July 21, 2008 Second Discussion Section: Culture & Ethics; International Trade
Nov 20, 2014
July 21, 2008Second Discussion Section:
Culture & Ethics; International Trade
AgendaChapters 1, 2 in a Nutshell Review Chapters 3 and 4Discussion 1:
Selling Domino’s Pizza WorldwideReview Chapters 5 and 6Discussion 2:
Boeing v. Airbus
Chapters 1 and 2Chapter 1:
What is globalization?What is driving globalization?What are the trends in globalization?What are the debates about globalization?
Chapter 2:How are countries different: politically, economically,
legally?What are the factors leading to economic development?
How to measure economic development Protection of property rights + Innovation? What about the
legal and political systems of the country?
Chapter 3: Differences in CultureWhat is Culture?
Values and NormsCulture, Society, and the Nation-StateThe Determinants of Culture
Social StructureIndividuals and GroupsSocial Stratification
Religious and Ethical SystemsLanguageCulture and the Workplace
Hofstede study Power distance; individualism vs. collectivism;
uncertainty avoidance; masculinity vs. femininity
Chapter 3 Learning GoalsKnow what is meant by the culture of a
society.Identify the sources that lead to differences
in social culture.Identify the business and economic
implications of differences in culture.Understand how differences in social culture
influence values in the work place.Develop an appreciation for the economic
and business implications of cultural change.
Chapter 3 Exercise: Domino’s Pizza commercials from around the world U.S.
http://www.youtube.com/watch?v=8QuozSISqW4 http://www.youtube.com/watch?v=VIHj7f8mOLI http://www.youtube.com/watch?v=YoZhpsNztgY
Australia http://www.youtube.com/watch?v=iyHQHEWpf3A http://www.youtube.com/watch?v=f5J8TnWHxVI
Mexico/Latin America http://www.youtube.com/watch?v=x8tSR-itf9o http://www.youtube.com/watch?v=YTqtta8VMyo
Europe http://www.youtube.com/watch?v=MdTXbQ6t5os http://www.youtube.com/watch?v=GRpixqTRejs
Middle East Israel: http://www.youtube.com/watch?v=lOKPCxRKhdg
Asia Japan: http://www.youtube.com/watch?v=HOlsj46QOwU Korea: http://www.youtube.com/watch?v=hh52CqPVj6E
http://www.youtube.com/watch?v=_k7kcEqdaH4 India: http://www.youtube.com/watch?v=nhz9JjN942k
http://www.youtube.com/watch?v=pTQskWbBtW8&feature=related
Chapter 3: Critical ThinkingOutline why the culture of a country might
influence the costs of doing business in that country. Illustrate your answer with examples.
Chapter 3: Critical ThinkingChoose two countries that appear to be
culturally diverse. Compare the culture of those countries and then indicate how cultural differences influence (a) the costs of doing business in each country, (b) the likely future economic development of that country, and (c) business practices.
Domino’s Discussion Questions1. Domino’s has successfully grown its
international presence very quickly. Compare and contrast its strategy with that of another well-known international fast food operation, McDonald’s. What similarities do you see? Are they any significant differences between the two companies? What has led to the success of Domino’s?
Domino’s Discussion Questions2. While its pizza appears to be universally
accepted, Domino’s has had to make some adjustments to its marketing mix. Discuss the different components in the marketing mix and how the company has responded to local needs.
Chapter 4: Ethics in International Business Ethical issues in International Business
Employment Practices; Human Rights; Environmental Pollution; Corruption; Moral obligations
Ethical Dilemmas What are they?
The Roots of Unethical Behavior How do they arise?
Philosophical Approaches to Ethics Straw Men
Friedman Doctrine; Cultural Relativism; Righteous Moralist; Naïve Immoralist
Utilitarian and Kantian Ethics Rights Theories Justice Theories
Ethical Decision Making Hiring and Promotion; Organization Culture and Leadership;
Decision-Making Processes; Ethics Officers; Moral Courage
Chapter 4 Learning GoalsBe familiar with the ethical issues faced by
international businesses. Recognize an international dilemma. Discuss the causes of unethical behavior by
managers. Be familiar with the different philosophical
approaches to ethics. Know what managers can do to incorporate
ethical considerations into their decision making.
Chapter 4 Critical ThinkingQUESTION 1: A visiting American executive
finds that a foreign subsidiary in a poor nation has hired a 12-year-old girl to work on a factory floor, in violation of the company’s prohibition on child labor. He tells the local manager to replace the child and tell her to go back to school. The local manager tells the American executive that the child is an orphan with no other means of support, and she will probably become a street child if she is denied work. What should the American executive do?
