Test 1 Cheat Sheet PDF

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Chapter 1|Globalization -refers to the shift toward a more integrated and interdependent world economy|Globalization of markets- refers to the merging of historically distinct and separate national markets into one huge global marketplace|tastes and preferences of consumers in different nations are beginning to converge on some global norm, thereby helping create a global market|differences still exist among national markets along many relevant dimensions, including consumer tastes and preferences, distribution channels, culturally embedded value systems, business systems, and legal regulations|require companies to customize marketing strategies, product features, and operating practices to best match conditions in a particular country|global markets are typically for industrial goods| globalization of production refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of Page 7factors of production (such as labor, energy, land, and capital)|Early outsourcing efforts were primarily confined to manufacturing activities, such as those undertaken by Boeing, Apple, and Vizio; increasingly, however, companies are taking advantage of modern communications technology, particularly the Internet, to outsource service activities to low-cost producers in other nations|substantial impediments still make it difficult for firms to achieve the optimal dispersion of their productive activities to locations around the globe. These impediments include formal and informal barriers to trade between countries, barriers to foreign direct investment, transportation costs, issues associated with economic and political risk, and the shear managerial challenge of coordinating a globally dispersed supply chain|Over the past half century, a number of important global institutions have been created to help perform these functions, including the General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization; the International Monetary Fund and its sister institution, the World Bank; and the United Nations|160 nations that collectively accounted for 98 percent of world trade were WTO members, thereby giving the organization enormous scope and influence. The WTO is also responsible for facilitating the establishment of additional multinational agreements among WTO member states. Over its entire history, and that of the GATT before it, the WTO has promoted the lowering of barriers to cross-border trade and investment. In doing so, the WTO has been the instrument of its member states, which have sought to create a more open global business system unencumbered by barriers to trade and investment between countries|The International Monetary Fund (IMF) and the World Bank were both created in 1944 by 44 nations that met at Bretton Woods, New Hampshire. The IMF was established to maintain order in the international monetary system; the World Bank was set up to promote economic development. In the more than six decades since their creation, both institutions have emerged as significant players in the global economy | Group of Twenty (G20)|forum through which major nations attempted to launch a coordinated policy response to the global financial crisis |Foreign direct investment (FDI) occurs when a firm invests resources in business activities outside its home country|Moore’s law, which predicts that the power of microprocessor technology doubles and its cost of production falls in half every 18 months|stock of foreign direct investment (FDI)| multinational enterprise (MNE) is any business that has productive activities in two or more countries. Since the 1960s, two notable trends in the demographics of the multinational enterprise have been (1) the rise of non-U.S. multinationals and (2) the growth of mini-multinationals|Firms outsource production of goods and services to take advantage of differences in cost and quality of factors of production like land, labor, energy, and capital Chapter 2| National differences in Political, Economic, and Legal Systems| market economy, all productive activities are privately owned, as opposed to being owned by the state. The goods and services that a country produces are not planned by anyone. Production is determined by the interaction of supply and demand and signaled to producers through the price system|the role of government in a market economy is to encourage vigorous free and fair competition between private producers| command economy, the government plans the goods and services that a country produces, the quantity in which they are produced, and the prices at which they are sold|abolition of private ownership means there is no incentive Page 48for individuals to look for better ways to serve consumer needs| political economy to stress that the political, economic, and legal systems of a country are interdependent; they interact with and influence each other, and in doing so, they affect the level of economic well-being| political system, we mean the system of government in a nation|The first is the degree to which they emphasize collectivism as opposed to individualism. The second is the degree to which they are democratic or totalitarian. These dimensions are interrelated; systems that emphasize collectivism tend to lean toward totalitarianism, whereas those that place a high value on individualism tend to be dem|socialism-state owns shit for the good of society|communists believed that socialism through violent means|Individualism is built on two central tenets. The first is an emphasis on the importance of guaranteeing individual freedom and self-expression. The second tenet of individualism is that the welfare of society is best served by letting people pursue their own economic self-interest, as opposed to some collective body (such as government) dictating what is in society’s best interest|Democracy-Political system in which government is by the people, exercised either directly or through elected representatives. Totalitarianism is a form of government in which one person or political party exercises absolute control over all spheres of human life and prohibits opposing political parties.