International Business Test 1
Explain the factors that determine the value of a currency. I may ask you to explain one or more specific factors.
Currency is like a commodity and the laws of demand and supply will hold
Define globalization and explain the cost and future of globalization.
Deforestation means lack of air to breathe. Overcrowding in some countries. Some regions are growing faster than others. How can we grow this to their advantage is the key.
How does democracy differ from totalitarianism? Will the conduct of business be different in the two systems? How?
Democracy: is a government "of the people, by the people and for the people." Citizen participation in the decision-making and governance processes, either directly or through elected representatives is ensured. Examples: USA, UK, India, European nations.
What is global governance? Explain the role of each institution in Global Governance.
Development- World Bank Made initially to help Europe after WWI to help rebuild Europe. Equality between countries so one country does not become extremely rich while others go very poor.
Who are the emerging nations? Discuss their impact in a globalized world.
Emerging Nations are the center of most economic discussions today.
Define the following terms and distinguish their differences: spot rate, forward rate, options, futures and swap.
FX Swaps: is exchange of currencies in the spot market with agreement to reverse the transaction in the future. It is a combination of spot and forward transaction at the same time.
Discuss the Features of an Economy and their policy implications for international business managers.
Income distribution/inequality: globally, within the country, GINI index, urban vs. rural. Poverty: definition, global implication, bottom of the pyramid. Balance of Payments: current, capital and international reserve account.
What is global governance? Explain the role of each institution in Global Governance.
Money/Finance- International Monetary Fund [IMF] Organization to keep the Monetary stabilization of the world.
Explain how the dynamic interplay of nation, language and religion shapes the culture of a country.
Religion is a cultural stabilizer because centuries of religious influence continue to shape cultural values even in these societies.
Who is IMF? How does it manage global monetary stability?
Quotas form the basis for the voting power of each member nation, the higher the quota, the greater the number of votes. Now, 24 executive board members run IMF. IMF constantly monitors global economy through internal surveillance, policy suggestions are mandated accordingly.
Define globalization and explain the forces driving globalization
4. Growing consumer pressures. 5. Increased global competition. 6. Changing political situations. 7. Expanded cross-national cooperation.
Who is IMF? How does it manage global monetary stability?
Bank of International Settlements (BIS) does the exchange rate settlements. Support members experiencing BOP difficulties.
Explain the six behavioral practices that affect the business in a country. I may ask you to explain any two or three of them.
Behavioral Practices Affecting Business. Issues in Social Stratification. Work Motivation.
Define globalization and explain the forces driving globalization
Globalization Defined. Understanding Globalization: refers to the widening set of interdependent relationships among people from different parts of the world that happens to be divided into nations.
Define globalization and explain the cost and future of globalization.
Globalization has become so big that some people say that smaller countries don't count. As we grow, global warming gets larger, more carbon dioxide, and more to the environment including sea levels go up causing islands to go under water.
Define globalization and explain the forces driving globalization
Globalization is inevitable International business facilitates the globalization process Four Dimension of Globalization Index are: Economic, Technological, Personal Contact, and Political
Who is IMF? How does it manage global monetary stability?
Goals of IMF as per Articles of Agreement: Ensure international monetary stability. Promote international monetary cooperation. Facilitate balanced international trade growth. Establish a multilateral system of payments.
What is convertibility of a currency? How governments intervene FX, and why? Explain.
Governments control the convertibility of its currency through: licensing, a multiple exchange rate system, advance import deposits, quantity controls.
Who is IMF? How does it manage global monetary stability?
IMF Quota: the sum of the total assessments levied on member countries to form the pool of money (about $1 trillion) from which the IMF draws to make loans to member nations. National quotas are based upon countries' GDP, monetary reserves, trade balances, and other economic indicators.
Who is IMF? How does it manage global monetary stability?
IMF is a multinational institution established in 1945 as part of the Bretton Woods Agreement to maintain order in the international monetary system. 187 members as of 2012.
Explain the factors that determine the value of a currency. I may ask you to explain one or more specific factors.
