Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
17 Cards in this Set
- Front
- Back
|
The Political Economy
|
A country’s political economy plays a HUGE role in international business, for several reasons:
Political and economic systems differ widely across countries, making it difficult to make generalizations or have a uniform strategy. Countries, represented by their governments, are sovereign entities. |
|
|
Collectivism and Individualism
|
Collectivism
Concerned with the needs of the overall society or group, rather than those of the individual Socialism, existence of welfare states System is concerned about the needs of the entire society No one should be left behind or treated differently Individualism Guarantee individual freedom and expression People can pursue own economic self-interest Not that there is no care for society, but they operate with a different set of assumptions If given freedom to work hard and prosper, it will influence people to be better to get what they want Some people are left behind Want people to try harder: emphasis of individual |
|
|
Democracy vs Totalitarianism
|
Cannot have these two together at once
Democracy Government by people exercised directly or through elected representatives. Totalitarianism One person or party exercises control over all spheres of human life. Opposing political parties are prohibited. Communist Theocratic Tribal Right Wing |
|
|
Different Types of Economic Systems
|
Who owns productive resources? Determines how decisions are going to be made (government or private)
Economic systems can be classified by property ownership private: individuals own the resources public: government owns the resources Capitalist or market (consumer-oriented) Socialist (society-oriented) Command (production-oriented) Decisions made for production purposes Mixed |
|
|
A Market Economy
|
Free hand of the economy (market) determines how much is produced/bought...
Involves an interrelationship of price, quantity, supply and demand individuals supply labor for wages by company wages are set on basis of available labor prices based on scarcity of resources, labor and productivity products are consumed if price is acceptable Consumers influence production by exercising their power of choice Legal and institutional frameworks to safeguard economic choice Allows the market to function efficiently US has strong contract law (low risk related to getting into contracts) |
|
|
A Command Economy
|
Government is KING, in lieu of the market
The government sets goals and determines the price and quantity of what is produced Typically, large bureaucratic firms Firms have no competition (monopoly positions) Guaranteed employment, housing, health care and other benefits Wages are typically the same Shortage economy Not following demand, and government decides what to produce so people may not be able to get enough of what is demanded Investment and R&D effects? No market, no need to reinvest (in R&D, specialized equipment, etc) Don’t bother, and become stagnant Guaranteed sales, no incentive to innovate, upgrade (don’t care to give consumers what they want) After a while, the economy system crumbles and eventually they will be in the worst shape |
|
|
A Mixed Economy
|
Different mixtures of market and central planning
Example of central planning and market: China 45% government directed (planned/owned) 55% market Britain: # of government owned enterprises that compete Combination of private and public ownership Private and public ownership ownership of means of production high social welfare spending Varies by industry or sector Designed to maximize power of the state in certain areas |
|
|
State-Directed Economy
|
Government involvement/intervention
No government ownership Involves governmental planning and intervention into the economy Based on goals and objectives of an established industrial policy Japan’s MITI After WWII, had ministries to direct capital and incentives for businesses to revamp economy Korea and Southeast Asian economies Comparable to Japan Engages in state directed approach in different way Today Korea is in the 1st world Criticisms |
|
|
Classifying Countries
|
Two most common measures of categorizing countries are per capita GNP or GDP:
Gross national product (GNP) Gross domestic product (GDP) Can see how country is creating value by comparing these #s Classify into high, low-middle, high-middle, low-income categories Can find average income of each person to classify the country |
|
|
Gross national product (GNP)
|
the market value of final goods and services newly produced by domestic factors of production (KNOW), whether at home or abroad
domestic factors of production Domestic firms how much value is created by a specific countries firms at home or away |
|
|
Gross domestic product (GDP)
|
the market value of production (good and services) that occurs within a country’s borders whether done by domestic or foreign factors of production
Don’t care who produces or creates value (domestic or foreign), but want to know how much value is created in the country |
|
|
Other Measures
|
Purchasing Power Parity: The number of units of a country’s currency required to buy the same amt of goods/services in the domestic mkt as one $ would buy in US
Quality of Life: human happiness, life expectancy, educ standards, purchasing power, health, sanitation, treatment of women Distribution of income |
|
|
Broader Conceptions of Development: Amartya Sen
|
Development should be measured less by material output measures, such as GNP, per capita and more by the capabilities and opportunities that people enjoy.
HDI measures quality of life in different nations Human development index Quality of life (life expectancy, educational) Based on life expectancy, educational attainment, and PPP based average incomes |
|
|
Legal Systems
|
A common law system is based on tradition, precedent, custom and usage, and interpretation by courts
Can set laws, and leave the ability to amend those laws (can reinterpret laws) A civil law system is based on a very detailed set of laws organized into a code Based completely on the laws that exist A theocratic law system is one based on religious precepts, such as Islamic law Islamic law does not permit banks to pay or benefit from interest, so they share profits with depositors |
|
|
Some Key Legal Issues in IB
|
Trade and investment regulation
Intellectual property protection Product safety and liability Financial flows regulation Taxation Reporting requirements Ownership regulation Contractual relationships International treaties Dispute resolution |
|
|
Corruption
|
Deviations for the rule of law
World is corrupt Each country has different forms of corruption |
|
|
Patent Laws
|
A patent issued in one country does not provide protection in other countries.
Patents are nationally based. Separate patent applications must be made in each country. First to invent – grants patent protection to the person who first invented the technology or product. Just has to prove he is the inventor US has had this one for long time Importance of intellectual property First to file – grants patent protection to the first to file, without need to prove he/she was the inventor. First to file for the patent |
