1. Review for Midterm 1: Global Dimensions of Business
Business 187 – Prof. Wood

2. 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

3. 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)

4. 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.

5. Bring
Scantron (Form 882-E – the small style)
Blue book (small is OK)

6. 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

7. 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

8. 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
The purpose of the course is to give you the basic background in international business you need to become a professional today.
When I summarize things on slides, I do my best to summarize them. When I summarize the summaries on today’s slides, I do my best.
But I can’t write the whole of the basic background you need to be a professional in 90 or so slides. You have to read the text assignments and read your notes to properly understand the topics that are on the slides.
If a whole topic is not mentioned, you can assume it won’t be on the test. But if it is mentioned, you have to really understand it, not just memorize what’s on the slides.

9. Use today’s presentation as a guide to studying
the text
your notes
the original slides available on the class web page

10. 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

11. I assume you have highlighted 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

13. 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
One of the most challenging things for me is to figure out how to review in a way that will be really helpful. I want to go over specific ideas to give a sense of what I consider most important. This will work if we make it a team effort. So please ask me questions to clarify. If somebody takes up too much time with what I consider a small point, I may ask you to take it to me after class, but tell me what you are having difficulty with.

14. 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

15. 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

16. 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

17. Economic systems – Market, Command, Mixed
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”

18. 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
Spread of democracy – pp 68-75

19. Economic risk
The likelihood that macroeconomic events, including economic mismanagement, will cause drastic changes in 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.

20. 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

21. Religious and ethical systems
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 ) are not required
3 of Hofstede’s dimensions of culture
Power distance, uncertainty avoidance, individualism vs. collectivism
How cultures change

22. 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)

23. 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

24. Ways to ensure ethical decision-making
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

25. 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

26. 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

27. Your company has comparative advantage in the product or service where the ratio Cost in your country Cost in the other country is lowest

28. 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?

29. 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

30. History of emergence of institutions discussed in Chapter 1
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

31. 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
Free trade area – just removal of barriers to trade between countries
Common market – also sets common external tariff policy and allows free movement of factors of production.
Economic union – common currency, harmonization of tax rates, common monetary and fiscal policy
Political union – centralized political institutions (fairly strong) coordinate economic, social, and foreign policy

33. Cases
You are not required to memorize any facts from the cases

34. 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
Pfizer could be argument for keeping trade out of HillCountry