Inflation Differential. Inflation is given by the price index. It reduces the value of a currency. Generally, forward rate of a currency is determined by discounting a currency with the prevailing inflation rate. Again, DIFFERENTIAL between two (or more) countries is important.
Discuss the Features of an Economy and their policy implications for international business managers.
Inflation/deflation: price index and cost of living, Employment/Unemployment. civilian labor force, labor regulations. Debt: internal and external debt.
How governments intervene trade with the help of non-tariff barriers? Explain.
NON ECONOMIC RATIONALES. Maintaining essential industries. Promoting acceptable trade practices abroad. Maintaining or extending spheres of influence. Preserving national identity.
Explain how the dynamic interplay of nation, language and religion shapes the culture of a country.
National cultures are dynamic, they evolve over time, change may occur by choice or by imposition. Three features are: The Nation or Nation-State as point of reference [identity, symbolism, common history].
What are the effects of subsidies (or quotas) on price, production, market, motivation and trade? Explain.
Nontariff barriers (NTB): Direct Price Influences. Subsidies. Aids and Loans. Customs valuation.
What are the effects of subsidies (or quotas) on price, production, market, motivation and trade? Explain.
Nontariff barriers (NTB): Quantity Controls. Quotas: VER, Embargoes. "Buy Local" legislation.
What are the effects of subsidies (or quotas) on price, production, market, motivation and trade? Explain.
Nontariff barriers (NTBs) represent administrative regulations, policies, and procedures, i.e., quantitative and qualitative barriers, that directly or indirectly impede international trade.
Explain the Balance of Payments account with its four subheads. Why is it important to in international business manager?
Reports the total of all money flowing into a country less all money flowing out of that country to any other country during a given period of time. Records a country's international transactions amongst companies, governments, and/or individuals. Concept of trade surplus and trade deficit.
Explain the six behavioral practices that affect the business in a country. I may ask you to explain any two or three of them.
Risk-taking Behavior. Uncertainty avoidance, i.e., one's tolerance of risk. Trust, i.e., one's belief in the reliability and honesty of another.
Define culture? Why an international business manager should study the culture of a country?
The chapter begins with an understanding of the Saudi, Arabian, or Muslim culture.... The basis of all culture is people....people living in a geographic society/nation
Define globalization and explain the forces driving globalization
The term also refer to the integration of world economies through the elimination of barriers to movement of goods, services, capital, technology, and people.
How does the fluctuation of exchange rate affect trade? For example, if Yen appreciates against Dollar, how will this affect U.S.-Japan trade? I can ask similar question with any currency.
To them, imports from USA is now cheaper. This means that they will import more from USA. In other words, U.S. exports to Japan will increase.
How does democracy differ from totalitarianism? Will the conduct of business be different in the two systems? How?
Totalitarianism: the monopolization of power by a single agent; opposition is neither recognized nor tolerated. Examples: Communist/Socialist countries, military dictatorship, kingdoms.
What are the effects of subsidies (or quotas) on price, production, market, motivation and trade? Explain.
Trade barriers have often been the sources of conflict among nations and in WTO negotiations
What is global governance? Explain the role of each institution in Global Governance.
Trade- World Trade Organization [WTO] Helps countries trade on their own. Makes sure that everyone benefits from trade.
Explain the six behavioral practices that affect the business in a country. I may ask you to explain any two or three of them.
Verbal vs. Nonverbal Language [kinesics: body language and gestures]. We need to be sensitive to linguistic differences in communication and definitely in translation.
Define culture? Why an international business manager should study the culture of a country?
What is Culture?: "Sum total" of all learned activities, a way of life.....of societies or relatively homogeneous groups of people-who share attitudes, values, beliefs, and customs
Explain the six behavioral practices that affect the business in a country. I may ask you to explain any two or three of them.
Work Motivation. Work vs. leisure-how it affects productivity. Role of materialism, how it motivates people. Achievement orientation. Expectation of success and reward. Hierarchy of Needs.
