cannot go out of business
- no dynamism and innovation
mixed economy
certain parts are left to private ownership and free market mechanisms while others have state ownership and government planning
- governments tend to take in firms whose operation is vital to national interests
- US government prefers market-oriented solutions to economic problems
legal system
rules that regulate behavior along with the processes by which they are enforced
common law
based on tradition, precedent and custom
- tradition is legal history
- precedent is past cases
- custom is how laws are applied in situations
- degree of flexibility because judge interprets the law
civil law
detailed set of laws organized into codes
- judges only have power to apply the law
theocratic law
law is based on religious teachings
- basic foundations cannot be changed if coming from a holy document
contract law
body of law that governs contract enforcement
- normally for when one party feels that the other has violated the agreement
- very detailed when in common law (more $ but greater flexibility)
- in civil law contracts are shorter
United Nations Convention on Contracts for the International Sale of Goods
uniform set of rules governing certain aspects of the making and performance of everyday commercial contracts between sellers and buyers who have business in different nations
private action
theft, piracy, blackmail etc by private individuals or groups
- Mafia
public action
public officials extort income, resources or property itself from property holders
- corruption, demanding bribes, levying excessive taxation, taking assets without redistributing to property owners
Foreign Corrupt Practices Act
illegal to bribe a foreign government official to obtain or maintain business over which the foreign official has authority
- requires all publicly traded companies to keep detailed record
intellectual property
product of intellectual activity (computer software, screenplay, chemical formula)
patent
grants inventor exclusive rights for a defined period to the manufacture, use or sale of the invention
copyright
exclusive legal rights of authors, composers, playwrights, artists and publishers to publish and disperse work as they see fit
trademarks
designs and names that are officially registered where merchants and manufacturers designate and differentiate their products
World Intellectual Property Organization
An international organization whose members sign treaties to agree to protect intellectual property
Paris Convention for the Protection of Industrial Property
International agreement to protect intellectual property
product safety laws
safety standards to which a product must adhere
product liability
holding a firm and its officers responsible when a product causes injury, death or damage
civil liability
payment, monetary damages
criminal liability
fines, imprisonment
gross national income (GNI)
total income received by residents in a nation
purchasing power parity
adjustment in gross domestic product/capita to reflect differences in the cost of living with US as a baseline
- more direct comparison for standard of living/cost of living
innovation
new products, processes, management practices and strategies
economic freedom
innovation and entrepreneurship require market economy that gives greater incentives for innovation
- people can try to make money out of their idea by starting a business
- businesses can improve operations through innovation
strong property rights
need to be given profit for innovative ideas
- without strong property rights, profits can be taken and reduce economic growth rates
need right political system
representative democracy associated with market economic system
- totalitarian systems can have success but only if committed to market system and have strong protection of property rights
geography, education and economic development
geography
- coastal states support more market institutions
- temperate climates usually neglect market-based trade and reject an extensive division of labor
- soil, disease, climate can affect development
education
- with higher education, will have higher growth rate
spread of democracy
not all democracies are free because some still restrict civil and political liberties
- totalitarian regimes failed to deliver economic progress
- new information and communication technologies reduce state's ability to control access to uncensored information
- economic advances led to emergence of prosperous middle and working classes that push for democratic reforms
global terrorism and the new world order
universal civilization
- free market capitalism, democratic regimes
- different visions of a world in different civilizations, each with own value systems and ideology
- terrorism is clash of value systems and ideology
deregulation
removing legal restrictions to free play of markets, establishment of private enterprises and how private enterprises operate
- removing price controls, relaxing/removing restrictions on FDI (command)
- state set prices, owned businesses, limited private enterprise, restricted investment by foreigners, restricted international trade (mixed)
privatization
transfers ownership of state property into hands of private individuals
- stimulate gains in economic efficiency by giving private owners incentive to increase productivity, enter new markets and leave losing ones
- fails if newly privatized firms receive subsidies from the state and are protected from foreign competition by trade barriers and FDI
- must be accomplished by general deregulation and opening of the economy
legal systems
without a legal system that protects property rights and enforces the system, incentive to engage in economic activity can be reduced by private and public entities that expropriate profits
benefits of international business
- market size, purchasing power, future wealth
