MGT 405 Exam 1 (Ch. 1-3, 5-6)
187 current member states; 29 initial member states
How many member states are in the International Monetary Fund (IMF)? How many originally
153 Member States; 97%
How many member states are in the World Trade Organization? What percentage of member states represents all trading companies?
Regional Integration
Implementation of a multitude of economic and/or political steps by member states to increase their global competitiveness, including preferential trade access.
Emerging Market Economies
Implementing more open trade and free-market policies to "compete with everyone from everywhere for everything"
Foreign Direct Investment
Inflows of capital from abroad for investing in domestic plant and equipment for production of goods and/or services and for buying domestic firms
Litigation
Involves bringing a dispute to a publicly or governmentally run court of law for resolution
Civil Law Legal System
Is based on a comprehensive listing of legal rules in sets of written codes of law
Theocratic Law Legal System
Is based on a religious document and religious teachings
Common Law Legal System
Is comprised of legislative bodies that enact less specific legal rules that give judges or courts considerable authority in interpreting these rules based on precedent and other factors
F
Is culture inherited? (T/F)
F
Is it possible to change an entire country's culture (especially external group)? (T/F)
Seller
Is the U.S. seller or buyer beware?
National security, Protection of critical (strategic) industries, Embargoes, International commerce
Managed Trade Geo-Political Rationale
Countertrade, Export cartels, Protection of infant industries, Questionable labor practices, Environmental considerations, Health and safety
Managed Trade Socio-Economic Rationale
Economic Union
Member states treated as 1 entity (common currency, healthcare, etc.); a union formed when members of a common market agree to implement common social programs (on education, employee benefits and retraining, health care, etc.) and coordinated macroeconomic policies (such as fiscal and monetary policies) that would lead to the creation of a single regional currency and a regional apex central bank
Brazil, Russia, India, and China
Name the four BRIC economies
Factors of Endowment
Nations primarily export goods and services that intensely use their abundant factors of production
Caveat Venditor ("Seller Beware")
Places on manufacturers or sellers the burden of making sure their products are safe or at least clearly and explicitly warning consumers about the potential safety risks of their products
Caveat Emptor ("Buyer Beware")
Places the burden of determining product safety on consumers
Antitrust Law
Promote "fair competition" among businesses
Intellectual Property
Property that is the product of intellectual rather than physical activity
Import Quotas
Quantitative Restrictions (QRs) limit the amount or number of units of products that can be imported to a country
Domestic Content Provisions
Regulations requiring that a certain percentage of the value of import be sourced domestically
Corruption
Situation where businesses can legally alter decision making by way of bribes, kickbacks, extortion and blackmail
Totalitarian Government
System of government in which individuals govern without the support or consent of the citizenry; for example, a military dictatorship
Instruments of a Trade Policy
Tariffs (mostly), preferential duties, most favored nation status, nontariff barriers
Export Taxes
Taxes meant to raise export cost and divert production for home consumption
Sources of Cultural Information
The U.S. Department of Commerce Country Commercial Guide, The Economist's Intelligence Unit Country Reports, Culture Grams, from Brigham Young University's Center, Craigshead's International Business, Travel and Relocation Guide, Price Waterhouse Coopers
Absolute Advantage
The ability of one country to produce a good or service more efficiently than another; specialization as a basis of trade theory
Comparative Advantage
The ability of one country with absolute advantage in the production of two or more goods (or services) to produce one of them relatively more efficiently than the other; specialization/factors of endowment as a basis of trade theory
Arbitration
The disputing parties designate a neutral private person or group of persons to hear and decide their dispute
Copyright
The exclusive legal right that authors, playwrights, publishers, artists, composers, performers, photographers, and other creators have to publish and disseminate their work as they see fit.
Social Stratification
The extent to which groups at the top of the social pyramid exert control over others at lower levels of the pyramid; How top tier affects lower tiers
Communism
The government or state owns and controls all major factors of production and is philosophically an economically classless society
Socialism
The government plays a strong role in the economy and may own stakes in certain businesses
Education
The level of and emphasis on education by a society is a determinant of its potential for economic growth.
