Summary International business – Charles W.L. Hill

What is in chapter one? About globalisation

Discussion of globalisation, pro and cons

PROS / CONS
Cheaper goods / Government regulations (EU f.i.)
Global products / Loss of sovereign powers
Competitive advantage / More calls for trade barriers
Global institutions (GATT,IMF, UN,World Bank) / Power of multinationals
Foreign direct investments / Changing world order
Technology / Loss of jobs
Adaptability to changes / Unequal spreading of wealth
Encourages cooperation / Unequal labour standards
Should serve collective interest / Globalisation of greed
New generation of managers / Loss of identity
  • Note: Jacques Attali: most issues are regional or global, not national
  • Who started to think about it? Ricardo – arguments
  • Is the world becoming flat? (Book of Thomas Friedman)
  • The manufacturing of the iPhone’s?
  • Implications for managers

What is in chapter two? About political economy

Note: Samuelson, “Every economy has to answer three questions: what to produce? How to produce and for whom?”Questions three is political question.

This chapter is about how political, economic and legal systems may shape social culture

POLITICAL

  • Two extremes: collectivism versus individualism & totalitarian versus democratic
  • Roger’s remark on democracy
  • Collectivism: re Socialism, Communism, Social democrats, State owned enterprises
  • Individualism: re Adam Smith, John Stuart Mill, Friedman, Hayek
  • Accountability checks
  • Totalitarianism: theocratic, tribal, right-wing
  • Economies: market, command, mixed

LEGAL

  • Common law, civil law, theocratic law
  • Contract law (CIGS)
  • Property rights
  • Corruption (Transparency international) Recent case in Rumania (06/02/2017)
  • Foreign corruption practices act
  • Intellectual property (TRIPS)
  • Product safety

NOTE

Civil law, civilian law, or Roman law is a legal system originating in Europe, intellectualized within the framework of late Roman law, and whose most prevalent feature is that its core principles are codified into a referable system which serves as the primary source of law. This can be contrasted with common law systems whose intellectual framework comes from judge-made decisional law which gives precedential authority to prior court decisions on the principle that it is unfair to treat similar facts differently on different occasions (doctrine of judicial precedent, or stare decisis).[1][2]

Historically, a civil law is the group of legal ideas and systems ultimately derived from the Codex Justinianus, but heavily overlaid by Napoleonic, Germanic, canonical, feudal, and local practices,[3] as well as doctrinal strains such as natural law, codification, and legal positivism.

Conceptually, civil law proceeds from abstractions, formulates general principles, and distinguishes substantive rules from procedural rules.[4] It holds case law to be secondary and subordinate to statutory law. When discussing civil law, one should keep in mind the conceptual difference between a statute and a codal article. The marked feature of civilian systems is that they use codes with brief text that tend to avoid factually specific scenarios.[5] Code articles deal in generalities and thus stand at odds with statutory schemes which are often very long and very detailed.

NOTE Nationalism versus globalism

Yuval Noah Harari

  • People stop believing in the story and are their worst own enemy
  • They feel they are left out
  • There is a real divide between global and national

Two solutions

  1. Going back
  2. Globalize the political system

If something does not work, we retrograde.

Example of going forward = the yellow river and the foundation of China: tribes came together to prevent the worst - technology is the cyber river, with jobs lost and global problems. The more A.I. (artificial intelligence) the more we have to solve it together.

Robots and algorithms will take jobs. Should we build a wall around California? People are aware of the fact there is a major technological disruption – what will the job market look like in 2040? Reminder the agricultural revolution where the elite was better off and the workers worse off, the proletarians. The brain has a problem in handling much information.

Climate change

There is a close correlation between nationalism and climate change. We need another level of loyalty, i. e. a concern about humanity. For instance, universal income needs to be universal or it will not work. It is an ethical question with no national solution. We can end up with a useless class of people!

Quote

Never underestimate human stupidity and violence”

Unquote

Question on a world government: would it be like Denmark or Somalia? Question based on the corruption perception index of Transparency International. Answer: Universal government would probably look more like ancient China than modern Denmark.

Quote

The ability of politicians to do good is limited but the to do harm is not.

Unquote

Question on humans, what are humans for? Answer for nothing, reason why there are religions. We are getting better at understanding the mind but not the consciousness. We are creating artificial intelligence but not artificial consciousness. We do not need to find our sense in the universe, we should focus on how to liberate ourselves from “suffering” as this is the only reality. We created a lot of fiction but the only truth is suffering.

