International Business Chapter 3 Midterm

13. Common Law system based on Tradition- Precedent and Usage (ex: USA)

originated in England ten centuries ago. Common law takes into account particular situations and circumstances. It is based on: Tradition, or a nation's legal history. Precedent, or past cases that have come before the courts. And usage, or how laws are applied in specific situations.

15. Theocratic Law

systems must be sensitive to local values and beliefs. Islamic law is the most widely practiced theocratic legal system today.

11. What is laissez faire economics

an approach to national economics that calls for less government interference in commerce and greater individual economic freedom. Loosely translated from French as "allow them to do [without interference]."

8. Definition of a mixed economy.

Economic system in which land, factories, and other economic resources are rather equally split between private and government ownership. In a mixed economy, ownership of economic resources is split rather evenly between private and government entities. Government controls the economic sectors important to national security and stability and provides generous welfare programs to support the unemployed and to provide health care for the general population.

4. Full civil and property rights elections non- politicized bureaucracies minority rights

Full civil and property right: Civil rights include freedom of speech, freedom to organize political parties, and the right to a fair trial. Property rights are the privileges and responsibilities of owners of property (homes, cars, businesses, and so forth). Nonpolitical Bureaucracies: The bureaucracy is the part of government that implements the rules and laws passed by elected representatives. In politicized bureaucracies, bureaucrats tend to implement decisions according to their own political views rather than those of the people's representatives. This clearly contradicts the purpose of the democratic process. Minority Rights: In theory, democracies try to preserve peaceful coexistence among groups of people with diverse cultural, ethnic, and racial backgrounds. Ideally, the same rights and privileges extend legally to each group, no matter how few its members.

7. Critic of the centrally-planned system

German philosopher Karl Marx popularized the idea of central economic planning in the nineteenth century. Different versions of Marx's ideas were implemented in the twentieth century by means of violent upheaval. Nations that relied on central control of their economies failed to achieve their objectives. Specifically, they: Failed to create economic value by failing to produce quality products efficiently. Failed to provide incentives for businesses to maximize the outputs obtained from resources, which slowed economic growth and lowered living standards. Failed to achieve rapid economic growth and witnessed themselves falling quickly behind other nations. And failed to satisfy consumer needs for even basic necessities.

12. What is the role of government in a market economy?

In a market economy, government is to enforce antitrust (antimonopoly) laws. This encourages the development of industries with many competing businesses, and prevents trade-restraining monopolies that can raise prices and exploit consumers. Governments in market economies also strive to preserve property rights. By preserving and protecting individual property rights, governments encourage individuals and companies to take risks such as inventing new technology, inventing new products, and starting new businesses. Strong protection of property rights ensures entrepreneurs that their claims to assets and future earnings are legally safeguarded. The government in a market economy is to provide a stable fiscal and monetary environment. This is achieved through effective management of fiscal and monetary policies. Stability reduces overall risk in an economy, improves business forecasts, and helps control inflation and unemployment rates. Finally, government in a market economy is to preserve political stability. This encourages the smooth operation of a market economy. Political stability helps businesses engage in activities without worrying about terrorism, kidnappings, and other political threats to their operations.

10. What is a market economy and what are its characteristics?

In a market economy, most of a nation's land, factories, and other economic resources are privately owned, either by individuals or businesses. This means that who produces what and the prices of products, labor, and capital in a market economy are determined by the interplay of two forces: Supply: the quantity of a good or service that producers are willing to provide at a specific selling price Demand: the quantity of a good or service that buyers are willing to purchase at a specific selling price Market economics is rooted in the belief that individual concerns should be placed above group concerns.

20. Difference between law and ethics

Just because something is legal doesn't mean it is ethical- vice versa- laws are the legal system. Ethics are morals and beliefs.

1. What is totalitarianism anarchism pluralism democracy

Totalitarianism: the belief that every aspect of people's lives must be controlled for a nation's political system to be effective. Totalitarianism disregards individual liberties and treats people as slaves of the political system. The state reigns supreme over institutions such as family, religion, business, and labor. Totalitarian political systems include authoritarian regimes such as communism and fascism. Anarchism: the belief that only individuals and private groups should control a nation's political activities. An anarchist views public government as unnecessary and unwanted because it tramples personal liberties. Pluralism: the belief that both private and public groups play important roles in a nation's political activities. Each group (consisting of people with different ethnic, racial, class, and lifestyle backgrounds) serves to balance the power that can be gained by the others. Pluralistic political systems include democracies, constitutional monarchies, and some aristocracies. Democracy: a political system in which government leaders are elected directly by the wide participation of the people or by their representatives. Democracy differs from totalitarianism in nearly every respect.

