Bec 5 Flashcards
The primary purpose of CPI
It is a measure of overall cost of a fixed basket of goods and services purchases be an average household. It is used to compare relative price changes over times
Used to calculate inflation rate
It measures consumer buying power but not buying power of industry or business
What is hyperinflation
It occurs when a country see very high and (often accelerating price level)increases while inflation is just increased in prices over times
The velocity of money is generally measured as a ratio of
And what is velocity of money
the nominal gross domestic product to the money supply
It is the rate at which money is exchanged in the economy
What happens to AD and AS would lead to a reduction in inflation
Decrease in AD
Increase in AS
The best measure to combat a period of deflation
Increase money supply
Most likely cause of increase in frictional unemployment in the foreign colony
A reduction in the aggregate age of the work force as young workers tend to move between jobs more frequently
What happens to ST and LT rate of return if inflation is expected to be lower in the future
LT investment will have lower IR as investor or lender will not require as high a return because value of reciting dollars in the future will not be as eroded
Why depreciation is not reflective of current fixed asset replacement costs when inflation occurs
Because total value used as the basis for depreciation is the assets historical costs
what are the approach of value chain analysis
1) Internal costs analysis to check the sources of profit and costs of internal activities within the firm 2) internal differentiation analysis to analyze ability to create value through differentiation 3) vertical linkage analysis to understand suppliers and buyers activities and decide where value can be created external to the firm’s operations.
is political issues an external factor that directly affects the competitive environment of the firm?
no because they are factors that affect the overall industry not simply the competitive environment of the firm
what is value chain
a value chain is that value starts with the suppliers who provide the raw materials for a production process, continues with the firm and its strategic plan, continues with the value created by the customers, and then end s with the disposal and recycling of the materials.
if the manufacturing costs of a firm are more than those of rivals, then does that mean the firm has no competitive market advantage?
no, only if total costs can determine firm’s position as whole in terms of competitive advantages compared to other firms
what are the four major factors that impact global competitive advantage
conditions of the factors of production (skilled labor force), conditions of domestic demand (if rivals are mostly international), related and supporting industries (especially with other rival domestic firms), firm strategy, structure, and rivalry (less regulation/prompt competition/low taxes would help firm grow in global market)
porter’s five forces
barrier to entry, market competitiveness (between existing rivals), existence of substitute products, bargaining power of customer and BP of suppliers
price discrimination
when customers are distinct, a seller can charge different prices to different groups by justifying that the products they are buying are unique to that specific group
differentiation strategy focused on a narrow range (niche) of buyers versus a broad range
not emphasize one feature of the product versus specifically emphasize on one feature of the product such as prestige
how is globalization measured
world trade as a percentage of GDP. the greater the better
globalization is frequently associated with what
comparative advantage and increased specialization as increased economies of scale will likely result in increased specialization in individual economies
comparative advantage vs competitive advantage
comparative advantage is produced when specialization in the production and trade of specific products in relation to trading partners.
competitive advantage is produced when company can produce goods or services better or more cheaply than its rivals.
what is dumping
dumping occurs when the price charged to foreign customers on exported goods is less than either the price charged in the domestic market or less than the production cost
Types of business combinations
1) horizontal - between competitors join together under single management/leadership 2) vertical - combination of companies at different stages of the production process 3) circular - different business units under centralized management 4) diagonal combination - the company is buying another companying that provides shipping
Backward integration vs forward integration
backward integration is when company’s purchase of its supplier of raw materials while forward integration is buying its distributor
types of business transactions
1) merger - similar size companies forming a new company 2) acquisition - a larger company purchase a smaller company 3) tender offer - a company offers directly to shareholders to buy the o/s shares of another company 4) purchase of assets - purchase of portion of the selling company’s assets such as product line/division
types of divestiture
1) sell off - to generate cash - get rid of underperforming/unnecessary unit to focus on core business 2) spin off - no to generate cash and not to public - separating a subsidiary business from a parent company to form a new entity - some potential to grow 3) to generate cash for the parent company and providing controlling interest to the parent - sub is made public through IPO thereby creating a new entity
