Test 1

Overall Attractiveness

The overall attractiveness of a country as a potential market and/or investment site for an international business depends on balancing the benefits, costs, and risks associated with doing business in that country -Generally, the costs and risks are lower in economically developed and politically stable markets -However, the potential for growth may be higher in less developed nations

Changing FDI Picture

The share of world output generated by developing countries has been steadily increasing since the 1960s -The *stock of foreign direct investment* (total cumulative value of foreign investments) generated by rich industrial countries is declining -Cross-border flows of foreign direct investment are rising -The largest recipient of FDI is China, followed by Brazil, Mexico, and China

Economic Transformation

The shift toward a market-based economic system involves: 1-Deregulation 2-Privatization 3-The creation of a legal system to safeguard property rights

Internet Extra: The U.S. State Department produces a series of annual "Country Reports"

The site is {http://www.state.gov/travelandbusiness/}. 1. Click on Doing Business in International Markets. Discuss the ways the State Department helps American companies doing business in other countries. 2. Next, click on More Business Information and then on Investment Climate Statements. Compare the investment climate in several countries. Where would you invest? Which countries would you avoid?

Country Focus: India's Software Sector Summary

This feature explores the growth of India's software industry. Starting from nothing just twenty-five years, the industry now generates revenues of nearly $40 billion, and exports of $31.3 billion. With global spending on information technology expected to be some $260 billion in 2009, Indian companies are primed to capture a significant share of the pie, forcing their Western counterparts to make changes to their strategies. Suggested Discussion Questions 1. What factors have contributed to the growth of India's software industry? Discussion Points: Four key factors have contributed to the growth of India's software industry. First is the huge number of engineers in India. Some 400,000 engineers graduate from Indian universities every year. A second factor is India's low wage structure. Indian engineers make about 12 percent of what an American colleague might make. Third, coordination between Western firms and Indian firms is facilitated by the large number of English-speaking Indians. Finally, because of the differences in time zones, Indian firms operate while American firms are closed. 2. How has India's software industry changed in recent years? What are the implications of these changes for American companies like IBM and Microsoft? Discussion Points: There has been a gradual shift in the Indian software industry in recent years. Initially, Indian firms focused on the low end of the industry to supply basic software development and testing services to Western firms. Today however, many companies have moved into higher end services to compete for large software development projects, business outsourcing contracts, and information technology consulting services. This new competitive threat is forcing American firms like IBM and Microsoft to rethink their global strategies. Some Western companies are now investing in India with the goal of capturing some of the cost advantages Indian companies like Infosys and Wirpro enjoy. Lecture Note: India's smartphone industry is growing rapidly and Google is just one company that is looking to capitalize on this growth. To learn more, go to {http://www.businessweek.com/articles/2014-10-21/googles-big-plans-for-low-cost-android-one-phones-in-india}. Video Note: The iGlobe India's Economy Remains Robust Despite Global Downturn examines India's economic strength even during the recent global recession.

Internet Extra: To learn the status of current trade issues, "hot" areas of international trade, and the responsibilities of the WTO

go to {http://www.wto.org/}. Review the issues that are currently at the top of the agenda for the WTO. Do they affect developed countries or developing countries? What are their implications for global trade? Go to Trade Topics. Click on Disputes Gateway. Explore the disputes currently under review. How do you think they will be resolved? Why?

Determinants of Culture

religion, political philosophy, economic philosophy, education, language, social structure all lead to culture norms and value systems

The Globalization of Production

*Globalization of production* - the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of *factors of production* (labor energy, land, and capital) Goal: -Lower overall cost structure -Improve the quality or functionality of the product to gain competitive advantage

What Is Globalization?

*Globalization* refers to the trend towards a more integrated global economic system Two key facets of globalization are: -The globalization of markets -The globalization of production

Human Rights

*What is the responsibility of a foreign multinational when operating in a country where basic human rights are not respected?* Basic human rights taken for granted in the developed world such as freedom of association, freedom of speech, freedom of assembly, freedom of movement, and so on, are not universally accepted

Employment Practices

*When work conditions in a host nations are clearly inferior to those in a multinational's home nation, what standards should be applied?* The standards of the home nation? The standards of the host nation? Something in between?

The Roots of Unethical Behavior

*Why do managers behave in an unethical manner?* Managerial behavior is influenced by: -Personal ethics -Decision making processes -Organizational culture -Unrealistic performance expectations -Leadership -Societal culture

Changing FDI picture

*summary* US and other established countries decreasing in stock of foreign direct investment from 1980-2012 developing countries increasing from 1980-2012

Environmental Pollution

*Should a multinational feel free to pollute in a developing nation if doing so does not violate laws?* -When environmental regulations in host nations are far inferior to those in the home nation, ethical issues arise -The tragedy of the commons occurs when a resource held in common by all, but owned by no one, is overused by individuals resulting in its degradation

Country Focus: Corruption in Nigeria

*Summary* This feature describes the corruption that has characterized Nigeria's economy over the last 50 years. When the country initially gained its independence from Britain in 1960, expectations were high that Nigeria would become an economic heavyweight in Africa. With abundant natural resources and a large population, it seemed the stage was set for success. However, the 2012 United Nations Human Development Index ranked the country 153 out of 187 nations, noting that Nigeria suffers from extreme poverty, illiteracy, and high debt. Several factors have been blamed for Nigeria's troubles including political instability and corruption. Furthermore, in 2013 Transparency International still ranked Nigeria one of the most corrupt countries in the world. Suggested Discussion Questions 1. 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? Discussion Points: Corruption in Nigeria involves open and systematic plundering of the nation's state treasury. Bribery is also a regular part of business. In fact, the situation in Nigeria is so dismal that Transparency International ranked Nigeria one of the most corrupt countries in the world in 2013. When a country experiences this sort of activity, returns on business investments are lower, and there is less incentive for inward foreign direct investment. Most students will recognize that this then negatively affects economic growth. 2. 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. Discussion Points: Studies show that countries with high levels of corruption have lower inward foreign direct investment, lower levels of international trade, and poor levels of economic growth. Nigeria is a perfect example of this type of country. Political strife resulting from in-fighting between the various tribes and ethnic groups within the nation has led to instability and questionable legitimacy in the government. Military dictatorships were inept and corrupt. Because the country is viewed so poorly thanks to its level of corruption and political instability, investors are reluctant to bring in the kinds of funds that could help the economy grow. 3. 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? Discussion Points: Many students will probably suggest that even if Nigeria explicitly prohibits corrupt behavior, it is unlikely to have little effect on the real way of doing business in the country. Other students however, may note that Nigeria's newly elected president, Goodluck Jonathon, has promised to put an end to corruption in the country, and is being seen by voters as a force for the future. Teaching Tip: The CIA's World Factbook on Nigeria {https://www.cia.gov/library/publications/the-world-factbook/geos/ni.html} provides a wealth of information on the country. Teaching Tip: To learn more about Transparency International's corruption ranking of Nigeria and general perspective of the country go to {http://www.transparency.org/country}.

Political Economy & Economic Progress

*What is the relationship between political economy and economic progress?* Economic freedom in a market economy creates greater incentives for innovation and entrepreneurship than in either a planned or mixed economy

Collectivism and Individualism

*Collectivism*: a system that stresses the primacy of collective goals over individual goals -Can be traced to the Greek philosopher Plato -*Today, socialists support collectivism* When collectivism is emphasized, the needs of the society as whole are generally viewed as being more important than individual freedoms *Socialism* Modern socialists trace their roots to Karl Marx -Advocated state ownership of the basic means of production, distribution, and exchange -The state then manages the enterprises for the benefit of society as a whole In the early 20th century, socialism split into communists and social democrats: *Communists* - socialism could only be achieved though revolution and totalitarian dictatorship *Social democrats*- worked to achieve the same goals by democratic means Many state-owned enterprises failed to succeed, and many nations implemented privatization programs Individualism: suggests individuals should have freedom over their economic and political pursuits -Can be traced to Aristotle who argued that individual diversity and private ownership are desirable Individualism stresses: -Individual freedom and self-expression -Letting people pursue their own self-interests to achieve the best overall good for society -Democratic systems and free markets

Types of Totalitarianism

*Communist totalitarianism*: advocates achieving socialism through totalitarian dictatorship *Theocratic totalitarianism*: political power is monopolized by a party, group, or individual that governs according to religious principles *Tribal totalitarianism*: a political party that represents the interests of a particular tribe monopolizes power *Right wing totalitarianism*: individual economic freedom is allowed but individual political freedom is restricted in the belief that it could lead to communism

Deregulation

*Deregulation* - involves removing legal restrictions on the free play of markets, the establishment of private enterprises, and the manner in which private enterprises operate -Removing price controls -Abolishing laws limiting private enterprise -Removing restrictions on foreign investment and trade

Introduction

*Ethics* - accepted principles of right or wrong that govern the conduct of a person, the members of a profession, or the actions of an organization *Business ethics* - accepted principles of right or wrong governing the conduct of business people *Ethical strategy* - a strategy, or course of action, that does not violate these accepted principles

