An ethnocentric staffing strategy can facilitate the transfer of special know-how to
branch operations.
In a backward integration joint venture, the parties choose to invest together in
downstream business activities.
Companies use polycentric staffing to re-create local operations in the image of
home-country operations.
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.
A value-added tax is a tax levied on each party that adds value to a product throughout
its production and distribution.
Free-market economies tend to levy high taxes on business profits whereas socialist
economic systems normally levy lighter taxes.
Factor proportions theory states that factors in great supply relative to demand will be
more costly than factors in short supply relative to demand.
Reverse culture shock is the trouble expatriates face while adjusting to a new
environment in which they find themselves.
Brain drain is the departure of highly educated people from one profession, geographic
region, or nation to another.
A culture with small power distance tends to be characterized by considerable
inequality between superiors and subordinates.
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.
Incentives and rewards for individual business initiatives are an important aspect of
collectivist cultures.
In the maturing product stage of the international product life cycle theory, production
facilities are introduced in countries with the highest demand.
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. The North American Free Trade
Agreement membership includes Canada, Mexico, and the United States.
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.
Political risk insurance is more likely to be purchased by MNEs that apply an active
approach to political risk management.
Flexible labor markets allow workers to be redeployed rapidly to sectors of the
economy where they are highly valued.
National competitive advantage theory states that a nation’s competitiveness in an
industry depends on the capacity of the industry to innovate and upgrade.
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.
The belief that Freeland’s emerging industries need protection from international
competition during their development phase is an example of ________.
A) a local content requirement
B) a normal trade relation
C) the infant industry argument
D) the political motive of Freeland
The unbundling and repackaging of hard-to-trade financial assets into more liquid,
negotiable, and marketable financial instruments is called ________.
A) currency hedging
B) commercialization
C) currency arbitrage
D) securitization
Which of the following is true of a “follow the leader” scenario in the context of foreign
direct investment?
A) Companies that practice “follow the leader” supply each other with inputs.
B) Companies that practice “follow the leader” pressurize each other to follow
environmentally safe methods.
C) It is a frequent practice in industries with a limited number of large firms.
D) It is common in industries in which producers source component parts from
suppliers.
The most common tariffs used today are the ________ tariffs.
A) import
B) transit
C) inverted
D) export
Which of the following is an important goal of regional economic integration?
A) to increase the selling prices of products
B) to raise the living standards of people
C) to limit the choice of products available to customers
D) to establish a socialist government
Scenario: The French Government
The French Government has placed many restrictions upon the use of the English
language within their borders. They argue that the inflow of English movies, music, and
literature is responsible for the dilution of their rich culture.
According to Hofstede’s framework, a culture with large power distance tends to be
characterized by ________.
A) inequality between superiors and subordinates
B) the absence of any form of hierarchy
C) power derived from hard work and entrepreneurial drive
D) a preference for individualism over collectivism
A loan in which a parent company deposits money with a host-country bank, which
then lends the money to a subsidiary located in the host country is called a ________.
A) syndicated loan
B) back-to-back loan
C) mortgage loan
D) title loan
A(n) ________ is a right to exchange a specific amount of a currency on a specific date
at a specific rate.
A) forward contract
B) currency option
C) currency hedging
D) interest arbitrage
If the family finds it difficult to adjust on returning to Japan after three years, they will
experience ________.
A) social loafing
B) reverse culture shock
C) expatriate failure
D) halo effect
A ________ strategy often means designing products and promotions aimed at
consumers who are either dissatisfied with existing choices or who want something
distinctive.
A) global
B) stability
C) low-cost leadership
D) focus
Planning for decruitment normally occurs when a company ________.
A) discontinues manufacturing or selling in a market
B) finds that current HR levels are lesser than anticipated needs
C) plans to establish multiple foreign subsidiaries
D) hires new executive leadership to implement a growth strategy
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.
Which of the following is used by home-country governments to promote outbound
foreign direct investment?
A) political pressure
B) performance demands
C) ownership restrictions
D) sanctions
Economic integration whereby countries remove all barriers to trade among themselves,
but set a common trade policy against nonmembers is called a(n) ________.
A) preferential trade area
B) customs union
C) economic nationalism
D) free trade area
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.
Material culture often displays uneven development across a nation’s industries.
An increase in the level of trade among nations that results from regional economic
integration is called ________.
A) trade diversion
B) mercantilism
C) trade creation
D) economic nationalism
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. The regional trade agreement between
Canada, Mexico, and the United States to eliminate tariffs and non-tariff barriers
between themselves is known as the ________.
A) Central American Free Trade Agreement
B) Andean Community
C) Caribbean Community and Common Market
D) North American Free Trade Agreement