Globalizing Business Chapter 1

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Questions and Answers

What does Gross National Income (GNI) include that Gross Domestic Product (GDP) does not?

Income from nonresident sources abroad (correct)

Income from government operations

Income from resident sources only

Total market value of all final goods

Which of the following best describes Purchasing Power Parity (PPP)?

An adjustment to GDP reflecting cost of living differences (correct)

An adjustment to GDP based on population size

A calculation of income from abroad

A measure of total income generated within a country

What is the primary focus of the resource-based view in international business?

Environments and resources available to firms (correct)

Institutions and their regulations

Government policies in host countries

Consumer behavior trends

Which of the following groups is collectively referred to as BRIC?

Brazil, Russia, India, and China Signup and view all the answers

Which best defines 'Bottom Billion'?

Countries with limited economic growth, primarily in Africa and Central Asia Signup and view all the answers

How does formal rule structure impact foreign firms in a host country?

It can enhance or undermine the chances for foreign firms’ success Signup and view all the answers

What is meant by 'liability of foreignness'?

The disadvantages foreign firms face in new markets Signup and view all the answers

Which region is not part of the 'Triad'?

South America Signup and view all the answers

What differentiates global business from international business?

Global business includes both domestic and international activities. Signup and view all the answers

Which term has gradually replaced 'developing countries' since the 1990s?

Emerging economies Signup and view all the answers

What is an example of Foreign Direct Investment (FDI)?

A company managing local operations in another country. Signup and view all the answers

Why is it important to study global business?

To analyze global business trends. Signup and view all the answers

What characterizes a Multinational Enterprise (MNE)?

It runs operations in multiple countries. Signup and view all the answers

What does the infant industry argument advocate for?

Support for young domestic firms from government Signup and view all the answers

What are nontariff barriers (NTBs)?

Regulatory measures discouraging imports not based on taxes Signup and view all the answers

Which of the following best describes a trade embargo?

Politically motivated trade sanctions against foreign countries Signup and view all the answers

What do import quotas restrict?

The quantity of a good allowed to be imported Signup and view all the answers

What is the purpose of an antidumping duty?

To protect domestic companies from unfair competition Signup and view all the answers

Which statement correctly describes a voluntary export restraint (VER)?

A mutual agreement between exporting countries to limit exports Signup and view all the answers

What is a significant consequence of import tariffs?

Deadweight cost leading to net losses in the economy Signup and view all the answers

Which of the following is an example of an administrative policy?

Rules making customs checks more burdensome Signup and view all the answers

What is the theory of mercantilism primarily concerned with?

Exports exceeding imports for national wealth Signup and view all the answers

What is the concept of opportunity cost in the context of comparative advantage?

The loss of potential gain from choosing one alternative over another Signup and view all the answers

Which of the following best describes the modern trade theory of product life cycles?

It describes changing trade patterns as products evolve over time. Signup and view all the answers

How does the theory of absolute advantage differ from comparative advantage?

It emphasizes specialization based on overall efficiency. Signup and view all the answers

Which factor is central to the Heckscher-Ohlin theory?

Availability of labor as a production factor Signup and view all the answers

What happens when a nation has a trade deficit?

It imports more goods than it exports. Signup and view all the answers

What is one potential benefit of being a first mover in a market according to strategic trade theory?

Exclusive benefits and advantages in trade Signup and view all the answers

What is a key characteristic of protectionism in international trade?

It aims to bolster domestic industries against foreign competition. Signup and view all the answers

In terms of trade theories, what does the term 'balance of trade' refer to?

The difference between the value of exports and imports. Signup and view all the answers

Which theory suggests that strategic intervention by governments can lead to international success in specific industries?

Strategic trade theory Signup and view all the answers

Study Notes

Chapter 1: Globalizing Business

Global business encompasses both international and domestic business activities.
International business is a firm engaged in cross-border economic activities or doing business abroad.
Multinational enterprise (MNE) is a firm that invests in foreign direct investment (FDI) to manage and control value-adding activities in other countries.
FDI includes investments in controlling and managing value added activities in other countries.
Global business includes domestic firms competing or collaborating with foreign firms.
Emerging economies focus on understanding the importance of economies other than developed ones.
Emerging economies have gradually replaced "developing countries" in the 1990s.
Key economic terms for understanding global business operations include:
- Gross National Product (GNP)
- Gross Domestic Product (GDP)
- Gross National Income (GNI)
- Purchasing Power Parity (PPP)
Key terms for emerging economies include:
- Triad (North America, Western Europe, and Japan)
- BRIC (Brazil, Russia, India, and China)
- Group of 20 (G20)
Figure 1.1 displays the contributions of emerging economies relative to developed economies across various categories.
The "base of the pyramid" encompasses the vast majority of the world's population, making under $2,000 annually.
The "bottom billion" comprises 58 countries concentrated in Africa and Central Asia, facing issues with growth, incomes, and human development.
Developed and emerging economies are often classified by bodies such as the IMF.
Studying global business improves employability and career advancement within the global economy.
Expatriate managers are those who work abroad, often receiving an international premium package for additional compensation.
Key perspectives in global business include the institution-based view and the resource-based view..
- An institution-based view outlines that firm success and failure are constrained by institutions. Formal and informal rules are relevant to this viewpoint.
- A resource-based view highlights that firm success and failure are determined by environmental factors, such as a firm's resources and capabilities. Liability of foreignness is the innate disadvantage foreign firms experience as they establish a presence in a foreign host country.
Globalization can be viewed as a new force, a long-running historical evolution, or as a pendulum swinging between extremes.
Semiglobalization suggests that barriers to market integration are high but not enough to isolate countries completely.
Risk management involves identifying and assessing risks to minimize the impact of high-risk events.
Scenario planning is a technique for preparing and planning for multiple scenarios.
Students' and the general public's viewpoints on globalization vary.
NGOs, or nongovernmental organizations, are categorized by their role as either advocacy groups, focused on environmental issues or human rights, etc, or as operational organizations, designing and implementing development programs.

Learning Objectives

Explain international business and global business, focusing on emerging economies.
Articulate the reasons for studying global business (e.g., employability).
Identify the core perspectives in global business research (e.g., institutional & resource-based).
Articulate three ways of understanding globalization.

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Description

Dive into the foundational concepts of global business in Chapter 1. Explore the definitions of international business, multinational enterprises, and the significance of emerging economies. Understand key economic indicators that shape global operations and the evolving terminology in the business landscape.