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an ethnocentric approach is compatible with both global standardization and transnational strategies. there is no evidence that psychological factors play an important role in determining the expectations of market traders as to likely future exchange rates. Answer: false evidence reveals […]

a key benefit resulting from the adoption of the euro is the ability to compare prices across member markets. firms pursuing a global standardization strategy must cope with a higher level of performance ambiguity, and this raises their costs of […]

concentration of production is not favored when important exchange rates are expected to remain relatively stable. tariffs on industrial goods remain higher than tariffs on services. Answer: false tariffs on services remain higher than on industrial goods. the average tariff […]

when a company emphasizes personal selling, the company is probably using a push strategy. Current trends indicate the world is moving toward an economic system that is more favorable for international business. Answer: TRUE Over the next few decades, countries […]

a multinational firm may need to delegate marketing functions to national subsidiaries to be responsive to local differences in distribution channels. decentralized production is favored if differences between countries in factor costs have a substantial impact on the costs of […]

core competencies enable a firm to reduce the costs of value creation and/or to create perceived value in such a way that premium pricing is possible. an organizational culture can be strong but bad. Answer: true strong does not necessarily […]

a theocratic law system is one in which the law is based on religious teachings. in practice only a few countries country have adopted the free market view in its pure form. Answer: false in practice no country has adopted […]

Advocates of a floating exchange rate regime argue that removal of the obligation to maintain exchange rate parity would restore monetary control to a government. the risk that arises from volatile changes in exchange rates is known as foreign exchange […]

support activities are always less important than the primary activities in achieving a competitive advantage. according to rawls, inequalities are unjust even if the system that produces inequalities is to the advantage of everyone. Answer: false rawls accepts that inequalities […]

exporting is advantageous because it avoids the cost of establishing manufacturing operations in the host country and because it may help a firm achieve experience curve and location economies. for transnational enterprises to be successful, they must focus on leveraging […]

the process of identifying distinct groups of consumers whose purchasing behavior differs from others in important ways is known as consumer behavior analysis. to establish moral intent, managers need to stand in the shoes of a stakeholder and ask how […]

a benefit to companies of economic integration is the opportunity to centralize their production and reduce costs. hofstedes study found that in masculine cultures, sex roles were less sharply distinguished, and little differentiation was made between men and women in […]

firms pursuing a multipoint pricing strategy on an international scale will price low worldwide in an attempt to build global sales volume as rapidly as possible. Supporters of floating exchange rates claim that trade deficits are determined by the balance […]

new processes that might lead to a competitive advantage can be developed anywhere within the organizations global network of operations. Payment of dividends is an uncommon method of transferring funds from foreign subsidiaries to the parent company. Answer: FALSE Payment […]

The budget is the main instrument of financial control in an organization. the costs and risks associated with doing business in a foreign country are typically high in an economically advanced and politically stable democratic nation. Answer: false the costs […]

the product life-cycle theory argues that a large proportion of the worlds new products had been developed by u.s. firms. Non-U.S. firms increasingly began to invest across national borders because they wanted to disperse production activities to optimal locations and […]

a country has an absolute advantage in the production of a product when it is more efficient than any other country in producing it. the choice between centralization and decentralization is not absolute. Answer: true decisions regarding overall firm strategy, […]

unlike other trade policies, local content regulations tend to benefit consumers and not producers. to conform to local content regulations, a firm may have to locate more production activities in a given market than it would otherwise. Answer: true to […]

the ethical obligations of a multinational corporation toward employment conditions, human rights, environmental pollution, and the use of power are always clear-cut. A foreign debt crisis is a situation in which a country cannot service its foreign debt obligations. Answer: […]

A tax credit allows an entity to reduce the taxes paid to the home government by the amount of taxes paid to the foreign government. firms entering a market via a wholly owned subsidiary must bear all the costs and […]

one of the successful outcomes of the doha round negotiations has been that many nations have proceeded with bilateral free trade agreements. the government of a country takes over the airport security industries following a major terrorist attack, to improve […]

the structure of market segments may differ significantly from country to country. if the law of one price were true for all goods and services, the purchasing power parity (ppp) exchange rate could be found from any individual set of […]

ricardos theory makes fewer simplifying assumptions compared to heckscher-ohlin theory. an individual with a strong sense of personal ethics is less likely to behave in an unethical manner in a business setting. Answer: true our personal ethical code exerts a […]

buying a product from external vendors is highly appropriate when a firm intends to protect proprietary technology. in mixed economies, in certain sectors the state set prices, owned businesses, limited private enterprise, restricted investment by foreigners, and restricted international trade. […]

