C211 Global Economics Study Guide: Key Questions and Concepts
C211 Study Guide Questions V4
Do NOT copy/paste this document – click File (top left) and then Save
As or Create a Copy. Choose “download a copy”.
The following questions are developed as a study aid for C211 – Global
Economics for Managers. They cover important concepts in each
competency. The questions are designed to serve as an indicator of your
preparedness to take the C211 assessment. You can use these to help you
take notes as you go through the chapters. You may also use them to
reinforce your understanding after covering the material.
Competency 1: Business Decision-Making in the Global Environment
Globalization (Peng Chapters 1, 5, 6, 11)
1. List and explain the two core perspectives for global business in
detail, with examples for each.
Institution-based view: Business success depends on formal (laws,
regulations) and informal (culture, norms) rules of the game.
Example: Walmart failed initially in Germany because it ignored local
cultural norms (informal institutions).
Resource-based view: Success comes from unique internal resources and
capabilities.
Example: Apple's brand loyalty and innovation capability allow success
globally.
2. What is globalization? Explain the three views on globalization.
Globalization is the increased interconenctedness and integration among
countries, especially in trade, investment, and cultural exchange.
Views:
Long-run historical view: Globalization has always existed, evolving over
time. Example: Ancient Silk Road trade route.
Pendulum view: Globalization swings between openness (free trade) and
protectionism (restricted trade). Example: Post-WWII openness vs. recent
tariffs (trade war between US and China).
C211 Global Economics Study Guide: Key Questions and Concepts
,C211 Global Economics Study Guide: Key Questions and Concepts
New Force (Unique-Role View): Globalization today is unique and
unprecendented due to technology and modern communication. Example:
Instant global news, e-commerce platforms like Amazon.
3. What is FDI? What are horizontal and vertical FDI?
Foreign Direct Investment (FDI) is when a firm invests directly in operations
(factories, offices) in a foreign country.
Types of FDI:
Horizontal FDI: Investing in the same type of business abroad.
Example: Toyota opening car factories in the US (still cars).
Vertical FDI: Investing in different stages of production abroad.
Example: Apple designs products in the US but assembles in China.
4. What is the OLI advantage? Explain, providing an example of
each.
OLI Advantages = why firms engage in FDI
Ownership (L): Unique resources or capabilities a firm owns.
Example: Coca-Cola’s secret recipe.
Location (L): Advantages specific to certain places.
Example: Nike produces shoes in Vietnam due to cheaper labor costs.
Internalization (I): Benefits of managing operations internally rather than
outsourcing.
Example: Intel keeps its chip technology manufacturing internally for
protection of secrets.
5. What are the three political views on FDI? (Explain)
Radical view: FDI is harmful, exploiting host countries. Example: Some
Latin American countries historically rejected FDI, believing it took away
local opportunities.
Free Market view: FDI is good; it increases efficiency, jobs, and innovation.
Example: Singapore actively welcomes FDI for economic growth.
C211 Global Economics Study Guide: Key Questions and Concepts
,C211 Global Economics Study Guide: Key Questions and Concepts
Pragmatic Nationalism: Balances benefits and risks; allows FDI selectively.
Example: India restricts FDI in sensitive sectors like defense but
encourages it in technology.
6. Carrier (HVAC company) decided to close its manufacturing
plant in Ohio and move it to Mexico.
a. Which country is the host, and which is the home?
Home country: US (where the Carrier is from originally).
Host country: Mexico (where the Carrier moves production).
b. What are the costs and benefits of FDI to the home
country?
Home country (US)
Benefits: Increased profits for Carrier, cheaper products for consumers.
Costs: Loss of manufacturing job, negative political reaction.
c. What are the costs and benefits of FDI to the host country?
Host country (Mexico)
Benefits: New jobs, technology, economic growth.
Costs: Potential environmental issues, dependency on foreign company.
7. What is dumping, and what are anti-dumping duties?
Dumping: Selling products in foreign markets at unfairly low prices (below
production cost or domestic prices).