Intellectual Property Protections
The limited monopoly rights legally granted by a nation to the creator of intellectual property (Patent, Trademark, Copyright)
Collusion
The practice of companies acting in a manner which secretly thwarts competition amongst themselves (Dividing up markets, collaborating to fix prices on goods and services)
Mercantilism
The premise that a nation could only gain (accumulate wealth) from external trading if it had a trade surplus
Patent
The right granted to the inventor of a product or process that excludes others from selling, making, or using the invention for a certain period of time
Economic Risk
The risks that economic problems in a given country will have a negative impact on the conduct of business in that country
Political Risk
The risks that political forces in a given country will have a negative impact on the conduct of business in that country
Monopoly
The situation where there is only a single seller of a product in an industry and there are very high barriers to enter that industry
Economic Geography
The study of principles that govern the efficient spatial allocation of economic resources and the resulting consequences
Trade
The two-way flow of exports and imports of goods and services
Manners And Customs
The usual way a society does things
Social Institutions
The way people in a society relate to one another within group settings
Non-verbal Communication
Tone of voice, gestures, eye contact, body positions, facial grimaces, and other body language that accompanies verbal communication
Forbes 100
Top 100 billionaires by net worth
Fortune 500
Top 500 U.S. companies by revenue
Backward Translation
Translating a message from English into a foreign language, then translating it back into English to check for accuracy
Feelings or opinions
What are a region's attitudes?
Basic beliefs or philosophies that are pervasive in a society
What are a region's values?
Business operations, Manufacturing and marketing of products, Observance of holidays, Working days and working hours
What are a religion's effects on international business?
Job losses and income stagnation, Loss of local control over economic policies and developments, Disappearance of old industries, Related erosion of communities
What are four arguments/controversies regarding globalization?
Tariffs, specific tariffs, ad volerum tariffs, preferential duties, generalized system of preferences (GSP)
What are six possible tazes on imports?
(1) Large consumer pool (2) Encouraging economies of scale in production, global competitiveness, and economic growth (3) Freeing the flow of capital, labor, and technology to most productive areas in region. (4) Increasing cooperation, peace, and security (5) Encouraging member states to enhance their social welfare to match that of the most progressive states.
What are the benefits of Regional Integration?
(1) Large consumer pool with growing income (2) Encouraging economies of scale in production, increasing region's global competitiveness, and enhancing economic growth (3) Freeing the flow of capital, labor, and technology to the most productive areas in the region. (4) Increasing cooperation, peace, and security among countries in the region (5) Encouraging member states to enhance their social welfare to match that of the most progressive states.
What are the benefits of Regional Integration?
(1) Undermining the most-favored-nation status rule (2) Imposing uniform laws and regulations that do not take into account national economic, cultural, and social differences. (3) Eliminating jobs, increasing unemployment (4) Losing sovereignty, national independence, and identity. (4) Reducing the powers of the national government.
What are the cost of regional integration (short)?
(1) Undermining the most-favored-nation status rule, an essential principle of the WTO. (2) Imposing laws and regulations that are uniform, and that at times do not take into account national economic, cultural, and social differences. (3) Eliminating jobs and increasing unemployment in protected industries. (4) Losing sovereignty, national independence, and identity. (4) Reducing the powers of the national government. Increasing the problems of illegal drugs and terrorism due to the ease of cross-border labor movement.
What are the costs of Regional Integration?
Religion, Values, Attitudes, Material Elements, Aesthetics, Education
What are the elements of culture?
Global integration through trade liberation, Analysis and national trade policy advice, Agreements supporting international standards in financial systems, Information and knowledge transfer to developing countries to support sustainable development, Eradicating communicable disease
What are the five focuses of the World Bank?
Trade without discrimination, Increasingly freer trade, Predictability of trading relationships, Promotion of fair trade, Encouragement of economic reforms in developing countries
What are the five trading system principals set forth by the WTO agreements?
