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70 Cards in this Set
- Front
- Back
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Noblese Oblige
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obligation to engage in honorable and benevolent behavior toward other individuals in a society esp if in a position of power
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Duty Based Ethics
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duty to others based on certain standards derived from revealed truths (standards inherently known, differ from society to society)
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Religious Ethical Standards
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standards derived from religion... Look to religious writings for guidance
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Compassion
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use compassion as means of making decisions (have a poor performer in a business with a sick wife and child and do not fire him because if he loses his job he can not take care of his family)
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Kanthan Ethics
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based ethics on secular and religious...all humans have moral integrity and the compassion to reason therefore their thoughts and actions should be respected - if people are treated as means to an end they are being treated as objects and being denied their inalienable rights
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Kant - The Categorical Imperative
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when confronted with an ethical dilemma ask yourself "if everyone in society is confronted with the same ethical dilemma and everyone makes the same decisions... Is that good or bad for society?"
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Principle of Rights
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a duty can not exist without an existing right
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Rights Theory
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human beings have fundamental rights and privileges that transend national boundaries
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Natural Law Tradition
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influenced Thomas Jefferson...human beings have fundamental rights including the freedom to the pursuit of happiness
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Utilitarianism
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outcome, result oriented; will determine if something is right or wrong by the outcome (if more are helped than harmed then it is a good thing); cost/benefit analysis; be careful using in an individualistic society
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Milton Friedman
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conservative economic think tank
wrote an article asking how a business determines what is ethical or not 1. what is the ethical duty of the business 2. "The only social responsibility of a business is to increase profits as long as they stay within the limits of the law." |
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Foreign Corrupt Practices Act
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cannot bribe foreign officials
in the US it is illegal due to an ethical outcry - we don't want a public official to make decisions based on bribes but rather on reasonable decisions |
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Henry Kissinger - Sec State under Nixon
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Opened diplomatic relations with China...said that Jimmy Carter was guilty if moral imperialism
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UK Bribery Act of 2010
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you can not bride anyone working for another company who could buy one of your products
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Enlightened Self Interest
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ethical standard based on how it's going to act back home; even if it is cheaper/easier to do the unethical approach, you won't
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Cultural Relativism
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ethical standards in a certain country and act on that country... When in Rome do as the Romans
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Righteous Moralist
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a multinational company's home-country standards of ethics are the appropriate ones for companies to follow in foreign countries
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Invisible hand of Adam Smith
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The economy will self regulate
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Hecksher Olin
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exports products that can most efficiently be produced in your country and import products that are more efficiently produced elsewhere, should focus on factor endowments
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Adam Smith
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whoever has the absolute advantage should make the product; positive sum game... Win win!
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Mercantilism
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international trade being a zero sum game - only one person wins; if I import something I take gold out of my country (in a time where you couldn't just produce more minerals); I have to trade internationally but I will do it when I absolutely have to (like going to the dentist)
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Comparative advantage (David Ricardo)
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should produce things you have a comparative advantage, may have absolute advantage over many things, use opportunity cost to determine what you should produce; what does the country have to give up to make a good? If you have to give up less than another country you have the comparative advantage
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Absolute advantage
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when a country can make a product more cheaply than any other country
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Factor endowments
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areas are going to have unique factors that determine where products should be made - skilled labor force, martial resources
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Raymond Vernon
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product life cycle theory: products go through evolution in life cycles, they eventually mature; ex. from Thomas Jefferson making instant copies of his writings to the xerox machine; the US is successful using the product life cycle theory because of their large consumer base with uniform needs which contributed to the development of the EU which unified standards - the US of Europe
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First mover advantages
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when there are only so many consumers for a product; US and the aircraft industry we heavily invested in aviation and became the owners of the industry. Other countries were envious so EU companies invested in Air Bus, with inefficiencies in jobs split between the 6 countries who invested. Manufacturing decisions are based on politics rather than comparative advs or factor endowments leading to inefficiencies (where do the plants with the jobs go next?). Airbus did do something more efficient - made every cockpit standard for pilots to more easily maintain their commercial pilots license
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Michael Porter
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Shard value theory: influences domestic production and international trade
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4 Diamonds ratings that determine if you should export or import (old method):
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a nation positions its factors of production based on various things:
Factored endowments Demand conditions Related and supporting industries Firm Strategy, Structure and Rivalry |
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Tariffs
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Tax on imported goods
Raises price on good, discourages the consumption of a product Foreign producers and domestic consumers are hurt Domestic suppliers benefit 2 kinds: - Specific --> fixed charge on each unit - Ad valorem --> charge on proportion of value (i.e. property tax --> based on value of property) |
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Subsidy
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Any way you're giving a company economic advantage
Tax payers end up paying for subsidies Important for first mover advantages Domestic suppliers benefit Domestic consumers hurt |
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Import quota
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Limits number of inputs on a certain good during a certain time period
