Chapter 4—Managing in a Global Environment
TRUE/FALSE
1. Business has become a unified, global field as trade barriers fall, communication becomes faster and
cheaper, and consumer tastes converge.
2. The global stage of corporate international development is also referred to as the stateless stage.
3. When Harbor Trades, a Korean-based company, makes resources including technology, managerial
skills, and patent and trademark rights available to Nano Technologies, a Russian company whereby
allowing Nano to make products similar to CBA, it is engaging in a countertrade agreement.
4. The criterion traditionally used to classify countries as developed or developing is per capita income.
5. Large international firms typically are called multinational corporations.
6. The term top of the pyramid refers to the more than four billion people who earn the least, as defined
by per capita income.
7. Fifteen member states of the EU have adopted the rupee, as a single European currency.
8. A tendency to regard their own culture as superior and to downgrade other cultures reflects an attitude
called geocentric.
9. An example of global outsourcing is seen when Gap, Inc uses low-cost Caribbean labor to cheaply
produce its clothing, and then finishes off and sells its clothing in the United States.
10. With exporting, the corporation transfers its products for sale and its production facilities in foreign
countries.
11. Seeking cheaper sources of materials or labor offshore is called offshoring.
12. The least costly and least risky direct investment is called a greenfield venture.
13. Direct investing means that the company is involved in managing the productive assets, which
distinguishes it from other entry strategies that permit less managerial control.
14. Licensing means engaging in the international division of labor so that work activities can be done in
countries with the cheapest sources of labor and supplies.
15. When a company builds a subsidiary from scratch in a foreign country it is called a greenfield venture.
16. One advantage to acquiring a wholly owned foreign affiliate is that the company that acquires it would
then have complete control.
17. A form of direct investment is franchising.
18. The goal of the European Union is to create a powerful single market system for Europe’s millions of
consumers.
19. The sub-divisions of the international environment are the economic, the sociocultural, and the
legal-political environments.
20. The basic management functions of planning, organizing, leading, and controlling are the same
whether a company operates domestically or internationally.
21. Because of cheap labor, most international business firms are headquartered in the less developed
countries of Asia and South America.
22. A multinational corporation typically receives more than 25 percent of its total sales revenues from
operations inside the parent’s home country.
23. An MNC is managed as an integrated worldwide business system.
24. The primary emphasis of polycentric companies is on their home countries.
25. Geocentric companies are truly world-oriented and favor no specific country.
26. A country’s physical facilities that support economic activities make up its infrastructure.
27. The estimated 2010 misery index figures suggest significantly less misery for almost every country as
compared to figures at the beginning of the century.
28. Market risk is defined as the risk of loss of assets, earning power, or managerial control due to
politically based events or actions by host governments.
29. The countries experiencing political stability face the greatest threat of violence.
30. Many U.S. managers fail to realize that the values and behaviors that typically govern how business is
done in the United States do not translate to the rest of the world.
31. People who value high power distances normally expect equality in power..
32. The social value of uncertainty avoidance is evident in countries like Greece, which support beliefs
that provide stability and conformity among its citizenry.
33. Collectivism means a preference for a tightly knit social framework in which individuals look after one
another and organizations protect their members’ interests.
34. According to the GLOBE Project, a society with a high performance orientation places high emphasis
on performance and rewards people for performance improvements and excellence.
35. According to the GLOBE Project, gender differentiation refers to the extent to which a society
maximizes gender role differences.
36. Cultural intelligence refers to a person’s ability to use reasoning and observation skills to interpret
unfamiliar gestures and situations and devise appropriate behavioral responses.
37. Social values greatly influence organizational functioning and management styles.
38. According to the GLOBE Value Dimensions, Japan and Russia both have very high performance
orientation.
39. A high humane orientation means that a society encourages toughness, assertiveness, and
competitiveness.
40. A low-context culture is a culture in which communication is used to enhance personal relationships.
41. A high-context interaction requires more time because a relationship has to be developed, and trust and
friendship must be established.
42. Ethnocentrism refers to a natural tendency of people to regard their own culture as superior and to
downgrade or dismiss other cultural values.
43. Ethnocentrism refers to a natural tendency of people to regard their own culture as inferior to other
cultures.
44. German, Swiss, and North American cultures are among the high-context cultures.
MULTIPLE CHOICE
1. The extent to which trade and investments, information, social and cultural ideas, and political
cooperation flow between countries is called _____.
a.
standardization
b.
industrialization
c.
globalization
d.
internationalism
e.
linguistic pluralism
2. Today’s companies compete in a _____.
a.
growingly domestic
b.
low-context culture
c.
high-context culture
d.