Straw Men

*Friedman doctrine* - the only social responsibility of business is to increase profits, so long as the company stays within the rules of law -Companies should do only what is mandated by law and what is required to run a business efficiently *Cultural relativism* - ethics are culturally determined and firms should adopt the ethics of the cultures in which they operate "When in Rome, do as the Romans do" *Straw men approaches are raised by business ethics scholars primarily for the purpose of demonstrating that they offer inappropriate guidelines for ethical decision making in a multinational enterprise.* *Naïve Immoralist* - if a manager of an MNE sees that firms from other nations are not following ethical norms in a host nation, that manager should not either Actions are ethically justified if everyone else is doing the same thing *Righteous Moralist* - an MNE's home country standards of ethics are the appropriate ones for companies to follow in foreign countries Approach is common among managers from developed countries

The Globalization of Markets

*Globalization of markets* - the merging of historically distinct and separate national markets into one huge global marketplace In many markets today, the tastes and preferences of consumers in different nations are converging upon some global norm -Coca Cola, Citigroup credit cards, McDonald's hamburgers, and IKEA furniture

Differences in Contract Law

*How do common law and civil differ?* They approach *contract law* (the body of law that governs contract enforcement) differently -A *contract* specifies the conditions under which an exchange is to occur and details the rights and obligations of the parties involved In a common law state, contracts are very detailed with all contingencies spelled out In a civil law state, contracts are shorter and much less specific *In a contract dispute, which country's laws should apply?* The *United Nations Convention in Contracts for the International Sales of Goods* (CIGS) establishes a uniform set of rules governing certain aspects of the making and performance of everyday commercial contracts between sellers and buyers who have their places of business in different nations -Countries that adopt CIGS signal to other nations that they will treat the Convention's rules as part of their law

Culture and Business

*How does a society's culture impact on the values found in the workplace?* Geert Hofstede isolated four dimensions that summarized different cultures 1: *Power distance* -how a society deals with the fact that people are unequal in physical and intellectual capabilities 2: *Individualism versus collectivism* -the relationship between the individual and his or her fellows 3: *Uncertainty avoidance* -the extent to which different cultures socialize their members into accepting ambiguous situations and tolerating ambiguity 4: *Masculinity versus femininity * -the relationship between gender and work roles -Hofstede added *Confucian dynamism* - captures attitudes towards time, persistence, ordering by status, protection of face, respect for tradition, and reciprocation of gifts and favors -A sixth dimension called indulgence versus restraint may be added where indulgence refers to a society that allows relatively free gratification of basic and natural human drives related to having fun, and restraint refers to a society that suppresses gratification of needs and regulates it by means of strict social norms

Declining Trade and Investment Barriers

*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 its home country -During the 1920s and 1930s, many nations erected barriers to international trade and FDI to protect domestic industries from foreign competition After WWII, advanced Western countries began removing trade and investment barriers -Under GATT, nations negotiated decreases in tariffs and made significant progress on a number of non-tariff issues The WTO: -Provides a mechanism for dispute resolution and the enforcement of trade laws -Is focusing on cutting tariffs on industrial goods, services, and agricultural products -Is reducing barriers to cross-border investment Average tariff rates on manufactured products as a percent of value have declined tremendously since 1913. -US went from 44% to 3.2% Lower trade and investment barriers help companies: -See the world as a single market -Establish production activities in optimal locations around the globe This has led to an acceleration in the volume of world trade and investment -Companies now disperse production to drive down production costs and increase product quality -Economies of nation-states are becoming more intertwined

Corruption

*Is it ethical to make payments to government officials to secure business?* -The *Foreign Corrupt Practices Act* prohibits U.S. companies from paying bribes to foreign government officials in order to gain business (us mexico video) -The OECD's *Convention on Combating Bribery of Foreign Public Officials in International Business Transactions* obliges member states to make the bribery of foreign public officials a criminal offense Some argue that paying bribes might be the price of doing a greater good -Where preexisting political structures distort or limit the workings of the market mechanism, corruption -marketeering, smuggling, and side payments to government bureaucrats to "speed up" approval for business investments - may actually enhance welfare Others argue that corruption reduces the returns on business investment and leads to low economic growth

The Globalization Debate

*Is the shift toward a more integrated and interdependent global economy a good thing?* Many experts believe that globalization is promoting greater prosperity in the global economy, more jobs, and lower prices for goods and services Others feel that globalization is not beneficial

Political Systems

*Political system*: the system of government in a nation Political systems can be assessed in terms of the degree to which they: -Emphasize collectivism as opposed to individualism -Are democratic or totalitarian

Privatization

*Privatization* - transfers the ownership of state property into the hands of private investors -Because private investors are motivated by potential profits to increase productivity, privatization should increase economic efficiency -Privatization efforts are more successful when they are accompanied by more general deregulation and opening of the economy

Product Safety and Liability

*Product safety laws* set certain safety standards to which a product must adhere *Product liability* involves holding a firm and its officers responsible when a product causes injury, death, or damage -Liability laws are usually least extensive in less developed countries Firms must decide whether to adhere to the standards of the home country or the standards of the host country

Property Rights and Corruption

*Property rights*: the 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 Property rights can be violated by: *Private action*: theft, piracy, blackmail, and the like by private individuals or groups *Public action*: public officials extort income or resources from property holders -Excessive taxation, requiring expensive licenses or permits from property holders, or taking assets into state ownership without compensating the owners Corruption is present in all countries to some degree, however when a country has a high level of corruption: -Foreign direct investment falls -International trade falls -Economic growth falls *Property rights chart* somolia- most corrupt Denmark- least corrupt 100= clean 0=corrupt USA=73

Rights Theories

*Rights theories* - human beings have fundamental rights and privileges that transcend national boundaries and culture -Form the basis for the moral compass that managers should navigate by when making decisions that have an ethical component -The idea that some fundamental rights transcend national borders and cultures was the underlying motivation for the UN's *Universal Declaration of Human Rights* *The UN's Universal Declaration of Human Rights specifies the basic principles that should always be adhered to irrespective of the culture in which one is doing business.*

Management Focus: Did Walmart Violate the Foreign Corrupt Practices Act?

*Summary* This feature explores corruption at Walmart's Mexico division where managers allegedly bribed Mexican government officials to obtain permission to build the San Juan Teotihuacan store in the early 2000s. After leaders at Walmart's headquarters were alerted of the situation, Walmart launched an internal investigation. However, the investigation was turned over to Walmart Mexico to complete and only after a 2012 New York Times article again raised questions about the situation did Walmart reopen the investigation. Today, the company has spent more than $300 million on lawyers looking into the issue and Walmart is also facing scrutiny by the SEC and the U.S. Department of Justice. Suggested Discussion Questions Please see Critical Thinking Question 6 for discussion of this feature.

Management Focus: Starbucks Wins Key Trademark Case in China

*Summary* This feature focuses on intellectual property laws in China. When Starbucks entered China in 1999, the company was quickly challenged by a look-alike competitor, Shanghai Xing Ba Ke Coffee Shop. Not only did the name Xing Ba Ke mimic the Starbucks name, but Xing Ba Ke's stores were virtual replicas of those operated by Starbucks. In 2003, Starbucks sued Xing Ba Ke for trademark violations. In 2006, Starbucks won its case, and Xing Ba Ke was fined $62,000 and ordered to stop using its name. The case was seen as a break through of sorts, a signal that China was finally caving to pressure from other nations and the World Trade Organization to respect intellectual property rights. Today, Starbucks operates over 400 stores in China and expects the market to become second only to the U.S. Suggested Discussion Questions 1. Discuss the concept of property rights protection and why it is so important to companies. What does the court ruling against Xing Ba Ke mean for other companies that are already doing business in China, or are considering entering the market? Discussion Points: Most students will recognize that firms that depend on proprietary property such a brand name or technology for their competitive advantage probably also rely on property rights protection to ensure that competitors cannot benefit from their efforts. The finding against Xing Ba Ke is a symbol that property rights protection should be taken seriously, and that blatant violations of property rights will not be tolerated. 2. How important is the Chinese market to Starbucks? Does the presence of look-alike companies like Xing Ba Ke deter firms from entering the market? Discussion Points: With its growing middle class, the potential in the Chinese market is vast. Some students might argue that the presence of Xing Ba Ke is actually a positive force for Starbucks in that the coffee shop helps to promote the idea of coffee consumption in the Starbucks' way. Most students however, will probably suggest that companies like Xing Ba Ke are a nuisance because they could potentially damage the reputation of Starbucks if customers have a negative experience at the stores, and because they require constant monitoring, are a drain on profits. Lecture Note: To extend this discussion, consider {http://www.businessweek.com/articles/2014-04-03/starbuckss-howard-schultz-on-mobile-payments-china-and-oprah} and {http://www.businessweek.com/news/2014-09-24/starbucks-expanding-into-russia-s-urals-even-as-sanctions-mount}. Teaching Tip: To explore Starbucks in more depth, go to the company's web site at {http://www.starbucks.com/}. Click on "International" to explore individual country sites.

