Midterm Review

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Midterm Review

• February 23, 2007
• UGBA 178
• Sanny Liao / Brian Chen

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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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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

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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

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Chapter 3 Differences in Culture

• Definitions of culture
• Components of culture
• Determinants of culture
• Hofstede study of culture in the workplace

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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 man
• Utilitarian and Kantian
• Rights theories
• Justice theories
• Ethical Decision Making

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Chapter 5 International Trade Theory

• Key theories
• Mercantilism, Absolute Advantage (Adam Smith),
  Comparative Advantage (Ricardo), Extensions of
  the Ricardian Model, Heckscher-Olin, Vernon
  (Product Life Cycle), New Trade Theory, National
  Competitive Advantage (Porters Diamond)
• Key Definitions
• Factor Endowments (basic and advanced)

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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

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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

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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?)

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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) investor
  psychology and bandwagon effects
• Forecasting Exchange Rate
• Efficient market theory/ inefficient market
  theory
• Currency Convertibility
• Different forms of convertibility
• Tools to restrict convertibility

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Chapter 11 International Monetary System

• Key Definitions
• Floating exchange rates 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

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Case and Article Review

• Cases
• Wipro
• Etch-A-Sketch
• Airbus v. Boeing
• Starbucks FDI
• Articles
• South Koreas E-Mart Is No Wal-Mart
• Karma Capitalism
• Not Exactly Counterfeit
• Chinas Car Sector Gears Up for Big Change