GGR 209

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Faren_h
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20963
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GGR 209
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2010-06-19 17:07:27
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globalization
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PEOPLE, PLACES, AND MONEY FLASHCARDS
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  1. ACCORDING TO PETER DICKEN, WHAT ARE THE MAIN ARGUMENTS OF THE "HYPERGLOBALIST" CREED? HOW DOES HE ILLUSTRATE IT?
    - Hyperglobalists are the largest opinion body

    - Argument: live in a boarderless world where "natural" is no longer relevant



    -Nation states are no longer significant actors

    - Consumer tastes & cultures are homogenized

    - Standardized global products

    - with corporations having no allegiance to place/ community

    - "end of geography"

    - illustrated through a graph which shows increasing geographies spread and increasing functional integration between economic activities
  2. ACCORDING TO DICKEN, WHAT ARE THE MAIN ARGUMENTS OF THE "HYPERGLOBALISTS" OF THE RIGHT? OF THE LEFT?
    PRO-GLOBALIZERS (RIGHT)

    • - Neoliberals
    • - Globalization will bring the greatest benefit for the greatest number
    • - Let the free markets rules
    • - Human well-being will be enhanced
    • - Major Problem: Not that there is too much globalization, but that there is not enough


    ANTI-GLOBALIZERS (LEFT)

    • - Problem: globalization itself
    • - market forces are a problem
    • - market forces create inequalities
    • - globalization increases the scale & extent of such inequalities
    • - which leads to a reduction of well-being
    • - which also creates massive enviornmental problems
    • - markets must be regulated
  3. HOW DOES DICKEN SUMMARIZE THE "SCEPTICAL INTERNATIONALISTS'" STANCE?
    - He argues that the newness of the current situation has beengrossly exaggerated

    • -He argues: the world was more open and integrated prior to WWI
    • - emperical evidence to justify this is quantitative and
    • aggregative

    • -Prioir to WWI: trade, investment and population migration flowed in increasingly large volumes
    • - levels like that were not reached again until decades later

    - Hirst & Thompson: "we don't have a fully globalized economy, we do have an international economy
  4. ACCORDING TO DICKEN, WHAT ARE THE DISTINCTIONS BETWEEN 'LOCALIZING,' 'INTERNATIONALIZING,' 'GLOBALIZING' AND ' REGIONALIZING' PROCESSES?
    • LOCALIZING
    • - geographically concentrated economic activities with varying degrees of functional integration

    • INTERNATIONALIZING
    • - simple geographical spread of economic activities across national boundaries with low levels of functionaing integration

    • GLOBALIZING
    • - both extensive and geographical spread & also a high degree of functional integration
    • REGIONALIZING
    • - operation of "globalizing" processes at a more geographically limited scale, ranging from higher integrated & expanding European Union (EU), to much smaller regional economic activity
  5. WHAT ARE THE DIFFERENCES BETWEEN URBANIZATION AND LOCALIZATION ECONOMIES?
    • URBANIZATION
    • - Benefits of generalized clusters which create the basis for sharing costs of a wholerange ofservices
    • - the larger the city, the greater the variety

    • -Encourages growth of a variety of infrastructural, economic, social and cultural facilities

    • LOCALIZATION
    • - Benefits of specialized clusters
    • - Benefits based on the proximity of firms performing different but linked functions

    • ADDED NOTES
    • - both are based on an idea that the "whole" is greater than the sum of the parts due to benefits
  6. DISCUSS AND DESCRIBE THE BROAD TYPES OF INTERDEPENDENCIES DISCUSSED IN THE CONTEXT OF TRANSACTIONS. WHAT ARE THEIR CHARACTERISTICS?
    • TRADED INTERDEPENDENCY
    • - Direct transactions between firms in the cluster
    • - Spaitiak proximity is a means of reducing transaction costs, minimalizing transportation costs & reducing customer-supplier uncertanties

    • UNTRADED INTERDEPENDENCY
    • - less tangible benefits:
    • - devlopment of an appropriate
    • pool of labor
    • - particular kinds of institutions
    • - Broarder Socio-phenomena

    • CLUSTERING FACILITATES
    • - face to face contact
    • - soci-cultural interaction
    • - enhancement of knowledge and
    • information
  7. WHAT IS A RESOURCE? WHAT ARE THE TWO BROAD KINDS OF RESOURCES AND HOW ARE THEY DEFINED? WHY DO SOME PEOPLE NOT WORRY THAT WE WILL RUN OUT OF RESOURCES?
    • Natural Resource
    • - are not "naturally" resources
    • - an element/ material occuring in nature is only a "resource" is it is defined as such by a potential user