Country Focus: Islamic Capitalism in Turkey

*Summary* This feature examines the debate surrounding Turkey's membership in the European Community. Turkey has indicated that it would like to be a part of the regional bloc, but many are concerned that because the country's dominant religion is Islam, it would not be a good fit. Others however, argue that these fears are unfounded. Supporters of Turkey's membership in the European Union note that the country's central region is home to many thriving entrepreneurial ventures. Suggested Discussion Questions 1. Are the concerns of those opposing Turkey's admittance to the European Union well-founded? Can Islam, capitalism, and globalization co-exist? *Discussion Points:* Many students will probably suggest that if the country's religious preferences are the only issue preventing Turkey's membership in the European Union, then indeed these fears are unfounded. Students taking this perspective are likely to point out that Central Turkey, a region where Islamic values are particularly strong, is also referred to as the Anatolian Tiger because it is home to so many thriving Muslim companies, many of which are large exporters. Other students however, may note that traditionally Islam is critical of those who earn a profit through the exploitation of others. Depending on just how this view is defined could influence how Turkey views the economic activities of other European Union countries. 2. Explain the concept of Islamic Calvinism? How has Islamic Calvinism helped the Kayseri region of Turkey? *Discussion Points:* Islamic Calvinism is a fusion of traditional Islamic values and the Protestant work ethic. In the Kayseri region of Turkey, Islamic Calvinism is evident. The region is home to many thriving businesses in a wide variety of industries that have successfully meshed traditional Islamic values with the entrepreneurial values associated with the Protestant work ethic. Many companies set aside time for daily prayers and trips to Mecca, most restaurants in the region do not serve alcohol and require women to cover their heads. At the same time, businesses in the region have made it priority to make money. Lecture Note: To get an update of Turkey's current situation go to {http://www.mfa.gov.tr/default.en.mfa}. Lecture Note: To extend this discussion, consider {http://www.businessweek.com/videos/2014-09-26/why-turkey-is-key-in-fight-against-islamic-state}.

Management Focus: Making Apple's iPOD

*Summary* This feature explores Apple's experiences with employment practices at the Chinese factory that produces its iPOD. In 2006, two Chinese journalists reported that the working conditions at Hongfujin Precision Industries where Apple's iPODs are produced, were substandard. According to the report, not only were workers at the plant poorly paid, but they were also forced to work overtime. Apple immediately responded to the allegations and audited the factory in question. However, managers at the factory filed a defamation lawsuit against the two journalists. Despite the fact that Apple's audit did indeed show substandard working conditions at the factory, Hongfujin did not withdraw the lawsuit. Eventually the Reporters Without Borders group took up the case for the two reporters and the lawsuit was dropped. Suggested Discussion Questions 1. Should Apple be responsible for ensuring that its suppliers are safeguarding the basic rights and dignity of their employees? How can Apple be sure that its suppliers do not employ sweatshop labor? Discussion Points: Many students will probably agree that Apple should be responsible at least to some degree for ensuring that the factories where it sources its products are safe. Some students may suggest that to knowingly buy products from a company with substandard working conditions is a violation of basic human ethics. Other students however, may argue that Nike cannot force suppliers to adopt specific practices and policies toward labor. Students taking this perspective might further suggest that pushing American practices on Chinese companies is ethnocentric, and that for many Chinese the prospect of having a job, even in poor working conditions, is better than having no job at all. Many students may be surprised that Apple did not already have an audit policy in place prior to the accusations by the Chinese reporters, but will probably agree that the company handled the situation appropriately. 2. The allegations against Hongfujin Precision Industries were made by two Chinese reporters. Discuss the implications of this for other Chinese companies. Discussion Points: Most students will probably agree that the fact that the allegations against Hongfujin Precision Industries were made by Chinese reporters who work for China Business News, a state run newspaper, could have interesting implications for other companies. Some students will probably suggest that it should serve as a signal to other companies that poor working conditions are unacceptable, and that while in the past, it may have been possible to hide them, it is no longer the case. Other students may suggest that the allegations may force companies to rethink their production and look for new ways to increase productivity. Some students may note that the very fact that the report was published is startling in some regards, and that companies should anticipate further scrutiny. Lecture Note: Apple maintains that it requires its suppliers to practice responsible manufacturing. To learn more about Apple's policies go to {http://www.apple.com/environment/}. Lecture Note: To extend this case, consider exploring Apple's recent troubles with allegations of sweatshop conditions in supplier factories that have prompted worker suicide. Go to {http://www.businessweek.com/news/2010-06-02/apple-is-all-over-foxconn-after-suicides-ceo-steve-jobs-says.html} and {http://www.businessweek.com/news/2010-05-26/apple-hp-dell-begin-probing-supplier-after-suicides-update2-.html} for more details. Lecture Note: To explore Apple's recent issues with suppliers, consider {http://www.businessweek.com/articles/2014-09-18/some-apple-suppliers-get-cut-off-must-scramble-for-new-business}.

Country Focus: Using IT to Break India's Caste System

*Summary* This feature explores India's caste system and the implications of the system. While many urban middle class citizens are not affected in a significant way by the caste system, for India's rural population, the influence of the system is readily apparent. The government is strongly encouraging private companies to hire more lower caste individuals. Suggested Discussion Questions 1. India's castes system has been around for many years. Explain why its influence has diminished among educated urban middle class Indians. Discussion Points: The caste system in India was officially abolished in 1949. However, it seems that urban citizens have benefited the most from its abolishment. For many rural Indians, the system is still very much in effect. Educated, urban middle class Indians make up the majority of employees in India's high tech economy. They may work for large multinationals like Infosys and Wipro. Many students will probably attribute the relative freedom of these individuals to the presence of these large companies, and their need to hire the best people regardless of caste. In rural areas though, the caste system still has significant influence in daily life. One female engineer working for Infosys notes for example that as a member of a lower caste, she was not able to enter the homes of higher caste individuals. Yet the same engineer, a beneficiary of an Infosys training programs, now works for Infosys in a "higher caste" position. 2. Why are many private companies in India resisting the hiring quotas suggested by the government? Why might it be necessary to hire lower caste individuals? Discussion Points: The Indian government has suggested that private companies make an effort to employ lower caste individuals. However, many companies are resisting the request using the argument that they want to hire qualified people who want to work hard, and not people who are available simply because of a quota system. Some companies however, recognize that there may be a place for lower caste individuals, especially has business grows. Infosys for example, offers special training to low caste members. Lecture Note: To extend this discussion, consider {http://news.bbc.co.uk/2/hi/south_asia/7914229.stm} and {http://news.bbc.co.uk/2/hi/south_asia/6125940.stm}. Lecture Note: For more on India's caste system, go to {http://www.npr.org/programs/specials/racism/010828.caste.html}.

Management Focus: Unocal in Myanmar

*Summary* This feature explores Unocal's actions in Myanmar. Unocal, an American, oil and gas enterprise, formed a joint venture with a French company to build a pipeline from Myanmar to Thailand. Unocal made that investment at a time when many other American companies were exiting the country in protest of the local government's policy of brutally suppressing internal dissent. Suggested Discussion Questions 1. Why did Unocal's investment become so controversial? Did Unocal behave in an ethical manner? Discussion Points: Unocal made its investment in Myanmar just as many other companies were leaving the country in protest of the nation's brutal military dictatorship. The company had formed an agreement with the government that involved clearing a path for a new pipeline. The investment became controversial when, in order to fulfill the agreement, Myanmar's army forcibly moved villagers and then forced them to work under slave-like conditions. Unocal claims it had no knowledge of what was occurring, but this claim was rejected by a judge who heard the case that was filed against Unocal on behalf of Myanmar villagers. Students will probably agree that the company failed to act in an ethical manner, and that while it may not have directly participated in the brutality, Unocal did have a responsibility to oversee what was going on and ensure that people were treated fairly. 2. A 1996 law suit against Unocal was dismissed on the grounds that the Unocal could not be held liable for the actions of a foreign government against its own people, although the judge noted that the company was aware of what was going on in the country. Discuss the difference between acting in an ethical manner and acting according to the law. Discussion Points: Students will probably be familiar with the notion that even if something is not explicitly forbidden, it does not mean it is right. This concept would certainly seem to apply in this case. Ethical responsibility goes beyond the letter of the law to encompass the idea of behaving in a certain way simply because it is the right thing to do. It is worth noting that an appeal by the plaintiffs resulted in an out-of-court settlement in 2005, which would imply that Unocal was guilty at least to some extent. Teaching Tip: Unocal is now part of Chevron. The company's web page is {http://www.chevron.com/}. Lecture Note: To extend this discussion, consider {http://news.bbc.co.uk/2/hi/europe/8600278.stm}.

Management Focus: DMG-Shanghai

*Summary* This feature explores guanxi, or the relationships and connections that are so important in the Chinese business world. The notion of guanxi comes from the Confucian philosophy of valuing social hierarchy and reciprocal obligations. Dan Mintz, founder of DMG, one of China's fastest growing advertising agencies, credits guanxi for his success. Mintz established connections with two Chinese individuals with access to high ranking government officials. Through these guanxiwang, or connections, Mintz has been able to get permission to shoot advertisements in locations that are usually closed to foreigners. Suggested Discussion Questions 1. Explain the concept of guanxi. How did Mintz's guanxiwang help his company becomes so successful? *Discussion Points:* Guanxi literally means relationships, although in business settings in can better be understood as "connections." The concept of guanxi is deeply rooted in Chinese culture and Confucianism. The Chinese will often cultivate a guanxiwang, or "relationship network," for help. In China, there is a tacit acknowledgement that if you have the right guanxi, legal rules can be broken or bent. Mintz made connections with two Chinese men who had access to high ranking government officials. Through these men, Mintz was able to secure permission to film commercials in locations that are normally closed to outsiders. 2. Compare the difference between doing business in the West and doing business in China. *Discussion Points:* A basic difference between doing business in the West and doing business in China involves how legal agreements are handled. In the advanced economies of the West, business transactions are conducted and regulated by the centuries-old framework of contract law, which specifies the rights and obligations of parties to a business contract and provides mechanisms for seeking to redress grievances should one party in the exchange fail to live up to the legal agreement. China does not have the same infrastructure. Personal power and relationships or connections (guanxi), rather than the rule of law, have always been the key to getting things done in China.

