International Business, 14e (Daniels et al.)
Chapter 12 Country Evaluation and Selection
1) Comparing countries in international business is LEAST useful for determining the ________.
A) best location for sales and production
B) sequence of entering different countries
C) amount of resources to allocate in each country
D) selection of which managers to send to which countries
2) International managers most likely need to understand how to evaluate international geographic
alternatives because ________.
A) they usually have a surplus of resources and need to take advantage of all opportunities
B) many regional trading groups prohibit companies from outside of the trading group from
manufacturing in more than one member country
C) the commitment of resources to one locale may require forgoing projects in other locales
D) decreased worldwide transportation costs and increased trade liberalization now allow companies to
serve worldwide markets from a single production location
3) Executives at Wilson Enterprises need to determine how to leverage and improve the firm’s existing
competencies on a global basis. What are the two most basic questions that they must answer?
A) Which markets should we serve and where should production be located to serve those markets?
B) What are the short-term competitive advantages of the project and what is the return on investment?
C) What is the total investment required and what are the managerial resources needed to supervise the
investment?
D) What is the availability of land and what is the cost of labor?
4) A company’s overall geographic strategy should be flexible enough to ________.
A) implement concentration strategies instead of diversification strategies
B) respond to new opportunities and withdraw from less profitable ones
C) import from anywhere in the world to a single production location
D) export anywhere in the world from a single production location
5) Elison Enterprises is planning international geographic expansion. A manager at Elison has been
given the task of scanning for locations primarily to _______.
A) reduce the number of options available to a manageable number for further detailed analysis
B) assure the compatibility between the mode of corporate operation and the country
C) assure that all countries within a region have similar investment climates
D) decide whether to use a concentration or a diversification strategy
6) Which of the following most accurately compares the techniques of scanning versus detailed analysis
of countries?
A) Scanning is used for planning and detailed analysis is used for control.
B) Detailed analysis is used to consider countries overlooked in the scanning process.
C) Scanning considers a large number of countries so that only the most promising ones undergo a
detailed analysis.
D) Scanning compares one country to another, whereas detailed analysis compares regions within a
single country.
7) Opal Computers is considering international production expansion. After scanning to decide on a few
countries to consider more closely, Opal managers will most likely need to ________.
A) identify firms with which to form joint ventures
B) add some more countries for closer consideration
C) travel to the locations to analyze and collect specific data
D) make final decisions by expanding in locations near their rivals
8) Escalation of commitment is best described as the ________.
A) strategy of first entering a country on a small scale
B) process of entering a country because “everyone else is going there“
C) expectation of a higher return in more politically risky environments
D) increased likelihood of investing in a country because of having spent considerable time and money
in examining it
9) Sales expansion is probably the most important variable in determining international location
decisions. This statement is most likely based on the assumption that ________.
A) consumer demand exceeds supply
B) increased sales will lead to more profits
C) the company will have a first-mover advantage
D) raw materials are available in the country targeted for sales
10) Dawson Manufacturing produces and sells DVD players and is planning to expand sales
internationally. Dawson has narrowed down the list of potential countries to India and Guatemala. A
Dawson manager has the task of obtaining data regarding the number of DVD players sold annually in
India and Guatemala. If unable to locate this information, she might most likely estimate the sales
potential of these two countries by ________.
A) determining average wages
B) calculating future inflation rates
C) reviewing the countries’ dependence on steel imports
D) examining the sales history of flat-screen televisions
11) Gucci, a maker of luxury fashion and leather goods, plans to expand its sales market. The firm needs
to compare countries for the market potential of its products. Which of the following is the best indicator
for Gucci to use?
A) per capita income in each country
B) population size of each country
C) the number of millionaires in each country
D) gross domestic product for each country
12) When examining economic and demographic variables to compare countries’ sales potential for your
product, you should also consider all the following EXCEPT which one?
A) If countries depend heavily on the import of raw materials, what is the price of elasticity for the
demand?
B) Consumers in some countries may more conveniently substitute certain products than consumers in
some other countries.
