WGU C211 - Global Economics for Managers Exam Prep
Views on Globalization New, Evolutionary, and Pendulum
"New" view on globalization A force sweeping through the world in recent times.
"Evolutionary" view on globalization A long-run historical evolution since the dawn of human history
"Pendulum" view on globalization One that swings from one extreme to another from time to time
Foreign Direct Investment Direct investment in, control, and management of value-added activities in other
countries
Political views on FDI Radical View, Free Market View, Pragmatic Nationalism
Benefits to a country receiving FDI Capital Inflow, Technology Spillover, Advanced Management Know-How, Job
creation
Costs to a country receiving FDI Loss of Sovereignty, Adverse effects on competition,
Capital outflow.
How do resources and capabilities influence the Resource similarity and market commonality can yield a powerful framework for
competitive dynamics of a business? competitor analysis.
Resource similarity The extent to which a given competitor possesses strategic endowment
comparable, in terms of both type and amount, to those of the focal firm.
How does resource similarity impact competitive Firms with a high degree are likely to have similar competitive actions.
dynamics? (Starbuck's instant coffee & McDonald's iced coffee)
Classical theories of international trade Mercantilism, Absolute advantage, and Comparative advantage
Modern theory view Dynamic
Classical theory view Static
Absolute advantage The economic advantage one nation enjoys that is superior to other nations
Comparative advantage The advantage one economic activity nation enjoys in comparison with other
nations (relative, not absolute)
, WGU C211 - Global Economics for Managers Exam Prep
Mercantilism A theory that suggests that the wealth of the world is fixed and that a nation that
exports more and imports less will be richer.
Features of the product life cycle? New, Maturing, and Standardized
Strategic trade Intervention by governments in certain industries can enhance their odds for
international success.
How are supply and demand related to the exchange The price of a commodity, a country's currency, is fundamentally determined by
rate of a country? this. Strong demand leads to price hikes; oversupply results in price drops.
Which theory came first? Mercantilism (although both are of the idea that governments should actively
protect domestic industries from imports and vigorously promote exports)
If a company seeks to limit foreign exchange rate Forward transactions, an act know as currency hedging.
exposure in the forward direction, what is the most
effective way to do this?
Transaction risk The exchange rate risk associated with the time delay between entering into a
contract and settling it.
Hedging A transaction, such as forward transactions, that protects traders and investors
from exposure to the fluctuations of the spot rate.
Currency hedging A way to protect traders and investors from being exposed to the fluctuations of
the spot rate
Strategic hedging A means of spreading out activities in different currency zones in order to offset
the currency losses in certain regions through gains in other regions (currency
diversification)
First mover advantages Proprietary, technological leadership, pre-emption of scarce resources,
establishment of entry barriers to late entrants, avoidance of clash with dominant
firms at home, relationships with key stakeholders, (such as governments.)
Late mover advantages Opportunity to free ride on first-mover investments, Resolution of technological
and market uncertainty, First mover's difficulty to adapt to market changes.)
Foreign market entries types Non-equity and equity
Non-equity Reflects relatively smaller commitments to overseas markets. Determines firms
MNE status.
Equity indicative of relatively larger, harder-to-reverse commitments. Determines firms
MNE status.
How do institutions reduce uncertainty? Establish "rules of the game" that economic players play by. A standard to follow
in order to survive and prosper. By signaling which conduct is legitimate and
which is not, institutions constrain the range of acceptable actions.
Views on Globalization New, Evolutionary, and Pendulum
"New" view on globalization A force sweeping through the world in recent times.
"Evolutionary" view on globalization A long-run historical evolution since the dawn of human history
"Pendulum" view on globalization One that swings from one extreme to another from time to time
Foreign Direct Investment Direct investment in, control, and management of value-added activities in other
countries
Political views on FDI Radical View, Free Market View, Pragmatic Nationalism
Benefits to a country receiving FDI Capital Inflow, Technology Spillover, Advanced Management Know-How, Job
creation
Costs to a country receiving FDI Loss of Sovereignty, Adverse effects on competition,
Capital outflow.
How do resources and capabilities influence the Resource similarity and market commonality can yield a powerful framework for
competitive dynamics of a business? competitor analysis.
Resource similarity The extent to which a given competitor possesses strategic endowment
comparable, in terms of both type and amount, to those of the focal firm.
How does resource similarity impact competitive Firms with a high degree are likely to have similar competitive actions.
dynamics? (Starbuck's instant coffee & McDonald's iced coffee)
Classical theories of international trade Mercantilism, Absolute advantage, and Comparative advantage
Modern theory view Dynamic
Classical theory view Static
Absolute advantage The economic advantage one nation enjoys that is superior to other nations
Comparative advantage The advantage one economic activity nation enjoys in comparison with other
nations (relative, not absolute)
, WGU C211 - Global Economics for Managers Exam Prep
Mercantilism A theory that suggests that the wealth of the world is fixed and that a nation that
exports more and imports less will be richer.
Features of the product life cycle? New, Maturing, and Standardized
Strategic trade Intervention by governments in certain industries can enhance their odds for
international success.
How are supply and demand related to the exchange The price of a commodity, a country's currency, is fundamentally determined by
rate of a country? this. Strong demand leads to price hikes; oversupply results in price drops.
Which theory came first? Mercantilism (although both are of the idea that governments should actively
protect domestic industries from imports and vigorously promote exports)
If a company seeks to limit foreign exchange rate Forward transactions, an act know as currency hedging.
exposure in the forward direction, what is the most
effective way to do this?
Transaction risk The exchange rate risk associated with the time delay between entering into a
contract and settling it.
Hedging A transaction, such as forward transactions, that protects traders and investors
from exposure to the fluctuations of the spot rate.
Currency hedging A way to protect traders and investors from being exposed to the fluctuations of
the spot rate
Strategic hedging A means of spreading out activities in different currency zones in order to offset
the currency losses in certain regions through gains in other regions (currency
diversification)
First mover advantages Proprietary, technological leadership, pre-emption of scarce resources,
establishment of entry barriers to late entrants, avoidance of clash with dominant
firms at home, relationships with key stakeholders, (such as governments.)
Late mover advantages Opportunity to free ride on first-mover investments, Resolution of technological
and market uncertainty, First mover's difficulty to adapt to market changes.)
Foreign market entries types Non-equity and equity
Non-equity Reflects relatively smaller commitments to overseas markets. Determines firms
MNE status.
Equity indicative of relatively larger, harder-to-reverse commitments. Determines firms
MNE status.
How do institutions reduce uncertainty? Establish "rules of the game" that economic players play by. A standard to follow
in order to survive and prosper. By signaling which conduct is legitimate and
which is not, institutions constrain the range of acceptable actions.
