Unformatted Attachment Preview
Course: International Business (351BUS)
Course instructor: Dr. ALAWIYA ALLUI
THE REQUIRED STAGES OF THE COLLECTIVE PROJECT:
1. Choose a Saudi company and assume the latter seeks international expansion.
1.1.
General Introduction of the country chosen for the whole project. (1.0
Mark)
1.2.
Study the country’s chosen political, economic and legal systems. "here
give the principal characteristics of these three types of system". Based on
what has been explained in chapter 2 ( 6 Marks)
1.3
Study the political, economic and legal systems of the chosen country using
the current data (2019-2020). (3 Marks)
Be continued in the next page
1
Country
report : 10
Marks
VERY Important dates :
• Submission of the study country project : the 9th week on
Sunday or Tuesday.
• Submission of the international expansion project and the
whole project: the 13 th week on Tuesday.
• Presentations : the 14 th week.
2
Course: International Business (BUS351)
Course instructor: Dr. ALAWIYA ALLUI
DETAILS OF THE INTERNATIONAL EXAPANSION REPORT:
1. Give a small idea about this company: principal activity, size, employees'
number, competitive advantage in the national Market (Porter’s national diamond
of national advantage). (3.0 Mark)
2. Describe the type of FDI decision of your company and give its justification (1.0
Mark)
3. Describe the Strategic Position of your company (Low Cost or Differentiation
and its justification) and which Global Strategy is relevant for your company and
its justification. (2.0 Mark)
4. Describe the synthesis of your company strategy, the structure of your company
and its controls? Describe the four marketing mix for your company in the country
chosen (2.0 Mark)
5. Describe the staffing policy chosen for your company and its advantages.
Finally, give the conclusion and summary of why your company will be successful
and earn competitive advantage in the country chosen.
1
Internatio
nal
Expansion
Report: 10
Marks
VERY Important dates :
• Submission of the study country project : the 9th week on
Sunday or Tuesday.
• Submission of the international expansion project and the
whole project: the 13 th week on Tuesday.
• Presentations : the 14 th week.
2
International Business
11e
By Charles W.L. Hill
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Chapter 1
Globalization
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LEARNING OBJECTIVES
After reading this chapter you will be able to:
➢ L01 Understand what is meant by the term globalization.
➢ L02 Recognize the main drivers of globalization.
➢ L03 Describe the changing nature of the global economy.
➢ LQ4 Explain the main arguments in the debate over the
impact of globalization.
➢ L05 Understand how the process of globalization is creating
opportunities and challenges for business managers.
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1-3
What Is Globalization?
➢ Globalization - the shift
toward a more integrated
and interdependent world
economy
➢ The world is moving away
from self-contained
national economies
toward an
interdependent,
integrated global
economic system
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1-4
What Is The
Globalization of Markets?
➢ Historically distinct and separate national markets are merging into
one huge global marketplace
➢ Consumer products such as Citigroup credit cards, Coca-Cola soft
drinks, Sony PlayStation video games, McDonald's hamburgers,
Starbucks coffee, and IKEA furniture are frequently held up as
prototypical examples of this trend.
➢ There is the “global market”
➢ falling trade barriers make it easier to sell globally
➢ consumers’ tastes and preferences are converging on some
global norm
➢ firms promote the trend by offering the same basic products
worldwide
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1-5
What Is The
Globalization of Markets?
➢ Firms of all sizes benefit and
contribute to the globalization of
markets
➢ Markets for industrial goods and
materials that serve a universal
need the world over.
➢ 97% of all U.S. exporters have
less than 500 employees
➢ 98% of all small and mid-sized
German companies participate
in international markets
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1-6
What Is The
Globalization of Production?
➢ Firms source goods and services from locations around the globe to
capitalize on national differences in the cost and quality of factors of
production like land, labor, energy, and capital
➢ Consider Boeing's 777, a commercial jet airliner. Eight Japanese
suppliers make parts for the fuselage, doors, and wings; a supplier in
Singapore makes the doors for the nose landing gear; three suppliers
in Italy manufacture wing flaps; and so on
➢ Airbus Video
➢ Companies can
➢ lower their overall cost structure
➢ improve the quality or functionality
➢ of their product offering
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1-7
Why Do We Need
Global Institutions?
➢Global institutions
➢ help manage, regulate,
and police the global
marketplace
➢ promote the
establishment of
multinational treaties to
govern the global
business system
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1-8
Why Do We Need
Global Institutions?
