IB300 FINAL SAQ

Medium-sized company: could they benefit from going global?

• Yes they can 

• Companies go global for lower costs, market expansion, risk diversification, and competitiveness 

• Can also face challenges such as resource constraints, cultural barriers, and higher risk.

Why do companies go global? 

• They go global to reduce costs, expand market, increase revenue, access resources, and gain competitive advantages 

Ethics: relative or absolute?

• Ethics can be relative (based on cultural and moral values) or absolute (universal ethical principles)

Does paying off executives in global companies lead to economic growth? 

• Not directly, high executive compensation does not guarantee economic growth and may create inequality 

• Economic growth is based on productivity, investment, innovation, and policy

What is mercantilism?

• An economic theory that views global trade as a zero-sum game where countries maximize exports and minimize imports 

What are 2 economists we studied (10-point question)? 

• David Ricardo: Comparative Advantage

  • Producing a good or service at lower costs

• Adam: Absolute Advantage

  • Best at the production of goods or services 

Who does FDI benefit, the Host or the Home country?

• Both host and home countries. Hosts gain jobs and technology; home countries gain profits and market access.

What is the purpose of WTO, and what does it mean?

• World Trade Organization 

• Promotes free trade, reduces trade barriers, and resolves trade disputes  

Do fixed exchange rates lead to speculation and uncertainty?

• Yes, if the rate is unsustainable, it can cause both speculation and uncertainty 

• Fixed exchange rates reduce uncertainty in stable conditions but cause speculation if markets believe the peg will break.

How many legal systems exist in the world? (The United States is a common law)

1. Civil 

• Detailed laws are organized into codes 

• Less adversarial than a common law system 

• Based on what the lawyer/academics/judges decide 

2. Common 

• Royalty from England

• Tradition, precedent, custom 

• More flexible than other systems  

• Based on precedence, what happened in the past? Punishment should be the same 

3. Theotracic 

• Based on religious teachings 

• The most common is Islamic law

** why must you know legal system? 

• Contracts 

What is an expatriate manager?

• A manager sent to work and live in a foreign country 

What is an expatriate failure rate?

• An expatriate failure rate is when a manager gets moved to a foreign country to do work there, but it does not work out 50% of the time due to family issues or cultural adjustment 

David Ricardo developed which economic theory?

• Comparative Advantage theory 

  • explains how nations can gain an advantage in international trade by focusing on producing goods that come with a smaller opportunity cost

  • For example: if Portugal makes wine and England makes cloth, they trade with each other so they can make more of one instead of having to make both 

• LOWER OPPORTUNITY COST 

  • Producing at a lower cost

Adam Smith developed which economic theory?

• Absolute advantage theory 

  • Countries should specialize in producing goods they can make more efficiently (with less labor/resources) than other nations and trade freely, boosting global wealth by maximizing productivity and lowering costs

• COST TO PRODUCE 

  • Best at production

Are marketing and sales synonymous?

• No, they are not 

• Marketing creates demand, and sales convert demand into revenue