Global Business MidTerm
"socialists"
"The Communists believed that socialism could be achieved only through violent revolution and totalitarian dictatorship, whereas the social democrats committed themselves to achieving socialism by democratic means, turning their backs on violent revolution and dictatorship."
"political system "
"These dimensions are interrelated; systems that emphasize collectivism tend to lean toward totalitarianism, whereas those that place a high value on individualism tend to be democratic"
World Bank
A specialized agency of the United Nations that makes loans to countries for economic development, trade promotion, and debt consolidation. Its formal name is the International Bank for Reconstruction and Development.
righteous moralist
Belief that a multinational's home country standards of ethics are the appropriate ones for companies to follow in foreign countries. This approach is typically associated with managers from developed nations.
righteous moralist (strawman)
Belief that a multinational's home country standards of ethics are the appropriate ones for companies to follow in foreign countries. This approach is typically associated with managers from developed nations.
justified limited government intervention
Both the new trade theory and Porter's theory of national competitive advantage can be interpreted as justifying some limited government intervention to support the development of certain export-oriented indus- tries.
GNI
Gross national income (now used in preference to gross national product—GNP). The total value of goods and services produced within a country together with the balance of income and payments from or to other countries.
GNI per Capita
Gross national income per person on average. Calculated by dividing total gross national income by total population.
Porter's theory of national competitive advantage
Michael Porter developed a theory referred to as the theory of national competitive advantage. This attempts to explain why particular nations achieve international success in particular in- dustries. In addition to factor endowments, Porter points out the importance of country factors such as domestic demand and domestic rivalry in explaining a nation's dominance in the production and export of particular products
privatization
To change from government or public ownership or control to private ownership or control.
Tribal totalitarianism.
Tribal totalitarianism has arisen from time to time in The borders of most African states reflect the administrative boundaries drawn by the old European colonial powers rather than tribal realities. Tribal totalitarianism occurs when a political party that represents the interests of a particular tribe (and not always the majority tribe) monopolizes power. In Kenya, for example, politicians from the Kikuyu tribe long dominated the political system.
Heckscher and Ohlin Theory
comparitive advantage arises from differences in national factor endownments. countries will export goods that make intensive use of locally abundant factors that are locally scarce
subsidies help domestic producers
compete agains low-cost foreign imports, gain export markets, may be an incentive for forward fdi
adam smith
coutnries should specialize in production of goods for which they have an absolute advantage and then trade these goods for goods produced by other countries
GLOBES high future orientation
defined as the degree to which individuals in organiza- tions or societies engage in future-oriented behaviors such as planning, investing in the future, and delaying gratification.
GLOBE'S Gender Egalitarianism
degree to which a society seeks to minimize role differentiation that arises from gender differences
GLOBE's Humane Orientation
degree to which and organization or society encourages and rewards individuals for being fair, altruistic, friendly, generous, caring and kind to others
customs union
eliminates trade barriers between member countries and adopts a common external trade policy
common market
has no barriers to trade between member countries, a common external trade policy, and the free movement of the factors of production
aspects of tariffs
increase government revenues, force consumers to pay more for certain importants, are pro-producer and anti-consumer, reduce the overall effeciency of teh world economy, may be incentive for inward fdi
utilitarian approach to ethics
moral worth of actions or practices is determined by their consequences.32 An action is judged desirable if it leads to the best possible balance of good consequences over bad consequences. Utilitarianism is committed to the maximi- zation of good and the minimization of harm. Utilitarianism recognizes that actions have multiple consequences, some of which are good in a social sense and some of which are harmful. As a philosophy for business ethics, it focuses attention on the need to weigh carefully all the social benefits and costs of a business action and to pursue only those actions where the benefits outweigh the costs. The best decisions, from a utilitarian perspective, are those that produce the greatest good for the greatest number of people.
foreign direct investments
occurs when a firm invests directly in new facilities to produce and/or market inn a foreign country
GLOBES In-group collectivism
refers to the degree to which individuals express pride, loyalty, and cohesiveness in their organizations or families.
GLOBES Societal collectivism
refers to the degree to which organizational and societal institutional practices encourage and reward collective distribution of resources and collective action.
GLOBES performance orientation
refers to the extent to which an organization or society encourages and rewards group members for performance improvement and excellence.
"Common law
"evolved in England over hundreds of years. It is now found in most of Great Britain's former colonies, including the United States" is based on tradition, precedent, and custom. Tradition refers to a country's legal history, precedent to cases that have come before the courts in the past, and custom to the ways in which laws are applied in specific situations. When law courts interpret common law, they do so with regard to these characteristics. This gives a common law system a degree of flexibility that other systems lack. Judges in a common law system have the power to interpret the law so that it applies to the unique circumstances of an individual case. In turn, each new interpretation sets a precedent that may be followed in future cases. As new precedents arise, laws may be altered, clarified, or amended to deal with new situations"
"Collectivism"
"political system that stresses the primacy of collective goals over individual goals.3 When collectivism is emphasized, the needs of society as a whole are generally viewed as being more important than individual freedoms"
"Communist totalitarianism
. Communism, however, is in decline worldwide, and most of the Communist Party dictatorships have collapsed since 1989."
