C211 Global Economics Final Exam Latest Study guide 2023/2024 Top Examinable Questions (Guaranteed A+)
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WGU C211 – Global Economics for Managers
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WGU C211 – Global Economics For Managers
C211 Global Economics Final Exam Latest Study guide 2023/2024 Top Examinable Questions (Guaranteed A+)
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...
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C211 Global Economics Final Exam Latest Study guide
2023/2024 Top Examinable Questions (Guaranteed A+)
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
Investment in, controlling and managing value-added activities in other countries. The most
frequently discussed foreign entrance is the multinational enterprise (MNE) which is engaged in the
foreign direct investment. MNE, by definition, is a firm that engages in FDI when doing business
abroad. That sets MNEs apart from non-MNEs is FDI. An exporter has to undertake FDI in order to
become an MNE. In other words, BMW would not be an MNE if it made all its cars in Germany and
exported them around the world. BMW became an MNE only when it started to invest abroad
directly
Different political views on FDI
Radical View, Free Market View, Pragmatic Nationalism
a. Radical - radical view is hostile to FDI, treats FDI as an instrument of imperialism and as a vehicle for
exploitation of domestic resources, industries, and people by foreign capitalists and firms.
b. Free market - free market view calls for minimum or unrestricted government restriction in FDI, will
enable countries to tap into their absolute or comparative advantages by specializing in the
production of certain goods and services. Leads to a win-win situation for both home and host
countries.
c. Pragmatic nationalism - most countries practice pragmatic nationalism, weighing the benefits and
costs of FDI, having both pros and cons and only approving FDI when its benefits outweigh costs. FDI
brings a different (and often opposing) set of benefits and costs to host and home countries.
Benefits to a country receiving FDI
Capital Inflow, Technology Spillover, Advanced Management Know-How, Job creation
-Capital inflow improve the host country balance of payment. More technology, management, and
More jobs in their countries
-Technology, especially more advanced technology from abroad, can create technology spillovers that
benefit domestic firms and industries. Local rivals, after observing such technology, may recognize its
feasibility and strive to imitate it. This is known as the demonstration effect—sometimes also called
the contagion (or imitation) effect.
-Advanced management know-how may be highly valued. It is often difficult for indigenous
development of management know-how to reach a world-class level in the absence of FDI.
, -FDI creates jobs, both directly and indirectly. Direct benefits arise when MNEs employ individuals
locally. In Ireland, more than 50% of the Irish manufacturing employees work for MNEs
Costs to a country receiving FDI
Loss of Sovereignty, Adverse effects on competition,
Capital outflow.
1. loss of sovereignty- Because of FDI, decisions to invest, produce, and market products and/or to
close plants and lay off workers in a host country are being made by foreigners—or if locals serve as
heads of MNE subsidiaries, they represent the interest of foreign firms
2. adverse effects on competition- Having driven domestic firms out of business, MNEs, in theory, may
be able to monopolize local markets. While this is a relatively minor concern in developed economies,
this is a legitimate concern for less developed economies, where MNEs are of such a magnitude in size
and strength and local firms tend to be significantly weaker.
3. capital outflow- When MNEs make profits in host countries and repatriate (send back) such
earnings to headquarters in home countries, host countries experience a net outflow in the capital
account in their balance of payments. As a result, some countries have restricted MNEs' ability to
repatriate funds. Another issue arises when MNE subsidiaries spend a lot of money to import
components and services abroad, which also results in 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.
Classic Theory says things don't change, static.
Modern theory view of international trade
Dynamic, constantly changing
Modern theories include
(1) product life cycles,
(2) strategic trade, and
(3) "diamond" or national competitive advantage of industries (consisting of 4 parts that form a
diamond pattern - firm strategy, structure, and rivalry, domestic demand conditions, related and
supporting industries, and country factor endowments).
Classical theory view of international trade
Static, not changing
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