A multinational strategy is best suited to industries in which price competitiveness is a
key success factor.
Scenario: Not-So-Free Freeland
Freeland is a semi-closed economy whose government believes in protecting national
identity and building a self-sustained economy. The government’s priority is to protect
local jobs and provide opportunities to Freeland’s emerging industries to flourish
without the threat of external competition. Industries considered essential to national
security often receive government-sponsored protection.
The first step in the screening of potential markets is an assessment of the national
business environment.
A major disadvantage of American Depository Receipts (ADRs) is that investors who
buy them must pay currency-conversion fees.
Most large companies use exporting as a means of expanding total sales when the
domestic market has become saturated.
Scenario: Learning the Americas’ Way
The newly-formed countries that emerged after the break up of the United Frontier
States (UFS) are interested in learning more about integration in the Americas. Because
the former UFS nations have many similarities with the countries of North and South
America, they believe they can learn from the integration experience in the Americas.
To that end, they pose the following questions. Canada and the United States are early
examples of political unions.
A growth strategy is designed to increase the scale or scope of a corporation’s
operations.
The ISO 9000 is a production technique in which inputs to the production process
arrive exactly when they are needed.
Scenario: Moonland Union
Twenty-six nations of Moonland region, have decided to cooperate with one another to
eliminate trade barriers among them and create the Moonland Union. They are not sure,
however, to what extent they want to cooperate.
The Single European Act predominantly aimed at establishing common transportation
policies among the European Union members.
In order to capture the gains from currency translation, managers prefer exchange rates
that are volatile and unpredictable.
Foreign properties expropriated by a government cannot be reclaimed.
A convertible currency is traded freely in the foreign exchange market with its price
determined by London banks.
Total quality management reduces the responsibility on each individual in the
production process.
________ is the belief that only individuals and private groups should control a nation’s
political activities.
A) Pluralism
B) Anarchism
C) Theocracy
D) Totalitarianism
Scenario: Excelsior’s Limited
Excelsior’s Limited, a manufacturer of health and beauty aids, is expanding its presence
in several countries around the world. Excelsior’s president is surprised at some of the
responses the company is receiving from other countries.
When Excelsior’s Limited tried to convert its earnings from one country, the
government stipulated that the company had to exchange its currency at a very
unfavorable rate. This is an example of a(n) ________.
A) administrative delay
B) currency control
C) subsidy
D) tariff
The ________ of a country is its gross national product divided by its population.
A) GNP per capita
B) GDP per capita
C) purchasing power parity
D) purchasing power
To cool off an inflationary economy, a government might ________.
A) lower interest rates
B) raise interest rates
C) lower foreign exchange rates
D) raise foreign exchange rates
Which of the following is a disadvantage of a company with an international area
structure?
A) Country managers have very little authority.
B) The subsidiaries fail to develop organizational cultures suited to their locations.
C) Individual responsibility and accountability is foggy.
D) Cross-fertilization of knowledge from one unit to another may be less than desirable.
According to Hofstede’s framework, a culture with ________ values security and places
its faith in strong systems of rules and procedures in society.
A) large uncertainty avoidance
B) low power distance
C) short-term orientation
D) high individualism
Which of the following is a push strategy that companies use to promote their products?
A) mass media advertising
B) direct marketing techniques
C) free trial packages
D) retail product stocking
Companies that typically design promotional campaigns and advertising strategies at
their headquarters are most likely to follow a ________ strategy.
A) retrenchment
B) global
C) blue ocean
D) multidomestic
Which of the following terms refers to the broadest measure of economic development
of a country?
A) gross domestic product (GDP)
B) purchasing power parity (PPP)
C) gross national product (GNP)
D) human development index (HDI)
Scenario: Foodland and Drinkland
Two countries, Foodland and Drinkland, produce food and drinks. In Foodland, one
resource unit produces 20 tons of food and one resource unit produces 10 tons of
drinks. In Drinkland, one resource unit produces 12 tons of food and one resource unit
produces 24 tons of drinks. Food Drinks
Foodland 20 10
Drinkland 12 24
Which of the following statements is true of the above scenario?
A) Foodland has a comparative advantage in producing drinks.
B) Drinkland cannot trade with Foodland because trade is too expensive.
C) Drinkland has an absolute advantage in producing drinks.
D) Foodland should stop producing food and just produce drinks.
________ was the first nation to implement the gold standard in the early 1700s.
A) The United States
B) Britain
C) France
D) Japan
If Verandas International chooses to pursue equity financing, but wants to avoid the
time and money required to comply with stock exchange regulations, the company
would most likely issue ________.
A) American Depository Receipts
B) bills of lading
C) equity shares
D) irrevocable letters of credit
The ________ called for banking in a single common currency, setting up of monetary
and fiscal targets, and political union of the European Union members.
A) Maastricht Treaty
B) European monetary union
C) Single European Act
D) Copenhagen Criteria
Scenario: Blickinstock at the Crossroads
Auto parts supplier, Blickinstock Ltd., would like to expand its presence in Latin
America. To that end, Blickinstock is trying to decide whether to purchase an existing
company in a remote region of Argentina or build its own subsidiary. Keith Moon,
Blickinstock’s vice president of global business development, will be making a
presentation to the board outlining the company’s options. Increasing globalization is
causing a growing number of international companies from emerging markets to
undertake FDI.
To complete his business bookkeeping work each month, a business owner spends
about 20 hours and in the process, has to give up $900 in income. If he hired a
bookkeeper to do the work, the job would be completed in 15 hours and would cost him
$600. Should the owner hire the bookkeeper or continue to do the work himself?
A) He should hire the bookkeeper because the bookkeeper has an absolute advantage in
completing the books.
B) He should do the bookkeeping himself because he has an absolute advantage in
completing the books.
C) He should hire the bookkeeper only if the bookkeeper agrees to give him a discount
on the service price.
D) He should hire the bookkeeper only if the bookkeeper is willing to complete the
work in 12 hours.
A(n) ________ channel places a single intermediary between the producer and the
buyer.
A) intensive
B) exclusive
C) one-level
D) two-level