ECONOMICS C211 Study Guide Questions and Answers

C211 Study Guide Questions and AnswersC211 Study Guide Questions and Answers COMPETENCY: Globalization (Peng Chapters 1, 5, 6, 11) 1. Explain the New, Evolutionary, and Pendulum views of Globalization. How do these differ from one another? New: a new force sweeping through the world in recent times Globalization is a new phenomenon that comes from western ideology, technology and the want to dominate the world through MNE’s. Evolutionary: a long-run historical evolution since the dawn of human history States that globalization has been a natural part of history and that traces of globalization have existed within roman, Assyrian, Phoenician times. Some examples of this were importing silks or the East India Company importing goods in the colonial times. Pendulum: a pendulum that swings from one extreme to another from time to time The flows of goods, capital, knowledge, and people across borders. Neither recent or one directional, it moves back and forth with the flow of the worlds needs and events. 2. What is Foreign Direct Investment? Investing in, controlling, and managing value-added activities in other countries. 3. What different political views exist on FDI? Radical: Hostile to FDI – tracing roots to Marxism. Treats FDI as an instrument for imperialism and a vehicle for exploitation of the domestic resources a foreign economy can offer. Free Market View: Suggests that FDI, unrestricted by government, will enable countries to tap into their advantages for specializing in the production of certain goods and services. Win Win Logic. Pragmatic Nationalism: Views FDI to have both pros and cons and only approves FDI if the benefits outweigh costs. 4. What benefits exist to a country receiving FDI? Elaborate. Host (recipient) Country Benefits: Capital inflow, technology, management, job creation. Home (source) Country Benefits: Earnings, exports, learning FDI from operations abroad 5. What costs exist to a country receiving FDI? Elaborate. Host Country Costs: Loss of sovereignty, competition, capital outflow Home country Costs: Capital outflow, job loss 6. How do resources and capabilities influence the competitive dynamics of a business? Value: Firm resources must create value when engaging rivals. The ability to attack in multiple markets. Samsung and Apple are good examples because new smartphone launches in various countries simultaneously will throw off rivals, adding value. The ability to respond rapidly to challenges also adds value. Another way of adding value is patenting. The proliferation of patents makes it very easy for one firm to unwittingly infringe on rival’s patents. DownloadedbyRobShumate() lOMoARcPSD| Rarity: rare assets. Emirates has on of the best locations as a home base and is a well-run organization supported by government. They also have the advantage to fly overnight from Dubai, when other airlines cannot. Imitability: How well competition can be imitated by others. Organization: Firms better organized for competitive actions, such as stealth attacks and answering challenges. 7. What is resource similarity and how does this impact competitive dynamics? Resource Similarity: the extent to which a given competitor possesses strategic endowment comparable, in terms of both type and amount, to those of the focal firm. Apple vs. Samsung, McDonalds vs. Starbucks. McDonalds attacking Starbucks with its iced coffee drinks, Starbucks seeing the need to introduce more cost-effective drinks into their menu. COMPETENCY: International Trade and Foreign Exchange Market (Peng Chapters 5, 7, 10) • • mercantilism, • • absolute advantage, • • comparative advantage, • • product life cycle, • • strategic trade, and • • national competitive advantage.