Chapter 8: Global Management
TRUE/FALSE
1. In the same way that business is defined as the buying and selling of goods and services, global
business is defined as the buying and selling of goods and services by people from different countries.
2. Regional domestic investment is a method of investment in which a company builds a new business or
buys an existing business in a foreign country.
3. Direct foreign investment is an increasingly important and common method of conducting global
business.
4. Multinational corporations are corporations that own businesses in two or more countries.
5. Random House publishing company has signed a contract with the Korean-owned Joo-Ang Ilbo Media
Network, which will sell Random House books in Asia’s third largest market. This is an example of a
direct foreign investment.
6. No matter what part of the world they live in, most consumers prefer to buy domestically made
products rather than imported products.
7. The 20 percent tax on all leather shoes imported from China and Vietnam proposed by the European
Union’s trade commission is an example of protectionism.
8. The basis for determining whether Chupa Chups, the world’s largest maker of lollipops, received an
illegal subsidy from a European Union member nation lies in an examination of the category in which
the candy was classified.
9. The Maastricht Treaty of Europe was designed to create the European Union and make the euro, the
one common currency, for all members.
10. The North American Free Trade Agreement (NAFTA) is a regional trade agreement between Canada
and the United States. No other nations have signed this trade agreement.
11. In a multinational company, managers at company headquarters value global consistency as a
company policy over local adaptation because global consistency simplifies decision-making at
corporate headquarters.
12. Customs classification is a nontariff trade barrier. It is important to international marketers because the
category assigned by customs agents can affect the size of the tariff and the impact of import quotas.
13. One reason that Americans get more for their money is that the U.S. marketplace is the most
competitive in the world even though it has been one of the hardest for foreign companies to enter.
14. Countries that have not been open to foreign companies and products have higher prices due to a low
level of competition. For example, Japanese trade barriers amount to a 51 percent tax on food for the
average Japanese family.
15. Historically, companies have generally followed the phase model of globalization.
16. The phase model of globalization means that companies made the transition from a domestic company
to a global company in three sequential phases. The three phases are exporting, followed by wholly
owned subsidiaries, and finishing with strategic alliances.
17. It appears that all companies follow the phase model of globalization when entering foreign markets.
18. According to the Fair Labor Association, employees should not be required to work more than 40
hours and 20 hours of overtime.
19. The two kinds of cooperative contracts are licensing and franchising.
20. The biggest disadvantage associated with licensing is that the licensor gives up control over the quality
of the good or service sold by the foreign licensee.
21. An international joint venture is an example of mutually beneficial direct foreign investment.
22. One of the disadvantages of global joint ventures is that, unlike licensing and franchising, they do not
help companies to avoid tariff and nontariff barriers to entry.
23. Global joint ventures can be difficult to manage because they represent a merging of four cultures.
24. Unlike licensing, franchising, or joint ventures, wholly owned affiliates are 100 percent owned by the
parent company.
25. Deciding where to go global is just as important as deciding how your company will go global.
26. Two factors that help companies determine the growth potential of foreign markets are purchasing
power and foreign competitors.
27. The criteria for choosing an office/manufacturing location are different from the criteria for entering a
foreign market.
28. When conducting global business, companies should attempt to identify the two types of political risk,
which are political uncertainty and economic uncertainty.
29. The three strategies used to minimize or to adapt to the political risk inherent to global business are
avoidance, control, and cooperation.
30. A global business can prevent or reduce political risks by using a proactive strategy in which it lobbies
foreign governments or international trade agencies to change laws, regulations, or trade barriers.
31. The difficulty that companies face when trying to adapt management practices to cultural differences is
that different cultures will probably perceive management practices and policies differently.
32. Power distance is greatest in countries where power is distributed equally across all societies and
organizations.
33. SpongeBob SquarePants, the animated underwater adventures of a group of sea creatures, will soon be
available in China, but due to restrictions on conventional promotion, the event will be promoted on
the Great Wall. This modification of promotional strategy reflects a local adaptation to the Chinese
culture.
34. When a company based in Singapore hires an Australian manager to run its manufacturing plant in
Australia, the manager would be classified as an expatriate.
35. The evidence clearly shows that how well an expatriate’s spouse and family adjust to the foreign
culture is the most important factor in determining the success or failure of an international
assignment.
36. According to “What Really Works,” studies have proven that cross-cultural training helps employees
to adjust more quickly to new cultures that they are unfamiliar with.