inequity aversion
A negative reaction arising when expectation about the fair distribution of rewards is violated.
world trade organization
Administers the rules governing trade between its 144 members. Helps producers, importers, and exporters conduct their business and ensure that trade flows smoothly. also responsible for facilitating the establishment of additional multinational agreements between WTO member states. Over its entire history, and that of the GATT before it, the WTO has promoted the lowering of barriers to cross-border trade and investment. In doing so, the WTO has been the instrument of its member states, which have sought to create a more open global busi- ness system unencumbered by barriers to trade and investment between countries. With- out an institution such as the WTO, the globalization of markets and production is unlikely to have proceeded as far as it has. However, as we shall see in this chapter and in Chapter 7 when we look closely at the WTO, critics charge that the organization is usurp- ing the national sovereignty of individual nation-states. If the violator refuses to comply with the ruling, the WTO allows other states to impose appropriate trade sanctions on the transgressor.
international monetary fund
An international organization of 183 countries, established in 1947 with the goal of promoting cooperation and exchange between nations, and to aid the growth of international trade.
nationalization
Changing something from private to state ownership or control
rule of law
Concept that holds that government and its officers are always subject to the law (scale; -2.5=weak RoL, +2.5=strong RoL)(rank; 170=weak;1=strong)
planned economy
Economy that relies on a centralized government to control all or most factors of production and to make all or most production and allocation decisions
advantage for new trade theory
First, through its impact on economies of scale, trade can increase the variety of goods available to consumers and decrease the aver- age cost of those goods. Second, in those industries when the output required to attain econo- mies of scale represents a significant proportion of total world demand, the global market may be able to support only a small number of enterprises. r new trade theory
"Totalitarianism
In a totalitarian country, all the constitutional guarantees on which representative democ- racies are built—an individual's right to freedom of expression and organization, a free media, and regular elections—are denied to the citizen"
the rights theory
Individuals are entitled to certain rights such as freedom of speech, conscience, consent, privacy, and due process
corruption perceptions index
It is a composite index that ranks countries in terms of the degree to which corruption is perceived to exist among public officials and politicians. (scale; O=corrupt, 100=clean)(rank: 170=corrupt, 1=clean)
veil of ignorance
John Rawls' theory that holds that in any given situation, justice emerges only when all parties are treated without social differentiation; from this perspective, fairness is the fundamental idea in the concept of justice.
the friedman effect
Only social responsibility is to make a profit (not ethical argument)
cultural relativism (strawman)
Principle that people's beliefs and activities should be interpreted in terms of their own culture (when in Rome)
"right-wing totalitarianism.
Right-wing totalitarianism generally permits some individual economic freedom but restricts individual political freedom, frequently on the grounds that it would lead to the rise of communism. A common feature of many right-wing dictatorships is an overt hostility to socialist or Communist ideas - Fascists were right wing totalitarian
"theocratic totalitarianism.
Theo- cratic totalitarianism is found in states where political power is monopolized by a party, group, or individual that governs according to religious principles"
Flow and Stock of FDI
When discussing foreign direct investment, it is important to distinguish between the flow of FDI and the stock of FDI. The flow of FDI refers to the amount of FDI under- taken over a given time period (normally a year). The stock of FDI refers to the total accumulated value of foreign-owned assets at a given time. We also talk of outflows of FDI, meaning the flow of FDI out of a country, and inflows of FDI, the flow of FDI into a country.
in spite the us is the largest and most complex market in the world
a US domestic company operating nationwide may not face competition as great and complex as a similar international company from Luxembourg faces in the same industry operating in Europe, Africa and the middle East
Parochialism
a belief in the existence of a universal culture, oblivious to others (small mindedness)
Ethnocentrism
a belief in the superiority of one's culture
the growth of FDI is a result of the following global trends
a fear of protectionism, political and economic changes, new bilateral investment treaties, the globalization of the world economy
Purchasing Power Parity
a measure of how many units of currency are needed in one country to buy the amount of goods and services that one unit of currency will buy in another country
g20
forum through which major nations tried to launch a coordinated policy response to the 2008-2009 global financial crisis
radical view
a political view that sees FDI as an instrument of imperialism and a vehicle for foreign exploitation
local content requirement
a requirement that some specific fraction of a good be produced domestically
when entering a new market
a traditionally domestic company will face a higher level of difficulty and/or take more time to conquer that new market than a traditionally international company
example of foreign direct investment
acquisition and greenfield (build from ground up)
"market economy,
all productive activities are privately owned, as opposed to being owned by the state. The goods and services that a country produces are not planned by anyone. Production is determined by the interaction of supply and demand and signaled to producers through the price system. If demand for a product exceeds supply, prices will rise, signaling producers to produce more. If supply exceeds demand, prices will fall, signaling producers to produce less. In this system consumers are sovereign. The purchasing patterns of consumers, as signaled to producers through the mechanism of the price system, determine what is produced and in what quantity
multinational enterprise
any business that has productive activities in two or more countries
The Political, economic, socio-cultural, technological, environmental, and legal contexts of a country
are interdependent; they interact and influence each other
administrative policies
bureaucratic rules designed to make it difficult for imports to enter a country