Who are the emerging nations? Discuss their impact in a globalized world.
Youths from emerging nations think their government is trapped in old ideological conflicts. Countries that are growing and changing their ways. Being buried in a coca cola coffin.
What is protectionism? What are the arguments for and against protectionism?
the theory or practice of shielding a country's domestic industry from foreign competition by taxing imports. Any program, policy, or system of laws that seek to provide protection for others.
Explain the factors that determine the value of a currency. I may ask you to explain one or more specific factors.
A complex set of factors/variables simultaneously (thus a dynamic view) influence the value of the currency. They are: BOP statistics (trade and reserve). Interest rate differentials. Inflation differentials.
Define political system and explain why a business manager should study the political system of a country.
A political system can be based on individualism or collectivism: how we decide to govern ourselves Political ideology: the ideas that expresses the goals, theories, and aims of a political party/forum or a sociopolitical program
What are the effects of subsidies (or quotas) on price, production, market, motivation and trade? Explain.
A specific duty is a tariff that is assessed on a per unit basis. An ad valorem tariff is assessed as a percentage of the value of an item.
Explain the factors that determine the value of a currency. I may ask you to explain one or more specific factors.
All Subheads of the of the Balance of Payments (BOP) must be considered to understand the influence
How does the fluctuation of exchange rate affect trade? For example, if Yen appreciates against Dollar, how will this affect U.S.-Japan trade? I can ask similar question with any currency.
Because Japanese can buy the same dollar with a smaller quantity of Yen (95 now, instead of 105 before) their purchasing power has increased against the Americans.
Define the following terms and distinguish their differences: bid, offer, spread, and cross rate.
Bid: the rate at which traders buy foreign currency. Offer: the rate at which traders sell foreign exchange. Spread: the difference between bid and offer rates; the profit margin for the trader. Cross rate: determines the rate between two foreign currencies.
Who are the emerging nations? Discuss their impact in a globalized world.
Brazil, Russia, India, and China. Globalization of consumption such as McDonaldization. Consumers rely on global brands.
Explain the factors that determine the value of a currency. I may ask you to explain one or more specific factors.
Business Cycle and Politics. Political instability negatively affects a currency. Confidence and faith in the currency is important-despite a huge budget deficit, trade deficit and debt the mighty U.S. Dollar prevails.
Explain the factors that determine the value of a currency. I may ask you to explain one or more specific factors.
Business Cycle, Political Events and Psychological Factors. U.S. business cycle: 5-7 years of high and 3-5 years of low. A currency is more demanded when an economy is on a rising curve (and vice versa).
What are the three types of economic systems? What criteria do we use to evaluate them? Explain.
Capitalist is owned by private individuals. Socialist is owned by the government. Mixed is owned partly by both.
Define the three types legal systems and their implications in international business.
Civil law [based upon a set of laws that comprise a code]. Theocratic law [based upon religious precepts]. Mixed systems are possible. Implications of various types of legal system for business.
Explain the six behavioral practices that affect the business in a country. I may ask you to explain any two or three of them.
Communications. Spoken and Written Language. Silent Language of color, time/punctuality, distance/space, and friendship.
What is convertibility of a currency? How governments intervene FX, and why? Explain.
Convertibility: it refers to currency's ability to be converted in the global market without government restrictions. Fully convertible currencies are those that are freely traded and accepted by central banks, also know as hard currencies. Soft (weak) currencies are not fully convertible.
Define globalization and explain the cost and future of globalization.
Cost of Globalization Threats to national sovereignty Growth and environmental stress Growing income inequality and personal stress
Define globalization and explain the forces driving globalization
Culture and learning and life has changed dramatically in the past generation because of technology. Laws have been made to make this easier. Trade services, money, and products between countries.
How governments intervene trade with the help of non-tariff barriers? Explain.
ECONOMIC RATIONALES. Fighting unemployment. Protecting infant industries. Promoting industrialization. Improving comparative position.
Explain the factors that determine the value of a currency. I may ask you to explain one or more specific factors.