Example: China selling steel very cheaply in the U.S.
Anti-dumping duties: Taxes on imports to counteract dumping and protect
domestic producers.
Example: U.S. imposes duties on imported Chinese steel to protect
domestic steelmakers.
8. What is collusion, and what characteristics of a market make
collusion difficult?
Collusion is when competing firms secretly agree on prices, production
levels, or markets, instead of competing fairly.
Collusion is difficult because of different company interests, mistrust, legal
risks, temptation to cheat agreements. Example: OPEC oil producers have
C211 Global Economics Study Guide: Key Questions and Concepts
, C211 Global Economics Study Guide: Key Questions and Concepts
often failed to keep their agreements because members cheat to earn more
individually.
9. How do resources and capabilities influence the competitive
dynamics of a business? (Give an example)
Firms compete effectively if they have unique resources (assets like
technology, brand reputation) and capabilities (skills like innovation,
quality production).
Example: Tesla’s electric battery technology (resource) and Elon Musk’s
visionary leadership (capability) make it competitive against older
automakers.
10. What is resource similarity, and how does this impact
competitive dynamics? (Give an example)
Resource similarity: Competing firms have similar resources/capabilities.
High similarity means fierce competition, as firms try to attract the same
customers. Example: Coca-Cola and Pepsi have similar resources (brand
strength, distribution channels), leading to intense rivalry.
11. Explain the four strategies that local firms can take to fight
MNEs.
Defender: Focus on local strengths; keep customers loyal. Example: Local
Italian restaurant emphasizes authentic recipes to resist global fast-food
chains.
Extender: Expand internationally using home-country strengths. Example:
Mexican firm Bimbo expands into the U.S. using its expertise in baking.
Doger: Avoid direct competition by adapting or partnering with MNEs.
Example: Chinese smartphone makers producing budget phones to avoid
competing with premium Apple products.
Contender: Aggressively compete with global firms by upgrading skills/
resources. Example: Samsung competing globally with Apple by constantly
innovating in technology and design.
C211 Global Economics Study Guide: Key Questions and Concepts
C211 Study Guide Questions V4
Do NOT copy/paste this document – click File (top left) and then Save
As or Create a Copy. Choose “download a copy”.
The following questions are developed as a study aid for C211 – Global
Economics for Managers. They cover important concepts in each
competency. The questions are designed to serve as an indicator of your
preparedness to take the C211 assessment. You can use these to help you
take notes as you go through the chapters. You may also use them to
reinforce your understanding after covering the material.
Competency 1: Business Decision-Making in the Global Environment
Globalization (Peng Chapters 1, 5, 6, 11)
1. List and explain the two core perspectives for global business in
detail, with examples for each.
Institution-based view: Business success depends on formal (laws,
regulations) and informal (culture, norms) rules of the game.
Example: Walmart failed initially in Germany because it ignored local
cultural norms (informal institutions).
Resource-based view: Success comes from unique internal resources and
capabilities.
Example: Apple's brand loyalty and innovation capability allow success
globally.
2. What is globalization? Explain the three views on globalization.
Globalization is the increased interconenctedness and integration among
countries, especially in trade, investment, and cultural exchange.
Views:
Long-run historical view: Globalization has always existed, evolving over
time. Example: Ancient Silk Road trade route.
Pendulum view: Globalization swings between openness (free trade) and
protectionism (restricted trade). Example: Post-WWII openness vs. recent
tariffs (trade war between US and China).
C211 Global Economics Study Guide: Key Questions and Concepts
,C211 Global Economics Study Guide: Key Questions and Concepts
New Force (Unique-Role View): Globalization today is unique and
unprecendented due to technology and modern communication. Example:
Instant global news, e-commerce platforms like Amazon.
3. What is FDI? What are horizontal and vertical FDI?
Foreign Direct Investment (FDI) is when a firm invests directly in operations
(factories, offices) in a foreign country.
Types of FDI:
Horizontal FDI: Investing in the same type of business abroad.
Example: Toyota opening car factories in the US (still cars).
