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MGMT 421: Globalization, Offshoring, Outsourcing > Week 5 : National Differences > Flashcards

Week 5 : National Differences Flashcards

1
Q

Motivation

A

o International Business (IB)

The MSc in IB is designed to provide a broad
overview of the international management field
including key theories, trends, phenomena, and the
methods that are used to study them.

Ivey B School, Queens B Schools, HEC

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2
Q

Introduction

A

International business more complicated than
domestic
• Differing political, legal, and economic systems
• Vary in economic development and growth trajectories
• Cultural, education, and skill levels vary

The political, economic, and legal systems are known as the political economy:
• Systems are interdependent
• Societal culture affects political economy, and political
economy shapes societal culture

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3
Q

Political Systems 1

Political system:

A

Political system: system of government in a nation

  • Political systems assessed in terms of degree to which they:
  • Emphasize collectivism as opposed to individualism
  • Are democratic or totalitarian
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4
Q

Political Systems 2

Collectivism and Individualism

A

Collectivism: system that stresses the primacy of
collective goals over individual goals

  • Traced to Greek philosopher Plato
  • Society should be stratified into classes
  • Property should be owned in common

• When collectivism is emphasized, needs of society as
whole are generally viewed as being more important than individual freedoms

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5
Q

Political Systems 3

Collectivism and Individualism continued

Socialism

A
  • Modern socialists trace roots to Karl Marx
  • Advocates state ownership of basic means of production, distribution, and exchange
  • State then manages enterprises to benefit society as a whole
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6
Q

Political Systems 4

Collectivism and Individualism continued
• In the early 20th century, socialism split into:

A

Communists – socialism could only be achieved though violent
revolution and totalitarian dictatorship
• In retreat worldwide by mid-1990s

Social democrats, who worked to achieve same goals by democratic means
• Many state-owned enterprises failed to succeed,
and many nations
implemented privatization programs

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7
Q

Political Systems 5

Collectivism and Individualism continued

Individualism

A

Individualism
• Suggests individuals should have freedom over economic and political pursuits

  • Traced to Aristotle, who argued that individual diversity and private ownership are desirable
  • Refined in work of David Hume, Adam Smith, and John Stuart Mill
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8
Q

Individualism stresses:

A
  • Individual freedom and self-expression
  • Letting people pursue self-interests to achieve the best overall good for society
  • Democratic systems and free markets
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9
Q

Political Systems 6

Democracy and Totalitarianism

Democracy

A

Democracy
• Political system in which government is by the people, exercised either directly or through elected representatives

• Most common form today is representative democracy – elected representatives vote on behalf of constituents

 • Freedom of expression, opinion, and organization; 
 Free media; Regular elections; Universal adult 
suffrage; Limited terms for elected officials; Fair court 
system; Nonpolitical state bureaucracy; Nonpolitical 
police force and armed services; free access to state 
information
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10
Q

Political Systems 7

Democracy and Totalitarianism continued

Totalitarianism

A

Form of government in which one person or political party exercises absolute control over all spheres of human life, and opposing political parties are prohibited

In most totalitarian regimes:
• There is widespread political repression
• There are no free and fair elections
• Media is censored
• Basic civil liberties are denied
• Challenges to regime are prohibited
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11
Q

Political Systems 8

Democracy and Totalitarianism continued

Four major forms of totalitarianism today:

A
  1. Communist totalitarianism:
  2. Theocratic totalitarianism:
  3. Tribal totalitarianism:
  4. Right-wing totalitarianism:
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12
Q
  1. Communist totalitarianism:
A

advocates achieving socialism through totalitarian dictatorship

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13
Q
  1. Theocratic totalitarianism:
A

political power is monopolized by a

party, group, or individual that governs according to religious principles

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14
Q
  1. Tribal totalitarianism:
A

where a political party that represents

the interests of a particular tribe monopolizes power

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15
Q
  1. Right-wing totalitarianism:
A

individual economic freedom is

allowed but individual political freedom is restricted because it could lead to communism

