International Business and Globalization

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Questions and Answers

What are the primary actors engaged in international business?

MNEs and FDI (correct)

SMEs and local markets

Governments and NGOs

Start-ups and private investors

What is the significance of emerging economies in the global market?

They are experiencing above-average economic growth. (correct)

They rely heavily on foreign aid for development.

They contribute the majority to global GDP.

They have strong institutional frameworks that inhibit trade.

What does Gross Domestic Product (GDP) represent?

Total income generated from foreign investments only.

The sum of international trade activities conducted by a nation.

Total income generated by a nation's residents abroad.

The sum of value added by firms, households, and governments operating domestically. (correct)

How does Purchasing Power Parity (PPP) work?

It converts currencies to show how much goods and services they can buy. Signup and view all the answers

What impact does the creation of the common market in the EU have on the definition of home markets?

It results in an increasingly ambiguous definition of home markets. Signup and view all the answers

What is the relationship between Gross National Product (GNP) and Gross National Income (GNI)?

GNP focuses solely on domestic production while GNI includes foreign income. Signup and view all the answers

What primary characteristic defines Multinational Enterprises (MNEs)?

They engage in Foreign Direct Investment (FDI). Signup and view all the answers

Why is understanding international competition increasingly important for businesses?

It influences strategies in a globally integrated economy. Signup and view all the answers

What is the main characteristic of tight cultures?

They have strict rules and punishments for breaking them. Signup and view all the answers

What does cultural distance refer to?

The difference between two cultures along certain dimensions of value. Signup and view all the answers

Which statement best describes ethical relativism?

It suggests all ethical standards are influenced by culture. Signup and view all the answers

In the context of cultural clusters, which is a basis for clustering countries?

Shared religion and languages. Signup and view all the answers

Which of the following best describes ethical imperialism?

It believes in one absolute set of ethical standards. Signup and view all the answers

What role do cultural norms play in business when operating internationally?

They can create conflicts or confusion due to differing standards. Signup and view all the answers

What does institutional distance refer to?

The similarity or dissimilarity of regulatory, normative, and cognitive institutions. Signup and view all the answers

What impact does cultural tightness-looseness have on international business?

It affects expatriates' effectiveness in foreign societies. Signup and view all the answers

What does PPP help adjust for in international comparisons?

Living costs between countries Signup and view all the answers

Which view suggests that firms' success is largely influenced by their internal resources and capabilities?

Resource-based view Signup and view all the answers

What is referred to as the 'liability of outsidership'?

Disadvantages faced by newcomers in unfamiliar markets Signup and view all the answers

Which of the following is a characteristic of globalization as defined by Mauro Guillén?

Greater interdependence among social units Signup and view all the answers

What aspect of globalization do many young people primarily associate with it?

Information and communication technology Signup and view all the answers

Which statement best describes the impact of globalization on national cultures?

Globalization can diminish cultural identities Signup and view all the answers

In which century did traders from Spain and Portugal dominate intercontinental trade?

16th century Signup and view all the answers

What major change occurred in the 18th century regarding intercontinental trade?

England and the Dutch Republic rose to prominence Signup and view all the answers

What is the purpose of non-tariff barriers?

To protect domestic industries from foreign competition Signup and view all the answers

Which of the following is an example of a non-tariff barrier?

Subsidies to domestic firms Signup and view all the answers

What is an anti-dumping duty intended to do?

Protect local companies from unfair pricing Signup and view all the answers

Why might a government impose import quotas?

To restrict the quantity of foreign goods entering the market Signup and view all the answers

Which argument is often used to justify the protection of 'infant industries'?

They could achieve long-term international competitiveness Signup and view all the answers

What is a common political argument against free trade?

National security concerns Signup and view all the answers

What does a trade deficit indicate?

Imports exceed exports in value Signup and view all the answers

Which of the following is NOT a concern associated with trade agreements?

Accessibility of foreign markets Signup and view all the answers

What distinguishes representative democracy from direct democracy?

Voters elect representatives in representative democracy. Signup and view all the answers

What is a key characteristic of an authoritarian regime?

Power is concentrated in the hands of one individual. Signup and view all the answers

How do political systems influence international business practices?

They determine the rules and influencers within legislative processes. Signup and view all the answers

What is political risk associated with?

Political changes negatively impacting businesses. Signup and view all the answers

Which of the following defines a market economy?

Market forces, via the 'invisible hand,' guide economic decisions. Signup and view all the answers

What role does lobbying play within political systems?

