Globalization refers to a process of increasing integration between units around the world, including nation-states, households, corporations and other organizations. It is an umbrella term, covering economic, trade, social, technological, cultural and political aspects, and is the opposite of protectionism. Theodore Levitt is usually credited with globalization's first use in an economic context. People are linked together economically and socially by trade, investments and governance. These links are spurred by market liberalization and information, communication and transportation technologies. Globalization is the process of corporations moving their money, factories and products around the planet at ever more rapid rates of speed in search of cheaper labor and raw materials and governments willing to ignore or abandon consumer, labor and environmental protection laws. Technology is one of the strongest forces driving globalization. Cable television, satellites, fax machines, and the Internet have all contributed to networking a global society.

Globalization brings positive and negative effects to the market. For positive effect, as an engine of commerce; one which brings an increased standard of living, literacy and health to Third World countries and further wealth to First World countries.
As an engine of corporate imperialism, one which has no connection to local standards of human rights in developing societies. Negative effects include cultural assimilation via so-called cultural imperialism, the export of artificial wants, and the destruction or inhibition of what is currently determined to be the "authentic" local and global community, ecology and cultures. Terrorism has undergone globalization, with attacks in foreign countries that have no direct relation with the attackers' own country. Promotion of free trade can bring many merits to the market such as reduction or elimination of tariffs; construction of free trade zones with small or no tariffs ,reduced transportation costs, especially from development of containerization for ocean shipping and reduction, elimination, or harmonization of subsidies for local businesses

Globalization of production refers to the 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 like land, labor, and capital. Moreover, globalization also affects the production. This is particularly important where international trade takes the form of foreign outsourcing, since moving less-skill intensive production activities abroad makes production at home more skill-intensive. This may be observationally equivalent to changes in technology that are biased in favor of skilled labor. Foreign outsourcing is that it can increase the demand for skilled labor both at home and abroad. By moving low-skill activities to abroad, the average skill intensity of production rises in the host country. The same also happens in abroad, since initially specializes in low-skill tasks. Outsourcing from more skill-abundant to less skill-abundant countries then raises the relative demand and the relative earnings of skilled workers in both, contributing to a global increase in wage inequality. Firm can purchase good quality, economically produce design that is bought in bulk to keep raw materials costs down. In addition, they make their product in a fit size to cut down on transportation and assembly costs, which not only saves millions in shipping cost from suppliers.

Question 2

We can defines culture as ‘members of a group or society sharing a distinct way of life with common values, attitudes, and behaviours that are transmitted over time in a gradual, dynamic, process’. In relationships with people of different backgrounds, cultural differences reveal themselves in different ways of doing things and in different attitudes to the same things. There are five components such as symbol, languages, values, belief and norms.

Norms, often described as social norms ,guides or models of behavior which tell what is proper and what is not, appropriate or inappropriate, right or wrong. We can set limits within which individuals may seek alternatives or ways to achieve goals and regulates people’s behavior in a given society.

Language stands for a system of symbols that allows people to communicate with one another. Language allows for the community of culture. Cultural transmission is the process by which one generation passes culture to the next .Every society transmits culture through speech.

Values means that culturally defined standards by which people assess desirability, goodness and beauty and that serve as broad guidelines for social living.

Beliefs refer values are abstract standards of goodness. Beliefs are particular matters that individuals consider true or false.

Symbols means anything that carries a particular meaning recognized by people who share culture

Components of individual identity include upbringing, gender, nationality, religion, education, and, in a number of countries, class. These all inform the way a person looks at the world, the values a person holds, and the rules governing a person’s interaction with others. The main elements in which social structures, religion, values, language, and education influence cultures

According to Hosfstede’s study of five cultural dimensions which are power distance, uncertainty avoidance individualism, masculinity and time orientation.

Power Distance Index that is the extent to which the less powerful members of organizations and institutions accept and expect that power is distributed unequally. This represents inequality but defined from below, not from above. It suggests that a society's level of inequality is endorsed by the followers as much as by the leaders. Power and inequality, of course, are extremely fundamental facts of any society and anybody with some international experience will be aware that all societies are unequal, but some are more unequal than others.