➢ Examples include
➢ the General Agreement on Tariffs and Trade
(GATT)
➢ the World Trade Organization (WTO)
➢ the International Monetary Fund (IMF)
➢ the World Bank
➢ the United Nations (UN)
➢ the G20
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1-9
What Do Global
Institutions Do?
➢ The World Trade Organization (like
its predecessor GATT)
➢ polices the world trading system
➢ makes sure that nation-states
adhere to the rules laid down in
trade treaties
➢ promotes lower barriers to trade
and investment
➢ There are 164 members of the
World Trade Organization
(WTO), accounting for 81% of
the 202 countries in the world
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What Do Global
Institutions Do?
➢ The International Monetary Fund (1944)
➢ maintains order in the international
monetary system
➢ lender of last resort for countries in
crisis
➢ Argentina, Indonesia, Mexico,
Russia, South Korea, Thailand,
Turkey, Ireland, and Greece
➢ The World Bank (1944)
➢ promotes economic development
via low interest loans for
infrastructure projects
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What Do Global
Institutions Do?
➢ The United Nations (1945)
➢ maintains international
peace and security
➢ develops friendly relations
among nations
➢ cooperates in solving
international problems and
in promoting respect for
human rights
➢ is a center for harmonizing
the actions of nations
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What Do Global
Institutions Do?
➢ The G20 forum through which the
major nations tried to launch a
coordinated policy response to the
2008-2009 global financial crisis
➢ Established in 1999, the G20
comprises the finance ministers and
central bank governors of the 19
largest economies in the world, plus
representatives from the European
Union and the European Central
Bank
➢ https://saudigazette.com.sa/article/57
0280
➢ https://g20.org/en/Pages/home.aspx
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What Is Driving
Globalization?
➢ Declining barriers to the free flow of
goods, services, and capital
➢ average tariffs are now at just 4%
➢ more favorable environment for FDI
➢ global stock of FDI was $20.4
trillion in 2011
➢ facilitates global production
➢ Technological change
➢ microprocessors and
telecommunications
➢ Internet: information backbone of the
global economy
➢ transportation technology
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What Does Globalization
Mean For Firms?
➢Lower barriers to trade and investment
mean firms can
➢ view the world, rather than a single country,
as their market
➢ base production in the optimal location for that
activity
➢But, firms may also find their home
markets under attack by foreign firms
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Declining Trade And
Investment Barriers
Average Tariff Rates on Manufactured Products as Percent of Value
https://blogsimages.forbes.com/niallmccarthy/files/2018/03/20180323_Tariff_Map_Forbes.jpg
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What Does Globalization
Mean For Firms?
➢ Technological change means
➢ lower transportation costs
➢ help create global markets and
allow firms to disperse production
to economical, geographically
separate locations
➢ low cost information processing and
communication
➢ firms can create and manage
globally dispersed production
➢ low cost global communications
networks
➢ help create an electronic global
marketplace
➢ global communication networks and
global media
➢ create a worldwide culture and a
global consumer product market
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The Changing Demographics
Of The Global Economy
➢ Four trends are important:
1. The changing world output and world
trade picture
2. The changing foreign direct investment
picture
3. The
changing
nature
of
the
multinational enterprise
4. The changing world order
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1. How Has World Output And
World Trade Changed?
➢In 1960, the U.S. accounted for almost
40% of world economic activity, but by
2012, the U.S. accounted for just 23%
➢ a similar trend occurred in other developed
countries
➢In contrast, the share of world output
accounted for by developing nations is
rising
➢ expected to account for more than 60% of
world economic activity by 2020
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1. How Has World Output And
World Trade Changed?
The Changing Demographics of World Output and Trade
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2. How Has Foreign Direct
Investment Changed Over Time?
➢In the 1960s, U.S. firms accounted for
about two-thirds of worldwide FDI flows
➢ Today, the United States accounts for less
than one-fifth of worldwide FDI flows
➢ Other developed countries have followed a
similar pattern
➢In contrast, the share of FDI accounted for
by developing countries has risen
➢ Developing countries, especially China, have
also become popular destinations for FDI
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2. How Has Foreign Direct
Investment Changed Over Time?
Percentage Share of Total FDI Stock 1980-2013
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2. How Has Foreign Direct
Investment Changed Over Time?
