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Chapter 01 – Globalization 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. Explain the major arguments in the debate over the impact of […]

CRITICAL THINKING AND DISCUSSION QUESTIONS QUESTION 1: Describe the shifts in the world economy over the last 30 years. What are the implications of these shifts for international businesses based in Great Britain? North America? Hong Kong? ANSWER 1: Over […]

Chapter 10 – The Foreign Exchange Market The Foreign Exchange Market Learning objectives Describe the functions of the foreign exchange market. Understand what is meant by spot exchange rates. Recognize the role that foreign exchange rates play in insuring against […]

OPENING CASE: Subaru’s Sales Boom Thanks to the Weaker Yen The opening case explores the implications of changing currency values on the U.S. sales of Japanese automaker Subaru. Prior to 2012, the yen was relatively strong against the U.S. dollar. […]

Chapter 11 – The International Monetary System The International Monetary System 11-1 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 11 Chapter 11 – The International Monetary System […]

OPENING CASE: The IMF and Ukraine’s Economic Crisis The opening case explores the economic impact of political unrest in Ukraine and the IMF’s role in restoring stability. In 2013, Ukraine president Viktor Yanukovych pulled the country out of a trade […]

Chapter 12 – The Global Capital Market The Global Capital Learning objectives Describe the benefits of the global capital market. Identify why the global capital market has grown so rapidly. Understand the risks associated with the globalization of capital markets. […]

OPENING CASE: Alibaba’s Record-Setting IPO Summary The opening case explores the $231 billion initial public offering of Chinese e-commerce company Alibaba. Initially, Alibaba considered making an IPO in Hong Kong, but concerns over a rule that would cause founder Jack […]

The Strategy of International Business Learning objectives Explain the concept of strategy. Recognize how firms can profit by expanding globally. Understand how pressures for cost reductions and pressures for local responsiveness influence strategic choice. Identify the different strategies for competing […]

OPENING CASE: IKEA’s Global Strategy Summary The opening case describes IKEA’s global strategy and the way the company tailors its offerings to meet customer demands. When IKEA first expanded to the United States in the 1980s, it saw disappointing sales […]

Chapter 14 – The Organization of International Business 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. Explain how organization can be […]

OPENING CASE: P&G—Strength in Architecture Summary The opening case explores the extensive reorganization undertaken in 2014 by Proctor & Gamble, the U.S. household products conglomerate. P&G is one of the world’s largest companies, with customers in more than 180 countries […]

Chapter 15 – Entry Strategy and Strategic Alliances Entry Strategy and Strategic Alliances Learning objectives Explain the three basic decisions that firms contemplating foreign expansion must make: which markets to enter, when to enter those markets, and on what scale. […]

OPENING CASE: Starbucks’ Foreign Entry Strategy Summary The opening case describes the strategy used by Starbucks to expand into markets throughout Europe and Asia. Founded in 1971, Starbucks is based in Seattle. The company began its aggressive international expansion in […]

IKEA in 2013: Furniture Retailer to the World 1. By the early 1970s IKEA had established itself as the largest furniture retailer in Sweden. What was the source of its competitive advantage at that time? Answer: Many students will probably […]

Chapter 16 – Exporting, Importing, and Countertrade Exporting, Importing and Countertrade Learning objectives Explain the promises and risks associated with exporting. Identify the steps managers can take to improve their firm’s export performance. Identify information sources and government programs that […]

OPENING CASE: Exporting Desserts Summary The opening case explores the international expansion of LuLu’s Desserts, a company based in Torrance, California, that manufactures and distributes ready-to-eat flavored gelatin desserts inspired by its owner’s Mexican heritage. After a decade of building […]

Chapter 17 – Global Production and Supply Chain Management Global Production and Supply Chain Management Learning objectives Explain why production and logistics decisions are of central importance to many multinational businesses. Explain how country differences, production technology, and product features […]

OPENING CASE: Apple: The Best Supply Chains in the World? Summary The opening case explores the supply chain management techniques used by information technology company Apple. Apple is considered to have one of the world’s largest and most efficient supply […]

Chapter 18 – Global Marketing and R&D Global Marketing and R&D Learning objectives Explain why it makes sense to vary the attributes of a product from country to country. Recognize why and how a firm’s distribution strategy might vary among […]

OPENING CASE: Global Branding of Avengers and Iron Man Summary The opening case explores how Marvel movie studios capitalized on the popularity of lead character Tony Stark (and the actor that plays him) in branding its Avengers and Iron Man […]

Chapter 19 – Global Human Resource Management Global Human Resource Management Learning objectives Summarize the strategic role of human resource management in the international business. Identify the pros and cons of different approaches to staffing policy in the international business. […]

