Globalization

Globalization*of*Markets

shift&toward&a&more&integrated&and&interdependent&world&economy
merging&of&historically&distinct&and&separate&national&markets&into&one&huge&global&marketplace
sourcing&of&goods&and&services&from&locations&around&the&globe&to&take&advantage&of&national&differences&in&the&
cost&and&quality&of&factors&of&production

Globalization*of*Production
labor,&energy,&land,&capital
Factors*of*Production
General*Agreement*on*Tariffs*and*
global&institution&created&by&voluntary&agreement&to&manage,&regulate,&and&police&the&global&marketplace
Trade*(GATT)

primarily&responsible&for&policing&the&world&trading&system&and&making&sure&nation:states&adhere&to&the&rules&

World*Trade*Organization*(WTO) laid&down&in&the&trade&treaties&signed&by&WTO&member&states&(GATT&successor),&promotes&globolization
International*Monetary*Fund*
established&to&maintain&order&in&the&international&monetary&system,&seen&as&the&lender&of&last&resort
(IMF)
set&up&to&promote&economic&development&(less&controversial,&focuses&on&building&dams&or&roads)
World*Bank
United*Nations
UN*Charter

established&to&preserve&peace&through&international&cooperation&and&collective&security,&70%&devoted&to&
working&with&World&Bank&in&an&effort&towards&higher&standard&of&living

international&treaty&that&establishes&basic&principles&of&international&relations
comprises&the&finance&ministers&and&central&bank&governors&of&the&19&largest&economies&in&the&world.&originally&
established&to&formulate&a&coordinated&policy&response&to&financial&crises&in&developing&nations,&recently&
became&forum&through&which&major&nations&attempted&to&launch&a&coordinated&policy&response&to&the&global&
financial&crisis
G20tx
Two*macro*factors*underlie*the*trend* 1)&decline&in&barriers&to&the&free&flow&of&goods,&services,&and&capital&2)&technological&change&(communication,&
towards*greater*globalization
information&processing,&transportation)
occurs&when&a&firm&exports&goods&or&services&to&consumers&in&another&country
International*trade
Foreign*Direct*Investment*(FDI) occurs&when&a&firm&invests&resources&in&business&activities&outside&its&home&county
Average&tariff&rates&have&_____&significantly&since&1950&and&now&stand&at&about&__%&fallen,&4

Single*most*important*innovation microprocessor&(underlies&many&increases&in&telecommunications&technology),&high&power&low&cost&computing
predicts&that&the&power&of&microprocessor&technology&doubles&and&its&cost&of&production&falls&in&half&every&18&
months,&cost&of&global&communication&plummits

Moore's*Law
Transportation*Technology*top*3 containerization,&commercial&jet&aircraft,&super:freighters

simplifies&transshipment&from&one&mode&of&transport&to&another,&revolutionized&transportation&business
Containerization
Stock*of*foreign*direct*investment total&cumulative&value&of&foreign&investments

Multinational*enterprise*(MNE) any&business&that&has&productive&activities&in&two&or&more&countries
Since*the*1960s,*2*notable*MNE*
1)&rise&of&non&US:multinationals,&2)&growth&of&mini:multinationals
trends*are
highly&in&debt&poor&countries
HIPCs
Reasons*against*globalization
International*Business
Political*Economy
Political*System
Systems*that*emphasize*
collectivism*tend*towards
Systems*that*emphasize*
individualism*tend*towards
Collectivism
Socialists
Communists
Social*democrats
Privatization
Individualism
Democracy

1)&destroys&manufacturing&jobs&in&wealthy&advanced&economies&2)&decline&in&unskilled&wages&3)&lack&adequate&
labor&regulations&to&protect&from&abuse&4)&pollution&levels&increase&5)&gives&power&to&supranational&
governments&like&WTO&rather&than&national&governments&6)&gap&between&rich&and&poor&has&gotten&larger
any&firm&that&engages&in&international&trade&or&investment
political,&economic,&and&legal&systems&of&a&country&(interdependent)
System&of&government&in&a&nation
totalitarianism
democracy
political&system&that&stresses&the&primary&of&collective&goals&over&individual&goals
state&should&own&means&of&production
believed&socialism&could&only&be&achieved&through&violent&revolution
committed&themselves&to&achieving&socialism&be&democratic&means
selling&state&owned&enterprises&to&private&investors
refers&to&a&philosophy&that&an&individual&should&have&freedom&in&his&or&her&economic&and&political&pursuits
political&system&in&which&government&is&by&the&people,&exercised&either&directly&or&through&elected&
representatives

