Global Business Environment Test #1
Tribal Totalitarianism
A political system in which a party, group, or individual that represents the interests of a particular tribe (ethnic group) monopolizes political power. (Ex. Kenya, Tanzania, Uganda, Zimbabwe, etc.)
Right-Wing Totalitarianism
A political system in which political power is monopolized by a party, group, or individual that generally permits individual economic freedom but restricts political freedom, including free speech, often on the grounds that it would lead to the rise of communism. (Ex. WWII Germany and Italy, otherwise known as facism).
Theocratic Totalitarianism
A political system in which political power is monopolized by a party, group, or individual that governs according to religious principles. (Ex. Iran, Saudi Arabia, etc.)
Collectivism
A political system that emphasizes collective goals as opposed to individual goals.
United Nations Convention on Contracts for the International Sale of Goods (CIGS)
A set of rules governing certain aspects of the making and performance of commercial contracts between sellers and buyers who have their places of businesses in different nations.
Civil Law
A system of law based on a very detailed set of written laws and codes. (Russia, Romania)
Theocratic Law
A system of law based on religious teachings. (Ex. Islamic Law)
Common Law
A system of law based on tradition, precedent, and custom; when law courts interpret common law, they do so with regard to these characteristics. (ex. U.S., India, Great Britain)
Communist Totalitarianism
A version of collectivism advocating that socialism can be achieved only through a totalitarian dictatorship. (most widespread form, ex. Venezuela)
What did declining trade and investment barriers do for globalization?
Allows companies to base production in areas that are optimal for that activity. Also, enables greater international trade and opens up countries to more foreign direct investment.
Market Economy
An economic system in which the interaction of supply and demand determines the quality in which goods and services are produced.
Individualism
An emphasis on the importance guaranteeing individual freedom and self-expression.
What is meant by corruption? Explain how a corrupt political system affects the well being of a country. What are the implications of corruption for Nigeria?
Corruption in countries like Nigeria lead to poor economic turnarounds. The country has extremely high levels of poverty, human development and life expectancy.
Why is the manufacturing of flat panel TVs migrating to different locations around the world?
Countries are excelling in in low-cost manufacturing, rapid product innovation, high quality, and competitive pricing.
Read Management Focus: Vizio and the Market for Flat Panel TVs
Did you read it?
Watch the video on Hernando de Soto author of the mystery of capitalism
Did you watch it? Summary:
Factors of Production
Inputs into the productive process of a firm, including labor, management, land, capital, and technological know-how.
IMF stands for
International Monetary Fund
Define the International Monetary Fund?
International institution set up to maintain order in the international monetary system
World Bank
International institution set up to promote general economic development in the world's poorer nations.
General Agreement on Tariffs and Trade (GATT)
International treaty that committed signatories to lowering barriers to the free flow of goods across national borders and let to the WTO.
How does Globalization influence the World's Poor?
It decreases the poverty level in developing countries by shifting away from agriculture to industrial work and providing income for future generations to further their eduction (Think Nike's policy on under 16 year-old employees).
What are the benefits to a law firm of outsourcing legal services to a foreign country? What are the potential costs and risks?
It is more financially practical to fight court cases, but you put at risk some potential for error.
Why was the fall of the Berlin wall so significant?
It symbolized a change in the political division amongst nations and specifically, Germany was able to align its political system and get behind business practices that were best for its country.
What was this article about?
Jose Bove vandalized a McDonald's in France because the EU had a ban on hormone treated beef from the U.S. and the WTO ordered them to lift the ban and since they didn't a 100 percent tariff was placed on EU product to the U.S. Retaliation ensued for locals claiming that globalization led to a loss of national sovereignty, unfair trade policies, and an invasion on french culture.
How does Globalization, effect Labor Policies, and the Environment?
Labor policies are often improved as companies are put under the microscope and can implement revised employment policies. (Think of Nike in Vietnam) Environmental regulation is often not factor, but outside regulation from globalization can often improve factory emissions.
What is the role of technology in Globalization and did this change speed of globalization.
