Summary of International

Business
Chapters ( 1 4 )
Best Wishs By :
Moataz M. Shawkey

Globalization
Describe the process of globalization and how it affects
markets and production
Identify the two forces causing globalization to increase
Summarize the evidence for each main argument in the
globalization debate
Summarize the globalization debate
Identify the types of companies that participate in
international business
Describe the global business environment and identify its
four main elements

Discussion Question 1 P_28

What benefits might companies obtain
from the globalization of markets and
the globalization of production?

Global markets can reduce marketing

costs, create new market opportunities
abroad, and level income streams.
Global production can allow access to
lower-cost workers, technical expertise,
and production inputs.
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Globalization Drivers -1- Falling

Barriers P_31
Remove barriers to trade / investment
GATT
WTO
Regional trade agreements

Globalization Drivers -2-

Technological

Innovation
Email and videoconferencing
Better coordination and control

Internet, intranets and extranets

Improved communications and management

Transportation advancements
More efficient, dependable shipping
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Discussion Question - 2
__________ is the value of all goods and
services produced by a countrys domestic
and international activities over a one-year
period.
a. Gross Domestic Product
*b. Gross National Product
c. GNP Per Capita

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Jobs and Wages P_39

Opponents
Eliminates jobs in developed nations
Lowers wages in developed nations
Exploits workers in developing nations

Supporters
Increases wealth and efficiency everywhere
Generates labor market flexibility in
developed countries
Advances economies of developing nations

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Labor, Environment, & Markets

Opponents
Globalization lowers labor standards
Weakens protection of the environment
Exploits workers in poor nations

Supporters
Investment raises labor standards
Open economies most environment friendly
Companies concerned for future markets

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National Sovereignty
Opponents
Supranational institutions reduce autonomy
of national, regional, and local governments

Supporters
Globalization has benefited societies by
helping to spread democracy worldwide

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Impact on Culture
Opponents
Destroys cultural diversity
Homogenizes our world
Bankrupts local small businesses

Supporters
Specialize and trade to obtain other goods
Import cultural goods from other nations
Protects deeper moral and cultural norms

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Discussion Question 3 P_42

What does the evidence suggest for
each branch of the debate on
globalization and income inequality?

On the inequality within nations debate, studies suggest

that developing nations can boost incomes of their poorest
members of society by integrating them into the global
economy.
On the inequality between nations debate, it appears that
nations more open to trade and investment grow faster
than wealthy nations, while sheltered economies are worse
off.
On the global inequality debate, it is generally agreed that
global poverty has fallen in recent decades, though there is
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disagreement on the Int.
extent
of the drop.
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International Business Players

P_45
Multinational Corporation
Business that has direct investments abroad
in multiple countries

Small Businesses and Entrepreneurs

Small companies and individuals becoming
increasingly active in international trade and
investment

Born Global Firm

Adopts a global perspective and engages in
international business from or near inception

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Cross-Cultural
Business
Describe culture and explain the significance of national
culture and subcultures
Identify the components of culture and describe their
impact on international business
Describe cultural change and explain how companies
and culture affect each other
Explain how the physical environment and technology
influence culture
Describe two frameworks used to classify cultures and
explain their practical use

What is Culture? P_66

Set of values, beliefs, rules and institutions
held by a specific group of people
Ethnocentricity
Belief that ones own ethnic group or
culture is superior to that of others
Cultural literacy
Detailed knowledge of a culture that
enables a person to function effectively
within it
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Discussion Question - 1
Why should business people try
to avoid ethnocentricity and
develop cultural literacy?
Ethnocentricity distorts ones views of
other cultures and causes them to
overlook important human and
environmental differences among
cultures. Cultural literacy improves the
ability of managers to manage
employees, develop and market
products, and conduct negotiations in

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Components of Culture P_69-87

Aesthetics
Values & attitudes
Manners & customs
Social structure
Religion
Personal communication
Education
Physical environments

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Discussion Question - 2
Customs differ from _______ in that they
define appropriate ways or behaviors in
specific situations.
a. Values
b. Attitudes
*c. Manners

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Discussion Question - 3
How does an understanding of the
spoken, written, and body language in
a market abroad contribute to
business success?

Knowledge of a cultures spoken

and written language gives
international managers insight
into why people think and act the
way they do.
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Hofstede Framework P_89

Individualism vs. collectivism

Power distance
Uncertainty avoidance
Achievement vs. nurturing
Long-term orientation

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Discussion Question - 4
Cultures with small ____________ tend to
display greater equality and a more equal
distribution of rewards.
a. Individualism
*b. Power distance
c. Uncertainty avoidance

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Politics, Law, and Business

Ethics

Describe each main type of political system

Identify the origins of political risk and how
managers can reduce its effects
Describe each main type of legal system and the
important global legal issues
Explain ethics and social responsibility and key
issues facing international companies
Explain how international relations affect
international business activities

Political Ideologies P_101

Totalitarianism
Every aspect of peoples lives must be
controlled to preserve order

Pluralism
Both private and public groups need to
balance each others power

Anarchism
Only individuals and private groups can
preserve personal liberties
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Discussion Question - 1
What are the three main features of
totalitarianism and the five freedoms
that democracies strive to provide?
Totalitarian governments tend to share:
imposed authority, a lack of
constitutional guarantees, and
restricted political participation.
Democracies strive to provide: freedom
of expression, periodic elections, full
civil and property rights, minority
rights, and nonpolitical bureaucracies.
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Types of Political Risk P_106