    • - There must be:
    • - effective demand
    • - appropriate technology with which to exploit it
    • - means of ensuring "property rights"
    • **IF ANY OF THESE CONDITION CEASE- THE RESOURCE COULD "UNBECOME"**

    • TYPES OF RESOURCES
    • Renewable: resources where with time and good management, can be replensihed
    • - may become exhausted is they are not managed in a
    • sustainable manner

    • Non-Renewable: resources that are fixed in overall quantity (under
    • known technological condistions)


    • MAJOR CURRENT DEBATE
    • - The usage of non-renewable resources to extincition due to excessive exploitation
    • - "malthusian" view: resource exhastion is inevitable- the only thing is in
    • how long
    • - Other view: that new technology of exploration leading to discoveries
    • of new reserves, better means of exploitation, efficient use
    • use of resources & devlopment of appropriate substitutes.
  8. DESCRIBE THE OLD (PRE WWII) GEO-ECONOMIC MAP.
    - the economic connections were intimate

    • - over a period of time (300 years) a "global division of labor" devloped and intensified with industrialization
    • - this was shattered by WWII

    - Britain and Western European countries became increasingly dominant

    -Some core economics experienced a progressive decline to semi-peripherial status during the 18th century & new economies emerged

    - manufacturing production remained strongly concentrated in the core

    -the group of core industrial companies sold 2/3 of its manufactured exports to the periphery & absorbed 4/5 of the periphery's primary products

    - after WWII- most of the world's industries were destroyed. New technology was refined

    -71% of world's manufacturing production was concentrated in just 4 countries & aprox. 90% in only 11 countries

    • - since the 1950's two highly significant poltical events occured:
    • - The emergence of China into the Global Market
    • - The collapse of the Soviet Union
  9. WHAT IS DIRECT INVESTMENT? FOREIGN DIRECT INVESTMENT? PORTFOLIO INVESTMENT?
    Direct Investment: an investment by one firm in another, with the intention of gaining a degree of control over that firms opperations

    • Foreign Direct Investments: direct investments across national boundaries
    • - a firm from which a country buys a controlling investment in a firm
    • in another country
    • - it is a measure of TNC activity

    • Portfolio Investment: firms perchase stocks/ shares in other companies purely for financial reasons
    • - not made to gain control
  10. WHAT IS THE SIGNIFICANCE OF TNCS IN TERMS OF THE WORLD EXPORTS OF GOODS AND SERVICES? WHAT IS INTRA-FIRM TRADE? HOW SIGNIFICANT IS IT IN TERMS OF TOTAL WORD TRADE?
    • TNC: TNCs account for 2/3 of world exports of goods and services
    • - a significant share of that in "intra-firm" trade

    • Intra-firm trade:
    • - trade within national boundaries of the firm- although across national boundaries in the form of transactions between "different parts of the same firm"

    - Ballpark figure: aprox. 1/3 of total world trade in intra-firm

    - Does not take place on an "arms-length" basis

    - Intra-firms are not subkect to external market prices but to the internal decisions of TNCs

    - Important as the production Network of TNCs

    - Disintigration itself leads to more trade
  11. According to Dicken, what are the four major processes that describe the economic resurgence of Asia during the past four decades?
    1. THE RISE OF JAPAN AFTER WWII

    • - Economic growth in manufacturing
    • - Early 1960's- ranked 5th in the world
    • - Early 1990's- "Japan Inc."- became the biggest threat facing both the U.S and Europe


    2. THE RAPID GROWTH OF THE "FOUR TIGERS": THE NEWLY INDUSTRIALIZING ECONOMIC OF HONG KONG, KOREA, SINGAPORE & TAIWAN

    • - this followed by the emergence of the "Second Tier" of East Asian developing economics, primarily indonesia, Malaysia, & Thailand
    • - "Four Tigers": economic pioneers of manufacturing growth
    • - These 4 economies had extremely high growth rates

    • 3. THE (RE-)EMERGENCE OF CHINA- "THE DRAGON" AS A MAJOR PARTICIPANT IN THE GLOBAL MARKET ECONOMY
    • - China has a huge cheap labor force
    • - The economy of China is unusually open to trade
    • - Revolutionizing prices of: labor, capital goods, assests

