Exam 1 - BUS187
Righteous Moralists
*Approach that one's own ethics are appropriate in all cultures* -a righteous moralist can encounter problems caused by the prevailing cultural norms in the country where they are doing business -proponents go too far -it does not always follow that the appropriate thing to do is adopt home-country standards
Civil Law System
*Based on a detailed set of laws organized in code* -Judges have less flexibility versus common law -80 countries operate with this
*Benefits* of management practice of national differences in political economy
*Benefits* -*First-mover Advantages*: advantages accruing to the first to enter the market -*Late-mover Disadvantages*: handicap that late entrants to a market suffer -A country's *economic system, property rights regime, and market size* probably constitute good indicators of the potential long-run benefits of doing business in a country
Explain differences in the caste system and class system
*Caste System* - a system of social stratification in which social positions is determined by the family into which a person is born, and change in that position is usually NOT possible during an individual's lifetime *Class System* - a system of social stratification in which social status is determined by the family into which a person is born into by subsequent socioeconomics achievements. *Mobility between classes is possible.*
Globalization
*Refers to the shift toward a more integrated and interdependent world economy* -Four trends are important: 1) the changing world output and the world trade picture 2) the changing foreign direct investment picture 3) the changing nature of the multinational enterprise 4) the changing world order
Theocratic Law System
*The law is based on religious teachings.* -Ex: Islam uses this -Islamic law is primarily a moral rather than a commercial law and is tended to govern all aspects of life -->the foundation is the holy book of Islam, the Koran, Sunnah, Prophet Muhammad, and the writings of scholars
What is the Foreign Corrupt Practices Act?
*US law regulating behavior regarding the conduct of international business in the taking of bribes and other unethical actions* -Requires all publicly traded companies to keep detailed records that would reveal whether a violation of the act has occurred
Naive immoralist
*approach that accepts ignoring ethical norms if others do so too* (1) to say that an action is ethically justified if everyone is doing it is not sufficient (2) the multinational must recognize that it does have the ability to change the prevailing practice in a country
Kantian Ethics
*belief that people should be treated as ends and never purely as means to the ends of others* -its notion is to treat people with respect and treated with dignity
The _________________ believed that socialism could be achieved only through violent revolution and totalitarian dictatorship
Communists
Google launched Google Plus to gain a foothold in the social media market. However, given that there are numerous social networking platforms and Facebook is already a leader in social media, Google Plus found it challenging to generate brand loyalty and establish itself in the market. This was because of _____.
Late-mover Disadvantage
According to Geert Hofstede's study, which of the following cultural dimensions would be characterized by a greater readiness to take risks and less emotional resistance to change? -high collectivism -high power distance cultures -low uncertainty avoidance -low power distance cultures
Low uncertainty avoidance
An economy in which the interaction of supply and demand determines the quantity in which goods and services are produced is called a __________________.
Market Economy
Interdependent political, economic, and legal systems of a country make up its:
Political economy
True or False Over the past 30 years the flow of FDI has accelerated faster than the growth in the world trade and world output
True
true or false? Individualism has led to a high degree of managerial mobility between companies resulting in managers who have good general skills but lack company-specific experience.
True
True or False. Social responsibility refers to the idea that businesspeople should favor decisions that have both good economic and social consequences.
True - The concept of social responsibility refers to the idea that businesspeople should consider the social consequences of economic actions when making business decisions, and that there should be a presumption in favor of decisions that have both good economic and social consequences.
A multinational enterprise (MNE) is a firm that
has production units in more than two countries.
