Formal and Informal Institutions

Question 1

Formal Institutions

Answer 1

A term that stresses that the economic, legal and political systems of a country are interdependent; they interact with one another

Question 2

Political Systems

Answer 2

How a country is governed politically
Political systems can be assessed by;
-degree to which they emphasise collectivism as opposed to individualism
-degree tow which they are democratic or totalitarian

Question 3

Economic Systems

Answer 3

Connection between political ideology and economic systems

• countries where individual goals are given primacy free market economic systems are fostered
• countries where collective goals are given primacy there is a state control of markets

Question 4

Legal Systems

Answer 4

Rules that regulate behaviour

• Common Law - precedent, tradition (US, UK)
• Civil law - Germany, France
• Theocratic law - law based on religious teachings

Question 5

Intellectual property rights

Answer 5

Patents - new technological ideas, exclusive rights to derive income
Copyrights - exclusive rights of authors and publishers
Trademarks - Specified name, brand and designs

Question 6

Country Attractiveness

Answer 6

Benefits; size of the economy, likely economic growth
Costs; corruption, lack of infrastructure, legal costs
Risks; Political, economic and legal

Question 7

Culture

Answer 7

System of values and norms that are shared among a group of people and that when taken together constitute a design for living
Not right or wrong
Not about individual behaviour
Not inherited but learned

Question 8

Culture, Society and the National State

Answer 8

• Society is a group of people bound together by a common culture
• National state: political creation, may contain several cultures or single
• High context vs Low context

Question 9

How do cultural differences affect IB?

Answer 9

• Understanding and adapting to the local culture is important to international companies
• Cross cultural literacy: understanding of how cultural differences across and within nations can affect the way in which business is practiced
• Relationship may exist between culture and the costs of doing business in a country
• Large MNEs can be agents of cultural change

Question 10

Where culture can impact the conduct of IB

Answer 10

• developing products and services
• adverts and promotion
• screening and selecting foreign distributors
• communication
• negotiating