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Summary docx C211 C211 Study Guide Questions The following questions are developed as a study aid for the C211 COS. They cover important concepts in each competency. The questions are not comprehensive but are only designed to serve as an indicator of your p$7.49
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Summary docx C211 C211 Study Guide Questions The following questions are developed as a study aid for the C211 COS. They cover important concepts in each competency. The questions are not comprehensive but are only designed to serve as an indicator of your p
docx C211 C211 Study Guide Questions The following questions are developed as a study aid for the C211 COS. They cover important concepts in each competency. The questions are not comprehensive but are only designed to serve as an indicator of your preparedness take the C211 assessment. After ...
docx c211 c211 study guide questions the following questions are developed as a study aid for the c211 cos they cover important concepts in each competency the questions are not comprehensive b
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C211
C211 Study Guide
Questions
The following questions are developed as a study aid for the C211 COS. They cover important concepts in each
competency. The questions are not comprehensive but are only designed to serve as an indicator of your preparedness
take the C211 assessment. After reading the material for each competency, use these questions to reinforce your
understanding and review further as necessary.
COMPETENCY: Globalization (Peng Chapters 1, 5, 6, 11) 6 pts
1- Explain the New, Evolutionary, and Pendulum views of Globalization. How do these differ from one another? Ch.
1
a. New – a new force sweeping through the world in recent times
b. Evolutionary – a long-run historical evolution since the dawn of human history
c. Pendulum – a pendulum that swings from one extreme to another from time to time
2- What is Foreign Direct Investment? Ch. 1
a. Foreign direct investment (FDI) is direct investment in, control, and management of value-added
activities in other countries.
3- What different political views exist on FDI? Ch. 6
a. Radical – radical view is hostile to FDI, treats FDI as an instrument of imperialism and as a vehicle
for exploitation of domestic resources, industries, and people by foreign capitalists and firms.
b. Free market – free market view calls for minimum or unrestricted intervention by government in FDI, will
enable countries to tap into their absolute or comparative advantages by specializing in the production
of certain goods and services. Leads to a win-win situation for both home and host countries.
c. Pragmatic nationalism – most countries practice pragmatic nationalism, weighing the benefits and costs
of FDI, having both pros and cons and only approving FDI when its benefits outweigh costs. FDI
brings a different (and often opposing) set of benefits and costs to host and home countries.
4- What benefits exist to a country receiving FDI? Elaborate. Ch. 6
a. Capital inflow, technology, management, job creation
5- What costs exist to a country receiving FDI? Elaborate. Ch. 6
a. Loss of sovereignty, adverse effects on competition, and capital outflow
6- How do resources influence competitive dynamics of a business? Ch. 11
a. Value, rarity, imitability, and organization
7- How do capabilities impact the competitive dynamics of a firm? Ch. 11
a. Competitive dynamics is the actions and responses undertaken by competing firms.
b. Counterattacks are driven by awareness, motivation, and capability.
8- What is resource similarity and how does this impact competitive dynamics? Ch. 11
a. Resource similarity is the extent to which a given competitor possesses strategic endowment
comparable, in terms of both type and amount, to those of the focal firm.
b. Resource similarity and market commonality can yield a powerful framework for competitor analysis.
9- How do firms create value when engaging rivals? Ch. 11
a. Launch products in multiple markets, hold a dominant position in key markets, and secure patents on
key products
,COMPETENCY: International Trade and Foreign Exchange Market (Peng Chapters 5, 7,
10) 9 pts
1- Give a description of the classical theory of international trade. Ch. 5
a. The major theories of international trade that were advanced before the 20th century, which consist of
(1) mercantilism (oldest), (2) absolute advantage, and (3) comparative advantage.
b. Classical theory paints a static picture – no change in factor endowments and trade patterns
2- How would the modern theory compare to the classical theory? Ch. 5
a. Modern theories account for changes in pattern over time whereas classical theories are static.
b. Modern theories include (1) product life cycles, (2) strategic trade, and (3) “diamond” or national competitive
advantage of industries (consisting of 4 parts that form a diamond pattern - firm strategy, structure, and
rivalry, domestic demand conditions, related and supporting industries, and country factor endowments).
3- Compare absolute advantage to comparative advantage. What differences exist? Ch. 5
a. Absolute advantage involves being more efficient (or superior) than anyone else in the production of any good
or service. Countries specialize in production of goods for which has an absolute advantage so each produce
more and can benefit by trading more.
b. Comparative advantage is the relative (not absolute) advantage in one economic activity that one nation
enjoys in comparison with other nations. This takes into account the factor endowments for productivity
– labor, land, and technology, which impacts efficiency.
4- What is mercantilism and why is this an important term? Ch. 5
a. Classical trade theory that viewed international trade as a zero-sum game. A nation becomes richer by
exporting more than it imports.
