WGU C211 - Global Economics for Managers
Views on Globalization Correct Answer: New, Evolutionary, and Pendulum
"New" view on globalization Correct Answer: A force sweeping through the world in recent times.
"Evolutionary" view on globalization Correct Answer: A long-run historical evolution since the dawn of
human history
"Pendulum" view on globalization Correct Answer: One that swings from one extreme to another from
time to time
Foreign Direct Investment Correct Answer: Direct investment in, control, and management of value-
added activities in other countries
Political views on FDI Correct Answer: Radical View, Free Market View, Pragmatic Nationalism
Benefits to a country receiving FDI Correct Answer: Capital Inflow, Technology Spillover, Advanced
Management Know-How, Job creation
Costs to a country receiving FDI Correct Answer: Loss of Sovereignty, Adverse effects on competition,
Capital outflow.
How do resources and capabilities influence the competitive dynamics of a business? Correct Answer:
Resource similarity and market commonality can yield a powerful framework for competitor analysis.
Resource similarity Correct Answer: 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? Correct Answer: 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 Correct Answer: Mercantilism, Absolute advantage, and
Comparative advantage
Modern theory view Correct Answer: Dynamic
Classical theory view Correct Answer: Static
Absolute advantage Correct Answer: The economic advantage one nation enjoys that is superior to
other nations
Comparative advantage Correct Answer: The advantage one economic activity nation enjoys in
comparison with other nations (relative, not absolute)
Mercantilism Correct Answer: 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? Correct Answer: New, Maturing, and Standardized
Strategic trade Correct Answer: 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? Correct Answer: 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? Correct Answer: 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? Correct Answer: Forward transactions, an act know as currency hedging.
Transaction risk Correct Answer: The exchange rate risk associated with the time delay between
entering into a contract and settling it.
Hedging Correct Answer: A transaction, such as forward transactions, that protects traders and
investors from exposure to the fluctuations of the spot rate.
Currency hedging Correct Answer: A way to protect traders and investors from being exposed to the
fluctuations of the spot rate
Strategic hedging Correct Answer: 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 Correct Answer: 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 Correct Answer: 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 Correct Answer: Non-equity and equity
Non-equity Correct Answer: Reflects relatively smaller commitments to overseas markets. Determines
firms MNE status.
Equity Correct Answer: indicative of relatively larger, harder-to-reverse commitments. Determines firms
MNE status.
How do institutions reduce uncertainty? Correct Answer: 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 Correct Answer: New, Evolutionary, and Pendulum
"New" view on globalization Correct Answer: A force sweeping through the world in recent times.
"Evolutionary" view on globalization Correct Answer: A long-run historical evolution since the dawn of
human history
"Pendulum" view on globalization Correct Answer: One that swings from one extreme to another from
time to time
Foreign Direct Investment Correct Answer: Direct investment in, control, and management of value-
added activities in other countries
Political views on FDI Correct Answer: Radical View, Free Market View, Pragmatic Nationalism
Benefits to a country receiving FDI Correct Answer: Capital Inflow, Technology Spillover, Advanced
Management Know-How, Job creation
Costs to a country receiving FDI Correct Answer: Loss of Sovereignty, Adverse effects on competition,
Capital outflow.
How do resources and capabilities influence the competitive dynamics of a business? Correct Answer:
Resource similarity and market commonality can yield a powerful framework for competitor analysis.
Resource similarity Correct Answer: 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? Correct Answer: 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 Correct Answer: Mercantilism, Absolute advantage, and
Comparative advantage
Modern theory view Correct Answer: Dynamic
Classical theory view Correct Answer: Static
Absolute advantage Correct Answer: The economic advantage one nation enjoys that is superior to
other nations
Comparative advantage Correct Answer: The advantage one economic activity nation enjoys in
comparison with other nations (relative, not absolute)
Mercantilism Correct Answer: 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? Correct Answer: New, Maturing, and Standardized
Strategic trade Correct Answer: 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? Correct Answer: 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? Correct Answer: 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? Correct Answer: Forward transactions, an act know as currency hedging.
Transaction risk Correct Answer: The exchange rate risk associated with the time delay between
entering into a contract and settling it.
Hedging Correct Answer: A transaction, such as forward transactions, that protects traders and
investors from exposure to the fluctuations of the spot rate.
Currency hedging Correct Answer: A way to protect traders and investors from being exposed to the
fluctuations of the spot rate
Strategic hedging Correct Answer: 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 Correct Answer: 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 Correct Answer: 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 Correct Answer: Non-equity and equity
Non-equity Correct Answer: Reflects relatively smaller commitments to overseas markets. Determines
firms MNE status.
Equity Correct Answer: indicative of relatively larger, harder-to-reverse commitments. Determines firms
MNE status.
How do institutions reduce uncertainty? Correct Answer: 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.
