WGU C211 Global Economics for Managers
Study Guide Questions and Verified Answers
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1. Globalization: Is the close integration of countries and peoples of the world which
has been brought about by the enormous reduction of the cost of transportation and
communication, and the breaking down of artificial barriers to the flows of goods, services,
capital, knowledge, and (to a lesser extent) people across borders.
2. New view of Globalization: A new force sweeping through the world in recent times that it
is a new phenomenon beginning in the late 20th century, driven by recent technological
innovations and a Western ideology focused on exploiting and dominating the world through a
Multinational enterprises.
3. Evolutionary view of globalization: A long run historical evolution since the down of
human history. Historians are debating whether globalization started 2,000 or 8,000 years ago.
Earliest traces of globalization goes back to the Assyrian, Phoenician, and Roman times.
,4. Pendulum view of globalization: A pendulum that swings from one extreme to another
from time to time. Globalization is neither recent or one-directional. Risk management and
scenario planning is needed.
5. What is Foreign Direct Investment (FDI)?: Investment in, controlling and man- aging
value-added activities in other countries. In other words, investment made by a firm or
individual in one country into business interest located in another country. Most discussed
foreign entrance is MNE.
6. MNE: Multinational Enterprise: Is a firm that engages in FDI when doing busi- ness
abroad. FDI sets apart MNEs and non-MNEs.
7. What different political views exists on FDI?: -in developed economies, back- lash against
inbound FDI from certain countries is not unusual. Example, in the 1980s, Americans were
alarmed by the significant Japanese inroads into the United States.
-in some parts of the developing world, tension over foreign ownership can heat up. There were
numerous incidents of nationalization and expropriation against MNE assets throughout the
developing world.
,8. What 4 benefits exist to a country receiving FDI?: 1. Capital inflow improve the host
country balance of payment. More technology, management, and more jobs in their countries.
2. Technology, especially more advanced technology from abroad, can create technology
spillovers that benefits domestic firms and industries. Local rivals can learn and imitate such
technology resulting in what's called demonstration effect (contagion effect).
3. Advanced management know how may be highly valued. It's often difficult for indigenous
development of management to know how to reach a world-class level in absence of FDI.
, 4. FDI creates jobs, both directly and indirectly. Direct benefits arise when MNEs
employ individuals locally.
9. What costs exist to a country receiving FDI?: 1. Loss of sovereignty
2. Adverse effects on competition
3. capital outflow
10. How do resources and capabilities influence the competitive dynamics of a business?:
Firm resources must create value when engaging rivals. The ability to respond rapidly to
challenges also adds value.
11. Competitive Dynamics: Actions and responses undertaken by competing firms.
12. What is resource similarity?: Extent to which a given competitor possesses strategic
endowment comparable in terms of both type and amount to those of the local firm. In order
words, extent to which firm's tangible/intangible resources are comparable to competitors in
type and amount.
13. How does resource similarity impact competitive dynamics?: Firms with a high degree
of resources similarity are likely to have similar competitive actions. For example, Apple and IBM
used to have a lot of resource similarity in the 1990s that they fought a lot.
14. Classical theory of international trade.: 1. Mercantilism
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