" In a 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. Mixed economies were once common throughout much of the world, although they are becoming much less so. "In mixed economies, governments also tend to take into state ownership troubled firms whose continued operation is thought to be vital to national interests"
costs of the euro
loss of control over national monetary policy. eu is not an optimal currency area
in a command economy
enterprises have little incentive to control cost and be efficient because they cannot go out of business "he government plans the goods and services that a country produces, the quantity in which they are produced, and the prices at which they are sold "rationale being that the govern- ment can then direct them to make investments that are in the best interests of the nation as a whole rather than in the interests of private individuals. "Since the demise of communism in the late 1980s, the number of command economies has fallen dramatically limited international trade
naive immoralist
ethical norms from other countries are used in a country where these norms are not ethical
when transportation costs are added to production costs, it becomes unprofitable to
export some products over a large distance. This is particularly true of products that have a low value-to-weight ratio
justice theories
focus on the attainment of a just distribution of economic goods and services
voluntary export restraint
is a direct restriction on trade imposed by the exporting country. typically at the request of the importing country's government
" civil law system
is based on a detailed set of laws organized into codes. When law courts interpret civil law, they do so with regard to these codes. More than 80 countries, including Germany, France, Japan, and Russia, operate with a civil law system. A civil law system tends to be less adversarial than a common law system, because the judges rely upon detailed legal codes rather than interpreting tradition, precedent, and custom. Judges under a civil law system have less flexibility than those under a common law sys- tem. Judges in a common law system have the power to interpret the law, whereas judges in a civil law system have the power only to apply the law."
dumping
is defined as selling goods in a foreign market at below their costs of production or as selling goods in a foreign market at below their "fair" market value
GLOBES humane orientation
is defined as the degree to which individuals in organizations or societies encourage and reward individuals for being fair, altruistic, friendly, generous, caring, and kind to others.
a country has an absolute advantage in the production of a product when it
is more efficient than any other country in producing it
"theocratic law system
is one in which the law is based on religious teachings. Islamic law is the most widely practiced theocratic legal system in the modern world, although usage of both Hindu and Jewish law persisted into the twentieth century."
political economy
is used to comprise all political, economic, socio-cultural, technological, environmental, and legal contexts of a country, although some authors (such as Hill) focus on the political, economic, and legal systems
specific tariffs
levied as a fixed charge for each unit of a good imported
ad valorem tariffs
levied as a proportion of the value of the imported good
"individualism
refers to a philosophy that an individual should have freedom in his or her economic and political pursuits. In contrast to collectiv- ism, individualism stresses that the interests of the individual should take precedence over the interests of the state."
benefits of the euro
savings from having to handle one currency rather than many. it is easier to compare prices across Europe, so firms are forced to be more competitive gives a strong boost to the development of highly liquid pan-european capital market increases the range of investment options open both to individual and institutions
mini-multinationals
since the 1960's, a current trend in international business is the growth of medium-sized and small multinationals
tragedy of the commons
situation in which people acting individually and in their own interest use up commonly available but limited resources, creating disaster for the entire community
new trade theory
stresses that in some cases, countries in the production and export of particular products not because of underlying differences in factor endowments, but because in certain industries the world market can support only a limited number of firms
gross fixed capital formation
summarizes the total amount of resources invested in an economy in factories, stores, office buildings, and the like
tariffs
taxes levied on imports that effectively raise the cost of important products relative to domestic products
mercantilist doctrine advocates
that countries should export more than what they import
greenfield investments
the establishment of a wholly new operation in a foreign country
quota rent
the extra profit that producers make when supply is artificially limited by an import quota
liberalization
the government's removal or loosening of restrictions on something (typically a political or an economic system)
noblesse oblige
the obligation of those of high rank to be honorable and generous (often used ironically)
the globalization of the world economy has resulted in
the relative decline of US firms in the global marketplace
international trade allows a country
to specialize in the manufacture and export of products and services that it can produce efficiently import products and services that can be produced more efficiently in other coutnries
tariff rate quota
under a tariff rate quote, a lower tariff rate is applied to imports within the quota than those over the quota
economies of scale
unit cost reductions associated with a large scale of output. Economies of scale have a number of sources, including the ability to spread fixed costs over a large volume and the ability of large-volume producers to utilize specialized employees and equipment that are more productive than less specialized em- ployees and equipment. New trade theory makes two important points: First, through its impact on economies of scale, trade can increase the variety of goods available to consumers and decrease the aver- age cost of those goods
Characteristics that make a location attractive for international business
unregulated markets strong protection of property rights market based economic principles
kantian ethics
we should be ends and not means, we are not machines
David Ricardo
what happens when one country has an absolute advantage in the production of all goods
GLOBE'S Assertiveness
whether people in a society practice, or should be encouraged to practice, assertive or nonassertive behavior
concepts of absolute and comparative advantage show
why it is beneficial for a country to engage in international trade even for products it is able to produce for itself