5- What are the critical features of the product life cycle? Ch. 5
a. an economic theory that accounts for changes in the patterns of trade over time – lead innovation
nation, other developed nations, and developing nations
b. 1st stage – production of a new product that commands a price premium will concentrate in the US,
which exports to other developed nations
c. 2nd is the maturing stage, the demand and ability to produce grow in other developed nations so it is
worthwhile to produce there
d. 3rd stage is standardization where much production will move to low-cost developing nations which
export to developed nations – leading to comparative advantage change over time
5- How would you describe strategic trade? Ch. 5
a. Strategic intervention by governments in certain industries can enhance their odds for international success.
They tend to be highly capital-intensive, high entry-barrier industries in which domestic firms may have
little chance without government assistance. These industries also feature substantial first- mover
advantages— namely, advantages that first entrants enjoy and do not share with late entrants.
7- How are supply and demand related to the exchange rate of a country? Ch. 7
a. Strong demand will lead to price hikes, and oversupply will result in price drops.
b. When the United States sells products to China, US exporters often demand that they be paid in US dollars
—the Chinese yuan is useless (technically, non-convertible) in the United States. Chinese importers of US
products will have to generate US dollars somehow in order to pay for US imports. The easiest way to
generate US dollars is to export to the United States, whose buyers will pay in US dollars. At present, over
80% of the world’s foreign exchange transactions are in dollars.
c. A foreign exchange rate is the price of one currency expressed in another. Basic determinants of foreign
exchange rates include (1) relative price differences and PPP, (2) interest rates, (3) productivity and
balance of payments, (4) exchange rate policies, and (5) investor psychology.
8- Which theory came first, mercantilism or modern-day protectionism?
, Ch. 5 a. Mercantilism in 17th century, protectionism was 17-18th century
9- If a company seeks to limit foreign exchange rate exposure in the forward direction, what is the most effective way
to do this? Ch. 7a. Currency hedging is essentially a way to minimize the foreign exchange risk inherent in all
non-spot transactions, which characterize most trade and FDI deals. The primary benefit of forward transactions is
to protect traders and investors from being exposed to the fluctuations of the spot rate.
10- What is transaction risk?
Ch. 7
a. Traders and investors expecting to make or receive payments in a foreign currency in the future are
concerned whether they will have to make a greater payment or receive less in terms of the domestic
currency, should the spot rate change.
11- Explain the concept of “hedging” as it relates to reducing various types of risk. Ch. 7
a. Method to reduce the risk of loss caused by price fluctuation
12- What is the difference between currency hedging and strategic hedging? Ch. 7
a. Strategic hedging: spreading out activities in a number of countries in different currency zones to offset
the currency losses in certain regions through gains in other regions.
13- What advantages exist with first mover? Ch. 10
a. Proprietary, technological leadership, pre-emption of scarce resources, establishment of entry barriers
for late entrants, avoidance of clash with dominant firms at home, relationships with key stakeholders
such as governments
14- What advantages exist with late mover? Ch. 10
a. Opportunity to free ride on first-movers investments, resolution of technological and market uncertainty,
first mover’s difficulty to adapt to market changes
15- Consider the model of foreign market entries. How is scale-of-entry related/relevant? Ch. 10
a. Scale of entry involves the decision as to whether it should be large or small scale.
b. How to enter - A comprehensive model of foreign market entries first focuses on the equity (ownership)
issue. The second step focuses on making the actual selection, such as exports, contractual agreements,
JVs, or wholly owned subsidiaries.
c. The benefits of large-scale entries are a demonstration of strategic commitment to certain markets. The
drawbacks are limited strategic flexibility elsewhere and huge losses if these large-scale “bets” turn out
to be wrong.
d. Small-scale entries are less costly. They focus on “learning by doing” while limiting the downside risk.
The drawbacks of small-scale entries are a lack of strong commitment, which may lead to difficulties in
building market share and in capturing first-mover advantages.
COMPETENCY: Political and Economic Forces (Peng Chapter 2) 10 pts
1- How do institutions reduce uncertainty?
a. Key roles are to reduce uncertainty, curtail transaction costs, and combat opportunism. By signaling
which conduct is legitimate and which is not, institutions constrain the range of acceptable actions.
Political uncertainty, such as terrorist attacks and ethnic riots, may render long-range planning obsolete.
Political deadlocks in Washington have made the US government “less stable, less effective, and less
predictable,” which led Standard & Poor’s to downgrade its triple A credit rating to AA+. Economic
uncertainty such as failure to carry out contractual obligations may result in economic losses. Lack of
predictability is also a pitfall.
2- Discuss and compare the three pillars (regulatory, normative, and cognitive)
a. Regulatory pillar is the coercive power of governments.
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