C2 Study Guide Flashcards
(19 cards)
How do institutions reduce uncertainty?
Institutions are rules, structures, and norms that provide stability and predictability, reducing risks and uncertainty in business transactions.
Examples include contracts, laws, or informal agreements like handshakes.
What are the three pillars under the institution-based view of global business?
- Regulatory Pillar (Formal rules)
- Normative Pillars (Social norms)
- Cognitive Pillar (Informal beliefs)
Each pillar influences business behavior and decision-making.
What is the Regulatory Pillar?
Laws, regulations, and formal rules enforced by governments.
Examples include paying taxes, trade policies, or environmental regulations.
What is the Normative Pillar?
Values and social expectations influencing behavior.
Example: Japanese business culture values teamwork and consensus decision-making.
What is the Cognitive Pillar?
Shared understandings and internalized beliefs guiding behaviors without written rules.
Example: Belief that honesty in business transactions is the right thing to do.
What are the two core propositions of the institution-based view of global business?
- Firms act rationally within institutional constraints
- Informal and formal institutions influence a firm’s decisions
Examples include companies shifting production overseas due to wage changes and avoiding unstable countries.
What is Totalitarianism?
A political system where the government has absolute control, with no freedom of speech or democratic elections.
Types include Communist, Right-wing/Fascist, Theocratic, and Tribal regimes.
What are the distinct types of totalitarian regimes?
- Communist: Control through single-party system (e.g., North Korea)
- Right-wing/Fascist: Economic freedom but restricted political freedom (e.g., Germany during WWII)
- Theocratic: Religious leaders control (e.g., Iran)
- Tribal: Tribal groups monopolize power
Each type has unique characteristics and examples.
What characterizes a Democracy?
Citizens elect government leaders through free elections, and political freedoms and rights are protected.
Examples include the US and Canada.
What are the differences between Civil Law and Common Law?
- Civil Law: Based on clearly written laws and codes, less flexibility for judges (e.g., France, Germany)
- Common Law: Based on past judicial decisions (precedent), more flexible (e.g., US, UK, Australia)
Each legal system affects how laws are interpreted and applied.
What is Theocratic Law?
A legal system based on religious teachings.
Example: Saudi Arabia follows Islamic law or Sharia.
Which economy is the most flexible?
Market Economy.
It allows for decisions driven by supply and demand.
Which economy has private property and which has public ownership of means of production?
- Private: Market Economy
- Public: Command Economy
Mixed Economy includes both private and public ownership.
What is Political Risk?
Uncertainty or threat to business from political changes such as instability, violence, or new regulations.
Example: Venezuelan government nationalizing oil companies caused huge losses for foreign businesses.
What are the business implications for conducting international business in different political and economic systems?
- Political risks: Instability or sudden policy changes
- Economic freedom: Market economies offer more flexibility
- Legal differences: Risks include lawsuits, intellectual property violations
Cultural factors also play a role in preventing misunderstandings.
What are property rights?
Legal rights to own and use resources such as land, buildings, and products.
Protected by laws, courts, and enforcement systems.
How is intellectual property protected?
Through legal protections for creations like inventions, designs, and artistic works.
Types include patents, copyrights, and trademarks.
What are the types of intellectual property protections?
- Patents: Protect investments and technologies
- Copyrights: Protect creative work
- Trademarks: Protect brand names and logos
Each type serves to secure different aspects of intellectual property.
Why are intellectual property protections critical in today’s global business environment?
- Encourage innovation
- Ensure safe investment in R&D
- Maintain competitive advantage globally
Example: Apple protects its patents to prevent copying of iPhone technology.