Telecommunications and microprocessors enabled companies to process far more information than they ever imagined. The internet explosion developed the information backbone of the economy, which made it easier for buyers and sellers to find one another and expand global presence. Transportation technology, specifically containerization, increased human capability and affordability to ship product across the globe.
Contract Law
The body of law that governs contract enforcement.
Public Action/Corruption
The extortion of income or resources of property holders by public officials, such as politicians and government bureaucrats.
Why has Hisense established multiple R&D centers? How do these R&D centers fit into the firm's global strategy? (The changing world order and the global economy of the 21st century)
The firm feels its primary strength is in rapid innovation and taking away business from domestic businesses. The combination of R&D in foreign markets fits perfectly into the businesses leading strengths.
Who benefits from the globalization of the flat panel industry? Who are the losers?
U.S. consumers have benefited from the falling prices of flat-panel TVs and efficient manufacturers have taken advantage of globally dispersed supply chains to make and sell low-cost, high quality, flat-panel TVs. The losers are the businesses that make traditional cathode-ray TVs in high-cost locations. Companies like Sony and Hitachi took a big hit.
Which groups gain from the outsourcing of legal services? Which groups lose?
U.S. law firms lose on this end while defendants and for companies like India's Pangea3 benefit.
Foreign Corrupt Practices Act
U.S. law regulating behavior regarding the conduct of international business in the taking of bribes and other unethical action.
WTO stands for?
World Trade Organization
Clearly, Nigeria's corrupt government has been a major factor in the country's demise. In contrast, other countries including Finland and Canada expressly prohibit corruption. In your opinion, would Nigeria be better off following the example of countries like Finland and Canada? Why or why not?
Yes, because corruption leads to lower foreign investment because there is no level playing field to calculate a return on investment when so many variables are unpredictable. Controlling corruption would lead to greater foreign investment and improve the economic standards of the Nigerian people.
What are the 3 P's of Globalization?
1. A Phenomenon - Of extremely intricate interconnectedness of human life across the planet. 2. A Philosophy - Holding a global vision has become a prerequisite in boardrooms and situations across the world. 3. A Process -The two key engines of globalization are the technology revolution (World Wide Web) and politico-economic liberalization (sovereignty).
What are the three different types of legal system?
1. Civil Law 2. Common Law 3. Theocratic Law
What are the different types of totalitarianism?
1. Communist Totalitarianism 2. Theocratic Totalitarianism 3. Tribal Totalitarianism 4. Right-Wing Totalitarianism
What are the drivers of Globalization? (2)
1. Decrease in trade barriers leading to an increase in foreign investment. 2. Increase in telecommunications (cellphones, World Wide Web), information processing, and transportation technologies (containerization)
The Globalization of Markets: Do you know the elements?
1. Falling Barriers to cross-border trade 2. The convergence of markets into a global marketplace. (This is driven by firms offering standardized products worldwide) 3. Tastes and preferences consumers in different nations are converging upon a global norm (ex. Coca Cola)
What are the debates in Anti-globalization?
1. Falling barriers to international trade destroy manufacturing jobs in wealthy advanced economies (ex. U.S.) 2. Higher food prices 3. Loss of sovereignty 4. Taking advantage of environmental regulations 5. Loss of jobs (repeat of statement #1)
The most global markets are for (blank) goods not (blank) goods.
1. Industrial 2. Service
How has Apple capitalized on the globalization of production? What advantages does manufacturing in China offer the company?
1. Offers cheaper labor even though thats not the main or sole reason. 2. The ability for subcontractors in China to quickly scale up and down to meet Apple's demand. 3. It was much easier to hire a pool of engineers in China. It would have taken 9 months in the U.S. to hire on those many employees where in China it only took 15 days. 4. The entire factory supply chain for Foxconn was in China.
Command Economy
: An economic system where the allocation of resources, including determination of what goods and services should be produced, and in what quantity, is planned by the government.
What the difference between a democracy and a republic?
A democracy favors the majority and solely those in the majority while a republic give way to the majority and offers equal protection to the minority as well.