6. What is a centrally planned economic system and what are its characteristics?

A system in which the government owns the nation's land, factories, and other economic resources. The government makes nearly all economy-related decisions, including who produces what and the prices of products, labor, and capital. Central planning is rooted in the ideology of collectivism. Just as collectivist cultures emphasize group over individual goals, a centrally planned economy strives to achieve economic and social equality for the sake of the collective, not the individual.

17. Definition of patents- trademarks and copyrights

Patent: Property right granted to the inventor of a product or process that excludes others from making, using, or selling the invention. Trademark: Property right in the form of words or symbols that distinguish a product and its manufacturer. Copyright: Property right giving creators of original works the freedom to publish or dispose of them as they choose.

9. What is privatization?

Policy of selling government-owned economic resources to private operators.

16. Definition of intellectual property

Property that results from people's intellectual talent and abilities is called intellectual property. It includes graphic designs, novels, computer software, machine-tool designs, and secret formulas, such as that for making Coca-Cola.

3. Pure vs. representative democracy

Representative Democracy: For practical reasons most nations resort to a representative democracy in which citizens elect individuals from their groups to represent their political views. These representatives then help govern the people and pass laws. The people reelect representatives they approve of and replace those they no longer want representing them.

19. The three layers of activity of CSR

The first layer is traditional philanthropy, whereby a corporation donates money and, perhaps, employee time toward a specific social cause. The second layer is related to risk management, whereby a company develops a code of conduct that it will follow in its global operations and agrees to operate with greater transparency. The third layer is strategic CSR, in which a business builds social responsibility into its core operations to create value and build competitive advantage.

5. Definition of political risk

The risk an investment's returns could suffer as a result of political changes or instability in a country.

2. Theocracy secular totalitarianism (communist tribal and right-wing)

Theocratic Totalitarianism: A political system in which a country's religious leaders are also its political leaders is called a theocracy. The religious leaders enforce a set of laws and regulations based on religious beliefs. A political system under the control of totalitarian religious leaders is called theocratic totalitarianism. Secular Totalitarianism: A political system in which political leaders rely on military and bureaucratic power is called secular totalitarianism. It takes three forms: communist, tribal, and right-wing. Communist totalitarianism (or simply communism) is the belief that social and economic equality can be obtained only by establishing an all-powerful Communist party and by granting the government ownership and control over all types of economic activity. Tribal totalitarianism is a system whereby one tribe (or ethnic group) imposes its will on others with whom it shares a national identity. Right-wing totalitarianism is a system whereby government endorses private ownership of property and a market-based economy, but grants few (if any) political freedoms.

21. Different philosophies of ethics

There are four philosophies of ethics and social responsibility. The Friedman view argues that a company's sole responsibility is to maximize profits for its owners (or shareholders) while operating within the law. Many people disagree with this argument and say the discussion Is not whether a company has CSR obligations but how tit will fulfill them. The cultural relativist view says that a company should adopt local ethics wherever it operates because right and wrong are determined within a cultural context. "When in Rome, do as the Romans do" captures the essence of this view. The righteous moralist view argues that a company should maintain its home-country ethics wherever it operates because the home-country's view of ethics and responsibility is superior. If headquarters instructs a subsidiary manager to refrain from bribing local officials, it imposes its righteous moralist view on the local manager. The utilitarian view says that a company should behave in a way that maximizes "good" outcomes and minimizes "bad" outcomes wherever it operates. A utilitarian manager will take the action that produces the best outcome for all affected parties.

14. Civil Law system

based on written volumes that make a legal code, can be traced to Rome in the fifth century B.C. and is the most common legal tradition. It is based on a detailed set of written rules and statutes that constitute a legal code. It can be less adversarial than common law because the legal code defines all obligations, responsibilities, and privileges of the parties to a contract.

18. What does corporate social responsibility means

includes a wide variety of activities, including giving to the poor, building schools in developing countries, and protecting the global environment.