Greenfield economy
e.
borderless world
3. _____ is a concept that proposes that corporations can alleviate poverty and other social ills by selling
to the world’s poorest people.
a.
Cream of the crop
b.
Skimming the barrel
c.
Bottom of the pyramid
d.
Top of the peak
e.
Base hierarchy
4. The Digitec company has recently decided to design and manufacture a laptop that retails for under
$50, in an effort to make information technology available to people in places like rural Africa and
rural India. This is known as what type of strategy?
a.
Bottom of the pyramid strategy
b.
Skimming the barrel strategy
c.
Cream of the crop strategy
d.
Top of the peak strategy
e.
Base price strategy
5. Stateless stage is also referred to as the _____ stage.
a.
multinational
b.
global
c.
multidomestic
d.
international
e.
domestic
6. Color Copiers operates in a true global fashion, making sales and acquiring resources in whatever
country offers the best opportunities and lowest cost. The company can be called a:
a.
Stateless
b.
Multinational
c.
International
d.
Domestic
e.
Multidomestic
7. _____ places an emphasis on a worldwide perspective.
a.
Polycentric companies
b.
Geocentric companies
c.
Ethnocentric companies
d.
Regiocentric companies
e.
Domestic companies
8. Which of the following refers to engaging in the international division of labor so as to obtain the
cheapest sources of labor and supplies regardless of country?
a.
Franchising
b.
Licensing
c.
Market entry strategy
d.
Outsourcing
e.
Activity
9. The Maquiladora industry along the Texas-Mexico border on the Mexico side uses cheap labor for
assembling products. This lowers the price for U.S. consumers and is an example of:
a.
licensing.
b.
joint venture.
c.
outsourcing.
d.
franchising.
e.
none of these.
10. Which of the following is an entry strategy in which the organization maintains its production facilities
within its home country and transfers its products for sale in foreign markets?
a.
Franchising
b.
Licensing
c.
Exporting
d.
Greenfield venture
e.
Joint venture
11. Go RVing, a U.S. company, built a subsidiary from scratch in England. This is an example of:
a.
franchising.
b.
greenfield venture.
c.
joint venture.
d.
exporting.
e.
licensing.
12. Exporting, licensing, and direct investing are called _____ strategies because they represent alternative
ways to sell products and services in foreign markets.
a.
globalized
b.
expansion
c.
retrenchment
d.
market entry
e.
concentrated business
13. As a first step into international business, which two countries are most companies going to today?
a.
Russia and Japan
b.
Sweden and Germany
c.
China and India
d.
Brazil and Philippines
e.
Indonesia and Brazil
14. ____ is the most widespread approach to international involvement in China and India.
a.
Importing
b.
Exporting
c.
Manufacturing
d.
Outsourcing
e.
Greenfield venture
15. Which of the following is a form of franchising?
a.
Direct investing
b.
Licensing
c.
Exporting
d.
Countertrade
e.
Barter trade
16. CRL, a European plastics manufacturer, is considering forming an alliance with a U.S. military goods
manufacturer to develop a new type of polymer that can be used for international industrial and
military applications. Such a partnership represents what type of direct investment?
a.
Franchising
b.
Joint Venture
c.
Wholly owned affiliate
d.
Greenfield venture
e.
Outsourcing
17. Your company is interested in producing and marketing a line of coffee that will penetrate the Chinese
market. Your firm is willing to supply the equipment, products, product ingredients, trademark, and
standardized operating system to entrepreneurs. What type of strategy are you going to use?
a.
Wholly owned foreign affiliate
b.
A greenfield venture agreement
c.
A franchise
d.
An export agreement
e.
Barter trade
18. Which of the following pairs of alternatives closely resemble each other in the amount of ownership,
control and risk obtained in operating international businesses?
a.
Direct investment/franchising
b.
Wholly owned foreign affiliate/countertrade
c.
Exporting/licensing
d.
Franchising/licensing
e.
All of these
19. A foreign subsidiary over which an organization has complete control is called a:
a.
joint venture.
b.
licensing agreement.
c.
franchise.
d.
wholly owned foreign affiliate.
e.
foreign venture.
20. The Write Pens, Inc. wants to reduce transferring costs by producing closer to the consumer in a
foreign country. This will also help in reducing transportation and storage costs. Which strategy would
be the best to use given the circumstances?
a.
Franchising
b.
Exporting
c.
Direct investing
d.
Barter agreement
e.
Licensing
21. The management of business operations conducted in more than one country is called:
a.
global management.
b.
international management.
c.
outsourcing management.
d.
planning management.
e.
domestic management.
22. ____ aspects of management do not change when doing business internationally.
a.
