Chapter 18—Global Opportunities for Small Business
TRUE/FALSE
1. International dissimilarities in language and culture, business practices, and government regulations
are increasing over time.
2. Globalization explains the increasing similarity of markets around the world.
3. Born-global firms are small companies that begin with cross-border businesses around the globe.
4. Entrepreneurs decide to go global to expand their opportunities, but sometimes they are forced to enter
foreign markets to compete with firms that have already done so.
5. While a small firm can have global operations, size will limit growth.
6. The Council on Foreign Relations can assist a company in trade laws and payment issues related to
global markets.
7. The U.S. Department of Industry provides information for entrepreneurs considering global
operations.
8. Once a small business owner decides to expand internationally, s/he should study the competitive
forces in the foreign market.
9. A financial capacity question that needs to be answered before a company goes global with operations
is “Will international sales hurt domestic sales?”
10. The motivation to take domestic products to foreign markets is more relevant today than in the past.
11. Increasing sales in international markets is one of many ways to recoup a firm’s investments in
research and development.
12. Twenty-five percent of the world’s population lives in the United States.
13. The primary motivation for expansion into European markets is to be closer to sources of raw
materials.
14. Today, companies tend to focus on developed countries as they search out international markets.
15. The term BRICs refers to Bangladesh, Romania, Ireland, and Czechoslovakia, all emerging markets.
16. Together, China and India account for nearly 50 percent of the world’s 4 billion inhabitants.
17. Products that sell at home usually require little or no adaptation to be well received in foreign markets.
18. By informing consumers about the lifestyles of others, globalization is leading toward more diverse
consumer preferences.
19. Efforts to exploit the competitive advantage of specialized products across international markets is
more important to small businesses than to their large competitors.
20. Experience curve efficiencies refers to the savings that arise from repeated production of the same
product.
21. Learning effects occur when an employee gains insight from experience, which leads to improved
work performance.
22. Gains from learning effects continue to grow after startup; economies of scale efficiencies decline as
the business grows.
23. Increasingly, small firms are going global in search of raw materials.
24. International outsourcing and offshoring are increasingly being used by companies going global to cut
costs.
25. The unique features of a local environment can yield benefits to small firms locating there even when
the costs are greater.
26. Increasingly, small firms find that they must locate their operations abroad if they are to keep their
contracts as suppliers to large companies.
27. Exporting involves the sale of goods made in the home country to customers in another country.
28. A small firm can generate the greatest financial returns using international licensing strategies when
these efforts involve the company’s products.
29. Counterfeit activity is likely to increase with the use of foreign licensing, international franchising and
international strategic alliances.
30. While opening an overseas sales office can be effective, small businesses should wait until sales in the
local market are great enough to justify the move.
31. A cross-border acquisition is less demanding than a greenfield venture.
32. An economic risk for a global company is the threat of new labeling regulations.
33. Political moves by an international country have implications on the domestic company’s economic
risk.
34. International business will never be as easy as doing business on the domestic front.
35. China, India and Russia are classified as moderately challenging according to the World Bank’s Ease
of Doing Business Index.
36. Least challenging countries according to the World Bank’s Ease of Doing Business Index include
Canada, Mexico and the USA.
37. Small businesses that are either already or interested in exporting or importing can receive information
from the SBA through conferences, seminars, publications and counseling.
38. Trade missions typically are sponsored by foreign governments to promote strategic alliances in
international markets.
39. Perhaps the easiest way to break into international markets is to use a trade intermediary.
40. Trade leads are accessed most often through contacts.
41. A revocable letter of credit is an agreement to honor a draft or other demand for payment when
specified conditions are met and cannot be changed unless both the buyer and the seller agree to the
change.
42. An example of a trade intermediary most suited for small businesses is an export remarketer.
MULTIPLE CHOICE
1. When Wayne opened his business many years ago, most businesses operated only within one country.
But now thanks to __________, businesses increasingly take advantage of cross-border activities.
a.
born-global businesses
b.
globalization
c.
economic freedom
d.
economic liberty
2. Tim opened his business with the intention of importing goods from China and selling them in the U.S.
We could say that this business is
a.
an exporter.
b.
born-global.
c.
ready to launch offshoring.
d.
a trade mission.
3. Allen is considering entering the global marketplace. What question should be answered first?
a.
Does the company have the necessary “deep pockets” to follow through?
b.
Are the company’s domestic operations capable of subsidizing overseas operations?
c.
Is the company’s technology sufficient to enter into the international game?
d.
Is the company up to the task?
4. Antonio’s small pasta firm is considering exporting. A Canadian grocery store chain with its
corporate headquarters in Quebec has approached him. Which question would need to be answered in
relation to the pasta company’s management experience and resource objectives?
a.
How are the initial expenses of expanding to Canada going to be covered?
b.
What international expertise does Antonio have, specifically does he speak French?
c.
Why does Antonio want to export to Canada?
d.
Will Canadian sales hurt USA sales?
5. A Canadian grocery store chain with its corporate headquarters in Quebec has approached Antonio’s
small pasta firm about possible exporting. Which question would need to be answered in relation to the
pasta company’s management objectives?
a.
How are the initial expenses of expanding to Canada going to be covered?
b.
What international expertise does Antonio have, specifically does he speak French?
c.
