IB 320F Exam 1 Notes
IB 320F Exam 1 Notes IB 320F
Popular in Foundations of International Business
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This 13 page Study Guide was uploaded by Mrinalini Vijalapuran on Thursday February 11, 2016. The Study Guide belongs to IB 320F at University of Texas at Austin taught by Dr. Roberts in Winter 2016. Since its upload, it has received 40 views. For similar materials see Foundations of International Business in International Business at University of Texas at Austin.
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Date Created: 02/11/16
International Business Test 1 Notes 01/21/16 Class 2 Globalization Star Wars Trailer: o everyone watches it, actors not from domestic market (internationalization of production), filmed in Abu Dhabi, Scotland, Ireland, London, edited in Hollywood, merchandize sold everywhere What is Globalization? o Typical Economic Definition: A shift toward a more integrated and interdependent world economy o Wider Definition: The act or process of becoming more globally integrated or interconnected o Converse: the incremental elimination of traditional economic, geopolitical, and cultural barriers.(downside loss of local flavor) Aspects of Economic Globalization o Globalization of Markets: the merging of historically distinct and separate national markets into one huge global market o Globalization of Production: aka worldwide sourcing. The sourcing of Factors of Production from locations around the globe. Factors of Production o Classical View HAVE NOT CHANGED Land (i.e. Natural Resources: oil, mineral, water, timber) Labor (i.e. Skilled Labor: Engineers, Doctors, etc. ) Capital (dollars, yen etc) o Additional Factors Enterprise Technology Intellectual property most consumed Human Capital (education, networking) Entrepreneurship those who first commercialize innovations. requires a market economy and strong property rights. Culture most consumed is this or Intellectual property most consumed? In terms of sales, culture is the most commonly consumed thing right now Drivers of the Globalization o Declining Barriers elimination of tariffs, travel barriers, bureaucratic impediments o Transition from developing (LEDCs/second world/third world) to developed (MEDCs/first world), i.e. BRIC o Greater world and economic convergence OR greater poverty/economic divergence o Technological Change Information Technology Transportation costs have declined International Organizations Developing Countries Growth of /Increased competition from Agents of Globalization o States (lower legal barrier) o International Governmental Organizations (“IGOs”) (aka NAFTA, NATO) The term intergovernmental organization (IGO) refers to an entity created by treaty, involving two or more nations, to work in good faith, on issues of common interest. supported by government collective action to help the states an organization to which states can belong but is subservient to them, such as Interpol, NATO, the World Bank, WIPO, and the IMF. o Supranational Organizations (European Union) has authority over states (to some extent, at least) A Supranational organization is an organization to which states have ceded a certain amount of sovereignty and agreed to be subject to said organization’s jurisdiction o International Nongovernmental Organizations (Doctors without Borders) supported by individuals in state that have international capacity organizations which may work with and may lobby state governments, but are not intrinsically tied to them, such as the World Wildlife Fund, Greenpeace, the International Committee for the Red Cross, the International Society for Red Cross and Red Crescent Organizations. o Multinational Companies (“MNCs”) Referred to as “MNEs” in book A firm that owns business operations in more than one country Disney companies that operate on a multinational scale, e.g. Exxon, Google, Apple, Anheuser Busch, etc. Global Economic Trends o Increasing trade and FDI (foreign direct investment) o Reduced trade barriers o Shift from Developed to Developing shift of power, shift in ability to determine the way forward o Greater wealth and economic convergence / greater poverty and economic divergence between states convergence in states divergence o International Business no longer the scope of influence of large MNCs o look at trends in charts (FDI before Great Recession) Why is globalization important in terms of this class? o it’s the topic of the class o can’t talk about international business without talking about globalization 01/26/16 Class 3 Geopolitical Units & Political Systems Political Economy: o internal aspects of a country and interaction of political, economic, and legal aspects of states. Interaction of different social science aspects. Used to stress relationship and interconnect politics, law, and economics. Internationally, you are dealing with different systems and rules than the one of your home country. Geopolitical Units (Terminology) o Country: legally identifiable geographical area/unit o Nation: defined by political community of people who share common cultural identities (language, culture, political views, etc.) not defined by physical borders o State: political system of a geographical area (government). International relations involves states (USA, Rep. of France, Russian Fed, Rep. of China). Must have sovereignty and geopolitical subordination Dependent states Only recognized player in international relations Intrastate: state makes own law Transnational: law between states (all or large number of) o Nation State: not all states are nation states. Nation and State coinciding in one country ( it is when a nation of people are also considered a state), e.g. Israel Geographical area that can be identified as deriving its political legitimacy from serving as a sovereign nation; nation and a state coalescing within a country Example: Republic of France, Germany China & Taiwan: One State Policy: both say they are the legitimate state of china. They are different country, one nation, different