MULTIPLE CHOICE
1. Global business:
a.
is the buying and selling of goods and services to people from different countries
b.
includes any sale of goods and services
c.
only involves companies with more than 50 employees
d.
refers to sales made to people from different cultures, different regions, and different
nations
e.
is unregulated
2. ____ is a method of investment in which a company builds a new business or buys an existing
business in a foreign country.
a.
A strategic alliance
b.
Direct foreign investment
c.
A global new venture
d.
A joint venture
e.
Direct exporting
3. Which of the following countries has the largest direct foreign investment in the United States?
a.
Netherlands
b.
Germany
c.
Japan
d.
Canada
e.
United Kingdom
4. Nestlé is a company based in Switzerland with manufacturing plants in Columbia, Australia, Canada,
Egypt, Kenya, and more than 90 other nations. Nestlé is an example of a:
a.
multidomestic global company
b.
multinational corporation
c.
ethnocentric organization
d.
acculturated corporation
e.
macro-marketer
5. Several Arab countries boycott Coca-Cola products because the soft-drink company maintains product
distributors in Israel. This boycott is an example of:
a.
geocentrism
b.
nationalism
c.
nationalization
d.
a trade barrier
e.
acculturation
6. The two general kinds of trade barriers are:
a.
government import standards and industry import standards
b.
qualitative and quantitative barriers
c.
voluntary and involuntary barriers
d.
nationalistic and geocentric barriers
e.
tariff barriers and nontariff barriers
7. Protectionism is the use of trade barriers to protect local companies and their workers from:
a.
international unions
b.
foreign competition
c.
trademark infringements
d.
patent violations
e.
all of these
8. After years of flooding international markets with surplus milk products, the European Union, under
heavy pressure from member nations, has curtailed its $59 billion annual subsidy system for its dairies.
This curtailment of subsidies means:
a.
an end to tariff barriers
b.
European dairy farmers will no longer be protected from international competition
c.
dairy products will be given a new customs classification
d.
government import standards on dairy products will end
e.
an end to voluntary export restraints
9. The Japanese government has proclaimed that its snow is different from that found in any other region
of the world. As a result, all snow skis marketed in Japan must be manufactured in Japan. This is an
example of a(n):
a.
tariff
b.
nontariff barrier
c.
import boycott
d.
industry subsidy
e.
industry nationalization
10. The U.S. Rice Millers’ Association claims that if the Japanese rice market were opened to imports by
lowering tariffs, the resultant lower prices would save Japanese consumers about $6 billion annually.
The Japanese government continues to use the high tariffs to make sure local farmers can earn a living.
The tariff on rice is an example of:
a.
a voluntary government restriction
b.
geocentrism
c.
protectionism
d.
a security quota
e.
a bureaucratic subsidy
11. A ____ is a nontax method of increasing the cost or reducing the volume of imported goods.
a.
tariff
b.
nontariff barrier
c.
trade roadblock
d.
risk-aversive boycott
e.
subsidy quota
12. A(n) ____ is a direct tax on imported goods designed to make it more expensive to buy those goods, in
hopes of reducing the volume of those imported goods in a given country.
a.
tariff
b.
nontariff barrier
c.
trade roadblock
d.
boycott quota
e.
import subsidy
13. The Japanese government has proclaimed that its snow is different from that found in any other region
of the world. To make sure the product is safe for local use, all snow skis marketed in Japan must be
manufactured in Japan. This is an example of a(n):
a.
tariff
b.
government subsidy
c.
voluntary export restraint
d.
government import standard
e.
subsidy
14. Russia imposed limits on how much poultry, beef, and pork could be imported into the nation from the
European Union (EU) in retaliation to limits the EU placed on how much grain Russia could export.
What type of nontariff barrier did Russia use to control the amount of poultry, beef, and pork it
imported from the EU?
a.
quotas
b.
subsidies
c.
boycotts
d.
customs classifications
e.
duties
15. The European Union (EU) bans the importation of hormone-fed U.S. beef and bioengineered corn and
soybeans on safety grounds although Americans eat this food every day. This ban is so consumers in
the EU will buy domestic beef and products made from domestically produced corn and soybeans.
This ban is an example of:
a.
a subsidy
b.
an involuntary import restraint
c.
geocentrism
d.
expropriation
e.
a government import standard
16. ____ are long-term, low-interest loans, cash grants, and tax deductions used to develop and protect
companies or special industries.
a.
Quotas
b.
Voluntary export restraints
c.
Cooperative contracts
d.
Government subsidies
e.