Country Focus: India's Economic Transformation

*Summary* This feature explores the economic transformation in India over the last two decades. After implementing a series of deregulation reforms, India's economy has been expanding rapidly and the country has been the recipient of significant investment by foreign companies particularly in information technology and pharmaceuticals. These investments are helping India to become a force in global markets. Still, the country has some way to go. Recent efforts to reduce tariffs have met with opposition and laws still limit the operation of private enterprises. Discussion of this feature can begin with the following questions. Question 1: What kind of economic system did India operate during 1947 to 1990? What kind of system is it moving toward today? What are the impediments to completing this transformation? Answer 1: From 1947 to 1990, India operated under a mixed economy that included several large state-owned enterprises, central planning, and subsidies. Today, the country is moving towards a market economy. Already a number of economic reforms have been implemented allowing for more privatization of key industries and attracting more foreign investment. However, tariffs are still high and efforts to lower them are meeting with opposition from companies that fear lower tariffs will bring in too much competition. Antiquated labor and manufacturing laws are also making it difficult for firms to operate competitively. Question 2: How might widespread public ownership of business and extensive government regulations have impacted (i) the efficiency of state and private businesses, and (ii) the rate of new business formation in India during the 1947 to 1990 time frame? How do you think these factors affected the rate of economic growth in India during this time frame? Answer 2: Many students will probably agree that introducing privatization at a much earlier date could have led to greater corporate efficiency and generated more economic growth in India. Extensive government regulations also hampered the efforts of businesses to expand prior to 1990. In fact, it was India's lack of growth that forced the government to implement the reforms in 1990 that have been responsible for prompting the economic turnaround the country is currently experiencing. Question 3: How would privatization, deregulation, and the removal of barriers to foreign direct investment affect the efficiency of business, new business formation, and the rate of economic growth in India during the post-1990 time period? Answer 3: Since 1990, India has been much more open to foreign investment, and extensive privatization of numerous industries has introduced a new level of competition to the market - competition that forces firms to become more efficient. Foreign investment in the county is up from just $150 million in 1991 to $36.7 billion in 2007, and the overall economy has grown at a much quicker rate. Growth rates from 1994 to 2004 were about 6.3 per year, but about 9 percent per year from 2005 to 2008. Question 4: India now has pockets of strengths in key high-technology industries such as software and pharmaceuticals. Why do you think India is developing strength in these areas? How might success in these industries help to generate growth in other sectors of the Indian economy? Answer 4: India's information technology sector and pharmaceutical sector have been particularly successful in recent years. For example, in 2007, India's software development sector had sales of $50 billion as compared to just $150 million in 1990. Many students will probably attribute much of the country's success in these sectors to a combination of factors including a well-educated, low-cost workforce, and the country's growing middle class. Students will probably note that success in these industries should have a spillover effect for other sectors of the economy. Question 5: Given what is now occurring in the Indian economy, do you think the country represents an attractive target for inward investment by foreign multinationals selling consumer products? Why? Answer 5: Many students will probably suggest that despite the many recent changes in India, consumer products manufacturers could still face significant challenges in the country. India's laws make it difficult for private companies to operate efficiently, companies are limited in their ability to manufacture some products, and may also find it hard to fire workers. Still, the country's new prosperity and large potential market could make it attractive to many companies. Lecture Note: To extend this discussion, consider exploring the new rush of businesses that are investing in India. For example, Wal-Mart recently announced that its intention to open 50 retail outlets in the country and Google has announced plans to focus on India's android phone market. To learn more, go to {http://www.businessweek.com/articles/2014-10-23/wal-mart-struggles-to-crack-retail-market-in-india} and {http://www.businessweek.com/articles/2014-10-21/googles-big-plans-for-low-cost-android-one-phones-in-india}. Teaching Tip: Information on doing business in India is available at {http://www.indianembassy.org/newsite/Doing_business_In_India/FDI_Policy_Procedures.asp}.

Country Focus: Emerging Property Rights in China

*Summary* This feature explores the effect of a new property law in China. The law, which was passed in 2007, gives both rural and urban land holders more secure property rights. The new law was a much needed response to the changes in China's economy over the last 30 years. Under the law, urban land holders are granted 40 - 70 year leases, and rural land holders 30 year leases, and both groups have the right to automatically renew their leases. While the law has its limitations, it is a step toward strengthening property rights in China. Suggested Discussion Questions 1. What prompted the new property law in China? Why did it take so long to actually develop the law? Discussion Points: China's economy has undergone significant changes over the last 30 years. The country has shifted from a centrally planned economy where state ownership ruled, to a dynamic market based system where some two thirds of economic activity is now conducted by private companies. So, while the state technically still controls all land, the new law means that private enterprises have a greater opportunity to behave as true land owners. The new law took 14 years to create thanks to significant opposition from Communist Party activists who believe that it violates basic communist policies. 2. China's new law has implications for both urban land holders and rural land holders, but it is especially important for the latter group. Explain what China's new property law means for farmers. Discussion Points: The new law is important for both farmers and other land holders because it grants land holders the right to a long lease and the opportunity to renew the lease. In the past, many farmers found themselves evicted from their farms without compensation when the state took the land for housing or factories. Under the new law, while the state technically still controls all land, and could therefore, appropriate it, farmers have a more stable, secure environment. If the state needs the land, the farmer must be compensated. Still, the law fails to give farmers ownership rights to their land, and effectively prevents them from either acquiring additional land and taking advantage of scale economies, or selling their land, and moving into a more productive situation. Lecture Note: To extend this discussion consider exploring the rising frustration of multinational companies as the business environment in China becomes more challenging thanks to government policies. To learn more, go to {http://www.businessweek.com/articles/2014-10-24/frustrated-multinationals-look-to-trim-china-based-staff} and {http://www.businessweek.com/news/2014-10-26/china-trade-accord-unlikely-to-aid-manufacturers-survey-shows}.

Sustainability

*Sustainable strategies* - strategies that not only help the MNC make good profits, but that also do so without harming the environment while simultaneously ensuring that the company operates in a socially responsible manner with regard to its stakeholders -Sustainable strategies can be good for shareholders, the environment, local communities, employees, and customers

Utilitarian and Kantian Ethics

*Utilitarian approach* - the moral worth of actions or practices is determined by their consequences -Actions have multiple consequences, some good, some not -Actions are desirable if they lead to the best possible balance of good consequences over bad consequences *Kantian ethics* - based on the philosophy of Immanuel Kant who argued that people should be treated as ends and never purely as means to the ends of others -People have dignity and need to be respected, they are not machines

Videos

*Walmart video* Bribery all allegations to contain construction permits in Mexico, over 24 million. Purpose was to build more stores more quickly Top execs tried to shut down internal investigation Foreign curropt practices act- illegal for employees to bribe a foreign country FCPA • enacted in 1977, in wake of corp bribe scandals Lockheed • Prohibits corps individuals and companies to bribe foreign officials • requires stocks to maintain transparent accounting records so bribes can be identified WHAT PARTS OF FCPA DID WALMART VIOLATE • allegations go towards both parts of fcpa • Walmart de Mexico were paying bribes to mex officials, accounting was specifically trying to hide payments Bribe -exception "facilitating payments" -payments made to facilitate or speed up the acquisition of an already existing permit *Apparel* • 1990s impoverished and rebuilding after genocidal comer roosh years • Added minimum wages, working hours, union, freedom of expression • 400,000 workers in 300 factors near capital • ¾ dollars coming out of country comes from garmet industry • 61 bucks per month, no sick coverage, no retirement benefits • Many workers on temp contracts • Lawyer for factor owners disagrees o Says workers are paid more than the 61 dollars per month ~90 o "people come to work willingly" o The common factor worker earns 40% more than national per capital gdp *China environment* • Escel textiles o Largest importer of shirts o 54,000 employees, acts as a mini city o Lime cuts dwn pollutants but doesn't eliminate them o China's economy second to us Uses coal and is the largest emitter of greenhouse gasses • Investing massive amounts into cleanup efforts • Environment health and safety program o Trains managers with courses of environmental regulations health hazards and risk assessment • Cost of violations is lower than cost of compliance with pollution laws *World bank arab video* Need to open a dialogue with different voices in the region • New dynamics of public choice o Could contribute to new social contracts • "I have a voice" thanks to social media *Volkswagon* • 11 million diesel cars affected by software used to cheat on emission tests, primarily in Europe • Stocks plummet 19%/ 17 billion • Epa uncovered software • Switches on cars emission controls when a smog test takes place, turns off once the test is over. Leaves cars emitting over 40 times higher than legal limit • Present in vw jetta, beetle, golf, passat, and audi a3 • Vw is commiting to full transparency • The whole point people buy vw is to lessen amounts of emission *China economy* • China market plunged 7% o Caused us DOW to drop 400 points o Yet if china stock market has a bad day the ripples are felt in Europe and then us. • China has a large economy but not a big stock market • Chinas economy may be slowing more than we thought • Psychological panic is stronger than economic panic • Letting Chinese currency fall is only good when it comes to trading o They are relying more on exports because they anticipate consumer spending to be lower than expectations. • Stocks need to fall 20% in us before we stop it for the day o Chines halted trading after only 7% • Oil prices down for reasons of over supply o And lack of demand

Anti-globalization Protests

*What are the concerns of critics of globalization?* -Anti-globalization protesters fear that globalization is forever changing the world in a negative way --They believe that globalization negatively affects living standards and the environment -Evidence suggests their fears are exaggerated

