1.

What are three factors that have led to the increased growth in international business in
recent decades? Which do you think has been most important and why?
Answer:
A. Rise in technology: Every nation is increasing their science and technology domain to develop
their economy. Changes in information technology have led to the growth of nations.
B. Liberalization: Easy compliance procedures have made a way to look for new opportunities
worldwide.
C. Increasing consumer demand: Consumers are developing new preferences. The consumer
market is experiencing a flood in demand of consumers.

The most important are changes happening in technology because technology is supporting the
new ideas and beliefs of individuals like the internet. Due to the internet, individuals can set up
online stores and can reach a wider market than brick and mortar stores. 3 5 6 11

2. What is foreign direct investment? What social factors in the external environment
might affect FDI?
Answer:
Foreign companies purchase the capital and invest it. It helps businesses for increasing
resources, minimizing labour costs, and smooth trading. Several factors can affect FDI, like Tax
and wage rate, products, government policies, etc. For example, a company buys a factory in
India for manufacturing shoes because of the low wage rate. The company needs to check the
availability of raw material and government policies before investing in the manufacturing unit
because it can affect their business.

3. Describe the four major theories discussed in your text that explain why motivation
differs from one country to another.
Answer:
a. Materialism and Leisure: Historically, there is strong evidence that the desire for material
wealth is a prime incentive for the work that leads to economic development.
b. Expectation of Success and Reward: Generally, people have little enthusiasm for efforts that
seem too easy or too difficult, where the probability of either success or failure seems almost
certain. The greatest enthusiasm for work exists when high uncertainty of success is combined
with the likelihood of a very positive reward for success and little or none for failure.
c. Masculinity-Femininity Index: The average interest in career success varies substantially
among countries. In one study, employees with a high masculinity score were those who
admired the successful achiever, had little sympathy for the unfortunate, and preferred to be
the best rather than be on a par with others.
d. Needs Hierarchy: According to this theory, people try to fulfill lower-order needs sufficiently
before moving on to higher ones. People will work to satisfy a need, but once it is fulfilled, it is
no longer a motivator.

4. What is culture shock? How can an international employer help prevent culture shock
and improve the success of expatriates?
Answer:
Culture shock is frustration arising from experiencing a new culture and having to learn and
cope with a vast array of new cultural cues and expectations. Businesspeople can learn to
improve awareness and sensitivity and, by educating themselves, enhance the likelihood of
succeeding abroad and avoiding culture shock. Gathering some basic research on another
culture can be instructive as well as learning the language. There are country guidebooks based
on people's experiences, including those by international managers. Employees can also consult
with knowledgeable people at home and abroad, whether in a governmental or private
capacity to learn about the culture and avoid adjustment problems.

5. What is the difference between individualism and collectivism? What is the relationship
between government and business under each orientation?
Answer:
The principle of individualism emphasizes the priority of individual freedom, self-expression,
and personal independence. Individualism values the individual's ambitions and opposes
external interference by the government that constrains individual choice. Under individualism,
the role of the government is to protect the liberty of individuals to act as they wish, so long as
they do not infringe upon the liberties of others. Countries with an individualist orientation
typically have an economy shaped by the idea of laissez-faire, meaning that the government
should, for the most part, not interfere with business.

In contrast, the principle of collectivism emphasizes the priority of the group—class, society, or
the nation—over the interests of the individual. The group as a whole is greater than the sum of
its individual parts. Individuals define themselves in connection with the group. Under
collectivism, activities in the marketplace must improve the welfare of society. Systems that
feature a collectivist orientation, then, hold that government should intervene in business
situations to ensure that business practices benefit the group.

6. What are the differences between democratic and totalitarian political systems? What
does current research suggest about the spread of democracy and totalitarianism in the
world?
Answer:
In a democracy, power is distributed among citizens who can influence decision-making
through voting and participation. Political freedoms, like freedom of expression and the press,
are upheld. Totalitarianism, centralizes power in one entity, choking dissent and imposing strict
controls on various aspects of life. This includes occupation, income, personal interests, and
even family structure, often enforced through persecution, surveillance, censorship, and
violence. The current global trend indicates a decline in democracy and a rise in
authoritarianism, especially in regions like the Middle East and the former Soviet Union. This
shift raises concerns about the preservation of democratic values and individual liberties on a
global scale.

