International Business 8th Edition

1) assembly of electronic components is a relatively labor-intensive process requiring only low-skilled labor, and cost pressures are intense. as a result, final assembly may be carried out in a country such as the united states. Answer: false Answer: false Answer: false 2) critics of globalization suggest that over the last century, the gap between

1) arbitrage opportunities abound in the foreign exchange markets and they tend to be available for long periods of time. Answer: false Answer: false Answer: false 2) when substantial investments in specialized assets are required to manufacture a component, the firm will prefer to contract it out to a supplier. Answer: false Answer: false Answer: false 3) the

1) country factors, technological factors, and product factors, all influence the decision of where to produce. Answer: true Answer: true Answer: true 2) a big impediment to exporting is the simple lack of knowledge of the opportunities available. Answer: true Answer: true Answer: true 3) in theory, wto rules should ensure that a free trade agreement results in

1) most governments are in favor of transfer pricing. Answer: false Answer: false Answer: false 2) companies can strengthen the moral courage of employees by committing themselves to retaliate against employees who exercise moral courage, say no to superiors, or otherwise complain about unethical actions. Answer: false Answer: false Answer: false 3) the four main differences between distribution systems

1) the long-run benefits of doing business in a country are a function of factors such as the size of the market, the present wealth of consumers in that market, and the likely future wealth of customers. Answer: true Answer: true Answer: true 2) once a firm has established a low cost position, it

1) a benefit to companies of economic integration is the opportunity to centralize their production and reduce costs. Answer: true Answer: true Answer: true 2) the financial crisis that started in the united states and swept around the world in 2008 and 2009 could be attributed to the increasing correlation between different stock markets

1) firms pursuing the global strategy and the transnational strategy disperse each value creation activity to its optimal location in the world. Answer: true Answer: true Answer: true 2) systematic risk refers to movements in a stock portfolio's value that are attributable to macroeconomic forces affecting all firms in an economy, rather than factors

1) a company that depends on mass media advertising to communicate its marketing message to potential consumers is using a push strategy. Answer: false Answer: false Answer: false 2) by 2008, the u.s. had seen its share of exports fall to almost half its share in the 1960s. Answer: true Answer: true Answer: true 3) developing countries tend

1) when a country cannot service its foreign debt obligations, a banking crisis has occurred. Answer: false Answer: false Answer: false 2) the make-or-buy decision involves deciding whether a firm should make or buy the component parts that go into the final product. Answer: true Answer: true Answer: true 3) the imf can force countries to adopt the

1) moore's law predicts that the power of microprocessor technology doubles and its cost of production falls by half every 18 months. Answer: true Answer: true Answer: true 2) a source of concern of critics of free trade is that it usually encourages firms from advanced countries to move manufacturing facilities to less developed

1) when a firm focuses on increasing profitability by customizing the product or service so that they provide a good match to tastes and preferences in different national markets, the firm is following a localization strategy. Answer: true Answer: true Answer: true 2) barriers to cross-border capital flows could ultimately tend to produce differences in

1) the naive immoralist claims that a multinational's home country standards of ethics are the appropriate ones for companies to follow in foreign countries. Answer: false Answer: false Answer: false 2) most international businesses require all budgets and performance data within the firm to be expressed in the "corporate currency," which is normally the

1) the ppp theory is a strong predictor of short-run movements in exchange rates covering time spans of five years or less. Answer: false Answer: false Answer: false 2) the eximbank is a part of the wto's efforts to facilitate trade between nations. Answer: false Answer: false Answer: false 3) a firm's strategy can be defined as the

1) historically, most international businesses have been more concerned with management development than with training. Answer: false Answer: false Answer: false 2) limits on imports are often in the interests of domestic consumers, but not domestic producers. Answer: false Answer: false Answer: false 3) some critics argue that outsourcing has caused wage rates of poorer americans to fall