- investing early allows brand loyalty and experience with the country
- first-move advantage
- economic system, property rights and market size will tell long-term benefits of international business
costs of international business
political
- paying off political entities before allowing business
economic
- sophistication of country's economy
- if no infrastructure, can be costly because you will need to provide one and create supporting businesses
legal
- costly to do business in a country where local laws and regulations set strict standards with regard to product safety, workplace safety, pollution
- liability rates
- no way to settle contract disputes
risks of international business
political
- likelihood that political forces will cause drastic changes in a country's business environment that affect profit and business goals
- greater where there is social unrest, multiple nationalities
economic
- likelihood that economic mismanagement will cause changes in a country's business environment that affect profit and business goals
- economic issues can cause political risks
legal
- legal system fails to provide adequate safeguards in case of violation or protecting property rights
- if weak, more likely to steal intellectual property or break contracts
culture
system of values and norms that are shared among a group of people and that constitute a design for living
values
ideas about what a group believes to be good, right and desirable
- shared assumptions
norms
social rules and guidelines that prescribe appropriate behavior in particular situations
- guide actions towards each other
society
a group of people sharing a common set of values and norms
- societies and subcultures
folkways
routine conventions of everyday life
- dress, manners, behavior, rituals, symbolic behavior
- attitudes towards time
mores
widely observes norms that are central to the functioning of a society and its life
- can be laws against things like theft, adultery
determinants of culture
religion, social structure, political philosophy, economic philosophy, language
group
association of two or more people with 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
- social status determined by group
- strong group identity creates mutual self-help
- lack of dynamism
individual
basic building block of social organization
- emphasize individual achievement and can build personal brand
- entrepreneurship leads to new products and innovations
- sense of individualism creates job moving which is detrimental to the company
social stratification
hierarchical categories based on background, occupation, income
- trait of society, not reflection of individual differences
- carries over generations
- generally universal but variable
- involves beliefs and inequality
social mobility
extent to which individuals can move out of the strata that they are born in
caste system
social position based on family
- change not possible
- sometimes associated with different occupations
class system
less rigid form of social stratification in which social mobility is possible
- can change through achievements but varies in societies
class consciousness
condition where people tend to perceive themselves in terms of their class background and shapes relationships with members of other classes
- shapes relationships with others
religion
system of shared beliefs and rituals that are concerned with the realm of the sacred
ethical system
moral principles used to guide and shape behavior
religions ranked
Christianity, Islam, Hinduism, Buddhism
Christianity
- Protestant ethics value hard work, which helps with the creation of capitalism
- should invest in expansion of capitalist enterprises
- freedom to develop relationships with God can transfer to emphasis on economic and political freedoms and lead to individualism
Islam
- pro-free enterprise and earning legitimate profit through trade and commerce
- property rights as a gift from Allah but must be justly earned
- businesses should be receptive to Islam
mudarabah
bank takes a share in profits and deposit is used as an equity investment, so depositor receives a share in the profit from the investment
murabaha
when a firm wants to buy something with a loan, the firm tells the bank after negotiating a price and the bank buys the equipment with the borrower buying it back later on
fundamentalism
Muslim-majority countries should return to the fundamentals of an Islamic state
- radicals use it to further political and violent ends
- response to social pressures and modernization
- demand commitment to traditional beliefs and rituals
Hinduism
- judged by spiritual agreements, not materials
- strong self-control and self-reliance means less likely to engage in entrepreneurial behavior
Buddhism
- no stress on entrepreneurial activity
- economies more localized
- growing economy makes it difficult to understand effects that people have on the natural world
Confucianism
- personal salvation through right action and built around an ethical code that sets guidelines for relationships
- loyalty, reciprocal obligations, honesty
- lowering costs of business helps economic success
guanxi
- Confucian ethic referring to relationship networks supported by reciprocal obligations
- good for building long-term business relationships
spoken language
- way we perceive the world and define culture
- tensions between languages in the same culture
- Mandarin largest mother tongue and English is most widely spoken
unspoken language
- nonverbals, usually culture-based
- personal space and lack of respecting can lead to weak rapport
education and international business
- determinant of national competitive advantage
- factor in guiding business locations
- good index of products that can sell and what promo materials to use
power distance
how society deals with the fact that people are unequal in physical and intellectual capabilities
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