Provide a forum for cooperation on international monetary problems, Facilitate international trade that promotes job creation, economic growth, and poverty reduction, Promote exchange rate stability and an open system of international payments, Lend countries foreign exchange to help address balance of payment problems
What are the four functions of the IMF?
The Digital Generation,The Digital Divide Myth, Expanding the global use of IT, Leapfrogging into the Internet and Cell phone era
What are the four main impacts of IT on globalization?
Democracy, Athenian Democracy, Representative Democracy, Totalitarian Government
What are the four types of political systems?
(1) Phased elimination of trade barriers (2) Protection of intellectual property rights (3) Creation of institutions to address unfair trade practices, trade disputes, environmental protection, worker's rights, competition policies, and implementation of NAFTA rules and regulations
What are the major objectives of NAFTA?
Administering trade agreements, Acting as a forum for trade agreements, Settling trade disputes, Reviewing national trade policies, Providing developing countries with technical assistance and training programs, Cooperating with IMF and World Bank
What are the six ways the World Trade Organization promotes trade?
(1) Free Trade (2) Custom Unions (3) Common Market (4) Economic Union
What are the stages of Regional Integration?
(1) Start small (2) Think globally (3) Compensate the lease fortunate
What are the steps in regional integration?
Communism, socialism, capitalism
What are the three National Economic Ideologies?
International Monetary Fund (IMF), World Bank, World Trade Organization (WTO)
What are the three international organizations that facilitate globalization?
Civil Law , Common Law, and Theocratic Legal System
What are the three legal systems?
A greater amount of choice in the available goods and services (more competition = lower prices), Competition results in lower prices for goods and services consumed, Increased quality of life and higher living standards
What are the three primary benefits of international trade?
Mercantilism, Specialization, and Factors of Endowment
What are the three trade theories?
Patent, Trademark, Copyright
What are the three types of intellectual property protections?
U.S. (20%), China (13%), Japan (6%), India (5%), Russia (4%)
What are the top 5 largest economies based on purchasing power parity (PPP)?
China (11%), U.S. (9%), Germany (8%)
What are the top three exporting (world trade) economies?
Micropolitical and Macropolitical Risk
What are the two types of political risks in international business?
Criminal, contract, tax, antitrust, product safety, and dispute settlement
What are the types of laws?
Litigation and Arbitration
What are two ways to dispute settlement law?
Canada, USA, Mexico
What countries make up NAFTA?
China (investing in the DR Congo infrastructure for natural mineral trade)
What country is the best at Foreign Direct Investment?
Coal and steel industries
What did the EU initially grow from?
General Agreement on Tariffs and Trade
What does GATT stand for?
Non-verbal
What form of communication is more important: Verbal or Non-verbal?
North American Free Trade Agreement
What is NAFTA?
Emerging Market Economies
What is becoming the world's center of economic gravity through innovation, research, and development
economic, social, financial, and marketing infrastructures of a society
What is material culture a result of?
European Union of 28 member states
What is the EU?
Liberalized trade by lowering and/or removing trade barriers such as tariffs, quotas, subsidies
What is the General Agreement on Tariffs and Trade?
3 Organizations: IMF, GATT, World Bank; Under GATT is WTO
What is the International Trade Organzations structure?
Management Styles, Product Development and Management, Advertising Campaigns, Communication
What is the importance of culture for managing and marketing in overseas markets?
Creating a global monetary system for trade
What is the main purpose of the International Monetary Fund (IMF)?
Establish loans to financially aid in post-war reconstruction in effected countries
What is the main purpose of the World Bank?
To promote trade
What is the main purpose of the World Trade Organization (WTO)?
European Union (EU)
What is the most highly evolved in regional integration?
Tariffs
What is the number one trade policy intrument used on inbound goods?
Mercantilism
What is the oldest of the three trade theories?
To boost exportss
What is the purpose of an export subsidy?
Globalization
What leads to increased economic growth, geo-political integration, and interdependence among nations of the world
65%
What percentage of all countries makes up the top 10 largest economies based on purchasing power parity?