C) Consumers in developing countries may leapfrog technologies by first purchasing the latest products.
D) Trading blocs may enhance sales potential above what is indicated in individual country figures.
13) Which of the following is most likely a true statement about companies’ acquisition of
resources/assets abroad?
A) Regardless of industry, cheap labor is the most sought after resource.
B) Resource availability limits a firm’s production location choices.
C) Regardless of industry, raw materials are the most sought after resource.
D) Risks are higher for resource-seeking than for sales-seeking foreign operations.
14) The ability to compare production costs among countries in an effort to determine where to locate
production is significantly hampered by all of the following EXCEPT ________.
A) the number of ways the same product can be made
B) restrictions on the international flow of data
C) the ways that laws may be enforced
D) future costs from exchange rate changes
15) In which of the following situations would tax rate differences among countries be most important
for deciding where to place an investment?
A) Companies find advantages in being located near specialized private and public institutions.
B) Companies must compare the benefits of labor- versus capital-intensive production.
C) Companies want to serve an entire region within a regional trading bloc.
D) Companies must deal with difficult start-up regulations.
16) Labor cost advantages gained by moving into a country with low wages may be short-lived because
________.
A) transport costs go up to cancel out the cost savings
B) tax increases cancel out all labor cost differentials
C) rivals adopt capital-intensive production methods
D) competitors follow leaders into low-wage areas
17) Which of the following statements is NOT true about risk as it affects companies’ choice of locations
for foreign operations?
A) Companies and their managers differ in their perception of what is risky.
B) One company’s risk may be another company’s opportunity.
C) There are means to reduce risk other than avoiding locations.
D) Companies choose the cheapest location regardless of risks.
18) A company’s operations are most likely to be taken over by a host government when ________.
A) the operations are relatively small and, thus, unlikely to incur the wrath of the company’s home
government
B) the operations are substantial and have a widespread effect on the country because of the company‘s
size
C) the host country becomes involved in a regional war
D) the firm produces discretionary rather than essential products
19) In terms of political risk, it is most accurate to state that high risk ________.
A) affects all geographic regions of a country equally
B) affects all foreign companies in the same manner
C) if avoided, may lead to higher competitive risk
D) triggers government turnovers
20) Fidelity Manufacturing is considering expanding its operations into the Phillipines. A manager at
Fidelity has the task of predicting political risk in the Phillipines. Which of the following approaches
should the manager LEAST use to accomplish the task?
A) analyzing the market share of competitors in the country
B) analyzing the country’s past political patterns and trends
C) seeking and analyzing opinions of influential people in the country
D) examining social and economic conditions within the country
21) The concept of liquidity preference in international operations refers to ________.
A) a company’s willingness to accept a lower rate of return on investments in countries where it can
more easily sell them and convert the proceeds at a favorable rate
B) a company’s willingness to accept lower rates of return in poor countries that really need the
investments
C) management’s need to maintain sufficient funds, preferably in local currency, in each country of
operation to ensure meeting daily cash needs
D) investors’ preference for foreign stocks over foreign bonds because of the larger market for them
22) Risks to companies from natural disasters and communicable diseases are ________.
A) evenly distributed around the world
B) more complicated today because of publicity
C) a minor issue to global firms because of insurance
D) most prevalent in the poorest countries of the world
23) U.S. companies generally put earlier and more sales-seeking emphasis on countries ________.
A) with the largest economies
B) with regional trading blocs and high tariffs
C) where governments give operating incentives
D) where operating conditions seem similar to those at home
24) The lower survival rate of foreign companies in comparison to local firms for many years after they
begin operations is known as ________.
A) ethnocentric reaction
B) polycentric reaction
C) liability of foreignness
D) most-favored-nation behavior
25) Which of the following best explains why U.S. firms typically place earlier and greater emphasis on
expansion into Canada and the U.K.?
A) most significant sales opportunities
B) similarities in culture and legal systems
C) availability of necessary natural resources
D) government incentives for allied nations
26) Which of the following best explains Blockbuster’s failed expansion into Germany?
