IB 2000 Exam 1

globalization of production

the dispersal of production activities worldwide to minimize costs or maximize quality

- Bribery and corruption - Labor conditions and human rights - Fair trade practices - Environment and firm's carbon footprint

what are key ethical issues in international business?

- traditional philanthropy: donating money - risk management: operating by an ethical code - strategic CSR: builds social responsibility into core values (like tom's donating money for every pair sold)

what are the 3 types of corporate social responsibility (CSR)?

International Monetary Fund (IMF)

A global organization that works to achieve sustainable growth and prosperity for all of its 190 member countries It does so by supporting economic policies that promote financial stability and monetary cooperation, which are essential to increase productivity, job creation, and economic well-being

World Trade Organization (WTO)

Deals with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible. Incorporates the principles of the GATT and is better positioned to carry them out because, among other things, it is better versed in issues like intellectual property, has a faster dispute settlement system, and wields more power.

globalization of markets

the convergence in buyer preferences in markets around the world

legal system

Set of laws and regulations, including the processes by which a country's laws are enacted and enforced and the ways in which its courts hold parties accountable for their actions

General Agreement on Tariffs and Trade (GATT)

Set up to eliminate protectionism, get countries trading freely among themselves, and help restore economic prosperity following the devastation of World War II Sought to push the world toward a reality where goods and services are exchanged among countries without tariffs, quotas, and so forth, and without favoritism and discrimination. Replaced by WTO due to lack of institutional structure.

world bank

Supports investments in countries that underpin long-term growth and that help to meet the needs of their citizens Work with policy makers to develop markets, institutions, and economies that are stable, equitable, and efficient Focus upon developing countries

domestic company

a company that only conducts business in its home country

subculture

a group of people who share a unique way of life within a larger, dominant culture - can differ from the dominant culture in language, race, religion, lifestyle, values, attitudes, and more - they can exist across national borders

theocratic totalitarianism

a political system in which a country's religious leaders are also its political leaders

democracy

a political system in which government leaders are elected directly by the wide participation of the people or by representatives - freedom of expression - periodic elections - full civil and property rights - minority rights - nonpolitical bureaucracies

culture

a set of values, beliefs, rules, and institutions held by a specific group of people

mixed economy (socialist)

a system in which land, factories, and economic resources are pretty equally split between private and government ownership - the government controls sectors important for security and stability - Private industries control prices, competition, etc - Decline due to slow economic growth, lack of accountability, rising costs, and move toward market-based systems/privatization

centrally planned (command) economies

a system in which the government owns the land, factories, and all other economic factors of the nations - The government makes all economic decisions - Decline due to the failure to create economic value, provide incentives, achieve rapid growth, and satisfy customer needs

communication

a system of conveying thoughts, feelings, knowledge, and information through speech, writing, and action (spoken/written language, body language, etc)

pluralism

both private and public groups needed to balance each other's power

secular totalitarianism

communist, tribal, right-wing totalitarianism

cultural literacy

detailed knowledge about a culture that enables a person to work happily and effectively with it

totalitarianism

every aspect of people's lives is controlled to "preserve order" - Imposed authority - Lack of constitutional guarantees - Restricted participation

imports

goods and services purchased abroad and brought into a country

exports

goods and services sold abroad and sent out of a country

- perception of time (french way of leisurely/calmly working vs american way of using all available time to be productive) - view of work (live to work vs work to live) - material culture - cultural change (cultural traits, cultural diffusion, cultural imperialism)

how does culture affect the workplace?

values

ideas, beliefs, and customs to which people are emotionally attached - new cultural values are often highly resisted

product liability

involves holding a firm and its officers responsible when a product causes injury, death, or damage

theocratic law

legal system based on religious teachings

common law

legal system based on the tradition and precedent, founded in the UK, rather vague law with lengthy contracts (US uses this)

civil law

legal system that uses a legal code and has more specific laws

appropriate behavior

manners, customs, folk customs (practiced by a homogenous group based on age-old customs), popular customs (behavior shared by a heterogenous group that's often seen as a threat to folk customs), gift-giving customs (bribery rules differ between nations)

brain drain

the departure of highly educated people from one profession, geographic region, or nation to another

market economy

most of a nation's land, factories, and resources are privately owned - Market supply & demand determine who produces what at what prices - Gov's role: enforce antitrust laws, preserve property rights, provide fiscal + monetary stability, preserve political stability - Emphasis on individualism and laissez-faire economics - Economic freedom (free choice, free enterprise, price flexibility)

