WGU Global Business D080 ( 330 expert curated questions and answers )

Cost

Economies of scale and scope. Exploiting cost of factors of production

Competition

New Markets and increased levels of trade

Government

Favorable policies and support for industry

Subsidies

A sum of money granted by the government to assist an industry or business

Patents

Protects inventions and improvements to existing inventions for a limited period of time in exchange for detailed public disclosure of those inventions

Copyrights

A government authority or license giving the owner of an invention the right to exclude others from making or selling the invention for a set period of time

Trademarks

Protection for any word, name, symbol, device, or any combination used in commerce to identify and distinguish the goods of one manufacturer or seller from goods manufactured or sold by others

Ethical business practices

Arguably the most substantial of the challenges faced by MNCs-ethical business practices in areas such as labor, product safety, environmental stewardship, corruption, and regulatory compliance-has historically played a dramatic role in the success or failure of global players

Organizational structure

Another significant hurdle is the ability to efficiently and effectively incorporate new regions into the value chain and corporate structure

Public relations

Public image and branding are critical components of most businesses

Leadership

It can be difficult for businesses to find an effective organizational leadership having the appropriate knowledge and skills to approach a given geographic market successfully

Legal and regulatory structure

Every nation has unique laws and regulations that govern business. MNCs need access to legal expertise that will help them understand in country laws and comply with applicable regulations

Infrastructure

Infrastructure includes the basic physical and organizational structures needed for a society to operate and for an economy to function

Technology

The level of technological development of a nation affects the attractiveness of doing business there and the type of operations that are possible

Cultural distance refers to people's differences based on language, norms, national or ethnic identity, levels of trust, tolerance, respect for entrepreneurship and social networks, or other country specific qualities

Administration

Bilateral trade flows show that administratively similar countries trade much more with each other than dissimilar countries

In Globalization 1.0

nations dominated global expansion

Globalization 2.0

was driven by the ascension of multinational companies, which pushed global development

In Globalization 3.0

significant software advances have allowed an unprecedented number of people worldwide to work together with unlimited potential

Authoritarian governments

Centralize all control in the hands of one strong leader or a strong small group of leaders who have full authority

Totalitarianism

Contends that every aspect of an individual's life should be controlled and dictated by a strong central government. Tend to use more fear and corruption to maintain control

Anarchism

Contends that individuals should control political activities, and public government is both unnecessary and unwanted

Democratic governments

Derive their power from the people of the country, either by direct referendum (called a direct democracy) or through elected representatives of the people (a representative democracy)

Free trade zones

These areas have reduced tariffs, taxes, customs, procedures, or restrictions to promote trade with other countries

Command Economy

Economic effort is devoted to goals passed down from a ruler or a ruling class. Resources and businesses are owned by the government

Mixed economy

Supply and demand are generally determined by individuals or companies, but the government will intervene as necessary

Traditional economies

Are focused around families or tribes where everyone consumes and produces the same goods, there is no surplus, and members barter. Little to no global trade is practiced

Market economy, goods and services are owned by individuals or companies that can buy, sell, or lease them to make a profit with minimum interference by the government

Communism

A system in which all property is publicly owned and the government controls global trade

Capitalism

A system in which the means of production is controlled by private owners who can choose to participate in global trade

Socialism

A system in which the government controls the means of production and regulates global trade

Industrialized

Prevalent formation of new markets with possibility of saturation

Less developed

Focus on agriculture and raw materials with limited imports

Developing

Growing population which leads to long term growth potential

Civil Law

An inquisitorial system where the investigating judge investigates the facts of the case

Common Law

Judges interpret the law, and judicial rulings can set precedent

Religious Law

Is based on religious guidelines

Customary Law

Can vary from community to community and is found in countries without strong formal justice systems

Canon Law

This system is the body of laws and regulations made by a religious authority governing communities

Special Drawing Rights

The international type of monetary reserve currency created by the IMF

TRIPS

Trade Related Aspects of Intellectual Property Rights

Privatization

Selling government holdings to private companies

The International Monetary Fund (IMF)

Promote international economic cooperation, international trade, employment, and exchange rate stability by making financial resources available to member countries to meet their balance of payments needs

World Bank

Helps build sustainable economic growth, invests in people, end extreme poverty, improve the income of the lowest 40% of citizens in each country, and build resilience to shocks and threats

The European Central bank

Regulates the supply of euros

Debt Instruments

A tool used by a company or any other entity to raise money or capital

Federal Reserve Bank

U.S. central bank

Criticisms of The World Bank

Power imbalance in leadership, not help to developing countries, privatization in general and specifically in the health sector, not considering how funding projects will adversely affect the environment, and emerging markets have been frustrated with their lack of influence in the World Bank

Criticisms of IMF

Conditions of its loans, lack of accountability, and willingness to lend to countries with poor human rights records, requiring poor countries to reduce their government borrowing, an administrative underrepresentation of the global south, environmentalists criticize the IMF by blaming IMF loans for the exploitation of natural resources

Criticisms of The WTO

Free trade is not equal across all industries, reserves the right to review each nation's trade policies, protects developed countries more than developing countries, has refused to address the impacts of free trade on labor rights, and ignoring environmental concerns

One of the results of the Uruguay Round of the World Trade Organization negotiations, Decrease in tariffs

Specialization is

A method of production whereby an entity focuses on the production of a limited scope of goods to gain a greater degree of efficiency

Tariffs

A tax or duty to be paid on a particular class of imports or exports

Trade Surplus

When the value of a country's exports is greater than the value of goods being imported

