WGU C211 - Global Economics for Managers

WGU C211 - Global Economics for Managers Leave the first rating Students also studied Terms in this set (89) Western Governors UniversityC 211 Save

PRE-ASSESSMENT: GLOBAL ECON...

49 terms poo724Preview WGU C211 Key Terms and Definition...Teacher 227 terms Badman892Preview C211 Econ Ch 10 21 terms pino707Preview WGU c 129 term Joh Value - Resources must create value when engaging rivals Rarity - Certain assets are rare, giving an advantage in competitive dynamics Imitability - The inability to have your company imitated would give you a clear advantage in the market Organization - Some firms are better organized for competitive actions than others; it is challenging for slow- moving firms to wake up and become more aggressive What does VRIO stand for?Ownership - Refers to multinational firm possession and leveraging of certain valuable, rare, or hard to imitate or organizational embedded assets overseas (ex. VRIO) Location - refers to doing business in a certain place, such as natural or labor resources or its location near particular markets provide certain advantages to firms doing business Internalization - Refers to replacement of cross-border markets, such as exporting or importing, with one firm locating in two or more countries What is the OLI advantage?

Benefits to Host Country:

Capital inflow Technology spillover Advanced management know-how Job creation

Costs to Host Country:

Loss of sovereignty Adverse effects on competition Capital outflow List benefits and costs to host countries engaging in Foreign-Direct Investment:

Benefits to Home Country:

Repatriated earnings from FDI Increased exports of components and services to host countries Learning via FDI from operations abroad

Costs to Home Country:

Capital outflow Job loss List benefits and costs to home countries engaging in Foreign-Direct Investment: Few firms Existence of price leader Homogenous products High barriers to entry Market commonality Collusion is collective attempts between competing firms to reduce competition.What characteristics of a market make collusion difficult?Resource similarity is the extent to which a given competitor possesses strategic endowment comparable, in terms of both type and amount, to those of the local firm.When resource similarity is higher, higher competition exists.What is resource similarity? Is competition higher or lower when resource similarity between two firms is high?Market commonality is the overlap between the markets of two rivals.When market commonality is higher, lower competition exists.What is market commonality? Is competition higher or lower when market commonality between two firms is high?

Contender: Firm engaging in rapid learning and then

expand overseas (ex. a local company whose assets are transferable, allowing it to compete head-on with established global players worldwide)

Defender: Centers on local assets in areas in which MNEs

are weak (ex. a local company that has assets that give it a competitive advantage only in its home market)

Dodger: Cooperating through joint ventures with MNEs

(ex. a local company sells out to a global player or becomes part of an alliance)

Extender: Leveraging homegrown competencies abroad

(ex. a local company whose assets are transferable, allowing it to compete head-on with established global players) Explain the four strategies that local firms can take to fight MNEs (multinational enterprises, whose business activities occur in at least two countries).When a country's imports exceed its exports during a given time period What is a trade deficit?When a country's exports are greater than its imports What is a trade surplus?Resources are firm-specific assets useful for creating cost or differentiation advantage and that few competitors can acquire easily.

• Patents and trademarks

ii. Proprietary know-how iii. Installed customer base iv. Reputation of the firm

• Brand equity

What are resources? What are some examples of resources?Mercantilism: (Key term: winners and losers). Viewed as a zero-sum game. A nation that exported more and imported less would become richer. Self-sufficiency would be lost.Absolute Advantage: (Key terms: productive and efficient). A theory that suggests that under free trade, a nation gains by specializing in economic activities in which it has an absolute advantage (an economic advantage that one nation has that is superior to other nations).Comparative Advantage: (Key term: opportunity cost). A theory that focuses on the relative (not absolute) advantage in one economic activity that one nation enjoys in comparison with other nations.What are the three types of classical international trade theories and their key words? Classical means developed before the 20th century and static.

Product Life Cycle: Suggests that patterns of trade

change over time as production shifts from new to maturity and standardized stages

Strategic Trade: Suggests that strategic intervention by

government in certain industries can enhance their odds of success (ex. government helped Airbus to compete with Boeing) National Competitive Advantage of Industries (Diamond

Theories): Suggests that competitive advantage of certain

industries depends on four aspects that form diamond shape in a diagram.

• Firm strategy, structure and rivalry

ii. Country factor endowments iii. Related and supporting industries iv. Domestic demand conditions The dynamic interaction of these four aspects explains what is behind the competitive advantage of leading industries in different nations. This is the first multilevel theory to connect firms, industries, and nations, whereas previous theories only work on one or two levels.What are the three types of modern international trade theories?Mercantilism can be seen as a form of protectionism, where the focus is on protecting the interests of the home country in trade with colonies.What is the relationship between mercantilism and protectionism?

• When demand is high, prices rise and currency

appreciates in value and vice versa.

• If country imports more than it exports (trade deficit)

there is less demand for its currency, so prices decline.How do supply and demand determine the exchange rate of a country?

a. Fixed exchange rate policy: government set the

exchange rate of a currency relative to other currencies

b. Floating exchange rate policy: supply and demand

conditions determine exchange rate

c. Peg exchange rate policy: linking a developing

country's currency to a key currency (like the dollar)

d. Dirty floating (managed): floating policy with selective

government interventions.What are fixed, pegged, floating, and managed (dirty) float exchange rates?