Final Exam Section 1 & 2 Review Part 1: IB Definition: Exchange of goods and/or services that cross borders The

best concept of a global company is: - It affiliates are in different countries but work closely together Political Risks Overview - Chart - Outside of govt control: war, terrorism, revolution extortions, strikes - Foreign govt action: - Against ownership, confiscation, expropriation, domestication - Make life living hell One political risk against ownership of a foreign company is: - Expropriation One form of political risk is domestication that involves: - Government slowly taking control of a foreign company, generally through its management One strategy to lessen political risk of you are the manger of a foreign company is to: - Partner with a local company When a govt forces a foreign company to by local raw materials only the risk is called: - Local content PRAs (Political risk analysis) are reports that: - Provide assessment of political risks by country. Which help you decide about foreign investment

Intl Legal Environment Main Concept: Its a Mess 1. Absence of single, uniform and legal system 2. Plurality of laws and legal system 3. Absence of a supranational court for the IB disputes 4. Difficulty in settling jurisdiction 5. Legal recourses 6. U.S. Laws on intl arena 7. Corruption 8. Intellectual property rights A procedures for resolving conflict in the intl business arena through the use of third party intermediaries such as representatives of chambers of commerce, formal organisms, or third country institutions or individuals: - Arbitration Legal Resources: What to do? Conciliation Mediation Arbitration Litigation Through the 1988 Amendment of the Foreign Corrupt Practices Act (FCPA), the US government allowed giving money to facilitate business only in the form of: - Customary fees U.S. Laws in host countries Problem of intl legal system include all of the following except: - It is impossible for specify in a contract which countrys legal systems will be used Code Law Legal systems are based on: - Written rules

Intl operating court, such as the Intl Court of Justice of the UN resolve conflicts between: - Different sovereign nations It is difficult to stop the theft of intellectual property in view of all of the following except: - A company cannot register the patents of their products in a foreign country Geert Hofstede isolated four dimensions that he claimed summarized different cultures. Which of the following is not one of Hofstedes dimensions: - Capitalists versus socialistic It is necessary to study culture in business because: - Culture affects peoples behavior High context culture is one where: - The verbal component of messages is low - Low = more verbal than silent - High = more silent that verbal Ethnocentrism is a belief that: - Superiority of ones own culture or ethnic group There is a connection between some of the cultural dimensions of the Hof and the legal system of the countries. Which one of the following answers BEST illustrates this statement: - Latin America countries adopted the Civil (Code) Law because they are high in uncertainly avoidance Culture may affect the negotiation style of business people around the world. According to the indices, which of the following is not correct: - The Brazilians find personal relationships important as a result of their low UAI (Not on test)

Part 2: Theories (Know main facts): Mercantilism - King, does not work Absolute Advantage - Smith, first to say no problem with imports, make it cheaper than import, agriculture, 18th century, if you dont have the best price in the world import, Ricardo agreed with Smith Comparative Advantage - Ricardo Hoecksecher Ohlin Factor Endowment - Similar to absolute, countries highly endowed in labor (cheap) should export products high in labor, same with land Product life cycle Vernon Porters Demand - All theories According to Adam Smith, countries should specialize in the production of goods for which they have - Absolute Advantage Which theory suggests that goods will initially be produced in the advanced countries but that over time: - Product life Theory predicts countries will export goods that make intensive use of factors that are local abundant: - Factor Entry Modes: Trade (export/import), licensing, franchising, strategic alliance, joint venture, wholly owned subsidiary

A mode of entry which two companies contribute assets, own some equity (shares) and share risk to achieve a common business objective is called: - Joint venture Which ones are more similar: - Franchising and licensing Lack of control over the quality of your products is a distinct advantage of - Franchising The method by which a company permits a foreign firm to use its technology, patents, trademarks, and copyrights for a fee (royalty) - Licensing Pepsi and a Turkish investor established a jointly owned new entity for the purpose of bottling soda in Turkey - Joint venture

FDI (Foreign Direct Investment): Money that company sends to another country to start business there. 1. Growing fast 2. Problems with exporting: transportation, tariffs and other barriers, high manufacturing cots 3. US is still the major player in inflows and outflows 4. Firms do FDI but governments control the FDI In the last decade FDI has followed a pattern. What is not true: - Japan is the dominant force in FDI outflows (it is the U.S.) Between the extreme positions that countries take towards FDI (radical vs. free market), pragmatic nationalism: - Policies that max benefits and min drawbacks of FDI

Host country positive FDI aspects usually have corresponding negative aspects for the home country. Which does not bring a drawback to anyone of both countries - Sending managers abroad Govt (home and host) use policies to better control and benefit FDI. What does not encourage FDI: - Ownership restrictions Trade Policies: Chart of Summary of Trade Policies - Policy, description, main effect on Govt typically get money to pay from subsidies to domestic producers by: - Taxing individuals By lowering costs, subsidies help domestic producers in the following two ways: - They help domestic producers compete against low-cost foreign imports, and they help domestic producers gain export markets The U.S. Admin recently reacted by slapping a $100,000 fine on every cargo ship from Japan. - This is a nontariff barrier According to our classes, tariffs benefit the following two groups iin a country: - Government and Tax charged on imports - Tariff Tariff that is a percentage - Ad valorum

GATT / WTO 1. Organization created by countries to decrease trade wars and conflicts 2. GATT: 1946 1995 3. WTO: 1996 current 4. Both ineffective: a. GATT: no enforcement power b. WTO: fight between developed and developing countries (agriculture vs. manufacturing products) Difference between GATT and WTO: - Enforcement powers Action taken by WTO - Dealing with trade conflicts to allow intl trade flow One reason for replacing GATT and WTO: - Intl trade conflicts were increasing and more effective organization was needed GATT and WTO have been emphasizing the following trade policy orientation: - To eliminate nontariff barriers