WGU C211 Post Assessment Study Guide 2023 Globalization (Chapters 1, 5, 6, 11)

WGU C211 Post Assessment Study Guide 2023 Globalization (Chapters 1, 5, 6, 11) Explain the New, Evolutionary, and Pendulum views of Globalization. How do these differ from one another? – a. New Force – sweeping through the world in recent times b. Evolutionary – Long-Run Historical evolution since the dawn of human history c. Pendulum – that swings from one extreme to another from time to time. 2- What is Foreign Direct Investment? – investment in a business by an investor from another country for which the foreign investor has control over the company purchased.; is an investment made by a company or individual in one country in business interests in another country. 3- What different political views exist on FDI? – radical view or pragmatic view – chapter 6, Peng 6-3a – box – *Radical View is hostile to FDI, treats FDI as an instrument of imperialism and as a vehicle for exploitation of domestic resources by foreign capitalists and firms. *Free Markey View suggests that FDI, unrestricted by government intervention, will enable countries to tap into their absolute or comparative advantage by specializing in the production of certain goods and services. Pragmatic nationalism – viewing FDI as having both pros and cons and only approving FDI when its benefits outweigh costs.; nothing additional to add 4- What benefits exist to a country receiving FDI? Elaborate. - Benefits of country receiving FDI, Capital inflow, technology, management, job creation, Earnings exports, learning from abroad. 5- What costs exist to a country receiving FDI? Elaborate. – Costs – Loss of sovereignty, competition, capital outflow, job loss. 6- How do resources and capabilities influence the competitive dynamics of a business? 7- What is resource similarity and how does this impact competitive dynamics? – Resource similarity is defined as the “extent to which a given competitor possesses strategic endowment comparable, in terms of both type and amount, to those of a focal firm”; First with a high degree of resource similarity are likely to have similar competitive actions. 1- Give a description of the classical theory of international trade. – three different trade theories in the classical merchantilism, absolute advantage, comparative advantage – 1 a. Mercantilism – the theory suggests that the wealth of the world is fixed and that a nations that exports more and imports less will be richer. b. Absolute Advantage – theory that suggest under free trade, a nations gains by specializing in economic activities in which it has absolute advantage c. Comparative Advantage – relative (not absolute) advantage in one economic activity that one nations enjoys in comparison with other nations. 2- How would the modern theory compare to the classical theory? – modern product life cycle, strategic trade, national comparative advantage. a. Modern Theories: i. Product Life Cycle – accounts for changes in the patterns of trade over time by focusing on product life cycles ii. Strategic Trade – theory that suggests that strategic intervention by governments in certain industries can enhance their odds for international success. iii. National Competitive Advantage of Industries – theory that suggests that the competitive advantage of certain industries in different nations depends on four aspects that form a “diamond” 3- Compare absolute advantage to comparative advantage. What differences exist? – The producer that requires a smaller quantity inputs to produce a good is said to have an absolute advantage in producing that good. Comparative advantage refers to the ability of a party to produce a particular good or service at a lower opportunity cost than another. 4- What is mercantilism and why is this an important term? - the economic theory that trade generates wealth and is stimulated by the accumulation of profitable balances, which a government should encourage by means of protectionism. 5- What are the critical features of the product life cycle? – introduction stage – most expensive stage for a company, small market, low sales, high costs of R & D, consumer testing, marketing growth stage – strong growth in sales and profits, businesses invest more money in the promotional activity to maximize the potential of this growth maturity stage – established product, maintain market, most competitive, need wise investment in marketing. Consider product modifications or improvements to have competitive advantage. decline stage – shrinking market, shrinkage m/b due to market saturation, some companies switch to less costly production methods. 6- How would you describe strategic trade? – the policy certain countries adopt in order to affect the outcome of strategic interactions between firms in an international oligopoly, in industry dominated by a small number of firms. 7- Which theory came first, mercantilism or modern-day protectionism? 8- How are supply and demand related to the exchange rate of a country? – exchange rate implies the relative price of currency. Demand-supply model of exchange rate determination implies that the equilibrium exchange rate changes when the factors that affect the demand and supply conditions change. Different 2 factors that influence, ppp, interste rates, money supply, …..list. influence supply and demand. 9- If a company seeks to limit foreign exchange rate exposure in the forward direction, what is the most effective way to do this? – agree on price today in exchange today, forward contract. Limit risk and lock in price today. – airline tickets, car rentals 10- What is transaction risk? – is the exchange rate risk associated with the time delay between entering into a contract and settling it. The greater the time differential between the entrance and the settlement of the contract, the greater the transaction risk, because there is more time for the two exchange rates to fluctuate. 11- Explain the concept of “hedging” as it relates to reducing various types of risk. – chapter 7, peng Currency Hedging – a transaction that protects traders and investors from exposure to the fluctuations of the spot rate = take our dollars and buying other things with it. Value of dollar holds better Strategic Hedging – spreading out activities in a number of countries in different currency zones to offset any currency losses in one region through gains in other regions. – spread out risk. Factories in other countries 12- What is the difference between currency hedging and strategic hedging? – minimizing risks 13- What advantages exist with first mover? – the benefits that accrue to firms that enter the market first and that later entrants do not enjoy. First-movers build relationships with key stakeholders such as customers and governments. 14- What advantages exist with late mover? – benefits that accrue to firms that enter the market later and the early entrants do not enjoy. Late-movers can “free-ride” on first movers pioneering investments. Late-movers can offer lowercost solutions. 15- Consider the mode of foreign market entries. How is scale-of-entry related/relevant? – firms willing to enter with equity mode, some non-equity mode. Non-equity mode. Not jumping all in, low risk of reward. Vs jumping all in. 1- How do institutions reduce uncertainty? – by signaling which conduct is legitimate and which is not, institutions constrain the range of acceptable actions.; formal institutions, regulations are supposed to reduce uncertainty. However, the recent proliferations of regulation in the US seems to enhance the uncertainty. 4- Discuss and compare the three pillars (regulatory, normative, and cognitive) – Regulatory – the coercive power of governments; Regulatory pillar is the primary supportive pillar. Many individuals and companies may pay taxes out of their patriotic duty, a lar number of them do so in fear of the coercive