CH2

Question 1

Political Economy

Answer 1

Political, economic, and legal systems of a country are interdependent, they influence each other.

Question 2

Political Systems

Answer 2

• Collectivism vs Individualism
• Democratic vs Totalitarian

Question 3

Collectivism

Answer 3

The needs of a society as a whole are generally viewed as being more important than individual freedoms.

Question 4

Socialism

Answer 4

Calls for public rather than private ownership or control of property and natural resources. Karl Marx: The few benefit at the expense of the many in a capitalist society where individual freedoms are not restricted.

Question 5

Individualism

Answer 5

• An individual should have freedom in his or her economic and political pursuits
• The interests of the individual should take precedence over the interests of the state.
• Guarantees individual freedom and self expression.
• “Welfare” of society by letting people pursue their own economic self-interests.

Question 6

Democracy

Answer 6

• Democracy and Individualism go hand in hand.
• State power lies in the hands of the people and is exercised by them.

Question 7

Totalitarianism

Answer 7

• Totalitarianism and the communist version of collectivism go hand in hand.
• Prohibits opposition parties, controls and regulates public and private life, political power is centralized and dictatorial.
• No individual freedom.

Question 8

Economic Systems

Answer 8

• Market Economy
• Command Economy
• Mixed Economy

Question 9

Market Economy

Answer 9

-All productive activities are privately owned.
-Production is determined by supply and demand.
-Government encourages vigorous free and fair competition.
-Economic decisions and the pricing of goods are guided by the interactions of a country’s individual citizens and bussinesses.

Question 10

Command Economy

Answer 10

-Government plans the goods and services, quantity and price, then allocates them for “the good of society”.
-All businesses are state owned.
-Historically found in communist economies.
-No incentive for individuals to look for better ways to serve needs.

Question 11

Mixed Economy

Answer 11

• Some sectors are privately owned, some are government owned
• Once common in developed world, less so now
• Government may aid troubled firms

Question 12

Legal Systems

Answer 12

-Rules or laws that regulate behavior.
-Process through which laws are enforced.
- Influenced by the prevailing political system.

Question 13

Different Legal Systems

Answer 13

• Common Law
• Civil Law
• Theocratic Law

Question 14

Common Law

Answer 14

Looks at the past decisions of courts to synthesize the legal principles of past cases.
-Tradition, precedent, custom.
-More flexible than other systems.

Question 15

Civil Law

Answer 15

• Laws organized into codes.
• Less adversarial.
• Focuses on non-criminal duties.
• Determines the rights and obligations of individuals.

Question 16

Theocratic Law

Answer 16

-Based on religious teachings.
-Most common is Islamic law.

Question 17

Contracts

Answer 17

A contract is an agreement between parties, creating mutual obligations that are enforceable by law.

Question 18

United Nations Convention on Contracts for the International Sale of Goods (CISG)

Answer 18

• Establishes a uniform set of rules governing certain aspects of the making and performance of everyday commercial contracts between sellers and buyers who have their places of business in different nations.
• Applies automatically to all contracts for the sale of goods between different firms based in countries that have ratified the convention, unless the parties opt out.

Question 19

Property Rights

Answer 19

Property is a resource that an individual or business owns (land, buildings, equipment, capital, mineral rights, businesses, intellectual property)

Question 20

Public Action

Answer 20

Disciplinary actions, disciplinary fines, reprimands, probations, conditions or restrictions on a licensee, suspensions, summary suspensions, cease and desist orders, revocations, denials of licensure, or any other type of action taken by a member Board that is public.

Question 21

Private Action

Answer 21

Any action instituted by any person that is not a governmental Authority.

Question 22

Foreign Corrupt Practices Act (FCPA)

Answer 22

• Illegal to bribe a foreign government official to obtain or maintain business over which that foreign official has authority.
• Requires all publicly traded companies to keep detailed records that would reveal whether a violation of the act has occurred

Question 23

Protection of Intellectual Property

Answer 23

• Patent
• Copyrights
• Trademarks
• World Intellectual Property Organization
• Paris Convention for the Protection of Industrial Property

Question 24

Product Liability

Answer 24

The area of law in which manufacturers, distributors, suppliers, retailers, and others who make products available to the public are held responsible for the injuries those products cause.

Question 25

The implications for management practice of national differences in political economy:

Answer 25

• Political, economic, and legal systems of a country raise important ethical issues that have implications for international business.
• Political, economic, and legal environments of a country clearly influence the attractiveness of that country as a market or investment site.
• A country with democratic political institutions, market-based economic system, and strong legal system clearly more attractive to do business in.