Developing new product designs and new ways of organizing or training are some of
the ways in which companies innovate.
Grease payments intended to expedite transactions are both accepted and legal in many
countries.
Expatriates usually do not receive the benefits normally accorded to home-country
employees.
In emerging markets, the size and growth rate of conglomerates serve as signals of a
dynamic market economy.
Japan and China are examples of low-context cultures.
Privatization has provided many opportunities for foreign firms to enter transition
economies by purchasing former state enterprises.
Merchant banks provide capital to firms in the form of shares rather than loans.
Geographic area structure is an organizational design in which management and control
are decentralized to the level of individual geographic regions.
Export-led development refers to government policies that impose high tariffs and
quotas on imports from the developed world.
Cross-cultural proficiency is characterized by four key personality traits: tolerance for
ambiguity, perceptiveness, valuing personal relationships, and flexibility and
adaptability.
The most universally accepted currencies for international business transactions are the
British pound, European euro, Japanese yen, and U.S. dollar, which are all considered
hard currencies.
David Ricardo advanced the absolute advantage theory.
One of the advantages of a global matrix structure is that it provides better management
of subsidiaries or products, or operations in many foreign markets.
The floating exchange rate system is victim to maximum governmental intervention.
In the early stages of market research, managers examine three important statistics to
estimate market potential: per-capita income, size of the middle class, and market
potential indicators.
In the advanced economies, firms that engage in services such as lodging and retailing
account for a much lesser share of FDI than firms that manufacture products.
Since the 1980s, emerging market countries have experienced substantial market
liberalization and privatization.
Cultural differences necessitate adapting marketing activities to suit the specific needs
of target markets.
According to the absolute advantage principle, national prosperity is the result of a
positive balance of trade, achieved by maximizing exports and minimizing imports.
International business today is predominantly the domain of large, multinational
companies.
An export department rarely requires much organizational structure until export sales
reach a critical point.
Exporting is an entry strategy involving the sale of products or services to customers
located abroad.
According to the internationalization process model, a firm is unlikely to receive
unsolicited product orders from abroad before advancing to the pre-export stage.
The Internet provides the means to export pure services.
Democracy is closely associated with openness.
Globalization of production activities and services is a dimension of market
globalization.
SMEs usually choose exporting as their main strategy for entering foreign markets.
Firms are sometimes motivated to enter new markets because of unfavorable conditions
in the home market, such as regulation or declining local industry sales.
Direct marketing entails selling directly to end users.
An ethnocentric orientation positively impacts the ability of managers to manage
business projects and new business practices abroad.
Trade unions are part of a country’s legal system.
Governments intervene in international trade and investments in order to protect the
interests of foreign investment firms.
Corporate social responsibility represents the apex of the pyramid of ethical behavior.
Captive sourcing is an arrangement in which the focal firm contracts with an
independent supplier to manufacture products according to well-defined specifications.
Women enjoy equal access to senior management positions in most Asian countries.
Advanced economies tend to pay relatively lower wages.
A corporate culture that advocates profit over sustainability and human welfare cannot
lead to employee abuse.
An increase in a nation’s rate of inflation is caused by an oversupply of money and this
eventually leads to a decrease in the value of the nation’s currency.
The European Union impacts international trade and business because of its ability to
enact and enforce laws and regulations.
In a “common market,” barriers to the cross-border flow of factors of production are
removed.
Which of the following is the most likely reason for the establishment of the European
Community?
A) broaden the power of communism within East Germany
B) create strict tariffs for trade and international business
C) combine forces against the powerful former Soviet Union
D) establish judicial procedures to handle trade violators
Which of the following is most likely an additional problem faced by Country X due to
its inflation?
A) high interest rates
B) herding behavior
C) balance of trade
D) country risk
Economic interests refer to a firm’s economic impact on ________.
A) the localities where it does business
B) the top management of the firm
C) the middle management of the firm
D) the society as a whole
Which of the following statements is true with regard to the R&D activities of a firm?