i. by reducing supply, you raise the price ii. domestic products are more desirable |
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Quota rent
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i. the increase that will occur to a domestic product when it sees an import quota causes the price of a foreign good go up
ii. increase in domestic demand causes an increase in domestic pricing |
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Voluntary export quotas
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place restraints on self so a law does not come about legally restricting amounts of imports... Too hard to reverse a law later on
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Local contact requirement
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a certain fraction of the product must contain domestic components
hurts consumers --> product will be more expensive |
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Administrative trade policies
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create a trade policy to make it very unattractive for a product to reach a consumer ex. Tulip bulb example in Japan... Slicing import tulip bulb open to check for insects which makes the bulb useless within 24 hours and pushed consumers toward imported bulbs
Countries retaliate |
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Dumping
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Selling things at lower than what they cost to produce (eg China in the steel industry 10 years ago)
Forces competitors out of market Allows domestic to own the market |
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Countervailing duty
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Punishment for dumping
Make good very expensive for certain item |
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Most favored nation status
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specific foreign countries view another country's product as a domestic product and erases tariffs
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Foreign Direct Investment
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1. Building new buildings in other countries - green field approach (generally less expensive)
2. Buy out another foreign company - merger or acquisition (benefit being time!) |
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Flow of FDI
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investments undertaken over a given time in a given year
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Stock of FDI
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accumulated value of FDI over a given time
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Inflows of FDI
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non us companies setting up in ga
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Outflows of FDI
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ga companies setting up operations outside the us
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Foreign portfolio investment
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purchasing stock in foreign companies
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Gross fixed capital formation
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total amount of capital invested in factories, stores, etc
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free trade area
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area where countries get together and say trade barriers among member countries are removed - no tariffs, quotas, subsidies, duties
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customs union
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has all the elements of a free trade area plus you a adopt a common trade policy that will effect anyone doing business with any member country
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common market
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(EU used to be the European Common Market) free trade area, plus customs union, plus free movement of individuals - no need for passport - and capital
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political union
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centralized govt structure
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Currency fluctuation risk
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selling your widget to someone in France and the person wants to pay you in Euros
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Local currency
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the currency of a country in which an entity is located
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Functional currency
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currency with pays for day to day activity
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Foreign currency
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any currency other than functional currency
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Reporting currency
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the currency you report to govt
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Forward contract
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To buy (bank) or sell (widget producer) a certain amount of currency at a date set in the future at a price decided today
Prevents being the bearer of fluctuation |
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Limit order
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Agreement with bank to purchase a forward contract at some time in the future, if the currency moves in a certain amount
Ex deductible on health insurance policy |
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Direct quote
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a foreign exchange rate quoted as the domestic currency per unit of the foreign currency; involves quoting in fixed units of foreign currency against variable amounts of the domestic currency
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Indirect quote
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a foreign exchange rate of a foreign currency quoted per unit of the domestic currency; then foreign currency is a variable amount and the domestic currency is fixed at one unit
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Arbitrage
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buying a currency low and selling it high
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Peg exchange rate
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the value of the currency is fixed relative to a reference currency
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dirty float system
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when a country does not adopt a pegging system, but try to hold the value in some range to the dollar
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Fixed exchange rate
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the values of a set of currencies are fixed against each other at some mutually agreed on exchange rate
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International banks
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borrow money from banks in countries with lower interest rates
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Investment banks
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Hired by companies to find cheapest way to borrow money
Will search for lowest interest rates and acquisitions internationally |
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Bonds
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- how companies "borrow" money
- attractive for investors - stable part of one's portfolio |
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Foreign bond
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bonds sold outside the borrowers country and denoted in the currency in the country it is used
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Euro bond
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bond underwritten by a syndicate of banks and placed in countries other than the one the currency it denominates
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Differentiated strategy
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- why is this product more unique?
- can we make a more unique product? - will this be accepted in different cultures? |
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Low cost strategy
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strategy in entering an international market by selling items at the lowest price
- may be difficult with consumer goods to have pure low cost without differentiation... Can change all over the world |
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Differentiated
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- differentiation is necessary in some markets due in differences in international taste
- horizontal strategy -> have different types of the same products for different markets (countries, cultures, tastes) that are marketed towards different preferences - some differentiation is necessary in most products to be successful in some areas |
