Business and Economics

INTERNATIONAL BUSINESS MGF2351

Objectives

Group allocations: Get Excited!!!

Tutorial Program Week 2

Any Questions from last week?

International Business Environment

Political Economy: The political economy of a nation refers to how the political, economic, and legal systems of a country are interdependent

Legal systems

Determinants of economic development

Transition economies

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.

Types:

Common Law: tradition, precedent, custom

Civil Law: set of detailed laws, codes

Theocratic Law : religion

Why is it important for IB? Regulates business practice

Defines how business transactions can occur e.g. Sharia law no bank interest

Sets out rights and obligations of parties to a business transaction

Contract Law, Property Rights and Corruption, Protection of Intellectual Property and Product Safety and Liability

Economic Development Different countries have dramatically different

levels of economic development (GNI, PPP)

Human development Index: Amartya Sen

Life expectancy at birth

Educational attainment

Whether average incomes are sufficient to meet the basic needs of life (PPP based average income)

Transition Economies Those economies which have been

characterised by a move towards greater democracy and economic liberalization.

Often from centrally planned economic systems to market based (e.g. BRICS nations, former USSR countries, Central Asian Republics and some African States).

Implications for international business based on attractiveness, costs, and risks.

Q1. The Nobel prize-winning economist Amartya Sen argues that the concept of development should be broadened to include more than just economic development. What other factors does Sen think should be included in an assessment of development? How might adoption of Sen’s views influence government policy? Do you think Sen is correct that development is about more than just economic development? Explain.

Amartya Sen :Human Development Index Eco life should lead to development Development: Freedom (tyranny, social deprivation) Eco development is ONE factor Political freedom will lead to prosperity E.G. Poverty line http://hdr.undp.org/en/countries http://chartsbin.com/view/5352 Facilitate innovative activity and lead to Economic Vitality.

Rampant bribe taking in some countries, however shunned in Australia

Subordination of the interest of their country to the personal gain.

Reduction in the level of transparency in business interactions.

Many nations with rampant bribery appear to be among the most economically underdeveloped.

OK in some countries

China vs India

http://www.youtube.com/watch?v=20gs9aN8stM

http://www.youtube.com/watch?v=lGud_WBWpnE

Q 2.What is the relationship between corruption in a country (e.g., bribe- taking by government officials) and economic growth? Is corruption always bad?

Q 3.What is a country's legal system? Why is it important to international businesses? Compare and contrast the three main types of legal systems in use around the world. What implications do each of these raise for international business?

The rules, or laws, that regulate behaviour along with the processes by which laws are enforced through which redress for grievances are obtained.

It regulates business practice, defines the manner in which business transactions are to be executed, and sets down the rights and obligations of those involved in business transactions.

Case Study: Japan’s Eco Malaise Stagnation of Japanese economy

1980’s: Growth, Economic boom, surpass USA

Bubble burst- Stock market crash, recession, bank debt

Consequences: no lending by banks, no spending, deflation, vicious cycle (negative), job cuts

Stimulation of economy: Infrastructure development, lower/no interest rates, NOT WORKED

Demography: Aging population

Group 1: In the 1980s Japan was viewed as one of the world’s most dynamic economies. Today it is viewed as one of its most stagnant. Why has the Japanese economy stagnated?

Group 2: What lessons does the history of Japan over the last 30 years hold for other nations? What can countries do to avoid the kind of deflationary spiral that has gripped Japan?

Group 3: What do you think would be required to get the Japanese economy moving again?

Group 4: What are the implications of Japan’s economic stagnation for the benefits, costs, and risks of doing business in this nation?

Q1. In the 1980s Japan was viewed as one of the world’s most dynamic economies. Today it is viewed as one of its most stagnant. Why has the Japanese economy stagnated?

The stock market collapsed.

Property prices plunged.

Banks sharply curtailed the easy lending practices that had helped to finance the boom.

Consumers stopped spending pushing the country into a recession. Consumers and businesses expect prices to continue to fall and so continue to delay their purchases despite newly lowered prices pushing the cycle forward.

So far, government efforts to stimulate the economy have been ineffective.

Q2. What lessons does the history of Japan over the last 30 years hold for other nations? What can countries do to avoid the kind of deflationary spiral that has gripped Japan?

– There are similarities between the situation in Japan that led to its economic collapse and continued malaise to the situation that led to the 2008-2009 recession in the United States and its continued fallout today.

– Sufficient regulation of money lending might have prevented the situation.

– The role of the government in attempting to spend its way out of its economic slump. With Japan’s debt now at 200 percent of its GDP the country has few options left to get back on track.

Q3. What do you think would be required to get the Japanese economy moving again?

– Focus on innovation and the government might make it a national priority by supporting entrepreneurs and think tanks.

– Open its doors to immigrants. This could expand the market and help support Japan’s aging population.

Q4. What are the implications of Japan’s economic stagnation for the benefits, costs, and risks of doing business in this nation?

– Japan’s economic malaise offers both opportunities and challenges for companies interested in doing business in the country. On one hand money is cheap and wages are relatively low. On the other hand, consumers are unwilling to spend money and the future government policies to spark economic growth could make could make it more difficult for businesses.

Debate: Group I: Japan Group 2: India

– Despite some problems with laws governing business in India, the country’s long term potential makes it a more attractive destination for investment.

– Japan’s problems cannot continue indefinitely and that now is a great time to gain a competitive advantage in the market and be in a position to capture even more market share when the economy begins to grow again.

– Japan is likely to pose fewer political and legal risks as compared to India making it a more attractive investment location.

– http://in.reuters.com/assets/print?aid=INDEE96700820130708– http://economictimes.indiatimes.com/news/news-by-company/cor

porate-trends/mncs-find-it-tough-to-do-business-in-india-due-to-corruption-and-uncertain-laws/articleshow/21581460.cms

Group Allocations Groups of 3-4 students, Peer evaluation

TOPICS

Culture in International Business (W 4)

Theories of International Trade and Investment (W 5)

The Regulatory Framework (W 6)

FDI and the MNE (W 7)

Cooperation among Nations (W 8)

Foreign Exchange and the International Monetary System (W 9)

The Structure and Strategy of IB (W 10)

Entry Strategies for Internationalising (W 11)

Any Questions?