C211 Global Economics for Managers Complete Study Guide Notes | Accurate & Verified Answers to
Pass Actual Exam
C211 – Global Economics for Managers
Complete Study Guide (Learnable Version)
COMPETENCY 1
Business Decision-Making in the Global Environment
GLOBALIZATION (Peng 1, 5, 6, 11)
1. Two Core Perspectives for Global Business
Institution-Based View
This view says that businesses are shaped by the rules of the country they operate in. These rules
include laws, regulations, culture, and social norms. Firms must adapt their strategies to these rules to
succeed.
Example: Labor laws in Germany make it harder to lay off workers, which affects how companies hire and
manage employees.
Resource-Based View
This view focuses on the resources and capabilities a firm owns. Companies succeed globally when
they have valuable resources that competitors cannot easily copy.
Example: Apple’s brand and design skills allow it to compete successfully worldwide.
2. Globalization and the Three Views
Globalization is the increasing connection of countries through trade, investment, technology, and
information.
Three views:
1. Globalization is good: It lowers prices and increases efÏciency.
2. Globalization is bad: It causes job losses and income inequality.
3. Globalization is inevitable: Technology makes it impossible to stop.
3. Foreign Direct Investment (FDI)
FDI occurs when a company owns and controls business operations in another country.
Horizontal FDI: Same activity abroad (e.g., car manufacturing in multiple countries).
Vertical FDI: Different stages of production in different countries.
4. OLI Advantage
Explains why firms use FDI.
Ownership: Firm-specific assets (brand, technology)
Location: Benefits of a country (cheap labor, large market)
Internalization: Better to control operations than outsource
Example: Starbucks owns its brand, locates stores in China, and controls operations internally.
5. Political Views on FDI
Radical: FDI exploits host countries.
Free Market: FDI benefits everyone.
Pragmatic Nationalism: Accept FDI if benefits outweigh costs.
6. Carrier Example
a. Home country: U.S. | Host country: Mexico
b. Home country effects:
Benefits: Lower costs, higher profits
Costs: Job losses
, c. Host country effects:
Benefits: Jobs, investment
Costs: Low wages, environmental concerns
7. Dumping and Anti-Dumping Duties
Dumping: Selling goods below cost to gain market share.
Anti-dumping duties: Tariffs to protect domestic firms.
8. Collusion
Collusion is when firms agree to limit competition.
It’s difÏcult because firms want to cheat and earn more profit.
9. Resources and Capabilities in Competition
Strong resources allow firms to compete aggressively and sustain advantage.
Example: Amazon’s logistics system allows fast, cheap delivery.
10. Resource Similarity
When firms have similar resources, competition is more intense.
Example: Coke vs. Pepsi.
11. Local Firm Strategies vs. MNEs
1. Dodge – focus on niches
2. Defend – strengthen core business
3. Contend – compete directly
4. Cooperate – partnerships
INTERNATIONAL TRADE & FOREIGN EXCHANGE
1. Trade Deficit, Surplus, Balance of Trade
Trade deficit: Imports > Exports
Trade surplus: Exports > Imports
Balance of trade: Exports − Imports
2. Classical Trade Theories
1. Mercantilism: Export more than import.
2. Absolute Advantage: Produce what you do best.
3. Comparative Advantage: Produce what you do at lower opportunity cost.
3. Modern Trade Theories
1. Product Life Cycle Theory
2. Strategic Trade Theory
3. Porter’s Diamond
4. Exchange Rate
The price of one currency in terms of another.
5. Supply and Demand for Currency
Demand: Imports and foreign investment
Supply: Exports and domestic investment abroad
6. Purchasing Power Parity (PPP)
Pass Actual Exam
C211 – Global Economics for Managers
Complete Study Guide (Learnable Version)
COMPETENCY 1
Business Decision-Making in the Global Environment
GLOBALIZATION (Peng 1, 5, 6, 11)
1. Two Core Perspectives for Global Business
Institution-Based View
This view says that businesses are shaped by the rules of the country they operate in. These rules
include laws, regulations, culture, and social norms. Firms must adapt their strategies to these rules to
succeed.
Example: Labor laws in Germany make it harder to lay off workers, which affects how companies hire and
manage employees.
Resource-Based View
This view focuses on the resources and capabilities a firm owns. Companies succeed globally when
they have valuable resources that competitors cannot easily copy.
Example: Apple’s brand and design skills allow it to compete successfully worldwide.
2. Globalization and the Three Views
Globalization is the increasing connection of countries through trade, investment, technology, and
information.
Three views:
1. Globalization is good: It lowers prices and increases efÏciency.
2. Globalization is bad: It causes job losses and income inequality.
3. Globalization is inevitable: Technology makes it impossible to stop.
3. Foreign Direct Investment (FDI)
FDI occurs when a company owns and controls business operations in another country.
Horizontal FDI: Same activity abroad (e.g., car manufacturing in multiple countries).
Vertical FDI: Different stages of production in different countries.
4. OLI Advantage
Explains why firms use FDI.
Ownership: Firm-specific assets (brand, technology)
Location: Benefits of a country (cheap labor, large market)
Internalization: Better to control operations than outsource
Example: Starbucks owns its brand, locates stores in China, and controls operations internally.
5. Political Views on FDI
Radical: FDI exploits host countries.
Free Market: FDI benefits everyone.
Pragmatic Nationalism: Accept FDI if benefits outweigh costs.
6. Carrier Example
a. Home country: U.S. | Host country: Mexico
b. Home country effects:
Benefits: Lower costs, higher profits
Costs: Job losses
, c. Host country effects:
Benefits: Jobs, investment
Costs: Low wages, environmental concerns
7. Dumping and Anti-Dumping Duties
Dumping: Selling goods below cost to gain market share.
Anti-dumping duties: Tariffs to protect domestic firms.
8. Collusion
Collusion is when firms agree to limit competition.
It’s difÏcult because firms want to cheat and earn more profit.
9. Resources and Capabilities in Competition
Strong resources allow firms to compete aggressively and sustain advantage.
Example: Amazon’s logistics system allows fast, cheap delivery.
10. Resource Similarity
When firms have similar resources, competition is more intense.
Example: Coke vs. Pepsi.
11. Local Firm Strategies vs. MNEs
1. Dodge – focus on niches
2. Defend – strengthen core business
3. Contend – compete directly
4. Cooperate – partnerships
INTERNATIONAL TRADE & FOREIGN EXCHANGE
1. Trade Deficit, Surplus, Balance of Trade
Trade deficit: Imports > Exports
Trade surplus: Exports > Imports
Balance of trade: Exports − Imports
2. Classical Trade Theories
1. Mercantilism: Export more than import.
2. Absolute Advantage: Produce what you do best.
3. Comparative Advantage: Produce what you do at lower opportunity cost.
3. Modern Trade Theories
1. Product Life Cycle Theory
2. Strategic Trade Theory
3. Porter’s Diamond
4. Exchange Rate
The price of one currency in terms of another.
5. Supply and Demand for Currency
Demand: Imports and foreign investment
Supply: Exports and domestic investment abroad
6. Purchasing Power Parity (PPP)