A) As a strategic asset, R&D activities are of moderate importance to the firm.
B) R&D activities are usually concentrated at home.
C) R&D activities have a low likelihood of being internalized.
D) R&D activities have a high likelihood of being outsourced.
Big Boy Burgers (Scenario)
Big Boy Burgers (BBB) is an American fast food restaurant chain that has franchises
around the world. Recently, BBB managers have been concerned about protecting the
firm’s intellectual property, which includes the recipes for its unique burger sauces and
specialty burger buns. Although BBB has never experienced a theft of intellectual
property, the firm’s managers feel BBB should be more cautious. Managers are meeting
with security and legal experts to discuss the options available to the firm which would
protect BBB from future international problems.
Which of the following statements most likely supports BBB legal experts fully
investigating the intellectual property laws of each nation in which BBB has franchises?
A) Intellectual property laws and its enforcement varies from country to country.
B) Patents and trademarks granted in one country will transfer to another country.
C) TRIPS protects the intellectual property of firms doing business in any nation.
D) Nations with numerous IPR violators are beginning to comply with the WTO.
Which of the following is true with regard to a global market segment?
A) A global market segment refers to a group of customers belonging to the same
generational group within a country.
B) Firms target global market segments by using a relatively uniform marketing
strategy and programs.
C) Buyers in a global market segment are typically characterized by low spending
power.
D) Buyers in a global market segment rarely buy products representing luxury and
style.
Refrigerator Adaptations (Scenario)
Cold-Aire Inc. manufactures refrigerators from its facilities in the United States and
China and ships them to retail stores around the world. Kitchen sizes vary around the
world, and as a result, refrigerator sizes must vary as well. U.S. retailers want large
refrigerators, while European and Asian retailers demand smaller units. Cold-Aire
manufactures over 20 different models of refrigerators, which often vary in size by only
a few inches. Cold-Aire managers are concerned that the firm is losing money because
of product adaptations. Cold-Aire management is meeting to discuss the various
cost-saving options for the firm.
Which of the following best supports Cold-Aire making fewer refrigerator adaptations?
A) Adaptation caters to local consumer demands.
B) Standardization reduces manufacturing expenses.
C) Adaptation establishes a sense of buyer loyalty.
D) Standardization limits choices available to consumers.
One of the goals that firms most likely want to attain from internationalizing is
________.
A) decrease trade barriers in the foreign markets
B) establish their presence in saturated markets
C) increase their sales and profits
D) minimize country risk
Which of the following would exert pressure on a firm to become locally responsive?
A) the need to monitor and respond to global competitors
B) the need to cater to local customer needs
C) the desire to capitalize on converging consumer trends
D) the desire to provide uniform service to consumers
EZ Lawn Currency Risk (Scenario)
The EZ Lawn Corporation manufactures lawn equipment such as lawn mowers,
blowers, and trimmers. The lawn equipment is assembled in the U.S. at a facility in
Florida, but the firm outsources inputs from a number of countries, each with varying
degrees of economic stability. Given the importance of the firm’s sourcing activities, EZ
Lawn managers are discussing methods which might reduce the currency risk faced by
EZ Lawn.
Contracting with secondary suppliers outside the U.S. for critical input components
would most likely enable EZ Lawn to ________.
A) limit the amount of debt financing necessary for global expansion
B) shift production from one country to another in case of currency fluctuations
C) purchase components based on currency options instead of currency swaps
D) hedge translation exposure by limiting the amount of interest payments
Which of the following countries is home to the Hyundai Group?
A) India
B) South Korea
C) Russia
D) Taiwan
A researcher who assigns scores to countries for their overall market attractiveness uses
________ to choose the most promising foreign markets.
A) indexing and ranking
B) behaviorally anchored rating scales
C) thematic apperception tests
D) gradual elimination
Global Sourcing Debate (Scenario)
Prof. Sean Peterson’s class of international business has been studying the controversies
surrounding global sourcing. Prof. Peterson divided the class into two groups, A and B.