Introduction

*What are the implications of a country's political economy on its level of economic development and its environment for doing business? * A country's political economy influences its level of economic development Higher levels of economic development create a more favorable environment for international business

Implications for Managers

*What are the implications of the political economy for international businesses?* The overall attractiveness of a country depends upon the balance between the likely benefits of doing business in that country against the likely costs and risks

Managing in the Global Marketplace

*What does the shift toward a global economy mean for managers within an international business?* -Managing an *international business* (any firm that engages in international trade or investment) differs from managing a domestic business in four key ways 1. Country differences require companies to vary their practices country by country 2. Managers face a greater and more complex range of problems 3. International companies must work within the limits imposed by governmental intervention and the global trading system 4. International transactions require converting funds and being susceptible to exchange rate risk

Democracy and Totalitarianism

*What is the difference between a democracy and totalitarianism?* *Democracy*: political system in which government is by the people, exercised either directly or through elected representatives -Most common form today is representative democracy- elected representatives vote on behalf of constituents *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 In most totalitarian regimes: -There is widespread political repression -There are no free and fair elections -Media is censored -Basic civil liberties are denied -Challenges to the regime are prohibited

Introduction

*What is the political economy of a country?* A country's political economy refers to its political, economic, and legal systems These systems are interdependent, and interact and influence each other A country's political system has major implications for the practice of international business

Personal Ethics

-Business ethics reflect personal ethics -Expatriates may face pressure to violate their personal ethics because --They are away from their ordinary social context and supporting culture --They are psychologically and geographically distant from the parent company *Personal ethics refer to the generally accepted principles of right and wrong governing the conduct of individuals.*

Innovation and entrepreneurship: property rights

-Individuals and businesses must have the opportunity to profit from innovative ideas -Hernando de Soto - developing world will not benefit from capitalism until property rights are better defined and protected

Roots of Unethical Behavior

-personal ethics -decision making process -organizational culture -unrealistic performance goals -leadership -societal culture

A five-step process can also help managers think through ethical issues

1. How would a decision affect stakeholders Internal stakeholders - people who work for or who own the business such as employees, the board of directors, and stockholders External stakeholders - the individuals or groups who have some claim on a firm such as customers, suppliers, and unions 2. Determine if a proposed decision violates the fundamental rights of any stakeholders 3. Establish *moral intent* Moral intent refers to the business must resolve to place moral concerns ahead of other concerns in cases where either the fundamental rights of stakeholders or key moral principles have been violated. 4. Engage in ethical behavior 5. Audit decisions - reviewing them to make sure that they were consistent with ethical principles

The Changing MNE

A *multinational enterprise (MNE)* is any business that has productive activities in two or more countries Since the 1960s: -There has been a rise in non-U.S. multinationals -There has been a rise in mini-multinationals Small and medium-size firms are now expanding internationally -Easier to build international sales via the Internet MNE Chart summary US decreased from 48 to 22 in MNE Other countries except UK increasing

Differences in Economic Development

A country's level of economic development affects its attractiveness as a possible market or production location for firms -A common measure is gross national income (GNI) -A purchasing power parity (PPP) adjustment provides a more direct comparison of living standards in different countries Official figures can be misleading -Unrecorded cash transactions can be significant --India's black or shadow economy may be around 50% of GDP --The EU estimates that the shadow economy accounted for 10% of GDP in the UK and France in 2012, 24% in Greece, and 32% in Bulgaria *GNI and PPP data provide a static picture of development. It is also important to consider growth rates. If current trends continue China will become the world's largest economy in the next decade*

Mixed Economy

A mixed economy includes some elements of a market economy and some elements of a command economy -Governments tend to take over troubled firms that are considered to be vital to national interests The number of mixed economies in the world today is falling

Global Economy in the 21st Century

A more integrated global economy -New opportunities for firms -But, political and economic disruptions can throw plans into disarray

social structure

A society's social structure is its basic social organization Two dimensions to consider: -The degree to which the basic unit of social organization is the individual, as opposed to the group -The degree to which a society is stratified into classes or castes

Globalization and National Sovereignty

Critics worry economic power is shifting away from national governments and toward supranational organizations such as the WTO, the European Union (EU), and the UN Supporters argue that the power of these organizations is limited to what nation-states collectively agree to grant -The organizations must be able to persuade members states to follow certain actions -Without the support of members, the organizations have no power

Managerial Implications

Differences in culture imply that: 1) There is a need for managers to develop cross-cultural literacy 2) There is a connection between culture and national competitive advantage 3)There is a connection between culture and ethics in decision making

Globalization and the World's Poor

Critics argue the gap between rich and poor has gotten wider and the benefits of globalization have not been shared equally Supporters suggest that the actions of governments have made limited economic improvement in many countries -Many of the world's poorest nations are under totalitarian regimes, suffer from endemic corruption, have few property rights, are involved in war, and are burdened by high debt

Globalization, Jobs, & Income

Critics claim jobs in advanced economies are being lost to low-wage nations Supporters claim while some jobs may be lost, the economy as a whole is better off Free trade will result in countries: -Specializing in the production of those goods and services that they can produce most efficiently -Importing goods and services that they cannot produce as efficiently In doing so, all countries will gain -Invest in education to improve labor skills and increase wages

Social Stratification

All societies are stratified on a hierarchical basis into social categories, or social strata -Usually defined by characteristics such as family background, occupation, and income Societies differ in terms of: -The degree of mobility between social strata -The significance attached to social strata in a business context Four basic principles of social stratification: 1. It is a trait of society, not a reflection of individual differences 2. It carries over a generation to the next generation 3. It is generally universal, but variable 4. It involves not just inequality but also beliefs *Social mobility*- the extent to which individuals can move out of the strata into which they are born -*Caste system* - social position is determined by the family into which a person is born, and change in that position is unlikely -*Class system* - the position a person has by birth can be changed through achievement or luck

Broader Conceptions of Development

Amartya Sen - development should be assessed by the capabilities and opportunities that people enjoy The UN created the *Human Development Index* based on life expectancy, education attainment, and whether average incomes are sufficient to meet the basic needs of life in a country Reflects Sen's ideas and gauges a country's economic development and likely future growth rate

Philosophical Approaches

Approaches to business ethics include: -Straw men The Friedman doctrine Cultural relativism The righteous moralist The naïve immoralist -Utilitarian and Kantian -Rights theories -Justice Theories

Buddhism

Buddhists - stress spiritual growth and the afterlife, rather than achievement while in this world *What are the economic implications of Buddhism?* Buddhism does not support the caste system, so individuals do have some mobility and can work with individuals from different classes -Entrepreneurial activity is acceptable Buddhism is found mainly in Central and Southeast Asia, China, Korea, and Japan. Buddhism's Zen orientation has become a popular trend in the Western business world.

Org Culture and Leadership

Businesses need to build an organization culture that places a high value on ethical behavior -The business must explicitly articulate values that place a strong emphasis on ethical behavior -*Code of ethics* - a formal statement of the ethical priorities a business adheres to *Leaders in the business should give life and meaning to the code of ethics by repeatedly emphasizing their importance, and then acting on them. The business should put in place a system of incentives and rewards that recognize people who engage in ethical behavior and sanction those who do not.*

Hiring and Promotion

Businesses should strive to identify and hire people with a strong sense of personal ethics Prospective employees should find out as much as they can about the ethical climate in an organization

Christianity

Christianity is the most widely practiced religion *What are the economic implications of Christianity?* In 1904, Max Weber suggested that it was the Protestant work ethic (focus on hard work, wealth creation, and frugality) that was the driving force of capitalism Christianity is common throughout Europe, the Americas, and other countries settled by Europeans.

Confucianism

Confucianism - attain personal salvation through right action *What are the economic implications of Confucianism?* Three key teachings of Confucianism - loyalty, reciprocal obligations, and honesty - may all lead to a lowering of the cost of doing business in Confucian societies Confucianism is practiced mainly in China.

Internet Extra:

Consumers International {http://www.consumersinternational.org/}is an organization dedicated to protecting the rights of consumers worldwide. In doing so, it promotes ethical behavior on the part of companies. Go to the site and click on one of the organization's current efforts. What are the issues that are being raised? How do they affect companies? Do you agree with the organization's position? Why or why not?

Language

Countries differ in terms of language or means of communication There are two forms language: -Spoken -Unspoken Language is one of the defining characteristics of culture

Innovation and Entrepreneurship: Market economy

Countries with high economic freedom have high economic growth and richer citizens -Hong Kong, Switzerland, Singapore, the U.S., Canada, and Germany Countries that lack economic freedom also fail to achieve respectable economic growth

Spoken Language

Countries with more than one spoken language often have more than one culture -Chinese is the mother tongue of the largest number of people in the world -English is the most widely spoken language in the world, and is becoming the language of international business

Globalization, Labor Policies, Environment

Critics argue free trade encourages firms from advanced nations to move manufacturing facilities offshore to less developed countries with lax environmental and labor regulations Supporters claim tougher environmental regulation and stricter labor standards reflect economic progress -As countries get richer as a result of globalization, they raise their environmental and labor standards -Free trade does not lead to more pollution and labor exploitation, it leads to less

Introduction

Cross-cultural literacy - an understanding of how cultural differences across and within nations can affect the way in which business is practiced There may be a relationship between culture and the costs of doing business in a country or region Culture is not static (Cross cultural literacy is important to success in international business. The actions of MNEs can contribute to cultural change.)