    • 4. THE POTENTIAL ECONOMIC DYANISM OF INDIA
    • - india has a massive growth rate in the IT business (outsourcing)
    • - India is the world's 13th largest manufacturing economy
    • - Strength lies in services not manufacturing
  12. What are the differences between incremental and radical innovations? Which ones are most common?
    INCREMENTAL INNOVATION

    • - Small-scale, progressive modifications of exisiting products & processes, created through "learning by doing" and "learning by using". Although individually small-and, therefore, often unoticed- they accumulate, often over a very long period of time, to create highly significant changes
    • -incremental waves tend to be the most common

    RADICAL INNOVATION

    - Discontinuous events that drastically change existing products and processes. A single radical innovation will not, however, have a widespread effect on the economic system; what is needed is a "cluster" of such innovations
  13. Using bullet points, explain Henry Hazlitt’s reasoning as to why new labor-saving technologies end up creating more jobs. (Begin your answer with the following bullet point: “A coat manufacturer buys a new machine that gives him the opportunity to fire 50% of its workforce…”)
    A COAT MANUFACTURER BUYS A NEW MACHINE THAT GIVES HIM THE OPPORTUNITY TO FIRE 50% OF HIS WORKFORCE...

    However: you need people to build, use and desing the machines

    • What is seen
    • -after the machine has produced economies sufficient to offset its cost:
    • - the clothing manufacturere has more profits than before
    • - labor seems to have suffered a net loss of employment

    • What is not seen
    • - but following extra profits: REVENUE MUST BE USED IN 1 OF 3 WAYS
    • 1. To expand operations
    • - reinvesting in the business
    • - creating more jobs through reinvesting
    • 2. To invest elsewhere
    • - creating new jobs through another line of work- give money for more poeple to be hired
    • 3. To increase consumption
    • - material need to be made, constructed etc... therefore creating new jobs in the process

    • ***Soon competators catch on:
    • - manufacturing the product for less
    • - price of the product drops- which enables more people to buy these products

    • *** Technology and job creation
    • - consumers have more money to spend
    • - creates new jobs in other industries
    • - New technology = job creation
    • ***this is why more people are better off***
  14. What are the 5 stages of the product life cycle? How is that reflected in terms of industry structure?
    • 1) EARLY DEVLOPMENT
    • - a new idustry- few buyers
    • - rapidly changing techniques
    • - much of the knowledge involved is "know-how"
    • - scientific & engineering skills are important production factors

    • 2) GROWTH
    • - growing number of buyers
    • - introduction of mass production methods
    • - growing number of competition
    • - important factors: Management and Capital

    • 3) MATURITY
    • - Peak demand
    • - long production runs & stable technology
    • - number of firms start to decline
    • - important factors: labor and capital

    • 4) DECLINE
    • - Declining demand
    • - Capital intensity is high-specialized equipment
    • - general stability followed by exiting firms

    • 5) OBSOLENCE (INEVITABLE)
    • - steep fall of demand
  15. What are the 3 major ways in which a product’s sales may be maintained or increased?
    (1) To introduce a new product as the existing one becomes obsolete so that “over-lapping” cycles occur

    • (2) To extend the cycle for the existing product, either by making minor modifications in the product itself to “update” it or by finding new
    • uses

    (3) To make changes to the production technology itself to make the product more competative
  16. What are the 3 major decisions in production process?
    1) TECHNIQUE OF PRODUCTION

    • - The particular technology used and the way in which the various inputs or factors of production are combined
    • - However, there are limits to such subsitutions of factors. Some production processes are intrinsically more capital intensive than others

    2) SCALE OF PRODUCTION

    - In general, the average cost of production tends to decline as the volume of production increases, as a result of what are known as economies of scale. These vary considerably from one industry to another

    3) LOCATION OF PRODUCTION

    - Question of technique and scale are also intimately related to the geographical location of production. Large-scale operations require access to large makets; highly-labor-intensive production processes need access to appropriate pools of labor
  17. What are the differences between tacit and explicit knowledge? How does tacit knowledge shape the geographical organization of economic activity?
    • TACIT KNOWLEDGE
    • - The deeply personalized knowledge possessed by individuals that is virtually impossible to make explicit and to communicate to
    • others through formal mechanism

    • EXPLICIT KNOWLEDGE
    • - The kinds of knowledge that can be possessed by individuals that can be put into formal documents: blueprints, software, hardware

    • ***Distinction is fundamental because:
    • - Explicit knowledge can be transmitted easily through means that allows people to “act from a distance”
    • - Tacit knowledge requires direct experience and interaction. It depends on (though not completely) geographical prximity
  18. According to Peter Dicken, what is a transnational corporation? What are its three basic characteristics?
    TNC: A transnational Corporation is a firm that has the power to coordinate and control operations in more than one country, even is it does not own them