A) laws limiting hours of operation
B) lack of public interest in films
C) inadequate tax incentives
D) communication problems
27) The crowding of a foreign market to prevent competitors’ advantages is known as ________.
A) oligopolistic reaction
B) concentration strategy
C) liability of foreignness
D) a harvesting strategy
28) Companies are more likely to gain advantages by locating near competitors for all the following
reasons EXCEPT to ________.
A) take advantage of competitors’ research to pick an ideal location
B) attract multiple suppliers and personnel with specialized skills
C) agree with competitors on production limitations
D) attract buyers who want to compare suppliers
29) An example of a first-mover advantage in international operations is ________.
A) gaining economies of scale at a lower output level than competitors
B) increasing sales response functions and customer service
C) using a small country for market tests prior to entering a large country
D) lining up the best suppliers and distributors before competitors enter the market
30) Which of the following describes a company’s strategy of moving first to those countries where local
competitors are most likely to catch up to the firm’s innovative advantage?
A) lead country strategy
B) imitation lag strategy
C) oligopolistic reaction strategy
D) liability of foreignness strategy
31) A manager has the task of collecting and analyzing data that will help the firm decide where to
locate its international operations. Which of the following best describes how the manager should handle
this task?
A) conduct extensive research, regardless of the expense, in order to avoid costly mistakes
B) compare the costs of data collection with the probable payoff for the firm in order to budget and
schedule the collection
C) continue data gathering until all data have been collected, regardless of how long this takes
D) focus all data collection on governmental resources because they have the highest reliability
32) Which of the following is the LEAST likely reason for inaccuracies in published governmental data?
A) translation errors from the host country language
B) limitations of government resources and finances
C) purposeful publication of misleading information
D) false information provided to data collectors
33) Which of the following LEAST explains why inaccuracies appear in published information about
countries?
A) inclusion of both legal and illegal economic activities
B) inclusion of both market and non-market economic activities
C) poor methodology used in data collection
D) use of different translation software
34) Which of the following is generally the most costly information source for companies?
A) individualized reports
B) reports from international agencies
C) reports from government agencies
D) published reports by accounting firms
35) Top executives at Jordan, a U.S. consulting firm, are debating whether or not to expand into a
country with a great deal of violence by staffing mostly with U.S. personnel. A vice president argues
that Jordan should forego sending its employees there because of the high risk for them of kidnappings
in the region. Which of the following statements best supports the vice president’s position?
A) There is a high correlation between violence and life-threatening natural disasters.
B) Violence is a harbinger of additional risks that affect operations negatively.
C) Local personnel are immune from violence and are capable of filling positions.
D) The ability to evacuate people when necessary is much slower than it was in the past.
36) Top executives at Jordan, a U.S. consulting firm, are debating whether or not to expand operations
into a country with a great deal of violence by staffing mostly with U.S. personnel. A vice president
argues that Jordan should send its employees there. Which of the following statements LEAST supports
the vice president’s position?
A) Jordan can evacuate personnel more quickly than in earlier eras in case of a real emergency.
B) It is hard to identify countries without a possibility for violence.
C) Operating costs are lower in violent areas.
D) Jordan’s industry does not allow the firm the luxury of avoiding high risk locations.
37) Grids are a useful method of comparing countries for international business expansion because they
________.
A) generally show how countries will perform in the future
B) show risk on one axis and opportunity on another
C) set minimum scores for proceeding further
D) highlight first-mover advantages
38) A manager needs to prepare a grid to compare countries for location of the firm’s international
operations. It would be most useful for the manager to ________.
A) prepare an opportunity analysis in-house, but out-source the risk analysis
B) have agents within each country supply governmental data
C) prepare the risk analysis in-house, but out-source the opportunity analysis
D) use a team made up of people from different functions within the company
39) Which of the following best describes the purpose of using of an opportunity-risk matrix for
comparing countries?
A) narrow alternatives so decision makers can make a detailed analysis of the strongest candidates
B) eliminate countries that have specific unacceptable conditions
C) determine whether to use a concentration versus diversification strategy for international expansion
D) estimate where competitors are most likely to globalize
40) The major use of the matrix as a tool in international location strategy is to ________.
