WGU C211 Exam Study Guide
Chapters on Test:
1, 2, 4, 5, 6, 7
9, 10, 11, 13, 14, 15
16, 17, 21, 23, 29, 34
30% Competency 1: Business Decision-Making in the Global Environment
Globalization (Peng Chapters 1, 5, 6, 11) ------------------------------------------------------------------------------------- 1
International Trade and Foreign Exchange Market (Peng Chapters 5, 7, 10)---------------------------------------- 11
20% Competency 2: Political and Economic Forces Political and Economic Forces (Peng Chapter 2) ---------- 22
22% Competency 3: Economic Decision-Making by Firms and Customers Consumer Behavior (Mankiw
Chapter 21) --------------------------------------------------------------------------------------------------------------------------------------- 31
Firm Behavior Under Different Market Structures (Mankiw Chapters 13-17) -------------------------------------- 32
16% Competency 4: Microeconomics and Macroeconomic Principles Macroeconomic Principles
(Mankiw Chapters 29 & 34) ------------------------------------------------------------------------------------------------------------------ 35
Microeconomic Principles (Mankiw Chapters 4 & 5) --------------------------------------------------------------------- 36
12% Competency 5: Assessing Global Economic Performance and International Trade Measuring
Economic Performance (Mankiw Chapters 7 & 23) ------------------------------------------------------------------------------------ 38
International Trade (Mankiw Chapter 9) ------------------------------------------------------------------------------------- 39
30% Competency 1: Business Decision-Making in the Global Environment
Globalization (Peng Chapters 1, 5, 6, 11)
1. List and explain the two views (core perspectives) for global business in detail, with examples for each.
(Chapter 1)
a. Institution-Based View
- Formal and informal rules of the game (institutions)
Page 1 of 41
, - Success and failure of firms are enabled and constrained by institutions (determined
by the environment)
- Institutions: Laws, regulations, and rules
- External environment
b. Resource-based View
- Firm-specific resources and capabilities
- Overcomes the drawback of the institution-based view where the firm performance
is based entirely on the environment
- Firms possess rare and powerful firm-specific resources and capabilities that
determine the success of the firm
- Internal resources and capabilities
*What determines the success and failure of firms around the globe? – IB’s most fundamental question
2. What is globalization? Explain the three views on globalization. (Chapter 1)
a. Globalization
- Close integration of countries and people of the world
- Proponents: its contributions include greater econ. Growth, higher standards of
living, increased tech sharing, and more extensive cultural integration
- Critics: it undermines wages in rich countries, exploits workers in poor countries,
grants MNEs too much power, destroys the environment and promotes inequality
b. Three views
- a new force sweeping through the world in recent times because of recent
innovations- critic’s view
- a long-run historical evolution since the dawn of human history- one directional - has
always been part and parcel of human history
Page 2 of 41
, - a pendulum (bi-directional) that swings from one extreme to another from time to
time - (closer integration of the countries and people of the work which has been
brought about by the reduction of costs of
transportation, communication and artificial barriers to flows of goods services,
capital, knowledge)— Globalization is neither recent nor onedirectional.
3. What is FDI? What are horizontal and vertical FDI (Chapter 6-1b, 3b)
a. Foreign DIRECT Investment - Investing in, controlling, and managing valueadded activities
in other countries. >10% grants management rights (success/ failure dependent on global
business)
- FDI is preferred over licensing because:
- FDI reduces dissemination (unauthorized access to proprietary info) risks
- FDI provides tight control over foreign operations
- FDI facilitates the transfer of tacit knowledge through “learning by doing”
1) Horizontal
- a firm duplicates its home country-based activities at the same value chain stage
in a host country. (BMW cars in Germany = BMW cars in
U.S.)
- producing the same products or offering the same services in a host country as
firms do at home 2) Vertical ?????
- a firm moves upstream or downstream at different value chain stages in a host
country.
- Can be upstream or downstream.
- BMW only assembles cars and does not manufacture components in Germany;
Indonesia manufactures components through FDI - upstream activity ==>
Upstream Vertical FDI
- BMW ≠ distribute cars in Germany but Invests in car dealerships in
Page 3 of 41
, Egypt or marketing - downstream activity ==> Downstream Vertical
FDI
4. What is the OLI advantage? Explain, providing an example of each. (Chapter 6)
a. OLI Advantage - a firm’s quest for Ownership advantage, Location
advantages, and Internalization advantages via FDI
2) Ownership
- MNE’s possession and leveraging of certain valuable rare, hard-to-imitate, and
organizationally embedded (VRIO) assets overseas
- a firm moves upstream or downstream at different value chain stages in a host
country.
