FVC1 WGU Global Business Study Guide Questions (Complete) Graded A

FVC1 WGU Global Business Study Guide Questions (Complete) Graded A 1. What are the characteristics of globalization-- Communication, transportation, transnational businesses, free trade agreements, consumer culture, labor force. *People are interacting across borders. *Lower barriers to trade, expansion of technology, decoupling - trade is happening among lesser developed countries. Emerging markets trading with each other. INTERDEPENDENCE (financial) 2. How do major international institutions facilitate globalization-- International monetary funds (INF): provides financial stability. Oversight of international monetary systems [Global system of exchange rates and international payments/stability -facilitate other countries buying goods and services from each other] World bank: reconstruction and restructuring economies as an opportunity to reach global solutions to national challenges. * International Bank for Reconstruction and Development (IBRD): supports reconstruction using international capital markets * International development association (IDA): provides long-term low-interest social sector and infrastructure loans to poorest members using foreign aid funds provided by the rich nation members * International Finance Corporation (IFC): Provides loans and takes equity position to private companies of developing countries and works towards developing capital markets in those economies World trade organization (WTO): focuses on lowering/removing trade barriers to encourage trade and globalization to flow smoothly, freely and fairly, and predictably; settles trade disputes; negotiates and administers trade agreements. What is the rationale for managing trade?-- Managed trade refers to agreements, sometimes temporary, between countries (or a group of countries) that aim to achieve certain trade outcomes for the countries involved. Managed trade aims to replace global market or economic forces with government actions to determine trade outcomes. Under a managed trade regime, policymakers may use various socio-economic or geo-political rationales to protect specific companies or industries and achieve particular strategic objectives. (Socio-Economic and Geo-political definitions and related terms) 3. What are the costs of regional economic integration?-- Undermining the most-favored-nation status rule (the lowest tariff applicable to one member must be extended to all members), an essential principle of the WTO. Imposing laws and regulations that are uniform, and that at times do not take into account national economic, cultural, and social differences. Loss of Trade with Non-members Eliminating jobs and increasing unemployment in protected industries. Losing sovereignty, national independence, and identity. Reducing the powers of the national government. Loss of control over policy. Increasing the probability of rising crime associated with illegal drugs and terrorism because of ease of cross-border labor movement. (See other terms for regional integration definition) 4. What are key aspects of economic geography?-- Market size, location, and openness to trade Economic Geography is the study of principles that govern the efficient spatial allocation of economic resources and the resulting consequences 5. What are the components of the foreign exchange market?-- pot market - traded for immediate use • Futures market - Contracts to buy or sell a specified amount of currency at a future date at a pre-determined price - Standardized and traded on exchanges - Involve major world currencies • Forward market - Contracts to buy or sell currencies at a future date at a pre-determined price - Not standardized, traded over-the-counter- Available for less popular currencies 6. What are the major international trade theories and what are key features of each one?-- mercantilism *absolute advantage *comparative advantage *Heckscher-Ohlin theory *Factor-price Equalization Theory *Porter's Diamond Model 7. What are the costs of regional economic integration?-- Undermining the most-favored-nation status rule (the lowest tariff applicable to one member must be extended to all members), an essential principle of the WTO. Imposing laws and regulations that are uniform, and that at times do not take into account national economic, cultural, and social differences. Loss of Trade with Non-members Eliminating jobs and increasing unemployment in protected industries. Losing sovereignty, national independence, and identity. Reducing the powers of the national government. Loss of control over policy. Increasing the probability of rising crime associated with illegal drugs and terrorism because of ease of cross-border labor movement. 8. What are ways that culture influences product management and marketing?-- Management styles • Product Development and Management • Advertising Campaigns • Communication 9. What are the reasons why intellectual property protections are critical in today's global business environment?-- ntellectual property and protection infringement and piracy on the rise throughout the world. • Patents • Trademarks • Copyrights To protect the creation of intellectual property and to encourage innovation, creativity, and investment in this domain, most nations have laws that afford certain intellectual property special protections. 10. What are the business implications for conducting international business in different economic ideologies?-- Socialism - plays a strong role in the economy and may own stakes in certain businesses • Capitalism - businesses are privately owned, strong individual incentives exist, & government plays a very little role in the economy Communism - owns and controls major factors of production, and is philosophically and economically classless society 11. What are key political risks when conducting global business?-- Economic risks - currency inconvertibility or devaluation - weak enforcement of contracts - Labor union strikes - inflation • Political risks (negative impact upon business conduct) - nationalization or expropriation - Coups d'etat - Civil wars - Terrorism - Corruption 12. What are the reasons for having internal controls that facilitate ethical behavior? -- Internal control procedures fit into two categories. The first: preventing accidental errors and intentional misrepresentations—also called irregularities—from occurring. Second: identifying errors and irregularities after they occur so that corrective action may be taken. Thus, internal controls can be categorized as either preventive controls or feedback controls. 13. What is the relationship between ethics and economic progress?-- Ethics are "the decisions, choices, and actions (behaviors) we make that reflect and enact our values" In order or the economy to progress it must be ethical. When there is lack of ethics and integrity the economy will dampen. Classical economists considered economics a branch of ethics. Business activity would grind to a halt without trust, fair dealings, and honest communication. 14. What are reasons why multinational enterprises (MNEs) invest abroad?-- irm's goal: Profit maximization: • Increasing revenues • Decreasing costs • Diversifying and reducing risk Dunning's Eclectic Theory: • Ownership of Firm-specific advantages • Locational or country-specific advantages • Internalization advantages access to a country's resources to generate revenue -access to a country's markets(few players/monopolistic) --sometimes as a way to bypass protectionist barriers -take advantage of lower production costs e.g. lower labor costs and exchange rates MNC investments abroad can generate controversy. (you are sending jobs overseas, no care for environment or human rights, etc 15. What are the benefits of foreign direct investment from a host country perspective?-- Along with significant financial inflows (economic growth), *FDI creates new jobs, *allows access to new technologies, facilitates transfer of important management (and employee) skills; *increases domestic competition and choice. **In addition, FDI generates tax revenues (corporate, income, and sales taxes) needed for government services, reduces poverty, and accelerates economic development.