IFM Review Questions 2014-10-09.doc

8/11/2019 IFM Review Questions 2014-10-09.doc

1/11

MNC

1) Why might a producer want to own resources located in another country,rather than buy them in the open market?

2) What are the limitations of licences as an alternative to FD ?

!) What role do market imperfections play in FD ?

") Which of the reasons for the growth of #$%s do you think are the primaryreasons for the development of multinationals in the following industries?

a) &harmaceutical development and manufacturing

b )'utomobile manufacturing

c) #etal re(ning

d) otel operation

e) %ommercial banking

f )*nergy development

g) Fast food

h) Fashion clothing+

) Why might country risk depend on the diversity of e-ports as well as on thevalue of e-ports versus debt.service payments?

/) What is pollution haven? ow does an #$% use host country as a pollutionhaven? 0ive a e-ample to show an #$% has been using ietnam as apollution haven+

International Acquisitions

) 'lternatives to nternational 'c3uisitions

4astell, nc+, a 5+6+.based #$%, is considering the ac3uisition of a 4ussian target to

produce personal computers 7&%s) and market them throughout 4ussia, wheredemand for &%s has increased substantially in recent years+ 'ssume that the stockmarket conditions are not favorable in 4ussia, as the stock prices of most 4ussiancompanies rose substantially 8ust prior to 4astell9s assessment of the target+ Whatare some alternatives available to 4astell?

:) &rivati;ed


2/11

Why are valuationsof privati;ed businesses previously owned by the governments of developing countries more di= cult than valuations of e-isting ( rms in developedcountries?

>) Why a Foreign 'c3uisition #ay , and e-change rate forecasts for the ne-t 2years indicate values of B+2> and B+2 , respectively+ 0iven these facts, should'laska, nc+, pay 1 billion new sol for *stoya %orp+ if the re3uired rate of return is 1:percent? What is the ma-imum price 'laska should be willing to pay?

6. Pricing a Foreign Target.Alaska Inc. would like to acquire Estoya Corp., which is located in Peru. Ininitial negotiations, Estoya has asked for a purchase price of !illion Peru"iannew sol. If Alaska co#pletes the purchase, it would keep Estoya$s operations fortwo years and then sell the co#pany. In the recent past, Estoya has generatedannual cash flows of %&& #illion new sol per year, !ut Alaska !elie"es that it canincrease these cash flows !y % percent each year !y i#pro"ing the operations ofthe plant. 'i"en these i#pro"e#ents, Alaska !elie"es it will !e a!le to resellEstoya in two years for .( !illion new sol. The current e)change rate of the newsol is *.(+, and e)change rate forecasts for the ne)t two years indicate "alues of*.(+ and *.( , respecti"ely. 'i"en these facts, should Alaska Inc. pay !illionnew sol for Estoya Corp. if the required rate of return is - percent /hat is the#a)i#u# price Alaska should !e willing to payANSWER


3/11

NPV=-1000*0.29+ + =191.19>0

S=0.29, =0.29, (1+ )(1+f)=(1+ ) , (1+0.29)*(1+0.27)= (1+ ) , =0.28Alaska sho l! " # Es$o#a %o&'. $h 1 " ll o a ! $h a '& Alaska sho l!

" ll / $o 'a# s 81.19 ll o !olla&s ( $$ / NPV=0).

ANSWER o -l

Alaska, . sho l! o$ 'a# o& $ha 3 48.42 ll o fo& Es$o#a %o&'. Es$o#a sask / fo& 1.2 " ll o sol, h h $&a sla$ s $o 35 8 ll o a$ $h && $ ha&a$ of 3.29. 6h & fo& , Alaska, . sho l! ' & has Es$o#a %o&'.

-. Alternati"es to International Acquisitions.0astell Inc., a 1.2.3!ased 45C, is considering the acquisition of a 0ussian targetto produce personal co#puters PCs7 and #arket the# throughout 0ussia,where de#and for PCs has increased su!stantially in recent years. Assu#e thatthe stock #arket conditions are not fa"ora!le in 0ussia, as the stock prices of

#ost 0ussian co#panies rose su!stantially 8ust prior to 0astell9s assess#ent ofthe target. /hat are so#e alternati"es a"aila!le to 0astellANSWER o l 6h & a& a$ l as$ $ o al$ & a$ s a a la"l $o Ras$ ll . &s$

o l! $ & $o a l s / a/& $ $h $h R ss a $a&/ $ $o a fa $ & a !! s$& " $ P%s $h $h Ras$ ll a $h&o /ho $ R ss a. S o !, $ o l! $ & $o

:o $ $ & $h $h 'o$ $ al R ss a $a&/ $. ;o$h of $h s $ho!s o l! allo


4/11

Ras$ ll $o a ss $h R ss a P% a&k $. &$h & o& , h s$o k '& s R ss a! l , Ras$ ll o l! ak a " ! fo& $h 'o$ $ al R ss a $a&/ $.

