Topic 1 Flashcards
What is absolute advantage?
Exporting the goods and services for which a country is more productive than other countries
What is comparative advantage?
Produce and export the goods and services for which it is relatively more productive than other countries
How does money come into play for comparative advantage?
Produce and export the goods and services one is relatively best able to produce and buy other goods and services from people who are better at producing them
What are the 2 types of international investment?
Foreign direct investment and portfolio investment
Why of the 2 types of international investment gives you the most control?
Foreign Direct investment
What are the 3 international investment theories?
Ownership advantage, internalization, dunning’s eclectic theory
What is the ownership advantage in international investment theory?
A firm owning a valuable asset that creates a competitive advantage domestically can use that advantage to penetrate foreign market. i.e. ownership of a technology
What is the internalization theory in international investment theory?
When the cost of dealing with a partner is high. i.e. is the partner helpful
What is the Dunning’s Eclectic Theory in international investment theory?
There are 3 conditions for foreign direct investments: ownership advantage, internalization advantage and location advantage (why there?)
What are the supply factors affecting the FDI decision?
Production costs, logistics, resources availability and access to technology
What are the demand factors affecting the FDI decision?
Customer access, marketing advantages, exploitation of competitive advantagem customer mobility
What are the political factors affecting the FDI decision?
Avoidance of trade barriers and economic development incentive
What is a multinational company?
A company with a producting and distribution facilities in more than one country,
