D311 Exam 1 Questions With Complete
Solutions
What are the 3 motives for firms expanding internationally? 1. Market motives
2. Economic motives
3. Strategic motives
How do emerging market MNE's (Multinational Entreprises) differ from Western MNE in
motives? (4) 1. Acquiring strategic assets to compensate for their weaknesses
2. Seizing market opportunities
3. Institutional arbitrage
4. Seeking resources and commodities
Two types of Market Motives 1. Offensive motive
2. Defensive motive
Offensive Market Motive Seize market opportunities in foreign countries through trade or
investment
, D311 Exam 1 Questions With Complete
Solutions
Defensive Market Motive To protect and hold a firm's market power or position in the
face of threats from domestic rivalry or changes in government policy
5 Strategic Motives for Firms Expanding Internationally 1. Capitalize on distinctive
resources or capabilities already developed at home
2. Establish a strong foothold in a critical foreign market
3. Be the first mover in a target foreign market
4. Benefit from vertical integration involving different countries
5. Follow the company's major customers abroad
3 Economic Motives for Firms Expanding Internationally 1. Increase return through
higher revenues and/or lower costs
2. Enable the company to benefit from differences in 1) cost of labor 2) natural resources/raw
materials 3) capital 4) talents (science, innovation, R&D) 5) differences in policy treatment (tax,
tariff, treaties)
3. Diversify geographic and eco-political risks
, D311 Exam 1 Questions With Complete
Solutions
What kind of questions do international trade theories answer? They help understand trade
patterns and relationships. Examples: What products should be traded? How much should be
traded? With whom should trades take place? Should government control trade?
How many international trade theories are there? 4 categories (interventionist, free trade,
national trade patterns, export dynamics) with 10 theories
Interventionist Theories (2) 1. Mercantilism
2. Neomercantilism
Free Trade Theories (2) 1. Theory of Absolute Advantage
2. Theory of Comparative Advantage
Theories to Explain National Trade Patterns (4) 1. Theory of Country Size
2. Theory of Economic Size (how much does a country trade)
3. Factor Proportions Theory (what types of products does a country trade)
4. Country-Similarity Theory (with whom do countries trade)
, D311 Exam 1 Questions With Complete
Solutions
Export Dynamic Theories (2) 1. Product Life Cycle (PLC) Theory
2. Diamond of National Advantage
Theory of Production Factor Movement (1) Factor Mobility Theory (capital, technology,
and people)
Mercantilism (interventionist theory) Was popular from 1500 to 1800 that measured a
country's wealth by its holding of treasure (usually gold). The government policy was to export
more than they imported, governments would impose restrictions on most imports and they
subsidized products for export
The Concept of Balance of Trade (Mercantilism) To amass a surplus (favorable balance of
trade), a country must export more than it imports and then collect gold and other forms of
wealth from countries that run a deficit (unfavorable balance of trade)
Neomercantilism (interventionist theory) The running of a favorable balance of trade (run
an export surplus) to achieve some social or political objective
Solutions
What are the 3 motives for firms expanding internationally? 1. Market motives
2. Economic motives
3. Strategic motives
How do emerging market MNE's (Multinational Entreprises) differ from Western MNE in
motives? (4) 1. Acquiring strategic assets to compensate for their weaknesses
2. Seizing market opportunities
3. Institutional arbitrage
4. Seeking resources and commodities
Two types of Market Motives 1. Offensive motive
2. Defensive motive
Offensive Market Motive Seize market opportunities in foreign countries through trade or
investment
, D311 Exam 1 Questions With Complete
Solutions
Defensive Market Motive To protect and hold a firm's market power or position in the
face of threats from domestic rivalry or changes in government policy
5 Strategic Motives for Firms Expanding Internationally 1. Capitalize on distinctive
resources or capabilities already developed at home
2. Establish a strong foothold in a critical foreign market
3. Be the first mover in a target foreign market
4. Benefit from vertical integration involving different countries
5. Follow the company's major customers abroad
3 Economic Motives for Firms Expanding Internationally 1. Increase return through
higher revenues and/or lower costs
2. Enable the company to benefit from differences in 1) cost of labor 2) natural resources/raw
materials 3) capital 4) talents (science, innovation, R&D) 5) differences in policy treatment (tax,
tariff, treaties)
3. Diversify geographic and eco-political risks
, D311 Exam 1 Questions With Complete
Solutions
What kind of questions do international trade theories answer? They help understand trade
patterns and relationships. Examples: What products should be traded? How much should be
traded? With whom should trades take place? Should government control trade?
How many international trade theories are there? 4 categories (interventionist, free trade,
national trade patterns, export dynamics) with 10 theories
Interventionist Theories (2) 1. Mercantilism
2. Neomercantilism
Free Trade Theories (2) 1. Theory of Absolute Advantage
2. Theory of Comparative Advantage
Theories to Explain National Trade Patterns (4) 1. Theory of Country Size
2. Theory of Economic Size (how much does a country trade)
3. Factor Proportions Theory (what types of products does a country trade)
4. Country-Similarity Theory (with whom do countries trade)
, D311 Exam 1 Questions With Complete
Solutions
Export Dynamic Theories (2) 1. Product Life Cycle (PLC) Theory
2. Diamond of National Advantage
Theory of Production Factor Movement (1) Factor Mobility Theory (capital, technology,
and people)
Mercantilism (interventionist theory) Was popular from 1500 to 1800 that measured a
country's wealth by its holding of treasure (usually gold). The government policy was to export
more than they imported, governments would impose restrictions on most imports and they
subsidized products for export
The Concept of Balance of Trade (Mercantilism) To amass a surplus (favorable balance of
trade), a country must export more than it imports and then collect gold and other forms of
wealth from countries that run a deficit (unfavorable balance of trade)
Neomercantilism (interventionist theory) The running of a favorable balance of trade (run
an export surplus) to achieve some social or political objective