Individualism is the one side versus its opposite, collectivism, that is the degree to which individuals are inte-grated into groups. On the individualist side we find societies in which the ties between individuals are loose. Everyone is expected to look after him. On the collectivist side, we find societies in which people from birth onwards are integrated into strong, cohesive in-groups, often extended families which continue protecting them in exchange for unquestioning loyalty. The word 'collectivism' in this sense has no political meaning: it refers to the group, not to the state. Again, the issue addressed by this dimension is an extremely fundamental one, regarding all societies in the world. Masculinity versus its opposite, femininity refers to the distribution of roles between the genders which is another fundamental issue for any society to which a range of solutions are found. The IBM studies revealed that women's values differ less among societies than men's values; men's values from one country to another contain a dimension from very assertive and competitive and maximally different from women's values on the one side, to modest and caring and similar to women's values on the other. The assertive pole has been called 'masculine' and the modest, caring pole 'feminine'. The women in feminine countries have the same modest, caring values as the men; in the masculine countries they are somewhat assertive and competitive, but not as much as the men, so that these countries show a gap between men's values and women's values. Uncertainty Avoidance Index deals with a society's tolerance for uncertainty and ambiguity; it ultimately refers to man's search for Truth. It indicates to what extent a culture programs its members to feel either uncomfortable or comfortable in unstructured situations. Unstructured situations are novel, unknown, surprising, and different from usual. Uncertainty avoiding cultures try to minimize the possibility of such situations by strict laws and rules, safety and security measures, and on the philosophical and religious level by a belief in absolute Truth; 'there can only be one Truth and we have it'. People in uncertainty avoiding countries are also more emotional, and motivated by inner nervous energy. The opposite type, uncertainty accepting cultures, are more tolerant of opinions different from what they are used to; they try to have as few rules as possible, and on the philosophical and religious level they are relativist and allow many currents to flow side by side. People within these cultures are more phlegmatic and contemplative, and not expected by their environment to express emotions.

Long-Term Orientation versus short-term orientation: this fifth dimension was found in a study among students in 23 countries around the world, using a questionnaire designed by Chinese scholars It can be said to deal with Virtue regardless of Truth. Values associated with Long Term Orientation are thrift and perseverance; values associated with Short Term Orientation are respect for tradition, fulfilling social obligations, and protecting one's 'face'. Both the positively and the negatively rated values of this dimension are found in the teachings of Confucius, the most influential Chinese philosopher who lived around 500 B.C.; however, the dimension also applies to countries without a Confucian heritage.

Take the example in the course material Unit 1, the approach to international business taken by American and Japanese managers will be very different. If they are under the joint-venture, they may cause many argue due to different aspect of cultural. The consequences may be very serious such as terminate the joint-venture, diseconomies of scale etc. Cultural change may solve this problems but it may takes a long time.

Question 3

The risk that an investments returns could suffer as a result of political changes or instability in a country. Instability affecting investment returns could stem from a change in government, legislative bodies, other foreign policy makers, or military control. Instability affecting investment returns could arise from a change in government, legislative bodies, other foreign policy makers, or military control. Political Risk is also known as "geopolitical Risk", and becomes more of a factor as the Time Horizon of an investment gets longer. Broadly, political Risk refers to the complications businesses and governments may face as a result of what are commonly referred to as political decisions or any political change that alters the expected outcome and value of a given economic action by changing the probability of achieving business objectives. Political risks are notoriously hard to quantify because there are limited sample sizes or case studies when discussing an individual nation. Some political risks can be insured against through international agencies or other government bodies. The outcome of a political Risk could drag down investment returns or even go so far as to remove the ability to withdraw capital from an investment.

Many of international business may face political risk. Political upheaval, especially where it involves nationalist politics, is often very disruptive to the business of foreign organizations. Political stability therefore tends to be the core element of stability in a foreign business environment. In certain country such as Africa, political instability was a high cost for the international business. Business that has been painstakingly gained can be quickly lost. The politics of a country are more important to international business than the economics. Commercial opportunities may be lost through overestimating the political risk involved. Some countries impose controls on international businesses at the operational level to protect their domestic firms such as taxation exemptions and incentives, monopoly restrictions, local ownership and content percentage requirements and retention of earnings within the host country.

