MANA 4321 1nd EditionExam # 2 Study Guide Lectures: 8 - 17Lecture 8 (September 30)PROTECTIONISM: FORMS- Import tariffs- Quotas- Voluntary Export Restraints (VER)- Domestic content legislation- Monetary barriers- Stringent standards- Subsidies/ “Buy national” programs- Boycott/EmbargoLecture 9 (October 2) WHY PROTECTIONISM?- Promote domestic production; save jobs- Help “strategic” industries- Protect infant industry - Old industry argument- Level playing field; combating unfair competition- National security reasons- Political reasonsPOLITICAL RISK- Any company with exposure to foreign markets needs early, accurate information on political developments- International markets are more interconnected- The world has become a much more volatile place and that has changed risk calculations everywhere- Offshoring results in shifting of operations to countries with potential for unrest- Increased dependence for energy on states troubled by considerable political riskPOLITICAL RISK: TYPES- Transfer risko Change in ease of transfer of capital, goods, technology and people in and out of the country- Operational risko Impact on operations caused by changes in government’s policies- Ownership risko Change in the proportion of equity owned by a company in a foreign subsidiaryPOLITICAL RISKS -- MACRO- Causeso Competing political philosophieso Civil wars, armed conflicts o Social unrest and disorderso New international alliances- Form/Outcomeso Confiscation, expropriation or nationalizationo Damage to property, personso Loss of transfer freedomsPOLITICAL RISKS – MICRO- Causeso Changing social valueso Unstable economic conditionso Vested interestso Quasi-politicalo Local businesso Latent hostility towards foreignerso- Form/Outcomeso High inflation, increased taxation, currency instabilityo Breach/revision of contractso Discriminationo Mandatory labor benefits, Operating restrictionsPOLITICAL RISK RATING AGENCIES- Business Environment Risk Intelligence: BERI Index- Business Monitor International- Economist Intelligence Unit (EIU): Country Risk Ratings- OECD Country Risk Classification- PRS Group LLC- Institutional Investor: Country Credit RatingsPOLITICAL RISK -- DEFENSIVE STRATEGIES- Stay ahead -- technical and managerial capabilities- Multiple sourcing of products- Raise political costs of intervention- JVs with politically connected local companiesLecture 10 (October 7)- Maximize debt investment from local sources- Significant exports- “Good citizen” -- public services- Hedging via insurance (e.g., OPIC, MIGA)LEVELS OF ECONOMIC INTGEGRATION- Free Trade Area (FTA): Member countries eliminate trade barriers on trade among member countrieso NAFTA =(US, Canada and Mexico)- Customs Union: FTA plus a common external trade policyo MERCUSOR =(Argentina, Brazil, Paraguay, Uruguay)o ANDEAN PACT=(Argentina, Brazil, Paraguay, Uruguay)- Common Market: Customs Union that also allows free movement of factors such as labor and capitalo EU= (European Union)- Economic Union: Common Market wherein national economic policies of member countries are also harmonizedCASE FOR INTEGRATION- Economico Stimulates economic growth in countrieso Countries specialize in those goods and services efficiently produce.o Additional gains from free trade beyond the international agreements such as GATT andWTO- Politicalo Economic interdependence creates incentives for political cooperation  Reduces potential for violent confrontation.o Together, the countries have more economic clout to enhance trade with other countries or trading blocsLecture 11 (October 09)WHAT IS CULTURE? “A system of values and norms that are shared among a group of people and that when taken together constitute a design for living.”- Hofstede, Namenwirth and WeberCULTURAL ENVIRONMENT- Languageo Verbalo Non-Verbal- Attitudes and beliefso Timeo Directness and driveo Deadlineso Achievement and worko Wealth, material Possessions- Morals and etiquette- Religion- Social structure- Norms and value systems CULTURAL DIMENSIONS- Power distance- Uncertainty avoidance- Individualism- MasculinityPOWER DISTANCE- Inequality is fundamentally good- Most people should depend on a leader- The powerful are entitled to privileges- Everyone has a place; some are highUNCERTAINTY AVOIDANCE- Conflict should be avoided- Laws/rules are very important and should be followed- Experts and authorities are usually correct- Consensus is importantMASCULINITY- Gender roles should be clearly distinguished- People, especially men should be decisive - Work take priority over other duties, including family- Advancement, success and money importantINDIVIDUALISM- People are responsible for themselves- Individual achievement is ideal- People need not be emotionally dependent on organizations or groupsNATIONAL CULTURE: FIFTH DIMENSION- LONG TERM ORIENTATION (Recently added)o Society embraces long-term devotion to traditional, forward thinking valueso Country prescribes to the values of long-term commitments and respect a for traditiono Strong work ethic where long-term rewards are expected as a result of today's hard workLecture 12 (October 14)IMPACT OF CULTURAL DIFFERENCES- Policies and procedureso and standardization- Systems and controlso Structureo Planning systemso Reward systems- Information and communicationo Openness and informality- Decision makingo Who makes decisiono Level of participationCULTURAL ISSUES- CULTURAL BARRIERS o ETHNOCENTRISM: Concluding that new culture is bad, “stupid” or ineffective simply because it is differento LACK OF CULTURAL EMPATHY: Inability to view things from the perspective of the host culture- CULTURAL CHANGEo Culture evolves over timeo Changes can be painful for societyo Is not unidirectionalLecture 13 (October 16)DEMOGRAPHIC ENVIRONMENT- Population growth- Education and literacy- Age distribution and changes- Population and population shifts LEGAL ENVIRONMENT- Tariffs, quotas and trade barriers- Restrictive trade practices legislation- Taxation- Product safety and liability- Intellectual property o Patento Trademarko Copyright laws- Labor laws- Laws governing business practicesLOSS FROM PIRACY- Loss of sales in the copycat country- Loss of sales in third countries where it is forced to