|Types of totalitribal, right-wing (restrictions of personal liberties; against communism), theocratic, communist|Common law is based on tradition, precedent, and custom; flexibility to interpret law and flexibility| civil law system is based on a detailed set of laws organized into codes|more expensive to draw up contracts in a common law jurisdiction, and resolving contract disputes can be very adversarial in common law systems. But common law systems have the advantage of greater flexibility and allow judges to interpret a contract dispute in light of the prevailing situation| United Nations Convention on Contracts for the International Sale of Goods (CISG). The CISG establishes a uniform set of rules governing certain aspects of the making and performance of everyday commercial contracts between sellers and buyers who have their places of business in different nations| Property rights refer to the 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 refers to theft, piracy, blackmail, and the like by private individuals or groups|Public action to violate property rights occurs when public officials, such as politicians and government bureaucrats, extort income, resources, or the property itself from property holders|Foreign Corrupt Practices Act (FCPA) following revelations that U.S. companies had bribed government officials in foreign countries in an attempt to win lucrative contracts. This law makes it illegal to bribe a foreign government official to obtain or maintain business over which that foreign official has authority, and it requires all publicly traded companies (whether or not they are involved in international trade) to keep detailed records that would reveal whether a violation of the act has occurred|A patent grants the inventor of a new product or process exclusive rights for a defined period to the manufacture, use, or sale of that invention. Copyrights are the exclusive legal rights of authors, composers, playwrights, artists, and publishers to publish and disperse their work as they see fit. Trademarks are designs and names, officially registered, by which merchants or manufacturers designate and differentiate their products (e.g., Christian Dior clothes)| World Intellectual Property Organization, all of which have signed international treaties designed to protect intellectual property, including the oldest such treaty, the Paris Convention for the Protection of Industrial Property, which dates to 1883 and has been signed by more than 170 nations|Product liability involves holding a firm and its officers responsible when a product causes injury, death, or damage. Product liability can be much greater if a product does not conform to required safety standards. Both civil and criminal product liability laws exist. Civil laws call for payment and monetary damages. Criminal liability laws result in fines or imprisonment Chapter 3|National Differences in Economic Development|although democracy may not always be the cause of initial economic progress, it seems to be one consequence of that progress|high education, temperate, and coasts make economies grow faster|two trends have been evident. First, during the late 1980s and early 1990s, a wave of democratic revolutions swept the world. Totalitarian governments collapsed Page 73and were replaced by

democratically elected governments that were typically more committed to free market capitalism than their predecessors had been. Second, there has been a strong move away from centrally planned and mixed economies and toward a more free market economic model|spread of democracy: many totalitarian regimes failed to deliver economic progress to the vast bulk of their populations, new information and communication technologies have reduced a state’s ability to control access to uncensored information, and many countries, economic advances have led to the emergence of increasingly prosperous middle and working classes that have pushed for democratic reforms|Deregulation involves removing legal restrictions to the free play of markets, the establishment of private enterprises, and the manner in which private enterprises operate|Gross national income (GNI) per person measures the average total annual income received by residents of a nation| need to adjust GNI figures using purchasing power parity (PPP)| Also, GNI and PPP data are static / do not reflect economic growth rates|However, some totalitarian regimes have fostered a market economy and strong property rights protection and have experienced rapid economic growth. Four of the fastest-growing economies of the past 30 years—South Korea, Taiwan, Singapore, and Hong Kong—had one thing in common at the start of their economic growth: undemocratic governments! |Political risk - likelihood political forces will cause drastic changes in country's business environment that adversely affects profit and other goals of a business enterprise|Economic risk - likelihood economic mismanagement will cause drastic