Totalitarianism
Representative*Democracy
Communist*Totalitarianism
Theocratic*Totalitarianism
Tribal*Totalitarianism
RightWwing*Totalitarianism
In*countries*were*indivudal*goals*
are*given*primacy*over*collective*
goals,*we*are*likely*to*find*a
Market*economy
Command*economy
Mixed*economy
Legal*system
Common*law
Civil*law
Theocratic*law
Contract
Contract*Law

form&of&government&in&which&one&person&or&political&party&exercises&absolute&control&over&all&spheres&of&human&
life&and&prohibits&its&opposing&political&parties
citizens&periodically&elect&individuals&to&represent&them
most&widespread&until&recently
political&power&is&monopolized&by&a&party,&group,&or&individual&that&governs&according&to&religious&principles
political&party&that&represents&a&particular&tribe&monopolizes&power&(still&exist&in&Africa)
permits&some&individual&economic&freedom,&but&restricts&individual&political&freedom&(many&are&backed&by&or&
composed&of&military&power)

market&place&economy
all&productive&activities&are&privately&owned,&as&opposed&to&being&owned&by&the&state
government&plans&the&goods&and&services&that&a&country&produces
Combination&of&market&and&command&economy
rules&or&laws&that&regulate&behavior&along&with&the&processes&by&which&the&laws&are&enforced&and&through&which&
redress&for&grievances&is&obtained
based&on&tradition,&precedent,&and&custom&(degree&of&flexibility&since&judge's&can&interpret)
detailed&set&of&laws&organized&into&codes.&judges&can&apply&the&law,&not&interpret
law&is&based&on&religious&teachings&(Islamic&most&widely&used&practice)
document&that&specifies&the&conditions&under&which&an&exchange&is&to&occur&and&details&the&rights&and&
obligations&of&the&parties
body&of&law&that&governs&contract&reinforcement

Common*law*contracts*tend*to*be very&detailed&because&the&law&is&ill&specified
Civil*law*contracts*tend*to*be
United*Nations*Convention*on*
Contracts*for*the*International*
Sale*of*Goods*(CIGS)
When*firms*do*not*accept*CIGS,*
they*often*opt*for
Property*rights
Private*action
Public*action
Foreign*Corrupt*Practices*Act
Intellectual*property
Patent
CopyWrights
Trademarks
World*Intellectual*Property*
Organization
Paris*Convention*for*the*
Protection*of*Industrial*property
Product*safety*laws
Product*liability
Gross*National*Income*(GNI)

shorter&and&less&specific
established&a&uniform&st&of&rules&governing&certain&aspects&of&the&making&and&performance&of&everyday&
commercial&contracts&between&sellers&and&buyers&who&have&their&places&of&business&in&different&nations
arbitration
legal&rights&over&the&use&to&which&a&resource&is&put&and&over&the&use&made&of&any&income&that&may&be&derived&
from&that&resource
theft,&piracy,&blackmail,&and&the&like&by&private&individuals&or&groups
occurs&when&public&officials,&such&as&politicians&and&government&bureaucrats,&extort&income,&resources,&or&the&
property&itself&from&property&holders
Can't&bribe&foreign&government&officials&(US&was&doing&it),&must&keep&detailed&log&to&catch&such&actions
refers&to&property&that&is&the&product&of&intellectual&activity
grants&inventor&exclusive&rights&for&a&defined&period&of&time
exclusive&legal&rights&of&authors,&composers,&playwrights,&artists,&to&publish&and&disperse&their&work&as&they&see&
fit
designs&and&names,&often&officially&registered,&by&which&manufacturers&designate&themselves
183&countries&joined&since&policies&seem&to&be&lax
oldest&treaty.&without&it,&weak&enforcement&encourages&piracy
set&certain&safety&standards&to&which&a&product&must&adhere
involves&holding&a&firm&and&its&officers&responsible&when&a&product&causes&injury,&death,&or&damage

average&income&of&individuals.&yardstick&for&economic&activity
allows&for&more&direct&comparison&of&living&standards&in&different&countries.&base&for&the&adjustment&is&the&cost&
of&living&in&the&United&States
Purchase*Power*Parity*(PPP)
measures&quality&of&human&life&in&different&nations&1)&life&expectancy&at&birth,&2)&educational&attainment,&3)&
Human*Development*Index*(HDI) whether&average&incomes&are&able&to&meet&basic&needs

Innovation

new&products,&processes,&organizations,&management&practices,&strategies

Entrepreneurs
Innovation*and*entrepreneurship*
require*a*_____*economy
Innovation*and*entrepreneurship*
require*strong
Innovation*and*entrepreneurship*
require*a*______*political*system
Economic*progress*leads*to
Education*and*Geography*both*
play*a*role*in
Deregulation
Huntington's*thesis

first&commercialize&innovative&new&products&and&processes
market
property&rights
democratic
democracy&(China&::>&free&market&system)
economic&development
involves&removing&legal&restrictions&to&the&free&play&of&markets,&the&establishment&of&private&enterprises&and&the&
manner&in&which&private&enterprises&operate&(shift&towards&market:based&economic&system)
global&terrorism&is&the&product&of&tension&between&civilizations&and&the&clash&of&value&systems&and&ideology.

