International Business Exam 1
Venturing Abroad: Siemens Pays - and Pays and pays
-Firms that regularly offer bribes are EXPECTED to pay them, which could give an advantage to other firms that have a policy of not paying brings Siemens (a German company) has been fined millions of dollars for billions of dollars in bribes that its employees routinely paid to cabinet ministers and bureaucrats in Nigeria, Russia, and Libya; top executives have been replaced with outsiders to restore the company's public reputation and overhauling the company's code of conduct and compliance programs
Area susceptible to ethical variation with regard to how an organization treats its employees:
-Hiring and firing `in Brazil it's based on social class -wages and working conditions -employee privacy and respect
Differences between domestic and international business
-International business crosses national boundaries `Cross-border trade is easiest in: Poland, Slovak Repub, Romania, Portugal, Austria, Spain, Netherlands, Luxembourg, Belgium, and Italy; being amongst the world's richest, most stable, and most developed countries `Cross-border trade is most difficult in: Pakistan, Chad, Bangladesh, Equatorial Guinea, Afghanistan, Syrian Arab Republic, Liberia, South Sudan, Iraq, and Angola; being amongst the world's poorest and unstable -international business requires managers to think about currencies and currency fluctuation `currency fluctuations impose at least three different costs on international business: administrative costs, time costs, and hedging costs -int. business requires an understanding of different legal systems `policies regarding foreign investment `policies relating to acquisitions of domestic firms `the legal definition of "foreign investment" and "foreign investor" `how companies are allowed to operate within the country itself -int. business requires an understanding of different cultures -int. business gives company access to a wider range of resources `The World Factbook: a convenient and reputable source of info about countries' natural resources `Rich natural resources: US, Canada, Australia, Russia -int. business requires a broader set of skills and knowledge than doing business domestically
Strategic imperatives to go global
-Leverage core competencies -acquire resources and supplies -seek new markets -better compete with rivals
Organizational economic mission responsiveness
-Most organizations try to 1st be responsive to: customers, employees, and investors and THEN:needs and concerns of other organizational stakeholders How to treat...: Customers: fairly and honestly Employees: with dignity, part of a team, and fair Investors: managing the firm well, providing relevant and accurate information and accounting procedures
Japan Marketplace
-Much of Japan's growth can be attributed to the partnership b/w the industrial sector and the Ministry of International Trade and Industry (MITI), which guides the corporate elite's investment and production strategies -aging population and negative attitudes towards working women poses a serious threat for their future -slow to adjust to changes of the world economy (emerging markets and e-commerce) -Yen historically overvalued, discourages exports -Notorious for unfair trading practices `Dumping:a country promotes its exports by selling them at a lower price abroad than they would cost at home allows Japanese firms to drive other firms out of the industry and gain a larger share of the export market `Non-tariff barriers: block imports from the rest of the world
Differences in Accounting Practices
-Valuation and Revaluation of Assets -Valuation of Inventories `During inflationary periods, LIFO increases the COGS and reduces profits (and thus taxes), but FIFO provides a better estimate of the true value of the firm's inventory -Dealing with Tax Authorities -Use of Accounting Reserves -other differences `captialization of goods; goodwill practices
Area susceptible to ethical variation with regard to how employees and the organization treat OTHER economic agents:
-advertising and promotions -financial disclosures -ordering and purchasing -shipping and solicitations -bargaining and negotiating examples of ethical dilemmas: `pharmaceutical prices `financial reporting `bribes
Singapore and Hong Kong similarities
-both formally controlled by the British -both small -both separated from China -both have huge ports that facilitate trade -both exports more than 100% GDP
Economic impact of MNCs on host countries
-create local jobs & contribute to the local economy -harm domestic firm profits -local economy can become dependent on the MNC
Canada Marketplace
-exports important part of economy -US is it's largest trading partner; it's US's 2nd largest trading partner; US's biggest customer
Key cultural elements of the Japanese culture:
-hierarchical structure -groupism -wa - wa or "social harmony" -obligations random: many Japanese firms base pay on seniority rather performance -Japan's economic slowdown in the 1990s has caused many Japanese firms to abandon these business practices to become more competitive
US dollar's role
-it's the world's invoicing currency/lingua franca -investors ofter "flee to safety" by buying dollars -US is a huge recipient of Long-term FDI
Characteristics of culture
-learned -shared -adapted -elements are interrelated/dynamic
Formal dimensions that can be used to manage social responsibility:
-legal compliance: organization's conformity with regional, national , and international laws -ethical compliance: org.'s members' adherence to basic ethical and legal standards; formal ethics committees and peer review panels may be used to ensure ethical compliance and to review allegations of unethical conduct -philanthropic giving: donating money and gifts to charities and social programs
Major influences on a country's accounting system
-legal system `the accounting standard that prevail in common law countries are often more flexible than those that prevail in civil law countries -cultural values and attitudes -international political ties -economic system -sources of capital `reliance on investors vs reliance on banks
individual, family, and group roles in society
-nuclear family (father, mother, and offspring is important in the US) -extended family (other related individuals; more important for Arabs
Informal dimensions that can be used to manage social responsibility:
-organization leadership and culture: the words and actions of top leaders in an organization can contribute to a culture that promotes social responsibility -whistle-blowing: when employees report an organization's unethical or illegal conduct; orgs that promote whistle-blowing are promoting social responsibility; set formal systems in which employees can report without disciplinary or firing consequences
organizational practices
-organizational practices of top managers establish an overall corporate culture that guides ethical behavior throughout the organization
Venezuela: A Humanitarian Crisis
-price controls set by Chavez led to severe shortages of food, medicines, and basic necessities; resulted in black markets to buy goods at low price and resell them at higher prices; gov't official have food and sources the general public does not -once middle-income, oil rich country has slipped into poverty and people have turned to violence; 80% want Maduro out of office -Hyperinflation in Venezuela's economy; annual inflation rate of 80,000% (highest in the world) -GDP of -5%
North America Marketplace facts
-responsible for 26% of world's output; home to more than 546 million people
Self-deprecating humor differences in different countries
-seen as unserious in Germany and France -seen as a way to convey the speaker is not arrogant in the US and Britain
*Six Aspects of Globalization
-technological -economic -social -spatial `rural to urban `homes are more open than before; buildings designed to promote connectivity; infrastructure for ease of flight and internet access -cultural -biological `pollution and disease
Central American and the Caribbean in the Marketplace
-twice the population of Canada, but only 1/3 of Canada's GDP -political instability, a weak middle class, failed economic policies, U.S. intervention and poor educational systems have kept many of these countries poor; high poverty weak middle class; import limitations -Suez Canal & Panama Canal play a role in transport and trade -Haiti is the poorest country in the Caribbean; Cayman Islands richest in the Caribbean; Median is Costa Rica EXCEPTIONS: -islands thriving tourism and offshore-banking industries (Cayman Islands, Aruba, the Bahamas) -countries manged sign. economic growth upper-middle-income (Belize, Costa Rica, Dominica, Grenada, Jamaica, and Panama) -growth for overall region prjected to grow
Measures of increasing globalization
-world exports -FDI -tourism `30% of world service exports `Chinese tourist top spenders; US top earners -energy use
Mexico in the Marketplace
-world's largest Spanish-speaking country -aggressively sought out trade deals with the EU, Central American countries, Japan, and Uruguay -NAFTA reduced trade barriers and attracted foreign firms to Mexico (now its USMCA) -second largest US customer
Quebecois independence
-1/3 of quebec's pop argue that it's culturally and historically different from the rest of Canada -most do not support the sovereignty movement due to economic and logistic concerns
Western Europe Marketplaces
-28** countries in EU `**19/28 common currency is the Euro (members of the Eurozone) -greater government intervention in free markets -UK has aggressively fought against expansion of EU powers and has not adopted the euro
McDonald's Fits in
-34,000 restaurant in 119 counts -expansion model relies heavily on franchising -franchisees provide a lot of the start-up capital for their stores, and they also provide local knowledge about tastes and preferences; local franchisees are encouraged to custom-tailor their product offerings
Global trade fact
-57% of global trade is conducted in North America, Europe, and Japan
Why study GEB3373
-Business skills -future competitors in job markets -business techniques -cultural literacy -money
Environmental Causes of globalization
-Changes in the political environment (ex: the General Agreement on Tariffs and Trade - GATT and the World Trade Organization - WTO) -Technological changes (transportation, communication, and info technology) `Tourism is the largest contributor to international trade in services
Which emerging market countries make up 1/3 of the world's population?