Planning
b.
Organizing
c.
Controlling
d.
Leading
e.
All of these
23. Language, values, religion, and education all describe which dimension in the international
environment?
a.
Economic
b.
Legal
c.
Political
d.
Sociocultural
e.
Technological
24. In international operations, the economic environment represents all of the following factors except:
a.
infrastructure.
b.
resource and product markets.
c.
laws and regulations.
d.
inflation.
e.
exchange rates.
25. Resource development, infrastructure, and exchange rates all describe which dimension in the
international environment?
a.
Economic
b.
Legal
c.
Political
d.
Sociocultural
e.
Technological
26. In international operations, the economic environment includes:
a.
shared knowledge, beliefs and values.
b.
political risks.
c.
social organizations.
d.
infrastructure.
e.
tariffs, quotas, and taxes.
27. Which of the following is a sociocultural factor in the international environment?
a.
Language
b.
Exchange rates
c.
Tariffs, taxes, and quotas
d.
Per capita income
e.
Infrastructure
28. _____ is normally used to classify countries as developed or developing.
a.
Exchange rates
b.
Interest rates
c.
Gross national product
d.
Per capita income
e.
Inflation rates
29. Your grocery store in India is having trouble getting the local farmers to supply you with the proper
produce. This is a problem with India’s:
a.
product market.
b.
resource market.
c.
infrastructure.
d.
economy.
e.
power distance.
30. ____ generally are located in Asia, Africa and South America.
a.
MNCs
b.
EUs
c.
LDCs
d.
WTOs
e.
MFNs
31. Exchange rates are included in which of the following international environments?
a.
The legal-political sector
b.
The economic environment
c.
The sociocultural environment
d.
The barter system environment
e.
The government sector
32. A country’s physical facilities that support economic activities make up its _____.
a.
resource markets
b.
infrastructure
c.
physical markets
d.
product markets
e.
plants and equipment
33. If you built a computer company in Africa and then found that your product was having difficulty
being distributed to customers because of the road system, your problem would be related to:
a.
an inadequate infrastructure.
b.
an economy incapable of supporting growth.
c.
a poor resource market.
d.
a poor product market.
e.
none of these.
34. The legal-political environment, in international operations, includes which of the following?
a.
Shared knowledge, beliefs and values
b.
Political risks
c.
Social organizations
d.
Infrastructure
e.
None of these
35. Political risk is defined as an organization‘s risk of _____ due to politically based events or actions by
host governments.
a.
loss of assets
b.
managerial control
c.
earning power
d.
all of these
e.
managerial control and earning power only
36. A company’s risk of loss of assets, earning power, or managerial control due to politically based events
or action by host government is referred to as:
a.
MFN.
b.
political risk.
c.
tariffs.
d.
political instability.
e.
terrorism.
37. Rooftop International, Inc. buys insurance against host government takeover when investing in foreign
countries. This is an example of which sector of the international environment?
a.
Legal-political
b.
Sociocultural
c.
Technological
d.
Economic
e.
Infrastructure
38. Which of the following is NOT a legal-political factor in the international environment?
a.
Laws and regulations
b.
Language
c.
Tariffs, quotas, taxes
d.
Political risk
e.
Government takeovers
39. All of the following are considered emerging economies EXCEPT _____.
a.
Brazil
b.
Russia
c.
India
d.
China
e.
Canada
40. A foreign terrorist kidnaps your firm’s marketing VP while the VP is in the host country. This is a
harsh example of:
a.
economic development.
b.
infrastructure.
c.
political risk.
d.
international law.
e.
social risk.
41. A.R.C. is a large non-profit humanitarian aid organization that has been forced to pull out of several
African markets in recent years due to civil wars and large-scale violence. This demonstrates which
frequently cited problem for international companies?
a.
Political instability
b.
Communist governments
c.
Economic instability
d.
Political risk
e.
Financial risk
42. A nation’s _____ includes the shared knowledge, beliefs and values, as well as the common modes of
behavior and ways of thinking, among members of a society.
a.
power distance
b.
culture
c.
masculinity
d.
individualism
e.
uncertainty avoidance
43. Which of the following companies place an emphasis on their home countries?
a.
Polycentric
b.
Geocentric
c.
Ethnocentric
d.
Global
e.
Regiocentric
44. _____ refers to the degree to which people accept inequality in authority among institutions,
organizations, and people.
a.
Power distance
b.
Uncertainty avoidance
c.
Individualism
d.
Collectivism
e.
Masculinity
45. Organizations whose social values reflect low power distance:
a.
are highly democratic.
b.
expect superiors to make all of the decisions..
c.
expect equality in power.