1. Midterm Review February 23, 2007 UGBA 178 Sanny Liao / Brian Chen

2. 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

3. Review: Hill, International Business 6e Chapter 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

4. 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

5. Chapter 3: Differences in Culture  Definitions of culture Hofstede/Namenwirth/Weber  Components of culture Values/Norms/Folkways/Mores  Determinants of culture Religion, social structure, language, political philosophy, economic philosophy, education  Hofstede study of culture in the workplace What are the four dimensions? Why is it criticized?

6. 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 men Rights  Ethical Decision Making

7. Chapter 5: International Trade Theory  Key theories Mercantilism, Absolute Advantage (Adam Smith), Comparative Advantage (Ricardo), Extensions of the Ricardian Model, Keckscher- Olin, Vernon (Product Life Cycle), New Trade Theory, National Comparative Advantage, Porter’s Diamond  Key Definitions Factor Endowments (basic and advanced)

8. 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

9. 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

10. 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?)

11. 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; International Fisher Effect: ); investor psychology and bandwagon effects  Forecasting Exchange Rate Efficient market theory/ inefficient market theory  Currency Convertibility Different forms of convertibility Tools to restrict convertibility

12. Chapter 11: International Monetary System  Key Definitions: 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

13. Case and Article Review  Cases Wipro Etch-A-Sketch Airbus v. Boeing Starbucks FDI  Articles South Korea’s E-Mart Is No Wal-Mart Karma Capitalism Not Exactly Counterfeit China’s Car Sector Gears Up for Big Change