...Global Business Today 6e by Charles W.L. Hill McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 2 National Differences in Political Economy Introduction Question: What is the political economy of a country? A country’s political economy refers to its political, economic, and legal systems These systems are interdependent, and interact and influence each other A country’s political system has major implications for the practice of international business 2-3 Political Systems A political system is the system of government in a nation Political systems can be assessed in terms of the degree to which they emphasize collectivism as opposed to individualism in terms of the degree to which they are democratic or totalitarian 2-4 Classroom Performance System The political, economic and legal systems of a country are called a) Political systems b) Economic systems c) Legal systems d) Political economy 2-5 Collectivism and Individualism Collectivism refers to a system that stresses the primacy of collective goals over individual goals Collectivism can be traced to the ancient Greek philosopher Plato Today, socialists support collectivism When collectivism is emphasized, the needs of the society as whole are generally viewed as being more important than individual freedoms 2-6 Collectivism and Individualism Socialism Modern socialists trace their roots to Karl Marx who advocated state...
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...individual freedom as far as innovation, which is the opposite of what TP is trying to accomplish. Inner-directed individuals are required for TP in order to produce innovative ideas that are both scientific and technical, in order to understand and control natural processes. Such individuals are considered to be autonomous thinkers. Free market economy is essential to the idea of TP. Free market society is a system in which goods and services are exchanged, and privately owned. The reason this is essential is because free market society creates and involves competition. Having a free market society, that is competitive, leads to innovation. Competition is in my mind, the basis for innovation. People would not be driven to innovate or think in such creative ways if they were not being challenged, or competing against others is such an economy. Innovation (which is derived from free market economy and its competition) is very important in terms of TP. In the Wealth of Nations, Adam Smith argued that a free market economy encouraged innovation. He believed that innovation was derived from the specialization of labor. The free market economy leads to division of labor which therefore leads to specialization. Innovation derived from specialization includes such ideas as labor saving devices (such as the cotton gin), which then also leads to an increase in productivity....
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...C) Regiocentric D) Geocentric Ans: A) Ethnocentric 3) Gross Domestic Product (GDP) of a country denotes A) Health of its economy B) Productivity of the country C) Size of the economy D) All of the above Ans : D) All of the above 4) Which of the following is not one of the legal traditions A) Theocratic Las B) Judicial Law C) Civil Law D) Common Law Ans: A) Theocratic Las 5) Study of Global Business helps us to understand A) Political Systems B) Social & Cultural aspects C) Economic & Strategic advantages D) All of the above Ansr: D) All of the above 6) Which of the following parameters best describes how rich/poor a country is A) Per capita GNI based on exchange rates B) Per capita GNI based on PPP C) Per capita salary D) Gold reserves Ans: B) Per capita GNI based on PPP 7) A political system in which people elect representatives to govern the country is known as A) Theocracy B) Autocracy C) Democracy D) Communism Ans : C) Democracy 8) An economy that is characterized by the invisible hand of market forces is known as A) Mixed Economy B) Command Economy C) Forced Economy D) Market Economy Ans: D) Market Economy 9) The collective programming of the mind that distinguishes the member...
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...National Differences in Political Economy Learning objectives • Understand how the political systems of countries differ. • Understand how the economic systems of countries differ. • Understand how the legal systems of countries differ. • Be able to explain what determines the level of economic development of a nation. • Discuss the macro-political and economic changes taking place worldwide. • Describe how transition economies are moving towards market based systems. • Articulate the implications for management practice of national differences in political economy. This chapter discusses differences in national political, economic, and legal systems, highlighting the ways in which managers in global settings need to be sensitive to these differences. Political differences are described along two dimensions: collectivist vs. individualist and democratic vs. totalitarian. Economic systems are explored in terms of market characteristics: market economies, command economies, and mixed economies. Legal systems are discussed in terms of the protections they offer for business: intellectual property, product safety, liability and contracts. The opening case explores the political and economic situation in Venezuela since Hugo Chavez was elected president in 1998. The closing case describes the challenges facing Indonesia, a vast country populated mainly by Muslims that stretches over 17,000 islands. Indonesia...