Tariffs
17. To protect its farmers, Japan put limitations on the amount of mushrooms and leeks that could be
imported into Japan from China. This limitation is an example of a(n):
a.
tariff
b.
voluntary import restraint
c.
subsidy
d.
agricultural import standard
e.
import quota
18. The trade agreement that represented the most significant change to the regulations governing global
trade during the 1990s was the:
a.
Maastricht Treaty of Europe
b.
North American Free Trade Agreement
c.
General Agreement on Tariffs and Trade
d.
Mercosur
e.
Asian Free Trade Arrangement
19. The signing of the ____ created a regional trading zone.
a.
the Maastricht Treaty
b.
the Pact for Free Trade Agreement
c.
the Global Agreement for Transactional Trading (GATT)
d.
the South-East Asia Pact
e.
all of these
20. The General Agreement on Tariffs and Trade (GATT):
a.
decreases both tariffs and nontariff barriers
b.
puts stricter limits on government subsidies
c.
eliminates tariffs in ten specific industries
d.
protects intellectual property, such as trademarks, patents, and copyright
e.
does all of these
21. The ____ is a regional trade agreement that liberalizes trade between countries more than any other
such agreement.
a.
Maastricht Treaty of Europe
b.
Association of South East Nations
c.
Asia-Pacific Economic Cooperation agreement
d.
North American Free Trade Agreement
e.
Free Trade Area of South America
22. Trade barriers and free trade agreements matter to consumers because they do which of the following:
a.
increase choices
b.
increase competition
c.
increase purchasing power
d.
decrease what people pay for necessities
e.
all of the choices
23. One of the major questions that a company must typically answer once it has decided to go global is:
a.
How many additional employees will the company need?
b.
To what extent should the company standardize or adapt business procedures?
c.
To what extent should a company abide by global or regional trade agreements?
d.
Will the organization’s mission statement need to be changed?
e.
How many new shareholders will be influenced by global activities?
24. When a multinational company that acts with ____ has offices, manufacturing plants, and distribution
facilities in different countries, it will run those offices, plants, and facilities based on the same rules,
guidelines, policies, and procedures.
a.
policy certainty
b.
global consistency
c.
global adaptation
d.
global certainty
e.
regiocentrism
25. In a multinational firm, managers at company headquarters typically prefer an emphasis on ____
because it simplifies decisions.
a.
local consistency
b.
local adaptation
c.
global adaptation
d.
global consistency
e.
domestic adaptation
26. Which of the following approaches tends to be most important to making an international business
successful in any given country?
a.
global consistency
b.
local adaptation
c.
domestic synergy
d.
predetermined benchmarks
e.
mechanistic controls
27. Historically, most companies have used the ____ to successfully enter foreign markets.
a.
phase model of globalization
b.
global new venture approach
c.
ripple approach
d.
market echo approach
e.
guerrilla approach
28. Which of the following represents the correct sequence for the phase model of globalization?
a.
exporting; wholly-owned affiliates; cooperative contracts; strategic alliances
b.
exporting; cooperative contracts; wholly owned affiliates; strategic alliances
c.
exporting; cooperative contracts; strategic alliances; wholly owned affiliates
d.
exporting; strategic alliances; cooperative contracts; wholly owned affiliates
e.
home country sales; exporting; job ventures; strategic alliances, and direct investment
29. ____ occurs when a company sells domestically produced products to customers in foreign countries.
a.
Direct foreign investment
b.
Franchising
c.
Licensing
d.
Exporting
e.
A joint venture
30. Jim Beam is a distillery in the United States. In 2000, it began marketing its U.S. made liquor to
customers in 27 different European countries. Since it was at the first stage of the phase model of
globalization, it used ____ to reach European customers.
a.
licensing
b.
franchising
c.
strategic alliances
d.
exporting
e.
direct investment
31. Fran Wilson Creative Cosmetics is a medium-sized U.S. company that sells 1.5 million tubes of its
Moodmatcher lipstick in Japan annually. It has no physical presence within the country beyond the
fact its products are sold there. Fran Wilson Creative Cosmetics uses ____ to reach the Japanese
market.
a.
franchising
b.
direct investment
c.
licensing
d.
a strategic alliance
e.
exporting
32. SpongeBob SquarePants, the animated underwater adventures of a group of sea creatures, is produced
by MTV Networks, a part of the U.S. media group Viacom. The television show is broadcast in 171
international markets and has been translated into 26 different languages. Given that the show is
produced in the United States, which form of global business is MTV Networks using?
a.
direct foreign investment
b.
franchising
c.
strategic alliance
d.
exporting
e.
a joint venture
33. A(n) ____ is an agreement in which a foreign business owner pays a company a fee for the right to
conduct that business in his or her country.
a.
exporting agreement
b.
cooperative contract
c.
joint venture
d.
strategic alliance
e.
direct investment
34. ____ are both examples of cooperative contracts.
a.