Contract Law System
*the body of law that governs contract enforcement* - Under a common law system, contracts tend to be very detailed w/ all contingencies spelled out - Under a civil law system, contracts tend to be much shorter and less specific because many issues are already covered in the civil code - *United Nations Convention on Contracts for the International Sale of Goods (CIGS)* - agreement establishing a uniform set of rules governing contracts between businesses in different nations
Explain Privatization
*the sale of state-owned enterprises to private investors* - seen as a way to stimulate gains in economic efficiency by giving new private owners a powerful incentive to search for increases in productivity, to enter new markets, and to exit losing ones
Right Theories
*Ethical approaches that recognize that humans have fundamental rights and privileges that transcend national boundaries and cultures* -*Universal Declaration of Human Rights* (1948): ratified by almost every country on the planet and lays down basic principles that should always adhere to respective of the culture in which one is doing business
The Convention on Combating Bribery of Foreign Public Officials in International Business Transactions
*OECD agreement to make the bribery of foreign public officials a criminal offense* -It excludes facilitating payments (speed money/grease payments) made to expedite routine government action from the convention
*Risk* of management practice of national differences in political economy
*Political risk* - the likelihood that political forces will cause drastic changes in a country's business environment that will adversely affect the profit and other goals of a particular business enterprise *Economic risk* - the likelihood that events, including economic mismanagement, will cause drastic changes in a country's business environment that adversely affect the profit and other goals of a particular business enterprise *Legal risk* - the likelihood that a trading partner will opportunistically break a contract or expropriate (take away) intellectual property rights
Democracy
*a political system in which government is by the people, exercised either directly or through elected representatives* - associated w/ Individualism *Representative Democracy*: where citizens periodically elect individuals to represent them - form the government
What is a Multinational Enterprise?
*any business that has productive activities in two or more countries* - Since the 1960s, there has been a rise in non-U.S. multinationals, and a growth of mini-multinationals
What is International Business?
*any firm that engages in international trade or investment* Ways that it differs from domestic business: - Countries are different - The range of problems confronted in an international business is wider and the problems more complex than those in domestic business - Firms have to find ways to work within the limits imposed by governments intervention in the international trade and investment system - International transactions involve converting money into different currencies
Common Law System
*based on tradition, precedent, and custom* - *Tradition*; country's legal history - *Precedent*; cases that have come before the courts in the past - *Custom*; to the ways in which laws are applied in specific situations - Great Britain uses this - Allows the judge to interpret the law -as new precedents arise, laws may be altered, clarified, or amended to deal w/ new situations
Straw Men
*business ethics are raised by business ethics scholars primarily to demonstrate that they offer inappropriate guidelines for ethical decision making in a multinational enterprise* -Friedman Doctrine, Cultural Relativism, Righteous Moralists, Naive Immoralists
Friedman Doctrine
*created by (Nobel Prize- winning) economist Milton Friedman* -social responsibility of business is to increase profits, so long as the company stays within the rules of law -firm should maximize their profits because that is the way to maximize the returns that accrue to the owners of the firm, its stockholders -arguing against business ethics but not quite true -he states that a business's social responsibility is to use its resource and engage in activities designed to increase profits so long as it stays within the rules of the game, which is to say that it engages in OPEN and FREE COMPETITION w/o deception or fraud --> aka businesses should behave in an ETHICAL manner and not engage in deception and fraud
Utilitarian Approaches
*ethical approach that holds that the moral worth of actions is determined by their consequences* -focuses attention on the need to weigh carefully all the social benefits and costs of a business action and to pursue only those actions where the benefits outweigh the costs (benefits > cost) -problems include: --(1) measuring the benefits, costs, and risks of a course of action --(2) the philosophy omits (leaves out) the consideration of justice
Command Economy
*government plans the goods and services that a country produces, the quantity that is produced, and the prices as which they are sold* - All businesses are state-owned, and governments allocate resources for "the good of society" - Because there is little incentive to control costs and be efficient, command economies tend to stagnate (stay in place) - Consistent with the *collectivist's ideology*
Just Distribution
