ATHENA DONDERDAG

Question 1

When is export attractive

Answer 1

1. relative low cost
2. economies of sales

Question 1

high transportation cost, attractive or unattractive for export

Answer 1

unattractive

Question 2

high tariff barriers, attractive or unattractive for export

Answer 2

unattractive

Question 3

FRANCHISING

Answer 3

• special form of FRANCHISING
• insist to not only sell intangible property but also insists the franchise agree to abide by strict rules as to how it does business.

Question 4

franchisor

Answer 4

Mac Donalds headquarter

Question 5

franchisee

Answer 5

local Mac Donalds

Question 6

advantages of franchising as franchisor

Answer 6

similar to licensing but MORE CONTROL

Question 7

disadvantage franchising

Answer 7

• requires more management involvement
• bad reputation in one franchising location, could influence overall image of the brand

Question 8

how are companies who form a STRATIGIC ALLIANCE linked

Answer 8

linked by a contract

Question 9

advantages STRATIGIC ALLIANCE

Answer 9

• shared risk/investment
• reduce costs
• exploitation of complementary skills and assets
• establishing technological standards

Question 10

disadvantages STRATIGIC ALLIANCE

Answer 10

• skills transfers
• knowledge spillovers
• opportunistic behaviors (act in own interest)

Question 11

skills transfers: knowledge or capabilities

Answer 11

capabilities

Question 12

joint venture

Answer 12

• establishment of a firm that is jointly owned by 2+ independent firms.
• you have EQUITY SO MORE RISK

Question 13

advantages joint ventures

Answer 13

• benefit from local partners knowledge (culture, language, political and business systems)
• risks are shared
• synergies between partners
• avoiding expropriation risk by local partners

Question 14

why is joint venture risky?

Answer 14

• give control of its technology to partner
• risk of conflict
• shared ownership (problem if objective/goals change over time)

Question 15

acquisition

Answer 15

purchasing an already existing business in the foreign country

Question 16

advantages acquisition

Answer 16

• less risky
• QUICK to execute
• synergies with target company
• possibility to leverage local market knowledge/assets/resources

Question 17

why are acquisitions not attractive

Answer 17

• High risk of failure
• lack of strategic fit
• cultural clashes and post-acquisitons

Question 18

wholly owned subsidiaries

Answer 18

the parent company will hold all of the subsidiaries common stock, you build the company yourself (unlike acquisitions where you just buy it)

Question 19

advantages whole owned subsidiaries

Answer 19

• reduce risk of losing control over core competencies
• tight control
• Replication or redeployment of business models
• no integration costs with local partners

Question 20

the free trade theory is proposed by who

Answer 20

Adam smith

Question 21

what did Adam smith say about the market

Answer 21

imports and exports should be determined by the invisible hand of the market mechanism and not the government policy.

Question 22

3 theories

Answer 22

Adam smith: absolute advantage
David Ricardo’s theory: comparative advantage
heckscher-ohin theory

Question 23

benefits of trade

Answer 23

a country can specialize in things they’re good at and import products that other countries can produce more efficiently

Question 24

mercantilism

Answer 24

- export > import - governments use economies to augment state power at THE EXPENSE OF OTHER COUNTRIES - emerged in ENGLAND - ZERO GAME SUM: a again by one country results in the loss by another

Question 25

absolute advantage - who?

Answer 25

- Adam smith - countries differ in ability to produce goods efficiently - positive sum game(= arguing that all countries can benefit from specialization and exchange) - should produce good they have an absolute advantage in and trade for goods produced by other countries

Question 26

absolute advantage/Adam smith can be showed on what?

Answer 26

production possibility frontier

Question 27

production possibility frontier

Answer 27

- Adam smith/absolute advantage - graphical representation that shows the max possible output combinations of two goods or services that an economy can achieve when all resources are fully and efficiently utilized

Question 28

what if a country has an absolute advantage in the production of all goods?

Answer 28

then we use comparative advantage

Question 29

comparative advantage

Answer 29

if a company has an absolute advantage in both, they should produce the most efficient one an buy the 'least' efficient one.

Question 30

what does Ricardo say about the comparative advantage theory

Answer 30

unrestricted free trade will lead to better outcomes than with restricted trade. it suggests that consumers in all nations can consume more if there are no restrictions on trade.

Question 31

Why Diminishing Returns? (2)

Answer 31

*Not all resources are the same quality. *Different goods use resources in different proportions

Question 31

FREE TRADE ASSUMPTIONS

Answer 31

* Simple world with two countries and two goods. * No transportation costs. * No differences in price of resources. * Resources can move freely. * Constant returns to scale. * Each country has a fixed stock of resources and free trade does not change the efficiency with which a country uses its resources. * No effects of trade on income distribution within a country.

Question 32

Immobile Resources

Answer 32

* Resources do not always move easily from one activity to another. Example is employment/jobs → need retraining * Pain short term (retraining programs), benefits significant and enduring

Question 33

What are the two types of dynamic gains from trade?

Answer 33

1. Increased stock of resources (e.g., capital, labor) via access from abroad. 2. Improved efficiency in resource use.

Question 34

How do dynamic gains from trade affect a country's production possibilities frontier (PPF)?

Answer 34

They cause the PPF to shift outward, indicating economic growth.

Question 35

What is the Samuelson critique about trade and wages?

Answer 35

Paul Samuelson argued that free trade with a rapidly improving poor country could hurt a rich country by reducing wages, especially through offshoring service jobs.

Question 36

According to the Samuelson critique, what is the potential downside of lower prices from trade?

Answer 36

Lower prices from imports may not compensate for wage losses in the rich country.

Question 37

What is the link between trade openness and economic growth?

Answer 37

Countries that are open to international trade tend to experience higher economic growth rates.

Question 37

What historical pattern has been observed regarding free trade and wealthy countries?

Answer 37

Free trade has historically benefited wealthy countries more than poor ones.

Question 37

What trade-off exists when a country opens up to international trade?

Answer 37

Higher long-term growth comes with short-term costs, such as job losses or industry adjustments.

Question 38

exporaration

Answer 38

- JOINT VENTURE - By teaming up with a local partner, a foreign company can protect itself from the risk of being expropriated (taken over) by the host country's government.

Question 39

synergies with target company

Answer 39

acquisition advantage

Question 40

Often less risky than greenfield investments

Answer 40

advantage acquisitions

Question 41

disadvantages wholly owned subsidiaries

Answer 41

*Firms bear the full costs and risks of setting up overseas operations *Legitimacy problems (how accepted/trusted it is by the local people/consumers). *No bridge with host country

Question 42

synergies

Answer 42

creating together more value than they could at their own