BUSINESS POLICY Mid-term Examination 1

1. In the Brander and Krugman article A Reciprocal Dumping Model of

International Trade the authors make the paradoxical argument that there may
be benefits for two countries to trade with each other even if they are trading the
same exact products. In other words, producers and consumers will be better off
if these producers trade rather than selling to their own domestic markets.
Explain why this paradox may be true and in what types of situationsfor
example but not limited toproduct type, locations of trading partners, demand,
etc.
Sometimes two companies in two countries produce the same thing and export them
to each other this is called reciprocal dumping. Sometimes this is done do drive out
competition and because it increases the overall welfare of the economies. This is
only worth it when the international transportation costs are less than the domestic
shipping costs. For example, its easier to get something from Maine to Canada than
from Maine to California.
2. According to the textbook and the discussion in class, we noted that managers
should know the language of their workers, understand their attitudes, and
understand their needs. Why is each important? Which is the most important and
why?
Managers are ultimately there to guide the organization toward accomplishing a goal.
Without knowing the language of their workers, understanding their attitudes, and
understanding their needs, this cannot be done. Without the manager understanding the
language, nothing will get done. This goes beyond language barriers such as Japanese
and English, to barriers in the jargon of the everyday work. Someone who is trained in
marketing will not necessarily understand one of the finance or accounting people. It is
important that all of the divisions can interact in order to coordinate certain things, and
a manager is usually the one to facilitate that. It is important to understand employees
attitudes because culturally, everyone comes from different places. According to the
behavioral approach, production increases through the understanding of people. You
need to know what motivates people in order to have greater organizational success.
Understanding needs are important for the same reasons. In addition, Maslows
hierarchy of needs shows that needs higher up are irrelevant until the needs below are
reached. An employee, who struggles everyday to feed his family, will not necessarily
care about the certificate of achievement. The most important for an organization to
run smoothly is to understand the language. That is the first step towards
understanding everything else and making sure the business is ran seamlessly and
successfully.

3. Identify and define the four management process functions. Explain why they are
important in the functioning of an organization and give specific examples of
each.
Planning: involves choosing tasks that must be performed to attain organizational
goals, outlining how the tasks must be performed, and indicating when they should
be performed. This focuses on attaining goals and is where managers outline exactly
what organizations must do to be successful it is essential to getting he right things
done.
Example: If your goal is to increase sales, you first need to map out the
necessary steps. This might include things like increasing advertisements,
putting things on sale, etc.
Organizing: assigning the tasks developed under the planning function to various
individuals or groups. It creates a mechanism to put plans into action. The tasks
should be organized so that the output of individuals contributes to the success of
departments, which is the success of the organization.
Example: Give each employee or section a different job in the plan
some in marketing, etc.
Influencing: guiding the activities of organization members in appropriate directions,
which is just any direction that helps the organization move toward goal attainment.
The ultimate purpose of influencing is to increase productivity.
Example: Going back to employees and make sure they know what
theyre doing and helping them in any areas that help is needed
Controlling: gathering information to measure performance, comparing performance
to pre-established performance standards, and from this, determining whether the
organization should be modified to meet standards. Its an ongoing process
continually gather info, compare and find new ways to improve.
Example: Go back and see if sales are increased and evaluate it.
4. Define Corporate Social Responsibility. What are the arguments for and against
performing social responsibility activities. Take a side on this and support your
position.
Corporate social responsibility is the managerial obligation to take action that
protects and improves both the welfare of society as a whole and the interest of the
organization.
Pro: The business is a subset of society and must therefore help maintain and
improve the overall welfare of society, profitability and growth go hand-in-hand with
responsible treatment of employees, customers, and the community, and it leads to
revenue growth.
Con: Making managers responsible for profit and the betterment of society is a
conflict of interest, its not your money you are spending its the shareholders.
I think it is necessary for companies to have a balance. At the end of the day, I do
believe that it is the shareholders money that the company is using, and although it

