FVC1 - Global Business (Module 1 - 3)

Individuals control political activities, and the government has no control over these activities.

Anarchism

Political Systems Impact on Globalization

Anarchy (individuals control the country) Monarchy (Absolute and Constitutional Monarch) Oligarchy (power due to military, economic or other powers / e.g. Russia Dictatorship (Single Person / Libya) Democracy (Equal voice or vote in determining policy / The U. S.) impact on global business

Which activity of the International Monetary Fund (IMF) impacts policymaking?

Being owned and directed by governments of the member nations.

Which activity of the International Monetary Fund (IMF) impacts policymaking?

Being owned and directed by the governments of the member nations

Cons of Globalization

Benefits the rich at the expense of the poor Job loss in developed countries Environmental damage and unethical practices of labor Loss of power of local government

To sustain globalization, nations must build institutions that support all all of the following except ______________. A. Democratic Systems of Government B. Free Market C. Command Economies D. Independent Judiciaries E. A Free Press

C. Command Economies

Which of the following is not a key aspect of globalization? A. Elimination of barriers to trade B. Investment C. Financial Independence D. Culture E. Information Technology

C. Financial Independence

The government minimizes the role in the economy. Private ownership of the business is observed. (aka Market Economy)

Capitalism

Type of Economic System A system in which the means of production is controlled by the private owners who can choose to participate in global trade.

Capitalism

Which type of law system is based on a code and focuses on how the law is applied to the facts?

Civil

Legal System's Impact on Globalization: The judge applies law code

Civil Law

Economic System's Impact on Globalization: Controlled by the ruling class All resources are owned by the government (Paired with Communism)

Command Economy

In which law system does a judge decide the applicable law for the case as a jury determines the facts?

Common

In which law system does a judge decide the applicable law for the case as the jury determines the facts?

Common

Which law is based on tradition and precedent given that judicial rulings can stand as precedents for future cases?

Common

Legal System's Impact on Globalization: The judge interpret the law

Common Law

Classless society. Goods are distributed equally among citizens. All factors production are owned by the government. (aka Command Economy)

Communism

Type of Economic System A system in which all property is publicly owned and the government controls global trade.

Communism

A country produces goods RELATIVELY MORE EFFICIENTLY than all other countries in the same industry. What type of advantage does this country have?

Comparative

Something you give up to be able to produce the current product. Limited resources lead to opportunity cost Lower opportunity cost determines comparative advantage

Comparative Advantage

Criticism of IMF Causes the citizen of the borrowing country to pay a heavy price in the short-run. Requiring borrowing countries to make structural adjustments such as PRIVATIZATION or DEREGULATION can make conditions worse in a struggling country. IMF policies are significantly impacted by rich countries.

Conditionality

Criticisms of IMF

Conditionality Imbalance of Voting Power IMF's projects might hurt the environmental quality

A CEO seeks to better use the economies of scale and scope of production to increase the international company's profits. Which type of globalization driver is the CEO seeking to use?

Cost

Firm-based theory that incorporate brand, customer loyalty, technology, and quality into the understanding of trade flows. Consumers in countries that are in the same or similar state of development would have similar preferences. Companies first produce for domestic consumption. When they explore exporting, companies often find that markets that look similar to their domestic one, in terms of customer preferences offer the most potential for success.

Country Similarity Theory

Transmission of ideas, meanings, and values around the world.

Cultural Effect of Globalization

CAGE Analysis

Culture Administration Geography Economics

Which law system can vary from community to community and is found in countries without strong formal justice systems?

Customary

What was one of the results of the Uruguay Round of the World Trade Organization negotiations?

Decrease in tariffs

Economic System Growing population which leads to long-term growth potential

Developing

The government provides a method of voting for the people of a country, not for elected officials.

Direct Democracy

A CEO decides to expand the company's business internationally by purchasing production capability in another country, including the foreign country's buildings and equipment. Which type of market entry is the CEO using?

Direct investment

Currencies under The Special Drawing Right

Dollars (US) Euro (United Kingdom) Japanese Yen (Japan) British Pound (European Union) Chinese Yuan (China)

Which of the following is NOT a main purpose of IMF? A. provide a forum for cooperation on international monetary problems B. Facilitate the sustainable growth of international trade C. promote exchange rate stability D. Lend countries of foreign exchange when needed E. Provide long-term low-interest social sector and infrastructure loans

E. Provide long-term low-interest social sector and infrastructure loans

Which type of globalization refers to the international movement of goods, capital and services?

Economic

Which type of globalization refers to the international movement of goods, capital, and services?

