C1 Study Guide Flashcards
(39 cards)
What are the two core perspectives for global business?
- Institution-based View
- Resource-based view
- Institution-based View: Business success depends on formal and informal rules of the game. Example: Walmart’s failure in Germany due to cultural norms. 2. Resource-based view: Success comes from unique internal resources and capabilities. Example: Apple’s brand loyalty and innovation.
Define globalization.
Globalization is the increased interconnectedness and integration among countries, especially in trade, investment, and cultural exchange.
Examples of globalization include trade agreements and international collaborations.
What is the Long-Run Historical View of globalization?
Globalization has always existed, evolving over time.
Example: Ancient Silk Road Trade Route.
What is the Pendulum View of globalization?
Globalization swings between openness (Free Trade) and protectionism (Restricted Trade).
Example: Post WW2 openness vs recent tariffs (Trade war between the US and China).
What is the New Force (Unique-Role View) of globalization?
Globalization today is unique and unprecedented due to technology and modern communication.
Example: Instant global news, E-Commerce Platforms like Amazon.
What is Foreign Direct Investment (FDI)?
When a firm invests directly in operations (Factories or offices) in a foreign country.
What are the two types of FDI?
- Horizontal FDI
- Vertical FDI
- Horizontal FDI: Investing in the same type of business abroad (Example: Toyota opening car factories in the US).
- Vertical FDI: Investing in different stages of production abroad (Example: Apple assembles products in China).
What are the OLI Advantages?
- Ownership (O)
- Location (L)
- Internalization (I)
- Ownership: Unique resources or capabilities (Example: Coca-Cola’s Secret Recipe).
- Location: Advantages in specific areas (Example: countries rich in oil).
- Internalization: Benefits of managing operations internally (Example: Intel’s chip technology).
What is the Radical View on FDI?
FDI is harmful, exploiting host countries.
Example: Some Latin American countries historically rejected FDI.
What is the Free Market View on FDI?
FDI is good, it increases efficiency, jobs, and innovation.
Example: Singapore actively welcomes FDI for Economic Growth.
What is Pragmatic Nationalism in relation to FDI?
Balances benefits and risks, allows FDI selectively.
Example: India restricts FDI in sensitive sectors like defense, but encourages it in technology.
What is dumping?
Selling products in foreign markets at unfairly low prices (below production cost of domestic prices).
Example: China selling steel very cheap in the U.S.
What are anti-dumping duties?
Taxes on imports to counteract dumping and protect domestic producers.
Example: U.S. imposes duties on imported Chinese steel.
What is collusion?
When competing firms secretly agree on prices, production levels, or markets.
Example: OPEC oil producers often fail to keep agreements due to individual cheating.
How do resources and capabilities influence competitive dynamics?
Firms compete effectively with unique resources and capabilities.
Example: Tesla’s electric battery technology and Elon Musk’s leadership.
What is resource similarity?
Competing firms have similar resources/capabilities.
What are the four strategies that local firms can take to fight MNEs?
- Defender
- Extender
- Dodger
- Contender
- Defender: Focus on local strengths (Example: Local Italian restaurant).
- Extender: Expand internationally (Example: Bimbo in the U.S.).
- Dodger: Adapt or partner (Example: Chinese smartphone makers).
- Contender: Compete aggressively (Example: Samsung vs. Apple).
Define trade deficit.
When a country imports more than it exports.
Example: U.S. buying more electronics than it sells abroad.
Define trade surplus.
When a country exports more than it imports.
Example: Germany exporting more cars than it imports.
What is the balance of trade?
Difference between exports and imports; positive = surplus, negative = deficit.
What is mercantilism?
Belief that countries should export more than they import to accumulate wealth.
Example: 17th-century Britain limiting imports.
What is Absolute Advantage?
Countries specialize in producing goods they are most efficient at and then trade.
Example: Brazil growing coffee; Canada producing maple syrup.
What is Comparative Advantage?
Countries should specialize in what they produce most efficiently compared to other goods.
Example: U.S. producing more computers and importing clothes.
What is Product Life Cycle Theory?
Products go through stages (intro, growth, maturity, decline), shifting trade patterns accordingly.
Example: U.S. invents smartphones, production moves overseas.
