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Questions and Answers

What is a characteristic of Coca-Cola's business strategy compared to McDonald's?

Coca-Cola is primarily focused on customer marketing.

Coca-Cola issues franchises in every country.

Coca-Cola invests more in research and development. (correct)

Coca-Cola focuses on service provision across all countries.

Which type of international investment involves actual investment located in another country?

Foreign Equity Investments

Foreign Portfolio Investments

Foreign Direct Investments (correct)

Foreign Indirect Investments

How do economies of scope benefit firms?

By reducing production costs through large-scale operations.

By enabling firms to share resources across multiple products or services. (correct)

By limiting the variety of products to maintain quality.

By increasing market share through sole branding.

What does the New Trade Theory emphasize regarding market structures?

The role of competition in driving technological innovation. Signup and view all the answers

Which of the following best describes overlapping authority in the context of intellectual property?

When multiple entities hold rights to the same song or patent. Signup and view all the answers

What concept is central to determining what goods a country should produce according to comparative advantage?

Opportunity Cost Signup and view all the answers

What are intra-industry trades characterized by?

Business transactions within the same industry Signup and view all the answers

How did the rise of multinational corporations (MNCs) in the postwar international economy affect trade theories?

They highlighted the limitations of country-based theories. Signup and view all the answers

What is the primary focus of modern firm-based trade theories compared to traditional trade theories?

The role of economies of scale and firm strategies Signup and view all the answers

Which issue do contemporary trade theories seek to address that older models struggled with?

The occurrence of intra-industry trade growth Signup and view all the answers

What does the New Trade Theory primarily emphasize about international trade?

The impact of economies of scale on trade patterns. Signup and view all the answers

Which of the following is a characteristic of firm structure and strategy in international business?

Adaptation of marketing strategies to local preferences. Signup and view all the answers

How does the concept of intellectual property rights relate to international trade?

They enhance trade by protecting innovations. Signup and view all the answers

What is a primary benefit of economies of scale according to international business theories?

Reduced average costs leading to competitive pricing. Signup and view all the answers

Which theory suggests that a country should produce and export goods for which it is relatively more productive?

Comparative advantage theory. Signup and view all the answers

What is the main focus of modern firm-based theories in international trade?

Role of firms in promoting international trade. Signup and view all the answers

Which international investment strategy emphasizes the acquisition of local firms to gain market presence?

Direct acquisition. Signup and view all the answers

What is one of the challenges posed by international intellectual property rights?

Variability in enforcement across different jurisdictions. Signup and view all the answers

What role does regulatory compliance play in the context of international investments?

It can affect the success and feasibility of investments in different countries. Signup and view all the answers

What can result from not adhering to ethical standards in international business practices?

Potential legal repercussions and loss of reputation. Signup and view all the answers

Which of the following best describes comparative advantage?

The benefit obtained from producing goods at a lower opportunity cost. Signup and view all the answers

What impact does the concept of factor endowments have on international trade according to the Heckscher-Ohlin theory?

It influences trade patterns based on the abundance of production factors. Signup and view all the answers

Which stance in corporate social responsibility does the obstructive strategy represent?

Avoiding responsibilities and denying social issues. Signup and view all the answers

Study Notes

Ethical behavior conforms to generally accepted social norms.
Individuals have personal belief systems.
Similar cultural contexts lead to similar beliefs.
Behaviors can be rationalized.
Circumstances affect adherence to belief systems.
National culture is linked to ethics.

Organizational stakeholders.
Natural environment.
General social welfare.
Five approaches to social responsibility: obstructionist, defensive, accommodative, and proactive.

Ethical Behavior in a Cross-Cultural Context

Figure 5.1 displays a cyclical relationship between the cultural context and behaviors of employees and the organization toward each other.

Obstructionist Stance

Minimizes social/environmental concerns.
Denies/avoids responsibility.

Defensive Stance

Meets legal requirements only.
Profit maximization is the main priority.

Accommodative Stance

Meets ethical and legal requirements.
Seeks opportunities to contribute to social programs.
Responds to requests from non-profits.

Proactive Stance

Exceeds ethical and legal obligations.
Advocates for social responsibility.
Seeks opportunities to contribute social good.

Code of Ethics

Written statements that guide a firm's actions.
Defines values and ethical standards for employees.

Acceptability of Bribery

Some countries have different standards for acceptable business practices, including bribery.
- Russia, China, Taiwan, and South Korea had acceptable standards for bribery
- Australia, Sweden and Switzerland were unacceptable.

Legal compliance.
Ethical compliance.
Philanthropic giving

Leadership.
Organizational culture.
Whistle blowing.

Tool for evaluating social responsibility effectiveness.
It's a formal and thorough analysis.
Conducted by task forces.
Steps involve defining social goals, analyzing allocated resources, determining achievement status, and making recommendations.

Classical Country-Based Trade Theories

Early theories focused on individual countries and commodities.
Modern theories emphasize firms' role in trade and brand name recognition.
Mercantilism: Importance of increased exports and reduced imports.

Absolute Advantage

Countries export goods where they are more productive than others.
It weakens a country if its focus is on exporting more than its imports.
It squanders a countries resources, ultimately reducing its wealth.

Comparative Advantage

Focuses on relative productivity differences.
A country should produce and export goods where its productivity is relatively higher than other countries.
Comparative Advantage is a key for trade and economic stability.

Factor Endowments

Heckscher-Ohlin theory examines the impact of factor endowments (e.g., labor, capital) on comparative advantage.
Countries export products that utilize relatively abundant factors of production.

Relative Factor Endowments-Leontief Paradox

The US imports more labor intensive goods than it exports (even though the US is a labor scarce nation)

Modern Firm-Based Trade Theories

Emphasize MNCs (multinational corporations) importance in the post-WWII world.
Inability of country-based theories to explain intra-industry trade, the exchange of similar products.

Intra-Industry Trade

Trade between different countries that trade products within the same categories.

Inter-Industry Trade

Trade between different countries that trade goods that are not in the same categories.

Vernon's Product Life Cycle Theory

New Product Stage
Maturing Product Stage
Standardized Product Stage

Linder's Country Similarity Theory

Countries with similar cultures/economies trade more.
This theory highlights that similar countries tend to trade more with each other.

Porter's Theory of National Competitive Advantage

Emphasizes factors like factor conditions, demand conditions, related and supporting industries, and firm strategy.

New Trade Theory

Economies of scale are key in trade.
Intra-industry trade in differentiated products is common.
The impact of economies of scale on trade of differentiated products is important.

International Portfolio Investment

Collection of business in the foreign country.
Example: Investments by PNG, Johnson & Johnson.

Foreign Direct Investment (FDI)

An investment made by a company or a resident of one country into a business or property in another country.
Actual investment located in foreign countries (NLEX, SLEX, CAVITEX)
Actual investments in business located in other countries.
Foreigners' investments.

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