Review Questions

1.What is the difference between inclusive and extractive institutions?

Inclusive- more democratic, the power is distributed in wide range of factors, widely distributed in the society,
more initiative for people to take scientific knowledge, countries with inclusive are better in international trade-
big advantage

Extractive- the power is distributed in a very narrow members of society, lack of incentive to do business

2.Briefly describe changes of commodity structure of international trade over subsequent industrial
revolutions.

1st industrial revolution-Britain, England

England has good property law
2nd industrial revolution USA
3rd industrial revolution-digital revolution

3.Which institutions created a background for the first industrial revolution?

All institutions connected with PROPERTY LAW
● They created incentive and trust necessary for people to take scientific knowledge and turn into
the business
● Create welfare effects

4.Describe the relationship between the transportation revolution and international trade.
Industrial revolution-brings new technologies
Important: costs of transportation goes down
SO: AS THE COSTS DIMINISH THE VALUE OF INTERNATIONAL TRADE INCREASE.

5.What are the most important institutions created by the Bretton Woods Conference?
Background: these institutions were created to help most devastated European countries by the 2WW.
1.WORLD BANK
2.INTERNATIONAL MONETARY FUND
INTERNATIONAL TRADE ORGANISATION

6. What is the Beggar thy neighbour policy?

Czasy 1914-1945
Competitive devaluation: increase tariffs, devalued currencies of some countries.Some countries did that
because they wanted to stimulate their export because when the price of the currency goes down→the products
are relative;y cheaper. BLOCKING export at the same time. It is quite destructive, it deepens the crisis.
7. What are three most important types of barriers to trade?
● Political barriers- human made barriers (np. institutions)- NAJWAŻNIEJSZE
● Geographical barriers
● Information barriers

8.Review advantages and disadvantages of a different approach to internalization.

Import, export, investments , joint ventures-internalisation process between countries

9.What are the stages of economic integration and how do they affect international trade?
The more integrated the area is, the more of these factors in the table happen.

10. What is regionalism?

Globalisation- structured process with international institutions. Ongoing process that is happening in the
world.

Regionalisation-integration within specific areas, np. EUROPEAN UNION, NAFTA, CEFTA

11.When should a country join the common currency area according to the theory of optimum currency
areas?

When a country wants to maximize economic efficiency in some area.

12. What are the benefits of fixed exchange rates?

● Costs of doing business(costs are better when you do not have to exchange the rates)
● More trust
● More stability

13.What is the difference between forward and spot rate?

Two kinds of exchange rate:
SPOT: involve near immediately exchange of bank deposits
FORWARD: involve exchange at some future date
Depends on agreement with a bank!
14. Briefly describe the main principles behind the law of one price.
Prices of identical goods in different markets must be the same after taking the currency exchange after
consideration.
Assumption:transportation costs involved
Prices will converge in the long run.

15.What factors influence international human resource management?

Expatriation: sending workers to other countries.
● Selection
● Training
● Delegating
● Reintegration
● Outcomes control

16.What is the difference between ethnocentric and polycentric approach in international management?
ETHNOCENTRIC- they are gonna use managers from the home country only.
POLYCENTRIC- MANY-they gonna use managers from the host countries.

17.What factors determine expatriation?

● Organization and position
● Personal factors environment of the host country
● Family factors

18.Describe phases of cultural shock.

1. Honeymoon
2. Crisis
3. Adjustment
4. Integration
It depends on how culture is.

19.What are Hofstede dimensions?

● Power Distance
● Individualism vs Collectivism
● Masculinity vs Femininity
● Uncertainty Avoidance Index- how people deal with unexpected

20.What are the most common types of management styles in the multicultural environment?
● Authoritarian
● Patriarchal
● Informative
● Advisory
● Cooperative
● Delegative
21. When is a corporation multinational? (MNC)
Corporation is multinational if it has more than 10% of start of devoting power of the subsidiary.
Greenfield and brownfield investments are two types of foreign direct investment. With greenfield investing, a
company will build its own, brand new facilities from the ground up. Brownfield investment happens when a
company purchases or leases an existing facility.
A multinational corporation (MNC) is one that has business operations in two or more countries. These
companies are often managed from and have a central office headquartered in their home country, but with
offices worldwide. Simply exporting goods to be sold abroad does not make a company a multinational.

Brownfield investment- buying existing facilities-factories

22. What is the difference between horizontal and vertical Foreign Direct Investment? (FDI)

Horizontal-production chain is broken up to different pieces and these different parts of production are move to
different countries

Vertical- production itself is move to different country

23. What is the main principle behind proximity-concentracion trade off FDI?

24. Which of the following is one of the main organizing principles underlying the GATT/WTO trading
regime? (slajd 16 K3pptx)

● Non-discrimination

● Transparency

● Reciprocity

25. Briefly describe the main idea behind the most-favored-nation-clause.

If you are lowering tariffs for one country, you have to do the same thing for others as well.

