October 5, 2012 CONCEPTS IN FEDERAL TAXATION CHAPTER 6: BUSINESS EXPENSE & MIDTERM REVIEW.
Review for Midterm 1: Global Dimensions of Business Business 187 – Prof. Wood.
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Transcript of Review for Midterm 1: Global Dimensions of Business Business 187 – Prof. Wood.
Review for Midterm 1: Global Dimensions of Business
Business 187 – Prof. Wood
Extra credit opportunity
Presentations on a country or a region (even a town/city in U.S.) some other subject in global
business An especially good chance to
discuss your home or your ancestors’ home
The midterm Approx. 30 multiple choice questions 1 essay question
Question has already been passed out Open book
You can refer to any material supplied by the professor (text, cases, slides from web site)
But you cannot refer to any notes You will write the essay in the classroom
(You can write a “practice essay” at home if you want, but you cannot bring it to class)
Essays graded on whether you practice
critical thinking
Show you understand the concepts In this case –
Gains from trade Comparative advantage Possibly ideas like infant industries, etc.
Your argument (whether you agree with what’s in the text or not) is based on and follows logically from facts and plausible existing theories.
Bring Scantron (Form 882-E – the small style)
Blue book (small is OK)
Multiple Choice will cover Chapters 1-6 and 9
Only the pages specified in the syllabus
But study each chapter carefully – remember that it’s a long time since we discussed Chapter 1
The multiple choice is closed-book
It requires very little math, but you can use a calculator You may not use any device capable of
communication Non-native speakers may bring a
standard foreign language-English dictionary No electronic dictionaries No specialized dictionaries
Study hard!
This discussion today is designed to remind you of key issues
You will need a deeper knowledge of the material than these slides provide Slides mention each key issue You will need the text and your notes to
gain enough understanding to answer the questions
Use today’s presentation as a guide to studying the text your notes the original slides available on the class
web page
Advice on how to study
If you haven’t downloaded slides for each chapter, do that soon PowerPoint Reader is available free
Have slides, your notes, and text open all at once All midterm topics are mentioned on
slides, but the slides themselves cannot provide full detail
I assume you have highlightedhighlighted key points in the chapters
Let the slides and your notes drive your studying
Keep asking whether you really understand the concepts summarized on the slides
Continually go back to the text and your notes to develop a deeper understanding
The Chapters so far… The basic nature and structure of
international business Ch. 1 – Introduction - Globalization
The environment in which we conduct international business Ch. 2 – Country Differences in Political Economy Ch. 3 – Differences in Culture Ch. 4 – Ethics Ch. 5 – International Trade Theory Ch. 6 – Political Economy of Trade Ch. 9 – Regional Economic Integration
Key Issues in Ch. 1: Globalization Globalization is ‘The shift toward
a more integrated and interdependent world economy’ Globalization of markets Globalization of production
Global economic institutions Founded after WW II – UN, GATT, IMF, World
Bank Founded in 1990s – World Trade Organization
Know what each does, know basic history See both Ch. 1 and Ch. 6
Drivers of globalization – why is globalization happening Decline in barriers Technological change (know some examples)
Be able to list some ways that managing in a global market us more complex
Key issues in Ch. 2: Differences in Political Economy
Political economy=the study of the political, economic, and legal systems of countries Differences are huge, create huge effects
Systems provide “rules of the game” that allow people to govern selves, work together
2 dimensions of difference Collectivism vs. individualism Democracy vs. totalitarianism
Be able to think about What the rules are in a country Whether they can be relied on
Corruption Unpredictable undemocratic changes
Economic systems – Market, Command, Mixed Economic freedom Individualism associates with free market
Legal systems – property rights, contract law Foreign Corrupt Practices Act
“facilitating payments”
Political and economic risks Differences in economic development
among countries GNI, per capita GNI, and GNI at PPP as
measures Spread of democracy – why?
Failures of totalitarian regimes Technology breaks down censorship Middle class demands democracy
Economic risk The likelihood that macroeconomic
events, including economic mismanagement, will cause drastic changesin a country’s economic environment such as a decline in per capita GNI or an increase in inflation
that adversely affect all businesses’ ability to achieve profits and other goals.
Key issues in Ch. 3: Differences in Culture
Definition – “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 et al
Values – assumptions about how things ought to be
Norms – social rules Folkways vs. mores
Social structure Group vs. individually oriented (parallels political
collectivism vs. individualism) Stratification – castes and classes
Religious and ethical systems Know largest religions, but details (pp. 100-107) are not
required
3 of Hofstede’s dimensions of culture Power distance, uncertainty avoidance,
individualism vs. collectivism How cultures change
Key issues in Ch. 4: Ethics Ethics=principles of right or wrong
governing the conduct of business No essay on ethics this time But we’ll use these principles in May
Different religious & ethical systems lead to different ideas but some analysis and principles help
Some key ethical issues Employment practices Human rights Environmental regulations Corruption Moral obligation of multinational corporations
(social responsibility)
Ethical dilemmas Approaches to ethics
“straw men” – Friedman doctrine, cultural relativism, righteous moralist, naïve immoralist
Credible components of appropriate approaches Utilitarian approach – worth of action
determined by consequences Kant – people are ends not means
Rights – minimum level of moral behavior United Nations Universal Declaration of Human
Rights – ”right to work, to free choice of employment, to just and favorable conditions of work”
Justice – pursuit of just distribution Theorists (e.g., Rawls) argue principles are
those all could agree if they could freely and impartially consider ‘veil of ignorance’
Ways to ensure ethical decision-making
Key issues in Ch. 5: International Trade Theory
Mercantilism Free trade – definition
No barriers limiting trade Economists think you should have the
same incentives when you consider a product from abroad as from your home country.
See special slides on the web site explaining what free trade is and why most economists support it
Arguments for gains from trade
Absolute advantage theory – Adam Smith Comparative advantage theory - Ricardo
Gains from trade when one country is better at everything
Assumptions and extensions of comparative advantage theory Immobile resources will mean not all resources
shift Diminishing returns to specialization Free trade further increases efficiency over time
Your company has comparative advantage in the product or service where the ratio Cost in your country . Cost in the other country
is lowest
Infant industry argument Product life-cycle theory (and limitations)
New trade theory – specialization leads to just a few winners Should government try to pick and
promote the winners of the future?
Key issues in Ch. 6: Political Economy of Trade
Ways of restricting trade and how they work Tariffs, subsidies, quotas, tariff rate
quotas “Voluntary” export restraints (quotas)
Administrative policies Local content rules Antidumping rules
Political reasons for restrictions
Plausible economic arguments for trade restriction (and dangers involved) Infant industry Strategic trade policy
Emerging industries Overcoming barriers to entry by existing foreign
firms History of emergence of institutions
discussed in Chapter 1 Depression Focus on free trade at end of WW II WTO launched in 1995
Key issues in Ch. 9: Regional integration
Some regions focus on barriers within themselves Levels of integration
Free trade area Common market Economic union Political union
European union – an economic union
NAFTA – just a free trade area
Cases
You are not required to memorize any facts from the cases
On tests, a question about a case will give you the facts you need
A multiple choice question will provide the basic data
You may use information from cases in your arguments in essay questions