International Business - Chapter 5
International Business - Chapter 5 MGMT 4710
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This 3 page Class Notes was uploaded by Anna Notetaker on Thursday September 8, 2016. The Class Notes belongs to MGMT 4710 at Middle Tennessee State University taught by Cheryl Ward in Fall 2016. Since its upload, it has received 14 views. For similar materials see International Business in Management at Middle Tennessee State University.
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Date Created: 09/08/16
International Business Week 3 Democracy is a political system in which citizens elect representatives to govern the country on their behalf. o President Totalitarianism (dictatorship) is a political system in which one person or party exercises absolute political control. They entail higher political risks due to wars, riots, protest, etc. o Communist o Right-Wing (One political position) o Theocratic (One religion) o Tribal (African/Historical) Civil Law – comprehensive statutes and codes as a primary means to form legal judgment. Common Law – English origin, shaped by precedents and traditions from previous judicial decisions. (UNITED STATES) Theocratic Law – based on religious teachings. ****80% of the world is a Civil Law, while the USA is Common Law**** Property Rights are the legal rights to use an economic property (resource) and to derive benefit from it. o Collateral for loans, Start-Ups, etc. Intellectual Property Rights is known as IPR, which are the rights with the ownership of intellectual property, which are intangible products that result from intellectual activities like books, videos, etc. o TYPES of IPR: Patents, Copyrights, Trademarks Market Economy is characterized by the “invisible hand” of market forces; government takes a hands-off, or laissez faire approach. Command economy is when the government is taking the “commanding height” in the economy. All factors of production are government or state owned and controlled. All supply, demand, and pricing are planned by the government. Mixed Economy is the elements of both market economy and command economy. o UNITED STATES Ethnocentrism is a self-centered mentality held by a group of people who perceive their own culture, ethics, and norms as natural, rational, and morally right. o Poor attitude o My way is the best way Context the underlying background upon which social interaction takes place. o Low context culture – communication is usually taken at face value without much reliance on unspoken context. o High context culture – communication relies a lot on the underlying unspoken contwxt, which is as important as the words used. Dimension Approach: o Power Distance – extent to which less powerful members within a country expect and accept that power is distributed unequally (think social classes) o Individualism – idea that an individual’s identity is fundamentally his or her own. o Collectivism – idea that an individual’s identity is fundamentally tied to the identity of his or her collective group. o Masculinity/Femininity – dimension of sex role differentiation. o Uncertainty avoidance – extent to which members in a culture accept or avoid ambiguous situation and uncertainty. o Long-term orientation – how much emphasis is placed on perseverance and savings for future betterment. Dimension Approach – focuses on multiple dimensions of cultural differences both within and across cultures. Ethics is the principles, standards, and norms of conduct that govern individual and firm behavior. Code of Conduct is a set of guidelines for making ethical decision. Ethical Relativism follows the cliché – When in Rome, do as the Romans. Three Core Principles – respect for human dignity and basic rights, respect for local traditions, and respect for institutional context. Corruption – the abuse of public power for private benefits o Usually in the form of bribery, is cash or in kind. Managers should enhance their cultural intelligence – an individual’s ability to understand and adjust to new cultures and managers should be aware of the prevailing norms and their transitions globally. Exporting – selling abroad. Importing – buying from abroad. Merchandise – tangible products being traded. Service – intangible services being traded. Trade Deficit – when a nation imports more than it exports. Trade Surplus – when a nation exports more than its imports. Balance of Trade is whether a country has a trade surplus or deficit. Mercantilism views international trade as a zero-sum game. o A nation that exported more than it imported would enjoy net inflow of money. o Intellectual ancestor of protectionism is the idea that governments should actively protect domestic industries from imports and promoted exports. o The main economic system used during the sixteenth to eighteenth centuries. The main goal was to increase a nation’s wealth by imposing government regulation concerning all of the nation’s commercial interests. It was believed the national strength could be maximized by limiting imports via tariffs and maximizing exports. Absolute Advantage is with free trade, a nation gains by specializing in economic activities in which it has an absolute advantage (win-win game). Free Trade is buying and selling of goods and services with little or no government intervention. Opportunity Cost is what you have to give up in order to make a choice. The theory of comparative advantage is when the nations should specialize in producing the good in which they have the lowest opportunity cost. In the end, people must also consider comparative advantage when deciding what goods to product and for whom to product them. International Product Life Cycle Theory (IPLC) – dynamic theory that accounts for changes in the patterns of trade over time. o Introduction o Growth o Maturity o Decline Tariff Barriers is the means of discouraging imports by placing a tariff (tax) on imported goods. Non-tariff barriers (NTB) – discourages imports by means other than tariffs: o Subsidies o Import quotas – restriction on the quantity of a good that can be brought into a country o Voluntary export restraints – exporting countries voluntarily agree to restrict exports o Local content requirements – rules stipulating that a certain proportion of the value of the goods made in one country must originate from that country. o Administrative policies – bureaucratic rules that make it harder to import o Antidumping duties – cost levied on imports that have been sold below cost Trade Embargo is when there is a politically motivated trade sanction against foreign countries to signal displeasure.
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