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...Chapter 02 National Differences in Political Economy True / False Questions 1. A country's political economy and culture are independent of each other. True False 2. It is not possible to have democratic societies that emphasize a mix of collectivism and individualism. True False 3. The communists believed that socialism could be achieved by democratic means, and turned their backs on violent revolution and dictatorship. True False 4. In an individualist society, the welfare of society is best served by letting people pursue their own economic self-interest. True False 5. The central message of collectivism is that individual economic and political freedoms are the ground rules on which a society should be based. True False 6. There is a global trend of societies shifting from individualism toward collectivism. True False 7. It is possible to have a democratic state where collective values predominate. True False 8. It is possible to have a totalitarian state that is hostile to collectivism and where some degree of individualism is encouraged. True False 9. The most practical form of democracy is direct democracy. True False 10. Most modern democratic states practice representative democracy. True False 11. In a market economy, if demand for a product exceeds supply, prices will rise, signaling to producers to produce more. True False ...
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...Emerging Markets Most of the Developing countries are known as the emerging markets. They are driving the global economy. Investing in emerging markets is a wise decision as the growth can be witnessed and also have better return on investment for future. It is anticipated that Emerging economies will mature two to three times more rapidly than developed nation like the US, as predicted by International Monetary Fund estimates. Corporate profits incline to grow faster when economic growth is higher. Likewise, US companies have done well in the last 12 months is because of their growth in non-US markets. Emerging markets also prove beneficial to investors as they create diversification as they act differently than developed markets. Emerging Markets Index of Morgan Stanley's consists of Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey (Forbes). Russia is one of the booming emerging markets in the East. However, Russia is not always an investor favorite as it is a booming market in global oil and gas demand. Russia has tons of both. It is the world's prominent natural gas producer and exporter and has the 8th largest oil reserves in the world. Russia is considered as a bargain for equity, but that is mostly due to country risk. (Forbes) During the recession in 2008, world markets in developed countries crashed but the emerging markets saved the global economy, mainly...
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...is the world second biggest economy in the world; this result was achieved in the last 30 years as its economy has been growing in average 10% annually (According to International Monetary Fund). This uncommon economics performance compels economists all around the world to ask them selves is a democracy an only system of government which guarantee sustainable growth and development of an economy? Though some economists believe that democracy, as the most common type of capitalism, is the most “healthful” and useful economics and government system, China is a socialist country. Socialism – “Compare capitalism an economic theory or system in which the means of production, distribution, and exchange are owned by the community collectively, usually through the state.” . From the definition it may be concluded that free market economy is more common for democracy (Capitalism), whereas planned economy is more typical to socialism. In a free market 3 basic production decisions: what to produce, how to do this and for whom these products should be produced; are made by the price mechanism without or very limited government intervention. Price mechanism assure that that there will be high competition in the market which will lead to high level of quality and innovations, low prices and quick respond to consumer’s wants as producers have to compete for consumers. However, as these decisions are made only by market forces some of them may be wrong, market failure, due to lack of information...
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...in other countries. For example Tesco, Ford, General Motor, McDonald, Disney, so many other companies. These companies have key interest to standardise their product for general acceptance. The international business becomes more complex. Tie between the different societies and organisations. (Meldrum, D.H) as businesses inter into new market it chances of 50% losses increases. Due to different in economic, political, cultural structure, policies, geography and currencies. These factor decreases profit ratio of international investment. There are no specific criteria to measure such in-stability. Every investor used their own method and measure. Uncertain condition of country make easy for international business to design their own stability criteria. (Considering risk in international business) Business has no idea about the local risk. It's difficult to operate and manage in such condition where the Culture, Social, Economic, Political, and legal structure are not stable. In such cause the international business need to take all the measurement either it`s Commercial, Culture, Social. Political or legal instability before enter into new market or country. 2. International business (McCulloch, C.1999)International business is started as with the formation of first national borders. Greek started such activity before the Christ follow by the British in 1600 when they establish the East India Company throughout the Asian as trading firm. With passage of time...
