Book Title
International Business: The Challenge of Global Competition 13th Edition

ECON 39732

February 28, 2019
Benefits of trade fairs include sales, making contacts with prospective buyers and
agents, and competitive intelligence.
Swap contracts exchange foreign currency debt for another liability in the home
Internal environmental forces are commonly referred to as controllable.
Scenario planning helps to emphasize that the business environment is predictable and
helps to emphasize the application of traditional perspectives when solving problems.
Adam Smith explained how countries can benefit from international trade even if they
lack any absolute advantage over their trade partners.
Parent-company nationals commonly encounter difficulty overcoming the biases of
their own cultural experience and being able to understand and perform effectively
within a new operating context.
Exports can help to offset cyclical sales in a firm's domestic market.
Stakeholder theory suggests that balancing competing tensions in a business is
impossible and that recognizing this early in the process is helpful.
Cognitive institutions are important to the international manager because these
institutions help the manager understand the schema operating in their international
environments and are easily missed or misunderstood by the non-native, so schemas
can easily lead to misunderstandings.
Low-context cultures such as the United States have explicit communication patterns.
Failure rates for expatriate assignments have been reported to range from 25 to 45
In a DAP (delivered at named place), the seller assumes risk when the goods leave the
seller's factory or warehouse.
Two of the concerns that management faces in designing the organizational structure for
an international company are (1) finding the most effective way to take advantage of
geographic differences and (2) coordinating the activities of departments to enable the
firm to meet its overall objectives.
One way in which contract manufacturing is used is to subcontract assembly work or
the production of parts to subsidiaries overseas.
Switzerland exports cheese and chocolate because one of its factor endowments is lots
of rich agricultural land.
Although the EU can influence the practices of businesses located in non-EU-member
countries, Microsoft has been able to maintain business in the EU much as it conducts
business in the United States.
Incoterms were created by the New York Chamber of Commerce and are revised every
The ISO (International Organization for Standardization) is the only international
standardizing organization.
Countries put limitations on the convertibility of their currencies when they are
concerned that their foreign reserves could be depleted.
The product global corporate form eliminates the duplication of product and area
Licensing refers to a contractual agreement in which the licensor grants access to its
patents, trade secrets, or technology for a fee paid by the licensee.
Team norms are legitimate, shared standards against which the appropriateness of
behavior can be evaluated.
Kurt Lewin's model of change involves understanding the need for change, changing,
and evaluating the change.
A common cause of the added complexity of foreign environments is managers'
unfamiliarity with other cultures and is called self-reference syndrome.
Hofstede's individualism-collectivism dimension measures the degree to which people
tend to be integrated into groups.
Direct exporting is an excellent means of getting a feel for international business
without committing a great amount of human or financial resources.
Terrorists avoid kidnapping because the repercussions can be harmful to their
Many smaller and developing nations want to reduce patent protection from the current
15 to 20 years down to 5 years or even 30 months.
Trademarks can include a shape, a color, or a sound.
The three main team leadership activities in any environment are establishing the team,
coaching team members, and setting team norms.
According to the text, outsourcing is hiring others to do noncore activities.
Sustainable business practices have three characteristics: limits, interdependence, and
The international division is a division in the organization that is responsible for all
non-home-country activities and reports to the domestic division.
Among the skills necessary for a global leader are cultural adaptability and an ability to
build global teams.
Trade flows are good indicators of the magnitude of present sales.
When a company's primary strategic orientation is multidomestic, an ethnocentric
orientation is particularly appropriate.
Some evidence suggests that pioneers gain and maintain a competitive advantage in
new markets.
Estimation by analogy is an example of a market factor.
Global teams are characterized by low levels of diversity and high levels of geographic
What is the role of the home country in risk assessment?
A. It has no role.
B. It is a significant consideration.
C. It is used initially, but then more micro issues become the focus of CRA.
D. None of the above.
Define and discuss country risk assessment, using examples to illustrate your points.
Country risk assessment (CRA) is an evaluation of the risk of losing an investment in a
particular country. It may be conducted by a bank or business and is increasingly
political in nature.
The risks themselves may be economic or financial and include the
balance-of-payments position, inflation levels, labor conditions, productivity levels, and
militancy in unions. Government instability that would lead to currency convertibility
restrictions, tariffs and quota changes, and tax rate and labor permit changes are also
assessed. Reliability and impartiality of the legal system and the risk of terrorism may
be assessed as well. CRA is affected by the nature of the business. Is it a hotel or a
mining company?
With regard to globalization's complexity, the condition of multiplicity means that:
A. many currencies may be used.
B. financial markets may have different rules.
C. there are many more players and many more relationships to maintain.
D. increased ambiguity can work in the global leader's favor.
E. B and D.
Official prices ensure that:
A. imported goods will be sold at minimum prices, to avoid dumping.
B. a black market will be healthy and available for imported goods.
C. low-priced invoices to avoid tariffs will not be successful.
D. two of the above.
The Foreign Corrupt Practices Act (FCPA) clearly stipulates terminology and behavior
that is illegal on the part of U.S. businesses and of foreign businesses operating in the
United States