1) if the net present value of the discounted cash flows is slightly less than zero, the firm should go ahead with the project. Answer: false Answer: false Answer: false 2) the letter of credit system effectively transfers the issue of trust to the bank. Answer: true Answer: true Answer: true 3) profit growth is measured by the

1) 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. Answer: true Answer: true Answer: true 2) as compared to exporting and licensing, fdi may be more expensive and risky. Answer: true Answer: true Answer: true 3) lean

1) economic freedom necessarily equates with political freedom. Answer: false Answer: false Answer: false 2) cultural toughness can be assessed by comparing cultures. Answer: true Answer: true Answer: true 3) firms may choose an ethnocentric approach to staffing as opposed to a polycentric approach because of the cost savings it promotes. Answer: false Answer: false Answer: false 4) it is important to

1) the matrix structure is designed to facilitate maximum integration among subunits. Answer: true Answer: true Answer: true 2) a lack of information about the fundamental quality of foreign investments may encourage speculative flows in the global capital market. Answer: true Answer: true Answer: true 3) the entry of large discount superstores such as tesco and carrefour have

1) when the firm simultaneously faces both strong cost pressures and strong pressures for local responsiveness, the ideal strategy to follow is the transnational strategy. Answer: true Answer: true Answer: true 2) as a plant output expands, unit costs decrease. Answer: true Answer: true Answer: true 3) the sullivan principles mandated that gm could operate in south africa

1) a central point in vernon's product life-cycle was that demand for new products tends to be solely based on price factors. Answer: false Answer: false Answer: false 2) beyond the initial functional division of the organization, further horizontal differentiation may be required if the firm significantly diversifies its product offering, which takes the firm

1) unlike their american and japanese counterparts, german firms are at a disadvantage when it comes to assistance in seeking export opportunities. Answer: false Answer: false Answer: false 2) cash balances are typically deposited in liquid accounts. Answer: true Answer: true Answer: true 3) the andean pact is a highly successful common market modeled after the eu. Answer: false Answer:

1) dunning, in the eclectic paradigm theory, suggests that a firm must establish production facilities where foreign assets or resource endowments necessary to the production of the product exist. Answer: true Answer: true Answer: true 2) the global financial crisis of 2008 and 2009 focused attention on the need for new regulations to govern

1) it is easier to establish free trade among a limited number of adjacent countries than it is among the world community. Answer: true Answer: true Answer: true 2) deregulation involves removing legal restrictions to the free play of markets, the establishment of private enterprises, and the manner in which private enterprises operate. Answer: true Answer:

1) the single european act committed eu countries to adopting a common currency by january 1, 1999 . Answer: false Answer: false Answer: false 2) the european union is an example of a perfect economic union. Answer: false Answer: false Answer: false 3) today, global changes in the political economy are characterized by free markets and democracy, with

1) rights theories recognize that human beings have fundamental rights and privileges that transcend national boundaries and cultures. Answer: true Answer: true Answer: true 2) licensing increases a firm's ability to realize experience curve and location economies by producing its product in a centralized location. Answer: false Answer: false Answer: false 3) porter suggests that different nations are

1) according to rawls, inequalities can be just if the system that produces inequalities is to the advantage of everyone. Answer: true Answer: true Answer: true 2) the shift toward a more integrated and interdependent world economy is referred to as globalization. Answer: true Answer: true Answer: true 3) gatt has not recognized the infant industry argument as

1) nearly all developing nations have substantial regulations governing the emission of pollutants, the dumping of toxic chemicals, the use of toxic materials in the workplace, and so on. Answer: false Answer: false Answer: false 2) market makers are the financial service companies that connect investors and borrowers, either directly or indirectly. Answer: true Answer: true Answer:

1) switch trading is the direct exchange of goods and/or services between parties without a cash transaction. Answer: false Answer: false Answer: false 2) countries with fragmented retail systems tend to have long channels of distribution. Answer: true Answer: true Answer: true 3) adverse exchange rate movements can transform otherwise profitable investments into unprofitable investments. Answer: true Answer: true Answer: true 4)