is always nice to help others, if you are doing it at the expense of your shareholders,
you will end up with no company at all. On the other hand, however, every company
must somehow contribute at least a little to society. If not by actively helping a
charity out, they should at least do preventative measures and not hurt the
environment. Solely by existing, companies employ many people, giving them jobs
and a livelihood.
5. Creating an ethical environment in the workplace is a major challenge. Name at
least five (5) rules or principles that managers might want to institute in their
organizations. Identify and define each. What are the pros and cons of each.
1. The golden rule: act in a way you would expect others to act toward you
Pro: People generally want to be treated well so will in turn, treat others
well
Con: Everyone cares about different things what is offensive to one
person may not be so someone else
2. The utilitarian principle: act in a way that results in the greatest good for the
greatest number of people
Pro: The majority of people are being benefited
Con: The minority is being overlooked, even if their point makes more
sense
3. Kants categorical imperative: act in such a way that the action taken under the
circumstances could be a universal law or rule of behavior
Pro: Generally, universal rules of behavior are pretty standard and require
people to act nicely
Con: Rules of behavior are different everywhere it may be offensive in
another country
4. The legal test: Is the proposed action or decision legal?
Pro: It ensures that every decision is legal
Con: Not all legal things are the morally correct thing to do
5. The TV test: ask: Would I feel comfortable explaining to a national TV audience
why I took this action?
Pro: most people would be embarrassed to disclose a bad decision they
made to the entire world
Con: Some people would be totally fine with it
6. What are Hofstedes dimensions of culture? Identify and define each. Why is it
important to understand these different dimensions when managing an
international/global business?
Power distance: the degree to which a society promotes an unequal distribution of
power. Countries that highly promote power distance have citizenry that tends to
emphasize, expect, and accept more autocratic than democratic.

Uncertainty avoidance: the extent to which a society feels threatened by uncertain or

unpredictable situations. Countries that are high in uncertainty avoidance prefer
being in more defined and predictable situations.
Individualism and collectivism: the degree to which people in a society operate
primarily as individuals or within groups. People who operate as individuals tend to
focus on meeting their own needs and succeed by competing with others. People
who operate collectively tend to build relationships among others and downplay
individualism.
Masculinity and feminity: the extent to which a culture emphasizes traditional
masculine or feminine values. Traditional masculine values place a high worth on
factors like competitiveness, assertiveness, success an wealth, while traditional
feminine values place a high worth on factors like caring for others and increasing
the quality of life.
Short-term and long-term orientation: the degree to which a culture deemphasizes
short-run success to achieve long-run success. Cultures that focus more on long-run
success emphasize activities like planning, education, rewarding long-run results and
keeping a future oriented perspective. Companies that focus more on short-run
success emphasize training to enable one do a job now, rewarding short-run results
and maintaining a day-to-day perspective.
When managing an international/global business, it is important to recognize the
differences in each country, and to cater to them individually. When you employ one
strategy across the board, it will not work because of the differences in these aspects.
Managers need to know how to properly connect and motivate their employees to do
the best possible job.
7. What are the determinants of opportunity identification? Identify and define each
and explain how each individually and/or collectively help to identify an
entrepreneurial opportunity.
Entrepreneurial alertness: refers to an individuals ability to notice and be sensitive
to new information about objects, incidents, and patterns of behavior in the
environment. When individuals have high levels of entrepreneurial alertness, they
are more likely to identify potential entrepreneurial opportunities. When they dont
have this, they are more likely to dismiss or ignore new info and overlook potential
opportunities.
Information asymmetry: variation in information, which involves both new info and
old info and no two people, share all this info at the same time.
Social networks: represents individuals patterns of social relationships. Some people
have a lot of social relationships while others dont. People with a bigger network
are more likely to identify potential opportunities it also depends on the type of
social network such as whether they are entrepreneurial.
Means-end relationships: people vary on their ability of entrepreneurs to understand
how to turn a new technology into a product or service that will be valued by
consumers. Individuals have to be able to understand how to turn a new technology

into something for commercial application.

8.

Identify and define (in appropriate order) the steps in the planning process.
1. State organizational objectives: this is necessary before planning can begin.
Often planners examine important elements of the environment of their
organizations, such as the overall economy or competitors, when forming
objectives.
2. List alternative ways of reaching objectives: once an objective is clearly stated,
they should list as many available alternatives as possible for reaching those
objectives.
3. Develop premises on which to base each alternative: list all the premises and
assumptions it would take to be accurate for each alternative way to succeed.
4. Choose the best alternative for reaching objectives: look at all the alternatives
and exclude the ones that have unreasonable premises, ad then choose which one
would best accomplish the objective
5. Develop plans to pursue the chosen alternative: develop strategic (long-range)
and tactical (short-range) plans.
6. Put the plans into action: implement the plans.