Ethics Ethics is the principles, standards and norms
Ethics Ethics is the principles, standards and norms of conduct that govern individual and firm behavior. What is ethical in one
country maybe unethical else where. Also, in some cases, there is a grey area which is legal but unethical. There are two schools of thought. 1) Ethical relativism is an idea that all ethical are relative. 2) Ethical imperialism is an idea
that there is one set of Ethics and we have it. In practice, both of these schools of thought are unrealistic. Ethics helps to combat corruption which is the abuse of public power for private benefits usually in form of bribery in cash or in kind.
Many companies have introduced a code of conduct - a set of guidelin es for making ethical decisions. Japanese gift giving customs Gift giving in Japan is deeply rooted in tradition with gifts given not only for social occasions, but also for social obli gations -- gifts given when indebted to o
thers, both family and business. Many aged Japanese believe gift giving is very ethical. However, if we would gave a very expensive gift to someone fo r some special private help, it would be a not ethical conduct. This is the reason why many companies have a code of co nduct.
The President of US is required to publicly disclose personal financial i nformation, including personal gifts over minimal amounts ($350 as of thi s writing) which have been received by him and his immediate family. For government officials
in USA, no gift but there are exceptions to the pro hibition may allow, for ex ample, the receipt of gifts of minimal value (unde r $20 in value), incidental food or drinks at events, Norms & Ethical challenges
Norms are prevailing practices of relevant players that affect the focal individuals and firms. How firms strategically respond to ethical challenges is often drive n by norms. When confronting et hical challenges, individual firms have four strategic choices.
VW under investigation over illegal software that masks emissio ns The US government has ordered Volkswagen to recall almost 500,000 cars after discovering that the company deployed sophisticated softwa re to cheat emission tests allo
wing its cars to produce up to 40 times more pollution than The Environment Protection Agency (EPA) on Friday accused V W of installing illegal defeat devic e software that dramatically reduc es nitrogen oxide (NOx) emissions but only when the cars are undergo
ing strict emission tests. Four Strategic choices 1. Reactive strategy Deny responsibility. Do less than required. 2. Defensive strategy Accept responsibility. Do the least that is required. 3. Accommodative strategy
Accept responsibility. Do all that is required. 4. Proactive strategy Accept responsibility. Do more than required. Sweatshop A sweatshop is a manufacturing facility characterized by poor work ing conditions, violations of labor l
aw, long hours, and low wages. It is a negatively connoted term for any working environment considered t o be unacceptably difficult or dang erous. The term originated in 1892, when concerned individuals began to spea k up about the unsafe working condi
tions for American garment workers . Today, sweatshops can be found all over the world, although they are an especially big problem in developing nations In some countries, consumers have lobbied major companies t
o reduce their reliance on this ty pe of labor in an attempt to pro mote healthy working condition s for laborers in the third world. There are pros and cons on this issue. In US, Sweatshop is defined as an employer that violates more t
han one federal or state labor law governing minimum wage and ov ertime, child labor, industrial ho mework, occupational safety and health, workers compensation or industry regulation in US. It is argued that sweatshop-type jobs in a developing country are
often a significant improvement ov er other employment options . UK, United States and Japan went thro ugh its own period of sweatshop la bor during its development. China has more than 150million mingong ( ), which is one of th e biggest labor troubles in China fo
r many years. However, it improved its situation a lot recently because of China s high economic growth. Nike Sweatshop (From Wikipedia)
Nike, Inc. has been accused of having a history of using sweatsho ps, a working environment conside red by many people to be dangero us and difficult. Workers can be ex posed to hazardous materials, har mful situations, extreme temperatu res, and abuse from employers.
Sweatshop workers often work long days, sometimes exceeding 14 hours, and earn pay far below a "l iving wage". Now, many firms in developed countries compare the wages and the amount of labor of the workers in Nike factories to de veloped world standards.
Nike Anti-Sweatshop Campaign The Nike Anti-Sweatshop campaign is one branch of a larger global movement aimed at raising awareness about labor conditions i n manufacturing zones of developi ng nations where major global cor porations increasingly contract for
the manufacture of their products. Nike is one of the largest, most popular, and most profitable shoe and c lothing companies in the world. But the reality for many workers overseas maki ng Nike shoes and clothing is far less ro sy. Workers are paid wages insufficient to meet their basic needs, are not allowe
d to organize independent unions, and often face health and safety hazards. IMC Japan In Feb.2009, IMC sold 12,000 Allerhand Ergo one shoulder backpack through Shop Channel TV shopping. (60 minutes & 30 minutes program) 1,200 pieces X JPY10,000= JPY12,000,000
= TBH3,600,000 The fist sales was in August 2008 and we sold 1,000 pieces. This was the second sales a t this TV shopping company. I had confidence on quality of this products because I visited their factory in China and did in line check by mysel f. However, I found a defect of this prod
uct before we get a claim from custome rs. I decided RECALL of this product and told my idea to Shop Channel. The y did not want to do RECALL and w e had a big discussion. Finally, they agree to do RECALL with unwillingness.
