Multinational Enterprise (MNE)
any business that has productive activities in two or more countries
Globalization
the shift toward a more integrated and interdependent world economy
interdependent, integrated global economic system
The world is moving away from self-contained national economies toward an _____
Globalization of markets
refers to the merging of historically distinct and separate national markets into one huge global marketplace.
land, labor, energy, and capital
Firms source goods and services from locations around the globe to capitalize on national differences in the cost and quality of factors of production like
Collectivism
work together; many control; common goals
Individualism
work alone; fear control; individual goals
Socialism
state control of factors of production; economy
Capitalism
rewards few; punishes many
Communism
believed that socialism could be achieved only through violent revolution and totalitarian dictatorship
Social democrats
committed themselves to achieving socialism by democratic means, turning their backs on violent revolution and dictatorship.
Democracy
refers to a political system in which government is by the people, exercised either directly or through elected representatives
Totalitarianism
is a form of government in which one person or political party exercises absolute control over all spheres of human life and prohibits its opposing political parties.
Communist totalitarianism
found in states where the communist party monopolizes power
Theocratic totalitarianism
found in states where political power is monopolized by a party, group, or individual that governs according to religious principles
Tribal totalitarianism
found in states where a political party that represents the interests of a particular tribe monopolizes power
Right-Wing totalitarianism
permits some individual economic freedom, but restricts individual political freedom
Market Economy
all productive activities are privately owned and production is determined by the interaction of supply and demand
Command Economy
government plans the goods and services that a country produces, the quantity that is produced, and the prices as which they are sold
Mixed Economy
certain sectors of the economy are left to private ownership and free market mechanisms while other sectors have significant state ownership and government planning
Legal System
the rules that regulate behavior along with the processes by which the laws are enforced and through which redress for grievances is obtained
Common Law
based on tradition, precedent, and custom
Civil Law
based on detailed set of laws organized into codes
Theocratic Law
the law that is based on religious teachings
Contract
document that specifies the conditions under which an exchange is to occur and details the rights and obligations of the parties involved
Contract Law
is the body of law that governs contract enforcement
common law system
under a _____ , contracts tend to be very detailed with all contingencies spelled out
Property Rights
the legal rights over the use to which a resource is put and over the use made of any income that may be derived from that resource
Private action
theft, piracy, blackmail
Public action
legally - ex. excessive taxation or illegally - ex. bribes or blackmailing
Private and Public Action
property rights can be violated through _____ and _____
The Foreign Corrupt Practices Act
makes it illegal for U.S. companies to bribe foreign government officials to obtain or maintain business over which that foreign official has authority (facilitating or expediting payments to secure or expedite routine government action are permitted)
Patents
exclusive rights for a defined period to the manufacture, use, or sale of that invention
Copyrights
the exclusive legal rights of authors, composers, playwrights, artists, and publishers to publish and disperse their work as they see fit
Trademarks
design and names by which merchants or manufacturers designate and differentiate their products
Gross national income (GNI)
per person measures the total annual income received by residents of a nation
purchasing power parity (PPP)
need to adjust GNI figures using _____
high
Japan, Sweden, Switzerland, and the U.S. have _____ GNI
low
China and India have a _____ GNI
Innovation and Entrepreneurs
What drives economic growth?
Human Development Index (HDI)
based on life expectancy at birth, educational attainment, and whether average incomes are sufficient to meet the basic needs of life in a country
Russia-Asia, Europe, Mid-Africa
Leaders in annual growth
Market economy, economic freedom = economic growth. Legal Protection of property rights and profit from innovation.
What makes a country conducive to #1
Democracy. Totalitarianism if it has a market system and property rights
What government system conducive to #1
Geographic location and Education
What other factors contribute to country and government system success?
deregulation
removing legal restrictions to the free play of markets, the establishment of private enterprises, and the manner in which private enterprises operate
privatization
transfers the ownership of state property into the hands of private investors