Globalization & Sustainability Midterm Revision

Chapter 1: Globalization

  • Globalization: A shift towards a more integrated and interdependent world economy.

  • Two sides of Globalization in Business:

    1. Globalization of Markets:
    • Consumer tastes and preferences converge globally, creating a global market.
    • Examples: Coca-Cola, McDonald's, IKEA, Starbucks, Apple.
    • Most global markets involve industrial goods that fulfill universal needs, like aluminum, oil, wheat, microprocessors.
    1. Globalization of Production:
    • Sourcing goods and services from different locations to take advantage of national differences.
    • Factors of Production: Labor, energy, land, capital.
    • Advantages:
      • Increased productivity ↑
      • Reduced costs ↓
      • Improved product quality and competitiveness.

  • Barriers to Globalization:

    1. Formal and informal trade barriers.
    2. Barriers to foreign direct investment (FDI).
    3. Transportation costs.
    4. Economic and political risks.
    5. Scattered supply chains.

  • Key Global Institutions:

    • World Trade Organization (WTO): Regulates the world trading system and ensures adherence to its rules.
    • International Monetary Fund (IMF): Lender of last resort, requiring specific policies in return for loans.
    • World Bank: Provides low-interest loans to promote economic development, seen as less controversial than the IMF.
    • Group of Twenty (G20): Finance ministers and central bank governors from 19 largest economies plus the EU.

  • Key Drivers of Globalization:

    1. Decline in trade barriers, including reduced tariffs.
    2. Technological advancements (e.g., communication and transportation improvements like containerization).

  • International Trade: Occurs when a firm exports goods/services to another country.

  • Foreign Direct Investment (FDI): Investment of resources in business activities outside the home country.

  • Shifts in Global Economic Power:

    • The US previously dominated the world economy; now there is a shift to developing countries like China, Mexico, India, and Brazil.

Chapter 2: National Differences in Political, Economic, and Legal Systems

  • Political Economy: The interplay of political, economic, and legal systems.

  • Dimensions of Political Systems:

    1. Collectivism vs. Individualism
    2. Democratic vs. Totalitarian

  • Collectivism: Emphasizes collective goals over individual freedoms.

    • Socialists favor public ownership for society's common good.
    • Split into:
      • Communists: Seek socialism through violent revolution.
      • Social Democrats: Pursue goals via democratic means.

  • Privatization: The transfer of state-owned enterprises to private investors.

  • Individualism: Advocates for individual freedom in economic and political pursuits.

    • Stresses self-expression and individual interests.

  • Democracy: Governance by the people, either directly or through elected representatives.

  • Totalitarianism: Absolute control by an individual or party over all aspects of life. Types include:

    1. Communist Totalitarianism
    2. Theocratic Totalitarianism
    3. Tribal Totalitarianism
    4. Right-Wing Totalitarianism

  • Economic Systems:

    1. Market Economy: Based on market forces, prioritizing individual goals.
    2. Command Economy: State-owned businesses, emphasizing collective goals.
    3. Mixed Economy: A blend of market and command economies.

  • Legal Systems: Rules regulating behavior enforced through different systems:

    1. Common Law: Based on tradition, precedent (UK and former colonies).
    2. Civil Law: Based on codes of laws (e.g., Germany, Japan, France).
    3. Theocratic Law: Based on religious teachings (e.g., Islamic law).

  • Intellectual Property Rights: Types include patents, copyrights, and trademarks.

  • Product Safety Laws: Ensure products meet safety standards.

  • Product Liability: Firms are responsible for damages caused by their products.

Chapter 3: National Differences in Economic Development

  • Development Assessment: Best political, economic, and legal systems for business include:

    • Democratic governance.
    • Market-based reforms.
    • Efficient legal systems that enforce property rights.

  • Gross Domestic Product (GDP): Total market value of all goods/services produced in a country per time period.

  • Purchasing Power Parity (PPP): Provides a clearer comparison of living standards but may not reflect growth rates accurately.

  • Human Development Index (HDI): Introduced by the UN for assessing development based on life expectancy, education, and income adequacy.

  • Innovation: New products, processes, organizations, management practices, and strategies.

    • Entrepreneurs: Key figures in commercializing innovations.

  • Political Economy Trends:

    1. Democratic revolutions overthrow totalitarian regimes.
    2. Shift towards free markets from centrally planned economies.
    3. Resurgence of authoritarianism in certain regions.

  • Deregulation and Privatization: Increase opportunities for foreign investments and transfers of state property to individuals.

Chapter 4: Differences in Culture

  • Cross-Cultural Literacy: Understanding how cultural differences impact business.

  • Culture Definitions:

    • A system of shared values and norms among people.
    • Values: Beliefs about what is good or desirable.
    • Norms: Rules that govern behavior and interactions.

  • Types of Norms:

    • Folkways: Everyday conventions; minor violations not serious (e.g., greeting customs).
    • Mores: Vital societal norms; serious violations (e.g., social conduct rules in certain cultures).

  • Social Structures:

    • Individualistic Societies: Promote individual achievement and liberty.
    • Group-Oriented Societies: Emphasize cooperation and community bonds.

  • Social Stratification: Categorization based on socio-economic status, income, occupation.

  • Caste vs Class Systems:

    • Caste System: Social position is ascribed at birth; difficult to change.
    • Class System: Positions can change through achievement and merit.

  • Class Consciousness: Heightened awareness of class disparities can lead to conflict between labor and management.

  • Religions and Beliefs:

    • Christianity: Most widespread religion.
    • Islam: Second-largest, with unique banking practices (e.g., mudarabah, murabaha).
    • Hinduism: Supports caste system, emphasizes spiritual growth.
    • Buddhism: No support for the caste system, focuses on spiritual enlightenment.

  • Language and Communication:

    • Verbal Language: Shapes world perception.
    • Mandarin: Most spoken language.
    • English: Widely recognized in business.
    • Nonverbal Language: Important in communication.

  • Geert Hofstede's Cultural Dimensions:

    1. Power distance.
    2. Individualism vs. collectivism.
    3. Uncertainty avoidance.
    4. Masculinity vs. femininity.
    5. Long-term vs. short-term orientation.