IMC lost JPY6,000,000 =TBH1, 800,000 + THB 500,000 sending and returning cost. However, e got a goo d reputation from customers like IMC is a very honest company because they t old customers the defect of the product before customers know. IMC lost around JPY15,000,000 =
THB 4,500,000 because of RECALL act ion. However, IMC got a good reputatio n from customers and TV shopping co mpany. Then, TV shopping company invited IMC again to join their program after t hat accident. (Ordinary, they stop the b usiness.)
PART II : Acquiring Tools We need academic tools for import & export management. Preface Why do nations trade International trade consists of Exporting & Importing. There are two
main sectors in Exporting & Importing ; Goods & Services. Why do nations tr ade? Because, both countries get econo mic gains from international trade. Int ernational trade is a win-win game not zero sum game. International Trade
International Trade EXPORT Goods & Services IMPORT Goods & Services
International Trade vs GDP International Trade GDP World Export & Import Volume
In merchandise export, China, USA , Germany and Japan are leadin g countries and have around 11%, 8 %,7% and 4% world market share re spectively in 2014. In merchandise import, USA is the largest countries and has around 12% world share in 2014.
World trade growth (6%) outpaces GDP growth (3%) averaging 3% duri ng 1998~2008. International Trade would be a key to increase GDP of each country. World export & import value of China is growing very rapidly . Also, India & Thai are growing more than average of
World export & import value. However, we must very carefully check the details of goods. ( ex. Fini shed products or Components) The value chain would be the key for this analyze in this global age. 2014 World Export Ranking
1 China -- EU 2 United States 3 Germany 4 Japan 5 South Korea 6 France 7 Netherlands
-- Hong Kong 8 Russia 9 UK 10 Italy 22 Thailand $2,252,000,000,000 $2,173,000,000,000 $1,610,000,000,000
33,045 70,786 61,923 118,158 156,900 474% Balance of Trade A country trade with the rest of the world
Trade surplus Export Import = (Merchandise & Services) Trade deficit I) Theories of International Trade There are six major theories of international trade. Three classical trade
theories and three modern th eories. International Trade Theory 1. Classical Theories Adam Smith (Absolute Advantage) is one of the most famous economists in hi story and he wrote The Wealth of Nati ons to criticize Mercantilism in 1776.
Then, David Ricardo (Comparative Advantage) improve Adam Smith idea in 1817. 2. Modern Theories In 1966, Raymond Vernon (Product life Cycle) pointed out that trade is not static in real world. In 1980s, Brander & Spen cer (Strategic Trade) insisted that strateg
ic intervention by governments would aff ect international trade results. The most resent theory is Michael Porter (National Competitive Advantage of Industries). Classical Trade Theories 1.Mercantilism 2. Absolute Advantage
3.ComparativeAdvantage International Trade Theories Modern Trade Theories 4.Product Life Cycle 5.Strategic Trade 6. National Competitive Advantage of
Industries. 1) The Mercantilism ( 1600~1800) If a country would promote favorable trade balance (a surplus of exports over imports), it would realize net pay ments received from the rest of the wor ld in the form of gold and/or silver. Such revenues would contribute to
increased spending and a rise in domestic output and employment. To promote a favorable trade balance, the mercantilists advocated government regulation of trade. Tariffs, quotas, and other commercial policies were proposed by the mercantilists to minimize imports in or
der to protect a nations trade position. However, this economic policy could pr ovide at best only short term economic advantage. Mercantilism; International trade is a zero-sum game. The wealth of the world is fixed. A nation should export more a
nd import less. A country gets trade surplus in the form of gold & silver. 2) Absolute Advantage This is the international trade theory by Adam Smith that Speciali zation and Free trade will be beneficial for the world. The world g ains benefit from specialization and i
nternational trade. In this case, each nation must have a good that it is ab solutely more efficient in producing t han the other nation. When one nation has an absolute cost advantage (using les s labor to produce a unit of outpu t) in one goods and the other nati
on has an absolute cost advantage in the other goods, a nation shoul d concentrate on producing this g oods. Then a nation export the goods in which it has an absolute cost adva ntage and import the other goods i n which it has an absolute cost dis
advantage. Absolute Advantage before Specialization In a 2-nation, 2-product world. To make 1 unit Car Japan hours
Thailand Rice 10 hours 20 40 hours
10 hours Production and Consumption without Trade Use 100 hours each product Car
Rice Japan 10.0 units 5.0 units Thailand 2.5 units 10.0 units ----------------------------------------------------------------Total production 12.5 units
15.0 units Production with specialization Car Rice Japan 20.0 0.0 Thailand
0.0 20.0 ------------------------------------------------------------------Total production 20.0 20.0 Japan Trades 6 units of Car for 6 units of Thai Rice Japan Thailand
Car Rice 14.0 (10.0) 6.0 (5.0) 6.0 (2.5) 14.0 (10.0) Gain from International Trade Japan Thailand
Car 4.0 3.5 Rice 1.0 4.0 Thailand could consume 3.5 units more car t
han it could have consumed before specialization and trade and 4 units more ric e. And Japan could consume 4.0 units more c ar than it could have consumed before specia lization and 1 unit more rice. As a result of sp ecialization and trade, output of both car and rice would be increased, and consumers in bo th nations would be able to consume more.
