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.
Economic integration can unintentionally reward a less efficient producer within a
trading bloc.
Centralized decision making is beneficial when fast-changing national business
environments put a premium on local responsiveness.
An absolute advantage is the economic and strategic advantage gained by being the first
company to enter an industry.
A multinational strategy is most appropriate for companies that do not have foreign
direct investments but rather export their products to foreign markets.
A product for which demand increases more relative to an increase in income has an
income-elasticity coefficient less than 1.
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.
Customs duties decrease the total amount of a good’s production cost.
The process of identifying and attracting a qualified pool of applicants for vacant
positions is called selection.
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.
A disadvantage of protection from import competition is the added cost of continuing to
produce a good domestically that could be supplied more efficiently by an international
supplier.
Scenario: Cleanshot USA in Russia
When Cleanshot USA, a photography products company, decided to enter the
international arena, it chose Russia as its main market. Although Russia has been in
transition for years, Cleanshot managers believe their company has tremendous
opportunities there.
International companies often must customize products to comply with local standards
if they are to do business in a particular country.
As the unpredictability of exchange rates increases, so does the cost of insuring against
the accompanying risk.
Countertrade provides a way for firms to trade either by using a small amount of hard
currency or even none at all.
Civil conflict, tax discrimination, weak legal systems, and terrorist actions are political
risks faced by MNEs operating in foreign countries.
Which of the following business-level strategies should a company follow in order to
charge a higher price for its products and enjoy greater customer loyalty?
A) differentiation strategy
B) stability strategy
C) mass customization strategy
D) retrenchment strategy
Scenario: Frankfurter Friday
Betty Cleveland is the vice president of Frankfurter Friday, a highly successful hot dog
joint in Oceania. Her company decides to expand to Asia and identifies China as the
ideal market. Before she leaves for China, she studies their culture extensively and
discovers that the number four is considered extremely unlucky, that not everybody is
fluent in China’s official language-Mandarin-and that punctuality is a highly valued trait
in the country.
Hispanics comprise a subculture in the United States.
________ is the value of all goods and services produced by the domestic economy
over a one-year period.
A) Gross domestic product (GDP)
B) Human development index (HDI)
C) Gross national product (GNP)
D) Purchasing power parity (PPP)
Which of the following is a special ability of a company that competitors find
extremely difficult to equal?
A) comparative advantage
B) absolute advantage
C) core competency
D) economy of scale
Which of the following is an example of a legal force that is used to assess the national
business environment?
A) resource quality
B) environmental regulations
C) workforce qualifications
D) liquidity issues
Which of the following statements about approaches to political risk management is
NOT true?
A) Passive political risk management discourages managers from fully or partially
hedging their bets against exposure to political hazards.
B) Passive political risk management assumes that it is difficult, if not impossible, to
systematically model political risk.
C) Active political risk management assumes that positive and negative political events
in any country are neither independent nor random events.
D) Active political risk management assumes that political events unfold in observable
patterns that statistical methods can detect.
A company is conducting a research on new markets by comparing countries in terms
of their human development index (HDI) scores. The company wishes to expand into a
market where individuals experience a very high level of total well-being. Which of the
following countries would the company most likely choose?
A) Russia
B) Mexico
C) China
D) Japan
Scenario: Susan Goes Global with Grape Fizz
Susan is the CEO of Grape Fizz, a global drinks-manufacturing company. She wishes to
set up production facilities in other countries and has been advised to assess the
political system of each country before she does so.
Susan is worried that San Tarino’s demand that she must use locally available raw
material and employ local workers might interfere with the quality and efficiency of her
business. San Tarino, on the other hand, views this as a way to foster local business
activity and lessen regional unemployment. What are these laws called?
A) local content requirements
B) antitrust laws
C) nationalization laws
D) internalization policies
The main drawback of a multinational strategy is that it does not allow a company to
________.
A) exploit scale economies in product development or marketing
B) closely monitor buyer preferences in each local market
C) modify its products except for the most superficial features
D) respond quickly and effectively to emerging buyer preferences
Scenario: Better Mousetrap Inc.
Better Mousetrap Inc. is a manufacturing company that sells pest control products.
Recently the company launched an innovative mousetrap with a unique design that has
been selling well in the U.S. market. Senior Vice President Marc Wallace, even
recommended expanding sales overseas in order to increase company revenues.
According to the Porter diamond, which of the following is an example of an advanced
factor?
A) labor forces in the nation
B) technological infrastructure in the nation
C) climate in the nation
D) natural resources in the nation
Donna Bader, Globalization opponent
Donna Bader spent her final year at college studying the effect of various economic
factors on the economy of developing nations. Based on the results of her study, she
concluded that globalization does these countries more harm than good.
Upon what assumption does Donna’s conclusion rest?
Donne assumes that ________.
A) there are no factors other than globalization which influence the economic
conditions of a country
B) the welfare of individuals matters less than the economic prosperity of a nation
C) globalization does not affect the employment rate of developed and developing
countries
D) the wages paid to all individuals within developed countries are equal
Briefly describe how exchange rates influence business activities.
Explain the process of facilities location planning. What issues must companies
consider while selecting the location for their production facilities?
Explain the theory of comparative advantage using an example, and describe its
assumptions and limitations.
Describe any three organizational structures that are common for a vast majority of
international companies.
Compare and contrast the two main techniques for forecasting exchange rates.
Define subsidies. What are their disadvantages? In what ways do the protection of
infant industries produce similar drawbacks?
What challenges do international labor unions face as they try to accomplish their
objectives?
Donna Bader, Globalization opponent
Donna Bader spent her final year at college studying the effect of various economic
factors on the economy of developing nations. Based on the results of her study, she
concluded that globalization does these countries more harm than good.
Describe the global business environment and each of its four elements.
How are countries classified? Explain with examples.