    • 3 BASIC CHARACTERISTICS
    • 1) The ability to coordinate and control various processes and transactions with transnational production networks, both within and
    • between different countries

    • 2) The potential ability to take advantage of geographical differences in the distribution of factors of production (i.e. natural resources,
    • capital, labor) & in state policies

    • 3) The potential geographical flexibility- an ability to switch and re-switch its resources and operations between locations at an
    • international or even global scale

    • NOTES:
    • - Much of the changing geography of the global economy is shaped by the TNC through its decision to invest, or not to invest, in
    • particular geographical locations

    - Very few parts of the world which TNC influence is not important
  19. According to John Dunning, what are the three conditions required for a firm to engage in transnational production?
    (O) 1. A firm must posses ownership- specific advantages not possessed by competing firms of other nationalities. These are assesa internal to a firm overwhich it has proprietary right of use. Example: types of knowledge, marketing, organizational & human skills

    *** firms size and power are distinct advantages***

    (I) 2. Such advantages must be most suitably exploited by the firm itself rather than by selling or leasing them to to other firms. Therefore the firms will internalize the use of its ownership specific-advantages. The more uncertain the environment faced by a form (ie.e availability & price/quality of product) the more likely it is to internalize its operations. Internalization is especially likely to occur in the case of knowledge.

    ***firms have a strong incentive to retain the technology for use within their own organizational boundaries***

    (L) 3. There must be location-specific factors that make it more profitable to the firm to exploit its internalized assets in domestic locations

    • Factors are:
    • - Factors specific in origin to particular locations
    • - Factors that have to be used in specific locations
    • - i.e.: production costs, resources, political conditions, cultural/linguistic attributes
  20. Compare and contrast Market-Oriented and Asset-Oriented Production.
    • Market Oriented
    • - Most foreign market investments are designed to serve a specific geographical market by locating inside that market

    • - 3 Attributes:
    • 1) Size
    • - Sometimes measured in terms of per-capita
    • - The largest geographical markets in terms of income are obviously USA & Western Europe
    • - Variations in per-capita provide a crude indication of how the level of demand will vary place to place

    • 2) Structures
    • - Countries with different income levels = different structures
    • - As income rises= aggregate demands for goods and services will to
    • - However, increased demand does not affect all products equally
    • - Low income levels tend to spend a large proportion of their income on basic needs and necessities
    • - Higher income levels spend it on manufactured goods and services

    • 3)Accessibility
    • - Markets vary in accessibility
    • - Past: a major barrier was transportation
    • - Present: Various trade barriers & political constraints

    • Asset-Oriented
    • - Most of the various assets needed by a firm to produce and sell its specific products & services are unevenly distributed geographically

    - Most obvious case: natural resources- firms must locate near supply

    - In many cases, final processing of natural resources occurs close to the final market

    - Natural- Resource orientated foreign investments remain highly significant in the global economy

    - Technology changes in production processes & transportation have evened out the significance of location for some of the traditionally important factors of production

    • - 2 important location specific factors are:
    • 1) Knowledge
    • 2) Access to labor

    • - Large tendency for knowledge and technology to be in geographical clusters- creates major incentive for other companies to locate in/ near these clusters
    • - Technological change= is rapid and unpredictable

    - Much of the attraction derives from the skills and knowledge embodied in labor
  21. What is a corporate headquarters? What are its main roles and functions? What are their locational requirements?
    • CORPORATE HEADQUARTERS: the locus of overall control of the entire TNC
    • - Responsible for all the major investments & disinvestment decisions that shape & direct the enterprise
    • o Which products / markets to enter
    • o To expand particular parts
    • o To acquire another firm

    • - One of the key roles is financial
    • o The CHQ generally holds the purse-strings and decides on the allocation of the corporate budget between its component units

    • - Legal and advertising (of the brand name) are other key roles
    • - Aka: handlers, processors and transmitters of information

    • LOCATIONAL REQUIREMENTS
    • - Requires a strategic location on the global transportation & communications network in order to keep in close contact with other geographically dispersed, parts of the organization

    - Requires access to high quality external services and a particular range of labor markets skills, especially people skilled in information processing

    - Since much corporate HQ activity involves interaction with the Head Offices of the other organizations, there are strong agglomerative forces involved. Face to face contacts with the top executives of other organizations- facilitated by proximity

