Sovereign state: a sovereign state is independent & free from all external contr

ol; enjoys free legal equality w/ other states; governs its own territory; selec
ts its own political, econ, & social systems; & has the power to enter into agre
ements w/ other nations. Refers to both powers exercised by a state in relation
to other countries & the supreme powers exercised over its own members.
Political climate for a firm: ideal political climate for a multinational firm i
s a stable, friendly gov. Radical shifts in gov philosophy when an opposing poli
tical party ascends to power, pressure from nationalist & self-interest groups,
weakened econ conditions, bias against foreign investment, or conflicts among go
vs are all issues that can affect the stability of a gov. The concern of MNEs is
the continuity of the set of rules or codes of behavior & the continuation of th
e rule of law regardless of which gov is in power. Italy 50 diff govs since end
of WWII. Institutional Revolutionary Party controlled Mexico from 1929 2000, pol
icies ranged from expropriation of foreign investments to Mexicos membership in N
AFTA & an open door for foreign investment & trade. 5 main political causes of i
nstability: (1) some forms of gov seem to be inherently unstable, (2) changes in
political parties during elections can have major effects on trade conditions,
(3) nationalism, (4) animosity target toward specific countries, (5) trade dispu
tes themselves.
Nationalism: an intense feeling of national pride & unity, an awakening of a nat
ions people to pride in their country. Can take form of anti-foreign bus bias. Ec
on nationalism = national interest & security more important than international
relations.
Confiscation/expropriation/domestication: some of the political risks that are m
ost costly b/c result in transfer of equity from co. to gov, w/ or w/out adequat
e compensation. Most severe is confiscation = seizing of a co.s assets w/out pymt
(ex. Fidel Castro & Shah of Iran), most prevalent in 50s/60s when underdeveloped
countries saw as means of econ growth. Less drastic but still severe is expropri
ation = gov seizes an investment but makes some reimbursement for the assets (ex
. Mexicos CEMEX
ops), often seized assets become nationalized or gov-run entities. Domestication
= host countries gradually cause the transfer of foreign investment to national
control & ownership thru a series of gov decrees that mandate local ownership &
greater national involvement in a co.s mgmt. Typically leads to nationalized bus
that is inefficient, technologically weak, & noncompetitive in world mkts.
Terrorism: although not usually gov initiated, violence is another related risk
for MN co.s to consider in assessing political vulnerability of their acts. Terro
rism has many diff goals when they target MNCorps: embarrassment of a gov & its r
elationship w/ firms, generate funds by kidnapping execs to fin terrorist goals,
use as pawns in political or social disputes not specifically directed at them,
& to inflict terror w/in a country, as did 9/11. 9/11 raised cost of doing bus
both domestic & internationally. In last 30 yrs., 80% of attacks against US are
aimed at American buss.
Common law/code law/Islamic law: common law = basis is tradition, past practices
, & legal precedents set by the courts thru interpretations of statutes, legal l
egislation, & past rulings, seeks interpretation thru the past decisions of highe
r courts which interpret the same statutes or apply established & customary prin
ciples of law to a similar set of facts. Code law = based on an all-inclusive sys
tem of written rules of law, legal systems generally divided into 3 separate cod
es: commercial, civil, criminal. Steps being taken in common-law countries to co
dify commercial law even though the primary basis of commercial law is common la
w. Common law ownership is established by use while code law establishes it by r
egistration. Islamic law (Shariah) = based on interpretations of the Koran. Encom
passes religious duties & obligations, as well as secular aspects of law regulat
ing human acts. Prescribes specific patterns of social & econ behavior for all i
ndividuals. Ex. prohibits pymt of interest/places emphasis on the ethical, moral
, social, & religious dimensions to enhance equality & fairness for the good of
society.
World court adjudication: there is no supranational system of laws. World Court
@ The Hague is the principal judicial organ of the UN. The court is
operative in international disputes btw sovereign nations of the world rather th
an btw private citizens &/or co.s. Disputes btw a co. & a gov or btw 2 co.s must b
e handled in the courts of the country of one of the parties involved or through
arbitration. Which law governs? Jurisdiction determined by: (1) basis of jurisd
ictional clauses included in contracts, (2) basis of where a contract was entere
d into, (3) basis of where the provisions of the contract were performed.