Capital budgeting is the technique financial managers use to try to quantify the benefits, costs, and risks of an investment. resources always move easily from one economic activity to another. Answer: false resources do not always move easily from one […]

in a classic matrix structure, individual managers belong to two hierarchies (a divisional hierarchy and an area hierarchy) and have two bosses (a divisional boss and an area boss). an importer obtains a letter of credit from a bank in […]

in the modern era, the concept of countertrade arose as a way for the united states to purchase imports. upward migration in the strategic role of foreign production sites arises when they upgrade their own capabilities. Answer: true upward migration […]

although a foreign exchange transaction can involve any two currencies, most transactions involve pounds on one side. the east african community (eac) has been a successful integration effort in africa during the last three decades. Answer: false in early 2001, […]

the carrying value of a bond is equal to the market price on the date of sale. The amount of a currency needed to purchase one ounce of gold was referred to as the gold par value under the gold […]

In the face of unpredictable movements in exchange rates, businesses should pursue strategies that will reduce their economic exposure. a countrys economic system and property rights regime are reasonably good predictors of economic prospects. Answer: true a countrys economic system […]

the spread between the eurocurrency deposit rate and the eurocurrency lending rate is more than the spread between the domestic deposit and lending rates. since the late 1980s, there has been a strong move away from a more free market […]

in ethnocentric firms, the lack of managers mobility among national operations implies that pay can and should be kept country-specific. Recent evidence indicates that the solution to the problem of stagnant incomes among the unskilled is to be found in […]

the number of intermediaries between the producer and the consumer is known as the channel length. the main advantage of greenfield investment is that it gives the firm a much greater ability to build the kind of subsidiary company that […]

an integrated international capital market is less volatile compared to a nonintegrated market. in a matrix structure all roles are viewed as integrating roles. Answer: true when the need for integration is very high, firms may institute a matrix structure, […]

mercantilism supports the idea that countries should export more than what they import. u.s. organizations can get financing aid from the export-import bank. Answer: true u.s. organizations can get financing aid from the export-import bank and export credit insurance from […]

upon meeting a foreign business executive, a japanese executive will hold his business card in both hands and bow while presenting the card to the foreigner. this is an example of ritual behavior. the great depression had roots in the […]

social responsibility refers to the idea that businesspeople should favor decisions that have both good economic and social consequences. products such as refined sugar, certain bulk chemicals, paint, and petroleum products have low value-to-weight ratios. Answer: true products such as […]

According to supporters of free trade, as countries get richer they commit greater violation of environmental and labor regulations. the cold war was a war between collectivism and individualism. Answer: true the cold war, in many respects, was a war […]

top management should be viewed as part of the firms infrastructure. the international trade secretariats have had tremendous success. Answer: false in the 1960s, organized labor began to establish international trade secretariats (itss) to provide worldwide links for national unions […]

one of the sources of economies of scale is the ability to spread fixed costs over a large volume. a draft is the instrument normally used in international commerce to effect payment. Answer: true a draft, sometimes referred to as […]

regional economic integration involves agreements among countries in a geographic region to reduce, and ultimately remove, tariff and nontariff barriers to the free flow of goods, services, and factors of production between each other. with an interest-bearing note, the amount […]

the entry of large discount superstores such as tesco and carrefour has shortened channel length in some countries. free trade refers to a situation where a government does not attempt to influence through quotas or duties what its citizens can […]

according to the righteous moralist, if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, that manager should not either. many firms of all national origins increasingly depend on […]

hofstedes concept of power distance focused on the extent to which different cultures socialized their members into tolerating uncertainty. plato, to whom the advocacy of collectivism is traced back, did not equate collectivism with equality. Answer: true advocacy of collectivism […]

ethics officers are hired by many businesses to make sure that all employees are trained to be ethically aware and that ethical considerations enter the business decision-making process at all levels of the organization. inflation occurs when output increases faster […]

