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