Cultural Change

Culture evolves over time, although changes in value systems can be slow and painful for a society -Social turmoil is an inevitable outcome of cultural change -Cultural change is particularly common as countries become economically stronger

What is culture?

Culture is a system of *values* and *norms* that are shared among a group of people and that when taken together constitute a design for living Values refer to abstract ideas about what a group believes to be good, right, and desirable. Norms are the social rules and guidelines that prescribe appropriate behavior in particular situations.

The Spread of Democracy

Democracy has spread to new countries because: -Many totalitarian regimes failed to deliver economic progress to the majority of their population -New information and communication technologies have broken down the ability of the state to control access to uncensored information -Economic advances of the last quarter century have led to the emergence of increasingly prosperous middle and working classes who have pushed for democratic reforms

Economic Progress Begets Democracy

Democracy is often a consequence of economic growth -South Korea and Thailand This has contributed to the attitude of many Western governments towards human rights violations in China -If China establishes a free market system, it is hoped that greater individual freedom and democracy will follow

The Required Political System

Democratic regimes tend to be more conducive to long-term economic growth than dictatorships - even the benevolent kind -Limiting human freedom also suppresses human development and therefore limits progress

Corporate Social Responsibility

Do MNEs have a responsibility to give back to societies that enable them to grow and prosper? *Corporate social responsibility* - the idea that business people should take the social consequences of economic actions into account when making business decisions -There should be a presumption in favor of decisions that have both good economic and good social consequences

Moral Courage

Employees in an international business may need significant moral courage -Managers need to be able to walk away from decisions that are profitable, but unethical -Employees need to be able to say no to actions that are unethical

Societal Culture

Ethical policies differ by country -MNEs located in countries where individualism and uncertainty avoidance are strong are more likely to emphasize ethical behavior -MNEs located in countries with high masculinity and high power distance are less likely to promote ethical behavior

Engines of Growth

For a country to sustain long term economic growth, the business environment needs to be conducive to innovation and entrepreneurial activity *Innovation* - new products, new processes, new organizations, new management practices, and new strategies *Entrepreneurs* first commercialize innovative new products and processes

Education

Formal education is the medium through which individuals learn many of the language, conceptual, and mathematical skills that are indispensable in a modern society The knowledge base, training, and educational opportunities available to a country's citizens can also give it a competitive advantage in the market and make it a more or less attractive place for expanding business The general education level of a country is a good indicator of the types of products that might sell in that location or the type of promotional materials that might be successful

The Emergence of Global Institutions

Global institutions: -Manage, regulate, and police the global market place -Promote the establishment of multinational treaties to govern the global business system The *World Trade Organization (WTO)* - polices world trading system and ensures nations adhere to the rules established in WTO treaties -Succeeded the *General Agreement on Tariffs and Trade (GATT)* -In 2013, its 159 members accounted for 98% of world trade The *International Monetary Fund (IMF)* - maintains order in the international monetary system The *World Bank* - promotes economic development using low-interest loans The *United Nations (UN)* -Maintains international peace and security -Develops friendly relations among nations -Cooperates in solving international problems -Promotes respect for human rights -Is a center for harmonizing the actions of nations

Individuals and groups

Group - an association of two or more individuals who have a shared sense of identity and who interact with each other in structured ways on the basis of a common set of expectations about each other's behavior -Groups are common in many Asian societies -Many Western countries emphasize the individual In societies where the *individual* is dominant: -Individual achievement and entrepreneurship are promoted -Encourages job switching, competition between individuals rather than team building, and a lack of loyalty to the firm In societies where the *group* is dominant: -Cooperation and team work are encouraged and life time employment is common -Individual initiative and creativity may be suppressed

Hinduism

Hinduism - focuses on the importance of achieving spiritual growth and development, which may require material and physical self-denial *What are the economic implications of Hinduism?* Hindus are valued by their spiritual achievements -Promotion and adding new responsibilities may not be the goal of an employee, or may be infeasible due to the employee's caste Hinduism is practiced primarily on the Indian sub-continent. Note though that India today is a dynamic entrepreneurial society.

Leadership

If a firms leaders fail to act in an ethical manner, other employees may not act ethically -Actions speak louder than words

Decision-Making Processes

If a manager can answer "yes" to the following questions, the decision is ethically acceptable -Does my decision fall within the accepted values of standards that typically apply in the organizational environment? -Am I willing to see the decision communicated to all stakeholders affected by it? -Would the people with whom I have significant personal relationships approve of the decision?

Command Economy

In a *pure command* economy the goods and services that a country produces, the quantity in which they are produced, and the price at which they are sold are all planned by the government -All businesses are state-owned, and so have little incentive to control costs and be efficient -Because there is no private ownership, there is little incentive to better serve consumer needs

Market Economy

In a *pure market* economy the goods and services that a country produces, and the quantity in which they are produced is determined by supply and demand Consumers, through their purchases, determine what is produced and in what quantity -Interaction of supply and demand determines production The role of government is to encourage free and fair competition between private producers

What is the significance of social stratification for business?

In cultures where class consciousness (where people tend to perceive themselves in terms of their class background) is high, the way individuals from different classes work together may be prescribed -Antagonism between labor and management can raise the costs of doing business

Changing Demographics

In the 1960s: -The U.S. dominated the world economy, world trade, and world FDI -U.S. MNEs dominated the international business scene -About half the world-- the centrally planned economies of the communist world-- was off limits to Western international business Today, much of this has changed

Changing World Output

In the early 1960s: -U.S. - dominant industrial power accounting for about 38.3% of world manufacturing output By 2012: -U.S. accounted for only 23.1% Germany, France, and the U.K. had a similar decline -Rapid economic growth now in countries like China, India, Russia, and Brazil -Further relative decline by the U.S. is likely So companies may find both new markets and new competitors in the developing regions of the world

Introduction

In the world economy today, we see: -Fewer self-contained national economies with high barriers to cross-border trade and investment -A more integrated global economic system with lower barriers to trade and investment -Over $5 trillion in foreign exchange transactions daily -Over $18 trillion of goods and $4 trillion of services being sold across national borders -The establishment of international institutions

Summary

In this chapter we have: -Explored what is meant by the term globalization. -Identified the main drivers of globalization. -Described the changing nature of the global economy. -Explained the main arguments in the debate over the impact of globalization. -Discussed how the process of globalization is creating opportunities and challenges for business managers.

Cross-Cultural Literacy

Individuals and firms must develop cross-cultural literacy -Firms that are ill-informed about the practices of another culture are unlikely to succeed in that culture Individuals must also beware of ethnocentric *behavior* -Belief in the superiority of one's own culture

Protection of Intellectual Property

Intellectual property: property that is the product of intellectual activity *Intellectual property rights include:* *Patents*: give the inventor exclusive rights to the manufacture, use, or sale of that invention *Copyrights*: exclusive legal rights of authors, composers, playwrights, artists, and publishers to publish and dispose of their work as they see fit *Trademarks*: designs and names, often officially registered, by which merchants or manufacturers designate and differentiate their products The protection of intellectual property rights differs greatly from country to country 185 nations are members of the *World Intellectual Property Organization* -*Paris Convention for the Protection of Industrial Property*: agreement signed by 170+ countries to protect intellectual property rights --Enforcement is lax in many nations especially in China and Thailand Companies can respond to violations of intellectual property by: -Lobbying governments for better laws and enforcement of those laws --Trade Related Aspects of Intellectual Property Rights (TRIPS) - requires WTO members to grant and enforce patents lasting at least 20 years and copyrights lasting 50 years -Filing lawsuits -Avoiding countries with poor intellectual property laws

Islam

Islam is an all-embracing way of life that governs one's being One true omnipotent God *What is Islamic fundamentalism?* In the Western media, Islamic fundamentalism is associated with militants, terrorists, and violent upheavals -Fundamentalists have gained political power in many Muslim countries, and have tried to make Islamic law the law of the land While Islamic fundamentalism is viewed negatively in the Western media, the vast majority of Muslims claim that Islam teaches peace, justice, and tolerance. *What are the economic implications of Islam?* Under Islam, people do not own property, but only act as stewards for God and thus must take care of that which they have been entrusted with -Islam is supportive of business, but the way business is practiced is prescribed -Businesses that are perceived to be making a profit through the exploitation of others, by deception, or by breaking contractual obligations are unwelcome

Justice Theories

Justice theories focus on the attainment of a just distribution (one that is considered fair and equitable) of economic goods and services -John Rawls - all economic goods and services should be distributed equally except when an unequal distribution would work to everyone's advantage -Impartiality is guaranteed by the *veil of ignorance* - everyone is imagined to be ignorant of all his or her particular characteristics *What system would people design under a veil of ignorance?* -A system where people would agree that each person is permitted the maximum amount of basic liberty compatible with a similar liberty for others -Once equal basic liberty is assured, inequality in basic social goods are to be allowed only if they benefit everyone --The *difference principle* suggests that inequalities are justified if they benefit the position of the least advantaged person

Ethical Dilemmas

Managers often face situations where the appropriate course of action is not clear *Ethical dilemmas* - situations in which none of the available alternatives seems ethically acceptable -Exist because real world decisions are complex, difficult to frame, and involve various consequences that are difficult to quantify

Pseudo-Democracies

Many nations lie between pure democracy and complete totalitarianism Follow an imperfect or pseudo-democracy -Russia -Venezuela

