46) CADE Enterprises, a U.S. manufacturer, received assistance from the Overseas Private
Investment Corporation when it expanded operations into Saudi Arabia. Which of the following
types of support did CADE most likely receive from OPIC?
A) financial capital
B) cultural training
C) legal guidance
D) political risk insurance
47) A solid grasp of local values, customs, and traditions can help reduce a company’s exposure
to political risk.
48) Expropriation involves the forced transfer of assets from a company to the government with
compensation.
49) Among asset seizure approaches, expropriation is more common than confiscation and
nationalization.
50) Lobbying is the policy of hiring people to represent a company’s views on political matters.
51) Civil conflict, tax discrimination, weak legal systems, and terrorist actions are political risks
faced by MNEs operating in foreign countries.
52) Expropriation is said to have occurred when a foreign national company dispossesses a
home-country company through uncompetitive practices.
53) If a foreign company is taken over by the host-country government and some form of
compensation is paid, confiscation is said to have occurred.
54) A government can limit the economic activities of a foreign firm that resists its effort to
introduce home-country nationals into the company.
55) Foreign properties expropriated by a government cannot be reclaimed.
56) The immediate cause of country risk is a legal or political factor.
57) Nationalization describes government seizure of an entire industry, with or without
compensation.
58) Explain the three types of property seizure. Why might property seizure be a risk for a
business operating in a totalitarian nation?
59) Local content regulations are primarily intended to ________.
A) address cultural differences between local employees and expatriates
B) encourage MNEs to increase production activities in a country
C) address contract negotiation difficulties
D) assess local tax rates on MNEs
60) SJC Enterprises, a global firm, operates a facility in Angola. Managers want to reduce the
firm’s vulnerability to political risk in Angola. All of the following actions would most likely
accomplish this task except ________.
A) reducing net investment in the subsidiary
B) purchasing capital equipment outright
C) buying inputs from local suppliers
D) being a good corporate citizen
61) ________ refers to governmental action to dispossess a company or investor.
A) Equity dilution
B) Deracination
C) Expropriation
D) Earnings stripping
62) ________ occurs if ownership of a property or assets of a company is transferred to the host
government.
A) Internalization
B) Nationalization
C) Deportation
D) Deracination
63) Country risk is considered similar to ________.
A) political risk
B) commercial risk
C) currency risk
D) cross-cultural risk
64) Rockwall Enterprises is planning to expand the firm by establishing operations outside of the
U.S. In which of the following countries would Rockwall most likely be able to establish
operations most quickly?
A) Bangladesh
B) Zimbabwe
C) Uganda
D) Australia
65) Which of the following statements is true about the political risks in a global marketing
environment?
A) The political risk of low-income countries is lesser than high-income countries.
B) The more a country is developed, the greater is the political risk.
C) Political risk is a major deterrent for companies that want to invest abroad.
D) A country with high political risks attracts more investors.
66) An individual from a country with a high degree of political risk would most likely be from
________.
A) Canada
B) Singapore
C) Syria
D) Japan
67) An individual from a country with a low degree of political risk would most likely be from
________.
A) Venezuela
B) Switzerland
C) Zimbabwe
D) Iraq
68) Guanxi, in the Chinese business context, means ________.
A) bribing government officials
B) manufacturing inexpensive products
C) personal relationships
D) preference for communism
69) Russia is in transition from ________.
A) a capitalist economy to a mixed economy
B) a centrally planned economy to a free-market economy
C) a market economy to a centrally planned economy
D) a mixed economy to a centrally planned economy
70) The Foreign Corrupt Practices Act forbids U.S. companies from bribing government officials
or political candidates in other nations.
71) Managers who take an active approach to political risk management are likely to rely on
statistical modeling to quantify the precise degree of political risk.
72) International companies often must customize products to comply with local standards if
they are to do business in a particular country.
73) Expropriation is the term used to describe a host-country government seizing the assets of a
foreign corporation and providing no compensation in return.
74) Political risk occurs when the property of an MNE is threatened through either confiscation
or expropriation.
75) Political risk insurance is more likely to be purchased by MNEs that apply an active
approach to political risk management.
76) International companies never have to customize products to comply with local standards if
they are to do business in a particular country.
77) Political risk tends to be higher in developing countries compared to industrialized countries.
78) U.S. individuals are exempt from being prosecuted for bribery under the Foreign Corrupt
Practices Act.
79) Briefly explain each of the three main methods companies use to manage political risk.
80) Explain each of the four means of incorporating risk into business strategies when companies
employ an adaptation strategy.
81) Explain the risk-management method of “adaptation.” Why would it most likely be less
costly and time-consuming to pursue this method in a nation that practices civil law rather than
in a nation that practices common law?
82) Describe the Foreign Corrupt Practices Act, and explain how it relates to corporate social
responsibility.
83) Which of the following challenges is Cleanshot most likely to face in Russia?
A) organized crime
B) too many competitors
C) low demand for the products of non-Russian companies
D) fading underground economy
84) Given the lack of available hard currency, Russian businesses often use goods and services
as payment for other products they buy from abroad. This practice is referred to as ________.
A) letter of credit
B) fiat money
C) barter
D) guanxi
85) Why are many mixed economies converting to market-based systems? How does the role of
government change when a mixed economy transitions to a market economy?
86) Compare and contrast the business environments in China and Russia.