C211 Study Guide Exam questions
and Answers
What is resource similarity and how does this impact competitive dynamics? -
ANSWER-The degree to which two firms with similar resources are likely to have
competitive actions. ie: market commonality
Give a description of the classical theory of international trade. - ANSWER-The major
theories typically studied consist of mercantilism, absolute advantage, and comparative
advantage
How would the modern theory compare to the classical theory? - ANSWER-the major
theories typically studied consist of product life cycle, strategic trade, and national
competitive advantage.
Absolute advantage - ANSWER-involves being more efficient than anyone else in the
production of any good or service
comparative advantage - ANSWER-is the relative (not absolute) advantage in one
absolute activity that one nation enjoys in comparison with other nations
Mercantilism - ANSWER-Classical trade theory that viewed international trade as a
zero-sum game
What is Foreign Direct Investment? - ANSWER-is direct investment in, control, and
management of value-added activities in other countries.
What different political views exist on FDI? - ANSWER-Radical, Free Market, and
Pragramatic Nationalism
What benefits exist to a country receiving FDI? - ANSWER-Capital inflow, Technology,
management, job creation
What costs exist to a country receiving FDI? - ANSWER-Loss of sovereignty, adverse
effects on competition, and capital outflow
How do resources and capabilities influence the competitive dynamics of a business? -
ANSWER-Value, rarity, imitibility, and organization (VRIO)
Globalization new view - ANSWER-A new force sweeping through the world in recent
times
Evolutionary globalization view - ANSWER-long-run historical evolution since the dawn
of human history
, "Pendulum" view on globalization - ANSWER-One that swings from one extreme to
another from time to time
What are the critical features of the product life cycle? - ANSWER-An economic theory
that accounts for changes in the patterns of trade over time
How would you describe strategic trade? - ANSWER-A theory that suggests that
strategic intervention by governments in certain industries can enhance their odds for
international success
How are supply and demand related to the exchange rate of a country? - ANSWER-
Exchange rates rise and fall based on the underlying economic conditions that prompt
traders, investors and others to want more of a particular currency.
Which theory came first, mercantilism or modern-day protectionism? - ANSWER-
Mercantilism: As protectionism is the idea that governments should protect domestic
industries from imports & vigorously promote exports
If a company seeks to limit foreign exchange rate exposure in the forward direction,
what is the most effective way to do this? - ANSWER-This can be accomplished by
hedging
Explain the concept of "hedging" as it relates to reducing various types of risk. -
ANSWER-Strategies or Tools used =Hedging
Risk associated with =Transaction risks
They use hedging to minimize transaction risks
What is transaction risk? - ANSWER-The Risk that a company will incur losses due to
an adverse change in the relevant foreign exchange rate
Strategic hedging - ANSWER-spreading out actives in a number of different currency
zones to offset any currency losses in one region through gains in another region.
currency hedging - ANSWER-A transaction that protects traders and investors from
exposure to the fluctuations of the spot rate.
What advantages exist with first mover? - ANSWER-1-They gain advantage through
proprietary technology
2-They make pre-emptive investments
3-They erect significant entry barriers for late entrants, such as high switching cost due
to locality
4- They may build relationships with key stake holders (customers & governments)
What advantages exist with late mover? - ANSWER-1-Late movers can free-ride on first
movers pioneering investments
and Answers
What is resource similarity and how does this impact competitive dynamics? -
ANSWER-The degree to which two firms with similar resources are likely to have
competitive actions. ie: market commonality
Give a description of the classical theory of international trade. - ANSWER-The major
theories typically studied consist of mercantilism, absolute advantage, and comparative
advantage
How would the modern theory compare to the classical theory? - ANSWER-the major
theories typically studied consist of product life cycle, strategic trade, and national
competitive advantage.
Absolute advantage - ANSWER-involves being more efficient than anyone else in the
production of any good or service
comparative advantage - ANSWER-is the relative (not absolute) advantage in one
absolute activity that one nation enjoys in comparison with other nations
Mercantilism - ANSWER-Classical trade theory that viewed international trade as a
zero-sum game
What is Foreign Direct Investment? - ANSWER-is direct investment in, control, and
management of value-added activities in other countries.
What different political views exist on FDI? - ANSWER-Radical, Free Market, and
Pragramatic Nationalism
What benefits exist to a country receiving FDI? - ANSWER-Capital inflow, Technology,
management, job creation
What costs exist to a country receiving FDI? - ANSWER-Loss of sovereignty, adverse
effects on competition, and capital outflow
How do resources and capabilities influence the competitive dynamics of a business? -
ANSWER-Value, rarity, imitibility, and organization (VRIO)
Globalization new view - ANSWER-A new force sweeping through the world in recent
times
Evolutionary globalization view - ANSWER-long-run historical evolution since the dawn
of human history
, "Pendulum" view on globalization - ANSWER-One that swings from one extreme to
another from time to time
What are the critical features of the product life cycle? - ANSWER-An economic theory
that accounts for changes in the patterns of trade over time
How would you describe strategic trade? - ANSWER-A theory that suggests that
strategic intervention by governments in certain industries can enhance their odds for
international success
How are supply and demand related to the exchange rate of a country? - ANSWER-
Exchange rates rise and fall based on the underlying economic conditions that prompt
traders, investors and others to want more of a particular currency.
Which theory came first, mercantilism or modern-day protectionism? - ANSWER-
Mercantilism: As protectionism is the idea that governments should protect domestic
industries from imports & vigorously promote exports
If a company seeks to limit foreign exchange rate exposure in the forward direction,
what is the most effective way to do this? - ANSWER-This can be accomplished by
hedging
Explain the concept of "hedging" as it relates to reducing various types of risk. -
ANSWER-Strategies or Tools used =Hedging
Risk associated with =Transaction risks
They use hedging to minimize transaction risks
What is transaction risk? - ANSWER-The Risk that a company will incur losses due to
an adverse change in the relevant foreign exchange rate
Strategic hedging - ANSWER-spreading out actives in a number of different currency
zones to offset any currency losses in one region through gains in another region.
currency hedging - ANSWER-A transaction that protects traders and investors from
exposure to the fluctuations of the spot rate.
What advantages exist with first mover? - ANSWER-1-They gain advantage through
proprietary technology
2-They make pre-emptive investments
3-They erect significant entry barriers for late entrants, such as high switching cost due
to locality
4- They may build relationships with key stake holders (customers & governments)
What advantages exist with late mover? - ANSWER-1-Late movers can free-ride on first
movers pioneering investments
