ib 2013 - answers to final paper
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Cocoa Rice
Ghana 10 13.33
South Korea 40 20
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Production Possibility
Frontier
5 10O
T
2.5
5.0
10
15
20
3.75
15
7.5
Rice
Cocoa
G
C
A
GK
B
K
Ghana can produce 20 tons of cocoa and no
rice OR 15 tons of rice and no cocoa, or any
combination in between its PPF (GG)
South Korea can produce 5 tons of cocoa
and no rice OR 10 tons of rice and no
cocoa, or any combination in between its
PPF (KK)
Ghana will produce 10 tons of cocoa and
7.5 tons of rice (point A)
South Korea will produce 2.5 tons of cocoa
and 5 tons of rice (point B)
Ghana has an absolute advantage in
the production of both the goods, why
should it trade with South Korea?
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Ghana has absolute advantage in
the production of both cocoa andrice, but comparative advantage
only in the production of cocoa.
HOW?
Ghana can produce 20 tons of cocoa and no
rice OR 15 tons of rice and no cocoa, or any
combination in between its PPF (GG)
South Korea can produce 5 tons of cocoa
and no rice OR 10 tons of rice and no
cocoa, or any combination in between its
PPF (KK)
Ghana will produce 10 tons of cocoa and
7.5 tons of rice (point A)
South Korea will produce 2.5 tons of cocoa
and 5 tons of rice (point B)
Ghana has an absolute advantage in
the production of both the goods, why
should it trade with South Korea?
Ghana can producethan South
Korea:
4 times as much as cocoa
1.5 times as much as rice
Ghana is comparativelymore efficientat producing cocoa than it is at
producing rice
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Cocoa Rice
Ghana 10 7.5
South Korea 2.5 5.0
Total Production 12.5 12.5
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Cocoa Rice
Ghana 15 3.75
South Korea 0 10.0
Total Production 15 13.75
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Cocoa Rice
Ghana 11 7.75
South Korea 4.0 6.0
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Cocoa Rice
Ghana 1.0 0.25
South Korea 1.5 1.0
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I. MEASURING POLITICAL RISKA. Country-specific perspective
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B. Political Stability1. Measured by:
a. Frequency of governmentchanges
b. Level of violencec. Number of armed
insurrectionsd. Conflict with other states
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C. Economic Factors1. Indicators of politicalunrest
a. Rampant inflation
b. Balance of paymentdeficitsc. Slowed growth of percapita GDP
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3. Capital Flighta. Definition:
the export of savings by a
nations citizens because of
safety-of-capital fears.
b. Measurement: use the
balance-of- payment account
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c. Causes of capital flight1.) Inappropriate economic
policies
2.) Expectation of devaluation
3.) High political risk
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D. Resource Base-lack of strong work ethic
E. Country Risk and Adjustment toExternal Shocks
1. What are the impacts ofexternal shocks:-how well a nation responds
varies
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Key indicators of economic healtha. Structural incentives
b. Legal structure
c. Clear incentives to save
d. Open economy
e. Stable macroeconomicpolicies
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Gl b li ti d B i
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Definition: Globalization is the growing integration of the worlds economy. It is
suggested that economic decision taken in one part of the world willaffect other parts of the worlds so businesses need to base theirbusiness decision-making on what is happening in the world marketrather than the national market.
There are three important features or aspects ofglobalization, which can be seen as follows:
1. The increasing importance o f international trade2. More and more multinational companies3. More and more businesses thinking globally about their strategy.
Globalization and Business
-What Is Globalization?
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The increasing reliance of
economies on each other
The opportunities to be able to
buy and sell in any country in the
world
The opportunities for labour and
capital to locate anywhere in the
world
The growth of global markets in
finance
Stock Markets are now accessible from anywhere in the world!
http://www.sxc.hu/browse.phtml?f=download&id=45339 -
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Stages of Development of a Transnational
Corporation
Stage one - domestic
Stage two - International
Stage three - multinationalStage four - global
Stage five transnational
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Domestic in focus, visions and operationsfocus on domestic markets
environment scanning is local
if its not happening in the home country, its nothappening
often conscious decision
can develop to be stage two company
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Extends marketing, manufacturing and otheractivities outside the main country
remains ethnocentric (home country orientated)
groups people together in an internationaldivision
strategy of extension
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Global development always begins in stage two
it would be a mistake to simultaneously jump
into new customer and new
product/technology markets
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Discover that different markets need some degree
of adaptatione.g Toyota first entered US in 1957 as Toyopet
overpriced, underpowered, built like tanks
no such thing as failure, only learning
multi-domestic focus
Polycentric orientation
adapts domestic marketing mix to suit the differinginternational markets
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Major strategic departure
global marketing and/or sourcing strategyfocus globally and supply from domestic market
e.g Harley Davidson
supply domestic market from global sources e.g.
GAP
Must understand the limitations of competitive
advantage (not too ambitious!)
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Internationalexploits the parent companys knowledge and capabilities
through worldwide diffusion of products
Multinationalflexible ability to respond to national differences
Globalcost advantage through centralised operations
Transnationalcombines above in an integrated network, which leverages
worldwide learning and experience
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