anarchism

only individuals and private groups can preserve personal liberties

attitudes

positive or negative evaluations, feelings, and tendencies that people harbor toward objects or concepts - learned within specific cultures - more flexible than values

intellectual property

property resulting from people's intellectual talent and abilities

patent

property right granted to the inventor of a product/process that excludes others from making or selling the invention

trademark

property rights in the form of words/symbols that distinguish a product and its manufacturer

ethnocentricity

the belief that one's own ethnic group/culture is superior to others

international business

the commercial transaction that crosses the borders of two or more nations

economic system

the structure and processes that a country uses to allocate its resources and conduct commercial activities

globalization

the trend toward greater economic, cultural, political, and technological interdependence among national institutions and economies - characterized by denationalization - different from internationalization

lingua franca

third or linked language to connect two different native speakers, a mutually understood language

- patent - trademark - copyright

types of industrial property?

aesthetics

what a culture considers "good taste" in the arts/music, the imagery evoked by expressions, and the symbolism of certain colors

- Social groups - Social status - Social stratification: ranking people into social classes - Social mobility: the ease with which one can move up/down the ladder - Caste system: When people are born into a certain caste with no social mobility - Class system: a system in which personal ability and actions determine social status

what are components of social structure?

- Friedman's view: business's responsibility is to maximize profits legally, doesn't matter how ethical it is (bare minimum view) - Cultural relativist view: Adopt local ethics because values/ethics differ between cultures - Righteous moralist view: Use home country ethics when traveling because the home country's ethics are superior - Utilitarian view: Company should behave in a way that maximizes good outcomes for all parties

what are the 4 philosophies of ethics?

1. physical environment 2. values & attitudes 3. communication 4. aesthetics 5. appropriate behavior 6. social structure 7. religion 8. education

what are the 8 components of culture?

- Reduces marketing costs - Creates new market opportunities - Levels the uneven income streams - Local buyers' needs - Global sustainability

what are the benefits of the globalization of markets?

- Access to lower-cost workers (the biggest reason in recent years) - Access technical expertise - Access production inputs

what are the benefits of the globalization of production?

Culture: allows us to profit from our differing circumstances and skills, however, homogenizes our world and destroys our rich diversity of cultures National Sovereignty: Globalization spreads democracy worldwide, however, empowers supranational institutions at the expense of national governments, causing countries to feel that they're losing their autonomy and governance Environment: Most international firms today support reasonable environmental laws, however, is it just a race to the bottom?

what are the debates about culture, sovereignty, and the environment and globalization?

- WTO still exists - WTO is more efficient and automatic when disputing settlements - WTO is permanent, GATT lacked institutional structure to be an organization

what are the differences between WTO and GATT?

1. falling barriers to trade and investment 2. technological innovation

what are the forces driving globalization?

- christianity - islam - hinduism - confucianism - buddhism - judaism - shinto

what are the world's 7 top religions?

strict jews follow a kosher diet, so they can't eat many foods

what do (food) companies need to be careful of when marketing to Jewish customers?

Prevent market sharing, price fixing, and unfair advantage

what do antitrust regulations do?

strict hindus don't hurt or eat any animal, especially cows/beef, so food companies must keep this mind

what do companies need to be careful of when marketing to hindu customers?

- can't sell pork - can't sell alcohol - many other caveats companies must research

what do companies need to be careful of when marketing to muslim customers?

- Eliminates jobs and lowers wages in developed nations - Exploits workers in developing nations (by paying them less)

what is the argument against globalization?

- Increases wealth and efficiency in all nations, improves the standard of living, allows workers to purchase goods at lower prices - Generates labor market flexibility in developed nations - Advances the economies of developing nations

what is the argument for globalization?

Inequality within nations: wage gap widens between white-collar and blue-collar occupations in rich nations Inequality between nations: widening the gap in average incomes between rich and poor nations Global inequality: widening income inequality between all of the people of the world

what is the debate about globalization & income inequality both within and between nations, and globally?

- Large companies from the wealthiest nations - Firms from emerging markets - Small and medium-sized companies - Multinational corporations (MNCs) (business with direct investments) - Born global firm (instantly global, usually e-commerce)

who are the key players in international business?