Why does Antonio want to export to Canada?
d.
Will Canadian sales hurt USA sales?
6. Antonio’s small pasta firm is considering exporting its products. A Canadian grocery store chain with
its corporate headquarters in Quebec has approached him. Which question would need to be answered
in relation to the pasta company’s financial capacity objectives?
a.
How are the initial expenses of expanding to Canada going to be covered?
b.
What international expertise does Antonio have, specifically does he speak French?
c.
Why does Antonio want to export to Canada?
d.
Will Canadian sales hurt USA sales?
7. A Canadian grocery store chain with its corporate headquarters in Quebec has approached Antonio, the
owner of a company that produces pasta, about exporting its pasta into Canada. Which question
would need to be answered in relation to the company’s production capacity objectives?
a.
How are the initial expenses of expanding to Canada going to be covered?
b.
What international expertise does Antonio have, specifically does he speak French?
c.
Why does Antonio want to export to Canada?
d.
Will Canadian sales hurt USA sales?
8. For most small businesses, the primary motivation for going global is to
a.
develop new market opportunities.
b.
reduce the costs of doing business.
c.
gain access to resources that are important to the firm’s operations.
d.
capitalize on special features of location.
9. According to the 2011 BRIC Markets, which country has shown the most economic growth in GDP?
a.
Brazil
b.
China
c.
India
d.
Russia
10. Seeking to extend the product life cycle by expanding into international markets has become a less
effective strategy because
a.
customer preferences have become more similar around the world.
b.
income levels in many countries are insufficient to support this strategy.
c.
international delivery systems cannot handle the variety of company distribution systems.
d.
product life cycles have already been growing over the years.
11. International markets are increasingly demanding
a.
the same products that are distributed to other national markets.
b.
differentiated products that satisfy their unique needs and interests.
c.
direct access to products sold elsewhere in the world.
d.
more expensive products and fewer inexpensive products.
12. To expand a market, an emerging motivation for going global is to
a.
take advantage of unique features of the local market.
b.
find buyers for highly specialized products.
c.
obtain tariff reductions.
d.
extend the product life cycle.
13. Experience curve efficiencies refers to
a.
expanding a business globally to decrease per unit costs.
b.
having more experienced team members.
c.
insights gained by employees that lead to improved work performance.
d.
the outcomes of learning effects and economies of scale.
14. A company with the most experienced production employees and the lowest unit costs in its industry
indicates that it had benefited from
a.
learning effects.
b.
experience curve efficiencies.
c.
economies of scope.
d.
economies of scale.
15. Learning effects occur when
a.
mistakes are made and then new solutions found.
b.
insights gained by employees enhance their work performance.
c.
economies of scare are present.
d.
companies take advantage of experience curve efficiencies.
16. As Antonio’s pasta company increases in size, the business is able to realize economies of scale:
a.
through learning effects from manufacturing experience.
b.
through incremental drops in costs that results from the doubling of output.
c.
by spreading of an investment across more units of production.
d.
through efficiencies of operations in service operations.
17. In the past, companies have left the United States to:
a.
take advantage of unique features of the local market.
b.
find raw materials.
c.
change the shape of the product life cycle.
d.
serve the local community through the business.
18. A company specializing in flavoring compounds opens a plant near the rain forest. This move enables
its biologists to derive flavors without destroying the plants and supports company globalization
efforts being related to
a.
reducing tariffs
b.
cutting costs.
c.
expanding its market.
d.
gaining access to resources.
19. Increasingly, small businesses are expanding internationally to
a.
obtain raw materials.
b.
gain access to skilled labor.
c.
create job opportunities for domestic employees.
d.
take advantage of government incentives.
20. Nike and many other companies engage in international outsourcing, which refers to
a.
sending US employees to manage foreign-based operations.
b.
relocating stateside operations abroad.
c.
obtaining raw materials in foreign countries.
d.
accessing foreign labor through contracts with independent providers.
21. Labor rates have risen over time to the point that Antonio’s Pasta is considering ____________ to
reduce costs.
a.
outsourcing.
b.
offshoring.
c.
exporting.
d.
importing.
22. A company that operates a customer service call center is likely to contract with a company in India to:
a.
capitalize on the special features of location.
b.
cut costs.
c.
expand its market.
d.
gain access to resources.
23. Some small firms choose to outsource internationally in order to
a.
avoid domestic taxes.
b.
avoid competition from other US companies.
c.
cut costs and access talented foreign employees.
d.
take advantage of legal loop-holes in foreign countries.
24. Regional free trade areas have been formed in order to
a.
duplicate government regulatory systems.
b.
reduce tariffs to increase trade.
c.
coordinate the currencies of included countries.
d.
accommodate the demands of organized labor.
25. When it comes to cutting costs, many foreign companies have chosen to locate production facilities in
Mexico to:
a.
obtain tariff reductions.
b.
find raw materials.
c.
follow large client firms that locate abroad.
d.
find suppliers offering highly specialized products.
26. If an olive oil importer sets up operations in Italy to be near its supplier, the company is going global
by
a.
capitalizing on the special features of location.
b.
cutting costs.
c.
expanding its market.
d.
gaining access to resources.
27. For some small businesses, a recent trend for going global is to
a.
be closer to large clients.