Counterfeiting: difficult to pinpoint, lost sales from the unauthorized use of U
S patents, trademarks, & copyrights amt to more than $300 billion annually, 2 mi
llion jobs lost.
Deterrents to litigation: (1) high cost, (2) delays, (3) extended aggravation, (
4) fear of creating a poor image & damaging PR, (5) fear of unfair treatment in
a foreign court, (6) difficulty in collecting a judgment that may otherwise have
been collected in a mutually agreed settlement thru arbitration, (7) relatively
high amt time required when bringing legal action, (8) loss of confidentiality
b/c litigation is public.
Domestic vs. foreign marketing research: mkting research = systematic gathering,
recording, & analyzing of data to provide info useful to mkting decision makers
. International mkting research involves 2 additional complications: (1) info mu
st be communicated across cultural boundaries (translate research), (2) environm
ents w/in which the research tools are applied are often different in foreign mk
ts.
Primary vs. secondary data: Primary = data collected specifically for the partic
ular research project at hand. Secondary = data collected already by some other
entity or agency.
Quantitative vs. qualitative data:
Quantitative research
* Usually a large number of respondents
* Respondents answer structured oral or written questions using a specific respo
nse format (such as yes/no) or to select a response from a set
of choices * Responses can be summarized in percentages, averages, or other stat
istics * Toto a Japanese firm with the premiers quantitative research on bathroo
m & toilet technology Qualitative research
* If questions are asked, they are almost always open-ended or in-depth * Seeks
unstructured responses that reflect the persons thoughts & feelings on the subjec
t Qualitative research interprets people in the sample & is helpful in revealing
the impact of sociocultural factors on behavior patterns & in developing resear
ch hypotheses
Cultural differences in regard to marketing research participation: Cultural dif
ferences provide best explanation for unwillingness or inability of many to resp
ond to research surveys. The role of the male, the suitability of personal gende
r-based inquiries, & other gender-related issues can affect willingness to respo
nd. Less direct measurement techniques & nontraditional data analysis methods ma
y also be more appropriate
Sampling problems: Problems in sampling stem from the lack of adequate demograph
ic data & available lists from which to draw meaningful samples. Affected by a l
ack of detailed social & economic information * No officially recognized census
information
* No other listings that can serve as sampling frames
* Incomplete & out-of-date telephone directories
* No accurate maps of population centers
Language barriers: most universal survey research problem in foreign countries,
caused by differing idioms & difficulty of exact translation creates problems in
eliciting specific info desired & in interpreting respondents answers. Back tran
slation = translated from one language to another, & then a 2nd party translates
it back into the original. Parallel translation = used to overcome problems, mo
re than 2 translators are used for back translation. Decentering = hybrid of bac
k translation, successive process of translation & retranslation of a questionna
ire,
each time a different translator.
Factors leading to increasing trade & prosperity: transitions from socialist to
mkt-driven econ, liberalization of trade & investment policies in developing cou
ntries, transfer of public-sector enterprises to private sector, & rapid develop
ment of regional mkt alliances.
UN stages of economic development: based on lvl of industrialization MDCs (more d
eveloped countries) = industrialized countries w/ high per capita inc (Canada, E
ngland, France, Germany, Japan, & US). LDCs (less-developed countries) = industri
ally developing countries just entering world trade (Asia & Latin America), with
relatively low per capita inc. LLDCs (least-developed countries) = industrially
underdeveloped, agrarian, subsistence societies w/ rural pops, extremely low per
capita inc & little world trade involvement (Central Africa & parts of Asia), v
iolence and its potential are often associated w/ LLDCs. NICs (Newly Industrialize
d Countries) Chile, Brazil, Mexico, South Korea, Singapore, and Taiwan
First large open market:
Fundamental objective of most developing countries: Industrialization is the fun
damental objective of most developing countries. Most countries see in econ grow
th the achievement of social as well as econ goals: better education, better & m
ore effective government, elimination of many social inequities, & improvements
in moral & ethical responsibilities are some of the expectations of developing c
ountries. Thus econ growth is measured not solely in econ goals but also in soci
al achievements. Experience w/ state-owned buss proved to be a disappointment to
most govs. Instead of being engines for accelerated econ growth, SOEs were misman
aged, inefficient drains on state treasuries. Many countries have deregulated in
dustry, opened their doors to foreign investment, lowered trade barriers, & begu
n privatizing SOEs. The trend toward privatization is currently a major economic
phenomenon in industrialized as well as in developing countries.