A) pinpoint acceptable and unacceptable characteristics of countries
B) indicate the relative placement of countries in terms of attributes
C) rank countries on the basis of expected investment return
D) show the degree of certainty for projected returns
41) In a concentration strategy of foreign expansion, a company would go to ________.
A) many countries very rapidly, and then build up slowly in each
B) a foreign country with one product and not sell other products in that country until a target market
share is reached
C) a reporting system that measures performance on a regional rather than a country-by-country basis
D) one or a few foreign countries and build a strong involvement there before going to other countries
42) In a diversification strategy for international expansion, a company would move ________.
A) rapidly into many foreign countries, and then gradually increase its presence in those countries
B) rapidly into a few foreign countries with many of its products and most of its resources
C) into one foreign country and fully expand its product lines in that country before moving to another
country
D) move quickly into a regional foreign market but build up its resources in only a few of the countries
in the region
43) A company should probably use a concentration strategy for international expansion when there are
________.
A) high needs for product adaptation and low growth in each market
B) short competitive lead time and low spillover effects
C) high growth rate and long competitive lead time
D) low sales stability and short competitive lead time
44) The decision-making process for a company’s reinvestment choices is often different from those for
new investment choices because ________.
A) internal rate of return and other financial measurement criteria are more difficult to compile and
analyze on existing operations, given currency translation distortions
B) failure to support an existing investment may jeopardize the firm’s operations and competitiveness in
that country
C) most of the net value of foreign investment comes from new international capital transfers rather than
from reinvestment of earnings abroad
D) corporate management feels that country managers are best able to make divestment decisions
45) Which of the following is NOT true about the harvesting or divestment of foreign operations?
A) One of the motives is to use resources where the performance prospects are better.
B) Companies can harvest or divest by selling existing facilities.
C) Closing a facility can be difficult because of governmental performance contracts.
D) Companies have tended to divest too soon, rather than working to improve performance.
46) Which of the following best explains why foreign subsidiary managers are often reluctant to propose
divestments in the countries where they are working?
A) They are afraid of proposing the elimination of their jobs.
B) They are usually poorly trained in how to sell units or how to close them down.
C) They are too nationalistic to examine political risk objectively.
D) Many are in countries where the cultural attribute of power-distance is very high.
47) The origin of investment proposals differs from the origin of divestment proposals in that the
divestment proposals are more likely to come from ________.
A) subsidiary management
B) outside the organization
C) higher up in the organization
D) line personnel as opposed to staff personnel
48) A go-no-go decision means ________.
A) an individual project decision is based on whether the project meets threshold criteria
B) projects are ranked and approved from the top of the list down until available resources are exhausted
C) management reviews existing information and decides whether additional individualized feasibility
studies are warranted
D) projects are approved or disapproved based on the potential ease of divestment
49) Instead of comparing different proposals involving foreign operations, companies often make
decisions by looking at proposals one at a time. All of the following are reasons for this behavior
EXCEPT which one?
A) Companies need to respond quickly to opportunities.
B) Defensive decisions typically need to be made rapidly.
C) A lack of comparable data on different countries renders comparison impossible.
D) Conclusion of different proposals or studies does not usually happen simultaneously.
50) Assume Company A receives a proposal from Company B to be a joint venture partner abroad.
Company A is most likely to make its decision based on ________.
A) an opportunity-risk matrix
B) a go-no-go basis
C) a global matrix comparison
D) an oligopolistic reaction
51) Which of the following reasons most compels companies to make location decisions on one
international opportunity at a time rather than comparing among two or more?
A) The lack of comparability in data among countries renders comparison unfeasible.
B) The information on some countries is so unreliable that companies must deal with these countries
separately.
C) Decisions are made by teams, and it is usually not feasible to give so many people time away from
their usual duties to examine multiple proposals.
D) If an important customer develops opportunities in a foreign country, a company may have little
alternative except to follow that customer’s lead.