Chapter 01 – Globalization 1-1 Globalization Learning objectives • Understand what is meant by the term globalization. • Recognize the main drivers of globalization. • Describe the changing nature of the global economy. To begin the discussion of contemporary issues […]

Chapter 10 – The Foreign Exchange Market 10-1 The Foreign Exchange Market Learning objectives • Describe the functions of the foreign exchange market. • Understand what is meant by spot exchange rates. Exchange rates determine the value of one currency […]

Chapter 11 – The International Monetary System 11-1 The International Monetary System Learning objectives • Describe the historical development of the modern global monetary system. within which exchange rates move. The history of monetary systems includes a period with • […]

Chapter 12 – The Global Capital Market 12-1 The Global Capital Market Learning objectives • Describe the benefits of the global capital market. • Identify why the global capital market has grown so rapidly. their risk. Advances in information technology, […]

Chapter 13 – The Strategy of International Business 13-1 The Strategy of International Business Learning objectives • Explain the concept of strategy. • Recognize how firms can profit by expanding globally. profitability by expanding their operations in foreign markets, the […]

Chapter 14 – The Organization of International Business 14-1 The Organization of International Business Learning objectives • Explain what is meant by organizational architecture. • Describe the different organizational choices that can be made in an international business. architecture must […]

Chapter 15 – Entry Strategy and Strategic Alliances 15-1 Entry Strategy and Strategic Alliances Learning objectives • Explain the three basic differences that firms contemplating foreign expansion must make: which markets to enter, when to enter those markets, and on […]

Chapter 15 – Entry Strategy and Strategic Alliances 15-13 some students may point out that U.S. producers have also established operations in other locations like Mexico to capitalize on production advantages there. 4. Chrysler is hoping to add some Fiat […]

Chapter 16 – Exporting, Importing, and Countertrade 16-1 Exporting, Importing and Countertrade Learning objectives • Explain the promises and risks associated with exporting. Exporting is not just for large enterprises; many small firms have benefited significantly from the moneymaking opportunities […]

Chapter 17 – Global Production and Supply Chain Management 17-1 Global Production and Supply Chain Management Learning objectives • Explain why global production and supply chain management decisions are of central importance to many global companies. when they are performed […]

Chapter 18 – Global Marketing and R&D 18-1 Global Marketing and R&D Learning objectives • Explain why it makes sense to vary the attributes of a product from country to country. can realize substantial unit cost reductions from experience curve […]

Chapter 19 – Global Human Resource Management 19-1 Global Human Resource Management Learning objectives • Summarize the strategic role of human resource management in international business. Firm success requires that HRM policies are congruent with strategy and with formal and […]

Chapter 02 – National Differences in Political Economy 2-1 National Differences in Political Economy Learning objectives • Understand how the political systems of countries differ. • Understand how the economic systems of countries differ. Political differences are described along two […]

Chapter 20 – Accounting and Finance in the International Business 20-1 Accounting and Finance in the International Business Learning objectives • Discuss the national differences in accounting standards. • Explain the implications of the rise of international accounting standards. Accounting, […]

Chapter 03 – National Differences in Economic Development 3-1 National Differences in Economic Development Learning objectives • Explain what determines the level of economic development of a nation. national political, economic, and legal systems, highlighting the ways in which managers […]

Chapter 04 – Differences in Culture 4-1 Differences in Culture Learning objectives • Explain what is meant by the culture of a society. • Identify the forces that lead to differences in social culture. • Identify the business and economic […]

Chapter 05 – Ethics, Corporate Social Responsibility, and Sustainability 5-13 not have directly participated in the brutality against villagers, Unocal did have a responsibility to oversee what was going on and ensure that people were treated fairly. CLOSING CASE: Bitcoin […]

Chapter 05 – Ethics, Corporate Social Responsibility, and Sustainability 5-1 Ethics, Corporate Social Responsibility, and Sustainability Learning objectives • Understand the ethical issues faced by international businesses. • Recognize an ethical dilemma. This chapter looks at ethics in international business. […]