b) Absolute advantage Adam Smith (1723~1729), the Farther of modern Economics, is the author of The We alth of Nations which is the first modern wo rk of Economics. Smith was a leading advocate of free trade. Smiths trading principle was the pri nciple of absolute advantage. With free tra
de, nations could concentrate their producti on on goods they could make most cheaply, with all the consequent benefits of the divisi on of labor. 3) Comparative Advantage Comparative Advantage is still one of the most important international trade t heories. This theory is one step further th
an the absolute advantage by exploring what might happen when one nation has an absolute advantage in the production of all goods. David Ricardo (1772~1823) made Adam Smiths theory improved by exploring what might happen when one country h as an absolute advantage in the producti
on of all goods. Ricardo developed a principle to show that mutually beneficial trade can occur even when one nation is absolutely more efficient in the production of all goods. Ricardo emphasized the supply side of the market. The immediate bases for trade stemmed from cost differen
ces between nations, which were unde rlaid by their natural and acquired a dvantages. Also, Ricardo emphasized the importance of absolute cost differences among nations. Specialization According to Ricardos theory of
comparative advantage, it makes sens e for a country to specialize in the p roduction of those goods that it produ ces most efficiently and to buy the goo ds that it produces less efficiently fro m other countries, even if this means buying goods from other countries th at it could produce more efficiently its elf.
Specialization Video https://www.youtube.com/watch? feature=player_detailpage&v=e0H7r_Dl1CQ Comparative Advantage Before Specialization In a 2-nation, 2-product world To make 1 ton
Mango Rice Thailand 10.0 hours 13.33 hours Japan 40.0 hours
20.0 hours Production and Consumption without Trade Use 100 hour /product Mango Rice Thailand Japan
12.5 tons After swapping 4 tons of rice with Thailand which gets 4 tons of rice from Japan , Japan still ends up with 6 tons of rice, which is more than it had before specialization. In addition, the 4 tons of Mango it receives in exchange is 1.5 tons more
than it produced before trade. Specialization Mango Thailand Rice
15.0 (10.0) 3.75(7.5) Use 150 for Mango /50 for Rice Japan 0.0 (2.5) 10.0 (5.0) Use 200 for rice
---------------------------------------------------------------- Total production 15.0(12.25) 13.75(12.5) Thailand 4 tons of Mango to Japan 4 tons of Rice from Japan Mango Thailand Japan
11.0 4.0 7.75 6.00 Rice
Gains from Trade Mango Rice Thailand 11.0 7.75
10.0 7.50 ------------------------------------------------------1.0 0.25 Japan 4.0 6.0
2.5 5.0 -------------------------------------------------------1.5 1.0 If Thailand exchanges 4 tons of Mango with Japan for 4 tons of rice, it still left with 11 tons of rice, which i
s 1 ton more than it had before trade. In exchange for its 4 tons of Mango, when added to the3.75 tons it now produces domestically, leaves it with a total of 7.75 tons of rice, which is 2. 5 ton more than it had before speciali zation. The basic message of the theory of
comparative advantage is that potential world production is greater with unrestric ted free trade than it is with restricted tra de. Ricardos theory suggests that consumers in all nations can consume more if there a re no restrictions on trade. This occurs ev en in countries that lack an absolute adva ntage in the production of any good.
. In other words, to an even greater degree than the theory of absolute advantage, the theory of comparati ve advantage suggests that trade is a positive-sum game in which all co untries that participate realize econ omic gains.
Thailand WHY 150/50 ? Production with specialization Thailand Use 200 for Mango Japan Use 200 for rice
Mango 20.0 Rice 0.00 0.0 10.0
Summery Theory of Comparative Advantage Theory of comparative advantage was explained by David Ricardo in 1817 and it improved Adam Sm iths the theory of absolute advant age.