  22. What are the main external conditions and internal pressures that may lead to corporate reorganization and restructuring?
    EXTERNAL CONDITIONS

    • NEGATIVE PRESSURES
    • - Declining demand
    • - increased competition
    • - Change in the cost/ availability of production inputs
    • - Militancy/ resistance of labor forces
    • - Pressure of national governments

    • POSITIVE PRESSURE
    • - Growth of a new geographical market
    • - availability of new production opportunities

    • INTERNAL CONDITIONS
    • - May relate to the enterprise or individual parts
    • - i.e. sales may be low in relation to target points- may be monitored
    • - key influence: "New Broom Factor": a new chief executive who undertakes a sweeping evaluation of the enterprise's activities & makes changes that stampt his/her authority on the firm

  23. What is subcontracting? Commercial subcontracting? Industrial subcontracting?
    • Subcontracting
    • - form of one firm outsourcing some of its operations to another firm is a kind of half-way bewtween complete internalization of a procurement vs. arms-length transactions through the open market

    Commercial subcontracting

    - the manufacturer of a finished product

    - the subcontractor plays no part in marketing the product which is generally sold under the principal's brand name & through its distribution channels

    • - the principal firm may either be a producer firm (also involved in manufacturing) or a retailing/ wholesailing firm whose sole business is distribution
    • Industrial subcontracting (3 types)

    I) Specialty subcontracting involves the carrying out, often on long-term basis, of specialized functions which the principal chooses not to preform for itself but for which the subcontractor has special skills and equiptment

    II) Cost-saving subcontracting is based upon differentials in production costs between principal and subcontractor for specific processes / products

    • III)Complimentary/ Intermittent subcontracting is a means adopted by principal firms to cope with occasional surges in demand without expanding their own production capacity
    • - in effect, the subcontractor is used as extra capacity, often for a limited period/ for a single operations
  24. In a subcontracting relationship, what are the benefits and costs to the principal firm? To the subcontractor?
    • Benefits and costs to Principal firm
    • - Avoids beed to invest in a new production capacity
    • - Flexible: easier to change subcontractors
    • - Externalizes some risks, while retaining some control
    • - Possible problems with controlling how subcontractors work (incl. labor issues)

    • Benefits and costs to subcontractor
    • - Access to markets
    • - Continuity of orders
    • - Access to technical knowledge, possible injection of finances
    • - Risk of being "expendable" if principal firm changes its priorities
    • - Possibleover-dependence on one or small number of customers
  25. What are strategic alliances (SA)? How do they differ from mergers? What are their potential advantages?
    • Definition:
    • - Formal agreements between firms to pursue a specific strategic objective
    • - to enable firms to achieve a specific goal that they cannot achieve on thier own
    • - it involves sharing of risks and rewards via joint-decisionmaking responsibility
    • - They are NOT mergers (firms remain seperate and competitors

    - what is new is the proliferation, scale and the fact they have become central to the global strategies of many firms rather than peripherial to them

    - most strategic alliances are between competators

    - it is not just a single alliance being formed but network alliances where relationships are incresingly multilateral vs. bilateral

    Mergers: identities of the merging companies are completely subsumed
  26. How does Johan Norberg explains the contrasting performances of Kenya and Taiwan over the last few decades, especially in terms of trade policy?
  27. Give a concise summary of the differences between Free Trade Areas, Customs Unions, Common Markets and Economic Unions.
    • I) Free Trade Areas
    • - Areas in which trade restrictions between states are removed by agreement but where member states retain their individual trade policies towards non-members

    • II) Custom Unions
    • - in which member states operate a free trade arrangement with each other and also establish a common external trade policy (tariffs and non-tariff barriers) towards non-members

    • III) Common Markets
    • - in which not only are trade barriers between member states removed and a common external trade policy adopted but also the free movement of factors of production (capital, labor) between memeber states is permitted

    • IV) Economic Unions
    • - involves the highest form of regional economic integration short of full-scale political union
    • - in an economi union, not only are internal trade barriers removed, a common external tariff operated and free factors movements permitted, but also broader economic policies are harmonized and subject to supranational control
  28. What is a state? A nation? A nation-state?
    • 1) State
    • - is a portion of geographical space within which the resident population is organized (ie. governed) by an authority structure
    • - States have externally recognized sovereignty over their territory

