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24 Cards in this Set

  • Front
  • Back
Need for Global Trade

countries more effecient
Global trade encourages globalization, which helps to unify societies of the world. It increases the mobility of goods, services, labor, technology and capital throughout the world. Countries become more efficient with their processes and techniques. Global trade encourages competition because it makes companies strive for better products than their competitors. This process produces better quality items for consumers.

Values/Morals, used for?, affects attitudes?
Religion is very important when dealing with international business as many of the values and morals one has stems from their religious beliefs. People turn to religion for comfort and reasons for being here. Religion provides a basis for transcultural similarities as people from different nations share similar beliefs and behaviors. Religion affects attitudes towards entrepreneurship, consumption and social organizations.
Home country Perspective on Investment Policies

promote FDI as?
FDI brings?
Allows for?
Many countries promote foreign direct investment as a means to stimulate economic growth, which helps expand employment and markets. Foreign Direct Investment brings new technology and management. It also increases competition between domestic and foreign companies, which in turn produce better quality products. It allows for tax deductions and use of low-price land, as well as investment in infrastructure facilities.
Impacts of FDI on Host Nations

FDI can help
company level
positive benefit
Host governments are caught in love-hate relationships with FDI. The country has to appreciate the various contributions, esp. economic, that FDI can make. On the other hand, allowing investment from abroad gives rise to fears of dominance, interference, and dependence. FDI can help develop particular industry sectors or particular geographical region, lowering unemployment levels. At the company level, FDI may intensify competition and result in benefits to the economy as a whole, as well as to consumers, thru new techniques, goods and services and ideas. A positive benefit of FDI is the transfer of technology from developed countries to developing ones.
Gross Domestic Product

US export growth
US doesn't protect markets?
US firms in foreign countries?
Gross Domestic Product is the value of goods and services produced in a country per year. US export growth has not kept pace with the rest of the world because the US pays more attention to services than commodities, and services are a non-tradeable good. The US is also more advanced so we don't protect our markets as much. The US is also putting a lot of US firms in other countries, so they are essentially importing their own goods. For example, while a lot of imports come from China, they are mainly American products. They are only produced in China due to cheaper labor
Investment Promotion

implement policy measures?
policies can result?
investment promo usually arise
Many countries implement policy measures to attract foreign direct investment. These policies can result from the need of poorer nations to bring in foreign capital without taking out more loans that call for fixed schedules or repayment. In industrialized nations, investment promotions usually arise from the pressure to provide jobs, as FDI can serve to create employment opportunities. Incentives offered by policymakers to facilitate foreign investments are mainly of 3 types - fiscal, financial and nonfinancial.
International Monetary Fund
UN, 1944, 185 countries, estb. to?, also provides?, rethink they way they do business?
The IMF is a specialized agency of the UN that was established in 1944. It is an international organization of 185 countries. It was established to promote monetary cooperation, exchange stability, orderly exchange arrangements, help foster economic growth and high levels of employment. It also provides temporary financial assistance to countries to help ease Balance of Payment problems. Over the years, the main operations of the organization have remained the same but the IMF has had to rethink its traditional rules of operations. They have developed to meet the changing needs of the member countries.
Global Links Today

trade/investment controlled?
volume expanded?
forging network?
global linkages?
World trade and investment are central to well-being of the global community. In the past 30 years alone, the volume of international trade in goods and services has expanded from $200 billion to more than $7.6 trillion. The sheer volume and value of international trade has led to forging of a network of global links around the world that binds us all much closer than ever before. Global linkages have also become more intense on an individual level. Communication has built new international bridges. Service firms are part of the global scene, also. Consulting firms, insurance companies, software firms and universities are participating to a growing degree in the international marketplace.

1947, set or rules, MFN clause?, 1955
The General Agreement on Tariffs and Trade started out in 1947 as a set of rules to ensure nondiscrimination, transparent procedures, the settlement of disputes and participation of lesser-developed countries in international trade. It created a very important tool - the most favored nations clause. This clause states that member countries grant each other the same treatment accorded any other national with respect to trade. It is still in effect to this day and is known as the equal-opportunity clause. In 1995, GATT became a new organization - the World Trade Org.