OPENING CASE: A Global Team at Mary Kay Inc. Summary QUESTION 1: How are Mary Kay’s marketing and human resources strategies related? ANSWER 1: Mary Kay uses a direct-sales approach to marketing, relying upon the interpersonal QUESTION 2: In what […]

Chapter 02 – National Differences in Political, Economic, and Legal Systems National Differences in Political, Economic, and Legal Systems Learning objectives Understand how the political systems of countries differ. Understand how the economic systems of countries differ. Understand how the […]

CRITICAL THINKING AND DISCUSSION QUESTIONS QUESTION 1: Free market economies stimulate greater economic growth, whereas state-directed economies stifle growth. Discuss. ANSWER 1: In a market economy, private individuals and corporations are allowed to own property and other assets. This right […]

Chapter 20 – Accounting and Finance in the International Business 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. Explain how accounting systems […]

OPENING CASE: Skype Now a Division of Microsoft Summary The opening case describes Microsoft’s acquisition of Internet communications company Skype in an all-cash deal worth $8.5 billion. The company financed the deal using cash stored overseas in countries with low […]

Chapter 03 – National Differences in Economic Development National Differences in Economic Development Learning objectives Explain what determines the level of economic development of a nation. Identify the macropolitical and macroeconomic changes occurring worldwide. Describe how transition economies are moving […]

OPENING CASE: Democracy and Economic Development in Sub-Saharan Africa Summary The opening case explores the transformation of sub-Saharan Africa from a region plagued by corrupt military dictatorships to one in which democracy, civil rights, and a diverse market-based economy are […]

Chapter 04 – Differences in Culture 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 implications of differences in […]

Chapter 04 – Differences in Culture CRITICAL THINKING AND DISCUSSION QUESTIONS QUESTION 1: Outline why the culture of a country might influence the costs of doing business in that country. Illustrate your answer with examples. ANSWER 1: This question has […]

Chapter 05 – Ethical Issues in International Business Ethical Issues in International Business Learning objectives Understand the ethical issues faced by international businesses. Recognize an ethical dilemma. Identify the causes of unethical behavior by managers. Describe the different philosophical approaches […]

OPENING CASE: Making Toys Globally Summary The opening case explores the prevalence of lead and other poisonous heavy metals in children’s toys, particularly those made in China. Although the use of lead in house paint, toys, and cookware was banned […]

Disaster in Bangladesh: The Collapse of the Rana Plaza Building 1. From an economic perspective, was the shift to a free trade regime in the textile industry good for Bangladesh? Answer: Until 2005, Bangladesh’s opportunities in the developed nations were […]

Chapter 06 – International Trade Theory International Trade Theory Learning objectives Understand why nations trade with each other. Summarize the different theories explaining trade flows between nations. Recognize why many economists believe that unrestricted free trade between nations will raise […]

OPENING CASE: China and Australia Enter into a Free Trade Agreement The opening case explores a new free trade agreement between China and Australia. China is Australia’s biggest trading partner, and the agreement is expected to offset declines in Chinese […]

Chapter 07 – Government Policy and International Trade Government Policy and International Trade Learning objectives Identify the policy instruments used by governments to influence international trade flows. Understand why governments sometimes intervene in international trade. Summarize and explain the arguments […]

OPENING CASE: U.S. Tariffs on Chinese Solar Panels Benefit Malaysia The opening case explores the decision by the United States and the European Union to levy tariffs on solar panels imported from China. The decision stemmed from the fact that […]

Chapter 08 – Foreign Direct Investment Foreign Direct Investment Learning objectives Recognize current trends regarding foreign direct investment (FDI) in the world economy. Explain the different theories of FDI. Understand how political ideology shapes a government’s attitudes towards FDI. Describe […]

OPENING CASE: Volkswagen in Russia The opening case considers Volkswagen’s decision to invest over $1 billion in Russia beginning in 2007. The decision was motivated by surging demand in Russia and Volkswagen’s desire to avoid Russian import tariffs. In 2014, […]

Chapter 09 – Regional Economic Integration Regional Economic Integration Learning objectives Describe the different levels of regional economic integration. Understand the economic and political arguments for regional economic integration. Understand the economic and political arguments against regional economic integration. Explain […]

End of Part Case Notes Part Three Legal Outsourcing 1. What are the benefits to a law firm of outsourcing of legal services to a foreign country? What are the potential costs and risks? 2. What kind of legal services […]

OPENING CASE: Regional Trade Pacts Give the Mexican Auto Industry an Edge Summary The opening case describes the growth of the Mexican auto industry due to a wave of foreign direct investment spurred by regional trade agreements. Beginning with the […]