Virtual teams that meet frequently to build trust are said to:
A. live in airport terminals.
B. have nomadic norms.
C. have high levels of consideration.
D. B and C.
E. create a regular heartbeat.
Employee compensation payments added to base salaries because of higher expenses
encountered when living abroad are considered:
A. bonuses.
B. allowances.
C. perks.
D. tax exempt.
E. two of the above.
Research found that suppliers cut invoice and ordering errors by an average of ___
percent when using an e-marketplace.
A. 10
B. 24
C. 37
D. 56
E. 69
Fixed-rate relationships among currencies could not stay fixed, according to Obstfeld
and Rogoff, because:
A. the volume of global transactions started to exceed most countries' foreign exchange
reserves, so governments couldn't intervene to sustain the value of their currency.
B. the complexity of international trade demanded return of the gold standard.
C. Walmart and other leading firms argued successfully at the Federal Reserve that
fixed rates were too costly to maintain.
D. the EU had decided to float the euro.
Historically, firms making a foreign direct investment have generally preferred:
A. direct exporting.
B. joint ventures.
C. strategic alliances.
D. wholly owned subsidiaries.
E. contract manufacturing.
The various methods of communicating with the firm's publics to secure a favorable
impression are:
A. advertising.
B. promotion.
C. public relations.
D. marketing.
E. none of the above.
Arbitration is often preferred because it is:
A. easier to influence an arbiter than a judge.
B. quicker and more private than the U.S. court system, although often more expensive.
C. more discreet, although more costly than the court system.
D. less bureaucratic than the court system of any country.
E. none of the above.
Extraterritoriality is:
A. a nation's attempt to enforce its law beyond its borders.
B. added territory as a result of dispute settlements in wars, such as the Sakalin Islands.
C. a citizen's claim to government assistance in a foreign environment.
D. a taxable condition most international firms attempt to avoid.
E. two of the above.
Both the ISO and the IEC promote:
A. harmonization in international accountancy.
B. standardization in technology-related fields through specifications.
C. union membership in fields that are technology-intensive.
D. shared bankruptcy standards across the globe.
In the process of bridging, team members:
A. discuss their similarities.
B. relate their personal histories.
C. decenter.
D. discuss their task-relevant skills.
E. A and E.
_______________ occurs primarily because of relative price differentials among
A. Foreign direct investment
B. International trade
C. Portfolio investment
D. All of the above
E. Two of A, B, and C
A fronting loan enables the firm to:
A. protect itself from the risk of blocked asset transfers, such as remittances, loan
payments, and profit repatriations.
B. build collateral with local firms.
C. devote more resources to bricks and mortar.
D. gain a competitive advantage in new markets.
Credit information is available for new exporters through all of the following except:
A. Dun & Bradstreet.
B. the FCIB (Finance, Credit, and International Business Association).
C. the exporter's bank.
D. the SBA (Small Business Administration).
E. all of the above.
The SDR is:
A. a special deposit for corporate reimbursement.
B. special drawing rights, an international reserve asset.
C. a special deficit refund, made to compensate for currency devaluation.
D. a paper credit issued by the Bank for International Settlements.
The Ottoman Empire's powerful location raised the cost of Asian trade for the
Europeans and resulted in a search for sea routes to Asia.
The product is:
A. the central focus of the marketing mix.
B. more than a physical object.
C. the result of economies of scale.
D. A and B.
E. all of A, B, and C.
In the U.S. court system, tort claims may result in:
A. exceedingly large awards.
B. lower liability insurance.
C. a reduction in strict liability.
D. reduced liability insurance costs for foreign companies.
E. none of the above.
Arguments for trade restrictions include:
A. national defense, infant industry, and job protection.
B. punishment of offending nations.
C. fair competition and retaliation.
D. all of the above.
According to the text, which of the following is true regarding "corporate
A. It involves extensive use of historical data on cultures.
B. It involves extensive use of surveys.
C. It involves watching consumers use products.
D. All of the above.
Enforcing contracts that cross international borders is:
A. simply a matter of applying the local law to the contract.
B. quite complicated and governed in most nations by the CISG.
C. the responsibility of Interpol.
D. secondary to who has possession of the goods, regardless of title.
The international Fisher effect says that interest rate differentials:
A. predict exchange rate movement.
B. can be used to determine purchasing power parity.
C. are an example of the law of one price.
D. illustrate Pareto optimality.
In designing the organizational structure, management knows two concerns,
__________ and __________, run counter to each other.
A. finding the most effective way to departmentalize; coordinating activities
B. earning profits; paying taxes
C. hiring employees; reducing labor costs
D. sales growth; research and design expenditures
E. none of the above.
Arbitrage functions to:
A. provide French markets access to other EU markets.
B. exploit price differences between markets, so as to profit with no risk.
C. create wealth through interest rate swaps.
D. create increased trading in commodity markets.
International business differs from domestic business in that a firm operating across
borders must deal with what environmental forces?
A. International
B. Foreign
C. Political
D. Competitive
E. Two of the above
The U.S. Export-Import Bank (Ex-Im Bank) offers the following:
A. export credit insurance.
B. guarantees.
C. direct and intermediary loans.
D. Working Capital Guarantee.
The effectiveness of every organization depends to a great extent on how well its:
A. human resources are utilized.
B. production facilities are operated.
C. financial resources are planned.
D. all of the above.
An argument against the protection of an infant industry is that:
A. in the long run the industry will have a competitive advantage.
B. firms need protection from imports until the required investment capital is obtained.
C. protection of emerging industries occurs only in developing nations.
D. there can be high costs from subsidizing infant industries.
E. Two of the above.

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