Only int'l body?
3 main purposes?
World Trade Org. administers international trade and investment accords. It is the only international body dealing with rules of trade between nations. Their goal is to help producers of goods and services, exporters and importers conduct good business in the global marketplace. Their 3 main purposes are to help trade flow as freely as possible as long as there are no undesirable side effects, server as a forum for trade negotiations among community of trading nations and settle trade disputes among member nations.

refers to
driving force
holds promise
global. of economy
Globalization refers to the increasing global connectivity, integration and interdependence in the economic, social, technological, cultural, political and ecological spheres. It is the driving force behind international business, and vice versa. It holds the promise of improved quality of life and a better society. Globalization of the economy depends on the role of human migration, international trade, movement of capital and integration of financial markets.

Comprised of
Most important factor
Effectively work with
Culture is learned, shared and transmitted from one generation to the next. It is usually passed down from parents but also transmitted through social organization, special interest groups, governments , schools and churches. It is comprised of many different elements, from religion to education. It is the most important factor to doing business with an international firm because cultures is the backbone to the values and morals of all societies. To effectively work with international partners, you must be willing to learn and understand their culture so you can better communicate and understand your partners. It is also important so as not to step over an cultural boundaries and offend someone.
Elements of Culture

Language, Nonverbal, Infrastructure, Education, Religion, Values and Morals
Language is the ultimate element of culture. If you can speak someone's language, you are already on the right path for better communication. However, while language is important it is not the most essential. Nonverbal language is also very important. Many different cultures do not touch (shake hands) and many touch to much (kiss on the lips). Normal, everyday gestures and mannerisms to Americans may be quite offensive to other nations. Infrastructure and education are a huge part of culture, and all cultures have different ways of educating their youth, some much better than others. Religion is probably the most important element of culture, as it is the driving force behind the values and morals of a society. In my opinion, understanding your partner's religion is the most critical aspect of doing international business
Four Dimensions of Culture

Individualism-I/we, define themselves
Power distance-equality/inequality
Uncertainty avoidance-formal rules, threatened
Individualism, Power distance, Uncertainty avoidance and Masculinity. Individualism refers to the "I" consciousness versus the "we" consciousness. This dimension refers to how people define themselves and their relationships with others. Power distance refers to the levels of equality in society, or the way cultures deal with inequalities. Uncertainty avoidance refers to the need for formal rules and regulations. It is the extent to which people in a culture feel threatened by uncertain or unknown situations. Masculinity refers to the attitude toward achievement and roles of men and women. Cultures that place high values on masculine traits stress assertiveness, competition and material success, while cultures that place high value on feminine traits stress quality of life, interpersonal relationships and concern for the weak.

Related to?
Baci economic infrastructure?
SOcial infrastructure?
Financial infrastructure?'
Levels of infrastructure development?
A culture's infrastructure is directly related to how society organizes it's economic activity. Basic economic infrastructure consists of transportation, energy and communication systems. Social infrastructure refers to housing, health and educational systems. Financial and marketing infrastructures provide the facilitating agencies for the international firm's operation in a given market. Levels of infrastructure development can be used to aid segmentation in international markets. The degree to which infrastructure is developed impacts multiple decisions related to the introduction of products into new markets
Import Restrictions

exert restraints
common in
tariffs are
quotas are
nontariff barriers
Many countries exert restraints on free trade through import controls and barriers. They are particular common in countries that suffer from major trade deficits or major infrastructure problems, causing them to enter into voluntary restraint agreements with trading partners. Tariffs are taxes on imports based on the value of the imported goods and services. Quotas are restrictions on the number of foreign products that can be imported. Nontariff barriers consist of variety of measures such as testing, certifications, or simply bureaucratic
Export Restrictions

