C211 STUDY GUIDE
C211 Study Guide Questions and VERIFIED
ANSWERS GRADED A+ GUARANTEED PASS ACE
YOUR TEST
Instructions – Read the questions carefully
Competency 1: Business Decision Making in the Global Environment -30%
Globalization (Peng Chapters 1, 5, 6, 11) – 6 Questions (12%)
1. What determines the success and failure of firms around the globe? This is the fundamental question in global business.
2. List and briefly explain the two views (core perspectives) for global business.
a. Institution-based view – a leading perspective in global business that suggest that the success and failure of
firms are enabled and constrained by institutions. Formal and informal rules of the game.
b. Resource-based view – suggest that the success and failure of firms are determined by their environments-
firm-specific resources and capabilities (value, rarity, imitability, organization: VRIO)
3. What is globalization? Explain the three views on globalization. Globalization – the close integration of countries and peoples
of the world. Semiglobalization – strategy that suggest that barriers to market integration at borders are high but not high
enough to completely insulate countries from each other.
a. New force– opponents suggest that it is a new phenomenon beginning late 20th century driven by
technological innovations and western ideology
b. Evolutionary (Long-running historical view)– has always been a part of human history with the earliest traces
between 2000 and 8000 years ago. Probably always existed.
c. Pendulum – is neither recent nor one-directional – closer integration of countries and peoples of the world which
has been brought about by the enormous reduction of the coses of transportation and communication, and the
breakdown of artificial barrier to the flows of goods, services, capital, knowledge and people across boarder.
4. What is FDI? Identify and define the key terms associated with FDI. Investing in, controlling and managing value- added
activities in other countries.
a. Horizontal FDI – firm duplicates its home country-based activities at the same value chain stage in a host
country. i.e, producing the same products or offering the same services in a host country as firms do at home.
b. Vertical FDI – moves upstream or downstream in different value-chain stages in a host country through FDI. i.e.,
BMW assembles but does not manufacture components in Germany, in Indonesia enters into component
manufacturing.
i. Upstream vertical FDI – Using FDI in an earlier activity in the value chain
ii. Downstream vertical FDI – using FDI in a later activity in the value chain
c. FDI Flow – amount of FDI moving in a given period (usually a year) in a certain direction
(inflow/outflow)
i. FDI Inflow: FDI moving into a country in a year (top receiving FDI inflows: US, France, Hong
Kong/China)
ii. FDI Outflow: FDI moving out of a country in a year (top generating FDI outflows: US, France, UK)
iii. FDI Stock: total accumulation of inbound FDI in a country or outbound FDI from a country.
5. What is the OLI advantage? (Explain) Quest for Ownership (control), Location, Internalization (replacement of export and
import)
1
, C211 STUDY GUIDE
a. Ownership = MNEs possession and leveraging of certain valuable, rare, hard to imitate and
Organizationally embedded (VRIO) assets overseas
b. Location = features unique to a place, such as its natural or labor resources or its location near particular
markets, that provide certain advantages to firms doing biz there.
c. Internationalization = replacement of cross-border markets (such as exporting/importing) with one firm locating and
operating in two or more countries
6. What are the political views on FDI? (Explain)
a. Radical View– treats FDI as an instrument of imperialism and a vehicle for exploiting domestic resources,
industries, and people by foreign capitalists and firms
b. Free Market View- unrestricted by government intervention FDI will enable countries to tap into their absolute or
comparative advantages by specializing in the production of certain goods and services
c. Pragmatic Nationalism – considering both the pros and cons of FDI and approving FDI only when it’s benefits
outweigh its costs
7. What are the costs and benefits of FDI to the host country? (Explain)
a. Costs – Loss of sovereignty, competition/Demonstration effect (rivals may try to imitate foreign technology
aka competition), capital outflow
b. Benefits – Capital inflow, technology spillover (domestic diffusion of foreign technical knowledge and processes),
management, job creation
8. What are the costs and benefits of FDI to the home country? (Explain)
a. Costs – capital outflow, job loss
b. Benefits – earnings, exports, learning from abroad.
9. How do resources and capabilities influence the competitive dynamics of a business? (Give an example) – Resource
similarity and market commonality can yield a powerful framework for competitor analysis. Ensures resources used in
product production for industry can be shifted and used in another industry.
What is resource similarity and how does this impact competitive dynamics? (Give an example) Resource similarity
– extent to when a given competitor possesses strategic endowment comparable, in terms of both type and amount, to
those of the focal firm. Companies with high resource similarity and low market commonality with find themselves in
regular adversarial interactions. Low resource similarity and high market common lead to few adversarial interactions. High
resource similarity increases the likelihood of adversarial interaction. High market commonality leads to fewer adversarial
interactions.
10. Multinational Enterprise (MNE) – firms that engage in FDI
11. Foreign Portfolio Investment (FPI) -holding securities, such as stocks and bonds, of companies in countries outside
one’s own but does not entail the active management of foreign assets
International Trade and Foreign Exchange Market (Peng Chapters 5, 7, 10) – 9 Questions (18%
1. What is a trade deficit, trade surplus, and balance of trade?
a. Trade Deficit – when a nation imports more than it exports
b. Trade Surplus – when a nation exports more than it imports
c. Balance of trade – whether a country has a trade surplus or a deficit
2. Why do nations trade? To build wealth
3. Describe classical and modern international trade theories (what differences exist?) Classical= Developed before 20th century,
static. Modern=dynamic
4. Explain the three types of classical international trade theories.
2
C211 Study Guide Questions and VERIFIED
ANSWERS GRADED A+ GUARANTEED PASS ACE
YOUR TEST
Instructions – Read the questions carefully
Competency 1: Business Decision Making in the Global Environment -30%
Globalization (Peng Chapters 1, 5, 6, 11) – 6 Questions (12%)
1. What determines the success and failure of firms around the globe? This is the fundamental question in global business.