A s & "# s$ ! $s1) ; l! / a s "s ! aRas$ ll a s$a"l sh a s "s ! a R ss a. 6h s allo s Ras$ ll $o & a$ as "s ! a $ ! s & s $ho $ ass / $h '& s $ $a&/ $


5/11

asso a$ ! $h s ll / a"&oa! a " & ! ! "# s / a a$ sal s a/ $. S la&l#, h af & l s s $s k o -ho , $ ! o$ " a& $h os$s o& & sks of @ , s $h s a& "o& "

a$ f & $ha$ l s s $h k o -ho . So h# !o so a # f & s a''a& $l# '& f & @ o &$h & 'o&$ / o& l s /

6h k a s & s $ha$ o$h & $h /s a& o$ alD A " & of fa $o&s a al$ & $h & la$a$$&a $ ss of 'o&$ /, l s /, a ! @ . W ll o s ! & $h s fa $o&s (1) $&a s'o&os$s, (2) a&k $ ' &f $ o s, (5) follo / o ' $ $o&s, ( ) $h '&o! $ l f # l , a ! ( )

lo a$ o a! a $a/ s.

Transportation Costs

Wh $&a s'o&$a$ o os$s a& a!! ! $o '&o! $ o os$s, $ " o s '&of $a"l $o sh ' so '&o! $s o & a la&/ ! s$a . 6h s s 'a&$ la&l# $& of '&o! $s $ha$ ha a lo al -$o-

/h$ &a$ o a ! a " '&o! ! al os$ a # lo a$ o ( ./., $, sof$ !& ks, $ .). o& s h '&o! $s, & la$ $o $h & @ o& l s /, $h a$$&a $ ss of 'o&$ / ! & as s.

'&o! $s $h a h /h al -$o- /h$ &a$ o, ho &, $&a s'o&$ os$s a& o& all# a oo 'o $ of $o$al la ! ! os$ ( ./., l $&o o 'o $s, ' &so al o ' $ &s, ! al' $, o ' $ & sof$ a& , $ .). s h as s, $&a s'o&$a$ o os$s ha l $$l 'a $ o $

& la$ a$$&a $ ss of 'o&$ /, l s /, a ! @ .

4arket I#perfections Internali;ation Theory7

Fa&k $ ' &f $ o s '&o ! a a:o& 'la a$ o of h# f & s a# '& f & @ $o $h &'o&$ / o& l s /.4arket i#perfections a& fa $o&s $ha$ h " $ a&k $s f&o o&k /

' &f $l#. 6h a&k $ ' &f $ o s 'la a$ o of @ s $h o fa o& ! "# os$o o s$s.8 $h $ & a$ o al " s ss l $ &a$ & , $h a&k $ / ' &f $ o a''&oa h $

s $#' all# & f && ! $o asinternali;ation theory.

W $h & /a&! $o ho& ?o $al @ , a&k $ ' &f $ o s a& s $ o & s$a s h $h' ! $s $o $h f& flo of '&o! $s " $ a$ o s, a ! h $h & a& ' ! $s $o

$h sal of k o -ho . ( s / s a ha s fo& s ll / k o -ho .) ' ! $s $o $h f&flo of '&o! $s " $ a$ o s ! & as $h '&of $a" l $# of 'o&$ /, & la$ $o @ a !l s /. ' ! $s $o $h sal of k o -ho & as $h '&of $a" l $# of @ & la$ $ol s /. 6h s, $h a&k $ ' &f $ o s 'la a$ o '& ! $s $ha$ @ ll " '& f && !

h & $h & a& ' ! $s $ha$ ak "o$h 'o&$ / a ! $h sal of k o -ho ! ff l$a !Go& ' s . W ll o s ! & a h s $ a$ o .