This is the theory that focuses on the relative (not absolute) advantage in one economic activity that one nation enjoys in compariso n with other nations. Even without an absolute advantage, still a nation gains from international trade.
Opportunity Cost Opportunity cost is the cost of purchasing one activity at the expensive of another activity, give t he alternatives. For example : Thailand produces more rice and less apples. Japan pr oduces more apples and less rice fr
om the decision of selecting less op portunity cost. Factor Endowments Theory In 1933, Heckscher & Ohlin explained that absolute & comparative advantage stem from different factor endowments . A factor endowment is commonly understood as the amount of land, labor,
capital, technology and entrepreneurship th at a country possesses and can exploit for m anufacturing. This theory proposed that nati ons will develop comparative advantage bas ed on their locally abundant factors. 4) Product Life Cycle The three classical theories have an assumption of static economic situation.
However, in the real world, factor endowments and trade patterns change over time. Thailand was an importer of cars for many years but now it became an exporter. This is the first dynamic international trade theory which accounts for changes in the pat terns of trade over time by focusing on prod uct life cycles.
In 1966, Raymond Vernon explained his dynamic (not static) theory of international trade in his book. He divided the world into three categories. A. The lead innovation country (USA) B. Other Advanced countries
C. Developing countries Every product has three life cycle stages: 1. New product 2. Maturing product 3. Standardized product 5) Strategic Trade Absolute Advantage & Comparative
Advantage do not say anything about the rol e of governments. Smith & Ricardo insisted no government intervention would be better for (international) trade - Free Market. Strategic Trade theory suggests that strategic intervention by gover nments in certain industries can enhance its possibilities for international success.
Highly capital-intensive industries like as the com mercial aircraft industry with high barriers to entry where domestic firms may have little chance of enteri ng and succeeding without government assistance.
trade theorists propose only a few strate gically important industries, not a ll industries like Mercantilists did. Airbus by EU countries (France, Germany, UK & Spain) would be the best example. Boeing vs. Airbus
Japanese government decided to subsidize Elpida Memory Inc. whic h is a manufacture of DRAM for P C to cope with Korean manufactur es . Dynamic random-access memor y (DRAM) is a type of random-acce ss memory that stores each bit of da ta in a separate capacitor within an
integrated circuit. This kind of subs idize would increase year by year. Boeing vs. Airbus No subsidize from government Boeing vs. Airbus Subsidize to airbus $10billion from government
6) National Comparative Advantage Theory of National Comparative Advantage focus on why certain industries within a nation are competitive internationally. The competitive advantage of certain industries in different nations depends on 4 aspects. 1. Factor endowments 2. Domestic demand conditions
3. Domestic firm strategy 4. Related & supporting industries The dynamic interaction of these four aspects explains what is behin d the competitive advantage of lead ing industries in different nations. This theory is the first multilevel theory to realistically connect
firms, industries and nations. Some critics argue that this theory places too much emphasis on domestic conditions. In this global age, some cases, overseas demand is more important than domestic dem and.
7) Evaluating Theories of International Trade 1. The classical pro free trade theories seem like common sense today. Although, these theories have as sumptions of two-nation & two-produ ct world, perfect resource mobility, no foreign exchange complications and ze ro transportation costs, free trade still
beneficial as Smith & Ricardo suggest ed in the real world. 2. Modern theories rely on more realistic product life cycles, firstmover advantages and the diamond th eory to explain and predict patterns of trade. 3. The victory of pro-free trade theories is not complete. The political r
ealities governing international trade i ndicate that Mercantilism is still alive. Mid Term Examination II) Realities of International Trade
International Trade has substantial mismatches between theories and realties. The political realties are that ple nty of trade barriers exist. There are two types of trade barriers; 1) Tariff Barriers 2) Nontariff Barriers 1) Tariff Barriers
A trade barrier is a means of discouraging imports by placing a tariff on imported goods. An import tariff is a tax imposed on a good bro ught in from another country. When import tariffs are imposed, net losses called deadweight costs occur. Although everybody in a country suffers because of high price, the government must list en to the powerful lobby. (political realties)
2) Nontariff Barriers (NTBs) Tariff barriers are criticized around the world and nontariff barriers are choice in trade wars, now. NTB discourages imports using means other than taxes on imported goods. NTB
Subsidies Import Quota Export Restraints Local Contents requirements Administrative Policies Antidumping duties Subsidies Subsidies are government
payments to domestic firms like the EU s Common Agricultural Policy (CAP) and Japans rice subsidy.
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