WGU C211 - Global Economics for Managers

WGU C211 - Global Economics for Managers 40 studiers today 4.8 (277 reviews) Students also studied Terms in this set (136) Western Governors UniversityC 214 Save

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178 terms dosa54Preview WGU C213 Accounting for Decision ...82 terms Cait_Blankenship Preview WGU C214 Concepts Only Multi Cho...Teacher 222 terms Lydia_Smith75 Preview WGU C 222 term ctca Views on GlobalizationNew, Evolutionary, and Pendulum "New" view on globalizationA force sweeping through the world in recent times."Evolutionary" view on globalizationA long-run historical evolution since the dawn of human history "Pendulum" view on globalizationOne that swings from one extreme to another from time to time Foreign Direct InvestmentDirect investment in, control, and management of value-added activities in other countries Political views on FDIRadical View, Free Market View, Pragmatic Nationalism Benefits to a country receiving FDICapital Inflow, Technology Spillover, Advanced Management Know-How, Job creation Costs to a country receiving FDILoss 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 similarityThe 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 tradeMercantilism, Absolute advantage, and Comparative advantage Modern theory viewDynamic Classical theory viewStatic Absolute advantageThe economic advantage one nation enjoys that is superior to other nations Comparative advantageThe advantage one economic activity nation enjoys in comparison with other nations (relative, not absolute) MercantilismA 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 tradeIntervention 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 riskThe exchange rate risk associated with the time delay between entering into a contract and settling it.HedgingA transaction, such as forward transactions, that protects traders and investors from exposure to the fluctuations of the spot rate.Currency hedgingA way to protect traders and investors from being exposed to the fluctuations of the spot rate Strategic hedgingA 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 advantagesProprietary, 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 advantagesOpportunity 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 typesNon-equity and equity

Non-equityReflects relatively smaller commitments to overseas markets. Determines firms MNE status.Equityindicative 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.Regulatory pillarThe coercive power of governments (laws, regs, rules) Normative pillarValues, beliefs, and actions of other relevant players (norms, cultures, ethics) Cognitive pillarThe internalized, taken-for-granted values and beliefs that guide behavior. (beliefs between right/wrong) Formal institutionOne that include laws, regulations and rules Informal institutionOne that includes norms, cultures and ethics What core propositions lie at the root of the institution based view on global business?(1) managers and firms rationally pursue their interests and make choices within institutional constraints (bounded rationality) (2) in situations where formal constraints are unclear or fail, informal constraints play a larger role in reducing uncertainty and providing constancy to managers and firms (personal relationships and connections) The institution based view global business is grounded upon The dynamic interaction between institutions and firms, and considers firm behaviors as the outcome of such an interaction.How is global business affected by democracy? An individual's right to freedom of expression and organization. For example, starting up a firm is an act of economic expression How is global business affected by totalitarianism? These countries often experience wars, riots, protests, chaos, and breakdowns, which result in higher political risk.DemocracyCitizens elect representatives to govern the country on their behalf.TotalitarianismOne person or party exercises absolute political control over the population.Civil lawLaw that uses comprehensive statutes and codes as a primary means to form legal judgments.Common lawLaw shaped by precedents and traditions from previous judicial decisions.Theocratic lawA legal system based on religious teachings.How do civil, common and theocratic laws compare? Relative to civil law, common law has more flexibility because judges have to resolve specific disputes based on their interpretation of the law. Civil law has less flexibility because judges only have the power to apply the law.

Property rightThe legal rights to use an economic resource and to derive income and benefits from it. Can be used as collateral for starting a firm; not as common in developing countries, therefore hindering economic growth.Intellectual property rightRights associated with the ownership. They primarily include rights associated with patents, copyrights, and trademarks.Market economyOne that is characterized by the "invisible hand" of market forces-all factors of production should be privately owned.Command economyOne that is defined by a government taking all factors of production to be government-owned or state-owned, and all supply, demand, and pricing are planned by the government.Mixed economyOne has elements of both a market economy and a command economy. It boils down to the relative distribution of market forces versus command forces.Indifference curveA curve that shows consumption bundles that give the consumer the same level of satisfaction (i.e. combinations of pizza and Pepsi with which the consumer is equally satisfied.) Four properties of an indifference curve(1) Higher indifference curves are preferred to lower ones. People usually prefer to consume more goods rather than less.(2) Indifference curves are downward sloping. The slope of an indifference curve reflects the rate at which the consumer is willing to substitute one good for the other.(3) Indifference curves do not cross.(4) Indifference curves are bowed inward. The slope of an indifference curve is the marginal rate of substitution—the rate at which the consumer is willing to trade off one good for the other.Marginal rate of substitution.The rate at which the consumer is willing to trade off one good for the other (i.e.how much Pepsi the consumer requires to be compensated for a one-unit reduction in pizza consumption) Budget constraintThe consumption bundles that the consumer can afford.How might a budget constraint be impacted by an increase in income?Additional bundles could be consumed with an increase in income.Graphical elements needed to determine a consumer's optimal point of consumption Indifference curve and budget constraint.How is a consumer's optimal point of consumption determined precisely? What is the condition that must be met?The point at which this indifference curve and the budget constraint touch (the best combination of pizza and Pepsi available to the consumer.) The marginal rate of substitution equals the relative price of the two goods.Marginal costThe increase in total cost that arises from an extra unit of production How is marginal cost related to total cost?The portion of total cost resulting from an extra unit of production.