MGT 405 Exam 1 (Ch. 1-3, 5-6)

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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?


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