state International relations tied to international business because IB exists in IR States are the actors in international relations. o Bilateral Treaty (2 states) o Multilateral Treaty (more than 2 states) Sovereignty: o an entity’s ability to govern itself o All sovereignty derives from the people wanting to be ruled and revolution is the ultimate aspect of a failure of sovereignty o Law of Nature: concept that there is a universal law of what is wrong and right o A State cannot exist without sovereignty; A nation can. Legal Implications of Sovereignty o The ruler of a particular state has the sole and exclusive authority and autonomy over the territory of the state (country) o All states are equal to one another in terms of rights, obligations, and autonomy o As a result of the first two implications, States are subject to no higher law than the law of their consent No state can make another state act in a way that the state doesn’t want to To get a state to do what you want you bind them to other states as a single state. Why is this important for IB? o States are sovereign entities o They determine the laws that take effect w/in a country o As such, they oversee the rules of the political economy w/in a country o Multinational Corporations (MNCs) must play by the rules of the state (i.e. laws) o This makes IB much more complicated Types of States (i.e. other Geopolitical Units) o Empire: vastly encompassing state that has many other dependent states under a single supreme authority. o Confederacy: permanent union of independent states (Euro Zone) o Federation: more interdependent entity that involves other states (Germany, Switz, UK, US) states are subservients to the greater sovereignty of the greater state. o City State: (Monaco, Singapore) many turn themselves into nations like Italy and Greece o Multinational State: multinational identities/nationalities in one state (Iraq, UK, Canada) o Republic a state with the power held by the people and their elected representatives. The Political Spectrum o Conservative vs Liberal o Right vs Left Right: supported king or church (Conservative) Left: those people who wanted reform, get rid of king, anarchy, laissez faire (business owners) (Liberal) Nolan Chart o Middle square is the mainstream; most states exist within that square – autonomy changes based on the will of people o A way to track politicians and political theories o USSR on chart: collectivist and authoritarianist (closer to top right corner) Collectivism vs Individualism o Collectivism: Stresses the primacy of collective goals rather than individual goals (associated with communist). more social and economic control to support freedom of the many as opposed to freedom of the few. Emphasizes the greater good. Also more interested in security than in opportunity o Individualism: Stresses importance of individual freedom and self expression (associated with liberal democracy and anarchist systems). Less security Authoritarianism vs Liberalism o Authoritarianism: Emphasizes state control Deemphasizes personal freedom i.e. Collectivist o Liberalism: Emphasized personal freedom Deemphasizes state control i.e. Individualist States fluctuate between all of these depending on the will of the people. Political Systems o Autocracy: rule by one Monarchy: sovereignty invested in one individual Dictatorship: achieves or comes to power o Polyarchy: rule by more than one Oligarchy: rule by a few o Democracy: rule by the people Direct vs Representative (Republic) o Theocracy: rule by priests(the will of God) 01/28/16 Class 4 State Economies and Legal Systems Basic Economic Ideologies o Capitalism: an economic ideology based on private ownership of the means of production. Individuals can own property and gain profit through whatever means. Ability to acquire things we want is based on our accessibility to capital. Distribution is determined by who has the capital and who has the supply. Associated with individualism(meaning the state does not control the economy) Traces its roots to Aristotle, but based on Adam Smith’s “Wealth of Nations” (1776) o Socialism: an economic ideology based on public/collective ownership of the means of production.( Karl Marx) o Communism Classless, moneyless and stateless social order based on the factors of production. All aspects go about what is the greater good he who has goes to he who needs. Some leaders have taken it by power and centralize the function of the state creating an autocratic socialist system. Basic Systems o Traditional Economy: economy that doesn’t have a methodology capital. What you create, you consume. Everyone must produce because if not everything stops o Barter Economy: a system of exchange of goods. Modern Economy: continued in Class 5 Scottish Independence Movement (Guest Speaker) Scotland: a nation, not an independent state (part of Great Britain), part of UK but does not have an international voice. 1314 Bannockburn ( Scottish had to fight 7 battles to win) Robert the bruce and the spider story 1320 Declaration of Arbroath (signed to gets its independence) 1603 Union of Crowns (still independent country but same monarch) James IV becomes king 1707 Act of Union (parliamentary act that brought together Scotland and England marriage of convenience ) 1934 First SNP Meeting ( political party created now biggest and strongest political party in Scotland) 1946 First SNP MP (first member of parliament elected) 1950 Stone of Destiny (stone used for coronations scottish students stole it from westminster then put it back) 1979 Scottish Assembly Referendum (found oil off coast of Scotland, could become independent country Westminster found technicality to say no) 1990 Thatcher Broke up unions and fought poll tax 1995 Blueprint for Devolution (scottish people could elect their representatives) 1995 Braveheart 1997 Scottish Parliament Referendum( organized referendum to make scottish parliament law legal systems health and education should be run by scottland 80% of the vote passed) 1999 Scottish Parliament ( Scottish Parliament opened) 2011 SNP Majority (got majority by electing SNP party members and tried to make a referendum of independence) 2012 YES Campaign (Should Scotland be an independent country?) 