Chapter 4 Critical ThinkingQUESTION 2: Under what conditions is it
ethically defensible to outsource production to the developing world where labor costs are lower when such actions also involve laying off long-term employees in the firm’s home country?
Chapter 4 Critical ThinkingQUESTION 3: Are facilitating payments
ethical?
Chapter 4 Critical ThinkingQUESTION 4: Drawing upon John Rawls’s
concept of the veil of ignorance, develop an ethical code that will (a) guide the decisions of a large oil multinational toward environmental protection, and (b) influence the policies of a clothing company to outsourcing of manufacturing process.
Chapter 5: International Trade Theory An Overview of Trade Theory
Mercantilism Absolute Advantage (Adams Smith) Comparative Advantage (David Ricardo)
The Gains from Trade/Qualifications and Assumptions Simple Extensions of the Ricardian Model
Heckscher-Ohlin Theory The Leontief Paradox
The Product Life-Cycle Theory (Raymond Vernon) Evaluating the Product Life-Cycle Theory
New Trade Theory (1970’s economists) Increasing Product Variety and Reducing Costs Economies of Scale, First-Mover Advantages and the Pattern of Trade Implications of New Trade Theory
National Competitive Advantage: Porter’s Diamond Factor Endowments Demand Conditions Related and Supporting Industries Firm Strategy, Structure, and Rivalry Evaluating Porter’s Theory
Chapter 5 Learning GoalsUnderstand why nations trade with each other.Be familiar with the different theories explaining trade
flows between nations.Understand why many economists believe that unrestricted
free trade between nations will raise the economic welfare of countries that participate in a free trade system.
Be familiar with the arguments of those who maintain that government can play a proactive role in promoting national competitive advantage in certain industries.
Understand the important implications that international trade theory holds for business practice.
Chapter 5: Critical ThinkingWhat are some potential costs of adopting a
free trade regime? Do you think governments should do anything to reduce these costs? What?
Chapter 5: Critical ThinkingThe world’s poorest countries are at a
competitive disadvantage in every sector of their economies. They have little to export. They have no capital; their land is of poor quality; they often have too many people given available work opportunities; and they are poorly educated. Free trade cannot possibly be in the interest of such nations! Discuss.
Chapter 5 Critical ThinkingUnions in developed nations often oppose
imports from low-wage countries and advocate trade barriers to protect jobs from what they often characterize as “unfair” import competition. Is such competition “unfair”? Do you think that this argument is in the best interests of (a) the unions, (b) the people they represent, and/or (c) the country as a whole?
Chapter 5 Critical Thinkinga) Who benefits from the outsourcing of skilled white
collar jobs to developing nations? Who are the losers?b) Will developing nations like the United States
suffer from the loss of high skilled and high paying jobs to other countries?
c) Is there a difference between the transference of high paying white collar jobs, such as computer programming and accounting, to developing nations, and low paying blue collar jobs? If so, what is the difference, and should government do anything to stop the flow of white collar jobs out of the country to countries like India?
Chapter 5 Critical ThinkingDrawing on the new trade theory and
Porter's theory of national competitive advantage, outline the case for government policies designed to build a national competitive advantage in biotechnology. What kind of policies would you recommend the government adopt? Are these policies at variance with the basic free trade philosophy?
Chapter 6: The Political Economy of International Trade Instruments of Trade Policy
Tariffs Subsidies Import Quotas and Voluntary Export Restraints Local Content Requirements/ Administrative Policies Antidumping Policies
The Case for Government Intervention Political Arguments for Intervention
Protecting jobs and industries; national security; retaliation; protecting consumers; furthering foreign policy objectives; protecting human rights
Economic Arguments for Intervention The infant industry argument; strategy trade policy
The Revised Case for Free Trade (or, counter-arguments to the case for government intervention)
Retaliation and Trade War Domestic Politics
Development of the World Trading System From Smith to the Great Depression 1947–1979: GATT, Trade
Liberalization, and Economic Growth 1980–1993: Protectionist Trend The Uruguay Round and the World Trade Organization WTO: Experience to Date The Future of the WTO: Unresolved Issues and the Doha Round
Chapter 6 Learning GoalsDescribe the policy instruments used by
governments to influence international trade flows.
Understand why governments sometimes intervene in international trade.
