C211 Study Guide questions with complete solutions

C211 Study Guide questions with complete solutions What is Foreign Direct Investment? - Answer- is direct investment in, control, and management of value-added activities in other countries. What different political views exist on FDI? - Answer- Radical, Free Market, and Pragramatic Nationalism What benefits exist to a country receiving FDI? - Answer- Capital inflow, Technology, management, job creation What costs exist to a country receiving FDI? - Answer- Loss of sovereignty, adverse effects on competition, and capital outflow How do resources and capabilities influence the competitive dynamics of a business? - Answer- Value, rarity, imitibility, and organization (VRIO) Globalization new view - Answer- A new force sweeping through the world in recent times Evolutionary globalization view - Answer- long-run historical evolution since the dawn of human history "Pendulum" view on globalization - Answer- One that swings from one extreme to another from time to time What is resource similarity and how does this impact competitive dynamics? - Answer- The degree to which two firms with similar resources are likely to have competitive actions. ie: market commonality Give a description of the classical theory of international trade. - Answer- The major theories typically studied consist of mercantilism, absolute advantage, and comparative advantage How would the modern theory compare to the classical theory? - Answer- the major theories typically studied consist of product life cycle, strategic trade, and national competitive advantage. Absolute advantage - Answer- involves being more efficient than anyone else in the production of any good or service comparative advantage - Answer- is the relative (not absolute) advantage in one absolute activity that one nation enjoys in comparison with other nations Mercantilism - Answer- Classical trade theory that viewed international trade as a zero- sum game What are the critical features of the product life cycle? - Answer- An economic theory that accounts for changes in the patterns of trade over time How would you describe strategic trade? - Answer- A theory that suggests that strategic intervention by governments in certain industries can enhance their odds for international success How are supply and demand related to the exchange rate of a country? - Answer- Exchange rates rise and fall based on the underlying economic conditions that prompt traders, investors and others to want more of a particular currency. Which theory came first, mercantilism or modern-day protectionism? - Answer- Mercantilism: As protectionism is the idea that governments should protect domestic industries from imports & vigorously promote exports