2014 Pre Referendum Poll and Final Result( 1.6 mil 44.7% yes, 2 mil 55.3% No, Turnout was 84.6%) 2015 UK Election result (SNP has 56 out of 59 seats) 2/2/16 Class 5 Modern Systems o Market Economy: investment production and distribution are based on capitalist concepts. Most effective because it gives consumer what they want based on limited capital resources.( Supply and Demand) Common problem = monopolies/oligopolies: distorts market economy by shifting it into a complete command economy where they control the price. Example: diamonds (they are being made artificially more expensive by keeping low supply) o Command Economy: autocratic that requires control (usually government) Common problem = black market: they cannot get what they need like they are supposed to. If you don’t have factors of production to produce certain amount demanded by government, you find other means to avoid repercussion. o Mixed Economy: everything in between market and command economy State shifts in Economic Ideology (some of the prime risks of moving in states) o Nationalization: states assumes control of private industry (towards command economy and away from market economy) o Privatization: state owned industries/institutions are sold to private enterprises o Deregulation: legal restrictions on markets are removed or lessened The Law o What is a law? The rules promulgated and enforced by the state that govern human behavior o What is a legal system? The rules or law that regulate behavior along with the process by which those rules are enforced and through which redress of grievances is obtained Legal Systems o Civil Law (Codal Law): Apply law but do not interpret law (applying laws that already exist not making new ones). When you write down laws you are creating civil law. o Common Law: US, UK. Case law based on precedent developed by judges through court decisions is the law. The laws are not written down. When you interpret laws you are creating common law. o Theocratic law: Laws based on religious teachings. Torah, Shri Law. Legal Systems Business Impact o Civil Code Law Common Law (details contained in law) (general principles for interpretation) low ambiguity elaborate contracts fewer disputes power of courts/lawyers limited contracts greater litigation more bureaucracy entrepreneurial opportunity / freedom more equal power among parties less creativity Key Legal Issues for Business o Intellectual property protection: used to increased production and efficiency o Private property protection tangible property protection so state can’t take it o Contract lawWhat is agreed upon between two parties in contracts has to be enforced o Enforcement of the above issues and general “rule of law” Why might laws not be enforced? o Philosophy vs “image”/political o Development of judicial system no system to enforce the law o Whose jurisdiction? whose law rules where o Level of Corruption he who pays the judge gets the decision. Why is all of this important? o It’s the rules of the game? 2/4/16 Class 6 An Introduction to Culture and Societies Why does culture matter in international business? o people actually doing things, a personal touch o Easier to adapt to culture because of mass communication o Most of the conflicts of international work groups and committees are caused by issues like working hours, lunch breaks, dress codes, and degrees of formality o International managers attribute 67% of their business challenges to cultural differences What is affected by culture? o Business values and objectives (i.e. o Market choice/ behavior o Country selection and prioritization o Segmenting markets (i.e dividing your market into segments that each have their own needs wants or demands) o Organization and location of business functions o Human Resources Mgmt (HRM) selection and policies o Managing & motivating people/groups o Incentive systems o Performance measures o Business interaction/negotiation o Mergers and acquisitions So it’s imperative o to understand what cultural is o to understand that there are differences in culture o to understand that these affect business o to minimize your ethnocentrism Ethnocentrism: the belief in the superiority of one’s own ethnic group or culture to the disregard of other culture o to develop some crosscultural literacy Crosscultural literacy: an understanding of cultural differences and practices So what is culture, anyway? o Culture: the system of values and norms that are shared among a group of people and that when taken together constitute a way of life o Intrinsically tied to individuals’ sense of identity o Which is in turn intrinsically tied to societal/national identity Sociological Basis for Culture o Individuals seek groups to satisfy basic social need and… o Individuals seek groups to satisfy their own basic needs (food, safety, order) o Social exchange drives group to common behavior o to be accepted by the group (and survive) individuals must behave according to the group’s rules Basic Elements of Culture o Values: abstract ideas about what a group believes to be good, right, and desirable. The basic conventions of life (Timeliness, Industriousness, Family) o Norms: social rules and guidelines that describe appropriate behavior in certain situations. How values are implemented into life o Folkways: routine norms of everyday life. Little significance o Mores: norms that are seen as central to the functioning of society. Closely tied to law Society o people tend to like to work with people they like and can effectively communicate with o Societal Structure The basic social organization of society o Society A group of people who share a common set of values and norms o Group An association of two or more people Different Levels of Society o Cultural Sub Group: group within a society. South Texas, Firms o Regional: East/West Coast o National: