·         World is potential market

·         World is Potential Source of Supply

·         World is Potential Location for Operations

·         Competition comes from anywhere in the world

·         Collaborations comes from anywhere in the world

·         Events that can impact your business can come from anywhere in the world

·         Democratization of technology

·         Democratization of information/communication

·         De-regulation

o   G.A.T.T.-1995, W.T.O-

o   Monetary System 1971

§  Fixed exchange rate system

·         Privatization

·         Democracy of finance

o   Commercial paper (corporate debt)

o   Securitization of home mortgages

o   Junk bonds

o   Securitization of international debt

·         Political policies and legal practices

·         Cultural factors

·         Economic forces

·         Geographic influences

What are the differences between the three stages of globalization: Globalization 1.0, 2.0 and 3.0?

·         Globalization 1: 1492-1800, The Nations were driving it. It was mainly in the U.S./E.U., had steam power

·         Globalization 2: 1800-2000, The firms were driving it. It was mainly in the U.S./E.U., had the Industrial Revolution, Transportation cost (1^st 1/2), Telecommunication cost (2^nd ½), and hardware

·         Globalization 3: 200, The individuals are driving it. It is with the non-western/ non-white. It has global fiber optics and software.

·         Different currencies

·         Different languages

·         Different enterprise laws

·         Tariffs and limits on imports/exports

·         Different tastes and customs

·         Different languages

·         Different management practices

·         Marketing, finance, accounting, MIS

·         Relationship of government

·         Political and economic systems

·         Type A Forces: Direct Forces

o   Firms that deal with economic welfare, economic stability, and economic development

§  Patterns of trade

§  Commodity composition

§  Price of exports/imports

§  Capital movement (financial capital)

·         International bonds, equity, euro-currency

§  Transfer of technology and ideas

§  F.D.I.

·         Type B Forces: Indirect Forces

o   Policy making agents and firms

§  National governments decision makers

§  W.T.O

§  I.MF. (International Monetary Fund)

§  W.B. (World Bank)

§  G7-8-25 (Industrialized Nations)

§  B.I.S. (Bureau International Settlements)

o   Deal with economic welfare, economic stability, and economic development

§  Fiscal (taxing & spending), monetary issues, trade issues

·         Democracy: a government “of the people, by the people, and for the people.” Involve wide participation by citizens in the decision-making process.

o   Parliamentary

o   Liberal

o   Multiparty

o   Representative

o   Social

·         Totalitarianism: restricts decision making to a few individuals. A single agent—whether an individual, group, or party--- monopolizes political power and tries to mobilize the population toward two ends

o   Unquestioning support for the official state ideology

o   Opposition to activities that run counter to the goals of the state

o   Authoritarianism

o   Fascism

o   Secular Totalitarianism

o   Theocratic Totalitarianism

·         a government “of the people, by the people, and for the people.” Involve wide participation by citizens in the decision-making process.

o   Parliamentary- citizens exercise political power by electing representatives to a legislative branch of government

o   Liberal- originates in a constitution that specifically protects certain individual freedoms. All citizens are treated equally before the law

o   Multiparty- when three or more political parties have the capacity to gain control of government. Prevents the leadership of a single party from setting policy without checks and balances

o   Representative- the people’s elected representatives hold ultimate sovereignty

o   Social – advocates the use of democratic means to achieve a gradual transition from capitalism to socialism

·         restricts decision making to a few individuals. A single agent—whether an individual, group, or party--- monopolizes political power and tries to mobilize the population toward two ends

o   Unquestioning support for the official state ideology

o   Opposition to activities that run counter to the goals of the state

o   Authoritarianism-citizens are subject, at the expense of political and civil liberties, to state authority in many aspects of their lives.

o   Fascism-control of people’s minds and souls as well as their daily lives

o   Secular Totalitarianism-leaders maintain power by wielding the authority of the state

o   Theocratic Totalitarianism- government is the preferred deity, with leaders often claiming to represent the deity’s interests on earth

·         A democratic party can influence a firms decision by keeping everybody equal or making sure that the public’s voice is heard

·         A totalitarian system can influence a firms decision by the government having sole power and that the firm is highly regulated. Nobody will have a “say so” in the firms decision.