-China and India -they're also the world's fastest-growing countries
Area susceptible to ethical variation with regard to how employees treat its organization:
-Conflicts of interest -secrecy and confidentiality -honesty
Alien Tort Claims Act
A 1789 law permitting foreign citizens to litigate, in a federal court, wrongful actions occurring anywhere in the world that violate international law or U.S. treaties. Been recently interpreted to impose liability on U.S. corporations that benefit from the human rights abuses of foreign gov'ts
Bribery Act
A 2010 British law that outlaws corrupt actions done anywhere in the world by firms with a business presence in the United Kingdom regardless if it's a UK firm. More comprehensive and extensive than FCPA
Cultural Cluster Approach
An approach to understanding communication based on meaningful clusters of countries that share similar cultural values; managers using this approach would be more likely to expand internationally to countries with the same cluster -ex: "Latin american" "Germanic european": "Latin European": Belgium
Japan's current deflationary spiral
Cause: firms transitioning from historical paradigm, in which workers were promised lifelong jobs to a new paradigm, in which weak sales have caused companies to not hire full-time worker and to prefer temporary workers over permanent ones. Jobless and underemployment in Japan has caused people who don't have jobs not to spend money which puts downward pressure on demand and prices; businesses earn less profit thus hire less workers and the cycle doesn't end -economy has slightly rebounded; five consecutive quarters of economic growth w/ increase in international trade; but still no inflation in the economy
In 2035 which country's millennial total income will surpass the total income collected by millennial?
China
Countries that export labor-intensive goods
China and Indonesia (bc of their abundance of low-wage labor)
Who is the US's largest trading partner?
China recently surpassed Canada
CAGE Model
Cultural distance Administrative and political distance Geographic distance Economic distance (differences in resources such as natural, technology, and human resources)
Values and Attitudes
Culture shapes one's values and attitudes towards such things as: -time -age -education -status `In US: personal achievement `in Europe: inherited `in Japan: corporate affiliation `in India: by caste
Federal Deficit vs. Federal debt
Deficit (annual number; how much its fed gov't went into debt w/in a fiscal year) Debt (total balance number of debt; all deficit since beg. of our country
Emerging Opportunities: Conflict Diamonds
Diamonds have a high value-to-weight ratio, so they are often smuggles. Smugglers of so-called "conflict diamonds" (which make up b/w 2%-20% of all of the diamonds sold in the world today) have been responsible for the start of many civil wars in Africa. Faced w/ growing pressure from consumers, the diamond industry responded by refusing to trade in conflict diamonds. Today, most diamonds are accompanied w/ a certificate that indicated their origin and certifying that they are not conflict diamonds. Growing concern about conflict diamonds has provided an opportunity for Canada's gem industry, which has seen an increase in demand because its diamonds are not conflict diamonds
Communication
Differences: -Nonverbal communication `80-90% of information is transmitted nonverbally; important to be aware of inappropriate gestures and other countries' nonverbal norms -Gift-giving and hospitality `relationships and gift giving important in Japan (private gifting) and Arab Countries (public gifting). In China lavish private banquets;in US expensive restuarants
The "Four Tigers"
Driven by open trade policies, The four Pacific Asian economies that have rapidly grown since 1945 and are high-income countries today. South Korea "Republic of Korea-ROK" (largest), Taiwan (fastest growing region; trade;moving towards high tech; tensions with China at rest for economic opportunities), Singapore (Center for information and technology;oil refining), Hong Kong(electronics,textiles, banking, finance;Break of Bulk Point for businesses to enter Chinese market): Because of their booming economies.
People, Plant, and Profits: E-Waste
E-waste: the disposal of electronic devices such as cell phones and computers; accumulating at a record pace -potential solutions: strengthening the relevant international agreements (the Basal Convention), designing goods with easy salvage in mind, and promoting recycling programs
*BRICS
EMERGING MARKETS Brazil, Russia, India, China, South Africa
EU (from Euro Coal and Steel Community, to Euro Economic Community to then EU)
Earliest roots in the Coal and Steel community; formed in 1951 by France, Italy, West Germany, Belgium, the Netherlands and Luxembourg (Benelux) -the industries they chose to unify were integral to production of instruments of war -goal of increasing economic interdependence in Euro in hopes of achieving lasting peace after WWII
US Economic trends
Economic trends- particularly negative ones- that begin in the US will inevitably spread to the rest of the world becasue of the relative sixe and importance of our economy
Big Ten
Emerging markets Argentina, Brazil, China, India, Indonesia, Mexico, Poland, South Africa, South Korea, and Turkey
Greenfield Investment
Establishing a new operation in a foreign country (starting from scratch) -Most likely when entering a country with a dissimilar culture
Law and the Internet
Evolving areas of law= -intellectual property rights -consumer privacy -cybersquatters -country-specific restrictions
True or false: All unethical behaviors are illegal
False
export controls
Federal laws that prohibit the unlicensed export of information, technology or commodities and their corresponding regulations, which direct how information and technology are transferred ex: control export of dual-use products, which can be used for both civilian and military uses
Protecting the Natural Environment
Firms trends have shifted towards adopting recycling programs and technological measures (ex: internet) to minimize the negative impacts of pollution and deforestation
International travel confusion
For particular types of services (education, tourism,etc) exporting occurs in transactions in the HOME country. If I go to France for vacation I'm importing tourism services and France exports tourism services to me
Expropriation
Forced transfer of assets from a company to the government with compensation
Aside from Germany, which country holds significant political clout within the EU?
