Chapter 2 Study Guide
Chapter 2 Study Guide INTB3080
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This 4 page Study Guide was uploaded by Jayne Johnston on Tuesday February 9, 2016. The Study Guide belongs to INTB3080 at University of Cincinnati taught by Dr. Ratee Apana in Spring 2016. Since its upload, it has received 106 views. For similar materials see Global Environment of Business in International Business at University of Cincinnati.
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Date Created: 02/09/16
Chapter 2 Study Guide Political Systems What are the implications of the political economy on business? The political, economic, and legal systems of a country are interdependent; they interact and influence each other, and in doing so they affect the level of economic well- being. Collectivism – a political system that stresses the primacy of collective goals over individual goals. Socialist – someone who believes in public ownership of the means of production for the common good of society. Communists – those who believe socialism can be achieved only through revolution and totalitarian dictatorship. Social Democrats – those committed to achieving socialism by democratic means. Individualism – a philosophy that an individual should have freedom in his/her economic and political pursuits. Democracy – a political system in which government is by the people, exercised either directly or through elected representatives. Totalitarianism – form of government in which one person or political party exercises absolute control over all spheres of human life and prohibits opposing political parties. Communist totalitarianism – version of collectivism advocating that socialism can be adhered only through a totalitarian dictatorship. Theocratic totalitarianism – political system in which political power is monopolized by a party, group, or individual that governs according to religious principles. Tribal totalitarianism – political system in which a party, group, or individual that represents the interests of a particular tribe (ethnic group) monopolizes political power. Right-Wing totalitarianism – political system in which political power is monopolized by a party, group, or individual that generally permits individual economic freedom but restricts individual political freedom, including free speech, often on the grounds that it would lead to the rise of communism. Country Focus: Chavez’s Venezuela In 2003, the World Bank concluded Venezuela was one of the most regulated economies and state controls over business activities gave public officials opportunities to demand bribes for permission to expand operations or enter new lines of business. Mid-2008, Venezuela received huge oil revenues, boosting the economy. Chapter 2 Study Guide There has been a cap on unemployment rates, but inflation has surged. Economic Systems Market Economy – economic system in which the interaction of supply and demand determines the quantity in which goods and services are produced. Command Economy – economic system where the allocation of resources, including determination of what goods/services should be produced, and in what quantity, is planned by the government. Mixed economy – certain sectors of the economy are left to private ownership and free market mechanisms while other sectors have significant state ownership and government planning. Privatization – is the selling of state-owned enterprises to private investors. Britain’s Conservative Party was more committed to a free market, which succeeded many Social Democratic parties in the late 1970s and early 1980s. Legal Systems Different Legal Systems Common Law – system of law based on tradition, precedent, and custom; when law courts interpret common law, they do so with regard to these characteristics. Civil Law – system of law based on a very detailed set of written laws and codes. Theocratic Law – system of law based on religious teachings. Differences in Contract Law Contract Law – body of law that governs contract enforcement. United Nations Convention on Contracts for the International Sale of Goods (CIGS) – set of rules governing certain aspects of the making and performance of commercial contracts between sellers and buyers who have their places of businesses in different nations. Property Rights and Corruption Property rights – 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 resource. Private action – theft, piracy, blackmail, and the like by private individuals or groups. Public action – extortion of income or resources of property holders by public officials, such as politicians and government bureaucrats. Chapter 2 Study Guide Foreign Corrupt Practices Act – U.S. law regulating behavior regarding the conduct of international business in the taking of bribes and other unethical actions. This law makes it: – Illegal to bribe a foreign government official to obtain/maintain business over which that foreign official has authority – Requires all publicly traded companies to keep detailed records that would reveal whether a violation of this act has occurred Protection of Intellectual Property Intellectual property – products of the mind, ideas (books, music, software, etc.); intellectual property can be protected by patents, copyrights, and trademarks. – Patent – grants the inventor of a new product/process exclusive rights to the manufacture, use, or sale of that invention – Copyrights – exclusive legal rights of authors, composers, playwrights, artists, and publishers to publish and disperse their work as they see fit – Trademarks – designs and names, often officially registered, by which merchants or manufacturers designate and differentiate their products Management Focus: Starbucks Wins Key Trademark Case in China Why is the concept of property rights protection so important to companies? If property rights were not established to prevent a government from freely stealing foreign created business ventures without proper compensation, then it is unlikely that any foreign company would risk going into that country for risk of losing their entire operation. Product Safety and Product Liability Product Safety laws – set certain standards to which a product must adhere. Product Liability – involves holding a firm and its officers responsible when a product causes injury, death, or damage. Country Focus: Corruption in Nigeria What is meant by corruption? Explain how a corrupt political system affects the well being of a country. What are the implications of corruption for Nigeria? Political corruption is the use of powers by government officials for illegitimate private gain. The legitimacy of government in Nigeria is always in question, which causes political leaders to purchase support through bribes and raiding the national treasury to reward allies. Chapter 2 Study Guide With its huge oil reserves and large population, Nigeria was expected to emerge as a major player in Africa. Yet today the country is extremely poor with little expectation for an economic turnaround any time in the near future. Explain how Nigeria came to be in such a sad state. During the 1990s, military dictator Sani Abacha plundered the state treasury, eating away at federal funds and revenues. Clearly, Nigeria’s corrupt government has been a major factor in the country’s demise. In contrast, other countries including Finland and Canada expressly prohibit corruption. In your opinion, would Nigeria be better off following the example of countries like Finland and Canada? Why or why not? The state that Nigeria is currently in as well as the culture that it comprises of does not have the ability to prohibit such corruption like Finland and Canada.
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