·         Expropriation, Confucation (Nationalization)— A government or political faction seizes a company’s local assets. Compensation is usually trivial.

·         Campaigns against foreign goods--- reduction in sales; more costs

·         Mandatory labor benefits legislation--- More costs

·         Kidnapings, terrorist threats, etc.—Action on the part of local agents targets local employees of a foreign company

·         Civil wars--- Destroys a company’s local assets

·         Inflation—Could interfere with trading

·         Repatriation—A foreign government arbitrarily limits the amount of gross profit that a foreign company can remit from its local operations

·         Currency devaluations--- Currency losses value, can effect trade and supply prices across borders

·         Increased taxation—Foreign company has higher tax burden than local competitor, other foreign firm is treated favorably because of its nationality

·         Unilateral breach of contract--- A government repudiates a contract negotiated with a foreign company. The company’s profits are often reallocated to the host country

What are the building blocks of democracy?

·         Transparency (reduces financial capital out the country)

·         Standards

·         Freedom of press

·         Flexibility

·         Legitimacy (are you legally in power?)

·         Predictability (no corruption)

·         Sustainability

What are the components of the "golden straight jacket"?

·         Labor freedom

·         Business freedom

·         Trade freedom

·         Fiscal freedom

·         Monetary freedom

·         Investment

·         Corruption

·         Government size

·         Peoples rights

·         Financial rights

·         Market

o   Individuals make the majority of economic decisions

o   Market has control

o   Major players are the sellers

o   Private ownership

·         Command

o   Government control

o   Major player is the state

o   Prices of goods and services often do not change

·         Mixed

o   Fall in the middle of capitalism

o   Economic decisions are largely market driven

o   Ownership is largely private

o   Government intervenes in private economic decisions

o   Government owns key factors of production

o   Consumers and private producers still influence price and quantity

·         Where do I fit in? Who’s in charge

·         Control of economic activity, type of property ownership, major player/ mechanisms, macroeconomic variables, transitions, economic freedoms

·         Inflation

·         Economic growth

·         Trade +/-

·         Balance of payments

·         PPP

·         Trade freedom

·         Fiscal freedom—government spending

·         Monetary freedom—government controls the supply of money and interest rates

·         Government size

·         They affect business decisions because it deals with the economy in a large scale (more externally).

·         To avoid negative impacts they can rely on market-oriented instruments for macroeconomic stabilization (tax or spending policies).

How do nations make a transition to a market economy?  What is required?  How successful have past transitions been relative to China and Russia?  What are the future issues for transitioning nations?

They make a transition through privatization (the state transfers its ownership and control of factors of production to private owners). The government is required to disengage from the economy by privatizing state-owned enterprises. China’s transition has generated great economic success. Russia is undergoing political and economic reforms that call for many new economic freedoms. Countries in transition must figure out how to maintain political and macroeconomic stability, boost economic growth, improve legal and institutional policies, and resolve a host of social issues.

What are the components of a cultural system?

·         Education-shows values of country

·         Language- importance of communication

·         Social structure

·         Religion

Define the different ways in which a nation stratifies its population.  Give examples.

·         Ascribed and acquired memberships

·         Performance orientation

·         Open and closed societies

·         Gender-based groups—male and female roles

·         Age based groups

·         Family based groups—family social status

·         Occupation

·         Christianity:

o   Wealth creation

o   Capital accumulation

o   Individual religious freedom

o   (Positive attitudes towards work and E.A., neutral impact on costs)

·         Islam (Muslim)

o   Paramount to life/values/culture

o   Ritualist nature (food, women, prayer)

o   Strict ethical code

o   (Positive attitudes towards work and E.A., small increase impact on costs)

·         Hinduism

o   Moral force

o   Karma/nirvana

o   Supports caste system

o   (hinders ec. Development in attitudes to work and EA, increase on impact on costs)