France; has lobbied for protectionist policies
Sovereign Wealth Funds (SWFs)
Funds controlled by governments holding investment stakes in foreign companies. -many middle eastern countries have put the money they earn from selling oil (oil revenues)to SWFs for future the future because of think about "life after oil"
Per capita income
GDP or GNP divided by the population of a country in a given year
In class note
Germans are stereotypically viewed as the most trustworthy and the least compassionate
Which country in the EU has the largest economy?
Germany (4th in the world); Germany is the 3rd largest exporter
The Artic Region Marketplace
Important emerging market; source of natural resources and Due to global warming and the Arctic ice cap melting, routes may be feasible and provide unprecedented opportunities for trade (security, trade, sovereignty, energy, transit, fisheries, indigenous people, the environment) between Europe and East Asia Artic five: US, Russia, Canada, Norway, and Denmark Middle powers: played a particular roles in negotiating deals and maintaining peace among nations with opposing claims to the Aritc
Foreign Direct Investment (FDI)
Investment made by a foreign company in the economy of another country. Gives a company ownership and control of foreign assets ex: builds & operates factory in another country or buys all the stock of a foreign company -fDi involves Doing something
Islamic Finance
Islamic law (Sharia) forbids the payment of interest, which poses a challenge to consumers who want to buy things with borrowed money -get around it with "rent" payments or to structure the loan as a lease-buyback transaction where the buyer of the good or property in question pays the lender for a certain amount of time and purchases the good at the end of the time period
Ochugen and oseibo
Japan's gift-giving periods
keiretsu
Japan's industrial structure organized as large families of interrelated firms which consist of a divers group of firms and almost always a major bank -vested interest in other members' performances because it is common for firms to own significant portions of each other's stock
Sogo Shosha
Japanese export trading companies; a key part of the keiretsu, the large Japanese industrial groups
Former socialist republics of the Soviet Union that lie in Central Asia
Kazakhstan, Uzbekistan, Tajikistan, Turkmenistan, and Kyrgyzstan -largely Muslim and share a common language -problems: rugged landscape, lack of arable land, and common opportunities such as extensive fossil fuel reserves
UK
London is the world's largest financial center b/c of tradition and its central location -voted to leave EU in 2016, but hasn't formally left yet
low-income countries
Low-middle- income nations:countries that have a good potential for growth (like Armenia, Morocco, Nigeria, Guatemala, Bangladesh, Vietname, Cambodia and Rwanda) -Per capita income $1,026-4,035 Low-income nations:those that seem to be mired in poverty and economic stagnation (like Somalia, Afghanistan, Haiti, South Sudan, Nepal, Zimbabwe, Dem. repub of the Congo) -Per capita income $1,025 or less
Income inequality
Reducing income inequality is important because it increases the size of the middle class, which increases consumer spending. GDP growth is often highly dependent of the size and strength of the middle class.
export promotion
Refers to a growth and trade strategy where a country attempts to achieve economic growth by expanding its exports. As a trade and strategy, it looks outward towards foreign markets and is based on stronger links between domestic and global economies.
Newly Independent States (NIS)
Refers to the 15 independent countries created as a result of the breakup of the Soviet Union
Which is the world's largest country in terms of land mass?
Russia `however has the 9th largest population
What started communist control of Russia?
The Bolshevik Revolution after WWI that overthrew the Russian tsar -economic policies, collectivizing farms, outlawing private property, outlawing the market system; lower living standard bc people had no incentive to work hard Berlin Wall Fell 1989 and USSR collaped in 15
CAGE Framework
The analytical framework used to understand country and regional differences along the distance dimensions of: Cultural Distance:diff similarities in language, religion, or values Administrative distance: ex: currency, politics, institutions of foreign market, gov't policies, leg environment Geographic distance: physical remoteness, transportation and communication infrastructure, country size and common borders or ports Economic distance: factors such as per capita income, the human resource base, infrastructure and tech
high-context culture
The context in which a conversation occurs is just as important as the words that are actually spoken, and cultural clues are important in understanding what is being communicated;implicit -ex: China, Korea, Japan, Vietnam, Arab countries -relationships and emotions*
Home Country
The country in which the business has its headquarters
Privatization
To change from government or public ownership or control to private ownership or control.
recession
Two consecutive quarters of negative economic growth (GDP growth)
Which countries have intermediate time orientations from Hofstede's dimensions?
US and Germany
*Regions by population; GDP and; GDP per capita
US: 327 mill; $19.4 trillion; $59,500 Canada: 36 mill; $1.77 tril; $48,300 Mexico: 125 mill; $2.46 tril; $19,900 Caribbean: 44 mill; $420 bill; $19,528 Central America: 43 mill; $370 bill; $8,698
Global Currencies
US: Dollar EU: Euro Russia: Rubble UK: Pound Japan: Yen Canada: loonie; canadian dollar Switzerland: swiss franc China: Yuan;renminbi
Education differences in values and attitudes
US: everyone should have the ability and desire to go to school and get a higher education UK: elite higher education is available to a small number of students Germany: relies on apprenticeship programs that create skilled manufacturing workers Japan & France: spend resources on primary and secondary education to prepare student for a college entrance exam; top scorers on that exam can attend one of a small number of top universities, which essentially guarantees them good jobs in the gov't of the private sector
Which country has the world's largest economy?
