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Economics > Globalization > Flashcards

Globalization Flashcards

1
Q

What is globalization

A

A close integration of countries and people of the world

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2
Q

What is international business

A

The action of doing business abroad

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3
Q

What is global business

A

Business around the globe

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4
Q

What is multinational enterprise

A

A firm that engages in foreign direct investment (FDI)

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5
Q

What is foreign direct investment (FDI)

A

Investing in, controlling and managing value added activities in other countries

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6
Q

What determines the success and failure firms around the globe?

A

Resource base view - all controls and blames on the firm. It indicates or states that the success and failure of the firm depends on themselves.

Institution base view - the success and failure of the firm lies in formal (government regulations, laws, rules) and informal (custom, tradition, and culture) institutions

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7
Q

What are the 3 views on globalization

A

A new force- the globalization is something new. Started with western countries and was enabled with technological advance. It is a way to exploit other developing countries.

A long run historical evolution- globalization has been with humans since human history started and has been growing with the population

A pendulum- globalization is not new or one way, but swings from one extreme to the other.

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8
Q

Why do nations trade

A

Because of the benefit from the trade.

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9
Q

What are the theories of international trade

A

Classical trade - developed before 20th century. They are static, meaning they don’t take into account changes over time.

Modern trade- developed in the 20th century. They are dynamic, taking into account changes over time.

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10
Q

Classical trade theories

A

developed before 20th century. They are static, meaning they don’t take into account changes over time.

Mercantilism, absolute advantage, comparative advantage

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11
Q

Mercantilism

A

International trade has winners and losers. they thought this because they believed there was limited amount of gold and silver the world.

Every other economy rejected this notion because both sides benefit from the trade.

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12
Q

Absolute advantage

A

The country that’s is more productive and efficient should specialize in that.

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13
Q

Comparative advantage

A

If a country can produce an item at the lower opportunity cost (cheaper) than the others, it has to specialize in that.

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14
Q

Modern trade theories

A

developed in the 20th century. They are dynamic, taking into account changes over time.

Product life cycles, strategic trade, national competitive advantage

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15
Q

Product life cycles

A

Patterns of trade change over time as production shifts from new to maturity and standardized stages.

(New - new product to the world. Maturity- other countries start developing the same new product. Standardized- developing countries start producing that same product)

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16
Q

Strategic trade

A

Suggests that strategic intervention by government in certain industries can enhance their odds of success.

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17
Q

National competitive advantage of industries

A

Competitive advantage of certain industries depends on 4 aspects

18
Q

Trade barriers

A

Tariff - tax on imported goods

Non- tariff - import quota, local content requirement, subsidies, etc.

19
Q

Deadweight loss

A

A net loss that occurs in an economy as a result of tariff or a loss of total surplus.

20
Q

Foreign portfolio investment

A

Investment in stocks and bonds in foreign countries, but without a controlling interest.
*FDI controls, but foreign portfolio investment does not.

21
Q

Multinational enterprise vs non multinational enterprise

A

Multinational enterprise engages in FDI. Non multinational enterprise does NOT engage in FDI

22
Q

Why FDI?

A

Ownership (control)
Location
Internalization

23
Q

What are the political views on FDI

A

Radical view, free market view, pragmatic nationalism

24
Q

Radical view

A

Very hostile to FDI, they don’t like FDI, they think that it’s a way of exploitation

25
Q

Free market view

A

They like FDI and they want less government intervention

26
Q

Pragmatic nationalism

A

Each government will weigh the costs and the benefits of FDI, and if the benefits outweigh the costs, then the government will allow it.

27
Q

What are benefits of FDI

A

Capital inflow, job creation, technological or management info that we can learn from foreign firms.

28
Q

Horizontal and vertical FDI

A

Producing the same goods in host countries as at home - horizontal

Upstream downstream. Selling in other countries NOT producing - vertical

29
Q

Alliances

A

Voluntary agreement of cooperation between firms.

“If you cannot beat them, join them”

30
Q

Acquisitions

A

Transfer of the control of operations and management from one firm to another.

31
Q

Resource based view- VRIO

A

Value
Rarity
Imitability
Organization

32
Q

Resource similarity

A

The extent to which a given competitor possesses strategic endowment comparable to those of competitors

33
Q

Market commonality

A

Overlap between 2 rival markets.

If commonality is low, competition is high. If commonality is high, competition is low.

34
Q

Explain the new view of globalization

A

A new force sweeping through the world in recent times.

35
Q

Explain the evolutionary view of globalization

A

Globalization has always been a part and parcel of human history.

36
Q

Explain the pendulum view of globalization.

A

Not recent and is not one directional.

Globalization has both rosy and dark sides and these change over time

37
Q

What is foreign direct investment?

A

Investing in, controlling, and managing value-added activities in other countries

38
Q

What different political views exist on FDI?

A

Radical view - hostile towards FDI
Free market view - unrestricted by government. FDI is a win-win for home and host countries
Pragmatic nationalism- pros and cons with FDI. FDI is approved when benefits outweigh costs

39
Q

What benefits exist to a country receiving FDI

A

Capital inflow, technology, management, job creation

40
Q

What costs exist to a country receiving FDI

A

Loss of sovereignty, competition, capital outflow

41
Q

How do resources and capabilities influence the competitive dynamics of a business?

A

In order to develop a competitive advantage the firm must have resources and capabilities that are superior to those of its competitors

42
Q

What is resource similarity and how does this impact competitive dynamics?

A

The extent to which a given competitor processes strategic endowment comparable, in terms of both type and amount.

High resource similarity has similar competitive actions

Economics (11 decks)

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