Impediments to Exporting

Ho & $s a& $h a so & of ' ! $s $o $h f& flo of '&o! $s " $ a$ o s;# 'la / $a& ffs o 'o&$ ! /oo!s, /o & $s a & as $h os$ of 'o&$ / & la$ $o

@ a ! l s /. S la&l#, "# l $ / 'o&$s $h&o /h $h 'os $ o of o$as, /o & $& as $h a$$&a $ ss of @ a ! l s /. o& a 'l , $h a of @ "# Ia'a s a

o 'a s $h J $ ! S$a$ s ! & / $h 1980s as 'a&$l# !& "# '&o$ $ o s$ $h& a$s f&o


6/11

%o /& ss a ! "# o$as o $h 'o&$a$ o of Ia'a s a&s. o& Ia'a s a $o o 'a s, $h sfa $o&s ha ! & as ! $h '&of $a" l $# of 'o&$ / a ! & as ! $h '&of $a" l $# of @ .

Impediments to the Sale of Know-How.

6h o ' $ $ a! a $a/ $ha$ a # f & s :o# o s f&o $h & $ h olo/ al, a&k $ /, o&a a/ $ k o -ho . 6 h olo/ al k o -ho a a"l a o 'a # $o " l! a " $$ & '&o! $K fo& a 'l , L &o Ms $ h olo/ al k o -ho a"l ! $ $o " l! $h f &s$ 'ho$o o' &a ! Fo$o&olaMs $ h olo/ al k o -ho has / $ a s$&o / o ' $ $ 'os $ o $h /lo"al

a&k $ fo& ll la& $ l 'ho ' $. Al$ & a$ l#, $ h olo/ al k o -ho a '&o ao 'a #Ms '&o! $ o '&o ss s- - s o ' $ $o&sK fo& a 'l , a # la $ha$ 6o#o$aMso ' $ $ a! a $a/ o s f&o $s s ' & o& '&o! $ o s#s$ . Fa&k $ / k o -ho a

a"l a o 'a # $o " $$ & 'os $ o $s '&o! $s $h a&k $'la s- - s o ' $ $o&sK $ho ' $ $ a! a $a/ of s h o 'a s as O llo//, . I. ?, a ! P&o $ & Ha "l s s

$o o f&o s ' & o& a&k $ / k o -ho . Fa a/ $ k o -ho $h & /a&! $o fa $o&s s has o&/a ?a$ o al s$& $ & , h a & la$ o s, o $&ol s#s$ s, 'la / s#s$ s, $o

a a/ $, a ! so o a a"l a o 'a # $o a a/ $s ass $s o& ff $l# $hao ' $ $o&s. 6h o ' $ $ a! a $a/ of Wal-Fa&$, h h s '&of l ! $h $ Fa a/ $o s, s s $o o f&o $s a a/ $ k o -ho .

f k o -ho ( ' &$ s ) as a o ' $ $ ass $, $ follo s $ha$ $h la&/ & $h a&k $ h h $ha$ ass $ s a''l !, $h /& a$ & $h '&of $s $ha$ a " a& ! f&o $h ass $. Fo$o&ola a& /& a$ & & $ & s o $s k o -ho "# s ll / $s ll la& $ l 'ho ' $ o&l! ! $h

"# s ll / $ o l# No&$h A & a. o &, $h s alo !o s o$ 'la h# Fo$o&ola! &$ak s @ ($h o 'a # has '&o! $ o lo a$ o s a&o ! $h o&l!). o& Fo$o&ola $o fa o&

@ , $ o o ! $ o s s$ hol!. &s$, $&a s'o&$a$ o os$s a !Go& ' ! $s $o 'o&$ / & l o $ 'o&$ / as a o'$ o . S o !, $h & s$ " so & aso Fo$o&ola a o$ s ll $s

ll la& k o -ho $o fo& / '&o! &s. S l s / s $h a ha s "# h h f & ss ll $h & k o -ho , $h & s$ " so & aso Fo$o&ola s o$ ll / $o l s a fo& / f &$o a fa $ & a ! a&k $ $s ll la& $ l 'ho ' $. B$h & $h /s " / al, l s

/h$ look a$$&a $ $o s h a f & , s $ o l! o$ ha $o " a& $h os$s a ! & sks asso$h @ # $ $ o l! s$ ll a& a /oo! & $ & f&o $s k o -ho $h fo& of &o#al$# f s.