26. What are the major functions of the GATT/WTO?

● Subsequent lowering the tariffs
● Providing the form for negotiations-negotiating machine

27. Why International Trade Organization never materialized during the B-W Conference in 1944?
Mindset in the politics at the time: US was right after the war they didn't want to be hegemon of world
They wanted organisations to be democratic and liberal so they did not decide to create an International Trade
Organization that would be managed by the US, they didn't want to take this responsibility.
28. Demonstrate that institutions of law- property and liberty forged the industrial revolution of the
XVII-XVIII century.
These institutions were more inclusive
These institutions- especially property law creates the incentive for people to take scientific
knowledge/discovery and the turn into innovation and these innovations turn itnto business.
IT WAS RISKY THINGS.

29. What is on the axes on the GG schedule? (slajd 48 K1 Pptx)

Involvement in the international trade and investments
Gain and losses of the international trade

● One axes: Degree of economic integration between joining country

● Another axes: Gain and losses for the joining country

30. What is the main postulate of the law of the one price? (wróć do pytania 14)
We can add here: There is no transportation costs

31. What is the percentage rate official statistics use when classifying FDIs?
10%- if it is more than 10%- is FDI (FOREIGN DIRECT INVESTMENT)- you have control over the
company!(główna różnica między portfolio a FDI)
If it is less than 10% it is usually classified as Portfolio Investments

32. Describe GATT/WTO reciprocity principle with an example. (slajd 19 k3pptx)

Reciprocity requires the country accepting a tariff concession to offer comparable concessions in return.

33. Use an example to describe a term distinctive competence.

Distinctive competence-competitive advantage thing that some companies do better than the others, np.:
● experience
● Unique- np. doing unique processes that others companies are unable
● organisation structure
● History- na przykład: if you have a long history of corporation with the government you might get that
contract

34. Compare two countries of your choice in terms of Power Distance Index and interpret the results.
(Access data from Hofstede website)

35. Describe delegative management style with an example (must contain multicultural team).

Delegative- if you have really high-tech company you use that style. -Flat organization structure. They will
find the solution to the problem. They organize projects. Making a decision takes a lot of time so not
every company works.
36. Why was GATT fashioned to avoid the repetition of the inter-war experience?
It is related to: Beggar thy neighbor policy
Competitive devaluation, huge tariffs

Because this pushed other countries towards politics based on populism and then as the power of populism
drew slowly towards totalitarianism which was very destructive because the technical knowledge was on such
level during 2WW and it was the 1st time human being industrialised that.

37. What is the main factor driving vertical FDI?

● It’s cost of production
● low wages

38. Demonstrate that increasing return to scale are the main reason the average plant size of MNCs is
larger than local non- exporters.

Multi-corpo have competitive advantages.

They know they are better in the local competition, they already have network of others companies
They can produce more because they already produce for a bigger market.
It is just a matter of experience and economic scale.

39. Why is vertical FDI associated with the production chain broken up and shift of production processes
to affiliate location?
Because companies when they use this process they are looking for something that can make their production
cheaper.
Comparative advantage-using that in production process
Even if some companies can produce things cheaper than you.
You can produce things relatively cheaper so you can still win when specialising.

40. What is the exchange rate?

The price of one currency relative to other currencies.

41. Describe all phases in cultural shock. (patrz pytanie 18)

42. What is the sequence of the international employment process? (Slajd45 K2pptx)
● Selection
● Training
● Delegating
● Reintegration
● Outcomes control

43. Use an example to describe the ethnocentric approach.

ETHNOCENTRIC: using managers from the home country only.
Japanese example: they use japanese managers when it comes to work (trust, cultural)
44. Find a definition that best describes international management.
Management process but with the international environment.

45. Demonstrate that having an effective control system helps ensure that an organisation achieves its
goals.
You have 3 options when you use the control system:
● Status quo- stały stan rzeczy
● Change the (controls) variables
● Change the process

46. What is the product life cycle?

Theory of 4 stages:
● Introduction
● Growth
● Maturity
● Decline

47. Name all dimensions of the PEST analysis.

Political
Economy
Social
Technology
Is used to assess the external environ in the company
It gives you additional information in the strategic management process

48. What is the usual time frame for the short-range plan?
Depends on the company but usually less than 3 years.

49. Is it true that Porter's Theory of the National Competitive Advantage is associated with modern
Firm-Based Trade Theories?
YES

50. Find a definition of multinational business.

Multinational business- use most of its resources and sell most of its products on foreign markets which are
located in different countries.

51. What is Beggar thy neighbour policy. Use an example to demonstrate.

Np. France and Germany
Both of these countries devalued the currency and increase currence at the same time.