75%
What percentage of all countries makes up the top 15 largest economies based on purchasing power parity?
Stage 1 Free Trade
What stage is NAFTA in regional integration in? Stage # Name
Stage 3 Common Market
What stage is the EU in regional integration in? Stage # Name
Stage 4 Economic Union
What stage is the EU moving into for regional integration? Stage # Name
Economic, political, and corruption
What types of risk and corruption are present when doing international business?
1999
What year did the EU adopt a common currency?
1994
What year was NAFTA agreed on?
1945 following the great depression
What year was the IMF founded?
1944
What year was the World Bank founded?
1995
What year was the World Trade Organization (WTO) founded?
Trade Surplus
When value of exports exceeds the value of imports; exports > imports; opposite of a trade deficit
The WTO sets these trading policy measures: Good governance, Anti-corruption Policies, Property rights, Competitive Markets
Where are the four effective trading policy measures to promote globalization? Who sets them?
Geneva, Switzerland
Where is the WTO headquarters located?
International Monetary Fund (IMF)
Which of the three international globalization organizations' purpose is focused around a global currency system
International Monetary Fund (IMF) and World Bank
Which of the two international globalization organizations are headquartered in Washington D.C.?
World Trade Organization (WTO)
Which organization is responsible for acting as a forum for trade agreements
World Bank
Which organization is responsible for analysis and national trade policy advice?
World Trade Organization (WTO)
Which organization is responsible for cooperating with the IMF and World Bank?
World Bank
Which organization is responsible for creating agreements supporting international standards in the financial systems?
World Bank
Which organization is responsible for eradicating communicable disease?
World Bank
Which organization is responsible for global integration through trade liberation?
World Bank
Which organization is responsible for information and knowledge transfer to developing countries to support sustainable development?
International Monetary Fund (IMF)
Which organization is responsible for international trade that promotes job creation, economic growth, and poverty reduction?
International Monetary Fund (IMF)
Which organization is responsible for lending countries foreign exchange to help address balance of payment problems?
International Monetary Fund (IMF)
Which organization is responsible for promoting exchange rate stability and an open system of international payments?
International Monetary Fund (IMF)
Which organization is responsible for providing a forum for cooperation on international monetary problems?
World Trade Organization (WTO)
Which organization is responsible for providing a forum for cooperation on international monetary problems?
World Trade Organization (WTO)
Which organization is responsible for providing developing countries with technical assistance and training programs?
World Trade Organization (WTO)
Which organization is responsible for reviewing national trade policies?
World Trade Organization (WTO)
Which organization is responsible for settling trade disputes?
The company
Who must adjust to culture when marketing?
Governments
Who practices trade policy?
The global firm
Whose responsibility is it to determine the level of importance of various aspects of the culture in the country they wish to do business in?
Custom Unions
a group of free trade member countries that have adopted a common external tariff with nonmember countries; Everyone not in the group is treated equally
Free Trade Area
an area in which two or more countries agree to eliminate all barriers to trade such as tariffs, quotas, and non-tariff barriers like border restrictions, while at the same time keeping their own external tariffs (within WTO guidelines) against nonmembers
Culture
how a group of people behave, what they value and appreciate, what they believe is right and fair and other aspects of life
time orientation
the extent to which a society emphasizes short-run or long-run time horizons; Hofstede
masculine vs. feminine
the extent to which a society minimizes gender inequality; Hofstede
uncertainty avoidance
the extent to which societies tolerate risk or are risk averse; Hofstede
Power distance
the level of egalitarianism (equality) in a society; Hofstede
individualism vs. collectivism
the worth of an individual versus the worth of a group; Hofstede
Caveat Emptor
"Buyer Beware"
Caveat Venditor
"Seller Beware"
Material Culture
A direct result of technology; best demonstrated by economic, social, financial, and marketing infrastructures of a society
Trademark
A distinctive phrase, name, word, picture, symbol or design, or combination of these, that identifies a given business' service or product and is owned by said business
Verbal Communication
A message's actual contents intended to be conveyed to the receiver (i.e., what the message says)
Export Subsidy
A negative tariff or tax aimed at boosting exports