USA
passive goal behavior
Value social relevance, quality of life, and the welfare of others; societal concerns are often placed over profits and women play more important role in business -ex: Norway, Finland, Sweden, Denmark, and the Netherlands
Geographical job restrictions on women
Women are restricted in ___ % of economies: Developed countries of OECD (like US); 27% Eastern Europe, Central Asia, Eastern Asia, and Latin America; >50% Middle East, South Asia, North Africa and Sub-Saharan Africa; incredibly high %ages -strong positive correlation b/w minimal limitation on women and being high-income, stable growth country
Multilateral Investment Guarantee Agency (MIGA)
World Bank affiliate that offers political risk insurance to investors in developing countries
Foxconn Technology Group
a Taiwanese contract manufacturer of electronic goods; assembly plants all over the world, but its largest and most infamous in China; poor working/living conditions for the workers; companies now follow labor Chinese laws and companies are annoyed of less earning potential -example demonstrates the ethical dilemmas faced by large international firms
Overseas Private Investment Corporation (OPIC)
a U.S. government agency that sells political risk insurance to U.S. businesses operating in countries with which the United States has a bilateral investment treaty. Provides insurance again foreign exchange inconvertibility, insurrections, revolutions, and nationalization
The Foreign Corrupt Practices Act (FCPA)
a U.S. law that prohibits U.S. corporations from making illegal payments to public officials of foreign governments to obtain business rights or to enhance their business dealings in those countries; applies extraterritorially
embargoes
a comprehensive prohibition against all commerce with a specific country
Theocracy
a country that bases its civil and criminal law on religion -Ex: Iran, Pakistan
low-context culture
a culture in which people are expected to be direct and to say what they mean; explicit -ex: Germany, Switzerland, Scandinavian countries, the US, and Canada -contracts and facts*
Foreign Sovereign Immunities Act (FSIA)
a federal law passed in 1976 that provides that the actions of foreign gov't against US firms are generally beyond the jurisdiction of U.S. courts; the exception is in commercial transactions ex: IBM could not go to a US court to challenge France's decision to nationalize its French operations, bit it could challenge France if the country did not pay for some computers that it ordered
shareholder model
a firm's goal is to maximize the after-tax present discounted value of the profits flowing over time to shareholders -managers must provide products demanded at a price that will maximize profits
repatriate
a form of constraint on foreign ownership but limited the ability of a foreign entity to bring profits earned abroad back home
Exam tip:
a good indicator of economic expansion, growth in the urban population of a region, is often referenced when discussing energy demand bc people in cities tend to use a lot of energy
water stress
a measure of the difficulty of accessing clean water; a condition where water availability is less than water demand, either currently or projected for the future -High in undeveloped -developed w/ high stress: Australia -US: medium stress
micropolitcal risk
a political risk that only affects a certain industry or set of firms in a given country -ex: nationalization of the Saudi Arabian oil industry in the 1970s and modern protests again McDonald's and Disneyland Paris are examples
ethics training
a proactive approach to shaping ethics in which employees are taught how they should respond to an ethical dilemma
Multinational Organization (MNO)
a profit-seeking (MNE), or a not-for-profit global enterprise
Sanction
a restraint on trade imposed by one country on another to encourage a country to change an undesirable policy -ex: embargo, export controls
Northwest Passage
a route that throughout history has been rumored to connect Europe to East Asia through the Arctic. Due to global warming and the Arctic ice cap melting, routes may be feasible and provide unprecedented opportunities for trade between Europe and East Asia
Accommodative Stance
a social responsibility stance in which an organization meets its legal and ethical obligations but will also go beyond these obligations in selected cases; does not actively seek out opportunities to contribute to society, but it will do so if asked
Proactive Stance
a social responsibility stance in which an organization views itself as a citizen in a society and proactively seeks opportunities to contribute
international franchising
a specialized form of international licensing occurs when a firm in one country (the franchisor) authorizes a firm in a second country(the franchisee) to use its operating systems as well as its brand names, trademarks, and logos in return for a royalty payment ex: opening a McDonald's in a foreign country
Common Law
a system of law based on precedent and customs set by prior judicial decisions Case-based law ex: US, UK, Australia, Canada, India
corporate social audit
a task force of high-level managers formally and thoroughly analyzes the effectiveness of a firm's social responsibility efforts
technology transfer
a technique for altering the technological environment which occurs when a foreign firm's know-how is passed on to a home-country firms or individuals -many countries make technology transfer a prerequisite for doing business there
International expansion of the "Bollywood" and "Nollywood" film industries
a term used to describe the Hindi and Nigerian film industries -by taking note of global trend and catering to different cultures, Bollywood has enjoyed increasing success, especially in many non-European countries Nollywood is centered in Lagos, Nigeria -seek wider audiences by filming in English and casting actors and actresses from other African nations
Code of ethics
a written statement about ethical standards and values that should guide the actions of managers and employees; must use organizational practices and corporate culture to back it
accounting reserves
accounts created in a firm's financial reports to record foreseeable future expenses that might affect its operations; setting the money aside in accounting reserves reduces the company's apparent profitability and thus reduces its tax burden (US IRS disfavors this practice; unlike Germany who uses it aggressively)
Purchase Price Parity (PPP)
adjusted for differences in price levels amongst countries
macropolitical risk
affects every firm in the country -ex: a civil war
developed countries
already rich countries of the world
Hall's Low-Context, High-Context Approach
an approach to understanding communication based on the relative emphasis on verbal and nonverbal cues to transmit meaning -High-context cultures: relationships and emotions more important -low-context cultures: contracts and facts are more important
The UN Human Development Index
an indicator that measures and ranks the level of progress in diffrent countries;measured by poverty, literacy, life expectancy, education, GDP
Ethics
an individuals beliefs about what is right and what is wrong -individualized -circumstantial -same culture more likely to hold similar ethics -impacted by national customs, cultures, and values
Corporate Social Responsibility (CSR)
an organizational philosophy that emphasizes an organization's obligation to be a good corporate citizen through programs that enhance society
self-reference criterion
an unconscious reference to one's own cultural values, experiences, and knowledge as a basis for decisions and reference point to understand the rest of the world
cross-cultural literacy
an understanding of how cultural differences across and within nations can affect the way in which business is practiced through research, experience and training
Political risks
any adverse changes in the political environment that hurt the value of the firm's business activities Three categories: -ownership risk -operating risk -transfer risk can arise for governmental action (devaluation, expropriation, or prohibiting repatriation of profits) or nongovernmental actions (such as piracy,kidnappings, or extortion)
organizational stakeholders
any group within or outside the organization that has a stake in the organization's performance or is impacted by the organization's practices
CSR model by Rob van Tulder and Alex van der Zwart
Holds that the interplay between the state, the market, and civil society determines public policy and what is acceptable in business Stereotypical behaviors: -the anglo- saxon approach: the state, the market and civil society are separate entities that operate antagonistically and compete w/ one another; corruption occurs when the distinction bw business and government break down -the Asian approach: a close relationship bw the gov't and the private sector, w/ civil society playing a relatively minor role; "crony capitalism" -the continental european approach: much more cooperative relationship bw the state, the market , and civil society
forum shopping
filing a suit in the country likely to render the most favorable decision in court when a contract doesn't specify where a dispute must be brought - most plaintiffs file suit in the US bc monetary awards are typically highest
stakeholder model
firms need to consider the interests of other stakeholders as well as shareholders in reaching decisions
subsistence farmers
have to work the fields to have enough food to survice
Brazil's Bolsa Familia
in an attempt to fight poverty and promote income mobility, it provides conditional cash transfers to poor families in exchange for ensuring that children attend school and participate in public health programs provides income to families to address their short-term nutrition needs while also addressing the long-term income mobility by promoting education
Future economic trends
increase in global middle class; Asia could represent 2/3 of middle class population
social mobility
individuals' ability to move from one social stratum to another; low in highly stratified societies -higher social mobility encourages education and entrepreneurship
Anti-Bribery Convention of the Organization for Economic Cooperation and Development (OECD)
international attempt to eliminate bribery; since proposed in 2000, it has been ratified by 41 countires
Just in time (JIT)
inventory management systems that originated in Japan and made it's way to the US
What does investing in education do to the technological environment?