*one that is considered fair and equitable* -*John Rawls*' Theory; all economic goods and services should be distributed equally except when an unequal distribution would work to everyone's advantage -Veil of Ignorance: everyone is imagined to be of all of his or her particular characteristics -two fundamental principles: (*1*) each person be permitted the maximum amount of basic liberty compatible with similar liberty for others (*2*) once equal liberty is ensured, inequality in basic social goods is to be allowed ONLY if such inequalities benefit everyone -difference principle; inequalities are justified if they benefit the position of the least-advantaged person - veil of ignorance is a moral compass that managers can use to help them navigate through difficult ethical dilemmas
Private Action
*refers to theft, piracy, blackmail, and the like by private individuals or groups*
Explain Deregulation
*removal of government restrictions concerning the conduct of a business* -removing prices so it allows prices to be set by the interplay b/w demand and supply -abolishing laws regulating the establishment and operation of private enterprises -relaxing / removing restrictions on direct investment by foreign enterprises and international trade *in mixed economy* - state set prices, owned businesses, limited private enterprises, restricted investment by foreigners and restricted international trade *India is an example of a deregulated country*
Communists
*socialism can only be achieved through violent revolution and totalitarian dictatorship* In retreat worldwide by mid-1990s
Social democrats
*socialism is achieved through democratic means* Retreating as many countries move toward free market economies State-owned enterprise have been privatized
Collectivism
*stresses the primacy of collective goals over individual goals* - Can be traced to the Greek philosopher, Plato (427-347 BC) - Today, collectivism is equated w/ *Socialists* (Karl Marx 1818-1883)
Cultural Relativism
*the belief that ethics are culturally determined, and a firm should adopt the ethics of the culture in which it is operating in* *"when in Rome, do as the Romans"* -implicitly rejects the idea that universal notions of morality transcend difficult cultures but some universal notions of morality are found across cultures
Which of the following is an example of deregulation? -A country that provides agricultural subsides to farmers -A country that encourages foreign direct investment -A country that takes over a leading private bank to prevent it from filing for bankruptcy -Country that implements a simplified income tax filing system
A country that encourages foreign direct investment
Right-Wing Totalitarianism
A political system in which political power is monopolized by a party, group, or individual that generally *permits individual economic freedom but restricts individual political freedom*, including free speech, often on the grounds that it would lead to the rise of communism
_____________________ is a closed system of stratification in which social position is determined by the family into which a person is born, and change in that position is usually not possible during an individual's lifetime.
Caste System
Identify the business and economic implications of differences in culture
Christianity Islam Hinduism Buddhism Confucianism
Child labor is permitted and widely employed in Country X. A multinational company entering Country X decides to employ minors in its subsidiary, even though it is against the multinational's home-country ethics. Which of the following approaches to business ethics would justify the actions of the multinational company?
Cultural Relativism
In its extreme viewpoint, __________________ suggests that if a culture supports slavery, it is all right to use slave labor in the country.
Cultural Relativism - Cultural relativism does not stand up to a closer look. At its extreme, cultural relativism suggests that if a culture supports slavery, it is OK to use slave labor in a country.
The system of values and norms that are shared among a group of people and that when taken together constitute a design for living best *defines*:
Culture
A Japanese executive's ritual of presenting a business card to a foreign business executive is an example of:
folkways
Totalitarianism
form of government in which one person or political party *exercise absolute control over all spheres of human life and prohibits opposing political parties* -->Splits into: *Communist Totalitarian* *Theocratic Totalitarian* *Tribal Totalitarian* *Right-wing Totalitarian*
Patent
grants the inventor of a new product or process exclusive rights for a defined period to manufacture, use, or sale of that invention
Define Ethnocentrism. How can it impact when doing business in a country?
page 115 *Belief in the superiority of one's own ethnic group or culture* -There's disregard or contempt for the culture of other countries -->Countries like US, France, Japan, and Britain are guilty of this
List the different philosophical approaches to ethics
pages 135-140 *Straw Men* *Utilitarian Approaches* *Kantian Ethics* *Rights Theories* *Just Distribution*
Individualism
refers to philosophy that an *individual should have freedom in his own economic and political pursuits* -traced to Greek philosopher, Aristotle (384-322 BC) --> Individual diversity and private ownership are desirable o Individual economic and political freedoms are the ground rules on which a society should be based o Implies democratic political systems and free market economies -splits into *Democrats* and *Totalitarianism*
According to ______________, the social responsibility of business is to increase profits, so long as the company stays within the rules of law.
the Friedman Doctrine - Friedman's basic position is that the only social responsibility of business is to increase profits, so long as the company stays within the rules of law. He explicitly rejects the idea that businesses should undertake social expenditures beyond those mandated by the law and required for the efficient running of a business.