Fiscal and Monetary Policy. Fiscal Policy-policy of the government regarding REVENUE and EXPENDITURE.
Explain the factors that determine the value of a currency. I may ask you to explain one or more specific factors.
Fiscal and monetary policy. Business cycles. Political events. Psychological (confidence) factors.
Define the following terms and distinguish their differences: spot rate, forward rate, options, futures and swap.
Forward rate is the future yield on a bond. Spot rate is the price quoted for immediate settlement on a commodity, based on the value of an asset at the moment of the quote.
Define globalization and explain the cost and future of globalization.
Future of Globalization Globalization is inevitable Reality is, we see more regional than global growth Globalization is slowing down
Explain the six behavioral practices that affect the business in a country. I may ask you to explain any two or three of them.
Future orientation, i.e., the need for immediate vs. delayed gratification. Fatalism, i.e., the belief that life is pre-destined, that events are "the will of God".
Explain the six behavioral practices that affect the business in a country. I may ask you to explain any two or three of them.
Information and Task Processing. Perception of Cues. Obtaining information: Low-Context cultures [explicit, USA] vs. High-Context cultures [implicit, Saudi Arabia]. Information processing: Monochronic [work sequentially] vs. Polychronic [multi-task]. Idealism vs. Pragmatism.
Explain the factors that determine the value of a currency. I may ask you to explain one or more specific factors.
Interest Rate Differential. Government affects Money Supply through: Interest rate, Open market operations-buying and selling of government bonds, Reserve ratio (for deposits in banks).
Define culture? Why an international business manager should study the culture of a country?
International business manager should learn because it involves peoples different national cultures, which involves every business function, managing a workforce, marketing and transporting output, purchasing supplies, dealing with regulators, and security funds.
Explain the six behavioral practices that affect the business in a country. I may ask you to explain any two or three of them.
Individualism vs. collectivism. Individualism represents a desire for personal freedom, time, and challenge. Collectivism represents a dependence on the organization as well as a need for a safe environment. Role of extended families/clans.
What is a peg system? Explain the current global pegging exchange rate arrangement.
Pegged rate system was introduced in the Jamaica Agreement in 1976. Pegged arrangement: hard, soft and free-float. Various forms of pegs possible, single currency, composite. Par value, band issue.
Explain how the dynamic interplay of nation, language and religion shapes the culture of a country.
Language as both a diffuser and stabilizer of culture [expression, sharing, bond]. Language limits peoples contact with other cultures. Religion as a cultural stabilizer [beliefs, ethics, spiritualism].
Define the three types legal systems and their implications in international business.
Legal system: the mechanism for creating, interpreting, and enforcing the laws in a specified jurisdiction. Types of legal systems: Common law [based on precedent, traditions].
What is political risk? How can we manage political risk?
Managing Political Risks. Be a good corporate citizen [example: participate in development projects, literacy etc.]. Expand power bases through business relationships [example: joint venture, licensing, political payoffs etc.].
How does the fluctuation of exchange rate affect trade? For example, if Yen appreciates against Dollar, how will this affect U.S.-Japan trade? I can ask similar question with any currency.
On the contrary, Americans are getting less Yen for the same dollar, so they will buy less from Japan. Thus Japanese exports to the U.S. will decrease.
Define the three types legal systems and their implications in international business.
Operational concerns. Starting and closing a business. Contract enforcement. Hiring and firing employees. Day to day operations.
Define the following terms and distinguish their differences: spot rate, forward rate, options, futures and swap.
Options are contracts specifying the right to buy or sell foreign exchange within a specific period or on a specific date. Futures are contracts for forward delivery of currency for specific amounts with specific maturity dates.
What is global governance? Explain the role of each institution in Global Governance.
Overall- G8 Nations [USA, Canada, UK, France, Germany, Italy, Japan, and Russia] Other international organizations and bodies
What is political risk? How can we manage political risk?
