INTB Exam 1

Chapter 1. Globalization

-Globalization: the shift toward a more integrated and interdependent world economy

-Globalization of production: many firms source goods and services from different locations around the glove

• Hopes to reduce the cost of factors of production (e.g. land, labor, energy, capital)

• E.g. Boeing, Lenovo, and many clothing companies 

-Moore’s law: The power of microprocessor technology doubles and its costs of production fall in half every 18 months “faster and cheaper” 

• Chip performance per dollar doubles every eighteen-months

  • Chip: computer chip/semiconductor

• “The rate of fast/cheap computing will lead to the creation of home computers”

• Next generations chips should be twice as fast in eighteen-months but cost the same as today's models

  • Also, chips that are the same speed today in eighteen-months should be half the price of today

  • We can develop generative AI very quickly and cost effectively

• Fitting chips into smaller spaces isn’t the only way to make tech faster and cheaper

  • Important to not solely focus on this where you could miss areas to advance/improve your technology

  • Data storage doubles as well every twelve months

• A way we’re seeing fast/cheap technology advance is through:

  • Improved chip design

    • E.g. Apple switching from Intel chips to making their own faster and cheaper ones

  • Offloading computing to the cloud

    • E.g. Siri is designed through the cloud

    • Downside is you need the internet to be able to run

    • Managers have to identify which tasks can be sent to the cloud

• E.g. the first iPod sold for $400 and offering 5GB of storage, now apple gives away free 5GB of storage to all users and the last iPod released was a fraction of the cost

• Moore’s law can impact mundane management tasks as well

-Global institution: monitor, manage, deal with disputes related to companies and governments getting involved

• World trade organization (WTO): The organization that succeeded the General Agreement on Tariffs and Trade (GATT) as a result of the successful completion of the Uruguay Round of GATT negotiations

  • Deals with trade disputes between countries

• International Monetary Fund (IMF): International institution set up to maintain order in the international monetary system

  • Manages currency-related issues, deals with fluctuation issues

-General Agreement on Tariffs and Trade (GATT): International treaty that committed signatories to lowering barriers to the free flow of goods across national borders and led to the WTO

Chapter 2. National Differences in Political Economy

-4 major forms of totalitarianism today:

• Communist totalitarianism: government leadership advocates for communist/socialist, 

• Theocratic totalitarianism: religious beliefs integrated with laws

• Tribal totalitarianism: a political party that represents the interests of a particular tribe monopolizes power

• Right-wing totalitarianism: individual economic freedom is allowed but individual political freedom is restricted in the belief that it could lead to communism

-3 different legal systems:

• Common law: based on tradition, results of legal cases/decisions from legal cases

• Civil law: parliament, congress decisions

• Theocratic law: based on religious beliefs

-The Foreign Corrupt Practices Act: illegal to bribe a foreign government official to secure a business

-Patent: grants the inventor of a new product or process exclusive rights for a defined period to the manufacture, use, or sale of that invention.

-Copyright: the exclusive legal rights of authors, composers, playwrights, artists, and publishers to publish and disperse their work as they see fit

Chapter 3. Political Economy and Economic Development

Indexes: 

-Gross National Income (GNI): measures the total annual income received by residents of a nation

-Purchasing Power Parity (PPP) An adjustment in gross domestic product per capita to reflect differences in the cost of living

• Adjusted from the cost of living in the U.S.

-Human Development Index (HDI): A way the United Nations assesses the impact of a number of factors on the quality of human life in a country (based on 3 measures)

• Life expectancy at birth 

• Educational attainment

• Weather average incomes based on PPP estimates are sufficient to meet the basic needs of life in a country 

-Three main reasons for the spread of democracy:

• Totalitarian regimes failed to deliver economic progress to the majority of their populations

• New information and communication technologies (TV, internet, social media)

  • Reduces the chances of a country being able to control censoring/limiting information

• Economic advances have led to an increase in successful middle and working classes that push for democratic reforms

Chapter 4. National Differences in Culture

-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

• E.g. laws against theft, cannibalism 

-Social mobility: the extent to which individuals can move up in society

• Caste system: social position is determined by the family into which a person is born into

  • A change in position is unlikely

• Class system: the position a person has at birth can be changed through achievements and/or luck

-Hofstede’s dimensions:

• Power distance: people are unequal in physical and intellectual capabilities

  • USA is middle-low, 40/100

  • People generally believe in meritocracy, where individuals can achieve success regardless of their background