Social Responsibility
the idea that businesspeople should consider the social consequences of economic actions when making business decisions and that there should be a presumption in favor of decisions that have both *good economic and social consequences*
A civil law system tends to be less adversarial than a common law system, since ____________.
the judge's decisions are based on detailed legal codes
Which of the following statements about values and norms of a culture is NOT true? -the values and norms of a society do not emerge fully formed -the values and norms of a society are the evolutionary product of a number of factors -the values and norms of a society are influences by religion -the values and norms of a society do not influence social structure
the values and norms of a society do NOT influence social structure
Socialists
those who believe in *public ownership of means of production for the common good of society * - developed by Karl Marx 1818-1883 o Advocate state ownership of the basic means of production, distribution, and exchange o Manage to benefit society as a whole, rather than individual capitalists -Split into *Communism* and *Social Democrats*
Buddhism
It may represent a more fertile ground for entrepreneurial activity than a Hindu culture
BP, one of the world's largest oil companies, has made it part of the company policy to undertake "social investments" in the countries where it does business. There was no economic reason for BP to make this social investment, but the company believes it is morally obligated to give something back to the societies that have made their success possible. BP's actions are an example of:
Noblesse Oblige
The finance minister of a country considers several large, state-owned iron manufacturing units to be inefficient and a source of corruption. To generate resources for public expenditure and promote economic growth, the government decides to auction an entire iron manufacturing plant to sell it to a strategic investor. This process exemplifies _________________.
Privatization
Explain various violations of property rights
Property rights - *the legal rights over the use to which a resource is put and over the use made of any income that may be derived from that resource* - Property rights can be violated by two ways -- (1) private action and (2) public action
Importance of Antitrust law in the US
Regulates the conduct and organization of business corporations to promote fair competition for the benefit of consumers
Which of the following statements about the legal systems of countries is NOT true? -They can affect the attractiveness of a country as an investment site or market -They are of immense importance to international business -They are influenced by the prevailing political system of the country -They are almost the same for all countries
They are almost the same for all countries
The __________________ occurs when a resource is shared by all, but owned by no one, is overused by individuals, resulting in its degradation
Tragedy of the commons - The tragedy of the commons occurs when a resource held in common by all, but owned by no one, is overused by individuals, resulting in its degradation.
The products of Carmen Stores, an international sports apparel chain, are manufactured in sweat factories in China. According to the company president, using sweatshop labor offers a means of livelihood to children and young adults, as well as supplies good quality apparel to customers at a lower cost. She asserts that the actions of the company are justified because it results in the benefit of the maximum number of people. The company president's argument is based on which of the following ethical viewpoints?
Utilitarian approach to business ethics
Public Action
Violates property rights occur *when public officials, extort income, resources, or the property itself from property holders* - legally ex: excessive taxation - illegally ex: bribes or blackmailing - high levels of corruption reduce foreign direct investment, the level of international trade, and the economic growth rate in a country
Tribal Totalitarianism
a political system in which a party, group, or individual that represents the interests of a *particular tribe (ethnic group) monopolizes political power*
Theorcratic Totalitarianism
a political system in which political power is monopolized by a party, group, or individual that governs according to *religious principles*
Communist Totalitarianism
a version of collectivism advocating that socialism can be achieved only through a *totalitarian dictatorship*
What is a first mover advantage?
advantages accruing to the first to enter the market
Market Economy
all productive activities are *privately owned*, and production is determined by the interaction of *supply and demand* - Government encourages free and fair competition between private producers
A situation in which none of the available alternatives seems morally acceptable is called:
an ethical dilemma -Ethical dilemmas are situations in which none of the available alternatives seems ethically acceptable
Cross-cultural literacy refers to:
an understanding of how cultural differences can affect business.