Economic

Trade Investment Information Technology

Economic Effect of Globalization

Pros of Globalization

Economic Growth Increased well-being of human society Increased trade and investment

Which factor is an element of a CAGE analysis when assessing barriers to cross-border activity?

Economics

Which factor of CAGE addresses differences in country size that affect barriers to globalization?

Economics

Selling in bulk that results in lower per unit cost.

Economies of Scale Advantage

Challenges of Global Expansion

Ethical business practice concerns Organizational structure Public relations Leadership Legal and regulatory structure

What is international trade?

Export + selling products to countries Import - buying products from other countries

True or False A growing ASEAN concern is the economic ascendancy of Turkey, which is a major low-cost manufacturing center, has been one of the world's most attractive destination for foreign direct investment.

False

Focuses on firm's competitive advantage Barriers to entry *R&D *IP rights *Economies of scale *Control resources

Global Strategic Rivalry Theory

Is defined as an international integration arising from the exchange of world views, products, ideas, and other aspects of culture.

Globalization

Members of a work team are from many different countries. They share their thoughts on developing a strategy to market a product in several different countries. What is the term for the international integration of the team members' exchange of worldviews and ideas to develop the strategy?

Globalization

Members of a work team are from many different countries. They share their thoughts on developing a strategy to market a product in several different countries. What is the term for the international integration of the team members' exchange of worldviews and ideas to develop strategy?

Globalization

Stage of Globalization This is the least desirable level of globalization to deal with due to a lack of transportation and technology options.

Globalization 1.0

Stage of Globalization This stage of globalism leads to more access to delivering goods on a worldwide platform due to advances in transportation.

Globalization 2.0

Stage of Globalization This is the most desirable level of globalism due to advances in technology and communication, making global interactions and transactions smoother.

Globalization 3.0

Factors of production: labor, land, natural resources, capital and technology

H-O Theory (factor propositions)

Criticism of the World Bank

Imbalance in the leadership (same criticism of IMF) Enforce conditionality causes harm to developing countries Privatization of Health Care Environmental damage caused by funded projects

Criticisms of IMF Poorer countries are underrepresented.

Imbalance of voting power

Economic System Prevalent formation of new markets with possibility of saturation

Industralized

A CEO is discussing an expansion of production of a company's highly perishable dairy line in a country that can offer low labor costs and good internet connections. The country has no highways, and roads are poorly maintained. Which challenge to international business expansion do the road conditions present?

Infrastructure

Relates to any situation where the product or distribution of goods or services crosses country borders. The opportunity is boosted in globalization as trade and investment barriers are reduced.

International Business

EST in 1944 Initial Goal: restore international payment system, STABILIZE EXCHANGE RATES, foster trade, and correct the BOP (Balance of Payment) issue (correct temporary trade imbalances with short-term loans). Surveillance: Oversee international monetary and financial system. Guide member countries to develop economic policies, provide technical assistance in banking, oversee fiscal affairs, and exchange rate stability. Voting: Based on a quota system The Special Drawing Right - international monetary reserve asset

International Monetary Fund

Oversees the international monetary system Cooperative institution Phase 1: Prior to 1973 - regulated international exchange rates Phase 2: Post-1973 - provides a means of effective international currency exchange, supervises economic policy, and provides financial assistance to neighbors. Acts more like a credit union Loans to all member nations Short Term Loan

International Monetary Fund

Which argument is used by critics who wish to discourage movement towards globalization?

It increase the wealth of the rich rather than the poor.

Which criticism is made about the World Trade Organization (WTO)?

It protects developed countries more than developing countries.

Benefits of Global Expansion

Larger Market Lower Cost Advanced Technologies

Economic System Focus on agricultural and raw materials with limited imports

Less-developed

Which type of economy is decentralized and allows firms and households to participate in global trade with minimum governmental interference?

Market

4 Industry Globalization Drivers

Market (Opportunity for scale and scope / Convergence of needs) Cost (Economies of scale and scope / Exploiting cost of production) Competition (New markets / Increased level of trades) Government (Favorable policies / Support for industry)

Economic System's Impact on Globalization: The market controls the distribution of resources No government control (Paired with Capitalism / Opposite of Command)

Market Economy

Which type of economy is decentralized and allows firms and household to participate in global trade with minimum governmental interference?

Market Economy

Trade Surplus: more export, less import Gold and Silver are important to a country's wealth Modern thinking - Neo-mercantilism: countries promote combination of protectionist policies and restrictions and domestic industry subsidies

Mercantilism

International Trade Theories

Mercantilism Absolute Advantage Comparative Advantage Heckscher-Ohlin Theory (Factor Proportions Theory) Country Similarity Theory Global Strategic Rivalry Theory

Economic System's Impact on Globalization: The market is the major determining power Partial government regulation as needed (Paired with Socialism)

Mixed Economy

What is the characteristic of the International Monetary Fund (IMF)?