Articulate the arguments against strategic trade policy.
Describe the developments of the world trading system and the current trade issues.
Explain the implications for managers of developments in the world trading system.
Chapter 6: Critical ThinkingDo you think that governments should
consider human rights when granting preferential trading rights to countries? What are the arguments for and against taking such a position?
Chapter 6: Critical ThinkingWhose interests should be the paramount
concern of government trade policy - the interests of producers (businesses and their employees) or those of consumers?
Chapter 6: Critical ThinkingGiven the arguments relating to the new
trade theory and strategic trade policy, what kind of trade policy should business be pressuring government to adopt?
Chapter 6: Critical ThinkingYou are an employee of an U.S. firm that produces
personal computers in Thailand and then exports them to the U.S. and other countries for sale. The personal computers were originally produced in Thailand to take advantage of relatively low labor costs and a skilled workforce. Other possible locations considered at that time were Malaysia and Hong Kong. The US government decides to impose punitive 100% ad valorem tariffs on imports of computers from Thailand to punish the country for administrative trade barriers that restrict U.S. exports to Thailand. How do you think your firm should respond? What does this tell you about the use of targeted trade barriers?
Boeing versus AirbusBoeing 787 Dreamliner
http://www.youtube.com/watch?v=mBuC9_jRVQ0
Airbus A380http://www.youtube.com/watch?
v=AK10MxtCAHc
Subsidy Dogfight: Boeing v. AirbusWhat are the facts?
Boeing’s development of Boeing 7E7 (now 787), which promises as much as 20% reduction in operating costs
Alliance with three Japanese companies1992 Agreement limits state aid that both
companies can receive from respective governmentsDoes 1992 Agreement extend to other parties in the
project? Japanese MET? State of Washington and Kansas
Airbus applies for launch aid for A350, direct competitor to 787
Dispute now before WTO as to the legality of the various subsidies
Boeing v. AirbusBoeing’s Claim
Airbus receives subsidies from UK, France, German and Spain Why is this bad? $13.5 billion government subsidies between 1970 and 1990 ($25.9
billion if commercial interest rates applied) Loans at below market interest rates and tax breaks Airbus is believed to have financed 80% of the cost of aircraft for a
term of 8 to 10 years at an annual interest rate of approximately 7% In contrast, US Export Import Bank required 20% down payments
from Boeing customers, financed only 40% of the cost of an aircraft directly, and guaranteed financing of the remaining 40% by private banks at an average interest rate to 8.5 for 10 years
Airbus received government $3.7 billion launch aid and $2.8 billion in indirect subsidies for the development of the A380 superjumbo and need not repay the aid if the aircraft is not a commercial success
Catalyst for latest dispute: launch aid for A350, direct competitor to B-787 ($700 million by UK, 30% launch aid from EU)
Boeing v. AirbusAirbus’ claims
Airbus success due not to subsidies but to good products and strategy Boeing benefited from US government aid for a long time Planes were built under government WWI, WWII. Boeing 707, for
example, was subsidized by the US government 1991 EC study contended that Boeing/McDonnell Douglas received
$18 to $22 billion in indirect aid between 1976 and 1990. US Dept of Defense gave as much as $6.34 billion from 1976 to 1990, and NASA gave $8 billion to commercial aircraft production. Moreover, tax exemptions gave an addition $1.7 billion to Boeing and $1.4 billion to MD
Boeing rejected these claims, saying no additional 5% for commercial work for every defense contract; only 3% of Boeing’s R&D from Department of Defense, and only 4% from NASA funding
Airbus contends: Boeing received some $12 billion from NASA to develop technology, much of it found its way to commercial jet aircraft
Airbus further contends: Boeing would receive as much as $3.2 billion in tax breaks from Washington, $1 billion in loans from the Japanese government
Boeing v. AirbusHow might the repayable launch aid for
Airbus change its decision making on launching a new aircraft? What are the potential consequences for (a) Boeing, (b) airlines, and (c) the profitability of both Boeing and Airbus?
Boeing v. AirbusWhen Airbus originally received government
aid back in the 1960s, it was a new enterprise. Today it is the global market share leader in the commercial aerospace business. How do gains in market share effect the legitimacy of claims for subsidies?
Boeing v. AirbusDo you think that R&D contracts from NASA
and the Pentagon benefit Boeing’s commercial aerospace business? How?
Boeing v. AirbusAt this point, what do you think is the most
equitable solution to the long running battle between the US and EU on subsidies for commercial aircraft development?