Group A was assigned the task of defending global sourcing, whereas Group B was
assigned the task of arguing against global sourcing.
Which of the following propositions would most likely be presented by Group B?
A) Global sourcing adversely affects national competitiveness.
B) Global sourcing improves the efficiency of manufacturing firms.
C) Global sourcing empowers workers in general.
D) Global sourcing is usually undertaken by focal firms to increase efficiency.
In establishing a firm’s organizational structure, a fundamental issue is ________.
A) how to optimize local responsiveness and flexibility
B) how much decision-making responsibility the firm should retain at headquarters
C) how to leverage natural endowments available to the firm
D) how the firm should invest in human assets
Which of the following is the purpose of a forward contract?
A) reduce corporate exposure to tax audits
B) maximize intracorporate finance
C) minimize the risk of exchange rate fluctuations
D) earn profits from outsourcing activities
Which of the following statements is true regarding the value of national currencies?
A) They cannot be quantified.
B) They remain highly stable.
C) They fluctuate constantly.
D) They change occasionally.
A firm’s subsidiary is the primary contributor to ________.
A) transfer pricing
B) capital planning
C) marketing
D) global profitability
Low-context cultures tend to ________.
A) emphasize nonverbal messages
B) conduct negotiations as efficiently as possible
C) view communication as a means to promote smooth, harmonious relationships
D) prefer an indirect and polite face-saving style of communication
In a typical value chain, the firm ________.
A) rarely conducts research and development
B) performs most upstream value-chain activities abroad, when exporting
C) performs marketing activities such as pricing, promotion, and selling
D) performs most downstream activities in the home market, when exporting
A value chain is ________.
A) the sequence of administrative policies implemented to promote economic
integration by a government
B) the process of relocating manufacturing and production to valuable and
cost-effective locations abroad
C) the process of integrating national economies during a financial crisis
D) the sequence of value-adding activities performed by a firm in the course of
developing, producing, marketing, and servicing a product
ABC Appliance (Scenario)
The ABC Appliance Corporation is a Florida-based manufacturer of refrigerators,
dishwashers, and other large household appliances. ABC takes advantage of NAFTA,
and as a result, the firm has loyal customers across North America. ABC managers
would like to expand into the Asian market, but are unsure of the best way to do so.
ABC managers are meeting to discuss various possibilities for entering the Asian
market.
Which of the following most likely supports a decision to enter the Asian market
through a project-based, non-equity collaborative venture with an Asian appliance
manufacturer to create an environmentally-friendly dishwasher?
A) Asian firms have offered to pool their resources with ABC to create a new legal
entity.
B) Managers of both firms have decided not to seek ownership, rather they have
decided to pool resources.
C) ABC managers have the financial resources to quickly build a new Asian plant.
D) The Asian government has offered incentives to ABC if the firm builds a plant.
Both common law and civil law systems originated in ________.
A) eastern Europe
B) western Europe
C) western Asia
D) eastern Asia
A country’s population is referred to as ________.
A) market intensity
B) market size
C) market receptivity
D) market growth rate
Which of the following is responsible for determining the admission of new member
countries to the EU?
A) the Council of the European Union
B) the European Parliament
C) the European Court of Justice
D) the European Commission
Global Operations Report (Scenario)
As Vice President of Global Expansion for Pax Telecom, Deva Mikiri is tasked with
preparing a comprehensive report on the company’s global operations over the past
twenty years. Deva assigns three strategists to collaborate on the History portion of the
report, which details the rationale behind Pax’s decisions to expand operations in
particular areas. Rashid Ahl focuses on early expansion to China, which occurred after
China began to make its market more accessible to foreign companies. Markus Teller
focuses on Pax’s expansion to Eastern Europe, which was motivated by increased
industry privatization in key countries. Lavonne Jackson focuses on expansion to Japan,
which happened when the company’s commercial bank expanded its service network to
Asia.