7. Why is economic freedom an important factor to consider when analyzing a country's

economic development, performance, and potential?
Answer:
Economic freedom helps explain a country's development, performance, and potential. Higher-
rated countries generally outperform laggards on a variety of measures. Countries with high
economic freedom have higher rates of growth and productivity. Income is higher in countries
with higher economic freedom; it more than doubles the worldwide average and is 7 times
higher than in mostly unfree and repressed economies. Positive relationships exist between
economic freedom inflation, and employment. Economic freedom pays social dividends. Life
expectancy, literacy, political openness, and environmental sustainability show positive
relationships with economic freedom. Collectively, data indicate a positive relationship
between economic freedom and various measures of economic performance and quality of life.
The data support the argument that liberating resources from government control improves
financial performance, economic stability, and standards of living.

8. What is the difference between a command economy and state capitalism?

Answer:
State Capitalism is an economic system whereby the State decides how, when, and where
assets will be valued and resources allocated. The State develops national champions, manages
trade relations and exchange rates to promote exports and punish imports, leverages control of
the financial system to provide low-cost capital to domestic industries, and maintains
accommodative legal and regulatory systems. In a command economy, the government owns
and controls resources, commanding the authority to decide what products to make, in what
quantity, at what price, and in what way. Unlike the command economy, State Capitalism is a
system whereby the government explicitly manipulates market outcomes for political purposes.
Politics has a profound and pervasive impact on the performance of markets. The government
uses markets to promote stability and growth, thereby creating the prosperity and wealth that
maximize state power and supports its continued rule. State Capitalism does not have an
ideological component—the government manages markets for long-term political survival and
power projection, not to enforce an abstract ideal or promote the cult of personality as with
the command economy.

9. Explain why the argument that "anything that is legal is ethical" is insufficient.
Answer:
a. The law is not appropriate for regulating all business activity because not everything that is
unethical is illegal.
b. The law is slow to develop in emerging areas of concern. Laws take time to be legislated and
tested in courts. Further, they cannot anticipate all future ethical dilemmas; basically, they are a
reaction to issues that have already surfaced.
c. The law often is based on moral concepts that are not precisely defined and that cannot be
separated from legal concepts. Moral concepts must be considered along with legal ones.
d. The law is often in need of testing by the courts. This is especially true of case law, in which
the courts establish precedent.
e. The law is not very efficient. Efficiency in this case implies achieving ethical behavior at a
very low cost, and it would be impossible to solve every ethical behavioral problem with a law.

10. What is the difference between relativism and normativism? How do these concepts
relate to ethical behavior in international business?
Answer:
Relativism affirms that ethical truths depend on the groups holding them. This makes
intervention by outsiders unethical. The idea of relativism can be expressed by the statement
"When in Rome, do as the Romans do." Normativism holds that there are universal standards of
behavior (based on people's own values) that all cultures should follow, making
nonintervention unethical. Managers thus struggle with implementing a "universal" set of
truths versus adapting to local conditions on the assumption that every place is different and
should be treated differently. Often, a company faces certain pressures to comply with local
norms. These may take the form of laws that permit—or even require—only certain practices
that grant competitive advantages to firms accepting local norms while throwing up roadblocks
in front of companies that try to impose home-country practices in the local arena. Conversely,
firms may face certain pressures not to comply from its home-country government, or even
from constituencies that threaten retaliatory action if it submits to objectionable foreign
practices.

11. How can an MNE operating in a developing country have a positive influence on labor
 policies? Illustrate your answer with an example.
Answer:
MNEs operating in countries with very different labor policies succumb to the pressure to
simply leave the market. Usually, this turns out to be a shortsighted decision. Research shows,
for instance, that companies like Nike have substantially improved the conditions of workers in
overseas facilities.
Granted, MNEs are in no position to revolutionize the employment practices of the countries in
which they operate, but they can improve conditions at subcontract facilities and even
influence the guidelines set by other foreign investors. In the case of IKEA, carpets make up a
small percentage of sales, and it would have been easy to simply give up the product line and
move out of India. But officials at IKEA felt a responsibility to the children and decided to do as
much as possible to make a difference. As IKEA got more involved in India, it set up the IKEA
Foundation and partnered with UNICEF, contributing over $190 million in cash and in-kind
donations to UNICEF programs to help children and their families. IKEA's work with UNICEF
went beyond the issues of the supply chain and moved more into the humanitarian aspect of
how to help the children. The IKEA Foundation targets South Asia, especially India, because of
its supply chain issues, but it also targets that region because of the tremendous need that
exists to help the children.