Contract
A document that specifies the conditions under which an exchange is to occur and details the rights and obligations of the parties involved.
Multinational Enterprise (MNE)
A firm that owns business operations in more than one country.
Totalitarianism
Form of government in which one person or political party exercises absolute control over all spheres of human life and opposing political parties are prohibited.
International Business
Any firm that engages in international trade or investment.
Who makes the Apple Iphone?
Apple has outsourced a number of its production processes to Asian and African countries, but its largest subcontractor is the Taiwanese multinational Foxconn in China.
Why are global institutions needed?
As more international transactions take place, institutions and regulators are needed to manage, regulate, and police global trade.
What does it specify?
Bribes are unethical, but expedite payments are allowed.
Property Rights
Bundle of legal rights over the use to which a resource is put and over the use made of any income that may be derived from that resource.
Mixed Economy
Certain sectors of the economy are left to private ownership and free market mechanisms while other sectors have significant state ownership and government planning.
What do we mean by a 2Speed Economy?
Economies whose industries experience unevenly distributed rates of growth (ex. Kenya's flower production)
What is G20?
Established in 1999, the G20 comprises the finance ministers and central bank governors of the 19 largest economies in the world, plus representatives from the European Union and the European Central Bank.
With its huge oil reserves and large population, Nigeria was expected to emerge as a major player in Africa. Yet today the country is extremely poor with little expectation for an economic turnaround any time in the near future. Explain how Nigeria came to be in such a sad state.
Ethic, tribal, and religious groups led the country to breakout into a civil war and the weak government officials began to take bribes and bribe other allies to gain power. This led to a reign of dictatorships that have put the country into an economic crisis. Abacha spent 25 percent of the federal budget at one point.
GATT stands for
General Agreement on Tariffs and Trade
Chapter 1
Globalization
What makes Hisense different from other manufacturers of consumer electronics? What factors have contributed to its success?
Hisense was formerly a state owned company that expanded into a global enterprise. It was run by a 35 year old engineer and has been stealing domestic business away from developing nations. ESTABLISHED THE FIRST R&D CENTER IN CHINA!!! It also developed China's first core digital processing chip for TVs, breaking dependence on foreign providers. Factors to success: Rapid product innovation, high-quality products, competitive pricing.
Why were the services in this case outsourced to India, as opposed to another country such as China? What does this tell you about the kinds of factors that are important when a firm is considering whether to outsource a value creation activity, and where to outsource it to?
India also adheres to common law as does Britain and the U.S. so it makes sense to outsource to countries that have similar law practices like India as opposed to China.
Political systems are judged on what two degrees/dimensions?
Individualism vs. Collectivism Democracy vs. Totalitarianism
Political stytem
System of government in a nation.
Legal System
System of rules that regulate behavior and the processes by which laws of a country are enforced and through which redress of grievances is obtained.
Who started privatization in the UK?
Margaret Thatcher as the leader of the Conservative party and prime minister started privatization.
Globalization of Markets
Moving away from an economic system in which national markets are distinct entities, isolated by trade barriers and barriers of distance, time, and culture, and toward a system which national markets are merging into one global market.
Chapter 2
National Differences in Political Economy
Define Globalization?
National economies are merging into an interdependent, integrated global economic system. Trend away from distinct national economic units and toward one huge global market. The shift toward a more integrated and interdependent world economy.
International Trade
Occurs when a firm exports goods or services to consumers in another country.
Foreign Direct Investment (FDI)
Occurs when a firm invests resources in business activities outside of the home country.
What are the implications of the political economy on business?
Political economies are interdependent upon the political, economic, and legal systems.
Democracy
Political system in which government is by the people, exercised wither directly or indirectly or through elected representatives
Why is the concept of property rights protection so important to companies?
Property rights are essential for businesses to leverage their resources for an economic profit.
