ib chapter 2

totalitarianism

- 1 person or political party exercises absolute control over all spheres of life, and opposing political parties are forbidden - china is still under totalitarian rule, but has adopted free market policies that tend to be associated with individualism. 4 forms of this: 1. communist 2. theocratic 3. tribal 4. right wing

mixed economies

- elements of a market economy and elements of a command economy are present. Governments often take control of industries that are considered vital to national interest. Until their recent shift to market economies, France, Great Britain, and Sweden were mixed economies. - 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

communist totalitarianism

- found in states where the communist party monopolizes power - advocates achieving socialism through totalitarian dictatorship. While this form of totalitarianism is declining worldwide, countries like Vietnam, Cuba, and North Korea still follow the philosophy.

market economies

- goods and services are privately owned and production quantities are determined by the interaction of supply and demand. - In a market economy, like the U.S., governments encourage free and fair competition between private producers and discourage monopolies.

b)

A political system that stresses the primacy of collective goals over individual goals is called a) individualism b) collectivism c) a democracy d) a market economy

common law

tradition, precedent, and custom. So, judges look at how previous cases have been treated to decide how to treat current cases. Then, as new precedents are made, laws can be amended if necessary. US

to avoid privacy, firms can

- stay away from countries where intellectual property laws are lax - file lawsuits - lobby governments for international property rights agreements and enforcement China and Thailand are currently among the world's biggest violators of intellectual property rights. Pirated products like Rolex watches, Levi's jeans, and computer software are widely available in both countries. In Latin America, about 68 percent of all software is pirated, and in China alone, 86 percent of software is pirated! Nearly 200 countries have signed the Paris Convention for the Protection of Industrial Property to protect intellectual property rights, and are part of the World Property Organization, but enforcement of property regulations is still lax in many countries. What can you do if your intellectual property is stolen? You can lobby your government to take action. Many companies have done this already, and as a result this is one of the areas that the WTO is working on though the Trade Related Aspects of Intellectual Property Rights or TRIPS agreement. You can also file your own lawsuit. Starbucks was successful at doing this against a Chinese firm that opened stores that were virtually replicas of the traditional Starbucks store.

tribal totalitarian

- system a political party that represents the interests of a particular tribe monopolizes power. This type of system is present in some African nations like Zimbabwe and Tanzania.

right wing totalitarian

- system allows individual economic freedom, but individual political freedom is restricted because it might lead to communism. A nation's military often backs this type of system. This type of system has been declining since 1980, but you might recall its presence in Germany and Italy during the 1930s and 1940s.

theocratic totalitarianism

- system political power is monopolized by a party, group, or individual that governs according to religious principles. You can think of countries like Saudi Arabia or Iran when you think of this type of system. Both countries are greatly influenced by the principles of Islam, and both countries restrict political and religious freedom.

command economies

- the goods and services that a country produces, the quantity in which they are produced, and the price at which they are sold, are planned by the government. - Businesses are state-owned and the government allocates resources for the good of society as a whole. - However, because state-owned companies lack the profit incentive to be efficient and develop new products that you find in market economies, command economies tend to stagnate.

property rights

- the legal rights over the use to which a resource is put and over the use of any income that may be derived from that resource. - ex that can be violated: land, buildings, equipment, capital, businesses, intellectual property - differ across countries. In some countries, even though there are laws protecting property, the laws are not consistently enforced. - can be violated through private actions and through public actions. >>> Levying excessive taxation, requiring expensive licenses or permits from property holders, taking assets into state ownership without compensating the owners, redistributing assets without compensating the prior owners Corruption, demanding bribes Private violations like theft, piracy, or blackmail, are done by individuals. this type of violation can take place in any country, but countries with weak legal systems like Russia have a much bigger problem with it. When public officials like politicians and bureaucrats violate property rights, they might use legal mechanisms such as levying excessive taxes like Chavez did in Venezuela, or requiring special expensive licenses, or even simply taking assets into state control. Public violation can also be illegal. You might think of having to pay a bribe in order to get the right to operate in a certain country like companies had to do in the Philippines when Ferdinand Marcos was in power.

legal systems types

1. common law 2. civil law 3. theocratic law

political system dimensions

1. the degree to which the country emphasizes collectivism or individualism 2. the degree to which the country is democratic or totalitarian *they're interrelated. collectivistic systems tend to be more totalitarian and individualistic systems tend to be more democratic.

economic system

3 types: 1. market 2. command 3. mixed - a nation's political system and its economic system are connected. - in countries where individual goals are given primacy over collective goals, free market systems are likely to exist, but in countries where collective goals are dominant, markets are likely to be restricted and state-owned enterprises are common.

c)

A form of government in which one person or political party exercises complete control over all spheres of human life and prohibits opposing political parties is a) a democracy b) a representative democracy c) totalitarianism d) socialism

intellectual property can be protected in 3 ways:

A patent gives the inventor of a new product or process exclusive rights to manufacture, use or sell the invention. A copyright is the exclusive right of authors, composers, playwrights, artists, and publishers to publish and dispose of their work as they see fit. A trademark is a design or name that may be officially registered, that allows merchants or manufacturers to designate or differentiate their products.

when doing business with other countries....

