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Midterm Review

Midterm Review . February 23, 2007 UGBA 178 Sanny Liao / Brian Chen. Exam Format. 22 multiple choice questions Emphasis on knowing key concepts from reading 5 short answers 2 from the textbook 1 from assigned articles 2 from the cases in the textbook.

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Midterm Review

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  1. Midterm Review February 23, 2007 UGBA 178 Sanny Liao / Brian Chen

  2. Exam Format • 22 multiple choice questions • Emphasis on knowing key concepts from reading • 5 short answers • 2 from the textbook • 1 from assigned articles • 2 from the cases in the textbook

  3. Review: Hill, International Business 6eChapter 1: Globalization • Globalization • Markets and Production • Global Institutions • WTO (formerly GATT), IMF, World Bank (Bretton Wood), UN • Drivers • Technological change, declining barriers • Globalization Debate • Impact on job and income security; on labor policies and the environment; on national sovereignty; on the poor

  4. Chapter 2: National Differences in Political Economy • Key definitions • Political systems; economic systems; legal systems; contract law and property rights, Foreign Corrupt Practices Act, Purchasing Power Parity • Concepts • Amartya Sen • Link between political economy and economic progress

  5. Chapter 3: Differences in Culture • Definitions of culture • Hofstede/Namenwirth/Weber • Components of culture • Values/Norms/Folkways/Mores • Determinants of culture • Religion, social structure, language, political philosophy, economic philosophy, education • Hofstede study of culture in the workplace • What are the four dimensions? • Why is it criticized?

  6. Chapter 4: Ethics in International Business • Key ethical issues in international business • Employment practices, human rights, environmental regulations, corruption, moral obligation of multinational corporations • Philosophical Approaches to Ethics • Straw men • Rights • Ethical Decision Making

  7. Chapter 5: International Trade Theory • Key theories • Mercantilism, Absolute Advantage (Adam Smith), Comparative Advantage (Ricardo), Extensions of the Ricardian Model, Keckscher-Olin, Vernon (Product Life Cycle), New Trade Theory, National Comparative Advantage, Porter’s Diamond • Key Definitions • Factor Endowments (basic and advanced)

  8. Chapter 6: Political Economy of International Trade • Instruments of Trade Policy • Tariffs, subsidies, quotas, local content, administrative policies, antidumping policies • Political Arguments for Intervention • Economic Arguments for Intervention • Development of the World Trading System • Great Depression  Rise of protectionism  GATT  Uruguay Round  Problems  GATT criticisms  WTO  Doha Round

  9. Chapter 7: Foreign Direct Investment • Key Definitions • FDI; flow (inflow and outflow), stock • Form of FDI • Greenfield, mergers and acquisitions • Horizontal FDI • Reasons for Horizontal FDI • Market imperfections (internalization); high transportation costs; strategic rivalry; product life cycle; location specific advantages • Vertical FDI (forward and backward) • Reasons for Vertical FDI • Strategic behavior; market imperfections

  10. Chapter 8: Political Economy of FDI • Three Ideologies of FDI • Radical, free market, pragmatic nationalism • Cost benefit analysis under the pragmatic nationalism view • Benefits to Host Countries • Resource transfer effect, employment effect, balance-of-payment effect; effect on competition and economic growth • Costs to Host Countries • Adverse effects on competition; adverse effects on the balance-of-payments; national sovereignty and autonomy • Host Country Policies and FDI • Encouraging Inward FDI (what are the tools?) • Restricting Inward FDI (what are the tools?)

  11. Chapter 10: Foreign Exchange Market • Functions of the FX Market • Currency conversion; Insurance against FX risks (know the types of exchanges available – forwards, swaps, etc) • Economic Theories of Exchange Rate Determination • Law of one price ( purchasing power parity); money supply and inflation; interest rates and exchange rates (Fisher Effect: i = r + I; International Fisher Effect: ); • investor psychology and bandwagon effects • Forecasting Exchange Rate • Efficient market theory/ inefficient market theory • Currency Convertibility • Different forms of convertibility • Tools to restrict convertibility

  12. Chapter 11: International Monetary System • Key Definitions: • Pegged exchange rates; dirty float; fixed exchange rates • Fixed vs. Floating Exchange Rates • Benefits of Fixed Exchange Rates • Monetary discipline, speculation, limits speculators, uncertainty, predictable rate movements, trade balance adjustments, no link between exchange rates and trade, link between savings and investment • Benefits of Floating Exchange Rates • Monetary policy autonomy (restores control to government) • Trade balance adjustments (adjust currency to correct trade imbalances

  13. Case and Article Review • Cases • Wipro • Etch-A-Sketch • Airbus v. Boeing • Starbucks FDI • Articles • South Korea’s E-Mart Is No Wal-Mart • Karma Capitalism • Not Exactly Counterfeit • China’s Car Sector Gears Up for Big Change

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