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...Globalization and Its Effects on International Strategy and Cross-Cultural Management Globalization is one of today’s most controversial buzzwords, though the spread of this term worldwide since the early 1990s may be testimony to its own significance. Skeptics argue that the entire discussion about globalization is unjustified, as all its essential facets—foreign trade, cultural exchange, technological progress and cross-national cooperation—are not new but are phenomena that can be traced back to our earliest civilizations. So, is globalization just a myth or a euphemism for the deregulation mantra under the supremacy of Anglo-American capitalism and for an economization of areas previously unrelated to the pressure of competitiveness, the market principle, and the price mechanism? Are the current trade patterns truly global, when 80 percent of trade is conducted within the “triad” of western Europe, North America, and the Pacific Rim, which together make up only 20 percent of the world’s population? Contrary to these arguments, we believe that globalization is as new a phenomenon as the term itself and that it does merit the attention it now receives in scholarly, political, and managerial debates. It is less a question of some new occurrences but is more so one that transgresses thresholds Markus Pudelko is a senior lecturer in international business at the University of Edinburgh Management School, 50 George Square, Edinburgh EH8 9JY, UK (tel.: +44 (0) 131 651 1491; fax: + 44...
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...1a) Descriptions of governments can be based on: Economy - what provides the goods and services that are bought, sold, and used? Capitalism-(Russia)--In a capitalist or free-market economy, people own their own businesses and property and must buy services for private use, such as healthcare Socialism (Norway)-- Socialist governments own many of the larger industries and provide education, health and welfare services while allowing citizens some economic choices Communism (Cuba)-- In a communist country, the government owns all businesses and farms and provides its people's healthcare, education and welfare. Politics - how is the government run? Dictatorship (Iraq)-- Rule by a single leader who has not been elected and may use force to keep control. In a military dictatorship, the army is in control. Usually, there is little or no attention to public opinion or individual rights. Totalitarian (China)-- Rule by a single political party. People are forced to do what the government tells them and may also be prevented from leaving the country. Theocracy (Iran)-- A form of government where the rulers claim to be ruling on behalf of a set of religious ideas, or as direct agents of a deity. Monarchy (Jordan)-- A monarchy has a king or queen, who sometimes has absolute power. Power is passed along through the family Parliamentary (Israel)-- A parliamentary system is led by representatives of the people. Each is chosen as a member of a political party and remains in power...
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...in other countries. For example Tesco, Ford, General Motor, McDonald, Disney, so many other companies. These companies have key interest to standardise their product for general acceptance. The international business becomes more complex. Tie between the different societies and organisations. (Meldrum, D.H) as businesses inter into new market it chances of 50% losses increases. Due to different in economic, political, cultural structure, policies, geography and currencies. These factor decreases profit ratio of international investment. There are no specific criteria to measure such in-stability. Every investor used their own method and measure. Uncertain condition of country make easy for international business to design their own stability criteria. (Considering risk in international business) Business has no idea about the local risk. It's difficult to operate and manage in such condition where the Culture, Social, Economic, Political, and legal structure are not stable. In such cause the international business need to take all the measurement either it`s Commercial, Culture, Social. Political or legal instability before enter into new market or country. 2. International business (McCulloch, C.1999)International business is started as with the formation of first national borders. Greek started such activity before the Christ follow by the British in 1600 when they establish the East India Company throughout the Asian as trading firm. With passage of...