Companies also need to be aware of product safety and product liability laws.

a)

Design and names by which merchants or manufacturers designate and differentiate their products are called a) trademarks b) copyrights c) patents d) name brands

property rights and corruption are related...

High levels of corruption reduce foreign direct investment (FDI), the level of international trade, and the economic growth rate in a country

d)

In which type of economic system are all productive activities privately owned? a) a mixed economy b) a command economy c) a representative economy d) a market economy

the link between political ideology and economic systems

Political ideology and economic systems are connected - countries that stress individual goals are likely to have market based economies - in countries where state-ownership is common, collective goals are dominant --The democratic-totalitarian dimension is not independent of the collectivism-individualism dimension. Democracy and individualism go hand in hand, as do the communist version of collectivism and totalitarianism. However, gray areas exist; it is possible to have a democratic state where collective values predominate, and it is possible to have a totalitarian state that is hostile to collectivism and in which some degree of individualism—particularly in the economic sphere—is encouraged. For example, China has seen a move toward greater individual freedom in the economic sphere, but the government is still a totalitarian dictatorship.

Why Is Product Safety And Product Liability Important?

Questions should be asked by a global manager: Does the high cost of liability insurance in the U.S. make American companies less competitive? Is it ethical to follow host country standards when product safety laws are stricter in a firm's home country than in a foreign country? _______________ Country differences in product safety and liability laws raise an important ethical issue for firms doing business abroad. When product safety laws are tougher in a firm's home country than in a foreign country and/or when liability laws are more lax, should a firm doing business in that foreign country follow the more relaxed local standards or should it adhere to the standards of its home country?

foreign corrupt practices act

The United States passed this in the 1970s to make it illegal for companies to bribe government officials in foreign countries to obtain or maintain business over which the foreign official has authority. Companies have to keep detailed records so that it's clear whether a violation has taken place. There are some exceptions to this law. Facilitating or expediting payments, which are also called grease payments, are still allowed. So a company can speed up the processing of routine paperwork, or obtain permits or licenses using grease payments. The U.S. argues that since these types of activities would be performed routinely anyway, speeding them is not a violation of the law. The Organization for Economic Cooperation and Development, or OECD, has also adopted a convention that requires member states to make bribery of foreign public officials a criminal offense

How Can Managers Determine A Market's Overall Attractiveness?

The overall attractiveness of a country as a potential market and/or investment site for an international business depends on balancing the benefits, costs, and risks associated with doing business in that country Other things being equal, more attractive countries have democratic political institutions, market based economies, and strong legal systems that protect property rights and limit corruption

graph slide 48

Which country is not among the most corrupt countries in the world?

b)

Which type of law is based on tradition, precedent, and custom? a) civil law b) common law c) theocratic law d) contract law

a)

_____ believe(s) that socialism can only be achieved through violent revolution and totalitarian dictatorship. a) communists b) social democrats c) social republicans d) Plato

c)

______ is found in states where political power is monopolized by a party according to religious principles. a) tribal totalitarianism b) right-wing totalitarianism c) theocratic totalitarianism d) communist totalitarianism

democracy

a political system in which government is by the people, exercised either directly or through elected representatives - associated with individualism - pure ___ is based on the belief that citizens should be directly involved in decision making - most modern democratic states practice representative ___ where citizens periodically elect individuals to rep them - Some of the characteristics of democracies include freedom of expression, free media, regular elections, a fair court system, and free access to state information. These freedoms do not exist in totalitarian systems.

civil law

detailed set of laws organized into codes. This type of system, which is practiced in more than 80 countries including Germany, Japan, and Russia, is less adversarial than common law because under civil law, judges only have the power to apply the existing law, not interpret the law. UK

Why it is important for international companies to be familiar with the legal system in the countries in which they operate?

each system approaches the enforcement of contracts in a different way. A contract is a document that specifies the conditions under which an exchange is to occur and details the rights and obligations of the parties involved. Contract law then is the body of law that governs contract enforcement. Common law systems tend to spell out detailed contingencies related to the enforcement of a contract, while in civil law systems contracts tend to be much shorter because many issues are already covered in a civil code.