Chapter 06 – International Trade Theory 6-1 International Trade Theory Learning objectives • Understand why nations trade with each other. • Summarize the different theories explaining trade flows between nations. theories have developed, along with efforts to refine them. Approaches […]

Chapter 07 – The Political Economy of International Trade 7-1 The Political Economy of International Trade Learning objectives • Identify the policy instruments used by governments to influence international trade flows. With an introduction to tariffs, subsidies, and the development […]

Chapter 08 – Foreign Direct Investment 8-1 Foreign Direct Investment Learning objectives • Recognize current trends regarding foreign direct investment (FDI) in the world economy. investment in the last 25 years has been phenomenal. FDI can take the form of […]

Chapter 09 – Regional Economic Integration 9-1 Regional Economic Integration Learning objectives • Describe the different levels of regional economic integration. • Understand the economic and political arguments for regional economic integration. political union. Integration is not easily achieved or […]

Chapter 09 – Regional Economic Integration Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. carefully crafted response by Greek labor unions to government officials who are negotiating with […]

overpayment for assets of an acquired firm is one reason acquisitions fail. if a corporation issued bonds at an amount less than face value, it indicates that the corporation has a weak credit rating. Answer: f firms pursuing a localization […]

bureaucratic control involves personal contact with subordinates. because differentiation across countries can involve significant duplication and a lack of product standardization, it may reduce costs. Answer: false firms that compete in the global marketplace face pressures for cost reductions and […]

the bank promises to pay on behalf of the importer when a bank is used as third party in international transactions. life expectancy at birth is one of the measures used by the human development index (hdi) to measure the […]

by placing tariffs on imported goods, governments can increase the cost of exporting relative to foreign direct investment and licensing. the level of output at which most plant-level scale economies are exhausted is referred to as the minimum efficient scale […]

a worldwide product division structure tends to be adopted by firms that are reasonably diversified and originally had domestic structures based on product divisions. common law is primarily a moral rather than a commercial law and is intended to govern […]

a well-functioning market economy requires laws protecting private property rights and providing mechanisms for contract enforcement. Accounting standards are rules for preparing financial statements. Answer: TRUE Accounting standards are rules for preparing financial statements. They define what is useful accounting […]

a key assumption in the heckscher-ohlin theory is that technologies are the same across countries. firms pursuing a global standardization strategy are more centralized than enterprises pursuing a localization or international strategy. Answer: true firms pursuing a global standardization strategy […]

an investor purchases the right to receive a specified fixed stream of income from the corporation when he purchases a share of stock. Gold was declared as the formal reserve asset in the Jamaica agreement of 1976. Answer: FALSE In […]

ex-im bank has a direct lending operation under which it lends dollars to foreign borrowers. export tariffs are far less common than import tariffs. Answer: true export tariffs are far less common than import tariffs. the value an international business […]

porters theory of national competitive advantage recommends unrestricted free trade between countries. a spot exchange rate is quoted for 30 days, 90 days, and 180 days into the future. Answer: false forward exchange rates are quoted for 30 days, 90 […]

unions bargaining power is largely derived from their ability to threaten to disrupt production. licensing limits the firms ability to realize experience curve and location economies by producing its product in a centralized location. Answer: true licensing limits the firms […]

culture is not static. the production possibility frontier will be parabolic if constant return to specialization is observed. Answer: false constant returns to specialization mean that the units of resources required to produce a good are assumed to remain constant […]

the forward exchange market does not provide adequate coverage for long-term borrowings. a wholly owned subsidiary limits a firms control over operations in different countries. Answer: false a wholly owned subsidiary gives a firm tight control over operations in different […]

arbitrage opportunities abound in the foreign exchange markets and they tend to be available for long periods of time. product liability can be much lower if a product does not conform to required safety standards. Answer: false product liability involves […]

according to porter, the way to create superior value is to drive down the cost structure of the business and/or differentiate the product in some way so that consumers value it more. payroll taxes include the employers share of social […]

since its establishment, the euro has had a stable trading history. the wto supports the promotion of international trade in services. Answer: true the wto embraces the promotion of international trade in services. many of the worlds larger trading nations, […]

a firms vertical differentiation determines where in its hierarchy the decision-making power is concentrated. Rivers Inc., a U.S. based sports apparel manufacturer, sets up a production unit in China to take advantage of the lower labor costs there. This is […]

education plays an important role, from an international business perspective, as a determinant of national competitive advantage. a debt loan requires a corporation to repay a predetermined portion of the loan amount at regular intervals regardless of how much profit […]

