WGU D080 Exam Questions With Complete Solutions Graded A+

What is globalization? - When international integration arises from the interchange of world views, products, ideas, and other aspects of cultures. different types of Globalization - 1. Economic 2. Political 3. Cultural Advantages of Economic globalization - more trade, investments, information technology, faster economic development, and increased social being Disadvantages of Economic globalization - benefits the rich at the expense of the poor, manufacturing job loss in developed countries, environmental damage, and unethical practices of labor Advantages of Political globalization - more cooperation amount countries, formation of international or regional organizations, NGOs Disadvantages of Political globalization - reduce the importance of nation-states, loss of sovereignty and power of local government Advantages of Cultural globalization - awareness of international community Disadvantages of Cultural globalization - loss of uniqueness of a country's culture What is international business? - any situation where the production or distribution of goods or services crosses country borders What are opportunities for international business? - New and large international markets offers possible more revenues, lower costs, and access to advanced technology What are challenges for international business? - Ethical business practice concerns, organizational structure (create new division), public relations (build customer loyalty), leaderships, and legal and regulatory structure What are the 5 stages of going global? - 1. Market entry 2. product specialization 3. value chain disaggregation 4. value chain reengineering 5. creation of new markets Market Entry - Companies enter new countries using business models similar to the ones deployed in their home markets Product specialization - Companies transfer the full production process of a particular product line to a single, low-cost location and export the goods to various consumer markets Value chain disaggregation - Companies disaggregate the production process and focus on completing each activity in the most advantageous location Value chain reengineering - Companies seek to further increase their cost savings by reengineering their processes to suit local market conditions by substituting lower cost labor for capital Creation of new markets - creates new demand due to the reduction of ticket price What are the 4 drivers of Globalization? - 1. Market 2. Cost 3. Competition 4. Government Market - Opportunity for scale and convergence of needs (foreign consumers have the same demand as domestic consumer, no need to redesign) Cost - - Economies of scale & scope: use same production facility for multiple procedures. - Exploiting cost of factors of production: labor cost reductions, natural resources cost reduction Competition - New markets & increased levels of trade Government - Favorable policies, support for the industry ((can use tax bracket to attract FDI and subsidies (free money) can help domestic business reduce cost and charge lower price)) What did Thomas Friedman propose? - The world is flat view - the use of technology and internet has made it easier for businesses to conduct global operation What did Ghemawat propose? - The world is a multi-domestic world What is CAGE analysis? - Culture, Administration, Geography, and Economics Culture (CAGE) - Cultural difference could reduce country's trade volume Administration (CAGE) - Administrative similar countries trade more, countries hold membership of the same trade Geography (CAGE) - geographical distance between countries impact trade volume Economics (CAGE) - differences in demographics and socioeconomics conditions such as standard of living, factors of production costs, etc. Anarchy - individuals country the country, no government needed Monarchy - Royal power Absolute monarchy - king/queen has absolute power constitutional monarchy - queen is only symbol, prime minister has absolute admin. power Oligarchy - Achieve power due to military, economic, or other powers, small group of elite members Dictatorship - Single person Democracy - Equal voice or vote in determining state policy Economic systems - determines a county's economic production of goods and services Traditional economy - - Farming - centered around family - everyone consumes the same goods - relies on bartering - no surplus Command economy - - more sustainable - controlling by the ruling class - all resources are owned by the government Market economy - - privately owned - the market controls the distribution of resources - minimum government control Mixed Economy - - United states uses - the market is the major determining power - partial government regulation as needed What are the legal systems? - 1. civil law 2. common law 3. religious law Civil law - Judge applies law code, rarely uses the jury (Continental Europe & Latin/Central America) Common law - Judge interprets the law, the jury determines the facts (US, UK, Australia) Religious law - religious guidelines, Islamic law, Talmudic law, Cannon law, customary law, etc. (middle-eastern, southeast Asia) Talmudic law - Jewish Cannon law - Christian Customary law - no strong justice system, verbally transferred What are the 3 international institutions - International Monetary Fund, World Bank, and World trade organization What are the twin institutions - IMF & World bank What was the INITIAL goal of the IMF - restore international payment system, oversee the fixed exchange rate system (Brenton Woods system) What is the current goal of the IMF - monitor the exchange rate system and stabilize exchange rates, guide member countries to develop economic policies, correct the debt issue IMF - financial stability, debt, currency, and exchange rate Criticisms of the IMF - - imbalance of voting power (IMF policies heavily impacted by rich countries) -conditionality causes the citizens of the borrowing countries to pay a heavy price - requires borrowing countries to made structural adjustments like privatization and deregulation and can make conditions worse in a struggling country - IMFs projects might hurt environmental quality What was the initial goal of the world bank - reconstruct the Europe for infrastructure projects What is the current goal of the world bank - support development of poor nations, fight poverty, improve life quality in developing areas Criticisms of the world bank - - imbalance leadership - enforced conditionality causes harm to developing countries - privatization of healthcare - environmental damage caused by funded projects What is the World trade organization? - Encourages international trade through the lowering of trade barriers and oversees trade agreements and facilitates disputes between member countries The Uruguay Round - reduced tariff significantly and it also covers Intellectual Property rights (TRIPS) The Doha Round - agriculture tariff Criticisms of the world trade organization - -transparency requirement hurts national sovereignty - trade rules protect developed countries more than developing countries - the MFN rule gives multinational companies an advantage - Agriculture product subsidy hurt developing countries (relating to Doha Round) - the impact of free trade in the labor rights - environmental concerns export - sell products to foreign buyers import - purchases from foreign producers Mercantilism - Gold & silver are important to a country's wealth TRADE SURPLUS: more export, less import Neo-Mercantilism - countries promote a combination of protectionist policies, restrictions, and domestic industry subsidies (use trade banners/tariff & quotas to limit import and protect domestic industry) Absolute advantage - - uses absolute cost - determines specialization - specialization then is determined by absolute advantage to increase production efficiency Comparative advantage - - uses opportunity cost - determines specialization - limited resources lead to opportunity cost - lower opportunity cost determines comparative advantage Hectscher-Ohlin Theory (Factor endowment theory) - Factors of production: land, labor, natural resources, capital, and technology Country Similarity theory - - Firm based theory that incorporate brand, customer loyalty, technology, and quality into the understanding of trade flows. - consumers in countries that are in the same or similar stage of development would have similar preferences - companies first product for domestic consumption Global strategic rivalry theory - - focuses on the firms competitive advantage - barriers to entry (r&d, IP rights, economies of scale, control of resources) Negative impacts of free trade - - possible manufacturing job loss in developed countries - labor standards and working conditions are concerned in developing nations - domestic businesses faces challenged What can governments use to limit trade - - sanctions (embargo), anti-dumping, protectionism, infant industry argument, health and safety, limiting outsourcing, global monopoly, and national security Benefits of Multi national corps. (MNCs) - -often overcome barriers to trade, sidestep regulatory problems, shift production from one plant to another, tap new technology from around the around, save on labor cost. Foreign Direct Investment (DIRECT) - 1. done with the primary objective to manage the asses 2. direct in involvement and ownership control 3. more permanent in nature as it is difficult to sell off