1) from a profit perspective, it makes sense for a firm to disperse its productive activities to those countries where, according to the theory of international trade, they can be performed most efficiently. Answer: true Answer: true Answer: true 2) the most attractive staffing policy is the ethnocentric approach. Answer: false Answer: false Answer: false 3) the balance

1) the so-called group of five major industrial countries includes great britain, the united states, japan, switzerland, and germany. Answer: false Answer: false Answer: false 2) a firm can lower costs by dispersing production to locations around the globe where each activity can be performed most efficiently. Answer: true Answer: true Answer: true 3) to conform to local

1) one criticism of the imf's policy prescriptions is that its "one-size-fits-all" approach to microeconomic policy is inappropriate for many countries. Answer: false Answer: false Answer: false 2) the sight draft specifies that the bank will pay a specified sum of money to the exporter upon the presentation of specified documents. Answer: false Answer: false Answer: false 3)

1) 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. Answer: true Answer: true Answer: true 2) a class system is a rigid form of social stratification in which the position a person has by birth cannot be

1) governments do not always act in the national interest when they intervene in the economy; politically important interest groups often influence them. Answer: true Answer: true Answer: true 2) the foreign exchange market is a market for converting the currency of one country into that of another country. Answer: true Answer: true Answer: true 3) historically, upward

1) small-scale entry allows a firm to learn about a foreign market while limiting the firm's exposure to that market. Answer: true Answer: true Answer: true 2) host country citizens that are employed by an mne following an fdi are an example of an indirect effect of fdi. Answer: false Answer: false Answer: false 3) the systematic risk is

1) money market accounts typically offer a relatively high rate of interest. Answer: false Answer: false Answer: false 2) outsourcing decisions pose plenty of problems for international businesses but even more problems for purely domestic businesses. Answer: false Answer: false Answer: false 3) the most rigid system of stratification is a class system. Answer: false Answer: false Answer: false 4) commercial banks

1) by diversifying a portfolio internationally, an investor's level of risk is increased even further because the movements of stock market prices across countries are not perfectly correlated. Answer: false Answer: false Answer: false 2) when a company emphasizes personal selling, the company is probably using a push strategy. Answer: true Answer: true Answer: true 3) it typically is

1) mnes can hedge against currency fluctuations by dispersing production to different locations around the globe. Answer: true Answer: true Answer: true 2) it is more important to have a common culture in firms employing a localization strategy than a transnational strategy. Answer: false Answer: false Answer: false 3) the iasb has developed accounting standards for firms seeking

1) there are two main trading blocs in europe, the european union and the european free trade association. Answer: true Answer: true Answer: true 2) the world bank's initial mission was to lend money to third world nations. Answer: false Answer: false Answer: false 3) building an organization culture that places a high value on ethical behavior requires

1) a firm's organizational culture refers to the values and norms that are shared among employees of an organization. Answer: true Answer: true Answer: true 2) according to lessard and lorange, the three exchange rates that can be used to translate foreign currencies into the corporate currency are the historical rate, the spot rate,

1) people who take food or safety for granted tend to be xenophobic, are wary of political activity, have authoritarian tendencies, and believe that men make better political leaders than women. Answer: false Answer: false Answer: false 2) the rate of new-product development seems to be lesser in countries where more money is spent

1) 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 Answer: false Answer: false 2) it is possible that a multinational's balance sheet may not balance when it uses the temporal method to translate the accounts of

1) firms use countertrade to trade goods and services for other goods and services when they cannot be traded for money. Answer: true Answer: true Answer: true 2) there is a strong relationship between economic freedom and economic growth. Answer: true Answer: true Answer: true 3) problems of limited liquidity are strictly restricted to less developed nations, which