The IMF is a cooperative institution and provides more effective currency exchange.

Stage 1 - Market Entry Stage 2 - Product Specialization Stage 3 - Value Chain Disaggregation Stage 4 - Value Chain Reengineering Stage 5 - Creation of New Markets

The Stages of Going Global

The oldest form of trade theory is called __________.

mercantilism

Which would a mercantilist value the MOST?

trade surplus

Taxes on imports are knows as __________.

Tariffs

Economic System's Impact on Globalization: Centered around family Everyone consumes the same goods Relies on bartering No surplus (The most sustainable economic system)

Traditional Economy

Which term describes a government giving a tax break to a producer to increase their global competitiveness?

Subsidies

Why do countries trade?

*Trade creates win-win situation for both exporting and importing countries *Trade promotes economic development and increases living standard *Specialization and economies of scale *Government policy's impact

What is a free trade zone?

A geographic region in which a county will reduce restrictions that might prevent or reduce trade

All of the following are arguments against globalization except: A. it may lead to an increase in the appearance of old industries B. it may lead to a loss of control over economic policies and developments C. it may lead to erosion of communities D. it can be a force of exploitation and injustice E. it can cause job loss and stagnant wages

A. it may lead to an increase in the appearance of old industries

A country produces goods MORE EFFICIENTLY than all other countries in the same industry. What type of advantage does this country have?

Absolute

Specialization in the area they can that they can best produce, best area where they can utilize their resources. Assume two countries and two products scenario, whoever can produce more is said to have absolute efficiency.

Absolute Advantage

A manager seeks to reduce production costs for a product by moving the production to a country with lower labor costs. What is the term for the movement of jobs from a high-cost labor country to a low-cost labor country?

Outsourcing

Rescue the importance of nation-states Some countries don't like political integration might create isolation policy NGO's (Non-Governmental Organization) - human aid project

Political Effect of Globalization

The CEO of an international company reminds the executive vice presidents that while the company may do good while performing corporate social responsibilities, the business has one ultimate goal since it is engaged in commercial activities with corporate shareholders. Which ultimate goal is the CEO emphasizing to the executive vice presidents?

Profitability

Legal System's Impact on Globalization: Based on religious guidelines

Religious Law

Which accommodation should an American multinational company make to conduct business in China?

Restrictions on freedom of speech

Match the driver of globalization Technology Transportation Cooperation Not a driver

Social Media Platforms Commercial Air Travel International Monetary Fund Wealth Inequality

Represented by some European countries. Government controls some industries but not all. Strong labor union usually is seen. (aka Mixed Economy)

Socialism

Type of Economic System A system in which the government controls the means of production and regulates global trade.

Socialism

__________ refers to the process of allowing efficient geographic distribution of business activities within and among countries.

Spatial Transformation

EST 1944 Initial Goal: support reconstruction of Europe after WW2 1950 - assist poorer nations to improve life quality (fight poverty) Aimed at RECONSTRUCTING ECONOMIES, PROMOTING INVESTMENT, and REDUCING POVERTY Provides long-term loans used for development projects Help resolve disputes related to foreign direct investment

The World Bank

Which criticism is associated with the World Bank?

The developed countries of US and Europe have too much control over decisions.

What was the first loan that the World Bank made after the end of World War 2?

To France to rebuild its infrastructure

A centralized government creates oppressive policies based on ideas from powerful leadership.

Totalitarianism

What type of economy is centered on families or tribes where little to no global trade is practiced?

Traditional

Criticisms of WTO

Transparency requirement hurts national sovereignty The trade rules protect developed countries more than developing countries The MFN rule give multinational companies an unfair advantage. Agricultural product subsidy hurt developing countries The WTO has refused to address the impacts of free trade on labor rights. The WTO has been ignoring environmental concerns.

Encourages developing countries to borrow for development projects. Development institution. Finance reconstruction after wars in 1940's now focused on supporting developing countries. Borrows and loans Borrowers must meet requirements to qualify for loans Long Term Loan

World Bank

EST 1995 Encourages international trade through the LOWERING OF TRADE BARRIERS (e.g. tariffs, quota) Expanded through successive negotiations called "rounds" A forum for negotiations to reduce tariff and non-tariff barriers to trade *The Uruguay Round - reduced tariff significantly. It also covers IP rights protection (TRIPS Trade Related Intellectual Property Rights) / GATT *The Doha Round - inconclusive till the present. Why? - focus on agriculture Oversees trade agreements and facilitates disputes between member countries. MFN status rule - one country cannot discriminate a trading partner.

World Trade Organization