International Business Exam 1 (1, 2, 3, & 5)

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Political Economy

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The political, economic, and legal systems of a country.

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Political System

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The systems of government in a nation. A political system can be assessed according to two related dimensions. The first is the degree to which they emphasize collectivism as opposed to individualism. The second dimension is the degree to which they are democratic or totalitarian.

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Collectivism

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A political system that emphasizes collective goals over individual goals. When collectivism is emphasized, the needs of the society as a whole are generally viewed as being more important than individual freedoms.

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Communists

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Those who believe socialism can be achieved only through revolution and totalitarian dictatorship.

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Social Democrats

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Those committed to achieving socialism by democratic means.

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Privatization

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The sale of state owned enterprises to private investors.

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Individualism

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An emphasis on the importance of guaranteeing individual freedom and self-expression. In contrast to collectivism, individualism stresses that the interests of the individual should take precedence over the interests of the state.

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Democracy

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Political system in which government is by the people, exercised either directly or through elected representatives.

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Representative Democracy

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A political system in which citizens periodically elect individuals to represent them.

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Totalitarianism

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A form of government in which one person or political party exercises absolute control over all spheres of human life and prohibits opposing political parties.

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Communist Totalitarianism

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Form of totalitarianism that advocated achieving socialism through totalitarian dictatorship (e.g. China, Vietnam, Laos, North Korea, and Cuba).

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Theocratic Totalitarianism

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Form of totalitarianism in which political power is monopolized by a party, group , or individual that governs according to religious principals (e.g. Iran and Saudi Arabia).

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Tribal Totalitarianism

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For of Totalitarianism (found mainly in Africa) in which a political party that represents the interests of a particular tribe monopolizes power (e.g. Zimbabwe, Tanzania, Uganda, and Kenya).

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Right-Wing Totalitarianism

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Form of totalitarianism in which individual economic freedom is allowed but individual political freedom is restricted in the belief that it could lead to communism (e.g. 1930's Germany and Italy, and 1980's Korea, Taiwan, Singapore, Indonesia, and Philippines)

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Economics Systems

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Three broad types of economic systems can be identified--market, command, and mixed economies.

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Market Economy

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An economic system in which the interaction of supply and demand determines the quantity in which goods and services are produced.

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Command Economy

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An economic system in which the government plans the goods and services that a country produces, the quantity in which they are produced, and the prices at which they are sold.

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Mixed Economy

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A mixed economy includes some elements of both a market and command economy. Until recently, Great Britain, France, and were all considered mixed economies. Today, however, as a result of extensive privatization, these countries function as market economies.

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Legal system (of a country)

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Refers to the system of 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.

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Common Law System

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The common law system (based on tradition, precedent, and custom) evolved in England over hundreds of years. It is now found in most of Great Britain's former colonies, including the United States.

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Civil Law System

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A civil law system is based on a very detailed set of laws organized into codes. Over 80 countries, including Germany, France, Japan, and Russia, operate with a civil law system.

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Theocratic Law System

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A system of laws based on religious teachings.

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Contracts

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A contract is a document that specifies the conditions under which an exchange is to occur and details the rights and obligations of the parties involved.

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Contract Law

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The body of law that governs contract enforcement.

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United Nations Convention in Contracts for the International Sale of Goods (CISG)

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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. By adopting CISG, a nation signals to other nations that it will treat the Convention's rules as part of its law.

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Property Rights

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The bundle of legal rights over the use to which a resource is put and over the use made of any income that may be derived from that source

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Private Action

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Refers to theft, piracy, blackmail, and the like by private individuals or groups.

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Public Action

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Public Action to violate property rights occurs when public officials extort income or resources from property holders using various legal mechanisms including excessive taxation, requiring expensive licenses or permits from property holders, or taking assets into stat ownership without compensating the owners.

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Foreign Corrupt Practices Act

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Makes it a violation of the US law to bribe a foreign government official in order to obtain or maintain business over which the foreign official has authority, and requires all publicly traded companies to keep detailed records so that it is clear whether a violation of the act has occurred or not.

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Intellectual Property

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Products of the mind, such as computer software, a screenplay, or the chemical formula for a new drug that is the product of intellectual activity. Intellectual property rights include patents, copyrights, and trademarks.

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Patent

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Documents giving the inventor of a new product of process exclusive rights to the manufacture, use, or sale of that invention.

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Copyright.

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Exclusive legal rights of authors, composers, playwrights, artists, and publishers to publish and dispose of their work as they see fit.

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Trademark

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Designs and names, often officially registered, by which merchants of manufacturers designate and differentiate their products.

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World Intellectual Property Organization

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An international organization whose members (183 countries) sign treaties designed to protect intellectual property.

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Paris Convention for the Protection of Intellectual Property

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An international agreement signed about 170 nations to protect intellectual property rights (dates to 1883).

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Product Safety Laws

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Set certain safety standards to which a product must adhere.

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Product Liability

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Involves holding a firm and its officers responsible when a product causes injury, death, or damage.

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International Business

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1. Any firm that engages in international trade or investment.
2. the performance of trade and investment activities by firms across national borders. Key activities include international trade, exporting, importing, international portfolio investment, and foreign direct investment.

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Globalization

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Trend away from distinct national economic units toward one huge global market.

