James W. Harrington

University of Washington Tacoma
GEOG 349: Geography of International Trade
Spring 2012

REVIEW QUESTIONS FOR SECOND TEST

Refer to the instructor's objectives for the course. For each objective:

Assess how well you've mastered that capability .
Identify what has helped you get to your current level of capability.

Identify one objective on which you'd like to work after the course is over. How might you go about that?

Assets are what an organization "owns" or at least invests in and manages (like key employees). Environment is what an organization can't control -- except by choosing in what environments it operates.

Though this section of the course is not as theoretically oriented as the first section of the course, the overarching framework is that of making organizational decisions that will maximize returns to key organizational assets, and that will strengthen those assets. These are the essential goals of corporate strategy, business (or competitive) strategy, and functional strategies. These are also important to determining the appropriate form of international business: you have to know what your core asset is before you can determine whether licensing or contracting production are reasonable alternatives to exporting or FDI. (Of course, regulations and barriers you face from your home country or a host country will play a role in this decision, as well). Finally, identifying unique assets is the first step in applying the OLI (or "eclectic") model to decisions whether to engage in FDI. [You should be able to apply the OLI model to "explain" a firm's choice of international business form.]

Identification of an organization's unique or key assets is an important part in determining the location and organization of procurement and production. Organizations generally want to own operations that are part of their core assets, but may contract other operations -- sometimes within a stable network of providers, sometimes by selecting the best deal in the open market. International differences in trade barriers and feasibility of FDI will also affect these decisions, and affect the decisions where to engage in what sorts of operations. Use the examples in this moderately complex table to help you understand some of these contingencies.

International marketing is an important example of a functional strategy in the international arena. What are the six components of an international marketing plan? I've emphasized that the decisions for each component must support the decisions for all the other components, and must be a function of the roles that international marketing play in the organization's overall business strategy -- which is based in part on the nature of the organization's strategic assets (a.k.a. organization-specific advantage). Be able to play with these components: if I provide a basic scenario (sector, size of organization, and its key assets or advantages), you should be able to create a quick-and-dirty marketing plan in which all the elements work together.

Why should a firm or other organization, which operates almost entirely in one country, hedge its exposure to foreign exchange risk? How can an exporter avoid exchange risk, given the choices in international payments?

Be able to define key export documents. What are the key variables and choices in payment for exports? Which are more advantageous for the exporter? What determines which choices are made in a given export arrangement?

What are the additional costs that an exporter faces (beyond the costs of design, procurement, production and its domestic marketing) -- i.e., the costs that need to be considered when it establishes its export price? If adding these costs raise a company's export price beyond competitive levels in a foreign country, suggest two reasons why a company might decide to absorb some of these costs to win an export contract.

Be able to apply the principles of strategic management to a hypothetical case: given a set of assets and capabilities that distinguish a particular firm from its (real and potential) competitors, suggest how, and where it should engage in exporting and/or FDI, and how it should manage key aspects of its supply chain (from where should it obtain key inputs, should it own or contract for those inputs, should it own downstream (closer to the final user) activities (where?). Think about the impact of import barriers and differential tax rates.

What have been the major impacts of trade liberalization and inward FDI on key regions (plural) in "your" country (Canada, China, or Mexico)? Why -- what are the key characteristics of those regions that have led to those impacts? Be able to use (a) basic trade theory (specialization according to comparative advantage, comparative advantage based on factor proportions, and the consequent impacts on abundant versus scarce factors) and (b) basic geographic considerations (location of factors, location of markets) to explain these regional impacts.

What are three main findings of Lori Kletzer's study of the impacts of trade on US labor? What two policy measures does she suggest to help ameliorate the negative impacts?

What can (a) national governments, (b) international agreements, and (c) labor organizations do to mitigate the negative impacts of trade liberalization on particular groups of labor? Think about this from the perspective of "your" country and from the perspective of the US.

How does increased international trade affect (a) the use of natural resources and (b) the location of environmental degradation? Refer to the online notes.

What are the major points in The Economist's article on national sovereignty under trade liberalization? Do you agree with the major points?

Identify three reasons why a company might engage in FDI. Identify three reasons why a government might make concessions to attract inward FDI. How might outward FDI benefit a country (i.e.,the country of the parent company)?