A o&! / $o o o $h o, $h & a& $h& & aso s $h a&k $ !o s o$ al a#s o&k ll ha s fo& s ll / k o -ho , o& h# l s / s o$ as a$$&a $ as $ $ all# a'' a&s.

&s$,licensing may result in a firm's giving away its know-how to a potential foreigncompetitor. o& a 'l , $h 1940s, R%A l s ! $s l a! /- !/ olo& $ l s o $ h olo/#$o a " & of Ia'a s o 'a s, l ! / Fa$s sh $a a ! So #. A$ $h $ R%A sal s / as a a# $o a& a /oo! & $ & f&o $s $ h olo/ al k o -ho $h Ia'a s a&k $

$ho $ $h os$s a ! & sks asso a$ ! $h @ . o &, Fa$s sh $a a ! So # kl#ass la$ ! R%AMs $ h olo/# a ! s ! $ $o $ & $h JS a&k $ $o o ' $ ! & $l# a/a s$R%A. As a & s l$, R%A s o a o& 'la# & $s ho a&k $, h l Fa$s sh $a a ! So #ha a h " // & a&k $ sha& .

S o !, licensing does not give a firm the tight control over manufacturing, marketing, and strategy in a foreign country that may be required to profitably exploit its advantage in know-


7/11

how. W $h l s /, o $&ol o & '&o! $ o , a&k $ /, a ! s$&a$ /# s /&a $ ! $o a l s& $ & fo& a &o#al$# f . o &, fo& "o$h s$&a$ / a ! o' &a$ o al & aso s, a f & a# a $& $a o $&ol o & $h s f $ o s. o& a 'l , a f & /h$ a $ $s fo& / s "s ! a $oa ! a&k $ a//& ss l# $o k ' a fo& / o ' $ $o& h k. Oo!ak s ' &s / $h ss$&a$ /# Ia'a . 6h o ' $ $ a$$a ks la h ! "# Oo!akMs Ia'a s s "s ! a a& k ' /

$s a:o& /lo"al o ' $ $o&, : , " s# ! f ! / $s o ' $ $ 'os $ o Ia'a . %o s $l#: has ' ll ! "a k f&o $s a&l & s$&a$ /# of a$$a k / Oo!ak a//& ss l# $h J $ !S$a$ s. J l k a holl# o ! s "s ! a, a l s o l! " l k l# $o a '$ s h a

'os $ o , s s h a s$&a$ /# o l! allo $h l s $o ak o l# a lo '&of $ o& $aka loss.

B& a f & a# a $ o $&ol o & $h o' &a$ o s of a fo& / $ $# $o $ak a! a $a/ of! ff & s fa $o& os$s a o / o $& s, '&o! / o l# 'a&$ of $s f al '&o! $ a /

o $, h l 'o&$ / o$h & 'a&$s f&o h & $h # a " '&o! ! a$ lo & os$. A/a , al s o l! " l k l# $o a '$ s h a a&&a / $ " a s $ o l! l $ $h l s Ma $o o #. o& $h s & aso s, h $ /h$ o $&ol o & a fo& / $ $# s ! s &a"l , ho& ?o $

s '& f &a"l $o l s /.6h &!,a firm's know-how may not be amenable to licensing. 6h s s 'a&$ la&l# $& of

a a/ $ a ! a&k $ / k o -ho . $ s o $h / $o l s a fo& / f & $o a fa $ & a 'a&$ la& '&o! $, " $ $ a o$h & $o l s $h a# a f & !o s " s ss--ho $ a a/ s '&o ss a ! a&k $s $s '&o! $s. %o s ! & 6o#o$a, a o 'a # hos o ' $ $ a! a $a/ $h /lo"al a $o ! s$ s a k o l !/ ! $o o f&o $s s ' & o& a" l $# $o a a/ $h o &all

'&o ss of ! s / /, / & /, a fa $ & /, a ! s ll / a $o o" l sK $ha$ s, f&o $sa a/ $ a ! o&/a ?a$ o al k o -ho . 6o#o$a s & ! $ ! $h ' o & / $h ! lo' $

of a '&o! $ o '&o ss, k o as l a '&o! $ o , $ha$ a"l s $ $o '&o! h /h &- al $#a $o o" l s a$ a lo & os$ $ha $s /lo"al & als.9 Al$ho /h 6o#o$a has &$a '&o! $s $ha$ a

