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106 Cards in this Set
- Front
- Back
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Globalization |
After WWII (1944), globalization was pushed to prevent another world conflict |
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European Union |
28 nations; an example of how individual countries don't all have their own market Over 500 million consumers |
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(NAFTA) North American Free Trade Agreement |
Canada, United States, Mexico |
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(SME) Small and Medium Enterprises |
95% of all businesses are SME, 90% of all international business. |
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International Business |
Whenever a company carries out any component of business outside of its country's borders. Accounting (India), buying, manufacturing, etc. |
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Why is Europe forced to participate in international business? |
Proximity and size |
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(FOP) Factors of Production |
Land, Labor, Capital; can lower costs and raise quality |
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(WTO) World Trade Organization |
made to resolve grievances to prevent trade wars which had led to the great depression. It created a set of rules about trade barriers; 161 countries |
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(IMF) International Monetary Fund |
Created to avoid countries playing with their currencies to gain trade advantage; now is a bailout institutions for countries in extreme need but help is only given in exchange for conditions |
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World Bank |
Promotes infrastructure projects via low interest rates on loans. It promotes economic development and was needed after the destruction of WWII; now aids developing countries |
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United Nations |
Provides a forum for peace to maintain peace between countries. |
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G20 |
combination of 20 advanced and emerging economies to talk about their different problems. Can nip problems in the bud for developing countries |
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Emerging economies |
BRICS- Brazil, Russia, India, China, South Africa |
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G7 |
For the largest economies for discussing their specific problems; United States, Japan, Germany, France, UK, Italy, and Canada. Russia was invited for awhile but kicked out when they tried to take over the Ukraine |
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Aids to Globalization |
Technology, Containers, which made it easier to boats to hold more |
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Opposition to Globalization |
Riots caused by BlackBloc, who instigate problems during peaceful rallies by the anti-global movement. Their argument is that the poor are becoming poorer and the rich are getting richer, creating more disparity between classes |
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Main problem with globalization |
loss of jobs in the manufacturing sector of the advanced economy |
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Counter argument to the anti-global movement's argument |
The service sector adds more value and the production of the workers are higher |
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Where does production take place? |
Countries who are less environmental restrictions to cut down to cost; Like China and LA and Prague. |
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Political Economy |
The interdependence of economies, politics, and legal systems |
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Political System |
How a country is run |
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What do International Observers do? |
Give a grade that corresponds with the degree of true democracy |
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Direct Democracy |
A true democracy asks citizens about everything. Switzerland is most like this. But no true direct democracy exists. There is restricted time in office and free elections |
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Italy's Politics |
Parliamentary democracy; all laws are approved by the parliment see notes page 3; 1d for more details |
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4 layers of Italian Governemt |
Central, Regional(20) , Provincial (irrelevant), City |
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Totalitarianism |
one party is in control; one person or one group. Elections are nonexistent or rigged by the government |
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Communistic Totalitarianism |
Left winged, say they are in support of the poor people and workers. Ex; Cuba and China |
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Fascist Totalitarianism |
Right winged, say that they are in support of landowners to encourage wealth that will eventually aid the poor. Ex, Saudi Arabia |
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Theocratic Totalitarianism |
They have elections but candidates are chosen by the religious leader and he can also hold elections over if the elections are not what he wants; like Iran |
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US politics; also France |
Presidential Democracy |
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Commanded(Planned) Economy |
what will be made, how it will be made, who willmake it, and the selling price are all decided by the government. Most likelyfound in a totalitarian system. |
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Market Economy |
decisions made by companies. Supply and demandrule the economy, the market is where consumers meet suppliers |
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Mixed Economy |
All economies are a mix between market and command economies with varying degrees |
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Common Law |
Any formerly British colonies. Parliament (Congress) creates a vague law. The judges are the interpreters of that law and the system is based on precedents |
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Civil Law |
Anywhere Napoleon ruled (Italy, France, and Spain). A law is written in codes that are very specific to all thought circumstances. In the event that a unique situation occurs, precedents can be used and judges can interpret. |
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Theocratic Law |
The religious word (the Bible, Quran (Sharja)) is used as law (see more details page 5; 3c) |
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Property Rights |
How much a foreign government respects property rights. Can be violated by private action, legally by the government, or illegally in the way of blackmail or bribes by official that get in the way of things that you are entitled to (inspections etc. ) |
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US Foreign Corrupt Practice Act |
No US company can be corrupt internationally or they will be tried and punished in the IS |
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(CPI) Corruption Perception Index |