it increases the abundance of high-skilled labor
Chaebol
large families of corporations that work together and play a major role in the South Korean economy -ex: samsung, LG, Kia
US largest import categories now
machinery/electrical, transportation, chemicals, and mineral products; -used to be our largest export categories
market-based economies vs centrally planned economies
market based: emphasize P&L centrally planned: emphasize output and whether production quotas were met
uncertainty avoidance
prefer consistent routine and structure to change and uncertainty -ex: Italy, Japan, Colombia, Austria, France, Belgium, Switzerland, and Peru -more likely to rely on rigid hierarchies, rules, and procedures to get work done; less likely to take risks and take a more conservative approach to maintain power and prestige
Exporting
producing products in the home country and selling them in another country
intellectual property rights
protection for patents, trademarks and copyrights -the more IP rights, the more you attract high-tech foreign investment
Foreign Portfolio Investment (FPI)
purchases of financial assets (stocks and bonds) for reasons other than control ex:buys a small amount of stock of a foreign firm fPi is Passive
Global Talent Competitiveness Index (GTCI)
ranks countries on ability to grow, attract, and retain talent top 5 countries:Switzerland, Singapore, UK, US, and Sweden
Lost decade
real estate and Stock market bubble in Japan burst in 1989 and led to slow economic growth in the 1990s -did not pick up until 2000s
re-exporting
receiving goods, repackaging them or modifying them slightly, and then sending them back out -ex: Singapore w. exports accounting for 326% of its GDP; Hong Kong exports 400% of its GDP
First World Countires
rich countries that aligned with the US (US allies)
Sistema and kompromat (Russia)
sistema: ambiguous pecking order that ranks politicians and businessmen and redistributes wealth and power, based on their adherence to unspoken rules (don't challenge Putin) kompromat:compromising material (ex: blackmail) that is used - or threatened to be used - against a public figure
Mittlestand
small and medium sized manufacturing firms in German speaking countries. Germany, Austria, Switzerland -account for more than half of German output -focus on high quality, well-engineered, niche- products
cultural impact of MNCs on host countries
sometimes change the norms, standards and behaviors of the countries in which they operate for better or worse
nationalization
takeover of property, private firm, or resources by the government
tariffs
taxes on imports -recent tariffs on steel and aluminum that trump made will only benefit domestic producers, it will be worse for foreign producers and domestic consumers; tariff increases foreign prices, so it increases domestic demand, which in turn increases domestic prices -there is not a net benefit to tariffs; loss>gain, society is worse off
least developed countries (aka non-high-income countries)
tend to be concentrated in Sub-Saharan Africa, w/ some in Asia and the Pacific; Haiti is the only LDC in the Western Hemisphere; pverty
KOF Globalization Index (regional patterns over time)
the Swiss economic institute; overall globalization index De Facto: flows and activities that can be measuredL trade, foreign investment, #international calls, levels of international tourism, # of embassies in a country, etc. De Jure: subjective measure of things a country can do to facilitate; policies that promote global flows and activities by enabling de factor variables: how developed the banking system is, attitudes towards trade in the regulatory environment, business culture majority of world's most global countries are European bc typically small and in close proximity to one another
economies of scale
the advantages of mass production in terms of reducing costs as production quantity rises
OPEC response to low oil prices
the current price of a barrel of oil is less than many countries' production cost; restricting output and an increasing oil prices, but this has ceded market share in the oil industry to other countries such as the US -has to invest in SWF because of "life after oil"
balance of trade
the difference between a country's total exports and total imports (x-i) -trade deficit (negative balance) -trade surplus (positive balance)
Middle East Marketplace "cradle of civilization"
the earliest components of human societies (agriculture, gov'ts, legal codes, and alphabets) evolved there -wars and political unrest have hampered its ability to grow -Israel largest per capita GDP -Saudi Arabia largest economy in the Middle East (oil accounts for 45% of its GDP and 90% of its exports) -centrally located on the globe, bw China and Europe
Culture
the entire sets of believes, values, customs, attitudes, and behaviors that make one society different from another
Resources Curse
the fact that many countries are rich in natural resources are also poor because they fail to diversify their economies in other sectors ex: countries that focus on oil productions (Iran, Iraq, Saudi Arabia)
social stratification
the grouping of people based on socio-economic status, including birth, occupation, and education -ex of strong social stratification regimes: Medieval Europe, the British class structure, the Indian Caste system
Values
the ideas, beliefs, and attitudes about what is important that help guide the way you live
diversify revenue streams
the impact of the negative event in one of your countries will be much less pronounced if you have other countries
internet penetration rate
the percentage of the population in a country or world region with access to the internet; important indicator of how connected a country or region is to the rest of the world world average: 50% Strong positive correlation bw internet penetration rates and GDP per capita -US has slower an more expensive broadband access than many countries around the world due to lack of competition for internet providers
Acculturation
the process in which people come to modify their behaviors to make them compatible with a new culture; cross-cultural literacy begins this process
transfer risk
the risk that the gov't will prevent the firm from bringing money into and out of the country
ownership risk
the threat of confiscation or expropriation of company property
operating risk
the threat that a change in the laws, tax codes, environmental standards, insurrections or terrorism will impact the firm's operations or its workers' safety.
Arbitration
the use of an arbitrator to settle a dispute. a process which the parties agree to abide by the decision of a private, non-judicial body -it's faster, cheaper, more private, and more informal than litigation
Globalization
the worldwide economic, social, tech, cultural, and political integration among individuals, groups of people, companies and nations. the inexorable integration of markets, nation states, and technologies... in a way that is enabling individuals, corporations, and nation-states to reach around the world farther, faster, deeper, and cheaper than ever before -internet a big factor -increase in exports and FDIs
upper middle-income countries
these include countries in the former Soviet bloc, as well as a handful of Latin American and Eastern European countries; BRICS and Big Ten -Per capita income bw $4,036-12,476
Global Cities Talent Competitiveness Index (GCTCI)
top cities: Copenhagen, Denmark; Zurich, Switzerland; Helsinki, Finland; San Francisco, Cali; Gothenburg, Sweden
Merchandise imports and exports
trade in goods -aka as visible trade in the UK
Service imports and exports
trade in services -aka as invisible trade in the UK
China's marketplace
trade liberalization and free market policies have led to outstanding economic growth; China's growth has affected commodity markers, as high Chinese demand has driven up the process of things like cement and aluminum; most populous and oldest continuous civilization -restricts personal freedoms (speech against the gov't; religious beliefs) -increase in wages has got americans reshoring back to the US or off-shoring to low-wage countries in SE Asia like Bangladesh, Vietnam or Thailand -internet has become important to the economy; benefit economically while maintaining power through censorship -Alibaba, the Chinese version of Amazon, went public with a massive IPO in 2014, and it's now one of the world's ten most valuable countries -slowing economic growth China has seen in recent years has contributed to lower demand for energy, leading to the currently low oil prices around the world
back-translation
translating something from one language to another and then asking someone else to translate it back into its original langue. Used by individuals and companies to determine whether translations are correct and meaningful to avoid embarrassing translation problems -ex: KFS "finger lickin good" translates to "eat your fingers off" in China
Ecotourism
traveling in an eco-friendly and sustainable way to areas to appreciate nature; the practice and business of recreational travel based on concern for the environment
Long-term outlook
value dedication, hard work, and thrift -ex: Japan, South Korea, Taiwan, Hong Kong
aggressive goal behavior
value material possessions, money, and assertiveness; emphasize rigid gender roles which men work outside of the home and women's place is at home w/ the family -ex: Japan, and to a lesser extent= Mexico, Italy, Germany, and US
short-term outlook
value traditions, social obligations -ex: Pakistan, the Philippines, and West Africa
International Labor Organization (ILO)
watchdog that monitors working conditions in factories in developing countries (like Cambodia, Bangladesh, and the Philippines
core competencies
what a company does best
Bureaucratic Law
whatever the country's bureaucrats say it is, regardless of the formal law of the land -ex: dictators the business environment in these countries is unpredictable and inconsistent
Extraterritoriality
when a country tries to regulate business activities outside of its borders
Confiscation
when a government seizes private property for an illegal purpose and without just compensation
Elements of Culture
●Social structure ●Language ●Modes of Communication ●Religion ●Values and Attitudes
Int. Business origins
back to 2000 BC in North Africa with spices, clothing, and olive oil
Religious law
based on one particular faith or religion
Ethical behavior
behavior that conforms to a society's accepted principles of right and wrong
unethical behavior
behavior that does not conform to generally accepted social norms concerning beneficial and harmful actions
Multinational Enterprise (MNE)
both corporations and firms that are not corporations doing cross-border transactions
Guanxi (China)
business relies on the mutual exchange of favors
International Business
business transactions among people or organizations from more than one country one that engages in cross-border transactions
Importing
buying products made in another country
Panama Canal
connects the Atlantic and the Pacific Ocean; 5% of global trade goes through it. Completed in 1914, it uses a series of locks to raise and lower ship; many container ships are specifically made to fit through this canal; Under went a $5.2 billion renovation that will allow for the passage of modern larger ships that was finished in 2016.