" l s !, $s & al o ' $ $ a! a $a/ o s f&o $s a a/ $ a ! '&o ss k o -ho .6h s k !s of sk lls a& ! ff l$ $o a&$ la$ o& o! f#K $h # a o$ " & $$ !o a sl s / o $&a $. 6h # a& o&/a ?a$ o ! a ! ha " ! lo' ! o & # a&s. 6h # a&

"o! ! a # o ! ! al, " $ s$ a! a& ! l# ! s' &s ! $h&o /ho $ $h o 'a #.6o#o$aMs sk lls a& " !! ! $s o&/a ?a$ o al l$ & , a ! l$ & s so $h / $ha$ a ol s !. 6h s, as 6o#o$a o s a a# f&o $s $&a! $ o al 'o&$ / s$&a$ /#, $ has & as /l#

' &s ! a s$&a$ /# of @ , &a$h & $ha l s / fo& / $ &'& s s $o '&o! $s a&s. 6hs $& of Wal-Fa&$, h h s '&of l ! $h a o 'a # / Fa a/ $ o s. Wal-Fa&$o s ! & ! 'a ! / $ & a$ o all# a f&a h s / " $ ! ! ! $ha$ $s l$ & o l! "

! ff l$ $o & 'l a$ f&a h s s. ( &a h s / s $h a&k $-"as ! ha s "# h h f &Cs llC o& Cl s C $h & /h$ $o s $h & "&a ! a , s ": $ $o $h f&a h s a!h & / $o s$& $ & & $s & /a&! / $h a# $ o' &a$ s $s " s ss.)

All of $h s s // s$s $ha$ h o o& o& of $h follo / o ! $ o s hol!s, a&k $s fa l as aha s fo& s ll / k o -ho a ! @ s o& '&of $a"l $ha l s / (1) h $h f &

has al a"l k o -ho $ha$ a o$ " a! a$ l# '&o$ $ ! "# a l s / o $&a $, (2) h $hf & !s $ /h$ o $&ol o & a fo& / $ $# $o a ? $s a&k $ sha& a ! a& /s

o $, a ! (5) h a f & Ms sk lls a ! k o -ho a& o$ a a"l $o l s /.


8/11

2trategic =eha"ior

A o$h & $h o s ! $o 'la @ s "as ! o $h ! a $ha$ @ flo s a& a & fl $ o ofs$&a$ / & al " $ f & s $h /lo"al a&k $'la . A a&l# a& a $ of $h s a&/ $

'o ! ! "# . 6. O k &"o k &, ho look ! a$ $h & la$ o sh ' " $ @ a ! & al

ol /o'ol s$ ! s$& s.10

A oligopoly s a ! s$ o 'os ! of a l $ ! " & of la&/f & s ( ./., a ! s$ h h fo & f & s o $&ol 80 ' & $ of a !o s$ a&k $ o l! "! f ! as a ol /o'ol#). A & $ al o ' $ $ f a$ & of s h ! s$& s s $ &! ' !$h a:o& 'la# &s Wha$ o f & !o s a ha a ! a$ 'a $ o $h a:o& o ' $ $o&s,fo& / a & s'o s k !. f o f & a ol /o'ol# $s '& s, $h s a $ak a&k $ sha&a a# f&o $s o ' $ $o&s, fo& / $h $o & s'o ! $h s la& '& $s $o & $a $h & sha& .

6h s k ! of $a$ " ha o& a $ak a # fo& s a ol /o'ol#. B f & &a s s '& s, $ho$h &s follo K so o 'a !s a'a $#, a ! $h & als $a$ l s$ $h # " l f$ a! sa! a $a/ o s 'os $ o $h f $ & . ; l! / o $h s, O k &"o k & a&/ ! $ha$ $h sa

k ! of $a$ " ha o& ha&a $ & ? s @ . %o s ! & a ol /o'ol# $h J $ ! S$a$ s $h& f & s--A, ;, a ! %--!o a$ $h a&k $. & A s$a"l sh s a s "s ! a &a . &; a ! % & fl $ $ha$ f $h s s$ $ s s ssf l, $ a# k o k o $ $h & 'o&$ " s ss $o

&a a ! / & A a f &s$- o & a! a $a/ . &$h & o& , & A /h$ ! s o & soo ' $ $ ass $ &a $ha$ $ o l! & 'a$& a$ $o $h J $ ! S$a$ s $o $o& $ & s ;

o $h & a$ so l. H $h s 'oss " l $ s, & s ; a ! % ! ! $o follo & A a !s$a"l sh o' &a$ o s &a .