Vertical FDI: Investing in different stages of production abroad.
Example: Apple designs products in the US but assembles in China.
4. What is the OLI advantage? Explain, providing an example of
each.
OLI Advantages = why firms engage in FDI
Ownership (L): Unique resources or capabilities a firm owns.
Example: Coca-Cola’s secret recipe.
Location (L): Advantages specific to certain places.
Example: Nike produces shoes in Vietnam due to cheaper labor costs.
Internalization (I): Benefits of managing operations internally rather than
outsourcing.
Example: Intel keeps its chip technology manufacturing internally for
protection of secrets.
5. What are the three political views on FDI? (Explain)
Radical view: FDI is harmful, exploiting host countries. Example: Some
Latin American countries historically rejected FDI, believing it took away
local opportunities.
Free Market view: FDI is good; it increases efficiency, jobs, and innovation.
Example: Singapore actively welcomes FDI for economic growth.
C211 Global Economics Study Guide: Key Questions and Concepts
,C211 Global Economics Study Guide: Key Questions and Concepts
Pragmatic Nationalism: Balances benefits and risks; allows FDI selectively.
Example: India restricts FDI in sensitive sectors like defense but
encourages it in technology.
6. Carrier (HVAC company) decided to close its manufacturing
plant in Ohio and move it to Mexico.
a. Which country is the host, and which is the home?
Home country: US (where the Carrier is from originally).
Host country: Mexico (where the Carrier moves production).
b. What are the costs and benefits of FDI to the home
country?
Home country (US)
Benefits: Increased profits for Carrier, cheaper products for consumers.
Costs: Loss of manufacturing job, negative political reaction.
c. What are the costs and benefits of FDI to the host country?
Host country (Mexico)
Benefits: New jobs, technology, economic growth.
Costs: Potential environmental issues, dependency on foreign company.
7. What is dumping, and what are anti-dumping duties?
Dumping: Selling products in foreign markets at unfairly low prices (below
production cost or domestic prices).
Example: China selling steel very cheaply in the U.S.
Anti-dumping duties: Taxes on imports to counteract dumping and protect
domestic producers.
Example: U.S. imposes duties on imported Chinese steel to protect
domestic steelmakers.
8. What is collusion, and what characteristics of a market make
collusion difficult?
Collusion is when competing firms secretly agree on prices, production
levels, or markets, instead of competing fairly.
Collusion is difficult because of different company interests, mistrust, legal
risks, temptation to cheat agreements. Example: OPEC oil producers have
C211 Global Economics Study Guide: Key Questions and Concepts
, C211 Global Economics Study Guide: Key Questions and Concepts
often failed to keep their agreements because members cheat to earn more
individually.
9. How do resources and capabilities influence the competitive
dynamics of a business? (Give an example)
Firms compete effectively if they have unique resources (assets like
technology, brand reputation) and capabilities (skills like innovation,
quality production).
Example: Tesla’s electric battery technology (resource) and Elon Musk’s
visionary leadership (capability) make it competitive against older
automakers.
10. What is resource similarity, and how does this impact
competitive dynamics? (Give an example)
Resource similarity: Competing firms have similar resources/capabilities.
High similarity means fierce competition, as firms try to attract the same
customers. Example: Coca-Cola and Pepsi have similar resources (brand
strength, distribution channels), leading to intense rivalry.
11. Explain the four strategies that local firms can take to fight
MNEs.
Defender: Focus on local strengths; keep customers loyal. Example: Local
Italian restaurant emphasizes authentic recipes to resist global fast-food
chains.
Extender: Expand internationally using home-country strengths. Example:
Mexican firm Bimbo expands into the U.S. using its expertise in baking.
Doger: Avoid direct competition by adapting or partnering with MNEs.
Example: Chinese smartphone makers producing budget phones to avoid
competing with premium Apple products.
Contender: Aggressively compete with global firms by upgrading skills/
resources. Example: Samsung competing globally with Apple by constantly
innovating in technology and design.
C211 Global Economics Study Guide: Key Questions and Concepts