It allows businesses to make their interests known to decision-makers. Signup and view all the answers

What is a common motivation behind contemporary authoritarian regimes?

Addressing an overriding national objective. Signup and view all the answers

Which statement best describes non-market strategies in business?

They aim to influence rules in host countries beyond financial means. Signup and view all the answers

Study Notes

Globalizing Business

International Business (IB) encompasses firms engaging in economic activities abroad.
Key actors in IB include Multinational Enterprises (MNEs) who engage in Foreign Direct Investment (FDI) by directly investing in, controlling, and managing value-added activities.
The international aspect of business is crucial due to international competition and the ambiguity of home markets, especially within the European Union's common market.
Emerging economies are significant due to their increasing weight in the global economy and potential future opportunities.

Understanding Globalization

Globalization is a process of increasing interdependence and mutual awareness between economic, political, and social units worldwide.
While globalization has fostered unprecedented cultural contacts, it hasn't significantly reduced conflicts or disagreements.
Risk management identifies, assesses, and mitigates risks.

Political Systems

Political systems define who sets business rules and whose interests those rules reflect.
Political systems determine the influence businesses have on legislative processes through lobbying or corruption.
Lobbying involves influencing political processes by expressing views to decision-makers, while corruption entails abusing public power for private benefits.
Non-market strategy involves influencing host country regulations through political and social actions.
Political risk is associated with political changes that could negatively impact domestic and foreign firms.

Economic Systems

Economic systems dictate how a country is governed economically.
The theoretical prototypes are pure market economies and command economies, with capitalism existing on a spectrum between them.
Market economies are characterized by the invisible hand of market forces, private ownership of production factors, and individual freedom to engage in contracts.

Cultural Tightness-Looseness

Cultural tightness-looseness refers to the strength of social norms and the degree of sanctioning within societies.
Tight cultures have strict rules with punishments for violations.
Loose cultures are more open to new people, ideas, and change.
Cultural differences impact expatriate effectiveness and the success of mergers and acquisitions by firms from different countries.

National Cultural Differences

Cultural clusters group countries with similar cultures, often based on shared religion and language.
Cultural distance measures the difference between two cultures across dimensions of values or subjective affinity.
Institutional distance gauges the extent of similarity or dissimilarity between the regulatory, normative, and cognitive institutions of two countries.

Ethics

Ethics encompass the principles, standards, and norms governing individual and firm behavior, addressing the question of "what is the right thing to do?".
Ethical relativism suggests that all ethical standards are relative, following the principle of "When in Rome, do as the Romans do."
Ethical imperialism holds an absolute belief in one set of ethics. In practice, companies often adhere to principles that respect human dignity and human rights.

Trade Restrictions: Non-Tariff Barriers (NTBs)

NTBs are government policies protecting domestic industries from foreign competition.
Examples of NTB's include:
- Subsidies: Government payments to domestic firms.
- Import quotas: Restrictions on the quantity of imports.
- Anti-dumping duties: Additional taxes imposed on imports sold at unfairly low prices.
- Public procurement: Government purchases of products or services.
- Local content requirements: Mandating value-added creation locally.
- Export restraints: Limitations on exporting certain goods.

Divergent Regulations

Regulations vary across countries on issues such as consumer protection, environmental standards, and labor rights.

Arguments Against Free Trade

Economic Arguments:
- Protecting domestic industries.
- Shielding infant industries (temporary protection to attain international competitiveness).
- Distribution effects: While benefiting society as a whole, free trade can negatively impact low-skilled workers due to increased competition.
- Political Arguments:
- National security: Protection of defense-related industries.
- Consumer protection: Justification for trade barriers.
- Foreign policy: Using trade measures to influence relationships and support strategic interests.
- Environmental and social responsibility: Balancing economic growth with environmental and social concerns.

Trade Deficit vs. Trade Surplus

Trade deficit occurs when the value of a country's imports exceeds its exports.

Jobs and Globalization

Globalization's impact on jobs is complex and multifaceted.
Some argue that globalization leads to job losses in developed countries due to outsourcing and offshoring.
Others believe that globalization creates new job opportunities in developing countries and enhances global economic growth.

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Description

Test your knowledge on the concepts of international business and globalization. This quiz covers key players like Multinational Enterprises, the impact of emerging economies, and the complexities of political systems in a global context. Understand the essential processes that drive interdependence in the economy.