6h & s ! $ha$ s h $a$ " ha o& !o s l a! $o @ . S$ ! s $ha$ look ! a$ @ "JS f & s ! & / $h 19 0s a ! 40s sho $ha$ f & s "as ! ol /o'ol s$ ! s$& s $ ! ! $o

$a$ a h o$h &Ms @ .11 6h sa 'h o o has " o"s & ! $h & /a&! $o @

! &$ak "# Ia'a s f & s ! & / $h 1980s.12

o& a 'l , 6o#o$a a ! N ssa & s'o ! ! $os$ $s "# o !a $h J $ ! S$a$ s a ! E &o' "# ! &$ak / $h & o @ $hJ $ ! S$a$ s a ! E &o' .

$ s 'oss "l $o $ ! O k &"o k &Ms $h o $o "&a $h o '$ of l$ 'o $o ' $ $ o .4ultipoint co#petition a& s s h $ o o& o& $ &'& s s o $ & a h o$h

! ff & $ & / o al a&k $s, a$ o al a&k $s, o& ! s$& s. E o o $h o s // s$s $ha&a$h & l k h ss 'la# &s :o k # / fo& a! a $a/ , f & s ll $ $o a$ h a h o$h &Ms o s ! ff & $ a&k $s $o $ $o hol! a h o$h & h k. 6h ! a s $o s & $ha$ a & al !o s /a a o a ! / 'os $ o o a&k $ a ! $h s $h '&of $s / &a$ ! $h & $o s "s ! ?

o ' $ $ a$$a ks o$h & a&k $s. Oo!ak a ! : Pho$o l %o., fo& a 'l , o ' $

a/a s$ a h o$h & a&o ! $h o&l!. f Oo!ak $ &s a 'a&$ la& fo& / a&k $, : ll ofa& " h !. : f ls o ' ll ! $o follo Oo!ak $o s & $ha$ Oo!ak !o s o$ /a a !o a $ 'os $ o $h fo& / a&k $ $ha$ $ o l! $h l &a/ $o /a a o ' $ $ a! a $a/

ls h & . 6h o &s also hol!s, $h Oo!ak follo / : h $h Ia'a s f & s $hf &s$ $o $ & a fo& / a&k $. S la&l#, $h o' / as sa ho El $&ol Ms 'a

$o Eas$ & E &o' , a$ A & a, a ! As a as 'a&$ " / !& "# s la& o s "# $s/lo"al o ' $ $o&s, s h as Wh &l'ool a ! H &al El $& . 6h @ " ha o& of El $&ol ,


9/11

Wh &l'ool, a ! H &al El $& /h$ " 'la ! 'a&$ "# l$ 'o $ o ' $ $ o a ! & al a /lo"al ol /o'ol#.

Al$ho /h O k &"o k &Ms $h o a ! $s $ s o s a h l' $o 'la $a$ @ " ha "# f & s a ol /o'ol s$ ! s$& s, $ !o s o$ 'la h# $h f &s$ f & ol /o'ol# ! !

$o ! &$ak @ , &a$h & $ha $o 'o&$ o& l s . o $&as$, $h a&k $ ' &f $ o s'la a$ o a!!& ss s $h s 'h o o . 6h $a$ $h o also !o s o$ a!!& ss $h ss ofh $h & @ s o& ff $ $ha 'o&$ / o& l s / fo& 'a ! / a"&oa!. A/a , $ha&k $ ' &f $ o s a''&oa h a!!& ss s $h ff # ss . o& $h s & aso s, a #

o o s$s fa o& $h a&k $ ' &f $ o s 'la a$ o fo& @ , al$ho /h os$ o l! a/& $ha$$h $a$ 'la a$ o $ lls 'a&$ of $h s$o.

The Product >ife Cycle

W o s ! & ! Ra# o ! V & o Ms '&o! $ l f - # l $h o %ha'$ & , " $ ha$ ! ! o$! ll o as V & o Ms o $ $ o $ha$ h s $h o also 'la s @ . V & o a&/ ! $ha$ of$

sa f & s $ha$ ' o & a '&o! $ $h & ho a&k $s ! &$ak @ $o '&o! a '&o! $ fo s '$ o fo& / a&k $s. 6h s, L &o $&o! ! $h 'ho$o o' & $h J $ ! S$a$ s,a ! $ as L &o $ha$ s $ ' '&o! $ o fa l $ s Ia'a ( : -L &o ) a ! H& a$ ;& $a (RaL &o ) $o s & $hos a&k $s.