There*has*been*a*recent*spread*of democracy&and&therefore&market&based&systems
Overall*attractiveness*of*a*country*as*a*potential*market*or*investment*site*for*a*international*business*depends*on*balancing*benefits,*
costs,*and*risks
size&of&economy,&likely&economic&growth
Benefits
corruption,&lack&of&infrastructure,&legal&costs
Costs
political,&economic,&legal
Risks
social&unrest/anti:business&trends
Political*risk
economic&management
Economic*risk
failure&to&safeguard&property&rights
Legal*risk
advantages&that&accrue&to&early&entrants&into&a&market
First*mover*advantages
Late*mover*advantages
CrossWcultural*literacy
Culture
Values
Norms
Society
Folkways
Mores
Social*structure
Group
Social*Strata
Social*mobility
Caste*system
Class*system
Class*consciousness
Religion
Ethical*systems

handicaps&that&late&entrants&might&suffer
understanding&of&how&cultural&differences&across&and&within&nations&can&affect&the&way&business&is&practiced.&
large&danger&is&being&ill&informed,&businesses&need&host:country&nationals
system&of&values&and&norms&that&are&shared&among&a&group&o&people&and&that&when&taken&together&constitute&a&
design&for&leaving
abstract&ideas&about&what&a&group&believes&to&be&good,&right,&and&desirable&(shared&assumptions&about&how&
things&ought&to&be)
social&rules&and&guidelines&that&prescribe&appropriate&behavior&in&particular&situations

Individualism*versus*collectivism dimension&focused&on&the&relationship&between&the&individual&and&his&or&her&fellows
Uncertainty*avoidance
Masculinity*versus*femininity
Holfstede's*four*dimensions
Confucian*dynamism
Ethnocentrism
World's*major*religions
Language
Formal*education*plays*an*
important*role*in*the*
determination*of
monochronic*vs*polychronic*
cultures
direct*vs*indirect
high*context*vs*low*context

LongW*term*orientation
high*long*term*orientation
low*long*term*orientation
Christianity

Islam
Islamic*fundamentalism

group&of&people&who&share&a&common&set&of&values&and&norms
routine&conventions&of&everyday&life&(social&conventions)
norms&that&are&seen&as&central&to&the&functioning&of&a&society&and&to&its&social&life
basic&social&organization,&two&dimensions,&1)&degree&to&which&the&basic&unit&of&social&organization&is&the&
individual,&as&opposed&to&the&group&2)&degree&to&which&a&society&is&stratified&into&classes&or&castes
association&of&two&or&more&individuals&who&have&shared&a&sense&of&identity&and&who&interact&with&each&other&in&
structured&ways&on&the&basis&of&a&common&set&of&expectations&abut&each&others&behavior
all&societies&are&stratified&on&a&hierarchical&basis&into&social&categories
refers&to&the&extent&to&which&individuals&can&move&out&of&the&strata&into&which&they&are&born
closed&system&of&stratification&in&which&social&position&is&determined&by&the&family&into&which&a&person&is&born,&
and&change&in&that&position&is&usually&not&possible&during&an&individual&lifetime
less&rigid,&social&mobility&is&possible.&can&move&based&on&achievements&or&luck
condition&where&people&tend&to&perceive&themselves&in&terms&of&their&class&background
system&of&shared&beliefs&and&rituals&that&are&concerned&with&the&realm&of&the&sacred
set&of&moral&principles,&or&values,&that&are&used&to&guide&and&shape&behavior
dimension&focused&on&how&a&society&deals&with&the&fact&that&people&are&unequal&in&physical&and&intellectual&
capabilities

Power*distance
high*index:*how*well*subordinates*
low&index:&equality&and&opportunity&for&all
accept