Mercantilism

One of the earliest economic theories, which stated that a country's wealth was determined by the amount of gold and silver they had in their possession

Imports

Bringing goods or services into the country from abroad for the purpose of selling

Exports

A commodity, good, or service sold abroad

Protectionism

The theory or practice of protecting a country's domestic industries from foreign competition by taxing imports

Government Subsidies

Money paid by the government to help an organization or industry reduce its costs

Free trade

International trade left to its natural course without tariffs, quotas, or other restrictions

Absolute Advantage

The ability of an individual or group to produce a good or service more efficiently than another

Economies of Scale

A proportionate savings in costs gained by an increased level of production

Convertible

A currency that can be used to buy or sell without government restrictions

Foreign Direct Investment

An investment strategy of investing in a foreign market through direct involvement in the operations of a company, either by acquisition or partnership or by creating a new business. A company engages in this due to it wants to control organizational assets in another country

Value Chain

Describes how a good is produced in stages.

Industry privatization

When a country converts a state owned enterprise into a private company

Skill specialization

When one country can gain a particular advantage in manufacturing one type of equipment by the nature of the labor skills and resources

Quotas

A limited quantity of a particular product that can be produced, exported, or imported under official controls

Comparative advantage

What a country as a whole can produce cheaper

Intra industry trade

Occurs between two countries that decide to use specialization to reduce costs of products in various industries

Consumer Surplus

The difference in price between the highest price a consumer is willing to pay for a good or service and what they actually paid. When tariffs and quotas are discontinued they increase

Import Tariffs

Taxes on goods that are imported into a country

Export Tariffs

Taxes on goods leaving a country

Protective Tariffs

Tariffs that protect a domestic industry by making imported goods more expensive than equivalent goods produced domestically

Revenue Tariffs

Tariffs levied to raise revenue for the government

Specific Tariffs

Import taxes expressed in an amount of money per unit imported

Ad Valorem Tariffs

Import taxes based on a fixed percentage of the assessed commercial value of imported goods

Compound Tariffs

Taxes on imported goods that are a combination of a fixed amount and an amount based on the value of the goods

Absolute Quota

Quota that strictly limits the quantity of goods that may enter a country

Tariff Rate Quota

Quota that permits a specified quantity of imported goods to enter a country at a reduced rate during the quota period

Dumping

When a country or company exports a product at a price that is below market price to gain an unfair share of the market

Protect domestic industries and employment

By reducing the number of imports, domestic suppliers must produce more to meet domestic demand

Protect against unfair trade practices

Setting a quota helps protect a domestic economy from unfair trade practices such as dumping, the pricing of imports below production cost

Protect national security

Import quotas discourage imports and encourage domestic production of goods that may be necessary to the security of the country

Portfolio Investment

An investment in another country is purely financial and does not involve any management responsibility

Merger

is the combination of two companies into a single entity to create an organization that possesses greater levels of economic, market, and financial capabilities for competition

Partnership

Legal relationship formed by the agreement between two or more individuals to continue a business as coowners and make joint decisions about the firm and its market position

Drawbacks to foreign direct investment

Governments are careful not to allow foreign ownership of strategically important industries as this could lower the competitive advantage of the nation. Foreign investors could also take advantage of the company they are investing in and take away all valuable assets then leave the country

Benefits of foreign direct investment

An inflow of capital can benefit the global and local economy. Invested capital goes to businesses with the highest potential for growth. The profit motive is color blind, and investments are made regardless of religion or politics. Investors can decrease their risk by diversifying. Investing capital in firms can lead to growth and subsequently increased jobs

Multinational Advantage

Multinationals can often overcome trade problems. Another advantage of a multinational is its ability to sidestep regulatory problems. Multinationals can also shift production from one plant to another as market conditions change. Multinationals can also tap new technology from around the world. Finally, multinationals can often save a lot in labor costs, even in highly unionized countries

Multinational Corporations can have

A significant impact on government policy through the threat of market withdrawal

A trade bloc is

A free trade zone, or near free trade zone, formed by one or more tax, tariff, and trade agreement between two or more countries

Free Trade Zone

An area where the nations allow free, or almost free, trade among each other while imposing tariffs on goods of nations outside the zone

Political Union

When a single nation is formed and a mutual organization confederates all policies

Customs unions

Provide for economic cooperation as in a free trade zone. Barriers to trade are removed between member countries. Its primary difference from the free trade area is that members agree to treat trade with nonmember countries similarly, which means they share a common external tariff

The common market

Allows for the creation of economically integrated markets between member countries. Trade barriers are removed, as are any restrictions on the movement of labor, technology, and capital between member countries

An economic union is created when

Countries enter into an economic agreement to remove barriers to trade and adopt common economic policies

Drawbacks to Regional Economic Integration

Member countries may trade more with each other rather than with nonmember nations. Countries may move production to cheaper labor markets in member countries. With each new round of discussions and agreements within a regional bloc, nations may find that they have to give up more of their political and economic rights. An economic bloc may impose greater external trade blocs to keep all trading internal to the bloc. Countries may see a dilution of their national cultural identity. Regional integration may encourage mergers and acquisitions within the block to create large rivals

Benefits of Reginal Economic integration

Trade agreements create more opportunities for countries to trade with one another by removing the barriers to trade and investment. Studies indicate that regional economic integration significantly contributes to the relatively high growth rates in less developed countries. By removing restrictions on the labor movement, economic integration can help expand job opportunities. Member nations may find it easier to agree with smaller numbers of countries

NAFTA

Agreement was implemented in 1994 and helped form a free trade zone between Canada, the United States, and Mexico by decreasing tariffs and trade barriers