WGU C211 - Global Economics for Managers

Explain the New, Evolutionary, and Pendulum views of Globalization. How do these differ from one another? - answer-"New" view on globalization - A force sweeping through the world in recent times. "Evolutionary" view on globalization - A long-run historical evolution since the dawn of human history. "Pendulum" view on globalization - One that swings from one extreme to another from time to time **What different political views exist on Foreign Direct Investment FDI?** - answer-Radical View, Free Market View, Pragmatic Nationalism **answer includes radicalism** What is Foreign Direct Investment? - answer-Direct investment in, control, and management of value-added activities in other countries What benefits exist to a country receiving FDI? - answer-Capital Inflow, Technology Spillover, Advanced Management Know-How, Job creation What costs exist to a country receiving FDI? - answer-Loss of Sovereignty, Adverse effects on competition, Capital outflow. How do resources and capabilities influence the competitive dynamics of a business? - answer-Resource similarity and market commonality can yield a powerful framework for competitor analysis. **What is resource similarity and how does this impact competitive dynamics?** - answer-The extent to which a given competitor possesses strategic endowment comparable, in terms of both type and amount, to those of the focal firm. *Firms with a high degree are likely to have similar competitive actions. (Starbuck's instant coffee & McDonald's iced coffee) Give a description of the classical theory of international trade. - answer-Mercantilism, Absolute advantage, and Comparative advantage How would the modern theory compare to the classical theory? - answer-Modern - Dynamic Classical - Static Compare absolute advantage to comparative advantage. What differences exist? - answer-Absolute advantage - The economic advantage one nation enjoys that is superior to other nations Comparative advantage - The advantage one economic activity nation enjoys in comparison with other nations (relative, not absolute) What is mercantilism and why is this an important term? - answer-A theory that suggests that the wealth of the world is fixed and that a nation that exports more and imports less will be richer. **What are the critical features of the product life cycle?** - answer-1. New stage: prod. of a new product (ex. TV) that commands a price premium will concentrate in the USA, which exports to other developed nations. 2. Maturing stage: demand & ability to prod.; grow in other dev. nations (ex. Australia & Italy), it is now worthwhile to produce there. 3. Standardized stage: the prev. new prod. is standardized (or commoditized). Prod. will now move to low-cost dev. nations, which export to dev. nations. In other words, comparative advantage may change over time. How would you describe strategic trade? - answer-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-The price of a commodity, a country's currency, is fundamentally determined by this. Strong demand leads to price hikes; oversupply results in price drops. Which theory came first, mercantilism or modern-day protectionism? - answer-Mercantilism (although both are of the idea that governments should actively protect domestic industries from imports and vigorously promote exports) If a company seeks to limit foreign exchange rate exposure in the forward direction, what is the most effective way to do this? - answer-Forward transactions, an act know as currency hedging.