M2A2 Discussion Chapter 3 Questions 1-3

MAN4442

1. What is the relationship among property rights, corruption, and economic progress? How

important are anticorruption efforts in the effort to improve a country’s level of economic

development?

 Property rights, or legal rights over the use of resources (property) for income, are very

important to any business. According to the textbook, strong legal protection of

property rights is required for innovation and entrepreneurial activity to take place in

the market. This results in economic growth for that business or area. Without these

rights- no business would come out with new ideas. It would not be profitable when

anyone can take that property and use it as their own. Corruption in relation to property

rights takes place when state bureaucrats grant company a license to do business in a

certain area. It is extremely important that anticorruption efforts take place in areas

such as Haiti, which have been affected economically. With better protection and

definition of property rights, Haiti would be able to get out of poverty.

2. You are a senior manager in a U.S. automobile company considering whether to invest in

production facilities in China, Russia, or Germany. These facilities will serve local market

demand. Evaluate the benefits, costs, and risks associated with doing business in each nation.

Which country seems the most attractive target for foreign direct investment? Why?

 When deciding where to do business, the risks of choosing China outweigh the benefits.

China is not a free country and is mostly unfree in terms of economic freedom. This can

cause a strain on profitability. The benefits of China include being amongst the upper

middle income bracket and having medium human development, compared globally.

Russia’s economic environment is very similar to China’s, given the communist

shares the same freedom levels. After looking over the maps from Chapter 3 of the

textbook (and using my knowledge as a senior manager), I believe that Germany would

be the best choice for doing this international business. Germany is the most relatable

to the U.S. With high income and human development, as well as being mostly free

economically. Germany and the U.S. have the same average annual growth rate making

this automobile company likely to reach its goals there.

3. Reread the Country Focus on India, and answer the following questions:

(1) What kind of economic system did India operate under during 1947- 1990? What kind of

system is it moving towards today? What are the impediments to completing this

transformation?

 India adopted a democratic system of government and had a mixed economy during the

years 1947-1990. The economy mostly consisted of state-owned companies, subsidies,

and central planning. After 1991 many business sectors were opened to the private

enterprises in an effort to increase wealth and GDP. Political opposition impedes further

transformation in India still today. Laws in place make it difficult to thrive in the private

sector in this country.

(2) How might widespread public ownership of businesses and extensive government

regulations have affected the (a) the efficiency of state and private businesses and (b)

the rate of new business formation in India during the 1947-1990 time frame? How do

you think these factors affected the rate of economic growth in India during this time

frame?
 The public or state ownership of enterprises, along with regulations and tariffs enforced

in India, caused widespread economic distress. Strict laws and regulations on

production, as well as large barriers for government permission made it impossible to be

efficient and profitable. These large barriers also made the rate of new business

formation in the private sector slow. The slow development resulted in an extremely

low GDP compared to India’s huge population. The economy was completely unable to

prosper without the help of the private sector.

(3) How would privatization, deregulation, and the removal of barriers to foreign direct

investment affect the efficiency of business, new business formation, and the rate of

economic growth in India during the post-1990 time period?

 In India post-1990 the economy has expanded. GDP and foreign direct investment grew

exponentially over the next 20 years. The private sector was given the ability to develop

into a thriving economy after the regulation and barriers were removed. Today India is

actually has a position in the global market and is more successful.

(4) India now has pockets of strengths in key high- technology industries such as software

and pharmaceuticals. Why do you think India is developing strengths in these areas?

How might success in these industries help generate growth in the other sectors on the

Indian economy?

 India has emerged with strengths in areas such as pharmaceuticals due to their ability to

produce them at a low cost- therefore creating high profit. With such a large and

growing population, it is no wonder these areas have become so important. The

increase in profit generated by these practices have gone back into the Indian economy,

helping everyone else grow as well.

an attractive target for inward investment by foreign multinationals selling consumer

products? Why?

 I think that India is an attractive target for investment due to its rapidly expanding

economy. India continues to flourish while still dealing with the lasting effects of the

previous era. The challenges facing India today are still being worked out and in the

future I believe that India will continue to increase wealth.

Hill, C. W., & Hult, G. T. (2016). Global business today (Ninth ed.). New York, NY: McGraw-Hill Education

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