Those who approve of globalization count its contributions to include higher economic growth and standards of living, increased sharing of technologies and more extensive cultural integration. Critics argue that globalization undermines wages in rich countries and exploits workers in poor countries and gives MNES too much power.

Investments in, controlling and managing value added activities in other countries.

1^st- many ambitious students aspire to join the top ranks of large firms, expertise in global business is often a prerequisite. Its hard to find top managers without global competence. 2^nd-  with the rapidly globalizing world by the time we are senior level managers a lot of our dealings could be with international firms and people.

– A firms ability to adapt to change, understand the innate differences of all the different cultures they wish to market to, and constantly innovate.

·         GDP plus income from nonresident sources abroad. GNI is the term used by the World Bank and other international organizations to supersede the term GNP

·         Gross Domestic Product-

is the focus of institution-based view of global business?-

?- An economic system refers to the rules of the game on how a country is governed economically. There are 3 types: 1 A pure market economy which is characterized by the invisible hand of market forces first noted by Adam Smith in the wealth of nations. The government takes hands off approach known as laissez faire. All factors of production should be privately owned. The government only performs functions the private sector cannot perform like building roads. 2- Command economy is defined by a government taking in the words of Lenin the commanding height an the economy all factors of production should be state owned and controlled, all supply and demand and pricing is controlled by the government. 3. Mixed Economy- A mix between a pure market ecnomy and a command economy.

What is the TRIPS system?  

What are the types of intellectual property?

1. patents – legal rights awarded by government authorities to inventors of new products or processes, who are given exclusive rights to derive income from such inventions through activities such as manufacturing, licensing or selling

2. copyrights – exclusive legal rights of authors and publishers to publish and disseminate their work

3. trademarks – exclusive legal rights of firms to use specific names, brand names and designs to differentiate their products from others.

What are the various legal systems and their origins?

Civil Law – a legal tradition that uses comprehensive statutes and codes as a primary means to form legal judgments

Common Law – a legal tradition that is shaped by precedents and traditions from previous judicial decisions

Theocratic Law – a legal system based on religious teachings

What are informal institutions?

What are political risks?

A code of guidelines for making ethical decisions.

What are cultural divergence and convergence?

Divergence – the opposite

Convergence - everyone becoming westernized

What is opportunism?

Self interest seeking with guile.  Examples include misleading, cheating and confusing other parties in transactions that will increase transaction costs.

What is corruption?

The abuse of public power for the private benefits usually in the form of bribery.

What are the provisions of the US Foreign Corrupt Practices Act?

Bands bribery to foreign officials.  Institutional weapon against the fight against global corruption.

What are the advantages and disadvantage of English being widely adopted as a global business language?

Advantages – English can be fluently translated into other languages easily

Disadvantages – gives native speakers a large advantage in global business and because of this native speakers may not think its necessary to learn other cultures languages (for ex. An American working for a company in Germany) and therefore it is difficult to detect translation errors.  One may also miss a lot of cultural subtleties and can only interact with locals fluent in English.

What role do informal institutions play?- 

Fundamental and comprehensive changes introduced to the formal and informal rules of the game all affect oranizations as players

What are: a high-context culture, a low context culture?

High Context Culture – a culture in which communication relies a lot on the underlying unspoken context, which is as important as the words used.

Low Context Culture – a culture in which communication is usually taken at face value without much reliance on unspoken context

What are resources and capabilities?

Resources – the tangible and intangible assets a firm uses to choose and implement its strategies

Capabilities – the tangible and intangible assets a firm uses to choose and implement its strategies

Tangible resources and capabilities - Assets that are observable and easily quantified

Intangible resources and capabilities – assets that are hard to observe and difficult (or sometimes impossible) to quantify

What are: tangible assets, intangible assets? – 

What is the global business perspective that deals with internal strengths and weaknesses? –

What are the focal points of the resource-based view?

What is the value chain?

A chain of vertical activities used in the production of goods and services that add value

Original equipment manufacturers:

original brand manufacturers: 

What is benchmarking?

What is product commoditization?

What are: captive sourcing, inshoring, offshoring, and outsourcing?

Captive sourcing – setting up subsidiaries abroad--=the work done is in house but the location is foreign.  Conceptually, this is also known as foreign direct investment (FDI)

Inshoring – outsourcing to a domestic firm

Offshoring - outsourcing to an international or foreign firm.

Outsourcing – turning over an org. activity to an outside supplier that will perform it on behalf of the focal firm.

