BUSMHR 2000 Exam 1
Mercantilism - ✔️✔️1st theory of international trade- an economic policy under which
nations sought to increase their wealth and power by obtaining large amounts of gold
and silver and by maximizing exports and minimizing imports
Economic Motives - ✔️✔️the motivation to increase return through higher revenues or
lower costs through international raw materials, natural resources, a cheap labor supply
for manufacturing goods
Global Institutions - ✔️✔️(1) -Help manage, regulate, and police the global
marketplace.
-Promote the establishment of multinational treaties to govern the global business
system.
- General Agreement on Tariffs and Trade (GATT), World Trade Organization (WTO),
International Monetary Fund (IMF), World Bank, United Nations (UN).
WTO - ✔️✔️The World Trade Organization - an international body that enforces
agreements that reduce barriers to international trade; successor to the GATT
IMF - ✔️✔️International Monetary Fund//a United Nations agency to promote trade by
increasing the exchange stability of the major currencies
International Business - ✔️✔️The business activites necessary for creating, shipping,
and selling goods and services across national borders.
International firm - ✔️✔️Any firm, regardless of size, that is engaged in international
business
MNE - ✔️✔️Multinational Enterprise. a global firm that has corporate units located in
foreign countries.
Market motives - ✔️✔️the motivation of a company to seize through trade and/or
investment or stand it's ground in the face of competitive international business
Strategic Motives - ✔️✔️the motivations leading firms overseas to capitalize on
distinctive resources and capabilities developed at home. These can include
technologies and Economies of Scale.
Economies of Scale - ✔️✔️as a company produces larger numbers of a particular
product, the cost of each of these products goes down
, International versus Domestic Business - ✔️✔️the variations in business seen locally
versus overseas including environmental dynamics and operational nature
Environmental Dynamics - ✔️✔️Currency, inflation, interest rates, accounting
practices, cultures, social customs, laws, political stability of another country
Operational Nature - ✔️✔️communication, coordination, motivation, differences in
organizational principles and management philosophies, made increasingly more
difficult in an international setting
• Globalization - ✔️✔️The trend toward increased cultural and economic
connectedness between people, businesses, and organizations throughout the world.
risk - ✔️✔️the unpredictability of operational and financial outcomes
uncertainty - ✔️✔️the unpredictability of environmental or organizational conditions that
affect firm performance
Mercantilism as a "zero sum" game - ✔️✔️the value of your currency goes up,
consumers import cheaper goods, and the currency goes back down
Neo-Mercantilism - ✔️✔️countries with large trade surplus - trade poicy under whic a
country relentlessly tries to maximize its trade surplus even at the sacrifice of its trading
partners welfare
Ex. CHINA
Comparative Advantage Theory - ✔️✔️David Ricardo (1817): against the corn laws,
Gains from trade will occur even when a country has absolute advantage in all products.
Trade is a positive-sum game
Heckscher-Ohlin Theory - ✔️✔️The theory that a country will export goods that make
intensive use of the factors of production in which it is well endowed. Thus, a labor-rich
country will export goods that make intensive use of labor.
Leontief Paradox - ✔️✔️the inconsistency that Wassily Leontief found between the
data on U.S. trade and the Heckscher-Ohlin model, showing even a labor intensive
business in the US can be more productive than a more labor-enriched country like
china
Leontief Paradox differences - ✔️✔️Heckscher-Ohlin Theory was too simple? Demand
bias for capital-intensive goods, Existence of trade barriers, and Additional factors that
vary by country like Human skills and Technology
Mercantilism - ✔️✔️1st theory of international trade- an economic policy under which
nations sought to increase their wealth and power by obtaining large amounts of gold
and silver and by maximizing exports and minimizing imports
Economic Motives - ✔️✔️the motivation to increase return through higher revenues or
lower costs through international raw materials, natural resources, a cheap labor supply
for manufacturing goods
Global Institutions - ✔️✔️(1) -Help manage, regulate, and police the global
marketplace.
-Promote the establishment of multinational treaties to govern the global business
system.
- General Agreement on Tariffs and Trade (GATT), World Trade Organization (WTO),
International Monetary Fund (IMF), World Bank, United Nations (UN).
WTO - ✔️✔️The World Trade Organization - an international body that enforces
agreements that reduce barriers to international trade; successor to the GATT
IMF - ✔️✔️International Monetary Fund//a United Nations agency to promote trade by
increasing the exchange stability of the major currencies
International Business - ✔️✔️The business activites necessary for creating, shipping,
and selling goods and services across national borders.
International firm - ✔️✔️Any firm, regardless of size, that is engaged in international
business
MNE - ✔️✔️Multinational Enterprise. a global firm that has corporate units located in
foreign countries.
Market motives - ✔️✔️the motivation of a company to seize through trade and/or
investment or stand it's ground in the face of competitive international business
Strategic Motives - ✔️✔️the motivations leading firms overseas to capitalize on
distinctive resources and capabilities developed at home. These can include
technologies and Economies of Scale.
Economies of Scale - ✔️✔️as a company produces larger numbers of a particular
product, the cost of each of these products goes down
, International versus Domestic Business - ✔️✔️the variations in business seen locally
versus overseas including environmental dynamics and operational nature
Environmental Dynamics - ✔️✔️Currency, inflation, interest rates, accounting
practices, cultures, social customs, laws, political stability of another country
Operational Nature - ✔️✔️communication, coordination, motivation, differences in
organizational principles and management philosophies, made increasingly more
difficult in an international setting
• Globalization - ✔️✔️The trend toward increased cultural and economic
connectedness between people, businesses, and organizations throughout the world.
risk - ✔️✔️the unpredictability of operational and financial outcomes
uncertainty - ✔️✔️the unpredictability of environmental or organizational conditions that
affect firm performance
Mercantilism as a "zero sum" game - ✔️✔️the value of your currency goes up,
consumers import cheaper goods, and the currency goes back down
Neo-Mercantilism - ✔️✔️countries with large trade surplus - trade poicy under whic a
country relentlessly tries to maximize its trade surplus even at the sacrifice of its trading
partners welfare
Ex. CHINA
Comparative Advantage Theory - ✔️✔️David Ricardo (1817): against the corn laws,
Gains from trade will occur even when a country has absolute advantage in all products.
Trade is a positive-sum game
Heckscher-Ohlin Theory - ✔️✔️The theory that a country will export goods that make
intensive use of the factors of production in which it is well endowed. Thus, a labor-rich
country will export goods that make intensive use of labor.
Leontief Paradox - ✔️✔️the inconsistency that Wassily Leontief found between the
data on U.S. trade and the Heckscher-Ohlin model, showing even a labor intensive
business in the US can be more productive than a more labor-enriched country like
china
Leontief Paradox differences - ✔️✔️Heckscher-Ohlin Theory was too simple? Demand
bias for capital-intensive goods, Existence of trade barriers, and Additional factors that
vary by country like Human skills and Technology
