International Trade Theories Quiz

A system where a country's currency is fixed to a specific value compared to another currency, usually a major currency like the US dollar.

The central bank buys or sells its own currency in the foreign exchange market to maintain the fixed exchange rate.

An example of a fixed exchange rate system where currencies were pegged to the US dollar.

Businesses know the exchange rate won't fluctuate greatly, making planning and investments easier.

The central bank prioritizes exchange rate stability over other economic goals.

Investors might believe that a fixed exchange rate is unsustainable and sell the country's currency, putting pressure on the central bank.

An extreme situation where the central bank can no longer defend the fixed rate and the currency crashes.

A system in which the value of a currency is determined by market forces, with the central bank sometimes intervening.

A legal system rooted in Roman law, where comprehensive codes and statutes determine legal judgments.

A legal system based on precedent and judge-made laws, where decisions from previous cases guide future judgments.

A legal system where religious law, typically derived from sacred texts, forms the basis for legal rulings.

The process of organizing and documenting laws into a systematic and comprehensive collection.

A method of reasoning that starts with a general principle and applies it to a specific case.

The ability of judges to interpret and apply the law with some degree of flexibility.

Decisions made in previous legal cases that are used as a guide for future cases.

The principle of applying legal rules consistently to everyone, regardless of their status or power.

A theory that views international trade as a competition where one nation's gain comes at the expense of another. Mercantilists believed that national wealth was measured by the amount of gold and silver accumulated.

An economic theory that suggests nations should specialize in producing and exporting goods in which they are most efficient compared to other nations.

A theory that argues that nations should specialize in producing and exporting goods where the opportunity cost of production is relatively lower compared to other nations, even if they are not the most efficient producer.

The initial stage of a product's life cycle where it is introduced in a developed country, often with high prices due to innovation and limited competition.

The stage of a product's life cycle where demand expands, and production may move to other developed countries to serve those markets. Competition increases, and prices begin to decline.

The final stage of a product's life cycle where production shifts to low-cost countries, and the product becomes standardized. Competition is intense, and prices reach their lowest point.

The economic theory that explains how the patterns of international trade change over time as a product progresses through its life cycle stages: introduction, maturity, and standardization.

The cost of producing one good compared to another. It's the value of the alternative that is given up.

A company that enters a market early, establishing a strong position before competitors arrive.

A company that enters a market after a first mover, learning from their experience and often adapting to established trends.

First movers can solidify their brand and make it harder for competitors to gain a similar level of recognition.

By being first, companies can secure a larger portion of the market before others enter.

Companies can influence how their products are perceived and widely used.

Early entrance allows companies to secure crucial resources like supplies and talent.

First movers face more uncertainty and potential for failure because they're breaking new ground.

First movers have to invest heavily in research, development, and marketing, which can be costly.

A perspective that focuses on the company's internal resources and capabilities as the main drivers of competitive success in international markets.

A valuable resource enables a company to exploit opportunities or counteract threats in a global market. It's a resource that lets the company take advantage of situations or protect itself from challenges.

A rare resource is not widely available to competitors, giving the company a unique edge. It's something that sets the company apart from its rivals.

An inimitable resource is difficult for competitors to copy. This could be due to complex factors like unique historical conditions, special relationships, or the difficulty in understanding how the resource creates value.

Organizationally embedded resources are deeply integrated into the company's systems, structures, and culture. It means the company has the processes and culture in place to fully utilize these resources for long-term success.

The inherent disadvantage foreign firms face in host countries due to their non-native status. They may need to overcome cultural differences, legal regulations, and skepticism from local customers.

To overcome the liability of foreignness, companies need to invest heavily in local relationships, adapt products/services to local preferences, and gain trust. The goal is to become accepted and respected in the local market.

The process of increasing interconnectedness and interdependence among nations, driven by trade, technology, and cultural exchange. It signifies a shrinking world where businesses, ideas, and people are increasingly global.

The advantage of entering a market after a competitor has already established it. This could involve benefiting from pre-existing market development, lower entry costs, and adapting to evolving market demands.

The challenges faced by companies entering a market after a competitor has already gained a strong position. These challenges can include difficulty gaining market share, overcoming existing barriers, and limited resource access.

A mode of foreign market entry that involves establishing ownership in the venture, usually with higher risks but also offering greater control and potential returns.

A wholly owned subsidiary is a company entirely owned and controlled by a parent company. It can be established either by building a new facility (greenfield operation) or acquiring an existing local company.

A type of foreign market entry where a company partners with a local firm to share resources, risks, and profits.

A less involved mode of foreign market entry. Companies use existing resources and networks without significant investment or ownership.

A non-equity entry mode using existing distribution channels and networks. It's similar to a franchising model.

A non-equity mode where a company collaborates with a foreign partner to enter a new market. It offers opportunities for market knowledge and access to resources.