·         Buddhism

o   Stresses afterlife & spiritual achievement

o   Life is full of suffering/misery

o   (Negative attitudes to work and E.A., increase in impact on costs)

·         Confusianism

o   High moral/ethical conduct

o   Loyalty

o   Reciprocal obligations

o   Honesty

o   (Positive attitudes to work and EA, neutral impact on costs)

Christianity:

o   Wealth creation

o   Capital accumulation

o   Individual religious freedom

o   (Positive attitudes towards work and E.A., neutral impact on costs)

 Islam (Muslim)

o   Paramount to life/values/culture

o   Ritualist nature (food, women, prayer)

o   Strict ethical code

o   (Positive attitudes towards work and E.A., small increase impact on costs)

·         Hinduism

o   Moral force

o   Karma/nirvana

o   Supports caste system

o   (hinders ec. Development in attitudes to work and EA, increase on impact on costs)

·         Buddhism

o   Stresses afterlife & spiritual achievement

o   Life is full of suffering/misery

o   (Negative attitudes to work and E.A., increase in impact on costs)

·         Confusianism

o   High moral/ethical conduct

o   Loyalty

o   Reciprocal obligations

o   Honesty

o   (Positive attitudes to work and EA, neutral impact on costs)

What are values, norms, folkways? How can they affect the costs of doing business for a firm outside its home country?

·         Values: the foundation, very abstract, the basis of what a culture believes in

·         Norms: rules that a culture uses for appropriate or inappropriate values, beliefs, and attitudes; illegal; important to the culture. “Laws on littering”

·         Folkways: not illegal; good manners. Habits learned as a child. Has to deal with the individual

·         They can cause some issues of doing business if people don’t understand another cultures customs. Ruin relationships with the countries and exports/imports

Explain the Social Organization/Social Stratification matrix. How do the various options affect the ability of business to operate? How does it affect productivity?

·         It is split up into lo/hi, individual/group groups. The various options affects the ability of business to operate because sometimes it’s better to work as an individual than in a group or vice verse. Groups can affect productivity if nobody is doing anything and individualism can affect productivity if too much work is involved.

Explain Geert Hofstede’s cultural model and its components and results. What are the weaknesses of the model? What are the implications for business?

·         Gender roles

·         Individual/ collective

·         Power distance- refers to a general relationship between superiors and subordinates

o   Autocratic : ruling with unlimited authority

o   Paternalistic: regulating conduct by supplying needs

·         Ambiguity Avoidance--- You have a preference for known quantities. When preference is high, employees prefer set rules that are to be followed even if breaking them may be in the company’s best interest. When  avoidance is high, superiors may need to be more precise in their directions to subordinates

·         Collecting/ Processing information

o   Chromic (multi-tasking)

o   How to deal with the world

o   Context (how to give facts)- Low context is when people get to the point. High context is when people like to “beat around the bush”, take a while to get to the point.

What are ethnocentrism/polycentrism/geocentrism and how may the practice of each of these impact businesses locating in countries outside of their home country? 

·         Polycentrism: believes that business units in different countries should act like local companies

o   Company might imitate too much of the other country that they might lose their competitive edge

·         Geocentrism: requires companies to balance informed knowledge of  their own organizational cultures with both home-and host-country needs.

o   It improves likelihood of succes

·         Ethnocentrisim: reflects that one’s own culture is superior to that of other countries

o   Could hurt business if they don’t know how to market to the country

o   Property Rights

o   Patents, copyrights, registered trade markets

o   Protection of piracy

o   W.T.O., Paris Conventions, Patent Coop Treaty

·         Contract Law

o   Civil law, common law, theocratic law

o   Violation

o   “local”/ domestic court system

·         Product Safety/Liability Ethics

o   Civil liability, criminal liability

o   Responsibility--- Issue

o   Domestic court system

·         Civil law is when the law is spelled out, coedified law

·         Common laws are based on laws in the past practice

·         Theocratic laws are based on religious views