Estimating demand: estimating demand involves additional challenges. Most diffic
ulty arising from coexistence of 3 distinct kinds mkts in each country: (1) trad
itional rural/agricultural sector, (2) modern urban/high-inc sector, (3) often v
ery large transitional sector usually represented by low-inc urban slums. Modern
sector = centered in capital city & has jet airports, international hotels, new
factories, etc. Traditional rural sector = tend to work in countryside, as it h
as for centuries. Transitional sector = contains those moving from the country t
o the large cities, managing & mkting to this sector is one of the greatest chal
lenges of the 21st century.
Regional economic cooperative agreements: countries create econ alliances to exp
and access to free mkts & have been around since WWII. Most successful one is th
e EU, the worlds largest multinational mkt region & foremost example of econ coop
eration. NAFTA & Latin American Integration Association (LAIA) & Association of
Southeast Asian Nations (ASEAN) & Asia-Pacific Economic Cooperation (APEC). Worr
ied that cooperative trade groups will become regional trade blocs w/out trade r
estrictions internally but w/ borders protected from outsiders.
WTO world trade organization: @ the most general level, the WTO represents the m
ost important & comprehensive trade agreement in history.
EU advantages: free movement of goods, persons, services, & capital throughout t
he member states; a common currency; common foreign & security policies; common
justice system; cooperation btw police & other authorities on crime, terrorism,
& immigration issues.
Free trade area: requires more cooperation & integration than the RCD. It is an
agreement btw 2 or more countries to reduce or eliminate customs duties & nontar
iff trade barriers among partner countries while members maintain individual tar
iff schedules for external countries. Provides members w/ mass mkt w/out barrier
s to impede the flow of goods & services.
Barriers to EU success: Language & cultural differences, individual national int
erests, political differences, & centuries-old restrictions designed to protect
local national mkts.
Former Soviet Union problems in development: Newly Independent States (NIS) regr
ouped into Commonwealth of Independent States (CIS). Differing econ policies, cu
rrency reform, & control of the military may break them apart. Recently, dispute
over the price & pymts of gas shipped.
Term for PRC & ROC: Peoples Republic of China & Republic of China.
China needs to do what to continue growth?: improve human rights & reform their
legal system.
Three direct links in China: Bundle of more concrete issues facing future talks ab
out One China transportation, trade, & communication. The three direct links issue
must be faced b/c each country has joined the WTO.
What has held Japan back?: Four explanatory themes have emerged: (1) faulty econ
policies (inflated real estate, investment flows into Japan dried up, etc), (2)
inept political apparatus (Japans long entrenched liberal democratic political p
arty & the Hidebound Japanese Bureaucracy), (3) disadvantages due to global circ
umstances (population shrinkage decr productivity, disadv in info age b/c of com
plex language, & American baby boomers operating at peak consumption lvls & oil
@ historical low real prices Japan was late to take part when SUVs became the rag
e in the US during 1990-2007), (4) cultural inhibitions (The Cultural Causation th
eory after WWII entire nation worked toward single goal of national recovery & s
pectacular progress ensuedthen in the 80s the nation decided to step back & look a
round at their manifest achievement they had nothing else, the ? was all right, w
hats next?.
Asian tigers: Hong Kong, South Korea, Singapore, & Taiwan. 1st countries in Asia
, after Japan, to move from a status of developing countries to NIC.
Each has become major influence in trade & development in the econ of the other
countries w/in their spheres of influence.
ASEAN: the fastest growing economies in the region & an incr in trade among memb
ers. 4 major events acct for the vigorous econ growth of the ASEAN countries & t
heir transformation from cheap-labor havens to industrialized nations: (1) ASEAN
govs commitment to dereg, liberalization, & privatization of their econ; (2) dec
ision to shift economies from commodity based to mfg based; (3) decision to spec
ialize in mfg components in which they have a comparative adv; (4) Japans emergen
ce as a major provider of tech & capital necessary to upgrade mfg capability & d
evelop new industries.