measures corruption by how managers perceive thecountry (how many times they have been asked for a bribe, etc). Done byTransparency International, a non-profit. Corruption reduces FDI |
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Intellectual Property Rights |
Trademarks, Copyrights, Patents |
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Trademarks |
The unique characteristics of a company; ie; logo, slogan, jingle, etc. Mcdonald's golden arches |
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Copyrights |
Works of intellect; movies, books, music, etc. Holders of copyrights are entitled to royalties |
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Patents |
Processes, Ideas, use, or sale of something; Valid for a certain number of years; ie. Amazon's one click shopping |
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(WIPO) World Intellectual Property Organization |
UN agency meant to protect intellectual property. Some members abide more closely to the rules. ie, important case in China where the judge ruled in favor of the foreign country for the first time ever over the counterfeit of Ferrero Rocher, Italian chocolate |
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Cross-Cultural Literacy |
an understanding of how cultural differences across andwithin nations can affect the way business is practiced. |
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Society |
a group of people who share norms and values |
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Culture |
Values and norms |
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Folkways |
the routine conventions concerning everyday life, but havinglittle moral significance. Ex; in Americawhite is a color for joy and marriage, while in Japan white is the color ofmourning. |
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Mores |
have significance and are seen as central to the functioningof a society. Ex; don’t marrycousins because of genetic mutations etc. (RussianCzar) |
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Social Stratification |
Strata are defined by family’s background, income, oroccupation. Individuals are born into a certain stratum and assume the samestratum as their parents. Societies differ in the degree of mobilitybetween stratums. |
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Caste System |
Used to be used in India;but is not illegal there, although mobility isstill rare there and the caste system is still informally there. |
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Class System |
very rigid in Britain, which dividespeople into different economic classes (upper, middle, and lower) |
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Nation states |
can have multiple societies within it and onesociety can be expanded over many nation-states. Ex; Turkey can be divided into the Turks and theKurds |
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Major Religions |
Christianity-Islam-Hinduism-Buddhism |
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Culture can be defined by: |
Religion, language, Education, Workplace |
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Christianity |
Largest religion;Found in Europe, Americas, and other Europeansettled nations-Protestants try to showtheir worthy for heaven while they’re on earth so they tend to be consistentlyhonest in business. - Catholics believe thatthey can repent anytime before death and their sins will be erased |
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Islam |
2nd largest religion, They have to find ways around big hurdles |
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Language
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Verbal;Japan and China are more polite while Germans are more blunt.Nonverbal; gestures, personal space, facial expressions |
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Education |
Europe is tougher on their students, with morereadings and studying, rather than the hands-on that the U.S. uses. Europe alsohas a year longer of public schooling. |
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Workplace |
Some companies focus on individualaccomplishments (America), whereasothers focus on the group as a whole (Asia) |
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Hofstede's dimensions of culture |
PDI;UAI;Individualism vs. Collectivism;Masculinity vs. Femininity |
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(PDI) Power Distance Index |
how difficult it is to move upward and how muchaccess you have to your bossa. Higher the number of the index, the higher powerdistanceb.Boss that has a corner office with a closed doorand an assistant that you have to make an appointment with to see him vs theopen door policy. c.Americahas less of a power distance than Italy |
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(UAI) Uncertainty Avoidance Index |
risk averse vs. risk prone. The higher the number,the more risk averse people are Americais more risk prone than Italy |
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Individualism vs. Collectivism |
higher index means higher individualism. Individualism can lead to entrepreneurship andthe ability to compare the different companies that they have worked for. Butalso there is a lack of loyalty and jobs depend on the experience of employees Collectivism leads to lack of entrepreneurship,but employees are very loyal and have a ton of company specific experience andcollective action. |
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Masculinity vs. Femininity |
Feminine culture is more willing to compromise Masculine culture is more likely to beconfrontational |
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Free Trade |
Tariff free; the whole world isone market *easier said than done-Economicallyideal, however not politically ideal because governments feel the need toprotect domestic producers through trade barriers. -Thereis free trade within the European Union and NAFTA |
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Tariffs |
Import tax |
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Specific Tariff |
fixed cost per unit; ex; $0.02 per unit |
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Ad Valorem |
proportional to the value of the goods as givenby the invoice; ex; 20% of the valuelisted on the invoice |
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Why are tariffs imposed? |
Revenue or protective tariffs |
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Revenue Tariffs |
Moreimposed for this reason in developing countries because the government can notget the funds they need by raising income tax because population does not makea high enough income, also those responsible for passing legislation are themembers of those countries who do make the highest income, so they would notraise income tax because it would not be beneficial to them. |
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Protective Tariffs |
imposed to protect the domestic producers.Import tariffs force the price of foreign prices up, protecting domesticproducers from being beat in pricing. However, this protection gives domesticproducers no incentive to try to be more efficient or productive. |
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Subsidies |
when the government gives money to companies toproduce in that country they are production subsides, (see page 9-10) |