FDI Inflows 1980-2013
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3. THE CHANGING NATURE OF THE
MULTINATIONAL ENTERPRISE
➢ Multinational enterprise
(MNE) - any business that
has productive activities in
two or more countries
➢ Since the 1960s
➢ the number of non-U.S.
multinationals has risen
➢ the number of minimultinationals has risen
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3. THE CHANGING NATURE OF THE
MULTINATIONAL ENTERPRISE
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4.The Changing World Order
➢ Many former Communist nations in Europe and Asia are now
committed to democratic politics and free market economies
➢ creates new opportunities for international businesses
➢ but, there are signs of growing unrest and totalitarian tendencies
in some countries
➢ China and Latin America are also moving toward greater free market
reforms
➢ between 1983 and 2010, FDI in China increased from less than
$2 billion to $100 billion annually
➢ but, China also has many new strong companies that could
threaten Western firms
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Hisense CEO Zhou Houjian led his company to become
one of China’s top-selling electronics manufacturers by
using a strategy of rapid innovation and low-cost
manufacturing.
If you were given the chance to run a leading
electronics company, would you use a similar approach
to grow your brand? Or would you devote more time to
research and development and produce fewer products
at a higher price point?
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Debate: How Will The Global
Economy Of The 21st Century Look?
➢ The world is moving toward a more global
economic system…
➢ But globalization is not inevitable
➢ there are signs of a retreat from liberal
economic ideology in Russia
➢ Globalization brings risks
➢ the financial crisis that swept through
South East Asia in the late 1990s
➢ the recent financial crisis that started in
the U.S. in 2008-2009, and moved
around the world
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Is An Interdependent Global
Economy A Good Thing?
➢ Supporters believe that increased trade and crossborder investment mean
➢ lower prices for goods and services
➢ greater economic growth
➢ higher consumer income, and more jobs
➢ Critics worry that globalization will cause:
➢ job losses
➢ environmental degradation
➢ the cultural imperialism of global media and MNEs
➢ Anti-globalization protesters now regularly show up at
most major meetings of global institutions
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Impact: How Does Globalization
Affect Jobs And Income?
➢Critics argue that falling barriers to trade
are destroying manufacturing jobs in
advanced countries
➢Supporters contend that the benefits of
this trend outweigh the costs
➢ countries will specialize in what they do
most efficiently and trade for other
goods—and all countries will benefit
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How Does Globalization Affect
Jobs And Income?
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How Does Globalization Affect Labor
Policies And The Environment?
➢ Critics argue that firms avoid the cost of adhering to labor and
environmental regulations by moving production to countries where
such regulations do not exist, or are not enforced
➢ Supporters claim that tougher environmental and labor standards
are associated with economic progress
➢ as countries get richer from free trade, they implement tougher
environmental and labor regulations
➢ https://www.arabnews.com/node/1731141/saudi-arabia
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How Does Globalization
Affect National Sovereignty?
➢ Is today’s global economy shifting
economic power away from national
governments toward supranational
organizations like the WTO, the EU, and
the UN?
➢ Critics argue that unelected bureaucrats
have the power to impose policies on the
democratically elected governments of
nation-states
➢ https://www.arabnews.com/
➢ Supporters claim that the power of these
organizations is limited to what nationstates agree to grant
➢ the power of the organizations lies in
their ability to get countries to agree
to follow certain actions
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How Is Globalization
Affecting The World’s Poor?
➢ Is the gap between rich nations and poor
nations getting wider?
➢ Critics believe that if globalization was
beneficial there should not be a
divergence between rich and poor nations
➢ Supporters claim that the best way for the
poor nations to improve their situation is
to
➢ https://www.youtube.com/watch?v=3oTLy
PPrZE4
➢ reduce barriers to trade and
investment
➢ implement economic policies based
on free market economies
➢ receive debt forgiveness for debts
incurred under totalitarian regimes
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How Does The Global
Marketplace Affect Managers?
➢ Managing an international business differs
from managing a domestic business
because
➢ countries are different
➢ the range of problems confronted in an
international business is wider and the
problems more complex than those in a
domestic business
➢ firms have to find ways to work within
the limits imposed by government
intervention in the international trade
and investment system
➢ international transactions involve
converting money into different
currencies
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LEARNING OBJECTIVES
After reading this chapter you will be able to:
➢ L01 Understand what is meant by the term globalization.
➢ L02 Recognize the main drivers of globalization.
➢ L03 Describe the changing nature of the global economy.
➢ LQ4 Explain the main arguments in the debate over the
impact of globalization.
➢ L05 Understand how the process of globalization is creating
opportunities and challenges for business managers.
