Scenario: Sam Dearing, Budding International Financier
Sam Dearing is a summer intern in the arbitrage department at a prestigious Wall Street
firm. Sam is hoping to be offered a full-time position at the firm after he graduates from
college, and therefore, Sam knows that he must demonstrate a strong understanding of
how exchange rates work.
Sam already knows that the ________ tells us how much of one currency we must pay
to receive a certain amount of another.
A) exchange rate
B) par value
C) law of one price
D) purchasing power parity theory
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. Building a subsidiary abroad
from the ground up is called a greenfield investment.
Which of the following is a contractual entry mode in which a company owning
intangible property grants another firm the right to use that property for a specified
period of time?
A) franchising
B) licensing
C) management contract
D) strategic alliance
Restrictions on the convertibility of a currency into other currencies are referred to as
________.
A) administrative delays
B) currency crisis
C) local content requirements
D) currency controls
Which of the following steps of the market screening process examines the effects of
country image on market-entry decisions?
A) identification of basic appeal of a market
B) measurement of market or site potential
C) assessment of the national business environment
D) selection of the market or site
Scenario: Global Manufacturing Inc. (GMI)
Global Manufacturing Inc., a fast-growing U.S. company, plans for a production system
in which two components of its product will be manufactured in locations where the
cost of production is lowest. The components will then be taken to maquiladoras for
final assembly. GMI plans to purchase an existing company in Brazil to produce
component A and build a subsidiary in Thailand to produce component B.
In which of the following accounts would GMI’s purchase of the company in Brazil
appear?
A) the current account of the United States
B) the current account of Brazil
C) the capital account of the Thailand
D) the capital accounts of Brazil and the United States
Which of the following is true regarding the protection of infant industries from
international competition?
A) It is difficult for governments to identify the industries worth protecting.
B) Protection of infant industries helps domestic companies become innovative.
C) Protection from competition leads to improved quality and lower prices.
D) Protection leads to more economic good than harm.
Scenario: Beanstalk International
Beanstalk International is a rapidly growing company with well-established subsidiaries
in several nations. The company wants to follow a strategy of adapting its products and
marketing activities in each national market to suit local preferences. This strategy aims
at creating value for its customers.
Which of the following is a primary activity that creates value for Beanstalk’s
customers?
A) firm infrastructure
B) procurement
C) human resource management
D) inbound logistics
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.
Wallace’s executive team reviews the stages of the international product life cycle to
understand better what to expect when the product is sold overseas. Since there is
virtually no export market for the product at present, the product is most likely in which
of the following stages of the international product life cycle?
A) maturing product stage
B) new product stage
C) product decline stage
D) standardized product stage
Which of the following is a political motive behind a government’s intervention in
trade?
A) promoting a strategic trade policy
B) gaining influence over other nations
C) protecting a country from unwanted cultural influence
D) protecting young industries from competition
________ take ownership of the merchandise when it enters their country and accept all
the risks associated with generating local sales.
A) Agents
B) Distributors
C) Sales representatives
D) Freight forwarders