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Globalization of markets

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moving away from an economic system in which national markets are distinct entities, isolated by trade barriers and barriers of distance, time, and culture, and toward a system in which national markets are merging into one global market.

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Globalization of production

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Trend by individual firms to disperse parts of their productive processes to different locations around the globe to take advantage of differences in cost and quality of factors of production.

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Factors of production

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Inputs into the productive process of a firm, including labor, management, land, capital, and technological know-how

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General Agreement on Tariffs and Trade (GATT)

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International treaty that committed signatories to lowering barriers to the free flow of goods across national borders and let to the WTO.

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World Trade Organization (WTO)

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The organization that succeeded the General Agreement on Tariffs and Trade (GATT) as a result of the successful completion of the Uruguay Round of GATT negotiations.

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International Monetary Fund (IMF)

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International institution set up to maintain order in the international monetary system.

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World Bank

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International institution set up to promote general economic development in the world's poorer nations. Less controversial than IMF because of focus on infrastructure investments (building dams and roads).

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United Nations (UN)

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An international organization made up of 193 countries headquartered in New York City, formed in 1945 to promote peace, security, and cooperation.

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G20

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Established in 1999, the G20 comprises the finance ministers and central bank governors of the 19 largest economies in the world, plus representatives from the European Union and the European Central Bank.

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International Trade

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Occurs when a firm exports goods or services to consumers in another country

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Foreign Direct Investment (FDI)

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Direct investment in business operations in a foreign country

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Moore's Law

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The power of microprocessor technology doubles and its costs of production fall in half every 18 months.

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Stock of FDI

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The total accumulated value of foreign-owner assets at a given time.

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Multinational Enterprise (MNE)

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A firm that owns business operations in more than one country.

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Gross National Income (GNI)

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The yardstick for measuring the economic activity of a country; it measures the total annual income received by a nation's residents.

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Purchasing Power Parity (PPP)

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An adjustment in GNI per capita to reflect differences in the cost of living.

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Human Development Index (HDI)

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An attempt by the United Nations to assess the impact of a number of factors (life expectancy, education attainment, and whether average incomes are sufficient to meet the basic needs) on the quality of human life in a country.

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Innovation

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The development of new products, new processes, new organizations, new management practices, and new strategies. Innovation is often seen as the product of entrepreneurial activity.

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Entrepreneurs

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Those who first commercialize new innovations

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Deregulation

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Involves removing restrictions on the free operation of markets, the establishment of private enterprises, and the manner in which private enterprises operate.

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First mover advantages

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Advantages that accrue to early entrants into a market.

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Late mover disadvantages

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Handicaps experienced by being a late ntrant into a market.

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Political Risk

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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

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Economic Risk

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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.

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Legal Risk

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The likelihood that a trading partner will opportunistically break a contract or expropriate proerty rights.

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Ethics

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Refers to accepted principles of right and wrong that govern he conduct of a person, the members of a profession, or the actions of an organization.

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Business Ethics

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The accepted principles of right and wrong governing the conduct of business people.

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Ethical Strategy

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A strategy, or course of action, that does not violate these accepted principles or right or wrong governing the conduct of business people.

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Tragedy of the commons

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When a resource held in common by all, but owned by no one, is overused by individuals resulting in its degradation. Corporations can contribute to the global tragedy of the commons by moving production to locations where they are free to pump out pollutants into the environment, thereby harming these valuable global commons. The question here is whether the decision to do so, while perhaps legal, is ethical.

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Foreign Corrupt Practices Act

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A US law regulating behavior regarding the conduct of international business in the taking of bribes and other unethical actions.

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Convention on Combating Bribery of Foreign Public Officials in International Business Transactions

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Organization for Economic Cooperation and Development (OECD) convention that obliges member states to make the bribery of foreign public officials a criminal offence adopted in 1999.

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Social Responsibility

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The idea that business people should take the social consequences of economic actions into account when making business decisions, and presumes that decisions should be favored that have both good and economic and good social consequences.

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Ethical Dilemmas

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Situations in which none of the available alternatives seems ethically acceptable.

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Organization Culture

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The values and norms that are shared among employees of an organization.

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Cultural Relativism

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Belief that ethics are culturally determined and that firms should adopt the ethics of the cultures in which they operate, or in other words, "when in Rome, do as the Romans do."

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Righteous Moralist

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Belief that a multinational's home country standards of ethics are the appropriate ones for companies to follow in foreign countries. This approach is typically associated with managers from developed nations.

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Naive Immoralist

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Belief that if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, that manager should not either.

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Utilitarian approaches

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These approaches to ethics hold that the moral worth of actions or practices is determined by their consequences. An action is judged to be desirable if it leads to the best possible balance of good consequences over bad consequences.

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Kantian Ethics

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The belief that people should be treated as ends and never purely as means to the ends of others

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Rights theories

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Twentieth century theories that recognize human beings have fundamental rights and privileges that transcend national boundaries and cultures. Moral theorists argue that fundamental human rights form the basis for the moral compass that managers should navigate b when making decisions that have ethical components.

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United Nations' Universal Declaration of Human Rightss

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A UN document that specifies the basic principles that should always be adhered to irrespective of the culture in which one is doing business.

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Justice Theories

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Focus on the attainment of a just distribution of economic goods and services. A just distribution is one that is considered fair and equitable.

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Code of Ethics

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A business' formal statement of ethical priorities.