modern day socialism

early 20th century socialism split into 2: 1. communism 2. social democrats

graph: rankings of corruption by country 2016

graph

product liability

involves holding a firm and its officers responsible when a product causes injury, death, or damage When product safety laws are stricter in a firm's home country than in a foreign country, or when liability laws are more lax, the firm has to decide whether to adhere to home country or host country standards _____________ You probably already know that the U.S. has some of the strictest laws in the world in this area. Developing nations usually have less comprehensive laws. This often leads to an ethical dilemma for companies. What should a company do if the standards in a foreign market are lower than the standards at home? Should they incur the costs of complying with the home country standards, even if this puts them at a competitive disadvantage, or should they simply meet the standards of the host market even if this means that foreign consumers may not be assured of the same product safety levels as domestic consumers?

CIGS

many countries, including the U.S., have signed the United Nations Convention on Contracts for the International Sale of Goods, or CIGS, which established a uniform set of rules governing certain aspects of the making and performance of everyday contracts between sellers and buyers who have their places of business in different nations. applies automatically to all contracts for the sale of goods between different firms based in countries that have ratified the convention, unless the parties opt out. Unfortunately, at the moment, only about 70 countries have ratified CIGS, and many major trading countries like the United Kingdom and Japan have still not signed the agreement.

individualism

philosophy that an individual should have freedom in his own economic and political pursuits (greek phil. aristotle) - individual and political freedoms are the ground rules on which a society should be based - implies democratic political systems and free market economies - based on 2 concepts 1. individual freedom and self expression are guaranteed 2. people are allowed to pursue their own self interest in order to achieve the best overall good for society - for international companies: individual and its free market economics is important for creating a favorable business environment - philosophy has been championed by david hume, adam smith, john stuart mill, and economists milton friedman and friedrich von havak

intellectual property

property that is the product of intellectual activity. So, it can include anything from computer software or a chemical formula for a new drug to a screenplay or a music score.

collectivism

refers to a system that stresses the primacy of collective goals over individual goals. the needs of a society > individual freedoms Collectivism past- Greek philosopher, Plato. In Collectivism present- socialism Modern day socialists (past: Karl Marx) advocate state ownership of basic means of production, distribution, and exchange (state owned enterprises can be managed to benefit society, rather than benefiting individual capitalists). Rationale behind state owned enterprises at Chavez's Venezuela

political economy

refers to how the political, economic, and legal systems of a country are interdependent

theocratic law

religious teachings. You might already know that today, Islamic law is the most widely practiced theocratic law system in the world. In practice, Islamic jurors and scholars are struggling to apply the foundations of Islamic law to the modern world, and many Muslim countries today are actually practicing Islamic law combined with common law or civil law. SAUDI ARABIA

product safety laws

set certain standards to which a product must adhere

communism

socialism can only be achieved through violent revolution and totalitarian dictatorship - in retreat worldwide by mid 1900s >>>(soviet union was replaced by 15 republics as democracies) >>> china though it still limited political freedom, was moving away from strict communist ideology. >>>Today, a few fringe states like Cuba and NK still practice this. - this was dominant in the 1970s...(former Soviet Union for example, and its Eastern European neighbors like Poland, Czechoslovakia, and Hungary. China, Cambodia, and Vietnam, and of Angola and Mozambique, Cuba, and Nicaragua)

social democrats

socialism is achieved through democratic means - retreating as many countries move toward free market economies - state-owned enterprises have been privatized - Today, this is also retreating. Countries like Great Britain, France, and Germany that had been greatly influenced by the principles of this, have realized that state-ownership of the means of production doesn't always benefit the public. - New parties have been voted into power w/ the goal of selling state-owned enterprises to private investors who will run them more efficiently. aka: privatization.

political system

system of a gov in a nation

contract law

the body of law that governs contract enforcement Under a common law system, contracts tend to be very detailed with all contingencies spelled out. (More expensive to draw up, and disputes will be very adversarial, but more flexibility in how a dispute is handled.) Under a civil law system, contracts tend to be much shorter and less specific because many issues are already covered in the civil code Under a Theocratic law system, contracts tend to be much shorter as well because many issues are already covered in religious teachings

legal system

the rules that regulate behavior, along with the processes by which the laws of a country are enforced and through which redress for grievances is obtained. - the system in a country is influenced by the prevailing political system - countries that are collectivistic totalitarian states restrict private enterprise, while individualistic market economies are pro private enterprise and pro consumer. - important for business because they... define how business transactions are executed identify the rights and obligations of parties involved in business transactions