Nations control?
US controls?
Reasons controlled?
Never in best interest of?
Nations control their exports for national security concerns. US controls weapons or high-technology exports that might adversely affect the safety of the nation. Exports are also controlled for reasons of foreign policy, short supply or the desire to retain capital. Export restrictions are almost never in the best interest of firms.
Investment Policies

influence investment capital
Investment screening agencies
many countries attempt to influence investment capital flows in order to protect ownership, control and development of domestic industries. Investment-screening agencies decide on the merits of any particular foreign investment project. Most developing nations require special government permission for investment projects. This permission frequently carries with it certain conditions, such as level of ownership permitted, levels of dividends that can be repatriated, numbers of jobs that must be created or the extent to which management can be carried out by individuals from abroad
Changes in Global Policy Environment

Reduction of domestic policy-
weakening of traditional int'l instituions-
sharpening of conflict btwn industrialized/developing nations
3 major changes have occurred over time: reduction of domestic policy influence, a weakening of traditional international institutions, and a sharpening of conflict between industrialized and developing nations. Nation-states may no longer be the natural problem-solving unit. Local government may be most appropriate to address some of the problems of individuals, while global entities are required to deal with larger issues. Intense links among nations and new economic environment resulting from new market entrants with different economic systems are weakening the traditional international institutions and affecting their roles. While many nations were hoping to pull through economic distress in the 70s, this did not happen for everyone. Policymakers in these nations have become increasingly aggressive in their attempts to reshape the ground rules of the world trade and investment flows.
Reduction of Domestic Policy Influences

very difficult
contemplate specific policies
Effects of growing global influences on domestic economies have been significant. Policymakers now realize it is very difficult to isolate domestic activity from international market events. When countries contemplate specific industrial policies that encourage industrial innovation or collaboration, they often encounter major opposition from trading partners who believe their own industries are jeopardized by such policies.
Values and Attitudes

V-shared beliefs
Differences affect?
A- not always deterrent
Values are shared beliefs that have been internalized by individuals. Attitudes are evaluations of alternative based on these values. Differences in cultural values affects the way business planning is executed, decisions are made, strategy is implemented and personnel is evaluated. The more rooted values are in central beliefs, the more cautious international companies need to be. Cultural attitudes are not always a deterrent to foreign business though and products that hit the right cultural buttons can be huge successes in foreign markets.
Manners and Customs

Influenced by?
They influence?Understanding them is important?
Common stumbling blocks?
Manners and customs provide clues to culture and are influenced by religion, values and attitudes. They influence the ways in which different culture use products. Understanding manners and customs is especially important in business negotiations because interpretations based on one's frame of reference may lead to incorrect conclusions. Common stumbling blocks that detail international negotiations include insufficient preparation on the part of the host country, lack of sensitivity toward different of thinking, lack of familiarity with the decision-making process, the role of personal relationships, and the time it takes to complete negotiations successfully
Weakening International Institutions

Tariff levels low? nontariff barriers
Consequence - emerging dispute?
Problems set asside for?
The formation of the WTO has provided the former GATT with new impetus. However, the organization is confronted with many difficulties. With tariff levels at an unprecedented low level, attention now has to rest with areas such as nontariff barriers, which are much more complex and indigenous to nations. As a consequence, any emerging dispute is likely to be more heatedly contested and more difficult to resolve. Another key problem results from the fact that many disagreements were set aside for the sake of concluding negotiations. Disputes in such areas as agriculture or intellectual property rights protection continue to cause a series of trade conflicts among nations
Investment Policies

policies can result?
incentives offered by policymakers?
Many countries implement policy measures to attract FDI. These policies can result from the need of poorer nations to bring in foreign capital without taking out more loans that call for fixed schedules of repayment. Incentives offered by policymakers to facilitate foreign investments are mainly of three types: fiscal, financial and nonfinancial. Fiscal incentives are specific tax measures designed to attract foreign investors. Financial incentives offer special funding for the investor by providing land, buildings and loans. Nonfinancial incentives include guaranteed government purchases, special protection from competition through tariffs, imports quotas, and local content requirements, and investments in infrastructure facilities.