    • 2) Nation
    • - is a "reasonably large group of people with a common culture, sharing one of more cultural traits, such as religion, language, political institutions, values and historical experiences. They tend to identify with one another, feel closer to one another than outsiders, and to believe that they belong together. They are clearly distinguishable from others who do not share their culture"
    • - A nation is an imagined community
    • - note: where as a state has a recognized and defined territory, a nation may not

    • 3) Nation-State
    • - is a condition where a 'state' and 'nation' are coterminous
    • - 'A nation-state is a nation with a state wrapped around it. That is, it is a nation with its own state, a state in which there is no significant group that is not part of the nation'
  29. According to Dicken/Hofstede, what are the four distinct cultural dimensions through which we can analyze culture?
    • 1) Individualism vs. collectivism
    • - socities vary between those in which people, in general, are motivated to look after their own individual interest
    • - ties between individuals are very loose
    • - and those in which the ties are very close and the collectivity (family, community) is the inportant consideration

    • 2) large or small power distance
    • - socieities vary in how they deal with inequalities (power, wealth) between people
    • - This is reflected in the extent to which authority is centralized and in the degree of autocratic leadership within society

    • 3) strong or weak uncertainty avoidance
    • - in some societies, the inherent uncertainty of the future is accepted- each day is taken as it comes
    • - the level of avoidance therefore is weak

    • - In other socieities, there is a strong drive to try and "beat the future"
    • - efforts are made to create a security and to avoid risk
    • - these are strong uncertainty avoidance socieities

    • 4) masculinity vs. femininity
    • - societies can be classified according to how sharply the social dividion of male and females is drawn.
    • - Societies with a strong emphasis on traditional masculinity allocate the more assertive and dominant roles to men
    • - they differ substantially from societies where the social sex role division is small and where such values are less evident
  30. According to Dicken, what are the four (4) varieties of capitalism? What is their differing conception of the “proper” role of government in regulating the economy?
    • 1) neo-liberal market capitalism
    • - market mechanisms are used to regulate all, or most aspects of the economy
    • - individualism is a dominant characteristic
    • - Short term business goals tend to predominate
    • - The state does not overtly attempt to plan the economy strategically
    • - the dominant philosophy is "shareholder value" facilitating maximum returns to the owners of capital

    • 2) social market capitalism
    • - a higher premium is placed upon collaboration between different actors in the economy, with a broader identification of "stakeholders" beyond that of owners of capital

    • 3) devlopment capitalism
    • - state plays a much more central role
    • - the state sets substantive social and economic goals within the explicit industrial strategy

    • 4) communist- capitalist
    • - the system of china
    • - uniquely, a highly centralized political system is combined wth an incresingly open capitalist market system
  31. What are the four (4) main factors affecting a state’s policy mix?
    1) its political and cultural complextion and the strength of insitutions and interest groups

    2) the size of the national economy, especially that of the domestic market

    3) the nation's resource endowment, both physical and human

    4)the nation's relative position in the world economy, including its level of economic devlopment and degree of industrialization
  32. What are tariffs and non-tariff barriers (NTBs)
    • I) TARIFFS
    • - are taxes levied on the value of imports that increase the price to the domestic consumer and make imported goods less competitive (in price terms) than they would otherwise be. In general, the tariff level tends to rise with the stage of processing, being lowest on basic raw materials and highest on furnished goods. The purpose of such 'tariff escalation' is to protect domestic manufacturing industry whilst allowing for the import of industrial raw materials.

    - thus, although tariffs may be regarded simply as one means of raising revenue, their major use has been to protect domestic industries
  33. What is transfer pricing? Illustrate concisely how the fiscal policy of different countries affect the fiscal behavior of Transnational Corporations
    - a problematical issues in the relationship of TNCs and states is how internal transactions & profits are actually taxed

    - by definition a TNC moves both tangible materials and products, also corporate services across international borders

    - in external markets, prices are changed

    • - however, in internal markets- operated by TNCs
    • - transactions are between related parties
    • - the external market rules do not apply
    • - the TNC itself sets the transfer prices of its goods and services within its own organizational boundaries
    • - therefore it has considerable flexibility in setting those transfer proces to help achieve its overall goals
    • - this flexibility also allows the TNC to influence the amount of tax and duties payable to national governemnts
  34. What are the three main elements in terms of bargaining power between TNCs and host countries?
    1) The relative demand by each of the two participants for resources which the other controls

    2)the constraints on each which affect the translation of potential bargaining power into control over outcomes