Legal Systems

Market economies require a well-functioning legal system -It should protect property rights and the machinery to enforce that system -Many countries have made significant strides toward creating a strong legal system, but more work is necessary

Changing Political Economy

Markets that were formerly off-limits to Western business are now open -China (population of 1.3 billion) could be a bigger market than the U.S., the EU, and Japan combined -India (population 1.2 billion) is also a potentially huge market -Latin America has 600 million potential consumers However, just as the potential gains are large, so are the risks

Country Focus: Venezuela under Hugo Chavez, 1999-2013

Note: In recent years that has been some movement back toward socialist ideals in several Latin American countries including Venezuela, Bolivia, and Paraguay, and also in Russia. *Summary* This feature explores the political and economic situation in Venezuela under Hugo Chavez. When Chavez, who was elected president in 1998, ran on a platform against corruption and economic mismanagement, Venezuela's economy was in a deep recession. Once in office, Chavez consolidated his hold over the government by drafting a new constitution that put him in power until 2012. Chavez died in 2013, but during his presidency Venezuela was considered to be only "partly free." Economically, things were also difficult for Venezuela. Chavez did achieve some gains. Unemployment, though still high, fell to 7.6 percent in 2013 from its high of 14.5 percent in 1998. Similarly, poverty remained a problem despite falling from 50 percent to 28 percent in 2012. Yet, corruption was rampant, and there was a move to take certain industries into state ownership, with the oil industry being a particular target. Suggested Discussion Questions Please see Critical Thinking Question 5 for discussion of this feature. Lecture Note: Since Chavez's death in 2013, the situation in Venezuela has become extremely uncertain. To learn more, consider {http://www.businessweek.com/news/2014-08-12/venezuela-sees-chavez-friends-rich-after-his-death-amid-poverty} and {http://www.businessweek.com/news/2014-05-03/chavez-food-utopia-withers-as-development-plans-left-unfulfilled}.

Geography, Education, and Progress

Other factors influencing a country's rate of economic development include: 1) Geography - influences economic policy, and thus economic development -Favorable geography facilitates trade which can promote economic growth 2)Education levels Investment in education promotes faster economic development

Economic Systems

Political ideology and economic systems are connected There are three types of economic systems: the market economy, the command economy, and the mixed economy -A free market system is likely in countries where individual goals are given primacy over collective goals -State-owned enterprises and restricted markets are common in countries where collective goals are dominant

Unrealistic Performance Expectations

Pressure from the parent company to meet performance goals that are unrealistic, and can only be attained by cutting corners or acting in an unethical manner can cause unethical behavior

Decision Making Processes

Studies show that business people may behave unethically because they fail to ask the relevant question—is this decision or action ethical? -Decisions are made based on economic logic, without consideration for ethics

Religious and Ethical Systems

Religion - a system of shared beliefs and rituals that are concerned with the realm of the sacred Religions with the greatest following are: -Christianity (2.25 billion adherents) -Islam (1.65 billion adherents) -Hinduism (1.07 million adherents) -Buddhism (500 million adherents) -Confucianism shapes culture in many parts of Asia *Ethical systems* - a set of moral principles, or values, that are used to guide and shape behavior -The ethical practices of individuals within a culture are often closely intertwined with their religion

Role of Technological Change

Since World War II, there have been major advances in communication, information processing, and transportation -The microprocessor - lowered the cost of global communication and the cost of coordinating and controlling a global organization -The Internet --2.4 billion Internet users in 2012 --Global e-commerce sales over $1 trillion in 2012 -Commercial jet aircraft, super freighters and containerization --Simplifies mode to mode trans-shipment *What are the implications of technological change for the globalization of production?* Lower transportation costs: -Make a geographically dispersed production system more economical -Allow firms to better respond to customer demands *What are the implications of technological change for the globalization of markets?*: -Low cost communications networks help create electronic global marketplaces -Low cost transportation: --Enables firms to create global markets --Facilitates the movement of people promoting a convergence of consumer tastes and preferences

Spread of Market-Based Systems

Since the late 1980s there has been a transformation from centrally planned command economies to market-based economies -Command and mixed economies failed to deliver the sustained economic performance achieved by countries that had adopted market-based systems -Many countries shifted to a market-based system

States in Transition

Since the late 1980s, a wave of democratic revolutions has swept the world, and many of the previous totalitarian regimes collapsed There has been a move away from centrally planned and mixed economies towards free markets

Culture, Society, and the Nation-State

Society - a group of people who share a common set of values and norms --Nation- states are political creations that can contain a single culture or several cultures --Some cultures embrace several nations *There is not a strict one-to-one correspondence between a society and a nation-state.*

Management Focus: Corporate Social Responsibility at Stora Enso

Summary This feature explores Stora Enso's sustainability strategy. Stora Enso, a Finnish pulp and paper manufacturer, has made sustainability a central focus for the organization. The company clearly outlines on its website and company reports its commitment to ensuring that it acts in a socially responsible, environmentally friendly way. All decisions at Stora Enso are guided by this commitment. 1. Why is a sustainable strategy so important to Stora Enso? What message does its publically stated commitment to sustainability send? Consider your response from the perspective of various stakeholders including investors and local communities. *Discussion Points*: Stora Enso has clearly and publically stated its policy toward sustainability and reinforces this commitment by defining how it measures success in achieving a sustainable strategy. Most students will probably suggest that by being so open about how decisions are made at the company, Stora Enso is not only demonstrating its true dedication to sustainability, it is also letting shareholders and communities know what to expect. Students may note for example, that investors should recognize that Stora Enso may not always choose the lowest cost approach to doing business because doing so could compromise its commitment to preserving the environment. Similarly, communities may be more welcoming to the company because its policies on how it will operate are clearly stated, and emphasize good corporate citizenship. 2. As an employee of Stora Enso, what does its commitment to a sustainable strategy mean to you? How does Stora Enso's strategy affect its position in the global marketplace? *Discussion Points*: Many students will probably agree that Stora Enso's commitment to a sustainable strategy indicates that the company will not knowingly pursue strategies that could negatively impact its employees. As such, it is likely to attract well-qualified employees and create a loyal workforce. Students will probably recognize that a strong workforce will be beneficial in the global marketplace, as will Stora Enso's environmentally friendly approach to doing business. Some students may also point out that as more local governments signal their commitment to protecting the environment through policy decisions, companies like Stora Enso stand to benefit. Teaching Tip: To learn more about Stora Enso go to {http://www.storaenso.com/}. Lecture Note: To extend this discussion, consider {http://www.businessweek.com/articles/2013-12-12/corporate-social-responsibility-reports-in-china-progress-or-greenwashing}.

Country Focus: Protesting Globalization in France

Summary This feature describes the anti-globalization protests going on in France. The protests, led by activist Jose Bove, started when the U.S. retaliated against EU bans on beef imports by imposing a 100% tariff on some EU products. Bove and his associates targeted McDonald's, and also California winemaker Mondavi as symbols of their opposition to American investments. Still, despite the protests, foreign investment in France is at record highs, and ironically, so are French investments abroad. Suggested Discussion Questions 1. Consider the trade war that initiated the protests led by Bove. The EU instituted restrictions on the import of hormone treated beef because it was feared that the product might lead to health problems. The WTO stated that the restrictions were prohibited under WTO agreements and ordered the EU to lift the restrictions or face retaliatory measures. In your opinion, did the WTO act appropriately? Should a government be permitted to make decisions as to what products are or are not available to consumers? Should the WTO? What do you think would have happened if the WTO had ruled in favor of the EU? Discussion Points: Many students will probably argue that the European Union's restrictions against hormone treated beef were nothing more than thinly veiled protectionism. Accordingly, students will probably feel that the World Trade Organization was justified in its ruling. Some students however, may suggest that the European Union was looking out for its citizens when it instituted the bans, and that therefore the World Trade Organization was overstepping its bounds. 2. Why was McDonald's chosen as the target for anti-globalization protests? How can companies like McDonald's protect themselves from the actions of protesters like Bove? Discussion Points: Students will probably recognize that as an icon of the United States, McDonald's is a symbol of America and as such was a natural target for protesters. The fact that its menu is based on beef was probably an added bonus. Many students will note that companies that are actively involved in local communities are less likely to attract negative feeling than those that are not. Students might recommend that companies like McDonald's work to ingratiate themselves with the host country through charitable programs, social activities, and so on. Lecture Note: For more on this case, see Chapter 6's Country Focus: Trade in Hormone-Treated Beef. Teaching Tip: To learn more about ongoing WTO disputes, go the WTO's homepage: {www.wto.org}. Video Note: Protesting against globalization is not uncommon. The iGlobe Environmental Activist Questions the Goals of Globalization also explores the negative effects of globalization.

Management Focus: China's Hisense - An Emerging Multinational

Summary This feature examines the growth of Hisense which began in 1969 as a state-owned factory with just 10 employees. Over the years, the company emerged as one of China's leading makers of television sets. In 1994, China relaxed its hold on the company and Zhou Houijan was appointed CEO. Under Zhou's leadership Hisense has become as one of China's premier manufacturers of consumer appliances and telecommunications equipment. Suggested Discussion Questions 1. What makes Hisense different from other manufacturers of consumer electronics? What factors have contributed to its success? Discussion Points: The success of Hisense can be attributed to not only its low cost structure, but also the company's skill in product innovation. In fact, Hisense believes that its main strength is its rapid production innovation. The company feels that to be successful in the highly competitive consumer electronics industry, it must be on the cutting edge of innovation. Consequently, the company's strategy is to continuously launch advanced, high quality, and competitively priced products. 2. Why has Hisense established multiple R&D centers? How do these R&D centers fit into the firm's global strategy? Discussion Points: In 1994, Hisense established its first R&D center in China. Since then, the company has also established R&D centers in South Africa and Europe, and is scheduled to open an R&D center in the United States in the near future. Being innovative is central to Hisense's strategy. Having multiple R&D centers allows Hisense to be closer to its markets, and should help the company better serve customer needs and preferences. Teaching Tip: To learn more about Hisense go to {http://www.hisense.com/} and click on English.