Which of the following statements is true of Web-based EDI systems? A. Cloud-based EDI systems are more expensive than proprietary solutions. B. Small firms will not be able to make use of cloud-based EDI systems. C. Cloud-based systems are much […]

The infant industry argument is the latest argument for government intervention in trade. As competition intensifies, global standardization strategies and transnational strategies tend to become less viable, and managers need to orientate their companies toward either an international strategy or […]

Which of the following is true of criminal liability laws? A. Calls for the payment of monetary damages B. They are more extensive in Western Europe than in any other region of the world C. Results in fines or imprisonment […]

The United Nations Universal Declaration of Human Rights, related to employment, upholds which of the following? A. The requirement for the formation of trade unions. B. A sliding pay scale based upon need. C. Prohibition of trade unions. D. Protection […]

Cross-licensing agreements are increasingly common in the _____ industries. A. transportation B. high-technology C. construction D. consumer durables Which of the following would a follower of the inefficient market school of thought agree with? A. Companies would be better off […]

“Beggar thy neighbor” retaliatory trade policies involved countries progressively lowering trade barriers against each other, which contributed to the Great Depression of the 1930s. Establishment of the euro created the largest currency zone in the world, replacing the position the […]

The Smoot-Hawley Act aimed at: A. diverting consumer demand toward foreign products. B. promoting unrestricted free trade. C. limiting global warming. D. avoiding rising unemployment. A(n) _____ distribution channel is one that is difficult for outsiders to access. A. selective […]

Which of the following is the reason why most economists prefer Heckscher-Ohlin theory to Ricardo’s theory? A. Heckscher-Ohlin stresses on the differences in productivity between nations. B. Ricardo’s theory considers factor endowments to describe national competitiveness. C. Heckscher-Ohlin theory makes […]

Money management decisions attempt to manage a firm’s _____. A. equity capital B. fixed costs C. working capital D. equipment costs Which of the following, in a business setting, is taken to mean benevolent behavior that is the responsibility of […]

What is the concept that is concerned with the long-run effect of changes in exchange rates on future prices, sales, and costs? A. Translation exposure B. Economic exposure C. Transaction exposure D. Risk exposure When an investor purchases a corporate […]

_____ have/has the most to gain from reductions in agricultural tariffs and subsidies that are a part of the Doha agenda. A. The world’s developed nations B. The world’s poorer nations C. European nations D. The United States Which of […]

Which of the following factors is likely to make a country a more attractive location for international business? A. Totalitarian regimes B. Planned economies C. Government ownership of production methods D. Market-based economic policies If a marketer asks “Is the […]

The extent to which the place of manufacturing influences product evaluations is known as _____. A. source effects B. country of origin effects C. noise effects D. location effects It has been observed that a product’s production costs decline by […]

A company does not need a large size to facilitate, and benefit from, the globalization of markets. Privatization refers to the process of hiring private management consultancy firms to manage state-owned enterprises. FALSE Privatization refers to the process of selling […]

Lack of knowledge is one of the biggest impediments to a company becoming a successful exporter. The most global markets currently are markets for consumer products. FALSE The most global markets currently are not markets for consumer products—where national differences […]

The major cost saving associated with JIT systems comes from: A. early delivery of raw materials to production. B. decentralization of manufacturing. C. speeding up inventory turnover. D. reduced spending on CRM activities. Which of the following occurs when traders […]

The marketing mix is comprised of product attributes, distribution strategy, communication strategy, and pricing strategy. The quality of investments declined significantly in the Asian countries during the 1990s. TRUE Volume of investments increased in the Asian countries during the 1990s. […]

Many firms, of all national origins, increasingly depend on _____ for their competitive advantage. A. globally dispersed production systems B. specific tariffs C. infant industries D. subsidies The need for coordination between subunits is highest in firms pursuing a(n) _____. […]

A manager receives a bonus because the national operating subsidiary, that she is in charge of, exceeds its performance target. This is an example of an incentive. A key benefit resulting from the adoption of the euro is the ability […]

Many totalitarian regimes were able to deliver economic progress to the vast bulk of their populations, which curbed the spread of democracy during the late 1980s. A central reason for the establishment of the EU was the devastation of Western […]

The purchasing power parity (PPP) theory tells us that a country with a high inflation rate will: A. export more goods to other countries. B. see depreciation in its currency exchange rate. C. import more goods from other countries. D. […]

Arbitrage opportunities abound in the foreign exchange markets and they tend to be available for long periods of time. The attractiveness of a country as a potential market for an international business depends on balancing the benefits, costs, and risks […]