    3) the negotiating status of the participants
  35. Describe concisely the clothing production circuit
    pg. 250 fig 9.1
  36. What are main measures adopted by governments in advanced economies to protect their Textiles and Garments industries?
  37. How did some developing country clothing producers avoid Multi-Fibre Arrangement restrictions?
    I) A producing country which had reached its quota ceiling in one product would switch to another item

    II) False labelling was used to change the apparent country of origin (an illegal act)

    III) Firms relocated some of their production to countries which were not signatories to the MFA or whose quota was not fully used by domestic producers
  38. What are the three interrelated characteristics of the market for new automobiles? Name three characteristics of the (historical) mass production of automobiles.
    • I) Interrelated Characteristics- New Automobiles
    • - it is highly cyclical
    • - There are long-term (secular) changes in demand
    • - There are signs of increasing market segmentation and fragmentation

    II) Historical Characteristics

    • STAGE 1
    • - The import of complete vehicles
    • - Tends to be limited in extent because of high transportation costs and by government import restrictions

    • STAGE 2
    • - Local assembly vehicles from a full 'kit' of component parts
    • - Permits transportation cost savings
    • - Provides the opportunity to make minor production modifications for the local market

    • STAGE 3
    • - Assembly involving a mix of imported and locally sourced components
    • - Both depends upon and encourages the development of a local components industry
    • - It is a stage strongly favored by national governments as a potential entry into stage 4

    • STAGE 4
    • - The full scale manufacture of automobiles
    • - This stage is restricted to a far smaller number of countries than stage 2,3
    • - Not inevitable that countries that have reached stage 3 will ten move to full-scale local manufacture
  39. Name and describe concisely the 3 main types of “automobile regimes” in current emerging markets, along with at least one country practising each policy
    • I) Protected Autonomous Markets (PAMs) : countries which continue to provide strong protection to the national market and the domestic industry
    • - examples: China
    • - This is the model for most major European countries (especially France) for many years

    • II) Integrated Peripheral markets (IPMs)
    • -Countries which have chosen to develop their automobile industry through integration with a geographically contiguous core automobile market
    • - Example: Eastern Europe
    • - national automobile industry policies are directed towards integration with the EU

    • III) Emerging Regional Markets (ERMs)
    • - groups of emerging market countries which have sought to increase the efficieny of their motor industries by reducing protection and increasing competitive pressures and by using access to the domestic market as a lever to promote investments by TNCs
    • - Example: Thailand (ASEAN)
  40. What are the three major trends that have recently occurred within the European automobile production network?
    I) first, large-scale geogrphical rationalization of core country operations as major firms grapple with problems of over-capacity and outdated physical plant

    II) Second, substantial development of automobile production in the southwestern periphery of Europe, notably in Spain and, to a lesser extent Portugal, US, French & German manufacturers establish production in lower-cost locations capable of serving the entire European market

    • III) Third, and most recently, significant devlopment of automobile production facilities in Eastern Europe
    • - Here the major devlopments have been in Czech Republic, Slovakia, Hungary
  41. What does “derived demand” means in the context of the semiconductor market? What is Moore’s Law?
  42. What were the 3 main strategies used by governments to intervene in the semi-conductor industry?
    I) Building and indigenous production capacity based upon domestically owned firms

    II) Attracting foreign semiconductor firms to establish production units

    III) Perchasing semiconductors on the open market and concentrating on developing the end uses
  43. What are the 5 broad types of semiconductor firms?
    • I) Vertically Integrated Captive Producers: manufacture semiconductors entirely for their own in-house use.
    • - This has been a common strategy in Japan, where virtually all of the major semiconductor producers were part of diversified electronics groups.
    • - it was also modeled by the US company IBM for many years

    • II) Merchant Producers: manufacture semiconductors for sale to other firms
    • - This strategy developed especially in the US in such firms such as Texas Instruments and Motorola

    • III) Vertically integrated captive-merchant producers: manufacture semiconductors partly for their own use and partly for their own use and partly for sale to others.
    • - this hybrid strategy was adopted by a number of the vertically integrated captive producers, notably IBM, to expand their market

    • IV) 'Fabless' Semiconductor firms: design semiconductors but do not manufacture them
    • - these emerged especially in the US during the 1980s
    • - they serve a variety of fast-growing industries, especially personal computers and communications, by offering more innovative designs and shirter delivery times

    • V) Foundaries: manufacture semiconductors to customer specifications but do not design them.
    • - They include both 'pure-play' (ie. dedicated) foundaries as well as the excess capacity of more traditional semiconductor firms
    • - They have become especially important in East Asia
    • - The foundaries is, the obverse of the fabless firm