Gross National Income (GNI)
consists of GDP plus the net income earned from investments abroad (dividends and interest received from foreigners, minus dividends and interest paid to foreigners)
International Licensing
contractual arrangement in which a firm in one country licenses the use of its intellectual property to a firm in a second country in return for a royalty payment ex: the right to use image of Mickey Mouse on clothing
emerging markets
countries in the process of rapid growth & industrialization either experienced or have potential
gravity model
countries that are geographically close and are economically alike have similar GDPs, similar demand patterns, and more likely to trade
The Arctic Council
countries with Arctic territorial claims -Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden, US
Invoicing Currency/lingua franco
currency in which the sale of goods and services is denominated -US is the world's major invoicing currency
Suez Canal
cuts through Egypt, opened in 1860s and provided the UK a route to its colonies in Asia. Egypt nationalized the canal in 1956; today it provides passage to 20,000 vessels annually
Defensive Stance
do only what is legally required and nothing more; believe role is to create value for shareholders,not to contribute to society
social structure
encompasses individuals roles in society, social stratification, and social mobility -individual, family,and group roles in society -social stratification -social mobility
international management contracts
establishes an arrangement in which a firm in one country agrees to manage the assets of a firm in another country for a fee
Comparing financial reports of different firms in different countries
ex: firms in Germany, France, and Japan tend to understate their profitability as compared to U.S. firms, so simply looking at an income statement may make it appear that German, French, and Japanese firms are less profitable than their U.S. counterparts when they actually are not
Helms-Burton Act
example of extraterritoriality; intended to punish foreign companies allows Americans to sue foreign firms that use property in Cuba confiscated from them after the 1959 revolution
Sub-Saharan Africa
extreme poverty remains a fairly constant problem -because of all the opportunity, China is trying to take advantage through BRI
Cultural Cluster Approach
An approach to understanding communication based on meaningful clusters of countries that share similar cultural values
Why was there a drop in some kind of international business activity from around 2007-2009?
Probably due to the Great Recession
Obstructionist Stance
An approach to social responsibility in which firms do as little as possible to solve social or environmental problems
Triple bottom line
"profits, planet, people" -Profits: economic mission to create value for stakeholders and create profits for shareholders -Planet: protecting the natural environment -People: enhancing society's general welfare
North American Free Trade Agreement (NAFTA)
Agreement that created a free-trade area among the United States, Canada, and Mexico.
Hofstede's Five Cultural Dimensions
1) Time orientation (Long-term Orientation): whether cultures are oriented to the future and defer gratification (short-term is opposite) `Highly Individualistic: US, UK, Canada, New Zealand, the Netherlands, Australia `Highly collectivistic: Japan, Mexico, Singapore, Pakistan, Hong Kong, Greece, Peru, Taiwan, Colombia 2) Uncertainty orientation: the degree to which people in a country are uncomfortable with unstructured, ambiguous, unpredictable situations -Uncertainty acceptance vs Uncertainty avoidance 3) Goal Orientation:the way in which people are motivated to achieve goals Masculinity: highly assertive cultures (feminine are nurturing) - Aggressive goal behavior vs. passive goal behavior 4) Social orientation (Individualism vs. Collectivism): the degree to which societies believe individuals should be self-sufficient 5) Power orientation: extent to which people in a country accept power is distributed unequally in society and organizations - Power respect vs. Power tolerance 6) Gratification orientation -Indulgent vs. Restrained
*Key Forces affecting the US trade deficit:
1) the growth differential: gap bw the rates of growth in two or more countries (ex: China and US) -ex: US period of economic growth encourages domestic and international consumer spending which leads to higher imports (imports>exports) 2)value of the dollar: our economic growth strengthens the US dollar which means that American goods are more expensive for foreign consumers which decreases US exports -trump's tax cuts increased budget deficit which means the government is demanding more (borrowed) money - an increase in demand, which causes an increase in both the "price" of the US dollar (the interest rate r) and the quantity of US dollars transacted (the amount of investment "sold" to borrowers. Naturally higher interest rates contribute to an attractive market for investment, which increases the value of the dollar
Top 5 largest economies
1. USA 2. China 3. Japan 4. Germany 5. UK
Difference categories of income nations
1. it doesn't take an extremely high per capita income to be categorized as "high: $12,476 2. best opportunities for growth - emerging economies - tend to be located in the middle
Largest global crude oil producers
1.US 2.Russia 3. Saudi Arabia
South American Marketplace
13 countries w/ common economic and social problems, as well as a common political history -natural resources exploited by the Spanish and Portuguese -poverty and political unrest, due to failed economic policies -*income inequality: large disparity b/w the rich and poor, and a corresponding lack of economic and social mobility; reasons: education,high birth rates of poor families, and ineffective public spending -Avg. GDP growth of 2%
China's Great Leap Forward
1958-1960 Intended to force industrialization Instead it suffered economically
China's/ Mao's Cultural Revolution
1966-1976 intended to cleanse the country of those who did not support Mao's communist doctrines
India's marketplace
2nd largest population, but one of the world's poorest countries; world's largest democracy; a lot of potential -market-orientation reforms from 1991 has helped pick up economic growth a little issues: overburdened infrastructure, unclear gov't policy, corruption (bribes*), and bureaucratic red tape to do business in India (makes FDI less attractive) -GDP is doing the best out of BRICS; 6th largest economy (surpassing France) -market for global business and investment opportunity bc India's population is mostly impoverished, but as the economy expands, India's middle class is likewise expected to expand
Africa Marketplace
55 countries and 1.1 billion people -close economic ties with former colonial powers has caused ongoing political problems -oil exporters (Algeria, Angola, Libya, Nigeria); agriculture economy; subsistence farmers -South Africa leads -enjoyed the benefits of a major commodity boom -top business function: manufacturing -top sector: coal, oil, and natural gas
Religion
84% of the world's pop claims a religious affiliation. Religion...: -shapes social attitudes -constrains business -shapes consumer behavior -international managers must be sensitive to religious traditions `religion has a bigger impact on business in some countries than others `ex: Saudi Arabia where 99% of the population is Muslim
Sarbanes-Oxley Act of 2002 (SOX)
A congressional act that enhances internal control and financial reporting requirements and establishes new regulatory requirements for publicly traded companies and their independent auditors. -established the Public Company Accounting Oversight Board (PCAOB) -prohibited companies from providing both consulting and auditing services to a firm at the same time -required corporate executives to sign off financial statements -prohibits executives from serving on the audit committee of the board of executives -sec 404 requires that managers of publicly traded corporations provide adequate control procedures for financial reporting -As a result, fewer and fewer new companies are established in the US; they are established in alternative locations (like London) instead
host country
A country where a company that is based in another country has business activities (is doing business).