Economic*Implications*of*Islam
Hinduism
Economic*Implications*of*
Hinduism
Buddhism
Economic*Implications*of*
Buddhism
Confucianism
Economic*Implications*of*
Confucianism

dimension&measured&the&extent&to&which&different&cultures&socialized&their&members&into&accepting&ambiguous&
situations&and&tolerating&uncertainty
dimension&looked&at&the&relationship&between&gender&and&work&roles
Power&distance,&Individualism&versus&collectivism,&Uncertainty&avoidance,&Masculinity&versus&femininity
captures&attitudes&toward&time,&persistence,&ordering&by&status,&persistence,&ordering&by&status,&protection&of&
face,&respect&for&tradition,&and&reciprocation&of&gifts&and&favors
belief&in&the&superiority&of&one's&own&ethnic&group&or&culture
Christianity,&Islam,&Hinduism,&and&Buddhism
defining&characteristic&of&culture,&both&spoken&and&unspoken.&where&there&is&more&than&one&language,&there&is&
more&than&one&culture

competitive&advantage
http://mgmtblog.com/?p=60,&mono:&one&thing&at&a&time,&concentrate&on&the&job,&take&jobs&seriously&:&poly:&
change&plans&easily,&multi&task&often
Direct&Communicators&say&exactly&what&they&think&and&attempt&to&convince&others&that&they&are&right.&Indirect&
Communicators&are&more&likely&to&observe,&ask&questions,&and&present&possibilities.
high:&implicit&(you&have&to&infer&what's&going&on),&low:&explicit&(obvious&intentions)
Long:&term&oriented&societies&foster&pragmatic&virtues&oriented&towards&future&rewards,&in&particular&saving,&
persistence,&and&adapting&to&changing&circumstances.&Short:term&oriented&societies&foster&virtues&related&to&the&
past&and&present&such&as&national&pride,&respect&for&tradition,&preservation&of&"face",&and&fulfilling&social&
obligations
long&term&commitments
doesn't&enforce&traditional&orientation
Roman&Catholic&Church&vs.&Orthodox&Church&vs.&Protestant&Church;&Protestant&work&ethic&and&the&emergence&of&
capitalism;&Protestantism&also&encourages&individuality
rooted&in&Judaism&and&Christianity;&major&principles&include&honoring/respecting&parents,&respecting&the&rights&
of&others,&being&generous&but&not&a&squanderer,&avoiding&killing&except&for&justifiable&causes,&not&committing&
adultery,&dealing&justly&and&equitably&with&others,&being&of&pure&heart&and&mind,&safeguarding&the&possessions&of&
orphans,&and&being&humble&and&unpretentious;&very&much&shapes&culture&and&way&of&life&for&Muslims
although&Islam&teaches&peace&and&tolerance,&some&have&hijacked&the&religion&to&further&political&and&violent&
ends;&for&an&impoverish&Muslim&who&has&seen&few&results&from&modernization,&a&resort&to&the&fundamental&
ideas&of&Islam&gives&a&renewed&sense&of&identity;&effects&of&Islam&on&law&in&certain&countries
prosperity&is&encourage&as&long&as&it&does&not&exploit&others&and&the&poor&are&helped&in&return;&the&Qur'an&does&
not&allow&for&interest&to&be&collected;&Islamic&banks:&mudarabah&(bank&takes&a&share&of&the&profit&resulting&from&
a&loan,&deposits&are&treated&as&equity&investments&and&depositors&receive&a&share&of&the&profit&from&the&bank's&
investment)&vs.&murabaha&(the&bank&executes&whatever&the&loan&would&be&used&for&and&the&firm&then&buys&this&
from&the&bank,&more&common&because&it&is&very&similar&to&Western&banking)
belief&in&a&moral&force&in&society&requires&the&acceptance&of&certain&responsibilities&(dharma),&reincarnation,&
karma&(the&spiritual&progression&of&each&person's&soul,&affected&by&how&he/she&lives)
the&pursuit&of&material&well:being&is&seen&as&making&the&attainment&of&nirvana&more&difficult,&less&encouraging&of&
entrepreneurship;&support&of&the&caste&system
Siddhartha&Gautama,&6th&century&BC;&Noble&Eightfold&Path:&right&seeing,&thinking,&speech,&action,&living,&effort,&
mindfulness,&and&meditation
Economic&Implications:&ascetic&lifestyle&but&not&to&the&extent&of&Hinduism;&does&not&support&caste&system:&
possibly&better&ground&for&entrepreneurship
not&a&religion,&ethical&system&and&was&of&life;&deeply&embedded&in&many&eastern&countries;&high&moral&and&
ethical&conduct,&loyalty&to&others
arguably&as&important&as&Protestantism;&emphasis&on&honesty,&loyalty,&and&trust&lower&costs&of&doing&business;&
greatly&stressed&loyalty&encouraging&cooperation&between&management&and&labor&but&is&not&blind&loyalty;&
guanxiwang:&relationship&network&in&Chinese,&reputations&must&be&upheld&by&keeping&obligations