    VI) Specialized providers of semiconductors designs: a recent devlopment of Electronic Design Automation (EDA) suppliers and system houses that compete in the provision of intellectual property design blocks and system-on-a-chip technology
  44. What are the two main emerging set of processes in the agro-food industries? According to your professor, what is the biggest drawback to the “food miles” perspective? Why is this drawback problematic?
    • - Standardized, specialized production processes responding to the economic standards efficiency and competitiveness
    • - Localized, specialized production processes attempting to trade on the basis of environmental, nutritional or health qualities


    II)
  45. What are the main characteristics of publican?
  46. What is the basic function of financial services? What is their dual character?
    I)

    - The function of the financial system as a whole is financial intermediation, the pooling of financial resources among those with surplus funds to be lent out to those who choose to be in defcit, that is to borrow…With financial intermediation, investors in new productive activities do not themselves have to generate a surplus to finance their projects; instead the projects can be financed by surpluses generated elsewhere within the economy


    • II)
    • - They are circulation services, fundamental to the operation of every aspect of the economic system

    - They are commodities or products in their own right, in the sense that they are produced and traded in the same way as more tangible manufactured goods are traded
  47. What are the major types of primary functions of financial service activity?
  48. What are the four major processes that have characterized the “new competition” in the financial services industry since the 1970’s (say a few words about each element)
    I) Market Saturation: by the late 1970's, traditional financial services markets were reaching saturation. There were fewer amd fewer new clients to add to the list; most were also being served, particularly in the commercial banking sector but also uin the retail sector in the more affluent economies

    • II) Disintermediation: this is the process whereby corporate borrowers make their investments or raise their needed capital without going through the 'intermediary' channels of the traditional financial instituitions, particularly the bank
    • - instead, they have increasingly sought capital from non-bank institutions (securities, investment trusts and mutual funds)
    • - process is extremly dynamic
    • - disintermediation may be challenged by reintermediation, as new forms of supplier-customer relationship emerge

    • III) Deregulation of financial markets: financial services markets have traditionally been extremly close regulated by national governments
    • - one of the most important developments of the past few years has been the increasing degregulation or liberalization of financial markets
    • - Deregulation has lead to:
    • - the opening of new geographical
    • - the provision of new financial products
    • - changes in the way in which prices of financial services are set

    • IV) internationalization of financial markets: demand for financial services is no longer restricted to the domestic context: financial markets have become increasingly global
    • - three types of demand are especially significant:
    • - the massive growth in international trade
    • - the global spread of transnational corporations
    • - the vastly increased institutionalization of savings
  49. According to Dicken, what factors explain the current significance of London as a global financial centre
    - The historical evolution of the City as a world centre has created both a large pool of relevant skills and also an almost unparalleled concentration of linked institutions within a small geographical area

    - Its geographical position locates it in a time zone between Asia and New York

    - The regulatory environment has encouraged the growth of transnational banking. Forign banks in London canoperate as ‘universal’ banks, a particularly important feature for US and Japanese banks. They can combine both banking and securities businesses there in ways that are prohibited so far in their domestic operations

    - Its key role as a ‘capital switching centre’: the London markets brings together in one place great diversity of market participants and, consequently, great diversity of risk preferences and profiles
  50. According to Dicken, what is the essential function of the distribution services industries? What do they involve? What are the two most significant barriers to movement in these industries?
    I)the essentital function of the distribution services is to intermediate between buyers and sellers at all stages of the production circuit.

    II) It involves noy only physical movement of materialsnd goods but also the transmission and manipulation of information relating to such movements

    • III)
    • - Physical conditions: that necessitate the transfer from one transportation mode to another
    • o For example: land/water interference
    • - Political Boundaries: that create complications of custom clearance, tariffs, duties, and administration
    • o Such barriers have become increasingly significant as economic activity has become more globalized
  51. Pg. 412 fig. 14.2
  52. What are the four specific functions performed by the sogo sosha
    - Trading and transactional intermediation: matching buyers and sellers in a long-term contractual relationship

    - Financial intermediation: serving as a risk buffer between suppliers and perchasers

    - Information gathering: collecting and collating information on market conditions throughout the world

    - Organization and coordination of complex business systems: for example, major infrastructural projects
  53. According to your instructor, what are the main advantages of containerization over previous transportation alternatives? What were the main benefits outside of the logistics industry?
    - Increased security of shipments

    - Simplified transshipment of freight from one mode of transporation to another

    - Reduced time and cost involved

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