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16
Q

Political Systems 9

Pseudo-Democracies

A

Pseudo-Democracies

  • Many nations lie between pure democracy and complete totalitarianism
  • Authoritarian elements capture much of the machinery of state and use this in an attempt to deny basic political and civil liberties
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17
Q

National Differences in Economic

Systems

A

National Differences in Economic

Systems

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18
Q

Economic Systems 1

A

Political ideology and economic systems are connected

Three types of economic systems: market economy,
command economy, and mixed economy:

• Market-based economic system likely in countries where individual goals are given primacy over collective goals

• State-owned enterprises and restricted markets are
common in countries where collective goals are dominant

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19
Q

Economic Systems 2

Market Economy

A

Goods and services a country produces and the quantity in which they are produced is determined by supply and demand:

  • Supply must not be restricted by monopolies
  • Government encourages free and fair competition between private producers
  • Constant incentive to improve products and processes
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20
Q

Economic Systems 3

Command Economy

A

Command Economy

Goods and services a country produces, the quantity in
which they are produced, and the price at which they are sold are planned by government

  • All businesses are state-owned and have little incentive to control costs and be efficient
  • Because there is no private ownership, there is little incentive to better serve consumer needs
  • Dynamism and innovation are absent
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21
Q

Economic Systems 4

Mixed Economy

A

Mixed Economy

Includes some elements of market economies and some elements of command economies
• Governments take over troubled firms considered vital to national interests
• Number of mixed economies becoming less common

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22
Q

National Differences in Legal Systems

A

National Differences in Legal Systems

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23
Q

Legal Systems 1

Legal system definition

A

Legal system of a country refers to rules, or laws, that
regulate behavior, along with processes by which laws
are enforced and through which redress for grievances
is obtained

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24
Q

A country’s legal system is important because laws:

A
  • Regulate business practice
  • Define manner in which business transactions are executed
  • Set rights and obligations of those involved in business transactions
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25
Q

Legal Systems 2

Different Legal Systems

A

1) Common law
2) Civil Law
3) Theocratic law

26
Q

1) Common law

A

based on tradition, precedent, and custom

• Found in most of Great Britain’s former colonies, including the United States

27
Q

2) Civil Law

A

Civil law: based on detailed set of laws organized into
codes

• Found in more than 80 countries, including Germany, France, Japan, and Russia

28
Q

3) Theocratic law

A

based on religious teachings

• Islamic law is most widely practiced

29
Q

Legal Systems 3

Differences in Contract Law

A

Common law and civil law systems approach contract law – body of law that governs contract enforcement –
differently

•A contract specifies conditions under which an exchange is to
occur and details rights and obligations of parties

  • In a common law state, contracts are very detailed with all contingencies spelled out
  • In a civil law state, contracts are shorter and much less specific
30
Q

Legal Systems 4

Differences in Contract Law continued

A

United Nations Convention on Contracts for the
International Sales of Goods (CISG) establishes a uniform set of rules governing certain aspects of the making and performance of everyday commercial contracts between sellers and buyers who have places of business in different nations

• Countries that adopt CISG signal to other nations they treat the Convention’s rules as part of their law

31
Q

National Differences in Economic

Development

A

National Differences in Economic

Development

32
Q

Introduction

A

Differences in political, economic, and legal systems
influence level of economic development and its
attractiveness for doing business

General move toward democratic forms of
government, market-based economic reforms, and
adoption of legal systems that better enforce property
rights

33
Q

Differences in Economic Development 1

A

Level of economic development affects a country’s
attractiveness as a possible market or production
location for firms

• Common measure is gross national income (GNI)

• Purchasing power parity (PPP) adjustment provides a
more direct comparison of living standards in different
countries

• GNI and PPP data give a static picture of development

• Economic growth rates provide a dynamic picture of
development

34
Q

Map 3.1 GNI per Capita, 2017

A

Slide 29

Canada and USA = Red (Upper high income: $20,001 or more

South America = mostly yellow and orange, lower middle and upper middle

Asia = Upper middle and lower middle

Africa = low income, low middle income, and upper middle

35
Q

Map 3.2 GNI PPP per Capita, 2017

Purchasing power parity

A

Slide 30

Difference from GNI are largest in Russia and South America

36
Q

Map 3.3 Average Annual Growth Rate in GDP (%) 2008 to 2017

A

Slide 31

Gross Domestic Product (GDP): is the total monetary r market value of all the finished goods and services produced within a country’s borders in a specific time period