1) according to statement 52, "foreign currency translation," the functional currency of an integral subsidiary is to be the home currency. Answer: false Answer: false Answer: false 2) regardless of a firm's domestic structure, its international division tends to be organized on economy. Answer: false Answer: false Answer: false 3) proactive firms do not consider exporting until their

1) a push strategy is generally favored by consumer goods firms that are trying to sell to a large segment of the market. Answer: false Answer: false Answer: false 2) the international trade secretariats have had tremendous success. Answer: false Answer: false Answer: false 3) an export management company is an export specialist who acts as the export marketing

1) specific tariffs are levied as a proportion of the value of the imported good. Answer: false Answer: false Answer: false 2) the purpose of consolidated financial statements is to provide accounting information about a group of companies that recognize their economic interdependence. Answer: true Answer: true Answer: true 3) the bonus a manager might receive if her subsidiary

1) transfer pricing is consistent with a policy of treating each subsidiary in the firm as a profit center. Answer: false Answer: false Answer: false 2) since 1973, exchange rates have been relatively stable thanks to the floating exchange rate system currently in place. Answer: false Answer: false Answer: false 3) under a jit system, products are briefly

1) transnational investment occurs when a firm based in one country enters another country's capital market to raise capital from the sale of stocks or bonds. Answer: false Answer: false Answer: false 2) when a gain by one country results in a loss by another, there is a positive-sum game. Answer: false Answer: false Answer: false 3) in

1) in the period 1950-1990, the world gdp showed a consistent decline as opposed to the volume of exports. Answer: true Answer: true Answer: true 2) mercantilism advocated that countries should encourage exports and imports. Answer: false Answer: false Answer: false 3) historically, most fdi has been directed at the developed nations of the world as firms based

1) the free trade area of the americas that was established in 2005 has thus far proven to be a success. Answer: false Answer: false Answer: false 2) great britain, germany, and france have led the push toward a euro zone in the eu. Answer: false Answer: false Answer: false 3) in a turnkey project, the contractor agrees to

1) myanmar has one of the worst human rights records in the world. Answer: true Answer: true Answer: true 2) in general, economic studies suggest that countries that adopt a more open stance toward international trade enjoy higher growth rates than those who keep their economies closed to trade. Answer: true Answer: true Answer: true 3) under a

1) raymond vernon suggested that the wealth and size of the u.s. market gave u.s. firms a strong incentive to develop new consumer products. Answer: true Answer: true Answer: true 2) without consolidated financial statements, a multinational firm could conceal losses in an unconsolidated subsidiary. Answer: true Answer: true Answer: true 3) according to some analysts, deregulation and

1) in a common law system, judges have the power to interpret the law. Answer: true Answer: true Answer: true 2) the heckscher-ohlin theory argues that free trade is not beneficial to most nations. Answer: false Answer: false Answer: false 3) while popular in its time, ricardo's theory is no longer a major intellectual weapon for those who argue

1) jobs created in local suppliers as a result of the mne's investment and jobs created because of increased local spending by employees of the mne are examples of direct employment effects of fdi. Answer: false Answer: false Answer: false 2) pricing decisions around the world must be delegated to the managers of various

1) entering a foreign market on a large scale provides the opportunity to learn about the foreign country. Answer: false Answer: false Answer: false 2) international businesses avoid or defer income taxes by establishing a wholly owned, nonoperating subsidiary in the tax haven. Answer: true Answer: true Answer: true 3) differences in the spot exchange rate and the 30-day

1) according to recent studies, different national stock markets appear to be only moderately correlated. Answer: true Answer: true Answer: true 2) the term "offshore production" refers to fdi undertaken to serve the home market. Answer: true Answer: true Answer: true 3) error! hyperlink reference not valid.error! hyperlink reference not valid.s, there is low pressure for local responsiveness. Answer:

1) the united nations cigs establishes a uniform set of rules governing certain aspects of the making and performance of everyday commercial contracts between sellers and buyers who have their places of business in different nations. Answer: true Answer: true Answer: true 2) commercial banks bring investors and borrowers together but do not charge