- Example: BMW owns proprietary tech/mngt to ensure the MNE beats rivals
3) Location
- Enjoyed by firms because they do business in a certain place
- Example: Vietnam is an ideal for MNEs to separate from coastal China’s rising labor
costs
- Resource-based view: MNE’s pursuit of ownership and location advantages can be
regarded as flexing resources and capabilities in global competition
4) Internalization
- Replacement of cross-border markets (export/import) with one firm (the MNE)
located in two or more countries
- Example: Instead of selling its tech to an Indonesian firm (licensing ==>
Non-FDI-based market entry mode) for a fee, BMW assembles cars in Indonesia via
FDI
- Institution-based view: response to the imperfect rules governing international
transactions ==> market imperfections/failure
Page 4 of 41
Chapters on Test:
1, 2, 4, 5, 6, 7
9, 10, 11, 13, 14, 15
16, 17, 21, 23, 29, 34
30% Competency 1: Business Decision-Making in the Global Environment
Globalization (Peng Chapters 1, 5, 6, 11) ------------------------------------------------------------------------------------- 1
International Trade and Foreign Exchange Market (Peng Chapters 5, 7, 10)---------------------------------------- 11
20% Competency 2: Political and Economic Forces Political and Economic Forces (Peng Chapter 2) ---------- 22
22% Competency 3: Economic Decision-Making by Firms and Customers Consumer Behavior (Mankiw
Chapter 21) --------------------------------------------------------------------------------------------------------------------------------------- 31
Firm Behavior Under Different Market Structures (Mankiw Chapters 13-17) -------------------------------------- 32
16% Competency 4: Microeconomics and Macroeconomic Principles Macroeconomic Principles
(Mankiw Chapters 29 & 34) ------------------------------------------------------------------------------------------------------------------ 35
Microeconomic Principles (Mankiw Chapters 4 & 5) --------------------------------------------------------------------- 36
12% Competency 5: Assessing Global Economic Performance and International Trade Measuring
Economic Performance (Mankiw Chapters 7 & 23) ------------------------------------------------------------------------------------ 38
International Trade (Mankiw Chapter 9) ------------------------------------------------------------------------------------- 39
30% Competency 1: Business Decision-Making in the Global Environment
Globalization (Peng Chapters 1, 5, 6, 11)
1. List and explain the two views (core perspectives) for global business in detail, with examples for each.
(Chapter 1)
a. Institution-Based View
- Formal and informal rules of the game (institutions)
Page 1 of 41
, - Success and failure of firms are enabled and constrained by institutions (determined
by the environment)
- Institutions: Laws, regulations, and rules
- External environment
b. Resource-based View
- Firm-specific resources and capabilities
- Overcomes the drawback of the institution-based view where the firm performance
is based entirely on the environment
- Firms possess rare and powerful firm-specific resources and capabilities that
determine the success of the firm
- Internal resources and capabilities
*What determines the success and failure of firms around the globe? – IB’s most fundamental question
2. What is globalization? Explain the three views on globalization. (Chapter 1)
a. Globalization
- Close integration of countries and people of the world
- Proponents: its contributions include greater econ. Growth, higher standards of
living, increased tech sharing, and more extensive cultural integration
- Critics: it undermines wages in rich countries, exploits workers in poor countries,
grants MNEs too much power, destroys the environment and promotes inequality
b. Three views
- a new force sweeping through the world in recent times because of recent
innovations- critic’s view
- a long-run historical evolution since the dawn of human history- one directional - has
always been part and parcel of human history
Page 2 of 41
, - a pendulum (bi-directional) that swings from one extreme to another from time to
time - (closer integration of the countries and people of the work which has been
brought about by the reduction of costs of
transportation, communication and artificial barriers to flows of goods services,
capital, knowledge)— Globalization is neither recent nor onedirectional.
3. What is FDI? What are horizontal and vertical FDI (Chapter 6-1b, 3b)
a. Foreign DIRECT Investment - Investing in, controlling, and managing valueadded activities
in other countries. >10% grants management rights (success/ failure dependent on global
business)
- FDI is preferred over licensing because:
- FDI reduces dissemination (unauthorized access to proprietary info) risks
- FDI provides tight control over foreign operations
- FDI facilitates the transfer of tacit knowledge through “learning by doing”
1) Horizontal
- a firm duplicates its home country-based activities at the same value chain stage
in a host country. (BMW cars in Germany = BMW cars in
U.S.)
- producing the same products or offering the same services in a host country as
firms do at home 2) Vertical ?????
- a firm moves upstream or downstream at different value chain stages in a host
country.
- Can be upstream or downstream.
- BMW only assembles cars and does not manufacture components in Germany;
Indonesia manufactures components through FDI - upstream activity ==>
Upstream Vertical FDI
- BMW ≠ distribute cars in Germany but Invests in car dealerships in
Page 3 of 41
, Egypt or marketing - downstream activity ==> Downstream Vertical
FDI
4. What is the OLI advantage? Explain, providing an example of each. (Chapter 6)
a. OLI Advantage - a firm’s quest for Ownership advantage, Location
advantages, and Internalization advantages via FDI
2) Ownership
- MNE’s possession and leveraging of certain valuable rare, hard-to-imitate, and
organizationally embedded (VRIO) assets overseas
- a firm moves upstream or downstream at different value chain stages in a host
country.
- Example: BMW owns proprietary tech/mngt to ensure the MNE beats rivals
3) Location
- Enjoyed by firms because they do business in a certain place
- Example: Vietnam is an ideal for MNEs to separate from coastal China’s rising labor
costs
- Resource-based view: MNE’s pursuit of ownership and location advantages can be
regarded as flexing resources and capabilities in global competition
4) Internalization
- Replacement of cross-border markets (export/import) with one firm (the MNE)
located in two or more countries
- Example: Instead of selling its tech to an Indonesian firm (licensing ==>
Non-FDI-based market entry mode) for a fee, BMW assembles cars in Indonesia via
FDI
- Institution-based view: response to the imperfect rules governing international
transactions ==> market imperfections/failure
Page 4 of 41