Macropolitical Risk
A political risk that essentially affects all businesses in a given country
Micropolitical Risk
A political risk that only affects a certain industry or set of firms in a given country
Athenian Democracy
A pure form of democracy, in which all adult citizens vote directly on matters affecting the community
Decoupling
A shift in which industrialized country-dependent economies grow based on their underlying economic strengths rather than those of highly-developed countries
Globalization
A socio-economic reform-process of eliminating trade, investment, cultural, information technology, and political barriers across countries
Ad Valorem Tariff
A tax on imports levied as a constant percentage of the monetary value of one unit of the imported good; fixed % of price
Multi-Polar World
A world economy in which the engines of growth are comprised of both industrialized and emerging market economies
International Business
All commercial transactions, both private and public, between nations of the world
Trade Policy
All government actions that seek to alter the size of merchandise and/or service flows from and to a country
Common Market
All trade and transportation barriers are removed and the member states function as 1 entity; a market formed when member countries of a customs union remove all barriers to allow the movement of capital and labor within the customs union
Generalized System of Preferences (GSP)
An agreement where a large number of developed countries permit duty-free imports of a selected list of products that originate from specific countries
Voluntary Export Restraint (VER)
An arrangement under which an efficient exporting nation agrees to limit exports of a product to another country for a temporary period
Preferential Duties
An import tariff established by a nation for goods of certain countries and not applied to the same goods of other countries
Specific Tariff
An import tax that assigns a fixed dollar amount per physical unit; fixed $ amount of price
Net Worth
Assets -Liabilities = Net Worth
Encouraging economies of scale in production, increasing region's global competitiveness, and enhancing economic growth
Benefits of Regional Integration
Encouraging member states to enhance their social welfare to match that of the most progressive states.
Benefits of Regional Integration
Freeing the flow of capital, labor, and technology to the most productive areas in the region.
Benefits of Regional Integration
Increasing cooperation, peace, and security among countries in the region
Benefits of Regional Integration
Large consumer pool with growing income
Benefits of Regional Integration
Capitalism
Businesses are privately owned, strong individual incentives exist, and the government plays very little role in the economy
Aesthetics
Color, form and music are the major components of aesthetics─what is perceived as taste and beauty by a society.
Eliminating jobs and increasing unemployment in protected industries.
Cost of Regional Integration
Imposing laws and regulations that are uniform, and that at times do not take into account national economic, cultural, and social differences.
Cost of Regional Integration
Losing sovereignty, national independence, and identity.
Cost of Regional Integration
Reducing the powers of the national government. Increasing the problems of illegal drugs and terrorism due to the ease of cross-border labor movement.
Cost of Regional Integration
Undermining the most-favored-nation status rule, an essential principle of the WTO.
Cost of Regional Integration
Tariff
Customs duties on imports that are collected by a designated government agency responsible for regulating imports
Tax Law
Deal with governmental levying of taxes on individuals and corporations
Factors of Production
Endowments used to produce goods/services: land (quantity, quality, underlying mineral resources), labor (quantity, skills), capital (cost), technology (quality); focuses production based on abundance
Product Safety Law
Establishes the standards of product safety to which the manufacturers and sellers of products are held
Criminal Law
Establishes which violations of a nation's laws are crimes punishable by possible incarceration; change over time and differs from country to country
Representative Democracy
Form of government in which citizens vote to elect given individuals to serve as their representatives for a certain period of time
Specialization
Free trade encourages countries to specialize in the production of those goods and services they they most efficiently produce
Dispute Settlement Law
Governs how disputes arising in the conduct of global business are settled
Contract Law
Governs legally enforceable agreements between parties to engage in economic exchange; common law contracts are short; arbitration clauses are in most
Democracy
Greek for "rule by the people"; form of government in which all citizens have the right to vote
Reference Groups
Groups that are important to individuals
Life of author + 70 years
How long does a copyright last?
variable; 5-20 years
How long does a patent last?