1) the world bank is responsible for maintaining order in the international monetary system. Answer: false Answer: false Answer: false 2) empirical studies show that there is a long-run relationship between a country's relative inflation rates and changes in exchange rates. Answer: true Answer: true Answer: true 3) if the spot exchange rate is 1 = $1.50 when

1) the tragedy of the commons occurs when a resource held in common by all, but owned by no one, is overused by individuals, resulting in its degradation. Answer: true Answer: true Answer: true 2) a country's balance of payments accounts keep track of both its payments to and its receipts from other countries. Answer:

1) in the eu, many firms have historically been limited by a low cost structure in their ability to compete globally with north american and asian firms. Answer: false Answer: false Answer: false 2) the maastricht treaty entails that the ecb take orders from politicians. Answer: false Answer: false Answer: false 3) in a planned economy, the state

1) during the past decade, countries with high individualism and low confucian dynamics such as the united states have attained high growth rates. Answer: true Answer: true Answer: true 2) culture is static. Answer: false Answer: false Answer: false 3) countertrade contracts may involve the exchange of poor-quality goods that the firm cannot dispose of profitably. Answer: true Answer: true Answer:

1) when a tourist changes one currency into another, the tourist is participating in the foreign exchange market. Answer: true Answer: true Answer: true 2) firms pursuing a global standardization strategy are more centralized than enterprises pursuing a localization or international strategy. Answer: true Answer: true Answer: true 3) high levels of corruption significantly reduce the foreign direct investment,

1) american exporters can minimize their risk by purchasing insurance from the foreign credit insurance association. Answer: true Answer: true Answer: true 2) ricardo noted the importance of country factors such as domestic demand and domestic rivalry in explaining a nation's dominance in the production and export of particular products. Answer: false Answer: false Answer: false 3) the

1) countries cannot prohibit national firms from investing in certain countries for political reasons. Answer: false Answer: false Answer: false 2) the failure rate for international strategic alliances is very low. Answer: false Answer: false Answer: false 3) the value of a currency is determined by the interaction between the demand and the supply of that currency relative

1) if $1 bought more yen with a spot exchange than with a 30-day forward exchange it indicates the dollar is expected to depreciate against the yen in the next 30 days. when this occurs, we say the dollar is selling at a premium on the 30-day forward market. Answer: false Answer:

1) emcs are experienced specialists who can help the neophyte exporter avoid common pitfalls. Answer: true Answer: true Answer: true 2) transaction exposure is the extent to which the income from individual transactions is affected by fluctuations in foreign exchange values. Answer: true Answer: true Answer: true 3) according to supporters of free trade, as countries get richer they

1) regulated domestic currency deposits ensure that banks have enough liquid funds to satisfy demand if large numbers of domestic depositors should suddenly decide to withdraw their money. Answer: true Answer: true Answer: true 2) the iasb has enough regulatory muscle to enforce its standards. Answer: false Answer: false Answer: false 3) international transactions are usually settled using

1) the governments of the argentina and brazil in 1988 agreed to enter into a free trade agreement, the goal of which was to eliminate all tariffs on bilateral trade between these countries by 1998 . Answer: false Answer: false Answer: false 2) proponents of nafta have argued that the free trade area should be

1) a global standardization strategy is appropriate when a firm is facing low pressures for cost reduction but high pressure for local responsiveness. Answer: false Answer: false Answer: false 2) cash needs are assumed to be normally distributed in each country and independent of each other. Answer: true Answer: true Answer: true 3) an expatriate manager is a

1) an oligopoly is an industry composed of a limited number of large firms. Answer: true Answer: true Answer: true 2) a decentralized organization allows managers to respond to environmental changes more quickly than in a centralized organization. Answer: true Answer: true Answer: true 3) high relative price inflation, a widening current account deficit, excessive expansion of domestic