Question on post-truth. We are and were always in that situation. Reminder of the sentence of J. Goebbels: “If you repeat a lie often enough it will become the truth.”

Question Global governance is not in contradiction with local identity and communities.

Why?

(1)we are completely dependent on the eco system

(2)we are very local – the natural group per person is about 150 (115?). Persons are social animals at local level; over that it is a fiction. People are losing their connection with their senses which entails a feeling of alienation.

Quote

Poor countries have the most to lose.

Unquote

Conclusion

The next step is getting control of ourselves inside us, understand the complexity of our mental system to avoid an internal personal meltdown. Is there a cause of hope? A.I. does not predetermine a single outcome: ex nuclear weapons reduced violence rather than a catastrophe. Hope: humans can stand up to challenge a catastrophic outcome but humans have probably only one chance to do it.

What is in chapter 3? About Political economy and economic development

Table of contents

  1. The issues of globalization
  2. Economic policy
  3. Economic policy and economic development
  4. Differences in culture

Economic development

  • Measures of economic development! GNI, GNI at PPP and HDI
  • The engines of growth: innovation and entrepreneurship require:
  1. Market economy
  2. Strong property rights
  3. Stable political system
  4. Democracy
  5. Education
  • Reasons for the spread of democracy
  • Totalitarian regimes fail to deliver economic progress
  • Reduced control by authorities because of technology in communication
  • Prosperous middle class
  • The spread of market based systems and the nature of economic transformation
  • Deregulation
  • Privatization
  • Legal systems
  • The impact of the 2008 crisis with likely retrenchment
  • Implications for managers
  • Benefits
  • Costs
  • Risks – see picture page 83 (fig 3.1)

What is in chapter 4? About differences in culture

  • The definition of culture
  1. Values, norms and “mores”
  2. The determinants of culture – see page 93 fig. 4.1
  • Social structure
  1. The individual & groups
  2. Social stratification
  3. Social mobility & class consciousness
  • Religious and ethical systems
  1. Christianity and the protestant work ethic (Max Weber)
  2. Islam & fundamentalism
  3. Hinduism
  4. Buddhism
  5. Confucianism
  • Language
  1. Spoken
  2. Unspoken
  • Education
  • Cultural change
  • Implication for managers
  1. Cross-cultural literacy
  2. Culture and competitive advantage

What is in chapter 5? About Ethics in international business

Example Apple’s supply chain

  • Ethical issues in international business

(1)Employment practices

(2)Human rights

(3)Environmental pollution

(4)Corruption (CPI, Corruption Perception Index)

(5)Moral obligations

(6)Ethical dilemmas

  • The roots of unethical behaviour

(1)Personal ethics figure 5.1 p 133

(2)Decision making process

(3)Organisational culture

(4)Unrealistic performance expectations

(5)Leadership

(6)Societal culture

  • Philosophical approaches to ethics

(1)The Friedman doctrine

(2)Cultural relativism

(3)Moralism

(4)Naive immoralist

(5)Kantian ethics

(6)Rights theories

(7)Justice theories

  • Implications for managers

(1)Code of ethics

(2)Decision making process

(3)Ethics officers

(4)Moral courage

What is in chapter 6? International trade theory

Example the TPP

  • Trade theory

(1)Benefits of trade

(2)Pattern of international trade

(3)Mercantilism

(4)Absolute advantage

(5)Comparative advantage

(6)Unrealistic assumptions of free trade

  1. Immobile resources
  2. Diminishing returns

(7)Dynamic effects and economic growth – Samuelson critique p 171

(8)The Hecksher-Ohlin theory

(9)The product life cycle theory

(10) NEW trade theory with Porter’s diamond p 181

  • Implications for managers
  1. location
  2. first mover advantage
  3. government policy
  • Balance of payments accounts, p 189

Does current account deficit matter?

Note on Ricardo (source New Ideas from dead Economists, Todd Bucholz, 1989, Plume)

Advocate for political freedom and free trade. Ricardo argued perhaps the most complex and counterintuitive principle of economics. To be noted is that businessmen love to shout about free enterprise at Rotary Club meetings, yet whisper requests for favors into the ears of politicians on Capitol Hill. His recommendation is related to the “corn laws” and linked with the absolute advantage considerations of Adam Smith. Ricardo showed that people and countries should specialize in whatever leads them to give up the least. It is a battle against protectionism. Protectionism is almost always bad for an economy as a whole, though good for a particular group. Furthermore, when economies turn inward, they almost always turn downward. Finally, the free market is not a pain-free market. Still, a country might prudently use a protectionist policy for “national defense/security” purposes or to ensure political stability in a time of acute uncertainty.