Management Focus: Vizio and the Market for Flat Panel TVs

Summary This feature explores the evolution of the flat panel television industry over recent decades. While the technology for flat panel televisions was developed in the United States in the 1960s, virtually all production now takes place in low-cost locations. The feature examines the strategy of one company, American-based Vizio, and clearly demonstrates the impact of globalization, and in particular the globalization of production. Suggested Discussion Questions 1. Why is the manufacturing of flat panel TVs migrating to different locations around the world? Who benefits from the globalization of the flat panel industry? Who are the losers? 2. 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? Discussion Points: 1. The market for flat panel televisions is huge. Sales have grown from virtually nothing to more than $2 billion in 2010. However, competition is intense forcing producers to continually look for new ways to cut costs. In their quest for efficiency, most manufacturers have developed global supply chains. American-based Vizio for example, outsources to various suppliers around the globe. Panels come from South Korea, components from China, and processors from the United States. Then, assembly takes place in Mexico. The goal for Vizio is to find the best source, wherever it may be, and bring all the pieces together. Consumers are clearly benefiting from the globalization of the flat panel television market. Thanks to the intense competition in the industry, prices have fallen dramatically. However, because manufacturers are continually looking for ways to cut costs and become more efficient, production changes and outsourcing is common, if not necessary, making jobs in the industry precarious. 2. Vizio could be considered a model of how to conduct business in a highly competitive global market. Vizio's strategy involves a realization that there is no single best production location. Instead, production should take place wherever it makes the most sense. To that end, the company has broken the value chain for the flat panel television into those parts that must be kept at home, and those that can be outsourced. Vizio, with a staff of just 100 people, outsources most engineering work, all of its manufacturing, and nearly all of its logistics. As the example with Vizio demonstrates, flexibility, speed, and innovativeness are all important qualities for successful firms in highly competitive global markets. Vizio is never satisfied with the status quo. To remain competitive, Vizio continually looks for better ways to produce its product. Teaching Tip: To extend this discussion, consider {http://www.businessweek.com/news/2012-01-11/vizio-aims-low-price-wrecking-ball-at-pcs-after-shaking-up-tvs.html}.

Management Focus: Sustainability at Umicore

Summary Umicore, a Belgian materials technology company, has been described as being the most sustainable multinational company on the planet. Umicore has achieved this distinction by clearly making sustainability a central focus across all areas of its business. 1. How can strategy at Umicore best be described - as a zero sum game or a positive-sum game? Support your answer. *Discussion Points*: Most students will probably suggest that Umicore is pursuing a strategy that can best be described as a positive-sum game. Umicore is committed to ensuring it is generating strong returns for its shareholders while at the same time protecting the environment and being a good corporate citizen. Umicore also emphasizes employee safety and employee development. 2. Reflect on strategy at Umicore. Consider why Umicore has chosen to pursue a sustainability strategy and why other companies in the industry may not share its passion for doing what's good for the planet. In your opinion, should all companies be required to take an approach similar to the one that Umicore has chosen? What is the ethical responsibility of companies? Discussion Points: *This question should generate considerable discussion among students.* Students may wonder why, given that companies like Umicore have successfully found a way to pursue a sustainable strategy, other companies either have not been able to follow a similar model or have chosen not to. Some students may attribute the difference to leadership. Students taking this perspective may note for example that at Umicore, the commitment to a sustainable strategy clearly comes from the top and is then diffused throughout the organization. Other students may comment on pressure from investors that may push companies into decisions that generate greater profits, but may not be beneficial for the environment. Teaching Tip: To learn more about Umicore, go to { http://www.umicore.com/en/}.

Foreign Corrupt Practices Act

The *Foreign Corrupt Practices Act* limits corruption in the U.S -It is illegal to bribe a foreign government official in order to obtain or maintain business over which the foreign official has authority -All publicly traded companies must keep detailed records so that it is clear whether a violation of the act has occurred -Facilitating or expediting payments to secure the performance of routine government actions are permitted

Legal Systems

The *legal system* of a country refers to the rules, or laws, that regulate behavior, along with the processes by which the laws of a country are enforced and through which redress for grievances is obtained A country's legal system is important because laws: -Regulate business practice -Define the manner in which business transactions are to be executed -Set down the rights and obligations of those involved in business transactions

Internet Extra:

The U.S. Census Bureau contains monthly statistics on trade between the United States and its trading partners. The web site is {http://www.census.gov/foreign-trade/top}. Click on Trade Highlights. Who is the top trading partner for the U.S.? What is the top destination for U.S. goods? What country exports the most to the U.S.?

Benefits

The benefits of doing business in a country are a function of market size, and current and future consumer purchasing power -By identifying and investing early in potential future economic stars, firms may be able to gain *first mover advantages* (advantages that accrue to early entrants into a market) -Late entrants may face *late-mover disadvantages*

The Changing World Order

The collapse of communism in Eastern Europe -Greater export and investment opportunities, but political unrest is increasing risk Economic development in China -Huge opportunities despite continued government control, but also new competition from Chinese firms Free market reforms and democracy in Latin America -New markets and new sources of materials and production, but economic and political risk remains high

Culture and Competitive Advantage

The connection between culture and competitive advantage is important because: -It suggests which countries are likely to produce the most viable competitors -It has implications for the choice of countries in which to locate production facilities and do business

Costs

The costs of doing business in foreign markets: Political costs - include the cost of paying bribes or lobbying for favorable or fair treatment Economic costs - relate primarily to the sophistication of the economic system, including the infrastructure and supporting businesses Legal costs - can be higher in countries with dramatically different product, workplace, and pollution standards, or where there is poor legal protection for property rights

New World Order & Global Terrorism

The end of the Cold War and the "new world order" that followed the collapse of communism in Eastern Europe and the former Soviet Union, taken together with the collapse of many authoritarian regimes in Latin America, have given rise to intense speculation about the future shape of global geopolitics -Geopolitical forces can affect how companies operate in certain countries

Ethical Issues in IB

The most common ethical issues in business involve: -Employment practices -Human rights -Environmental pollution -Corruption -Moral obligations

Risks

The risk of doing business in foreign markets: Political risk - the likelihood that political forces will cause drastic changes in a country's business environment that adversely affects the profit and other goals of a business enterprise Economic risk - the likelihood that economic mismanagement will cause drastic changes in a country's business environment that adversely affects the profit and other goals of a business enterprise Legal risk - the likelihood that a trading partner will opportunistically break a contract or expropriate property rights

Determinants of Culture

The values and norms of a culture evolve based on: -Prevailing political and economic philosophies -A society's social structure -The dominant religion, language, and education

Different Legal Systems

There are three main types of legal systems: *Common law*: based on tradition, precedent, and custom Found in most of Great Britain's former colonies, including the United States *Civil law*: based on a very detailed set of laws organized into codes Found in over 80 countries, including Germany, France, Japan, and Russia *Theocratic law*: based on religious teachings Islamic law is the most widely practiced

Implications for Managers

To ensure that ethical issues are considered in business decisions, managers should: -Favor hiring and promoting people with a well grounded sense of personal ethics -Build an organizational culture that places a high value on ethical behavior -Put decision making processes in place that require people to consider the ethical dimension of business decisions -Institute ethical officers in the organization -Develop moral courage -Make corporate social responsibility a cornerstone of the enterprise policy Pursue strategies that are sustainable

Ethics Officers

To encourage ethical behavior in a business, a number of firms now have ethics officers Ethics officers ensure that: -Employees are trained to be ethically aware -Ethical considerations enter decision-making -The company's code of ethics is followed

Internet Extra:

To learn more about international business etiquette, go to {http://www.cyborlink.com}. Choose a country, then find three fun facts about your country. Compare these to those in other countries. What are some areas where cultural misunderstandings could occur? How does Hofstede assess your country? Based on what you've read, do you agree?

organizational culture

Unethical behavior may exist in firms with an *organization culture* (the values and norms that are shared among employees of an organization) that does not emphasize business ethics -Values and norms shape the culture of a firm, and that culture influences decision making

Unspoken Language

Unspoken language - nonverbal cues -Examples include facial expressions and hand gestures -Can be important for communication Many nonverbal cues are culturally bound and because they may be interpreted differently, can result in misunderstandings

Values and Norms

Values - provide the context within which a society's norms are established and justified Norms - the social rules that govern the actions of people toward one another --Folkways - the routine conventions of everyday life --Mores - norms that are seen as central to the functioning of a society and to its social life

Implications for Managers

What are the implications of the political economy for international businesses? The political, economic, and legal systems of a country raise important ethical issues that have implications for the practice of international business The political, economic, and legal environment of a country clearly influences the attractiveness of that country as a market and/or investment site

Drivers of Globalization

What is driving the move toward greater globalization? -Declining trade and investment barriers -Technological change

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