Copyrights
are the exclusive legal rights of authors, composers, playwrights, artists, and publisher to publish and dispense their work as they see fit
Mixed Economy
certain sectors of the economy are left to *private ownership and free market mechanisms* while other sectors have significant *state ownership and government planning* - Governments tend to own firms that are considered important to national security - Not too long ago when Great Britain, France, and Sweden were mixed economies
Trademarks
designs and names, officially registered, by which merchants or manufacturers designate and differentiate their products
*Cost* of management practice of national differences in political economy
- # of political, economic, and legal factors determine the costs of doing business in a country: *Political* - A company may have to pay off politically powerful entities in a country before the government allows it to do business there *Economic* - Sophistication of a country's economy - More costly to do business in relatively underdeveloped economies because of the lack of infrastructure and supporting businesses *Legal* - More costly to do business in a country where local laws and regulations set strict standards w/ regard to product saftey, safety in the workplace, environmental pollution, and the like - More costly to do business in a country that lacks well-established laws for regulating business practice - In the absence of a well-developed body of business contract law, international firms may find no satisfactory way to resolve contract disputes, and routinely face large losses from contract violations
Con's of Globalization
- *work that globalization will cause*: o Job losses o Environmental degradation o The cultural imperialism of global media and MNEs - argue that falling barriers to trade are *destroying manufacturing jobs in advanced countries* - *argue that firms avoid costly efforts to adhere to labor and environmental regulations by moving production to countries where such regulations do not exist, or are not enforced* -*believe that if globalization was beneficial there should not be a divergence between rich and poor nations* o They believe that the gap has gotten WIDER; that the benefits of globalization have not been shared equally
Pro's of Globalization
-*believe that increased trade and cross-border investment mean*: o Lower prices for goods and services o Greater economic growth - *contend that the benefits of this trend outweigh the costs* o Countries will specialize in what they do most efficiently and trade for other goods - and all countries will benefit - *claim that tougher environmental and labor standards are associated w/ economic progress* o As countries get richer from free trade, they implement tougher environmental and labor regulations - *claim that the best way for the poor nations to improve their situation is to*: o Reduce barriers to trade and investment o Implement economic policies based on free market economies o Receive debt forgiveness for debts incurred under totalitarian regimes
Noblesse Oblige
- in French terms, refers to honorable and benevolent behavior considered the responsibility of people of high (noble) birth - business terms; *benevolent behavior that is the responsibility of successful enterprises* - businesses making social investments designed to enhance the welfare of the communities in which they operate
List the economic systems
-*Market Economy* -*Command Economy* -*Mixed Economy*
Understand the ethical issues faced by international businesses
-Employment practices -Human rights -Environmental pollution -Corruption -Moral obligations
Christianity
-Max Weber thought that *Protestant ethics emphasizes the importance of hard work and wealth creation and frugality* -->Needed to facilitate the development of capitalism -Hard work and the accumulation of capital, paved the way for the development of capitalism in western Europe and the US
Which of the following is NOT a consequence of the reductions in trade barriers and restrictions on FDI since 1950? -Nations are becoming more independent of each other for important goods and services. -The economies of the world's nation states are becoming more intertwined -Firms are dispersing parts of their productions process to global locations to drive down production costs and increase product quality. -The world has become significantly wealthier since 1950.
-Nations are becoming more independent of each other for important goods and services.