STUDY page 189, 19 & 191 Balance of payments accounts

What is in chapter 7? Political economy of international trade

Instruments of Trade Policy

  1. Tariffs
  2. Subsidies
  3. Import quotas & voluntary export restraints
  4. Local content requirements
  5. Administrative policies
  6. Antidumping policies

Political arguments for intervention

  1. Protecting jobs and industries
  2. National security
  3. Retaliation
  4. Protecting consumers
  5. Furthering foreign policy objectives
  6. Protecting human rights

Economic arguments for intervention

  1. Infant industry argument
  2. Strategic trade policy

Development of the world trading system

  1. GATT 1947-1979
  2. Protectionist trends 1980-1993
  3. Uruguay round and the WTO
  4. Reduced tariffs
  5. Special reduction for developed countries
  6. Reduction of agricultural subsidies
  7. Wide range of services includes
  8. Enhanced protectionism for patents (TRIPS)
  9. Reduction on barriers on textile
  10. Doha rounds of the WTO
  11. Antidumping actions
  12. Protectionism in agriculture
  13. Protectionism of intellectual property
  14. Market access to non-agricultural goods and services
  15. New Doha round ongoing & bilateral trade agreements re BREXIT

Implications for managers

  1. Trade barriers and firm strategy
  2. Policy implications

What is in chapter 8? Foreign direct investments

Outflows and Inflows of foreign direct investments

  1. Trends in FDI
  2. The direction of FDI
  3. The sources of FDI
  4. Acquisitions versus greenfield investments

Theories of foreign direct investments (3 complementary perspectives)

  1. Transportation cost
  2. Trade barriers
  3. Internalization theory

The pattern of foreign direct investments

  1. Oligopoly
  2. Location specific advantage
  3. Skilled labor
  4. Externalities (suppliers)

Political ideology and foreign direct investments

  1. The radical view (Iran)
  2. The free market view
  3. Pragmatic nationalism (France)
  4. Shifting ideology

Benefits and cost of FDI

  1. Host country benefits
  2. Resource transfer effects (re Baltic countries in the 90-ties)
  3. Balance of payments effects
  4. Effect on competition and economic growth
  5. Host country cost
  6. Adverse effect on competition
  7. Adverse effect on balance of payments
  8. National sovereignty and autonomy
  9. Home country benefits
  10. Inward flow of foreign earnings
  11. Demand for home-country exports
  12. Home country costs
  13. Balance of payments end employment effects
  14. Host country policies
  15. Home country policies
  16. Government policy in general
  17. Encouraging outward DFI
  18. Restricting outward DFI

Liberalization versus nationalism – The decision-making framework see fig 8.4 page 249

What is in chapter 9? Regional Economic integration

Levels of economic integration see Fig 9.1 p 257

  • Free trade area (EFTA & NAFTA)
  • Customs union
  • Common market
  • Economic union (EU)
  • Political union (USA)
  1. The case economic integration – FDI – adjacent countries
  2. The case for political integration -unbridled ambitions of nation-states
  3. Impediments to integration - Brexit
  4. The case of regional integration – cost – GATT with WTO rules
  5. The EU
  6. The evolution of the European union – treaty of Rome 1957
  7. The European Commission – EU Directives
  8. The European Council
  9. The European Parliament
  10. The Court of justice
  11. The single European act with a goal to have one market place by dec. 1992
  12. The establishment of the Euro – benefits and cost (NOT IN BOOK)
  13. The impact of the sovereign debt crises and 2008 crash
  14. ESMA the European Securities and Market Authority
  15. EBA the European Banking Authority
  16. EIOPA the European Insurance and occupational pensions Authority
  17. The enlargement of the EU
  18. North American Free Trade Agreement
  19. The case for NAFTA
  20. The case against NAFTA
  21. The Andean community
  22. Mercosur
  23. Central America common market CAFTA & CAPRICOM
  24. ASEAN
  25. APEC
  26. Impact for managers
  27. Opportunities
  28. Threats

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