Session 2

Question 1

What are examples for a global business?

Answer 1

• international business
• global business
• multinational enterprise (MNE)
• foreign direct investment

Question 2

What is an international business?

Answer 2

business firm that engages in international cross-border economic activities or the action of doing business abroad

Question 3

What is a global business?

Answer 3

business around the globe including both international cross-border activities and domestic business activities

Question 4

What is multinational enterprise (MNE)?

Answer 4

firm that engages in foreign direct investments

Question 5

What is foreign direct investment (FDI)?

Answer 5

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

Question 6

Which core perspectives exist?

Answer 6

• Institution-based view

- Resource-based view

Question 7

What does institution-based view describe?

Answer 7

formal and informal rules of the game

Question 8

What does resource-based view describe?

Answer 8

firm-specific resources and capabilities

Question 9

What are the formal rules?

Answer 9

requirements to treat domestic and foreign firms as equals, enhance the potential odds for foreign firms’ success

Question 10

What are the informal rules?

Answer 10

• cultures
• norms
• values

Question 11

What is the liability of leadership?

Answer 11

difference between the firm’s origin and host environment

Question 12

What is the advantage of the lack of outsidership?

Answer 12

if you are not legimitate with the local government

Question 13

What are the different steps of the global economic pyramid?

Answer 13

• top tier (more than 15.000€) one billion people
• second tier (1.500€-15.000€) one billion
• base of the pyramid (less than 1.500€) four billion

Question 14

Which trade theories belong to the classical trade theories?

Answer 14

• mercantilism
• absolute advantage
• comparative advantage

Question 15

Which trade theories belong to the modern trade theories?

Answer 15

• product life cycle
• strategic trade
• national competitive advantage

Question 16

What is a trade deficit?

Answer 16

a surplus of imports over exports

Question 17

What is a trade surplus?

Answer 17

a surplus of exports over imports

Question 18

Which properties belong to the mercantilism?

Answer 18

• theory of mercantilism

- protectionism

Question 19

What does the theory of mercantilism mean?

Answer 19

wealth of the world (measured in gold and silver) is fixed and that a nation that exports more and imports less would enjoy the net inflows of gold and silver thus become richer

Question 20

What does protectionism mean?

Answer 20

idea that governments should actively protect domestic industries from imports and vigorously promote exports

Question 21

Which properties belong to the absolute advantage?

Answer 21

• free trade
• theory of absolute advantage
• absolute advantage

Question 22

What does free trade mean?

Answer 22

buying and selling of goods and services with little or no government intervention

Question 23

What does the theory of absolute advantage mean?

Answer 23

nation gains by specialising in economic activities in which that nation has an absolute advantage

Question 24

What does the absolute advantage mean?

Answer 24

to be more efficient than anyone else in the production of any good or service

Question 25

Which properties belong to the comparative advantage?

Answer 25

• comparative advantage

- opportunity cost

Question 26

What does comparative advantage mean?

Answer 26

relative advantage in one economic activity that the nation enjoys in comparison with other nations

Question 27

What does opportunity cost mean?

Answer 27

cost of pursuing one activity at the expense of another activity

Question 28

What is the difference between the absolute and the comparative advantage?

Answer 28

every country has other ‘factors of production’

Question 29

In which categories does Vernon divide the world?

Answer 29

• lead innovation nation (typically USA)
• other developed nations
• developing nations

Question 30

Why is the product life cycle theory criticized?

Answer 30

• it assumes that the USA will always be the lead innovation nation for new products
• it assumes a stage-by-stage migration of production that takes at least several years

Question 31

What does the strategic trade theory mean?

Answer 31

• strategic intervention by governments

- certain industries can enhance their odds for international success

Question 32

Which are the main components of the national competitive advantage (“diamon model”)?

Answer 32

• firm strategy and rivalry
• domestic demand conditions
• related and supporting industries
• country resource endowments

Question 33

Which types of trade barriers exist?

Answer 33

1. ) tariff barriers

2. ) nontariff barriers

Question 34

What are import quotas?

Answer 34

restrictions on the quantity of imports

Question 35

What are voluntary export restraints (VERs)?

Answer 35

exporting countries voluntarily agree to restrict their exports

Question 36

What are antidumping duties?

Answer 36

imports that have been sold at less than a ‘dumped’ price and thus harm domestic firms

Question 37

Why are economists against free trade

Answer 37

• to protect domestic industries

- necessity to shield infant industries