principle of comity
A country will honor and enforce within its own territory the judgments of foreign courts, as long as the two countries extend reciprocity between one another
Hedging
A financial transaction in which one asset is held to offset the risk associated with another asset. A person or a company takes action now to offset or minimize future risks
lingua franca
A language mutually understood and commonly used in trade by people who have different native languages -English has become the predominant language of international business
Gini Coefficient
A measure of income inequality within a population, ranging from zero for complete equality, to one if one person has all the income.
Nepotism
A preference for hiring relatives of current employees
Great Firewall of China
A system of "tools" used by the Communist Party to tightly control the Internet in China from western sites - functions as protectionism for domestic tech firms in China to take the market and turn to profit
International Financial Reporting Standards (IFRS)
Accounting standards that encourages transparent financial reporting, issued by the IASB, that have been adopted by many countries outside of the United States.
Different cultural clustures
Anglo: Australia, Canada, Ireland, New Zealand, South Africa (white sample), UK, US Latin America: Argentina, Bolivia, Brazil, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Mexico, Venezuela Nordic Euro: Denmark, Finland, Norway, Sweden Germanic Euro: Austria, Belgium, Germany, Liechtenstein, Netherlands, Switzerland (German speaking) Latin Europe: France, Israel, Italy, Portugal, Spain, Switzerland (french and Italian speaking) Sub-Saharan Africa: Namibia, Nigeria, South Africa (black samples), Zambia, Zimbabwe Middle East: Algeria, Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Syria, Tunisia, Turkey, UAE, Yemen Southern Asia: India, Indonesia, Iran, Malaysia, Philippines, Thailand Eastern Europe: Albania, Georgia, Greece, Hungary, Hungary, Kazakhstan, Poland, Russia, Slovenia Confucian Asia: China, Hong Kong, Japan, Singapore, South Korea, Taiwan, Vietnam
multinational corporation (MNC)
As one of the primary agents of globalization, this business has headquarters in one country and production facilities in one or more other countries; sometimes called a transnational corporation. those that engage in FDI, taking a controlling interest in foreign operations
Countries that export agricultural goods
Australia, Argentina, and Thailand (they have an abundance of fertile land)
Australia and New Zealand marketplace
Australia: rich in natural resources and land-intensive agricultural goods (gold, coal, iron ore, wool, wheat, and beef) New Zealand: products from pasture lands, such as meat, wool, and dairy products
Power respect
Authority is inherent in one's position within a hierarchy -ex: France, Mexico, Japan, Spain, Brazil, Singapore, and Indonesia
Civil Law
Based on extensive codes that detail what is and is not permissible behavior statutory law=statutes enacted and written by legislature -judges are more like lawyers/fact finders -Louisiana
Belt and Road Initiative (BRI)
China's plan to dominate international trade; infrastructure project in Asia and Africa; building railways, roads, pipelines, oil refineries, power plants, and the like w/ the goal of facilitating China's trade with other countries; offering to lend billions to countries in the region that sign agreements to participate in BRI; these countries are extremely corrupt and anti democratic less likely to repay their debt
string of pearls
China's strategy of gaining critical allies along the Indian Ocean shoreline by setting up a string of naval bases to guard shipping routes through the region
*CIVETS
Colombia, Indonesia, Vietnam, Egypt, Turkey, South Africa
Commonwealth of Independent States
Confederacy of independent states of the former Soviet Union that have united because of their common economic and administrative needs. 12/15 Newly Independent States -Includes the Russian federation
Maastricht Treaty
Converted the Euro Economic Community to the EU
Countries with highest foreign-currency-denominated debt, relative to their GDPs
Countries that owe more than half of their GDP: Turkey, Hungary, Argentina, Poland and Chile
News: Lehman Brothers
In September 2008, this large Wall Street investment bank declared bankruptcy, which led to a panic in the financial industry and changed how many people think about money, jobs, and the future. The defining factor of the collapse was subprime mortgages. Subprime mortgage: a loan from a financial institution to an individual with low-credit ratings; both extremely lucrative and risky. When the financial institutions that were giving out these subprime mortgages started to accumulate a lot of debt, Lehman Brothers took on many of their debts -the resulting 2008 collapse of Lehman Bro's was the largest "chapter 11 filing" (bankruptcy) in US history and led to a 600 billion dollar loss inasset in addition to slaying the company's value in half and running the stock market down over 700 points US economy now: unemployment has reached the lowest points (3.7%)in decades and American national average are wealthier than ever; and saving more of their disposable income than they did pre-recession; more people are living at home bc rising rental property prices Since the crisis, wealth of the top 10% has surpassed pre-recession levels by approx. 10% while the typical American household has yet to recover Bankers need more reserves to be prepared for another financial crisis -"we are always very well prepare for the last crises;we maybe be missing the signs of different possible
World's 4 largest religions
In order of number of followers: 1.Christianity 2.Islam 3.Hinduism 4.Buddhism
Has unethical behavior increased or decreased globally in recent years?