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...$45,418 | New Zealand | 5 | 81.2 | 95.0 | 94.0 | $29,730 | Estonia | 11 | 75.9 | 90.0 | 64.2 | $21,713 | Eritrea | Last | 38.5 | 10.0 | 22.9 | $777 | Venezuela | 175 | 36.3 | 5.0 | 16.5 | $13,616 | 1. 2. Country | Economic System | Switzerland | Market | New Zealand | Market | Estonia | Market | Eritrea | Command | Venezuela | Communist | The free market economic system is bashed at home and abroad for greed, oppressing the poor, etc. Yet it is in the world’s countries that lack this free market economic system where the poor are the poorest and greatly oppressed and to which the world businesses are wary of investing. Read the following: http://www.forfreedomssake.com/blog/2009/03/economic-freedom-is-a-necessary-but-not-sufficient-condition-for-political-freedom-a-note-from-my-capitalism-socialism-democracy-course/ http://ashbrook.org/publications/onprin-v1n3-thompson/ http://www.forbes.com/sites/deanzarras/2011/07/24/idealistic-capitalism-vs-idealistic-socialism/3/ Based on the assignment materials, write a one to two page essay that explains why socialism is not moral and why there is so much corruption and poverty in countries that lack a free market system? A pure opinion piece not based on the assigned material will receive 0 points. Socialism: a political and economic theory of social organization that advocates that the means of production, distribution, and exchange should be owned or regulated by the community...
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...technology contributed to the globalization of markets and production? Would the globalization of production and markets have been possible without these technological changes? Answer: Changes in technology have contributed to the globalization of markets and production by bringing the world closer. I believe that improvements of technology in internet, microprocessors, and transportation not only make our lives more convenient, but also enable the growth of globalization of production and markets. For example, improvements in transportation technology have made it easy for companies like Coca-Cola, Levi Strauss, Sony and McDonalds to make their products available worldwide (Charles W.L. Hill, 2013). Changing technology; has also increased the rate of production, allowing goods to be produced and distributed more efficiently. Similarly, if communication does not exist, people around the world will not get the opportunity to connect and do business together. The ability to negotiate around the world has facilitated by improved communications technology. Moreover, the decreasing cost of communication makes coordinating and controlling global environment even more effective and efficient (Charles W.L. Hill, 2013). Most importantly, the impact that Information Technology has created has been tremendous. Companies now market worldwide by creating a website on the Internet. I strongly believe, that the globalization of production and markets may have been possible without improvements...
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...mechanisms * Traditional economy- you do what your parents do * ex: India in a way because of the caste system * Market economy- based on supply and demand, prices * Command economy- based on the government * Markets need homogenous goods, no barriers to entry or exit, perfect information and many buyers and sellers problem is that this is not the case, markets are not perfect List and describe the classification of economic systems based on forms of ownership * Capitalism- people privately own inputs (land, labor, capital) and will use them in their best interests more production more goods and services * Socialism- deals with ownership instead of allocation, distribution based on how much you work, etc., want to be more equal but isn’t efficient because government doesn’t work in same interest as private List and describe the classification of economic systems based on income redistribution and safety nets * Free markets * Maximum criterion- society equalizes everyone’s income, reciprocity- don’t know what will happen tomorrow * Pure communism- government distributes/allocates goods and services * Social safety nets (social market economies)- Germany-very large percent of income goes to taxes free healthcare with good quality * socialism- ownership of goods and services, communism—how goods and services are distributed List and describe the characteristics of perfectly competitive markets * homogenous goods *...
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...Globalization and Its Effects on International Strategy and Cross-Cultural Management Globalization is one of today’s most controversial buzzwords, though the spread of this term worldwide since the early 1990s may be testimony to its own significance. Skeptics argue that the entire discussion about globalization is unjustified, as all its essential facets—foreign trade, cultural exchange, technological progress and cross-national cooperation—are not new but are phenomena that can be traced back to our earliest civilizations. So, is globalization just a myth or a euphemism for the deregulation mantra under the supremacy of Anglo-American capitalism and for an economization of areas previously unrelated to the pressure of competitiveness, the market principle, and the price mechanism? Are the current trade patterns truly global, when 80 percent of trade is conducted within the “triad” of western Europe, North America, and the Pacific Rim, which together make up only 20 percent of the world’s population? Contrary to these arguments, we believe that globalization is as new a phenomenon as the term itself and that it does merit the attention it now receives in scholarly, political, and managerial debates. It is less a question of some new occurrences but is more so one that transgresses thresholds Markus Pudelko is a senior lecturer in international business at the University of Edinburgh Management School, 50 George Square, Edinburgh EH8 9JY, UK (tel.: +44 (0) 131 651 1491; fax: + 44...
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