Conflict and violence

Terrorism and kidnapping
Property seizure
Policy changes
Local content requirements

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Managing Political Risk

Adaptation
Incorporate
risk into
business
strategies
Partnerships
Localization
Development
assistance
Insurance
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Information
gathering
Gather data to
better predict
and manage
risk
Current
employees
with relevant
information
Agencies
specializing
in politicalrisk services
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Influence
local politics
Present firms
views on
political
matters
Lobbying
Influencing
local
lawmakers

Corruption
Foreign
Corrupt
Practices
Act
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Discussion Question - 2
Incorporating political risk into business
strategies by modifying operations, the
product mix, or some other business
element is called ____________.
a. Specialization
b. Globalization
*c. Localization

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P_112

Theocra
Civil Law
tic Law
Dates to
Roman
times in the
fifth century
B.C.
Rules and
statutes
constitute a
legal code
Defines all
obligations,
responsibilit
ies, and
privileges

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Legal
tradition
based on
religious
teachings
Islamic
law,
Jewish
law, and
Hindu law
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Common
Law
Tradition
nations
legal
history

Precedent
past cases
before the
courts

Usage
how laws
are
applied

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Discussion Question 3 P_115

What are intellectual property
rights and what is their significance
to business?
Intellectual
property rights are legal rights
to resources that result from intellectual
abilities and any income these resources
generate. Like other types of property,
intellectual property can be traded, sold,
and licensed in return for fees and/or
royalty payments. Intellectual property
laws are designed to compensate people
whose property rights are violated.

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Social Responsibility Issues

P_119

Go beyond legal obligations to balance

commitments to investors, customers,
communities, and other companies
Fight to eliminate bribery and corruption
Improve labor conditions and guard human rights
Practice fair trade to help the disadvantaged
Protect the environment and conserve resources

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Discussion Question - 4
The philosophy of business ethics and
social responsibility conveyed by the
expression, When in Rome, do as
the Romans do, is called the
__________ view.
a. Righteous moralist
*b. Cultural relativist
c. Utilitarian
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Economics and
Emerging Markets
Describe what is meant by a centrally planned economy
and explain why its use is declining
Identify the main characteristics of a mixed economy and
explain the emphasis on privatization
Explain how a market economy functions and identify its
distinguishing features
Describe the different ways to measure a nations level of
development
Discuss the process of economic transition and identify
the obstacles for business

Economic Systems P_134

Centrally Planned
Government ownership of economic
resources and state planning

Mixed
Government and private ownership of
economic resoures split rather evenly

Market
Mostly private (individual or business)
ownership of economic resources
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Centrally Planned Economy

Government owns most land, factories and other
economic resources and plans nearly all
economic activity
Welfare of the group is paramount
Economic and social equality is the goal
Communist system is needed

Asia
Central Europe
Eastern Europe
Latin America
Russia (1917)
China (1949)
Cuba (1959)

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Mixed Economy
Government and private parties share
ownership of land, factories and other
economic resources rather evenly
Noble goals
Low unemployment and poverty
Steady economic growth
Equitable distribution of wealth

But stagnant
State-owned businesses less competitive
Prices and taxes higher, living standards mixed

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Market Economy
Private parties (individuals or businesses)
own most land, factories and other
economic resources
Supply
Quantity of a good or service that producers
are willing to provide at a specific selling price

Demand
Quantity of a good or service that buyers are
willing to purchase at a specific selling price

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Discussion Question - 1
A __________ economy is one in which
government and private parties share ownership
of economic resources rather evenly.
a. Centrally planned
b. Systemic
*c. Mixed

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Discussion Question - 2
What are the three required features and
four expected roles of government in any
market economy?
The three key features of a market
economy are free choice, free
enterprise, and price flexibility.
The four roles of government in a
market economy are to: enforce
antitrust laws, preserve property
rights, provide fiscal and monetary

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Classifying Countries P_150

Developed Country
Highly industrialized, highly efficient and whose people
enjoy a high quality of life

Emerging Market
Newly industrialized countries plus those with potential
to be newly industrialized

Newly Industrialized Country

Recently greater national production and exports from
industrial operations

Developing Country
Poor infrastructure and extremely low personal income

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Discussion Question - 3
___________ is the relative ability of two
countries currencies to buy the same basket of
goods in those two countries.
a. Productivity
b. Purchasing Power
*c. Purchasing Power Parity

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Discussion Question 4 P_151

What is economic transition and what
are the remaining obstacles in postcommunist countries?

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Answer to Discussion Question - 4

Economic transition involves changing a nations
fundamental economic organization and creating
new free-market institutions.
Essentially, it involves:
Stabilizing the economy, reducing budget deficits,
and expanding credit availability.
Allowing prices to reflect supply and demand.
Legalizing private business, selling state-owned
companies, and supporting property rights.
Reducing barriers to trade and investment and
allowing currency convertibility.
Remaining obstacles in transition countries
include a lack of managerial expertise, a shortage of
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capital, cultural changes,
and environmental
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