Hinduism
-Perceives the pursuit of material well-being as making the attainment of nirvana more difficult -Supported india's caste system -Values of Hindu asceticism (severe self discipline) and self-reliance that Gandhi advocated had a negative impact on economic development of post independent India
__ occur when a firm exports goods or services to consumers in another country.
International Trade
Islam
-The Koran speaks of free enterprise and of earning legitimate profit through trade and commerce -Critical of those who earn a profit through the exploitation of others -Wealthy and successful have obligations to help the disadvantaged -Will make business with others if they behave in a manner that is consistent w/ Islamic ethics -The Koran condemns interest so their economic principle is to prohibit the payment or receipt of interest *Mudarabah*: -When islamic banks lends money to a business it takes a share in the profits that are derived from the investment -A deposit is treated as an equity investment in whatever activity the bank uses the capital for *Murabaha*: -Most widely used islamic bank method -When a firm wishes to purchase something using a loan the firm tells the bank after having negotiated the price with the equipment manufacturer
Explain the implications for management practice of national differences in political economy
-The political, economic, and legal systems of a country raise important ethical issues that have implications for the practice of international business -The political, economic, and legal environments of a country clearly influence the attractiveness of that country as a market or investment site -->The *benefits, costs, and risks* associated w/ doing business in a country are a function of that country's political, economic, and legal systems -->*Attractiveness* of a country as a market or investment site depends on balancing the likely long-term benefits of doing business in that country against the likely costs and risks (*benefits = cost + risk*)
What is a murabaha contract?
-When a firm wishes to purchase something using a loan the firm tells the bank after having negotiated the price with the equipment manufacturer
What are the various dimensions that Hofstede's study explores?
1) *Power Distance* - how a society deals w/ the fact that ppl are unequal in physical and intellectual capabilities 2)*Individualism vs Collectivism* - the relationship b/w the individual and his fellows 3) *Uncertainty Avoidance* - the extent to which different cultures socialize their members into accepting ambiguous situations and tolerating ambiguity -->US doesn't fall under this bc we don't tolerate ambiguity 4) *Masculinity vs Femininity* - the relationship b/w gender and work roles 5) *Confucian Dynamism*
Confucianism
3 values central to the ethics of Confucianism 1) *Loyalty: is a sacred duty* -The loyalty that binds employees to the heads of their organization can reduce the conflict b/w management and labor 2) *Reciprocal Obligations: superiors are obliged to reward the loyalty of their subordinates by bestowing blessings on them* -*Guanxi* - means relationships but in business setting it means connections -->It's an important mechanism for building long-term business relationships and getting business done in China -*Guanxiwang* - relationship network 3) *Honesty* in dealings with others -->When companies can trust each other not to break contractual obligations, the cost of doing business are lowered
Collective Action
???
Copyright Violation
???
Which of the following is an example of ethnocentrism? -An upper-middle-class woman talks rudely to a sales person, because she looks down upon individuals belonging to the working-class. -An American manager criticizes the cultural practices of Saudi Arabia, when he is sent there on business, because it differs from his own cultural norms. -A manager in India looks down upon his subordinates because they are from a lower caste, compared to him. -A French business owner, who plans to expand his market to China, conducts a detailed cultural study of China to customize his marketing campaign.
An American manager criticizes the cultural practices of Saudi Arabia, when he is sent there on business, because it differs from his own cultural norms.
True or False A market with a large number of consumers, with low living standards will have a relatively large market when measured in economic terms
False
True or False. Totalitarian states promote human freedom and human development, which facilities economic progress.
False
True or Fasle? The Foreign Corrupt Practices Act originally allowed "facilitating payments" to secure contracts that would not otherwise be secured.
False
True or False. An American firm that sets up production units in China is accused of releasing untreated chemical waste into water bodies. The manager of the firm defends the firm stating that, factories in China set up by French and British firms also release untreated chemical waste into water bodies. In this example, the manager is using the utilitarian approach to business ethics.
False - Utilitarian approaches to ethics hold that the moral worth of actions or practices is determined by their consequences. A *naive immoralist* asserts that if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, that manager should not either.
True or False. World Bank gives an aid of 100 million dollars to Kenya for creating rural healthcare facilities. This is an example of *foreign direct investment*.
False. FDI is a direct investment in business operations in a foreign country
______________ are social conventions concerning things such as the appropriate dress code in a particular situation, good social manners, eating with the correct utensils, neighborly behavior, and the like.
Folkways
What is a consequence of the emphasis on individual performance in many Western societies?
High degree of managerial mobility