1) licensing is a good option for firms in high-tech industries where protecting firm-specific expertise is of paramount importance. Answer: false Answer: false Answer: false 2) if the free market reforms in china continue for two more decades, china may move from third world status to industrial superpower status even more rapidly than japan

1) historically, the product life-cycle theory seems to be an inaccurate explanation of international trade patterns. Answer: false Answer: false Answer: false 2) licensing gives a firm tight control over manufacturing, marketing, and strategy in a foreign country that may be required to maximize its profitability. Answer: false Answer: false Answer: false 3) profitability can be defined as

1) concentrating production at an optimal location is more attractive when a product serves universal needs. Answer: true Answer: true Answer: true 2) as an investor increases the number of stocks in her portfolio, the portfolio's risk increases. Answer: false Answer: false Answer: false 3) there is now a trend toward greater decentralized control. Answer: false Answer: false Answer: false 4) universal

1) one of the sources of economies of scale is the ability to spread fixed costs over a large volume. Answer: true Answer: true Answer: true 2) a common market has no barriers to trade between member countries, includes a common external trade policy, and allows factors of production to move freely between members. Answer:

1) to survive, a firm must strive to achieve a fit between its environment, its strategy, and its organizational architecture. Answer: true Answer: true Answer: true 2) a foreign service premium is offered as an inducement to accept foreign postings. Answer: true Answer: true Answer: true 3) a shotgun approach to exporting will almost always result in that

1) when an investor purchases a corporate stock, he purchases the right to receive a specified fixed stream of income from the corporation for a specified number of years. Answer: false Answer: false Answer: false 2) if a country is characterized as having a single homogenous culture, then its national culture also is homogenous

1) political risk assessment is more art than science. Answer: true Answer: true Answer: true 2) during the period 1990 - 2000, the volume of total exports was more than twice the world gdp. Answer: true Answer: true Answer: true 3) a key disadvantage of the worldwide area structure is that it limits local responsiveness. Answer: false Answer: false Answer: false 4)

1) a consolidated financial statement combines the separate financial statements of two or more companies to yield a single set of financial statements as if the individual companies were really one. Answer: true Answer: true Answer: true 2) by centralizing decision making, a firm can avoid the duplication of activities that occurs when similar

1) smith's theory of international trade suggests that when one country has an absolute advantage in the production of all goods, the country might not derive any benefit from international trade. Answer: true Answer: true Answer: true 2) a geocentric staffing policy seeks the best people for key jobs throughout the organization, regardless of

1) fees are usually levied as a percentage of a subsidiary's gross revenues. Answer: false Answer: false Answer: false 2) according to the un, a typical international trade transaction can involve 50 different parties. Answer: false Answer: false Answer: false 3) unless there is no alternative, large, diverse multinational enterprises should probably try to avoid countertrade deals. Answer: false Answer: false Answer:

1) skills in an mne are always generated at the headquarters location and are then dispersed to the rest of the organization. Answer: false Answer: false Answer: false 2) the fisher effect states that a country's real interest rate is the sum of the nominal interest rate and the expected rate of inflation over

1) one of the problems of licensing is that it may result in a firm's giving away valuable technological know-how to a potential foreign competitor. Answer: true Answer: true Answer: true 2) the mission of the eximbank is to provide financing aid that will facilitate exports, imports, and the exchange of commodities between the

1) with regard to political factors, a company may have to pay off politically powerful entities in a country before the government allows it to do business there. Answer: true Answer: true Answer: true 2) debt continues to be a major burden for poorer nations as they strive to get ahead. Answer: true Answer: true Answer: true 3)

1) adam smith's basic argument is that a country should produce goods at home even if it can buy at a lower cost from other countries. Answer: false Answer: false Answer: false 2) a firm may be prevented from using standardized advertising because of advertising regulations. Answer: true Answer: true Answer: true 3) if a firm that makes