Midterm Review International Business PDF

Preview

Summary

Download Midterm Review International Business PDF

Description

Midterm Review 30 true/false 20 multiple choice 2 of 3 essay questions   



 

 

 

Is it easier to make decisions in smaller or larger countries or is it about the same? How common is exporting the first step of going international? What is the WTO? o The WTO was founded in 1995 as a permanent world trade body for the purposes of (1) facilitating reciprocal trade negotiations and (2) enforcing trade agreements between or among member nations. Currently the 153 member countries of the WTO collectively account for more then 97% of the value of world trade. Is it important to use slang when communicating cross culturally? o Common language serves as a unifying force but language diversity may undermine a firm’s ability to conduct business. Because some countries se language as such an integral part of their cultures, they may regulate the inclusion of foreign words and/or mandate the use of the country’s official language for business purposes. Translating one language into another can be very difficult because (1) some words do not have a precise translation, (2) the common meaning of words is constantly evolving, (3) words mean different things in different contexts, and (4) a slight misuse of vocabulary or word placement may change meaning substantially. Who are developed countries mostly trading with? o Developed countries are mostly trading with each other. What is the theory of comparative advantage? o Holds that a country can maximize its own economic well-being by specializing in the production of those goods and services it can produce relatively efficiently and enhance global efficiency through participation in (unrestricted) free trade. Ex. The best physician in the world is also the best medical secretary in the world, however, he can maximize output and income by working as a physician and employing a less skilled secretary. Produce what they are most efficient at producing and buy what they produce less efficiently. What has happened since the internet started in 1995 to the traditional channels of distribution? Explain what the international product life cycle theory claims to happen. o PLC theory states that the optimal location for the production of certain types of goods and services shifts over time as they pass through the stages of market introduction, growth, maturity, and decline. When a company exports that product/category most probably becomes and import at some point. Since the global credit crisis what has the government done as a result? Understand the different cross national agreements (the E.U., Mercorsur) (chapter 7)

o The European Union: represents the most advanced regional trade and investment group in the world today. Evolved from the European Economic Community (EEC) to the European Community (EC) to the EU (which transitioned to a common market). Single European Act—moving toward a single market. Most countries in the EU adopted the euro currency. o North American Free Trade Agreement: incorporates Canada, Mexico, and the U.S. into a regional trade bloc of countries of quite different sizes and sources of national wealth. NAFTA calls for the elimination of tariff and nontariff barriers, the harmonization of trade rules, the liberalization of restrictions on services and foreign investment, the enforcement of intellectual property rights, and a dispute settlement process. o The Caribbean Community and Common Market (CARICOM): working hard to establish an EU-style form of collaboration, one that would mirror the EU, but on a smaller scale. o MERCOSUR: The major trade group in South America comprised of Brazil, Argentina, Paraguay, Uruguay, and Venezuela. Chile, Bolivia, Colombia, Ecuador, and Peru are associate members of MERCOSUR, meaning they have duty free access to MERCOSUR markets without getting involved in negotiations to complete the customs union phase. o Andean Community (CAN): the second most important regional group in South America. Since its beginning, CAN has shifted its focus from one of isolation to being open to foreign trade and investment. o Latin American Integration Association (LAIA): Members from MERCOSUR, CAN, Chile, Cuba, and Mexico are part of LAIA. The hope was to go beyond FTA to become a common market. This association was previously known as South American Community of Nations (CSN). o Association of Southeast Asian Nations (ASEAN): ASEAN Free Trade Ares for the purpose of cutting tariffs on interzonal trade to maximum of 5% by 2008. Comprise of Brunei, Cambodia, China, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam, ASEAN holds great promise for market and investment opportunities because of its large market size. o Asia Pacific Economic Cooperation (APEC): founded to promote multilateral economic cooperation in trade and investment in the Pacific Rim. Comprised of 21 countries that border the Pacific on both the east and the west. Progress toward free trade is hampered by the number of members, the geographic distances between nations, and the lack of a binding treaty. o Pan-Arab Free Trade Area: comprised of several North African and Middle-East nations, with a goal of reducing trade barriers. The Gulf Cooperation Council is a smaller trading bloc that has a lower population, but large oil reserves. o The African Union: 53 African nations, the African Union took the place of the Organization of African Unity, which focused its energy and resources on political issues in Africa. The new AU is modeled loosely on the EU.



    

 

 



o The United Nations: promotes international peace and security and to help with global issues such as economic development, antiterrorism, and humanitarian relief. How are exchange rates determined? What are the variables they look at? o Exchange rates can be floating or pegged. Floating rates change continually based on the market forces of supply and demand. How much demand there is in relation to supply of a currency will determine the currency’s value in relation to another. Pegged (fixed) rates are fixed to another currency and move in tandem with that particular currency. These rates are set by the government and do not fluctuate as much as floating rates. Sometimes they are changed on specific dates. What are the positive or negative influences that government intervention can have on international businesses? What economic variables would an international manager look at when going into the market? What are some socio-cultural forces that you should consider when entering a foreign country? (chapters 1-4) In ethics, what is the relationship between morality, ethics, and legality? What is mercantilism? o The concept of mercantilism served as the foundation of economic thought for nearly 300 years (1500-1800). It purports that a country’s wealth is measured by its holdings of “treasure” (usually gold). Suggests that a country should maintain a trade surplus – exporting more than it imports. What is lingua franca? o Dominance of one language as a global business language. What is the relationship between GATT and the WTO? o GATT is the predecessor to the WTO. GATT was established in 1947 by 23 nations as a multilateral agreement whose objective was to abolish quotas and reduce tariffs. The WTO continued the Most Favored Nation (MFN) clause of GATT which suggests that member countries trade without discrimination giving foreign products “national treatment.” How does the Islamic law adjust to the current society? How well are intellectual property rights enforced or protected globally? o Cross-national and cross-cultural legal differences complicate specifying, regulating, and enforcing intellectual property rights. International property rights constitute a legally enforceable but limited monopoly granted by a country to an innovator. Enforcement of IPRs is difficult due to the fact that there is no way to globally register a patent, trademark, or copyright. Countries with a more individualistic orientation view intellectual property as intrinsically legitimate, however, countries with a more collectivist orientation extol the virtues of shared ownership. If tariffs are too high in a country what does that tend to stimulate? What can occur?