37
Q

Table 3.1 Economic Data for Select Countries

A

Slide 32

Table to compare GNI, GNI PPP, Annual GDP, and Size of Economy GDP with 13 countries compared

38
Q

Differences in Economic Development 3

A

UN created the Human Development Index based on life expectancy, education attainment, and whether average incomes are sufficient to meet basic needs of life in a country

39
Q

Map 3.4 Human Development Index, 2015

A

Slide 34

Canada and USA are very high, Russia / Asia is high

Africa has low human development

40
Q

Map 3.6 Index of Economic Freedom, 2018

A

Slide 35

41
Q

Figure 3.1 Country Attractiveness (slide 36)

A

Benefits: Size of the economy, likely economic growth

Costs: Corruption, lack of infrastructure, legal cost

Risks: -Political risks: Social unrest / antibusiness trends

       - Economic risks: Economic mismanagement
       - Legal risks: Failure to safeguard property rights
42
Q

National Differences in Culture

A

National Differences in Culture

43
Q

What Is Culture? 1

A

Scholars have not agreed on a simple definition

44
Q

Culture definition

A

a system of values and norms shared among a

group of people and, when taken together, constitute a design for living

45
Q

Society definition

A

a group of people sharing a common set of values

and norms

46
Q

What Is Culture? 2

A

Values and Norms

47
Q

Values:

A

provide the context within which a society’s

norms are established and justified

48
Q

Norms:

A

the social rules that govern the actions of people
toward one another

2 types: Folkways and Mores

49
Q

Folkways:

A

routine conventions of everyday life

50
Q

Mores:

A

norms that are central to the functioning of a society and its social life

51
Q

What Is Culture? 3

Culture, Society, and the Nation-State

A

Society reflects people who are bound together by a
common culture

  • Nation-states are political creations that can contain a single culture or several cultures
  • Some cultures embrace several nations
  • Also possible to talk about culture at different levels within societies
52
Q

What Is Culture? 4

Determinants of Culture

A

Values and norms of a culture evolve based on:
• Prevailing political and economic philosophies
• Society’s social structure
• Dominant religion, language, and education

53
Q

Figure 4.1 Determinants of Culture (slide 43)

A 
6 aspects
Religion
Political philosophy
Economic philosophy
Education
Language 
Social structure
54
Q

Social Structure 1

A society’s social structure is its basic social
organization

A

Two dimensions to consider:
• Degree to which the basic unit of social organization is the individual, as opposed to the group

• Degree to which a society is stratified into classes or castes

55
Q

Social Structure 3

Individuals and Groups continued

A

The Individual
• Emphasized in Western societies
• Encourages individual achievement and entrepreneurship
• Fosters managerial mobility
• Encourages job switching and lack of loyalty to the firm

56
Q

Social Structure 4

Individuals and Groups continued

A

The Group
• Emphasized in non-Westernized societies, such as Japan
• Cooperation and team work are encouraged and lifetime
employment is common
• Individual initiative and creativity may be suppressed

57
Q

Social Structure 5

Social Stratification

A

• All societies are stratified on a hierarchical basis into social categories, or social strata
• Often defined by family background, occupation,
and income

• Societies differ in terms of:
• Degree of mobility between social strata
• Significance attached to social strata in a
business context

58
Q

Map 4.1 World Religions

A

Slide 48

59
Q

Language

Spoken Language

A

Countries with more than one spoken language often
have more than one culture

  • Chinese is the mother tongue of the largest number of people in the world
  • English is the most widely spoken language in the world and is becoming the language of international business
60
Q

Economic Freedom

A

Is the fundamental right of every human to control their own labour and property

MGMT 421: Globalization, Offshoring, Outsourcing (9 decks)

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