WGU C211 - Global Economics for
Managers
Views on Globalization Ans: New, Evolutionary, and Pendulum
"New" view on globalization Ans: A force sweeping through the world in recent times.
"Evolutionary" view on globalization Ans: A long-run historical evolution since the dawn of
human history
"Pendulum" view on globalization Ans: One that swings from one extreme to another from time
to time
Foreign Direct Investment Ans: Direct investment in, control, and management of value-added
activities in other countries
Political views on FDI Ans: Radical View, Free Market View, Pragmatic Nationalism
Benefits to a country receiving FDI Ans: Capital Inflow, Technology Spillover, Advanced
Management Know-How, Job creation
Costs to a country receiving FDI Ans: Loss of Sovereignty, Adverse effects on competition,
Capital outflow.
How do resources and capabilities influence the competitive dynamics of a business? Ans:
Resource similarity and market commonality can yield a powerful framework for competitor
analysis.
Resource similarity Ans: 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 dynamics? Ans: Firms with a high degree are
likely to have similar competitive actions. (Starbuck's instant coffee & McDonald's iced coffee)
Classical theories of international trade Ans: Mercantilism, Absolute advantage, and
Comparative advantage
Modern theory view Ans: Dynamic
Classical theory view Ans: Static
Absolute advantage Ans: The economic advantage one nation enjoys that is superior to other
nations
, Comparative advantage Ans: The advantage one economic activity nation enjoys in comparison
with other nations (relative, not absolute)
Mercantilism Ans: 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? Ans: New, Maturing, and Standardized
Strategic trade Ans: 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? Ans: The price of a
commodity, a country's currency, is fundamentally determined by this. Strong demand leads to
price hikes; oversupply results in price drops.
Which theory came first? Ans: 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 exposure in the forward direction, what is the
most effective way to do this? Ans: Forward transactions, an act know as currency hedging.
Transaction risk Ans: The exchange rate risk associated with the time delay between entering
into a contract and settling it.
Hedging Ans: A transaction, such as forward transactions, that protects traders and investors
from exposure to the fluctuations of the spot rate.
Currency hedging Ans: A way to protect traders and investors from being exposed to the
fluctuations of the spot rate
Strategic hedging Ans: 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 Ans: 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 Ans: 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 Ans: Non-equity and equity
Non-equity Ans: Reflects relatively smaller commitments to overseas markets. Determines firms
MNE status.
Managers
Views on Globalization Ans: New, Evolutionary, and Pendulum
"New" view on globalization Ans: A force sweeping through the world in recent times.
"Evolutionary" view on globalization Ans: A long-run historical evolution since the dawn of
human history
"Pendulum" view on globalization Ans: One that swings from one extreme to another from time
to time
Foreign Direct Investment Ans: Direct investment in, control, and management of value-added
activities in other countries
Political views on FDI Ans: Radical View, Free Market View, Pragmatic Nationalism
Benefits to a country receiving FDI Ans: Capital Inflow, Technology Spillover, Advanced
Management Know-How, Job creation
Costs to a country receiving FDI Ans: Loss of Sovereignty, Adverse effects on competition,
Capital outflow.
How do resources and capabilities influence the competitive dynamics of a business? Ans:
Resource similarity and market commonality can yield a powerful framework for competitor
analysis.
Resource similarity Ans: 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 dynamics? Ans: Firms with a high degree are
likely to have similar competitive actions. (Starbuck's instant coffee & McDonald's iced coffee)
Classical theories of international trade Ans: Mercantilism, Absolute advantage, and
Comparative advantage
Modern theory view Ans: Dynamic
Classical theory view Ans: Static
Absolute advantage Ans: The economic advantage one nation enjoys that is superior to other
nations
, Comparative advantage Ans: The advantage one economic activity nation enjoys in comparison
with other nations (relative, not absolute)
Mercantilism Ans: 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? Ans: New, Maturing, and Standardized
Strategic trade Ans: 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? Ans: The price of a
commodity, a country's currency, is fundamentally determined by this. Strong demand leads to
price hikes; oversupply results in price drops.
Which theory came first? Ans: 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 exposure in the forward direction, what is the
most effective way to do this? Ans: Forward transactions, an act know as currency hedging.
Transaction risk Ans: The exchange rate risk associated with the time delay between entering
into a contract and settling it.
Hedging Ans: A transaction, such as forward transactions, that protects traders and investors
from exposure to the fluctuations of the spot rate.
Currency hedging Ans: A way to protect traders and investors from being exposed to the
fluctuations of the spot rate
Strategic hedging Ans: 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 Ans: 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 Ans: 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 Ans: Non-equity and equity
Non-equity Ans: Reflects relatively smaller commitments to overseas markets. Determines firms
MNE status.