Increased
gratification orientation
Indulgent: let people pursue satisfation of their natural drives (including sex drives) freely Restrained: regulate and suppress individual's ability to gratify these drives
"edgy investors are retreating from risky economies" article
Many developing economies throughout the world have increasing financial risk, and it's leading investors to pull out because of falling currencies, rising inflation, and worrisome investors; consequently, these developing nations are experiencing sharp declines in their currencies. The strong dollar and high interest rates is attracting international investors toward the US and way from the emerging markets Developing countries affect by it: -Argentina: faced some economic hardships due to drought (in its agricultural sector) that increased gov't deficit; inflation was increasing and its central banks lowered interest rates (big mistake should increase demand of borrowed money) which was taken as a sign that Argentina was more concerned with getting money to move through the economy - as opposed to being concerned w/ ensuring economic stability; as a result, the peso plunged and investors are withdrawing because of the economic turmoil and uncetainty -Turkey: saw significant economic growth over the past decade but is currently on the edge of a financial crisis, as its economic success was driven by a "debt-fueled bubble"; its debt from loans from foreign investors is 2/3 Turkey's GDP -Russia and South Africa:ruble and rand currency value has fallen significantly; similar economic difficulties as Turkey; Russia has more problems: sanctions, lack of rule of law, business culture issues, etc (makes investment extremely risky)
Protestant Ethic
Max Weber's term for the emphasize on achievement, hard work, frugality, and glorification of God that Weber believes attributed to capitalism
Eastern Europe and Central Asia Marketplaces
Modern Russia: -largest country (in landmass); 9th largest population -largest oil producer & 2nd largest oil exporter -oligarchs: extremely wealthy businessmen who run the country's largest companies; controlled the gov't during Yeltsin's presidency but they underestimated Putin -Putin led Russia in fighting the Chechen War Politics: corruption and graft (when gov't officials "skim money off the top" by misappropriating public funds for private or personal gain -authoritarian and militaristic society -Putin silences his adversaries and controls tv and the media to remain powerful; mysterious killings of journalist (ex: Anna Politkovskaya) -most effective cyber-army in the world of hackers -Western countries have imposed sanctions against Russia that has caused Russia's ruble and energy industry to collapse -weak legal system, lack of rule of law, aging population, (alcoholism), influence of oligarchs, mafia, security services Central Asian Republics: "the -Stans": Kazakhstan, Uzbekistan, Tajikistan, Turkmenistan, and Kyrgyzstan, Azerbaijan, Kyrgyzstan -heavily influenced by Russia and its culture -largely Muslim and share a common language -significant fossil fuel reserves (oil industry economies) -problems: rugged landscape, lack of arable land, and common opportunities such as extensive fossil fuel reserves, low per capita income Russia started w/ the highest GDP of these nations and was able to double it by 2013
*Doing Business
Mostly African Economies that improved the most over the previous years in terms of reforms to increase the ease of doing business were generally low-income and unstable -Brunei Darussalam, Kazakhstan, Kenya, Belarus, Indonesia, Serbia, Georgia, Pakistan, the United Arab Emirates, and BAhrain
Tiananmen Square Massacre (1989)
Not widely known about in China due to censorship -Chinese gov't cracked down on protesters and has become an iconic symbol of China's opposition to democracy and free speech
Mikhail Khodorkovsky
Once the richest man in Russia had his company nationalized bc of his public criticism of Putin; 10 yrs of prison
Percent vs. Percentage point
Percentage point= equal to 100 basis points; so 1.75 increase is 175 basis-point increase Change in percent= (actual-initial)/ initial
Cold War
Period from end of WWII till mid 1990s with the fall of the USSR
Primary Stakeholders vs. Secondary Stakeholders
Primary stakeholders: directly affected by the firm's practices and have an economic stake in its performance. -Ex: investors, customers, and employees Secondary stakeholders: do not directly engage in economic transactions with the firm, though they are nevertheless impacted by corporate decisions -ex: non-governmental organizations, the news media, and the local community
abenomics
Prime Minister Abe's three-pronged plan for economic recovery, including monetary easing (raising inflation), fiscal stimulus (budget increases), and structural reform -didn't work very well because reform was slow
FDI today
Significant drop in FDI, attributed to global market uncertainty -in 2017, top recipients of FDI inflows included US (which receives far more than any other country), China, Hong Kong, Brazil, Singapore, Netherland, and Friends(investors) -Top FDI Inflows: US, Japan, China, UK, Hong Kong (recipients)
Political impact of MNCs on host countries
Significant political influence in the countries where they operate
import substitution policies
South American policy after world war II, that promoted the use of the country's own products through tariffs and nontariff barriers rather than imports in order to develop strong domestic industries -failed bc small domestic markets weren't large enough to allow domestic firms to take advantage of economies of scale
export promotion
South American policy in which the govt subsidizes domestic export industries to boost exports -failed bc cost of these subsidies and nationalization was passed on to tax payers
Southeast Asian Countries marketplace
Thailand, Indonesia, Malaysia, and Vietnam have been increasingly popular among richer countries because of their low wage rates (lower than China)
cultural convergence
The tendency for cultures to become more alike as they increasingly share technology and organizational structures in a modern world united by improved transportation and communication.
Blat
The Russian word for "connections," used to describe the prevalence of clientelism and interpersonal relationships in which favors are exchanged between elites, between elites and masses, and between members of the general population.
Question
The share of world GDP from exports has INCREASED since 1950, and FDI (as a share of world GDP) has INCREASED since 1950
Gross Domestic Product (GDP)
The sum total of the value of all the goods and services produced in a nation in a year
Gross Domestic Product GDP Calculation
measure of the value of all new final goods and services PRODUCED WITHIN a country during a year GDP(Y) = C + I + G + NX Y=GDP C=consumption I=Investment G=Gov't spending NX: net exports NX=X-I -US GDP largest in the world; consumption is 70%
Second World Countries
middles-income countries that aligned with the Soviet Union at the time of the Cold War -largely isolated from the rest of the world
Flight capital
money that people from an unstable country invest in what they perceive as a "safe haven" -example the US dollar
Language
more than 3,000 languages and 10,000 dialects Language...: -shapes how we see the world -shapes culture -differences are an indicator of diversity -differences offer companies the opportunity to target market segments -can be a competitive weapon -English has become the lingua franca of the business world -difficulties with translation can plague business communication -people don't always mean exactly what they say `in Japan "yes" means "i understand" not that you agree
South Africa
most economically successful country; economic powerhouse after the end of apartheid (violent segregation of whites and blacks) -63% GDP on exports of minerals -Hindering issues: political unrest and corruption in the gov't
Approaches to Social Responsibility
obstructionist stance, defensive stance, accommodative stance, proactive stance -companies may not neatly fit into one of these categories
high-income countries
oil-rich countries of the Middle East, the smaller industrialized countries and inland states, and the Organization for Economic Cooperation and Development (OECD), a group of 34 market-oriented democracies of which the US is a member -Per capita income of 12,476 or more
Glasnost and Perestroika
openness and economic restructuring, respectively. reform initiatives under the U.S.S.R
Third World Countries
other low to middle-income countries -provided resources to the first world countries
deflation
period of falling prices, essentially caused by a low demand for money has far worse consequences
power tolerance
place less important on a person's place in a hierarchy -ex: US, Israel, Ireland, Denmark,Germany, Norway,Austria, New Zealand -better equipped to handle the needs of an Internet-based economy
Uncertainty acceptance
positive response to new opportunities and change -ex:US, Canada, Denmark, Hong Kong, Sweden, and Australia -Job mobility is higher; better equipped to succeed in the Internet age