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ADM 3318 - International Business - Possible Final Exam Questions and Answers.docx

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ADM 3318International BusinessDecember 12 2010Possible Final Exam Questions and AnswersQuestion 1 What are the drivers of globalizationGlobalization The shift toward a more integrates and interdependent world economyDrivers of Globalization Declining Trade and Investment Barriers oMany barriers to international trade took the form of high tariffs on imports of manufactured goods The typical aim of such tariffs was to protect domestic industriesoForeign Direct Investment FDI Occurs when a firm invests resources in business activities outside its home countryThe Role of Technological Change oMicroprocessors and Telecommunications Perhaps the single most important innovation for globalization It allowed for the explosive growth of highpower lowcost computing and vastly increasing the amount of information that can be processed by individuals and firmsoThe Internet and World Wide Web The web makes it much easier for buyers and sellers to find each other wherever they may be located and whatever their sizeoTransportation Technology In economic terms the most important development of transportation technology is the use of commercial jet aircrafts superfreighters and the introduction of containerization which simplifies transhipment from one mode of transport to anotherQuestion 2 Why do firms prefer to acquire existing assetsfirms through Mergers and Acquisitions than undertake Greenfield InvestmentsGreenfield Investment Establishing a new operation in a foreign countryMA Acquiring or merging with an existing firm in the foreign countryWhy MA over Greenfield1MAs are quicker to execute2Foreign firms are acquired because they have valuable strategic assets3The acquiring firms believe they can increased the efficiency of the acquired unit by transferring capital technology andor management skillsQuestion 3 PPP theory states that everything that is the same product or services should cost the same around the world This is not the case whyAlthough PPP theory seems to yield relatively accurate predictions in the long run it does not appear to be a strong predictor of short run movements in exchange rates covering time spans of five years or lessThis could be a result of1PPP theory does not account for transportation cost and barriers to trade 2Government intervention PPP theory states that market rates will establish exchange rates however all countries exert a degree of control over their exchange rate3Multinational Enterprises have lots of pricing power Monopoly and Oligopoly market structures show evidence of corporate competitors colluding with one another over price
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