Chapters 3 & 4 Test Prep

What does the Foreign Corrupt Practices Act prohibit?

"questionable" or "dubious" payments to foreign officials to secure business contracts.

What are four major hurdles to successful global trade?

1. Dealing with differences in sociocultural forces 2. economic and financial forces 3. legal and regulatory forces 4. physical and environmental forces

What are the two primary concerns associated with offshore outsourcing?

1. Loss of jobs (primarily manufacturing) 2. Safety (specifically foods, drugs, and toys)

What are the three major threats to doing business in global markets?

1. Terrorism 2. Nuclear proliferation 3. income inequality

What are the six steps to follow in establishing an effective ethics program in business?

1. Top management must adopt and support an explicit code of conduct. 2. Employees must understand expectations for ethical behavior begin at the top and sr. management expects all employees to act accordingly. 3. Managers and others must be trained to consider the ethical implications of all business decisions. 4. An ethics office must be set up with which employees can communicate anonymously. Whistleblowers must feel protected from retaliation. 5. Outsiders such as suppliers, subcontractors, distributors, and customers must be told about the ethics program. 6. The ethics code must be enforced with timely action if any rules are broken.

What is corporate social responsibility, and how does it relate to each of a business's major stakeholders?

A business's concern for the welfare of society. For a business to be operating in a way that is for the good of society everyone involved (customers, suppliers, distributors, etc.) must be abiding my social and ethical standards.

What is the key difference between a joint venture and a strategic alliance?

A joint venture is when two or more companies (from different countries usually) join to undertake a major project (more short term). A strategic alliance is a long-term partnership between two or more companies that helps each company build up a competitive market advantage.

How would a low value of the dollar affect U.S. exports?

A low value of the dollar would affect U.S. exports because you would be spending more money to produce the product than you will be making when people purchase the product, there will be no profit. The product/services will need to be listed for a lower price.

What are the advantages to a firm of using licensing as a method of entry in global markets? What are the disadvantages?

Advantages: A firm can gain revenues it would not otherwise have generated in its home market Licensors spend little to no money to produce and market their products because the licensees are required to do so. Disadvantages: Licensors must grant the licensing rights to the licensees for extended periods of time (20 years.) If a product becomes successful the bulk of the profits will go to the licensee. Because this is going on in foreign countries there is often times no law stopping licensees from ripping off the idea of a product and starting to make them for themselves often times breaking contract and cutting the licensors out completely.

Why is it unlikely that there will be a single set of international rules governing multinational companies soon?

Because there are so many different social standards throughout all parties involved in multinational corporations different things are acceptable to different cultures. Therefore; you can't have a single set of rules that everyone will abide by.

What are the advantages and disadvantages of trade protectionism and of tariffs?

Both trade protectionism and tariffs are supposed to be used to regulate the imports and exports of goods. They believe that this allows the domestic producers to survive and grow without being put out of business by the cheaper foreign suppliers. The disadvantage is that the goods sometimes cost more to purchase due to the cost of the tariffs.

What does the acronym BRIC stand for?

Brazil, Russia, India, China

What is comparative advantage, and what are some examples of this concept at work in the United States?

Comparative advantage is the theory that a country should sell their products that they can produce most effectively to those countries who cannot produce the products effectively or at all. The U.S. has a comparative advantage in producing software and engineering services.

What is meant by the term dumping in global trade?

Dumping is when products are sold in a foreign country at lower prices than available in the country that they are being produced in.

How do ethics differ from legality?

Ethics are what is considered to be socially acceptable in the minds of others and how you something will overall make someone feel. Legality is something that is determined by defined written out laws and when they are broken there are consequences to deal with such as fines and jail time.

When faced with ethical dilemmas, what questions can you ask yourself that might help you make ethical decisions?

Is my proposed action legal? (Am I violating a law or company policy?) Is it balanced? (Am I acting fairly, would I want to be treated this way?) How will it make me feel about myself?(Will I feel proud or embarrassed if someone found out?)

What key challenges must India and Russia face before becoming global economic leaders?

Russia must solve it's political, currency and social problems before becoming a global economic leader. India must address it's difficult trade laws and inflexible bureaucracy.

What are ethics?

Standards of moral behavior, that is, behavior accepted by society as right versus wrong.

How are a nation's balance of trade and balance of payments determined?

The balance of trade (total value of a nation's exports compared to its imports over a particular time frame) and the balance of payments (difference between money coming into a country from exports and money leaving the country for imports plus other money flows such as tourism, foreign aid and military expenditures.

What services are usually provided by an export-trading company?

The export-trading company will match buyers and sellers from different countries, deal with foreign customs offices, documentation, and weight and measurement conversions. It also assists exporters with warehousing, billing, and insuring.

What is the key objective of a common market like the EU?

The key objective of a common market is being able to trade regionally without having an internal tariff and a set setup of laws to facilitate the exchanges.

What are the two main arguments favoring the expansion of U.S. businesses into global markets?

There is not a single nation that can solely provide all goods and services that its people want and need. Global competition and less-costly imports will keep prices down.

What makes a company a multinational corporation?

To be multinational you must manufacture and market products in many different countries and have multinational stock ownership and management.

What is the primary purpose of the WTO?

To mediate trade disputes among nations.

How are U.S. businesses demanding socially responsible behavior from their international suppliers?

U.S. businesses will not import products made by people who violate human rights and environmental standards. They will cancel orders from these suppliers as well.

What three nations comprise NAFTA?

United States, Canada, Mexico

What are compliance-based and integrity-based ethics codes?

compliance-based - standards that emphasize preventing unlawful behavior by increasing control and by penalizing wrongdoers. integrity-based - standards that define the organization's guiding values, creating and environment that supports ethically sound behavior, and stress a shared accountability among employees.

What does ethnocentricity mean, and how can it affect global success?

ethnocentricity - an attitude that your own culture is superior to others. It can affect global success because outside of the United States there are a wide array of various cultures and if you do things to offend or act insensitive towards a specific culture your products/services will basically be shunned and you will not make any money.

What is a social audit, and what kinds of activities does it monitor?

social audit - A systematic evaluation of an organization's progress toward implementing socially responsible and responsive programs. It monitors things such as; workplace issues, product safety, the environment, community relations, military weapons contracting, international operations and human rights.