Political risk: refers to the threat that decisions or events in a country will negatively affect the profitability of an investment/firm. Four types of political risks are: Systemic: a change in public policy that affect everyone.
Define political system and explain why a business manager should study the political system of a country.
Political system: the complete set of institutions, political organizations, and interest groups, the relationships amongst those institutions, and the political norms and rules that govern their functions. We vote for President and freedom of speech, our rights and cultural.
What is global governance? Explain the role of each institution in Global Governance.
Politics/Peace- United Nations All countries are on their own. But there are rules between everyone to keep everyone united and succeed together. United Nations keep peace between every country. Security Council is between 5 countries.
What is political risk? How can we manage political risk?
Procedural: bureaucratic delays, labor disputes, etc.. Distributive: tax and regulatory risk in respective industries. Catastrophic: random political events, nationalization.
What is protectionism? What are the arguments for and against protectionism?
Protectionism refers to those government restrictions and incentives specifically designed to help a county's domestic firms compete with foreign competitors at home and abroad. Protectionist measures are likely to lead to retaliation by affected stakeholders.
What is a peg system? Explain the current global pegging exchange rate arrangement.
Refers to the monetary system/discipline that determines the value of a currency is in international markets. Usually, weaker currencies are tied to stronger currencies. Each country declares in advance as to what it will during the year.
Explain the six behavioral practices that affect the business in a country. I may ask you to explain any two or three of them.
Relationship Preferences. Power distance, i.e., the psychological and social distance between superiors and subordinates.
Explain the six behavioral practices that affect the business in a country. I may ask you to explain any two or three of them.
Relationship Preferences. Risk-taking Behavior. Information and Task Processing. Communications.
Define globalization and explain the forces driving globalization
Services that support international business includes transportation such as DHL and UPS delivering the goods. Some companies are just distributors or have online sites to purchase items. Legal services are also included. We are global consumers.
Explain the six behavioral practices that affect the business in a country. I may ask you to explain any two or three of them.
Social Stratification Systems. Individual's status in a culture. Ethnic and Racial. Gender-based groups. Age-based groups. Family-based groups.
Define globalization and explain the forces driving globalization
Some countries have restrictions: people flow, goods and customs. McDonalds and other restaurants have had to adapt to the local culture in other countries to keep business open and moving.
Define the following terms and distinguish their differences: spot rate, forward rate, options, futures and swap.
Spot transactions: are for immediate delivery of the currency, within two days maximum. Forward transactions: involve currency exchange beyond three days at a fixed rate, known as the forward rate.
Define the three types legal systems and their implications in international business.
Strategic concerns. Country of origin issue. Marketplace behavior-nature of competition. Product safety and liability. Legal jurisdiction. Intellectual Property Rights.
What is political risk? How can we manage political risk?
Study government attitude and participate government incentive programs. Maintain good relationship with political allies, other embassies in the country.
Explain the factors that determine the value of a currency. I may ask you to explain one or more specific factors.
Surplus/Deficit = Revenue - Expenditure. Monetary Policy-policy of the government regarding Money Supply. Budget Deficit, Trade Deficit, and Government Debt matters-FX market respects responsible governments.
What are the effects of subsidies (or quotas) on price, production, market, motivation and trade? Explain.
Tariffs (also called duties) are taxes levied on (internationally) traded products. Exports tariffs, transit tariffs, import tariffs, levied by the country of destination on imported products.
Explain the factors that determine the value of a currency. I may ask you to explain one or more specific factors.
The DIFFERENTIAL of the interest rates between two countries (or more) will determine the exchange rate. Also, consider money as an asset. People tend to keep assets in stronger currencies.
Define globalization and explain the forces driving globalization
The Forces Driving Globalization 1. Increase in and application of technology. 2. Liberalization of cross-border trade and resource movements. 3. Development of services that support international business.
Explain the six behavioral practices that affect the business in a country. I may ask you to explain any two or three of them.
The Hierarchy of Needs: 5.Self-actualization, 4. Esteem, 3. Affiliation, 2. Security, 1. Physiological