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 1-36
International Business
11e
By Charles W.L. Hill
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Chapter 2
National Differences in
Political, Economic, and
Legal Systems
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
LEARNING OBJECTIVES:
After reading this chapter you will be able to:
➢ L01 Understand how the political systems of
countries differ.
➢ L02 Understand how the economic systems of
countries differ.
➢ L03 Understand how the legal systems of
countries differ.
➢ L04 Explain the implications for management
practice of national differences in political
economy.
2-3
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LO1:What Is A Political
Economy?
➢Political economy of a
nation - how the political,
economic, and legal
systems of a country are
interdependent
➢ they interact and influence
each other
➢ they affect the level of
economic well-being in the
nation
2-4
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What Is A Political System?
➢ Political system - the
system of government in a
nation
➢ Assessed according to two
dimensions:
➢ the degree to which the
country emphasizes
collectivism as opposed
to individualism
➢ the degree to which the
country is democratic or
totalitarian
2-5
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What Is Collectivism?
➢ Collectivism stresses the primacy of
collective goals over individual
goals
➢ can be traced to the Greek
philosopher, Plato (427-347 BC)
➢ Today, collectivism is equated with
socialists (Karl Marx 1818-1883)
➢ advocate state ownership of the
basic means of production,
distribution, and exchange
➢ manage to benefit society as a
whole, rather than individual
capitalists
2-6
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➢
How Does Modern-Day
Socialism Look?
In the early 20th century, socialism split into
1. Communism – socialism can only be
achieved through violent revolution
and totalitarian dictatorship
➢ in retreat worldwide by mid-1990s
2.
Social democrats – socialism is
achieved through democratic means
➢ retreating as many countries move
toward free market economies
➢ state-owned enterprises have been
privatized
2-7
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What Is Individualism?
➢ Individualism refers to philosophy that an
individual should have freedom in his own
economic and political pursuits
➢ can be traced to Greek philosopher,
Aristotle (384-322 BC)
➢ individual diversity and private
ownership are desirable
➢
➢ individual economic and political
freedoms are the ground rules on which
a society should be based
➢ implies democratic political systems and
free market economies
2-8
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What Is Democracy?
➢ Democracy - a political system in which
government is by the people, exercised either
directly or through elected representatives:
➢ usually associated with individualism
➢ pure democracy is based on the belief that
citizens should be directly involved in
decision making
➢ most modern democratic states practice
representative democracy where citizens
periodically elect individuals to represent
them
2-9
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What Is Totalitarianism?
➢ It’s a form of
government in
which one person
or political party
exercises absolute
control over all
spheres of human
life and prohibits
opposing political
parties
2-10
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What Is Totalitarianism?
➢ Four major forms of totalitarianism exist today
1. Communist totalitarianism – found in states where
the communist party monopolizes power
2. Theocratic totalitarianism - found in states where
political power is monopolized by a party, group, or
individual that governs according to religious
principles
3. Tribal totalitarianism - found in states where a
political party that represents the interests of a
particular tribe monopolizes power
4. Right-wing totalitarianism - permits some individual
economic freedom, but restricts individual political
freedom
2-11
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Tribal Totalitarianism
2-12
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What Is The Link Between Political
Ideology and Economic Systems?
➢
Political ideology and
economic systems are
connected
➢ countries that stress
individual goals are
likely to have market
based economies
➢
in countries where stateownership is common,
collective goals are
dominant
2-13
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LO2:What Is An Economic
System?
➢
There are three types of
economic systems: Market,
Command and Mixed
1.
Market economies - all
productive activities are
privately owned and
production is determined by
the interaction of supply and
demand.
➢ Government encourages free
and fair competition between
private producers
2-14
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What Is An Economic System?
2. Command economies - government plans the
goods and services that a country produces,
the quantity that is produced, and the prices as
which they are sold
➢ all businesses are state-owned, and
governments allocate resources for “the
good of society”
➢ because there is little incentive to control
costs and be efficient, command economies
tend to stagnate
2-15
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Command Economies
2-16
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What Is An Economic System?
3. Mixed economies - certain sectors of the
economy are left to private ownership
and free market mechanisms while other
sectors have significant state ownership
and government planning
➢ governments tend to own firms that are
considered important to national security
2-17
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Mixed Economy
2-18
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LO3:What Is A Legal System?