Closing Case: Legal Outsourcing
Read it
Country Focus: Corruption in Nigeria
Read it
Country Focus: Protesting Globalization in France
Read it
Management Focus: China's Hisense - An Emerging Multinational
Read it
Country Focus: Chavez's Venezuala
Read the article: Summary: Hugo Chavez took presidency of Venezuela a few years after being imprisoned. He announced that he inherited the worst financial situation as the government regulated oil trade was tanking, unemployment high, and a high national deficit. Chavez has made worse decisions since by controlling and corrupting economic activity. Chavez was bailed out and reelected after oil prices surged with economic growth. To date, the economy has tanked by a third and taxes are high along with inflation.
Economic Systems
Read the section
Legal Systems
Read the section
Political Systems
Read the section
What kind of legal services are most amenable to outsourcing?
Reviewing documents, drafting contracts, and other routine preparatory work.
Product Safety Laws
Set certain safety standards to which a product must adhere.
Socialists
Someone who believes in public ownership of the means of production for the common good of society.
Management Focus: Starbucks Wins Key Trademark Cases in China
Starbucks anticipated that the Chinese market would be its second largest, but Chinese business Xing Ba Ke copied the Starbuck logo, name, and business model to ride off of the brand. The chinese company was forced to change names after a violation was proved under international trademark law.
Define World Trade Organization?
The organization that succeeded the General Agreement on Tariffs and Trade (GATT) as a result of the successful completion of the Uruguay Round of GATT Negotiations. Responsible for policing the world trade system.
Political Economy
The political, economic, and legal systems of a country.
Moore's Law
The power of microprocessor technology doubles and its cost of production falls in half every 18 months.
What would happen if the U.S. government required that flat panel displays sold in the United States had to also be made in the United States? On balance, would this be a good thing or a bad thing?
The price of the flat panel TV's would go up and lower quality product make be served. There would also be a less rapid urge for innovation as the competition would decrease. On the bright side, jobs would be kept and GDP would remain entirely in the U.S. Overall, this is a poor decision.
What is privatization?
The sale of state-owned enterprises to private investors.
Private Action
The theft, blackmail and the like by private individuals or groups.
Stock of Foreign Direct Investment
The total accumulated value of foreign-owned assets at a given time.
In the article about Amazon in India (posted on Blackboard for you) What were the characteristics of the market that differed from the US market? How did Amazon adapt?
There is a law forbidding foreign companies from selling directly to Indians. Only a quarter of the population has access to the internet (high potential). Amazon does not control the larger portion of the online shopping market (mostly controlled by Flipkart). Difficulties in transportation of product in India's crowded streets. Only 60% of Indians have bank accounts and only a fraction have payment cards. Interstate laws and future government changes are also a burden. Amazon had to change to a platform specifically for vendors. Amazon is offering a number of sales on billboards to keep up with Flipkart. Amazon is utilizing motorbike transportation centers. Amazon has partnered with thousands of small shop owners to hold and verify package delivery.
Why do you think Apple continues to keep activities like product design, software engineering, and marketing in the United States?
They are keeping their lead activities and more confidential business propositions in the United States. They can also foster company culture and work environment.
On balance, do you think that this kind of outsourcing is a good thing, or a bad thing? Why?
This is a good thing because it will either drive down court and law expenses in the U.S. or afford people the opportunity to find cheaper solutions.
How does Globalization, effect Jobs, and Incomes?
This usually leads higher wages and more job opportunities in developing nations. Also, usually an increase industrial work and a shift away from agriculture.
Social Democrat
Those committed to achieving socialism by democratic means.
Communists
Those who believe socialism can be achieved only through revolution and totalitarian dictatorship.
What does the example of Vizio tell you about the future of production in an increasingly integrated global economy? What does it tell you about the strategies that enterprises must adopt in order to thrive in highly competitive global markets?
To adapt to the future market, companies must outsource with a global supply chain to get the cheapest and highest quality product to consumers the fastest. The global competition also requires businesses to remain innovative.
The Globalization of Production: Do you know what this means?
Trend by individual firms to disperse parts of their productive processes to different locations around the globe to take advantage of differences in cost and quality of factors of production.