• Individualism vs. collectivism: the relationship between the individual and their peers

  • USA is more individualism, high, 90/100

  • Personal achievement, independence, and self-reliance are highly valued, and people prioritize personal goals over group loyalty

• Uncertainty avoidance: the extent to which different cultures socialize their members into accepting ambiguous situations and tolerating ambiguity

  • USA is middle, 46/100

  • More comfortable with ambiguity and risk-taking

• Masculinity vs femininity: the relationship between gender and work roles

  • USA is more masculine, mid-high, 62/100

  • More masculine culture, emphasizing competition, achievement, and success

  • Strong focus on work performance, ambition, and assertiveness

• (Confucian dynamism): captures attitudes towards: time, persistence, ordering by status, protection of face, respect for tradition, and reciprocation of gifts/favors

• Long-term vs. short-term orientation: the extent to which a culture programs its citizens to accept delayed gratification of their material, social, and emotional needs

Chapter 5. Ethics in International Business

-Organization for Economic Co-operation and Development (OECD):

• The Foreign Corrupt Practices Act (FCPA): illegal to bribe a foreign government official to secure a business

  • Excludes facilitating payments and speed money (a small bribe paid to expedite or secure a routine action)

-The Friedman doctrine: the social responsibility of business is to increase profits as long as the company stays within the rules of law

-Moral philosophies:

• Consequentialism (teleology): an act is morally right if the result is desirable or the ends justify the means

  • E.g. working for a company that builds hospitals, the government wants a bribe to give us a permit to build the hospital. A consequentialist would weigh the benefits/results. Many positives would results

  • Egoism: grounded in consequences/benefits/outcomes for the individual

  • Utilitarianism: seeks the greatest good for the greatest number of people/society

• Relativism: defining one's ethics in terms relative to a certain group (e.g. firms or industries) 

  • Benchmark against an external person or organization 

• Virtue ethics (virtue, role-based, mindset): a set of virtues is deemed valid regardless of the outcomes

  • E.g. paying a bribe is a violation of virtues so they wouldn’t pay the government the bribe

  • The good or the bad must be explained in terms of virtues

  • Virtue means being a certain type of person with a certain mindset

  • E.g. trust, self-control, empathy, fairness, and truthfulness 

-Ethical relativism vs moral absolutism

• Cultural relativism: ethical standards vary from culture to culture

  • Ethics are culturally determined and that firms should adopt the ethics of the cultures in which they operate

• Moral absolutism: a universal standard should apply for business conduct

Chapter 7. Government policy and International Trade

-Instruments of trade policy:

• Tariffs: a tax placed on imports that effectively raises the cost of imported products relative to domestic products

  • Specific tariffs: taxes placed as a fixed charge for each unit of a good imported

    • E.g. $3 per barrel of oil, 10 cents per orange

  • Ad valorem tariffs: taxes placed as a proportion of the value of the imported good

    • E.g. 8% on a container of bananas (0.8 * $10,000 = $800 tax)

• Subsidies: a government payment to a domestic producer

  • Helps domestic producers compete against low-cost foreign imports/competition domestically or abroad

  • Helps domestic producers gain export markets

• Import quotas: a direct restriction on the quantity of some good that may be imported into a country

  • Tariff rate quota: hybrid of a quota and a tariff where a lower tariff is applied to imports within the quota than to those over the quota

    • E.g. allowing the first 5,000 tractors imported at a tariff rate of 10%, any tractors imported above 5,000 would have a tariff rate of 30%

  • Voluntary export restraint: quota on trade imposed by the exporting country 

    • Typically at the request of the importing country’s government

• Local content requirements: a demand that a specific fraction of a good must be produced domestically

  • Benefits domestic producers and domestic jobs, but consumers face higher prices

  • E.g. producing a soft drink in a country having to use the local sugar

• Administrative policies: bureaucratic rules designed to make it difficult for imports to enter a country

  • These policies hurt consumers by denying foreign superior products, giving them less alternatives/options

• Antidumping policies (countervailing duties): designed to punish foreign firms that engage in dumping

  • Dumping: selling goods in a foreign market below their cost of production, or selling goods in a foreign market below their “fair” market value

    • May be predatory behavior, with producers using substantial profits from their home markets

    • E.g. last years Samsung (South Korean) TV models being sold at a discount in the US