 



  

     

 



o A tariff increases the delivered price of a product, and at the higher price, the quantity demanded will be less. What is the definition of an exchange rate? o Exchange rate: the price of one currency expressed in terms of another (the number of units of one currency needed to buy a unit of another). What affect does government instability have on economic development? If any. What is purchasing power parity (PPP)? o Represents the number of units of a country’s currency required to buy the same amount of goods and services in the domestic market that one unit of income would buy in another country. PPP is estimated by calculating the value of a universal “basket” of goods that can be purchased with one unit of a country’s currency. Differences in the cost of living. What is OPEC? o The Organization of Petroleum Exporting Countries: a group of commodity producing countries with significant control over output and price. Represents 60% of the oil traded internationally, therefore, OPEC can have significant control over the oil market. When looking at emerging markets that you may want to enter what would you consider? When was the euro currency introduced into the market place? o 1999 When did the Bretton woods conference occur? o July 1-22, 1944. Formally known as the United Nations Monetary and Financial Conference, was the gathering of 730 delegates from all 44 allied nations at the Mount Washington Hotel in Bretton Woods, New Hampshire to regulate the international monetary and financial order after the conclusion of WWII. Do companies prefer using their own currencies in transactions or does it matter? Exporting o You’re selling (sending out) Importing o You’re buying (bringing in) What is another word for importing? What European countries did not adopt the euro? o UK, Denmark, Sweden What is the boomerang effect? o A theory stating that attempts to restrict a person's freedom or change a person's attitudes often produce a strong opposing response. Do governments know how to make profit? What is the foreign corrupt practices act (FCPA)? o U.S. law regulating behavior regarding the conduct of international business in the taking of bribes and other unethical action. What is the factor proportion theory?







 





o Holds that (1) differences in a country’s relative endowments of land, labor, and capital explain the differences in the cost of production factors and (2) a country will tend to export products that utilize relatively abundant factors of production because they are relatively cheaper than scarce factors (countries with rich and abundant land tend to be large exporters of agricultural products, whereas countries with capital-intensive production lines tend to be large exporters of manufactured goods. What is Sarbanes oxley? o SOX Act of 2002, passed by U.S. congress to protect investors from the possibility of fraudulent accounting activities by corporations. The SOX Act mandated strict reforms to improve financial disclosures from corporations and prevent accounting fraud. Hofstede (cultural dimensions—people have certain attitudes and behaviors around the world) which dimensions cover the level of risk? o Uncertainty avoidance: one’s tolerance of risk. When the score is high, workers need precise directions and the prospect of long-term employment, while consumers are wary about trying new products. When the score is low, workers are willing to be creative and to move to new jobs, while consumers accept the risk of being first to try new products. High uncertainty avoidance: Belgium and Portugal. Low uncertainty avoidance: Britain and Denmark. What does the totalitarian system stand for? o Totalitarianism represents a political system in which citizens seldom, if ever, participate in the decision-making and governance process; power is monopolized by a single agent and opposition is neither recognized not tolerated. Through control of media, education, and police, the state suppresses dissent. Includes theocratic, secular, authoritarianism, and fascism. How important is the element of time for U.S. business people? o Time is the most important element. What does the Uruguay Round refer to? o The 8th round of multilateral trade negotiations conducted within the framework of the General Agreement on Tariffs and Trade (GATT) spanning from 1986-1994 and embracing 123 countries as “contracting parties.” At the conclusion of the Uruguay Round in 1994, the WTO was created in 1995 for the purpose of institutionalizing the GATT. How does a country protect an infant industry? o The Infant Industry Argument holds that a government should temporarily shield emerging industries in which the country may ultimately possess a comparative advantage from international competition until its firms are able to effectively compete in world markets (what the EU did when putting a quota on Japanese vehicles while transitioning to a common market). What is an NGO? o Non-Government Organization: non-profit volunteer organizations such as the Red Cross. Private institutions that can be involved in transnational activities



   



Extraterritoriality: what does it mean? o Also called diplomatic immunity, in international law, the immunities enjoyed by foreign states or international organizations and their official representatives from the jurisdiction of the country in which they are present. Who are the members of Mercorsur? o Brazil, Argentina, Paraguay, Uruguay, Venezuela What is another term for unofficial economy? What is the connection/difference between transparency and corruption? When a government reduces the value of its currency what has it done to the currency? o After devaluation, the new lower value of the domestic currency will make it less expensive for foreign consumers to obtain local currency with which to buy locally produced exports, so more exports will be sold, helping domestic businesses. Further, the new exchange rate will make it more expensive for local consumers to obtain foreign currency with which to import foreign goods, hurting domestic consumers and causing less to be imported. What does the world bank do? o International institution setup to promote general economic development in the world’s poorer nations....