– advantage that first entrants enjoy and do not share with late entrants

Product life cycle theory –

What are the classical theories evolved over approximately 300 to 400 years, up to the beginning of the 20^th century?

Mercantilism- Widely practiced in the 16 and 1700s, viewed international trade as a zero-sum game. Led by Frenchman Jean-Baptiste Colbert- this view says that the amount of wealth in the world is finite and fixed. The nation that exports more than they import would enjoy more wealth.

Absolute Advantage- Advocated by Adam Smith; opened the flood gates for the free trade movements. Smith argued that in the aggregate it’s the “invisible hand” of markets rather than governments that should determine the scale and scope of economic activities. This is known as laissez faire. Nations should produce the goods they are the best at producing. (Absolute advantage)

Comparative Advantage- Created by British economist David Ricardo in 1817. This theory suggests that even though the United States has an absolute advantage over china in both wheat and aircraft, as long as China is not equally less efficient in the production of both goods, china can still choose to specialize in production of one good that it has a relative advantage in producing like wheat.

What is protectionism?-

What does the national competitive advantage of industries depend upon? –( Also called the diamond theory) 

balance of trade: 

trade surplus : 

deficit: 

What are the impacts of Indian innovation on US software exports and the wages of the US IT workers?

What is strategic trade policy?

What are major tariff barriers?

• Import tariff – tax imposed on imports
• Deadweight costs – net losses that occur in an economy as the result of tariffs

What determines the success and failure of a firm’s exports around the globe?

What are the political arguments against free trade?

• National security- people think nations should rely on other nations to produce weaponry for them.
• Consumer protection- example is mad cow disease
• Foreign policy- countries will set up bans or trade embargoes against countries they don’t like, this can cause a lot of problems all over the world.
• Environmental and social responsibility- Some countries use practices which are harmful to the planet or wildlife and according to the WTO this is not a good enough reason to stop trading with them.

What are the various NTBs? (nontariff barriers)

• Subsidies – government payments to domestic firms
• Import quota – restrictions on the quantity of imports
• Voluntary export restraint – an international agreement that shows that exporting countries voluntarily agree to restrict their exports
• Local content requirement – a requirement that a certain proportion of the value of the goods made in one country originate from that country
• Administrative policy – bureaucratic rules that make it harder to import foreign goods
• Antidumping duty – costs levied on imports that have been “dumped” (selling below costs to unfairly drive domestic firms out of business)

What are horizontal and vertical FDI?

• Vertical – a type of FDI in which a firm moves upstream or downstream in different value chain stages in a host country
• Horizontal – a type of FDI in which a firm duplicates its home country-based activities at the same value chain stage in a host country

What are the political views on FDI?

• Radical View- A political view that is hostile to FDI. Tracing its roots to Marxism the radical view treats FDI as an instrument of imperialism and as a vehicle for exploitation of domestic resources and industries by foreign capitalists and firms.
• Free Market View-  A political view that suggests that FDI unrestricted by government intervention, will enable countries to tap into their absolute or comparative advantages by specializing in the production of certain goods and services.
• Pragmatic Nationalism- a view that approves FDI only when its benefits outweigh its costs.

How can non-MNE firms do business abroad?

• Exporting and importing
• Licensing and franchising
• Outsourcing
• Engaging in FPI (foreign portfolio investment) or other means

When entering foreign markets, what are the basic entry choices?

What is FDI flow?

What is FDI Stock?

Pragmatic nationalism –

Free-market based FDI

Home countries-

Earnings, exports, learning from abroad

Host countries-

Capital inflow, technology, management, job creation

A better economy increases the stability in a country’s currency there for most developed nations currencies are more highly demanded than developing countries currencies. Also, higher interest rates attract more buyers of a currency. Also, low inflation, trade surpluses, and the rise of a countries productivity increase demand for a currency.

What is the International Monetary Fund?

• managed float rate policy –

• floating rate policy – 

• target exchange rate policy 

• fixed exchange rate policy – 

What are the components of the balance of payments?

• Merchandise trade
• Service trade
• Capital movement

What is the “law of one price”?

The law of one price is an economic law stated as: "In an efficient market ( no trade barriers present) all identical goods must have only one price."

In the trade relationship with China, why is the US dollar in more demand than the Chinese Yuan?

Spot transaction-

Forward transaction-

Currency Hedging-

Currency Swap

What are the types of regional economic integration?

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What is the WTO and its functions?