V & o Ms s $ha$ f & s ! &$ak @ a$ 'a&$ la& s$a/ s $h l f # l of a '&o! $ha ' o & !. 6h # s$ o$h & a! a ! o $& s h lo al ! a ! $hos o $&/&o s la&/ o /h $o s ''o&$ lo al '&o! $ o (as L &o ! !). 6h # s "s $l# sh f$

'&o! $ o $o ! lo' / o $& s h '&o! $ s$a !a&! ?a$ o a ! a&k $ sa$ &a$ o / &$o '& o ' $ $ o a ! os$ '& ss & s. s$ $ ! lo' / o $& s, h & la"o& osa& lo &, s s as $h " s$ a# $o & ! os$s.

V & o Ms $h o has & $. & s !o s$ a fo& / o $ h ! a ! $ha$ o $s ''o&$ lo al '&o! $ o , a ! $h # !o s$ lo - os$ lo a$ o s ( ./., ! lo' / o $& s)

h os$ '& ss & s " o $ s .15 o &, V & o Ms $h o fa ls $o 'la h# $ s '&of $a"l fo& a f & $o ! &$ak @ a$ s h $ s, &a$h & $ha o $ / $o 'o&$ f&o ho "as a ! &a$h & $ha l s / a fo& / f & $o '&o! $s '&o! $. I s$ " a s ! a !

a fo& / o $ s la&/ o /h $o s ''o&$ lo al '&o! $ o , $ !o s o$ ssa& l# follo$ha$ lo al '&o! $ o s $h os$ '&of $a"l o'$ o . $ a# s$ ll " o& '&of $a"l $o '&o! a$ho a ! 'o&$ $o $ha$ o $ ($o & al ? $h s al o o s $ha$ a& s f&o s & / $h /

a&k $ f&o o lo a$ o ). Al$ & a$ l#, $ a# " o& '&of $a"l fo& $h f & $o l s afo& / f & $o '&o! $s '&o! $ fo& sal $ha$ o $. 6h '&o! $ l f - # l $h o /

$h s o'$ o s a !, s$ a!, s 'l# a&/ s $ha$ o a fo& / a&k $ s la&/ o /h $o s ''o&$lo al '&o! $ o , @ ll o &. 6h s l $s $s 'la a$o 'o & a ! $s s f l ss $o " s $ha$ $ fa ls $o ! $ f# h $ s '&of $a"l $o s$ a"&oa!.

>ocation32pecific Ad"antages

6h ;& $ sh o o s$ Ioh @ / has a&/ ! $ha$ a!! $ o $o $h a& o s fa $o&s ! s ssa"o , lo a$ o -s' f a! a $a/ s a h l' 'la $h a$ & a ! ! & $ o of


10/11

@ .1 ;# location3specific ad"antages, @ / a s $h a! a $a/ s $ha$ a& s f&o s /& so & !o $s o& ass $s $ha$ a& $ ! $o a 'a&$ la& fo& / lo a$ o a ! $ha$ a f & f

al a"l $o o " $h $s o ass $s (s h as $h f & Ms $ h olo/ al, a&k $ /, o&a a/ $ k o -ho ). @ / a '$s $h $ & al ?a$ o a&/ $ $ha$ a&k $ fa l & sak $ ! ff l$ fo& a f & $o l s $s o ass $s (k o -ho ). 6h & fo& , h a&/ s

o " / lo a$ o -s' f ass $s o& & so & !o $sand $h f & Ms o ass $sof$ & & s @ . $ & & s $h f & $o s$a"l sh '&o! $ o fa l $ s h & $hos foass $s o& & so & !o $s a& lo a$ ! (@ / & f &s $o $h s a&/ $ as $heclecticparadig#7.

