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CPA BEC > Business 6: Globalization and Local Economies > Flashcards

Business 6: Globalization and Local Economies Flashcards

1
Q

Define globalization.

A

Distribution of industrial and service activities across an increasing # of nations

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2
Q

What is the result of globalization?

A

Makes world more interdependent

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3
Q

How do you measure globalization?

A

Measured by world trade as a % of GDP

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4
Q

What factors drives globalization?

A
  • improvements in transportation
  • tech advancements
  • deregulation of int’l fin. markets
  • operational options for int’l business (more choices)
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5
Q

What is a natural outcome of globalization?

A
  • Promotes specialization (specialization that leverages comparative advantage)
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6
Q

Globalization imparts responsibilities of world citizenship. Corporations have what two implied duties?

A

1) Act responsibility reg. environmental issues

2) Promote political stability and cooperation among nations

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7
Q

What are three key motivations for int’l business operations?

A

1) Comparative advantage
2) Imperfect markets
3) Product cycle

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8
Q

What is Bermuda’s comparative advantage?

A

Tourism

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9
Q

What is the ability to trade freely between markets often limited by?

A
  • physical immobility of the resource
  • regulator barriers
    (so co. trade outside their borders to retrieve more resources)
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10
Q

Product cycle is driven by what?

A

Demand

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11
Q

One way of conducting int’l business operations is by exporting/importing products or services. What is this called?

A

International trade

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12
Q

Entities that provide the right to use processes or tech in exchange for a fee are engaged in what type of activity?

A

Licensing

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13
Q

Entities whose marketing service or delivery strategy provides training and related service delivery resources in exchange for a fee are engaged in what type of activity?

A

Franchising

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14
Q

Give an example of a franchise.

A

McDonald’s

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15
Q

What is a joint venture?

A

Takes advantage of comparative advantage of one or both of the participants in marketing or delivering a product

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16
Q

When an entity establishes int’l operations by purchasing a foreign company as a subsidiary or by starting a subsidiary operation w/i the borders of a foreign country, what type of activity are they engaged in?

A

Direct Foreign Investment (DFI)

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17
Q

What do you call the sync of all levels of product manufacturing on an int’l basis?

A

Global sourcing

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18
Q

How can a company mitigate the risk that governments may attempt to control economic activity through taxes and tariffs?

A

Transfer pricing

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19
Q

Should a company assess the risk of political intervention in business planning and financial reporting?

A

YES

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20
Q

What is NAFTA?

A

North American Free Trade Agreement

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21
Q

What is a foreign trade zone?

A

Trade zones in which tariffs are waived until goods leave the zone

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22
Q

The creation of foreign trade zones affects the government’s control of what?

A

Control of imports and the location of import facilities

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23
Q

China is an example of what type of economic system?

A

Centrally planned economy

24
Q

In centrally planned economies, factors of production are owned by whom?

A

Government (subject to restriction)

25
Q

The US is an example of what type of economic system?

A

Market economy

26
Q

In market economies, factors of production are owned by whom?

A

Individuals

27
Q

The Japanese keiretsu or the Korean chaebol is an example of what?

A

Conglomerates

28
Q

Define conglomerate.

A
  • Corporation that is made up of a number of different, seemingly unrelated businesses.
  • In a conglomerate, one company owns a controlling stake in a number of smaller companies, which conduct business separately.
29
Q

Define culture.

A

Shared values and attitude of a group

30
Q

What type of cultures may be highly averse to dealing w/ uncertainty?

A
  • Asian culture

- South American culture

31
Q

Exchange rate fluctuation is generally divided into what three categories?

A

1) Transaction risk
2) Economic risk
3) Translation risk

32
Q

Does an operation w/i a foreign economy carry the risk of functioning w/i the general health or weakness of a particular economy?

A

Yes

33
Q

Foreign demand is a function of what two things?

A

1) Income of customer

2) Purchasing power of currency

34
Q

Higher interest rates in the foreign country are indicators of what?

A
  • Slower economic growth

- Reduced demand

35
Q

Lower interest rates in the foreign country are indicators of what?

A
  • Increased growth

- Increased demand

36
Q

What is the effect of higher local economy inflation?

A
  • Reduces purchasing power

- Making imports more expensive and reducing local demand

37
Q

What is the effect of lower local economy inflation?

A
  • Increases purchasing power for imports, resulting in higher local demand
38
Q

What is the impact of a weak local currency on the demand for imported goods?

A

Reduces demand for imported goods

39
Q

What is the impact of a strong local currency on the demand for imported goods?

A

Increases demand for imported goods

40
Q

What are two complications of global sourcing?

A
  • multiple sources for materials

- multiple exchange rates

41
Q

The dominance of the US as the world’s lone superpower is referred to as what?

A

Unipolar distribution of power

42
Q

What are the BRIC countries?

A

Brazil
Russia
India
China

43
Q

The new era of multipolarity, wherein power is distributed among many nations, includes what nations?

A

US
EU
BRIC

44
Q

Nationals rich in natural resources have the potential to be more ______.

A

Powerful

45
Q

One dimension of national power is ______, which translates to workforce.

A

Population

46
Q

What is defined as the participation of nations in worldwide institutions (e.g. U.N, WTO, IMF)?

A

Functional interdependence

47
Q

What is defined as the acknowledgement that all members of the global community share the planet Earth?

A

Systematic interdependence

48
Q

The increase in _______ will require an acknowledgement of the interdependence of nations and cooperation among nations consistent w/ shifts in the balance of power.

A

Multipolarity

49
Q

What nations are generally regarded as the world’s largest industrial economies?

A

Developed nations

50
Q

What nations are generally regarded as the countries not included on the list of developed nations and are lead by BRIC?

A

Emerging nations

51
Q

Developed nations have generally produced trade _____ as their domestic consumption results in more imports than exports.

A

Deficits

52
Q

Emerging nations often produce trade ______ as their exports feed the consumption of developed nations.

A

Surpluses

53
Q

NAFTA offers trading partners operating w/i its boundaries reductions in tariffs on products in exchange for compliance w/ limits on imported labor and materials used in the manufacture of those products. This practice is also known as what?

A

Sourcing requirement

54
Q

True or false.

The IMF regulates currency values.

A

False (IMF activities are designed to stabilize exchange rates but it is not empowered to regulate currency values)

55
Q

Global companies that deal w/ the political and financial risks of conducting business in a particular foreign location face which type of risk?

A 
Country risk
(encompasses the political risk, economic risk, transfer risk, sovereign risk, and exchange rate risk associated w/ engaging in business w/ foreign countries)
56
Q

The concept of a global economic balance of power anticipates what?

A

A distribution of power and influence that ensures that no one nation or group of nations will dominate or interfere w/ the activities of others

CPA BEC (26 decks)

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