WGU C211 - Global Economics for Managers

WGU C211 - Global Economics for Managers Leave the first rating Students also studied Terms in this set (136) Social SciencesEconomics International Economics Save WGU C211 - Global Economics for M...136 terms jasonmcnearPreview

C211 OA

178 terms dosa54Preview WGU C211 OA Global Economics Ex...206 terms boo456tyPreview C211 Gl 240 term had The 3 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 Investment (FDI)A purchase of an interest in a company by a company or an investor located outside its borders.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 competitors have access to the same resources How does resource similarity impact competitive dynamics?Firms with a high degree of similarity in resources are likely to have similar competitive products. (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 ability of an individual, company, region, or country to produce a greater quantity of a good or service Comparative advantageA company, economy, country, or an individual's ability to provide a stronger value to consumers as compared with its competitors.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?· Introduction · Growth · Maturity · Decline Strategic tradeStrategic inventory 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 strategy to help spread out the risk of cash holdings Strategic hedgingSpreading out activities in a number of countries in different currency 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 pillarLaws, regulations and rules (Formal) Normative pillarValues, beliefs, and actions of a group (Informal) Cognitive pillarThe internalized values and beliefs that guide behavior. (Informal) 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 theoretical and legal ownership of resources and how they can be used. (are central for development) Intellectual property rightRights associated with the ownership. They primarily include rights associated with patents, copyrights, and trademarks.Market economyOpen Economy Invisible hand laissez faire (hands off approach) factors of production privately owned gov. intervention limited Command economyClosed Economy Government takes commanding height Factors of production are gov owned Supply and demand and price planned by gov.Mixed economyMix is a mixture of both economies, it is an academic term, and all countries are mixed economies Indifference curveA line that shows all the combinations of good which make you equally happy Four properties of an indifference curve· Higher indifference curve are preferred to lower ones · Indifference Curves are downward sloping · Indifference curves do not cross · Indifference curves are bowed inwards Marginal rate of substitution.The rate of exchange between two goods that keeps a person equally happy Budget constraintThat which you can and can't afford according to your income How might a budget constraint be impacted by an increase in income?It will shift the whole budget constraint outward, BUT IT WILL NOT CHANGE THE

SLOPE.

What are two 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.Formula to calculate marginal costChange in total cost divided by change in quantity