International business exam 2

Cross-cultural literacy

understanding how the culture of a country affects 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

Society

A community of people who share a common culture

Values

Provide the context within which a society's norms are established and justified

Norms

social expectations that guide behavior

Folkways

routine conventions of everyday life

Mores

norms that are seen as central to the functioning of a society and to its social life

Determinants of Culture

religion, political philosophy, economic philosophy, education, language, social structure

social stratification

a system by which a society ranks categories of people in a hierarchy

Social Mobility

Movement of individuals or groups from one position in a society's stratification system to another

Caste System

social position is determined by the family into which a person is born, and change in that position is unlikely

Class System

the position a person has by birth can be changed through achievement or luck

Class Consciousness

where people tend to perceive themselves in terms of their class background (British Society)

Religion

a system of shared beliefs and rituals that are concerned with the realm of the sacred

Ethical System

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

Christianity

Most widely practiced religion and was the driving force of capitalism

Islam

Most widely practiced religion of Muslims, associated with violet upheaves

Hinduism

World's oldest religion, believed bin reincarnation and karma, and acceptance of certain responsibilities called Dharma

Buhdism

Stress spiritual growth and the afterlife, rather than achievement while in this world

Confucianism

official ethical system of China, High moral and ethical conduct and loyalty to others

Language

Spoken - Often countries with more than one cultures

Non-spoken - Facial cues, and hand gestures

Hofstede's Cultural Dimensions

power distance, individualism, masculinity, uncertainty avoidance, long-term orientation

Power distance

Degree to which societies accept the idea that inequalities in the power and well-being of their citizens are due to differences in individuals' physical and intellectual capabilities and heritage

Individualism

giving priority to one's own goals over group goals and defining one's identity in terms of personal attributes rather than group identifications

uncertainty avoidance

the degree to which societies are willing to tolerate uncertainty and risk

Masculinity

A national culture attribute that describes the extent to which the culture favors traditional masculine work roles of achievement, power, and control. Societal values are characterized by assertiveness and materialism.

long-term orientation

a national culture attribute that emphasizes the future, thrift, and persistence

Ethnocentric Behavior

Belief in the superiority of one's own culture

Free Trade

international trade left to its natural course without tariffs, quotas, or other restrictions.

Mercantilism

it is in a country's best interest to maintain a trade surplus - to export more than it imports

Zero-gum game

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

absolute advantage

in the production of a product when it is more efficient than any other country in producing it

A. Smith

Absolute advantage
Zero-sum Game
Production Possibility frontier

production possibilities frontier

a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology

D. Ricardo

Comparative advantage - A country should specialize in the production of those goods that it produces most efficiently and buy the goods that it produces less efficiently from other countries

Theory of Comparative Advantage

Ricardo's theory that specialization and free trade will benefit all trading parties, even those that may be "absolutely" more efficient producers.

Constant Returns to Specialization

The units of resources required to produce a good are assumed to remain constant no matter where one is on a country's production possibility frontier.

Heckscher-Ohlin Theory

comparative advantage arises from differences in national factor endowments

Factor Endowments

A country's endowment with resources such as land, labor, and capital.

Leontief Paradox

Since the U.S. was relatively abundant in capital, it would export capital intensive goods and import labor-intensive goods

R. Vernon

Proposed the product life cycle

Product Life Cycle

As products mature both the location of sales and the optimal production location will change affecting the flow and direction of trade

New Trade Theory

As products mature both the location of sales and the optimal production location will change affecting the flow and direction of trade

Economies of scale

unit cost reductions associated with a large scale of output

first-mover advantage

Occurs when an organization can significantly impact its market share by being first to market with a competitive advantage

Strategic trade

a trade policy in which the state promotes certain export industries by providing government subsidies or other forms of assistance

Porter's Diamond

Factor endowments
Demand conditions
Related and supporting industries
Firm strategy, structure, and rivalry

Tarrif

A tax on imported goods

Specific Tariff

levied as a fixed charge for each unit of a good imported

Ad velorem tariff

a tariff levied as a proportion of the value of an imported good

Subsidy

government payment to encourage or protect a certain economic activity

Import quota

a direct restriction on the quantity of some good that may be imported into a country

Voluntary Export Restraint (VER)

quota on trade imposed by the exporting country, typically at the request of the importing country's government

local content requirement

demands that some specific fraction of a good be produced domestically

Administative trade policies

bureaucratic rules that are designed to make it difficult for imports to enter a country

Antidumping Policies

prevents goods from being sold below their cost of production, or below their "fair market value

The infant industry argument

An industry should be protected until it can develop and be viable and competitive internationally

strategic trade policy

By appropriate actions, government can help raise national income if it can ensure first-mover advantages in an industry are domestic

GATT (General Agreement on Tariffs and Trade)

Multilateral agreement to liberalize trade and gradually eliminate barriers to trade

IMF (International Monetary Fund)

organization which gives loans to poor countries

World Bank

an international bank that offers low-interest loans, advice, and information to developing nations

WTO (World Trade Organization)

the only international body dealing with the rules of trade between nations, helped reduce tarrifs, started quotas

Smoot-Hawley Tariff Act

legislation passed in 1930 that established very high tariffs. Its objective was to reduce imports and stimulate the domestic economy, but it resulted only in retaliatory tariffs by other nations

International Business

any firm that engages in international trade or investment

Multinational Enterprise

a firm that operates on a worldwide scale without ties to any specific nation or region

Types of Globalization

Market and Production

Factors of production

land, labor, capital, entrepreneurship

GDP per capita

broadest measure of economic wellbeing (figured with PPP)

Cost of living

The average cost of basic necessities, such as housing and food

Democracy vs. Totalitarianism

democracy allows people to represent themselves and doesn't allow one person to have total control. Totalitarianism on the other hand, has one leader with absolute power.

command economy

An economic system in which the government controls a country's economy.

mixed economy

an economic system combining private and public enterprise.

free market economy

Capitalism, private ownership law of supply and demand

Common Law

a system of law based on precedent and customs

Civil Law

A legal system based on a written code of laws

FCPA (Foreign Corrupt Practices Act)

U.S. law regulating behavior regarding the conduct of international business in the taking of bribes and other unethical actions.

Hernando de Soto

says that in a capitalistic society it is important to have law that protect property rights

Naive Moralist

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

Utalitarianism

Greatest good for greatest amount of people, cost and benefit analysis

Righteous Moralist

One who claims that a multinational's home-country standards of ethics are the appropriate ones for companies to follow in foreign countries

Strawman

Misrepresenting someone's argument to make it easier to attack

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