➢
➢
Legal system - the rules that
regulate behavior along with the
processes by which the laws are
enforced and through which
redress for grievances is obtained
➢ the system in a country is
influenced by the prevailing
political system
Legal systems are important for
business because they
➢ define how business
transactions are executed
➢ identify the rights and
obligations of parties involved
in business transactions
2-19
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What Are The
Different Legal Systems?
2-20
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How Are Contracts Enforced
In Different Legal Systems?
➢ Contract - document that specifies the conditions
under which an exchange is to occur and details
the rights and obligations of the parties involved
➢ Contract law is the body of law that governs
contract enforcement
➢ under a common law system, contracts tend to be
very detailed with all contingencies spelled out
➢ under a civil law system, contracts tend to be much
shorter and less specific because many issues are
already covered in the civil code
2-21
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Which Country’s Laws Should
Apply In A Contract Dispute?
➢ The United Nations Convention on Contracts for
the International Sale of Goods (CIGS)
➢ establishes a uniform set of rules governing certain
aspects of the making and performance of everyday
commercial contracts between buyers and sellers
who have their places of business in different nations
➢ Ratified by the U.S. and about 70 countries
➢ but, many larger trading nations including Japan and
the U.K. have not agreed to the provisions of CIGS
and opt for arbitration instead
2-22
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➢
How Are Property Rights
And Corruption Related?
Property rights -The
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
2-23
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How Are Property Rights
And Corruption Related?
➢ Property rights can be violated through
1. Private action – theft, piracy, blackmail
2. Public action - legally - ex. excessive
taxation or illegally - ex. bribes or
blackmailing
➢ high levels of corruption reduce foreign direct
investment, the level of international trade, and
the economic growth rate in a country
2-24
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How Are Property Rights
And Corruption Related?
➢ The Foreign Corrupt Practices Act makes it
illegal for U.S. companies to bribe foreign
government officials to obtain or maintain
business over which that foreign official has
authority
➢ facilitating or expediting payments to secure or
expedite routine government action are permitted
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Foreign Corrupt Practices Act
2-26
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Which Countries Are
Most Corrupt?
Somalia, South Sudan named world’s most corrupt countries
January 24, 2020
2-27
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➢
➢
How Can Intellectual
Property Be Protected?
Intellectual property - property that is the
product of intellectual activity
Can be protected using
1. Patents – exclusive rights for a
defined period to the manufacture,
use, or sale of that invention
2. Copyrights – the exclusive legal
rights of authors, composers,
playwrights, artists, and publishers
to publish and disperse their work as
they see fit
3. Trademarks – design and names by
which merchants or manufacturers
designate and differentiate their
products
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Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
How Can Intellectual
Property Be Protected?
➢ Protection of intellectual property
rights differs from country to country
➢ World Intellectual Property
Organization
➢ Paris Convention for the
Protection of Industrial Property
➢ To avoid piracy, firms can:
➢ stay away from countries where
intellectual property laws are lax
➢ file lawsuits
➢ lobby governments for
international property rights
agreements and enforcement
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Intellectual property theft is a major issue in the global
software industry. One method that software companies
use to avoid the threat of piracy is to develop “open
source” software – software that is distributed free of
charge and with part or all of the source code available to
other programmers. Users may alter or improve the
program as they see fit, so long as they share their
improvements with the rest of the open source community.
What are some potential advantages and disadvantages to
developing open source software? As the head of a
promising software startup, would you consider developing
an open source product?
2-25
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What Is Product Safety
And Liability?
➢ Product safety laws set certain standards to
which a product must adhere
➢ Product liability involves holding a firm and its
officers responsible when a product causes
injury, death, or damage
➢ liability laws tend to be less extensive in less
developed nations
2-31
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Why Is Product Safety And
Product Liability Important?
➢ Question:
➢ Does the high cost of liability insurance in the
U.S. make American companies less
competitive?
➢ Question:
➢ Is it ethical to follow host country standards
when product safety laws are stricter in a
firm’s home country than in a foreign country?
➢ Question:
➢ Is it ethical to follow host country standards
when liability laws are more lax in the host
country?
2-32
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How Can Managers Determine A
Market’s Overall Attractiveness?
➢ The overall attractiveness of a country as a
potential market and/or investment site for an
international business depends on balancing the
benefits, costs, and risks associated with doing
business in that country
➢ Other things being equal, the benefit-cost-risk
trade-off is likely to be most favorable in
politically stable developed and developing
nations that have free market systems and no
dramatic upsurge in either inflation rates or
private sector debt
2-33
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How Can Managers Determine A
Market’s Overall Attractiveness?
Country Attractiveness
2-34
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