political parties(nation wide groups) o Transnational: Goes across nations. Christian democrats, free labor, groups across nations o Global: Religion National vs Societal Identity o Society v Nation A society may be a subset of a nation a society may transcend nations you are seeing a larger movement of transnationalism. Nations themselves are always considered a society, but can have different levels of societies Societal identification is separate from national identification Difference between culture and society: culture is an aspect of a society but a society itself has its own culture. o 2/09/16 Class 7 Social Stratification o Social Strata: all societies are based on various hierarchical categories (occupation, income, etc.) Julius Caesar and his plebs and patricians and slaves. Social strata: Patricians, Plebs, Slaves o Caste System: A system of social strata in which social position is determined by the family into which a person is born, and change in that position is usually not possible during an individual’s lifetime. Ancient Rome, Ancient England born a pleb, die a pleb. o Class System: a system of social strata in which a position a person has by birth can be changed through his or her own achievement or luck. Could be that emperor gives you ability to move from class to class (luck) Most western systems are more class systems o Class vs. Caste: (Class has mobility caste does not) Social Perception o Class consciousness: the extent to which people perceive themselves and society in terms of social strata o Less apparent in the US. o Example: Duck Dynasty plays with concept of class, redneck jokes, we do understand the concept of city mouse and country mouse. Beverly Hillbilly o 1%: The Us vs. Them. The haves vs the have nots. Social Mobility o The extent to which individuals can move out of the strata into which they are born. o High social mobility: people can grow o Example: gain college education to succeed in and improve your life (better paycheck or more knowledge). Basic concept of American Dream and premise for Universities. What are the Managerial Implications o If in Caste based society, there will not be many implications because people who are higher up will remain there. o In Germany educ free is passed test, earned a higher class by virtue of hard work, there is this class consciousness. Problem is that people in lower class will have harder time getting into schools because of lack of experience, accents, etc. For example, UT has class based system. What Defines Culture? some aspects o Religious/Ethical Systems Realize that not everyone follows those aspects. Basic concepts of these systems. o Sense of Self and Material World very difficult to go into situations where people don’t have civilizations much more likely to fail o Social Structure and Relationships the value people place on interpersonal relationships o Language/communication o Time and time consciousness o Modes of learning and education o Habits, social practices, and aesthetics social customs/manners dress and appearance food and eating habits Cultural Assessment Edward Hall o Linguistic vs Silent Language Speaking vs non verbal communication which is anything that is not the meaning of the words(body language, tone, eye gaze, greeting practices) o Low Context Cultures: “Message is verbal” Everything that is said you take the literal meaning.( harder to understand things like sarcasm) you mean what you say and say what you mean. o High Context Cultures: “Message is more nonverbal” Not everything is spoken lots of things are implied based on situational factors.(sarcasm, inside jokes) o Tendencies o Importance? Cultural Assessment Hofstede o Most famous study of culture in relation to workplace o 50 countries, 117,00 individuals (IBM) o 4(5) dimensions explain differences Power Distance, Individualism, Uncertainty avoidance, Masculinity, Long Term Orientation , and Indulgence vs. restraint Individualism/Collectivism: relationship between the individual and others o Individualistic Societies: loose group ties individual freedom individual responsibility take care of self o Collectivistic Societies: Individuals are defined by group: work, family Individuals are responsible for care of group and vice versa Power Distance: how society deals with the inevitable “inequality” between people High Power Distance o Autocracy/Authoritarianism o Acceptance of centralized power o Formality o Bureaucracy o Enhancing differences between people – o social stratification Low Power Distance Egalitarian perspectives Lower respect for authority Informality Uncertainty AvoidanceDealing with an unknown future o High avoid unknown anxiety of future stress of unknown formal laws and rules o Low accept unknown accept karma master the unknown seize the day risk takers Masculinity/Femininity: division of social roles between genders Masculine Society o Maximize social division between genders o Maximize material achievements (money) o Bigger is better/“Macho” perspective o Feminine Society o People over possessions o Ostentatiousness inappropriate – o Keep a low profile o Preserve quality of life over o external achievements o Preserve the environment (Mother Earth?) Short Term Orientation Long Term OrientationruthJtmnestss’ Striving for correct behaviorts Overview: Cultural is intrinsically tied to business know yourself and know your business partner know when culture is relevant ALWAYS do your homework avoid stereotypes / ethnocentrism Exam Info: 30 multiple choice (application/scenario based) o state, nation, country (know difference) Discuss/talk about concepts Focus on class definitions and class notes o various religious aspects o Culture on test but not economic development or ethics Guest speaker (2 questions linking to class) know concepts and be able to apply them to situations Quizlets: https://quizlet.com/class/2442624/ or try https://quizlet.com/join/YDSTYNcZ3 let me know if it doesn’t work! and there are two still not filled out
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