Review for Midterm 1: Global Dimensions of Business

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Review for Midterm 1 Global Dimensions of
Business

• Business 187 Prof. Wood

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The midterm

• Approx. 30 multiple choice questions
• 1 essay question
• Question has already been passed out
• Open book, but you cannot refer to any notes
• You will write the essay in the classroom
• (You can write a practice essay at home if you
  want, but you cannot bring it to class)
• Bring
• Scantron (Form 882-E the small style)
• Blue book (small is OK)

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Multiple Choice will cover Chapters 1-7

• Only the pages specified in the syllabus
• But study early chapters carefully its a long
  time since we discussed Chapter 1

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Study hard!

• This discussion today is designed to remind you
  of key issues
• You will need a deeper knowledge of the material
  than these slides provide
• Use these as a guide to studying
• the text
• your notes
• the original slides available on the class web
  page

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Advice on how to study

• If you havent downloaded slides for each
  chapter, do that soon
• Have slides, your notes, and text open all at
  once
• All midterm topics are mentioned on slides, but
  the slides themselves cannot provide full detail
• I assume you have highlighted key points in the
  chapters
• Let the slides and your notes drive your studying

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• Keep asking whether you really understand the
  concepts summarized on the slides
• Continually go back to the text and your notes to
  develop a deeper understanding

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The Chapters so far

• The basic nature and structure of international
  business
• Ch. 1 An Overview
• The environment in which we conduct international
  business
• Ch. 2 Cultural
• Ch. 3 Political and Legal
• Ch. 4 Economic
• Ch. 5 International Trade Theory
• Ch. 6 Government Influence on Trade
• Ch. 7 Regional Economic Integration

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Today well reverse the order

• The environment in which we conduct international
  business
• Ch. 2 Cultural
• Ch. 3 Political and Legal
• Ch. 4 Economic
• Ch. 5 International Trade Theory
• Ch. 6 Government Influence on Trade
• Ch. 7 Regional Economic Integration
• The basic nature and structure of international
  business
• Ch. 1 An Overview

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Key issues in Chap. 2 Cultural Environments
Facing Business

• Define culture
• the specific learned norms based on attitudes,
  values, and beliefs that exist in every nation
• Definition of a culture is
• a group of people with shared attitudes, values,
  and beliefs
• Cultural stabilizers language, religion, shared
  business practices

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Cultural differences affecting business

• Status differences based on ascribed vs. acquired
  group memberships
• Power distance
• Individualism vs. collectivism
• Low-context vs. high-context cultures
• Differences in non-verbal language
• Example Colors associated with death

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Key points in Chap. 3 Political and Legal
Environments

• Definition of the political system of a nation
• The basic political process (Fig. 3.2)
• Interest aggregation
• Adjudication (sets policies which often become
  rules of the game)
• Political ideologies definition
• Pluralism in most countries
• Democracy common traits (in rich nations)
• Totalitarianism

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• Every nation has a political system that
  integrates the parts of society into a viable,
  functioning unit
• It provides rules of the game that allow the
  people of the nation to
• govern themselves
• work together

3-2
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• Political risk definition
• Macro vs. micro
• Different kinds of political risk in democracies
  vs. totalitarian states
• Are democracies safer places to invest?
• Individualistic vs. communitarian paradigms on
  role of government
• Power and prestige of officials
• Common law vs. civil law
• Law firms in international business

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Key points in Chap. 4 The Economic Environment

• Basic economic concepts
• Factors of production
• Demand conditions market potential
• Gross national income (GNI) and gross domestic
  product (GDP)

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• Economic systems Market economy vs. Command
  economy vs. Mixed economy
• Economic freedom
• Largest language group (Mandarin) vs. largest
  share of economic activity (English-speakers)
  (Ch. 2)
• Differences in economic growth rates by region
• (See graph attached to Map 4.2)

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Key points in Chap. 5 International Trade Theory

• Mercantilism
• Free trade definition
• No barriers limiting trade
• Economists think you should have the same
  incentives when you consider a product from
  abroad as from your home country.
• See special slides on the web site explaining
  what free trade is and why most economists
  support it

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Arguments for free trade

• Absolute advantage theory
• Natural vs. acquired advantage
• Comparative advantage theory
• Gains from trade when one country is better at
  everything
• Assumptions underlying free trade theory
• Full employment and mobility of labor
• Appropriate division of gains
• Importance of economic efficiency

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• Your company has comparative advantage in the
  product or service where the ratio Cost in
  your country . Cost in the other countryis
  lowest

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• Country similarity theory
• Problems of developing countries that depend
  heavily on a few primary commodities.
• Strategic Trade Policy

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Key points in Chaps. 6 7 Government Influence
on Trade

• Unemployment as a rationale for government
  intervention
• The infant industries rationale
• Successes
• Risks
• The overall argument for industrialization in
  developing nations

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• Ways of trade restriction
• Import tariffs
• Quotas
• Their effects on the exporters and on the
  importing country
• Examples of non-tariff barriers (e.g., safety
  regulations that differ from country to country)
• Countries that use these approaches are not
  practicing free trade

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• The General Agreement on Tariffs and Trade (1947)
• The World Trade Organization
• Basic approaches gradual negotiation of
  reductions in trade barriers

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Regional Economic Integration Agreements

• Reasons for regional agreements
• Free trade area
• The original approach in Europe
• Now used in North American Free Trade Agreement
• Customs union
• Common market
• The European Community

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If you learn all that

• you will have a very basic sense of the
  environment in which you will be conducting
  international business

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Key issues in Chap. 1 International Business -
An Overview

• Definition of international business
• Why has international business grown?
• Government policies (freer trade)
• New technology
• New institutions

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• Modes of international business
• Importing and exporting merchandise
• Service exports and imports
• Investment
• direct investment
• portfolio investment

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• What is a multinational enterprise?
• Two basic multinational strategies
• Globally integrated company
• Multi-domestic (locally responsive) company
• Price competition, rapid change, better
  communication favor global integration
• Ethical dilemmas Why considering right and
  wrong is difficult in global business
• Normativism
• Relativism

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Cases

• You are not required to memorize any facts from
  the cases

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On tests, a question about a case will give you
the facts you need

• A multiple choice question will provide the basic
  data
• You may use information from cases in your
  arguments in essay questions
• Sri Lanka Trade case and perhaps others can be
  relevant to this midterms essay question

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