2. List and briefly explain the two views (core perspectives) for global business.
a. Institution-based view – a leading perspective in global business that suggest that the success and failure of
firms are enabled and constrained by institutions. Formal and informal rules of the game.
b. Resource-based view – suggest that the success and failure of firms are determined by their environments-
firm-specific resources and capabilities (value, rarity, imitability, organization: VRIO)
3. What is globalization? Explain the three views on globalization. Globalization – the close integration of countries and peoples
of the world. Semiglobalization – strategy that suggest that barriers to market integration at borders are high but not high
enough to completely insulate countries from each other.
a. New force– opponents suggest that it is a new phenomenon beginning late 20th century driven by
technological innovations and western ideology
b. Evolutionary (Long-running historical view)– has always been a part of human history with the earliest traces
between 2000 and 8000 years ago. Probably always existed.
c. Pendulum – is neither recent nor one-directional – closer integration of countries and peoples of the world which
has been brought about by the enormous reduction of the coses of transportation and communication, and the
breakdown of artificial barrier to the flows of goods, services, capital, knowledge and people across boarder.
4. What is FDI? Identify and define the key terms associated with FDI. Investing in, controlling and managing value- added
activities in other countries.
a. Horizontal FDI – firm duplicates its home country-based activities at the same value chain stage in a host
country. i.e, producing the same products or offering the same services in a host country as firms do at home.
b. Vertical FDI – moves upstream or downstream in different value-chain stages in a host country through FDI. i.e.,
BMW assembles but does not manufacture components in Germany, in Indonesia enters into component
manufacturing.
i. Upstream vertical FDI – Using FDI in an earlier activity in the value chain
ii. Downstream vertical FDI – using FDI in a later activity in the value chain
c. FDI Flow – amount of FDI moving in a given period (usually a year) in a certain direction
(inflow/outflow)
i. FDI Inflow: FDI moving into a country in a year (top receiving FDI inflows: US, France, Hong
Kong/China)
ii. FDI Outflow: FDI moving out of a country in a year (top generating FDI outflows: US, France, UK)
iii. FDI Stock: total accumulation of inbound FDI in a country or outbound FDI from a country.
5. What is the OLI advantage? (Explain) Quest for Ownership (control), Location, Internalization (replacement of export and
import)
1
, C211 STUDY GUIDE
a. Ownership = MNEs possession and leveraging of certain valuable, rare, hard to imitate and
Organizationally embedded (VRIO) assets overseas
b. Location = features unique to a place, such as its natural or labor resources or its location near particular
markets, that provide certain advantages to firms doing biz there.
c. Internationalization = replacement of cross-border markets (such as exporting/importing) with one firm locating and
operating in two or more countries
6. What are the political views on FDI? (Explain)
a. Radical View– treats FDI as an instrument of imperialism and a vehicle for exploiting domestic resources,
industries, and people by foreign capitalists and firms
b. Free Market View- unrestricted by government intervention FDI will enable countries to tap into their absolute or
comparative advantages by specializing in the production of certain goods and services
c. Pragmatic Nationalism – considering both the pros and cons of FDI and approving FDI only when it’s benefits
outweigh its costs
7. What are the costs and benefits of FDI to the host country? (Explain)
a. Costs – Loss of sovereignty, competition/Demonstration effect (rivals may try to imitate foreign technology
aka competition), capital outflow
b. Benefits – Capital inflow, technology spillover (domestic diffusion of foreign technical knowledge and processes),
management, job creation
8. What are the costs and benefits of FDI to the home country? (Explain)
a. Costs – capital outflow, job loss
b. Benefits – earnings, exports, learning from abroad.
9. How do resources and capabilities influence the competitive dynamics of a business? (Give an example) – Resource
similarity and market commonality can yield a powerful framework for competitor analysis. Ensures resources used in
product production for industry can be shifted and used in another industry.
What is resource similarity and how does this impact competitive dynamics? (Give an example) Resource similarity
– extent to when a given competitor possesses strategic endowment comparable, in terms of both type and amount, to
those of the focal firm. Companies with high resource similarity and low market commonality with find themselves in
regular adversarial interactions. Low resource similarity and high market common lead to few adversarial interactions. High
resource similarity increases the likelihood of adversarial interaction. High market commonality leads to fewer adversarial
interactions.
10. Multinational Enterprise (MNE) – firms that engage in FDI
11. Foreign Portfolio Investment (FPI) -holding securities, such as stocks and bonds, of companies in countries outside
one’s own but does not entail the active management of foreign assets
International Trade and Foreign Exchange Market (Peng Chapters 5, 7, 10) – 9 Questions (18%
1. What is a trade deficit, trade surplus, and balance of trade?
a. Trade Deficit – when a nation imports more than it exports
b. Trade Surplus – when a nation exports more than it imports
c. Balance of trade – whether a country has a trade surplus or a deficit
2. Why do nations trade? To build wealth
3. Describe classical and modern international trade theories (what differences exist?) Classical= Developed before 20th century,
static. Modern=dynamic
4. Explain the three types of classical international trade theories.
2