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Import Quota |
- alimit to import quantity for a certain product for a certain time period. - Thisgives domestic producers “breathing room” to catch up to their competition |
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Quota Rent |
extra profit due to an import quota. When supplyis artificially limited and prices rise for that product the rent is thedifferent between the market price and the artificial price. |
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Tariff Quota |
-aftera set import quota, any quantity above the set amount is heavily tariffed. - Likea hybrid between a tariff and a quota-Ex; if the import quota is 500; thefirst 500 are given the normal import tariff, but the 501st istariffed at a much higher rate |
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(VER) Voluntary Export Restraint |
If country A is being flooded with exports fromcountry B, A asks B to voluntarily limit their exports to A |
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Why would a country say yes to a VER |
1. Skeletons in the closet 2. More negotiation power. 3. Prices rise; rent 4. Product Upgrading |
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Product Upgrading |
With a limited quantity of exports allowed fromB, they can sell the higher priced products first to generate the highestpossible revenue and then if they have any more allowed exports left they cansell them last. |
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Local Content Requirement |
a % ofthe product being exported by B(foreign) has to be produced in A(domestically)to be allowed. |
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Content Requirement |
-in areas with free trade (European Union andNAFTA); Imports must be produced mainly in the country that is exporting it. -Ex; whena European Union member is importing French perfume, the perfume has to bemainly made in France, not somewhere in Africa, Asia, etc. |
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Administrative Policies |
-themore “red tape” and bureaucratic hoops that companies have to jump through is abarrier to trade. -Governmentmight have standards with no real reason or scientific evidence ex; only importing white shelled eggs. |
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Types of Dumping |
1. Microeconomic reasons, 2. limited number to preserve reputation in home country. 3. Predatory Dumping |
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Dumping |
when a company sells a product for a lower cost in a foreign country than in the domestic country. |
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predatory dumping |
when a company enters a foreign market at a verylow price to gain consumers and to undermine competitors and therefore become amonopoly that raises their prices very high as soon as the competitors aregone, leaving consumers with no options |
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Anti-dumping duties |
If a company is found guilty of dumping and doesnot immediately stop, the government imposes a tax that is equal to the pricedifference between the company’s home country and their country so that thefinal price for the consumer in both places is the same |
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Why do governments create trade barriers |
Political and Economical |
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Political reasons for trade barriers |
they give their allying nations lower importtaxes and higher import taxes to hostile nations. |
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Economical reasons for trade barriers |
Protecting jobs; Protecting industries that are seen as importantas to not be held hostage if a conflict arises between you and the country incontrol of that industry. |
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Foreign Policy |
Helms-Burton, human rights, environment, infant industry argument |
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Helms-Burton Act |
some nations are “black-listed”(rogue states)and not traded with. Ex; Iran,Libya, and Cuba. Trade has recently been becoming more possible with theseplaces but not completely. |
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Protecting Human Rights |
sending a message to countries that don’t respecthuman rights: Ex; China 1999 |
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Protecting the Environment |
Countries with high environmental standards cutdown on trade with countries that have lower environmental standards (to lowercost) developing nations usually start with low environmental standards but gohigher as they make progress Ex; Chinaw/ Bejing Olympics), Vietnam is going through this and Mexico did |
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The infant industry argument |
they want to protect industries facing fierceglobal competition until they are “ready” to compete.(see page 12 for example) |
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Strategic Trade Policy |
government tells companies what area to focuson. Ex; Obama tried to get the US to focus on the“Green Economy” and failed because that’s not where the US has a competitiveadvantage. |
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Benefits of being a WTO members |
MFN clause; Negotiation power during trade rounds(see more page 13) |
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(MFN) Most Favored Nation Clause |
when you enter the WTO you must treat allmembers with the best trade deals available, lowest import tariffs available. |
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(FDI) Foreign Direct Investment |
to invest/ market/ produce in another country |
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Greenfield Investment |
FDI that involves starting a business in a foreign country fromscratch |
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Acquisition/Merger |
something that already existed. Only a FDI ifthe amount invested is a controlling percent of the company; not necessarily ,otherwise it’s a portfolio investment, purchased for the goal of earningcapital gain.(See page 14) |
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Stock of FDI |
the sum of FDI's in a Country |
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Licensing |
giving a foreign company toproduct your product according to you’re procedure and sell it under your name.Ex; coca-cola produced abroad is produced by companies with alicense to produce coca-cola |
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Why not continue to Export |
1.Import tariffs could be raised orother trade barriers could be put in place (if not a WTO member). 2. Transportation costs may increase 3.FDI may lower total cost, thushigher profits |
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Multipoint Competition |
when multiple countries enter a foreign country.The first competitor to be there will sell more. |
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Companies move to foreign countries because |
Location specific advantages: Itis a country you get resources from Proximityto factors of production Proximityto consumers |
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Externalities (External Economies) |
occurs when companies from the same industrylocate in the same area and knowledge spill over occurs |