A company does not need a large size to facilitate, and benefit from, the globalization of markets. the judges of the european court of justice are required to act as representatives of national interests, rather than as independent officials. Answer: […]

political freedom is one of the measures used by the human development index (hdi) to measure the quality of human life in different nations. heckscher-ohlin theory supports the case for unrestricted free trade between nations. Answer: true the theories of […]

Moral hazard arises when people behave recklessly because they know they will be saved if things go wrong. the social democrats believed that socialism could be achieved only through violent revolution and totalitarian dictatorship. Answer: false the communists believed that […]

there is a tendency for greater retail concentration in developing countries. deming, the proponent of total quality management, suggested that management shouldnt attempt to train employees in new skills. Answer: false deming argued that management has the responsibility to train […]

expatriate failure refers to a manager’s failure to understand host-country cultural norms and values, leading to ineffective work. if a country’s economy is to sustain long-run economic growth, the business environment must be conducive to innovations and entrepreneurial activity. Answer: […]

the values and norms of a culture do not emerge fully formed. new-product development has a high failure rate. Answer: true although a firm that is successful at developing new products may earn enormous returns, new-product development has a high […]

an expatriate manager is a citizen of one country who is working abroad in one of the firms subsidiaries. Royalties represent the remuneration paid to the owners for the use of technology or the right to manufacture and/or sell products […]

democracy is a form of government that prohibits opposing political parties. for privatization to work, it must also be accompanied by a more general deregulation and opening of the economy. Answer: true for privatization to work, it must also be […]

The great virtue claimed for a pegged exchange rate is that it imposes monetary discipline on a country and leads to low inflation. a geocentric approach tends to weaken local responsiveness. Answer: false the multinational composition of the management team […]

if $150,000 face value bonds are issued at 102, the proceeds received will be $102,000. adam smith argued that countries should specialize in the production of goods for which they have an absolute advantage. Answer: true according to smith, countries […]

domestic currency deposits are regulated in most industrialized countries. markets can be segmented in only one way: by socio-cultural factors. Answer: false markets can be segmented in numerous ways: by geography, demography (sex, age, income, race, education level, etc.), sociocultural […]

Doing business in Russia involves risks because the country has shown signs of shifting back toward greater state involvement in economic activity and authoritarian government. the strategy, operations, and organization of a firm must all be consistent with each other […]

poor product quality and low productivity are hidden costs associated with basing production in a foreign location. ethical systems may be defined as a system of shared beliefs and rituals that are concerned with the realm of the sacred. Answer: […]

a subsidy helps domestic producers to compete against foreign imports. cross-licensing agreements can be used to formalize arrangements to swap skills and technology in a strategic alliance. Answer: true both parties to an alliance can agree in advance to swap […]

an installment note calling for equal total payments each period will result in an interest portion that decreases in each successive period. firms pursuing global standardization or transnational strategies tend to prefer joint-venture arrangements over wholly owned subsidiaries. Answer: false […]

a chinese firm borrows 1 million u.s. dollars from an american bank. the cost of this loan will be less if u.s. dollar appreciates against the chinese currency. according to the infant industry argument, many developing countries have a potential […]

bringing managers together in one location for extended periods and rotating them through different jobs in several countries helps the firm build a formal management network. if the straight-line method of amortization is used, the amount of unamortized premium on […]

firms based in less-developed nations tend to build a lot of extra performance attributes into their products. recent years have seen a marked increase in the number of countries that adhere to a radical ideology regarding fdi. Answer: false recent […]

Differences between countries require that an international business vary its practices country by country. just-in-time systems help a firm respond quickly to increases in demand. Answer: false the drawback of a jit system is that it leaves a firm without […]