Chapter 5—The Global Environment Key
1. No organization is insulated from the effects of foreign markets and competition.
2. We can identify four distinct levels of international activity that differentiate organizations.
3. MNC stands for multiple nations and continents.
4. Only two of the worlds ten largest banks are headquartered in the United States.
5. Importing involves merchandise but not services.
6. Licensing is the easiest way of entering a new market.
7. Maquiladoras face competition in China.
8. A strategic alliance and a joint venture are the same thing.
9. Magna International Inc., a Canadian company, offered to buy Opel, a German company, from GM. This is
an example of direct investment.
10. International licensing agreements involve regulations for truckers transporting products between countries.
11. Most MNCs use direct investment exclusively because they are so big they can afford to buy companies.
12. France has a relatively low level of government ownership among the market economies.
13. Market systems are clusters of countries that engage in high levels of trade with one another.
14. High-potential/high-growth economies have been relatively underdeveloped and immature and, until
recently, were characterized by weak industry, weak currency, and relatively wealthy consumers.
15. Political stability in the Middle East makes it a less risky place to conduct business.
16. Most countries have pure systems of private ownership or pure systems of public ownership.
17. Stability can be viewed in two ways¾as the ability of a given government to stay in power in the country
and as the permanence of government policies toward business. A country that is stable in both respects is
preferable because managers have a higher probability of successfully predicting how government will affect
their businesses.
18. Export restraint agreements are accords signed by two parties that voluntarily limit the volume or value of
goods exported to a particular country.
19. Dumping is selling items for more than fair market value.
20. A country’s culture includes all the values, symbols, beliefs, and language that guide behavior.
21. Packaging for rice should be green because all countries think green is healthy.
22. Geert Hofstede identified five fundamental differences that can be used to characterize people in different
cultures. They are time, power, age, race, and gender.
23. People who exhibit short-term outlook behaviors tend to place a high premium on material possessions,
money, and assertiveness.
24. In contrast to MNCs, medium-size organizations doing business abroad are much more selective about the
markets they enter.
25. Fewer and fewer small organizations are also finding that they can benefit from the global economy.
26. To effectively plan and make decisions in a global economy, managers need to understand local market
conditions and technological factors that will affect their operations.
27. Japanese firms give managers of their foreign operations relatively great responsibility. As a result, top
executives frequently travel to the foreign operations.
28. Renata is a tax attorney in Germany. Her service is a(n) ____ business.
29. American Eagle is a regional airline that flies in the United States and Canada. It is an example of a(n) ____
business.
30. A(n) ____ business is one that is primarily based in a single country but that acquires some meaningful
share of its resources and/or revenues from other countries.
31. Coca-Cola is based out of Atlanta but reaches into hundreds of countries. The product is locally packaged,
but the cola inside is essentially the same throughout the world. Coca-Cola is edging closer to being a(n) ____
business.
32. Boeing sells planes to commercial airlines around the world. It has suppliers around the world too. The
defense side of Boeing sells primarily to the federal government. It is a(n) ____ business.
33. eBay is based in San Jose. Buyers and sellers on the site are located around the world. eBay is a(n) ____
business.
34. A(n) ____ business transcends national boundaries and is not committed to a single home country.
35. Which of the following statements can be used to explain the growth of international business?
36. Which of the following describes what has occurred in international business from 1960-2000?
37. Which of the following is the least intense level of international business strategy?
38. United States farmers are the biggest producers of corn. China’s demand for corn has increased. The U.S. is
a corn ____.
39. Two U.S. companies Cargill and Archer Daniels Midland purchase 25% of the world cocoa supply from
farmers in West Africa. These companies use
40. ____ is the least risky type of international business in which firms usually become involved.
41. Which of the following is NOT a potential disadvantage associated with an import/export operation?
42. A(n) ____ strategy requires little initial investment, is heavily regulated, and provides little opportunity to
modify products for local conditions.
43. Which of the following statements does NOT describe a characteristic of importing/exporting?
44. A disadvantage of importing/exporting is
45. In the U.S. Starbucks does not franchise. It has a(n) ____ agreement with Barnes and Noble.
46. The National Football League and team owners allow shirts, hats, blankets, and many other products to be
sold with team logos on them. The teams and league get a percentage of the sale. The teams have chosen to use
a(n) ____ strategy to generate more income.
47. Which of the following is NOT a reason for using a licensing agreement as a means of entering international
business?
48. Rest stops in New Jersey have Burger King restaurants. The NJ Transit Authority and Burger King use a(n)
____ strategy.
49. China requires foreign companies to form ____ with Chinese companies so that the Chinese get access to
the latest technology. China forces a(n) ____ strategy.
50. A(n) ____ strategy involves a partnership with a long-term commitment that can be used to acquire new
technology and information.
51. ____ is the form of international business involvement in which two or more firms have an equity position
in an operation.
52. Which of the following is a disadvantage of joint ventures/strategic alliances?
53. ____ strategy is considered the highest level of involvement in international business.
54. Which of the following statements about maquiladoras is FALSE?
55. Compassion International is a children’s charity that provides basic necessities, schooling, and job training
for poverty-stricken children around the world. This not-for-profit organization would require which type of
investment when it enters a new country?
56. Starbucks owns one third of its stores outside the U.S. Those stores are
57. The advantage of direct investing is
58. McDonalds operates restaurants around the world in airports. The agreement between McDonalds and the
airports is a(n)
59. Opponents to the maquiladoras concept are most critical of its
60. The major reason so many companies from all over the world are embracing the maquiladoras concept is
because of
61. Which of the following is a problem associated with the implementation of a direct investment strategy?
62. Which of the following is the type of economy most countries in the world are striving to attain?
63. ____ economies are recognizable by their tendency to allow market forces to determine business strategies
and to have private ownership of property.
64. Germany is a mature market economy. One major problem GE expected to face when it began operating in
Germany was
65. U.S. managers have the least difficulty operating in ____ economies.
66. The U.S. government became the majority shareholder in GM in 2009. The Obama administration was
moving the U.S. away from a ____ economy.
67. Which of the following countries does NOT have a mature market economy?
68. Which of the following countries is NOT a member of the European Union (EU)?
69. Which of the following is NOT an example of a mature market system?
70. With whom is the United States involved in a mature market system?
71. Which of the following countries is NOT a member of the European Union?
72. Which of the following describes one of the reasons for the establishment of the European Union?
73. Which of the following countries is NOT part of Pacific Asia?
74. ____ is an example of a high-potential/high-growth economy.
75. One of the primary challenges facing those who would like to enter a high-potential/high-growth economy
is
76. Which of the following statements is NOT true about the WTO?
77. Which of the following is NOT one of the environmental challenges identified in the text that complicates
international management?
78. Which of the following is an example of an economic challenge faced by international managers?
79. Which of the following is NOT an example of an economic challenge faced by international managers?
80. Trees are a part of a country’s
81. A nation’s cost of living is part of its