When the foreign exchange market determines the relative value of a currency, we say that the country is adhering to a _____ regime. A. currency board exchange B. pegged exchange rate C. fixed exchange rate D. floating exchange rate According […]

A currency swap deal enables companies to insure themselves against foreign exchange risk. The international monetary system refers to the institutional arrangements that govern exchange rates. TRUE The international monetary system refers to the institutional arrangements that govern exchange rates. […]

Which of the following is true of acquisitions? A. It is a time-consuming process and takes a lot of time to execute. B. They are less risky than greenfield ventures in the sense that there is less potential for unpleasant […]

The norms and values systems that are shared among the employees of a company are referred to as _____. A. processes B. control systems C. incentives D. organizational culture The state can expropriate the profits from innovation through legal means, […]

In the 1990s, most of the borrowing by the companies who invested in Asian countries had been in local currencies. A firm’s ability to establish a centralized depository that can serve short-term cash needs might be limited by government-imposed restrictions […]

In the United States, the only firms allowed to import cheese are certain trading companies, each of which is allocated the right to import a maximum number of pounds of cheese each year. This is an example of _____. A. […]

Historically, financial reports prepared by firms in Germany: A. reveal less information than reports of British or U.S. firms. B. contain detailed information required by individual investors. C. overvalued assets and undervalued liabilities. D. made more public disclosures compared to […]

Which of the following is a major limitation of the simple Ricardian model of comparative advantage? A. The model ignores the principle of diminishing marginal returns. B. The model recommends excessive governmental intervention in trade. C. The outcome of the […]

Decentralization of production is appropriate when: A. the product’s value-to-weight ratio is high. B. location externalities are important. C. the product serves universal needs. D. volatility in important exchange rates is expected. Mercosur originated as a(n) _____ between Brazil and […]

The Asian economic crisis and the global financial of 2008-2009 crisis were caused by _____. A. high inflation rates B. excessive debt C. low inflation rates D. a huge trade surplus A country is said to be in balance-of-trade equilibrium […]

Why did many Japanese firms invest in North America and Europe in the 1970s? A. To avoid a highly competitive domestic market. B. To exploit high domestic tariff barriers. C. To create a hedge against unfavorable currency movements. D. To […]

Under a pegged exchange rate regime, a country: A. commits itself to converting its domestic currency on demand into another currency at a fixed exchange rate. B. will peg the value of its currency to that of a major currency. […]

Which of the following statements is true? A. Firms in consumer goods industries that are trying to sell to a large segment of the market generally favor a push strategy. B. Mass communication has cost advantages for firms in consumer […]

Moral hazard arises when people behave recklessly because they know they will be saved if things go wrong. Corporations can contribute to the global tragedy of the commons by not pumping pollutants into the atmosphere or dumping them in oceans […]

Just-in-time inventory systems: A. are used when procurement is not organized. B. require large warehouses for storage. C. economize on inventory holding costs. D. maintain large buffer for inventory. _____ are reported on a real time basis on many financial […]

Financial management in an international business includes three sets of related decisions. Which of these involves making decisions about what activities to finance? A. Investment decisions B. Money management decisions C. Multilateral decisions D. Financing decisions A country is said […]

According to _____, suffering originates in people’s desires for pleasure. A. Hinduism B. Protestantism C. Buddhism D. Judaism Which of the following is one of the reasons why acquisitions fail? A. There is a clash between the cultures of the […]

Source effects occur when the receiver of the message evaluates the message based on the status or image of the sender. Most modern democratic states practice representative democracy. TRUE In complex, advanced societies with populations in the tens or hundreds […]

_____ covers a range of manufacturing technologies designed to reduce setup times for complex equipment. A. ISO 9000 B. TQM C. Lean production D. JIT Which of the following is a major drawback of using Knickerbocker’s theory in explaining FDI? […]

Regardless of a firm’s domestic structure, its international division tends to be organized on _____. A. product B. geography C. people D. economy Dumping occurs whenever a firm sells a product: A. for a price that is less than the […]

Peoples’ right to protest on issues of accountability in public expenditure would be possible in a _____ political set-up. A. dictatorial B. democratic C. totalitarian D. fascist In a representative democracy, citizens periodically elect individuals to represent them. These elected […]

What is the primary advantage of licensing? A. It helps a firm avoid the development costs associated with opening a foreign market. B. It gives a firm the tight control over manufacturing, marketing, and strategy. C. It helps a firm […]

Firms pursuing a(n) _____ have a low need for coordination between subunits. A. global standardization strategy B. localization strategy C. transnational strategy D. international strategy The _____ occurs when a resource held in common by all, but owned by no […]