Which of the following drivers of market globalization is Lavonne’s research most
likely to recognize as the factor responsible for the company’s expansion to Japan?
A) integration of world financial markets
B) the highly conservative nature of the Japanese economy
C) the rise of monopoly markets in Japan
D) reduction of barriers to investment
Sterling Auto International (Scenario)
Sterling Auto International is a successful car manufacturing company headquartered in
Detroit, Michigan. Over the past year, the company implemented multiple efforts to
expand its overseas operations. At a recent shareholder’s meeting, attendees questioned
the CEO’s motivations for authorizing certain aspects of the expansion efforts.
One shareholder wanted clarification about a research effort that investigated the
possibility of setting up a plant in China. The CEO explained that serving China’s
rapidly growing middle class population would enable Sterling to increase the size of its
customer base dramatically. In China, the CEO was most likely interested in ________.
A) avoiding government intervention
B) challenging Chinese competitors
C) gaining access to innovative ideas
D) developing economies of scale
Which of the following statements is true about managing country risk?
A) Scanning allows a firm to assess the potential country risk.
B) Firms can reduce country risk by entering markets in collaboration with a foreign
partner.
C) Country risk can seldom be anticipated by advance research.
D) Home-country employees are the best source for anticipating country risk in
host-countries.
Which of the following countries is an example of a strongly collectivist society?
A) Ireland
B) Canada
C) Australia
D) China
Which of the following is true with regard to new trade theory?
A) According to new trade theory, achieving economies of scale is not necessary for
superior international performance.
B) According to new trade theory, trade is beneficial even for countries that produce
only a limited variety of products.
C) New trade theory suggests that export is less beneficial to firms than commonly
believed.
D) New trade theory rests solely on the premise that countries differ in the type and
quantity of production factors they possess.
In which of the following are substantial autonomy and decision making authority
delegated to a firm’s subsidiaries around the world?
A) decentralized approach
B) global strategy
C) transnational strategy
D) nationalization
In a short essay, explain why consumers prefer global brands. What are some of the
important characteristics of the most successful global brands?
Explain franchising as an entry strategy into foreign markets. Describe three advantages
and three disadvantages of franchising for the franchisee.
What is the integration-responsiveness framework? Describe the two main components
of the framework.
Discuss four strategies that managers can employ in order to increase the chances of a
successful collaborative venture.
Discuss three reasons for firms seeking new market opportunities. Illustrate each with
an example of a firm that sought a new foreign market for that particular motive.
Explain the limitations of early trade theories. Discuss born global firms.
In a short essay, discuss how international firms manage the four types of international
business risk. Provide an example that illustrates the process of risk management.
Explain why contract laws can represent a country risk arising from the host-country
legal environment, and explain the three approaches firms typically employ to settle
international contractual disputes.
Briefly discuss the principal advantages of standardization.
What are the main differences between products and services? In a short essay, explain
the difference between the two and provide three examples of each. Which sector has
seen the greatest growth in international trade in recent years?
In a short essay, explain why agricultural subsidies have been implemented in Europe
and the United States. What are the criticisms to these subsidies?
Explain how quotas work as an instrument of government intervention. What are
voluntary export restraints? How can firms use foreign trade zones as a strategy to
manage government intervention?
In a short essay, discuss the three common pricing strategies. How do firms employ
each strategy? What are the main advantages and disadvantages of using such
strategies?
What has NAFTA accomplished for its members?
Describe four factors responsible for the fast-paced growth of the global capital market.
In a short essay, explain mercantilism and the monopolistic advantage theory.
What is meant by the term “entrept economies?” In a short essay, explain the concept
and provide an example.
Describe four traits that characterize visionary leaders, and explain why these traits are
especially necessary for a firm that operates within a global matrix structure.
Explain the five different approaches to examining ethical problems. What are the
difficulties that are likely to arise while using these approaches?