changes in country's business environment that adversely affects profit and other goals of a business enterprise|Legal risk - likelihood that trading partner will opportunistically break a contract or expropriate property rights Chapter 4| Differences in Culture| cross-cultural literacy, we mean an understanding of how cultural differences across and within nations can affect the way business is practiced| culture as a system of values and norms that are shared among a group of people and that when taken together constitute a design for living| values, we mean abstract ideas about what a group believes to be good, right, and desirable. Put differently, values are shared assumptions about how things ought to be|norms, we mean the social rules and guidelines that prescribe appropriate behavior in particular situations| society to refer to a group of people sharing a common set of values and norms| Folkways are the routine conventions of everyday life Mores| is a term that refers to norms that are more widely observed, have greater moral significance than other norms, and are central to the functioning of a society and to its social life. This means that mores have a much greater significance than folkways| social structure refers to its basic social organization, and this social organization is both emergent from and determinant of the behaviors of individual| A group is an association of two or more individuals who have a shared sense of identity and who interact with each other in structured ways on the basis of a common set of expectations about each other’s behavior| The term social mobility refers to the extent to which individuals can move out of the strata into which they are born. Social mobility varies significantly from society to society. The most rigid system of stratification is a caste system. A caste system is a closed system of stratification 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| class system is a less rigid form of social stratification in which social mobility is possible| Class consciousness refers to a condition by which people tend to perceive themselves in terms of their class background, and this shapes their relationships with members of other classes| Religion may be defined as a system of shared beliefs and rituals that are concerned with the realm of the sacred.32 An ethical systemrefers to a set of moral principles, or values, that are used to guide and shape behavior.33 Most of the world’s ethical systems are the product of religions| Hofstede’s power distance dimension focused on how a society deals with the fact that people are unequal in physical and intellectual capabilities. According to Hofstede, high power distance cultures were found in countries that let inequalities grow over time into inequalities of power and wealth. Low power distance cultures were found in societies that tried to play down such inequalities as much as possible| The individualism versus collectivism dimension focused on the relationship between the individual and his or her fellows| Hofstede’s uncertainty avoidance dimension measured the extent to which different cultures socialized their members into accepting ambiguous situations and tolerating uncertainty. Members of high uncertainty avoidance cultures placed a premium on job security, career patterns, retirement benefits, and so on. They also had a strong need for rules and regulations; the manager was expected to issue clear instructions, and subordinates’ initiatives were tightly controlled| Hofstede’s masculinity versus femininity dimension looked at the relationship between gender and work roles. In masculine cultures, sex roles were sharply differentiated, and traditional “masculine values,” such as achievement and the effective exercise of power, determined cultural ideals| The long-term versus short-term orientation dimension refers to the extent to which a culture programs its citizens to accept delayed gratification of their material, social, and emotional needs. It captures attitudes toward time, persistence, ordering by status, protection of face, respect for tradition, and reciprocation of gifts and favors| quality of life-At one end of this spectrum are “survival values,” the values people hold when the struggle for survival is of paramount importance. These values tend to stress that economic and physical security are more important than selfexpression. People who cannot take food or safety for granted tend to be xenophobic, are wary of political activity, have authoritarian tendencies, and believe that men make better political leaders than women. “Self-expression” or “well-being” values stress the importance of diversity, belonging, and participation in political processes| determinants- religion,political and economic philosophies, education, language, and social structure| Chapter 5| Ethical Issues Most Relevant- employment practices, human rights, environmental regulations, and corruption| ethics- principles of right or wrong that govern; conduct of a person, members of a profession, actions of an organization| Business ethics - accepted principles of right or wrong governing conduct of business people| Ethical strategy - strategy, or course of action, that does not violate these accepted principles| U.S. Foreign Corrupt Practices Act outlaws practice of paying bribes to foreign government officials in order to gain business| Convention on Combating Bribery of Foreign Public Officials in International Business Transactions - adopted by Organization for Economic Cooperation and Development (OECD)|...