The managers can try method for mitigating political risk is diversification. Be sure to spread your international investments around in a variety of countries and regions so that you won't get hurt too badly even if your political risk calculations turn out to be off the mark. Managers should establish measures to manage political risks from affecting businesses. There are various measures that can be used to manage political risks in the market. First, investors, governments and firms should analyze the environment before investing, and understand the political conditions in the country. They should analyze the risks faced by other business in the country before establishing an investment. Investors can get information about the political environment in the country from the website and any other source. Analyzing the business and political environment is important for any investor. It helps the investor make wise decisions. To overcome risks, one should carry out market research so as to get clear information. Market research helps control looses resulting from political risks as investors and other managers are able to make clear decisions. Most companies face looses caused by political risks because they do not assess political risks before establishing any business in a foreign market. Assessing the environment helps the company know the political risks in the country. The company gets clear information on the effects the risks have on the business. Assessing political risks is a major step in managing political risks and companies should utilize it. Secondly, manage political risks is improving decision making in the organization. Managers are required to communicate political risks with other members in the organization so as to improve decision making. Most organizations have risk managers who identify risk in the organization and how to manage them. The risk managers are required to help manage political risks in the organization. Having multiple businesses in different countries makes it safe for investors to manage political risks. Managers should integrate political risks into a risk management system. This will help manage political risks an organization. The risk management system helps organizations manage political risks by evaluating the risks in the country like evaluation of currencies and political instability. Managers analyze the effects of the risks and develop strategies to manage the risks.

Question 4

An economic system in which economic decisions and the pricing of goods and services are guided solely by the aggregate interactions of a country's citizens and businesses and there is little government intervention or central planning

Market economies work on the assumption that market forces, such as supply and demand, are the best determinants of what is right for a nation's well-being. These economies rarely engage in government interventions such as price fixing, license quotas and industry subsidizations.

While most developed nations today could be classified as having mixed economies, they are often said to have market economies because they allow market forces to drive most of their activities, typically engaging in government intervention only to the extent that it is needed to provide stability. Although the market economy is clearly the system of choice in today's global marketplace, there is significant debate regarding the amount of government intervention considered optimal for efficient economic operations. An economy in which the major parts of production, distribution, and exchange are carried out by private individuals or companies rather than by the government, whose intervention in the economy is minimal. Although decisions about resource allocation are made by innumerable, independent producers and consumers, the whole thing is co-ordinate by the market mechanism. Market economies are characterized by specialized production, the freedom to exchange commodities between individuals, and the use of the market mechanism to determine prices. A market economy is characteristic of capitalism.

The role of government is through necessary amendments in taxation and policies government plays an important role in determining the prices of intermediate as well as final goods. It also affects the salary and wages of employees. It also has three way to promote or intervene international business activities such as taxes, subsidy and law enforcement. All businesses are required by law to pay taxes on their income. This is the primary way in which government intervenes in business. In exchange for these taxes, both businesses and individuals are supplied with various publicly owned commodities such as roads, utilities, police and fire protection and other civic advantages. Business taxes are based on the amount of profit that a business takes in. However, the complexity of tax laws allows large businesses to take advantage of myriad tax breaks and tax-law modifications.

Many of the taxes that are garnished from businesses by the government are then returned to businesses in the form of subsidies. Subsidies are given to businesses based on a number of factors, including the importance of the service the business provides to society at large, economic threats to the business and various aspects of international trade and protectionism. Some examples of industries that frequently receive government subsidies are the airline industry in the form of tax free jet fuel, and the agriculture industry in the form of farmer payouts designed to prevent food producers from going out of business.

Finally, Government sometimes intervenes quite forcefully in businesses that are engaging in illegal activity. Some businesses, such as those that don't pay taxes or skirt health regulations, are working in legal fields in an illegal manner. Others, such as drug dealers or prostitution rings, engage in activities that are illegal by definition. In both of these cases, government intervenes in an attempt to enforce its laws and maintain a legal economic infrastructure.