A o" o s a 'l of @ /Ms a&/ $s a& a$ &al & so & s, s h as o l a ! o$h &&als, h h a& "# $h & ha&a $ & s' f $o &$a lo a$ o s. @ / s // s$s $ha$

s$ ! &$ak @ $o 'lo $ s h fo& / & so & s. 6h s 'la s $h @ ! &$ak "# of $h o&l!Ms o l o 'a s, h h ha $o s$ h & o l s lo a$ ! $o o " $h &$ h olo/ al a ! a a/ & al k o l !/ $h $h s al a"l lo a$ o -s' f & so & . A o$h &

a 'l s al a"l h a & so & s, s h as lo - os$ h /hl#-sk ll ! la"o&. 6h os$ a ! sk ll of

la"o& a& s f&o o $ $o o $. S la"o& s o$ $ & a$ o all# o" l , a o&! / $@ / $ ak s s s fo& a f & $o lo a$ '&o! $ o fa l $ s h & $h os$ a ! sk lls of lla"o& a& os$ s $ ! $o $s 'a&$ la& '&o! $ o '&o ss s. B & aso El $&ol s " l!fa $o& s %h a s " a s %h a has a a" !a $ s ''l# of lo - os$ " $ ll- ! a$ ! a !sk ll ! la"o&. 6h s, o$h & fa $o&s as ! , %h a s a /oo! lo a$ o fo& '&o! / ho s hol!a''l a s "o$h fo& $h %h s a&k $ a ! fo& 'o&$ ls h & .

o &, @ /Ms $h o has 'l a$ o s $ha$ /o " #o ! "as & so & s s h as &als ala"o&. %o s ! & S l o Vall #, h h s $h o&l! $ & fo& $h o ' $ & a ! s - o ! $o&

! s$. Fa # of $h o&l!Ms a:o& o ' $ & a ! s o ! $o& o 'a s, s h as A''l%o ' $ &, S l o H&a'h s, a ! $ l, a& lo a$ ! los $o a h o$h & $h S l o Vall # &

of %al fo& a. As a & s l$, h of $h $$ /- !/ & s a& h a ! '&o! $ ! lo' $ o ' $ &s a ! s o ! $o&s o &s h & . A o&! / $o @ /Ms a&/ $s, k o l !/ "/ &a$ ! S l o Vall # $h & /a&! $o $h ! s / a ! a fa $ & of o ' $ &s a !s o ! $o&s s a a la"l o h & ls $h o&l!. As $ s o & al ? !, $ha$ k o l !/! ff s s $h&o /ho $ $h o&l!, " $ $h l a! / !/ of k o l !/ / &a$ o $h o ' $ & a !s o ! $o& ! s$& s s $o " fo ! S l o Vall #. @ /Ms la / a/ , $h s a sS l o Vall # has alocation-specific advantage $h / &a$ o of k o l !/ & la$ ! $o $h

o ' $ & a ! s o ! $o& ! s$& s. 'a&$, $h s a! a $a/ o s f&o $h sh &o $&a$ o of $ ll $ al $al $ $h s a& a, a ! 'a&$ $ a& s s f&o a $ o&k of fo $a $s $ha$ allo f & s $o " f $ f&o a h o$h &Ms k o l !/ / &a$ o . E o o s$s & f

s h k o l !/ Cs' llo &sC ase)ternalities, a ! o ll- s$a"l sh ! $h o s // s$s $ha$ f & sa " f $ f&o s h $ & al $ s "# lo a$ / los $o $h & so & .1

so fa& as $h s s $h as , $ ak s s s fo& fo& / o ' $ & a ! s o ! $o& f & s $os$ & s a& h a ! (' &ha's) '&o! $ o fa l $ s so $h # $oo a l a& a"o $ a ! $ l ?

al a"l k o l !/ " fo& $hos "as ! ls h & , $h & "# / / $h a o ' $ $a! a $a/ $h /lo"al a&k $'la . E ! s // s$s $ha$ E &o' a , Ia'a s , So $h Oo& a ,a ! 6a a s o ' $ & a ! s o ! $o& f & s a& s$ / $h S l o Vall # & / o ,

'& s l# " a s $h # sh $o " f $ f&o $h $ & al $ s $ha$ a& s $h & .14 a s la& ,


11/11

o$h &s ha a&/ ! $ha$ ! & $ s$ $ "# fo& / f & s $h JS " o$ h olo/# ! s$ " o$ a$ ! "# ! s & s $o /a a ss $o $h lo a$ o -s' f $ h olo/ al k o l !of JS " o$ h olo/# f & s.17 @ /Ms $h o, $h & fo& , s s $o " a s f l a!! $ o $o $hoso $l ! a"o , fo& $ h l's 'la l k o o$h & ho lo a$ o fa $o&s aff $ $h ! & $ o of

IFM Review Questions 2014-10-09.doc

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