Licensing and joint ventures
b.
Franchising and licensing
c.
Direct investment and indirect investment
d.
Direct exporting and indirect exporting
e.
Joint ventures and strategies alliances
35. Sodiaal is a French cooperative that owns the name, the trade secrets, and the patents on Yoplait
yogurt. Before it purchased a controlling stake in Yoplait S.A.S. in 2011, General Mills paid Sodiaal
for the right to sell Yoplait yogurt in the United States. This is an example of:
a.
licensing
b.
a global joint venture
c.
exporting
d.
a strategic alliance
e.
direct investment
36. Robert Mondavi Wineries entered into an agreement with Baron Philippe de Rothschild, owner of
Bordeaux’s First Growth chateau, to produce a top quality wine in California. The two companies
working together to create a new product is an example of:
a.
exporting
b.
licensing
c.
a strategic alliance
d.
a cooperative contract
e.
a wholly-owned subsidiary
37. General Motors and Russia’s largest domestic carmaker collaborated to create a third independent
company to produce sport utility vehicles under the Chevrolet brand name. The two companies created
a:
a.
global new venture
b.
wholly owned affiliate
c.
joint venture
d.
strategic subsidy
e.
new franchise
38. Ernest & Young, an international accounting and management consulting company, entered Hungary
first by establishing a joint venture with a local firm. Ernest & Young later acquired the company with
which it had the alliance. Ernst & Young then had a(n) ____ in Hungary.
a.
franchise
b.
licensing arrangement
c.
cooperative contract
d.
wholly owned affiliate
e.
export agency
39. All global new ventures share two common factors. One is the bringing of a good or service to several
different foreign markets at the same time. The other is:
a.
the development of culturally-specific implementation policies
b.
the use of local adaptation strategy
c.
a mechanistic organizational culture
d.
the ability to respond quickly and efficiently to any changes in the external environment
e.
none of these
40. Which of the following types of global organization is most likely to suffer problems associated with
being culture bound?
a.
licensing
b.
franchising
c.
joint ventures
d.
global new ventures
e.
wholly owned subsidiaries
41. When McDonald’s entered into an agreement with a French entrepreneur who wanted to own and
operate a McDonald’s fast-food restaurant in Paris, it saw the new restaurant as an opportunity.
Unfortunately, the restaurant in Paris was not maintained at the cleanliness standards prescribed by
McDonald’s but at the cleanliness standards acceptable to the French. McDonald’s brought legal
action to have the restaurant closed. This example illustrates:
a.
an opportunity for McDonald’s to enter into more joint ventures
b.
a need for McDonald’s to curtail its international franchising
c.
a cultural threat against McDonald’s
d.
a weakness within the McDonald’s franchising system
e.
a problem with franchising in different cultures
42. Proton is the national carmaker of Malaysia. A(n) _____ with Volkswagen had been seen as vital to
the survival of the company. VW promised to provide technical help in improving the quality of
Proton cars, to add VW models to Proton’s product line, and to assist with expanding Proton’s small
export market. In return, VW sought a degree of management control that found little favor with the
Malaysian government that owns Proton.
a.
exporting license
b.
cooperative contract
c.
franchisee agreement
d.
strategic alliance
e.
indirect investment
43. A ____ is a strategic alliance in which two existing companies collaborate to form a third, independent
company.
a.
joint venture
b.
franchise
c.
wholly owned affiliate
d.
global new venture
e.
cooperative contract
44. Which of the following forms of organizing a global business help companies to avoid tariff and
nontariff barriers to entry of a given foreign market?
a.
licensing
b.
franchising
c.
global joint ventures
d.
wholly owned affiliates
e.
all of these
45. In Canada, General Motors and Suzuki entered into a ____ to create CAMI Automotive. Suzuki
management ran the plant, which made GM’s Geo cars. The agreement gave Suzuki access to GM
dealers to sell its brand of vehicles.
a.
licensing agreement
b.
subsidiary arrangement
c.
cooperative contract
d.
exporting agency
e.
joint venture
46. German chip manufacturer Infineon AG joined with Motorola Inc. and Agere Systems Inc. to establish
a new company to develop and license chip designs for cell phones. These three companies created a:
a.
license facilitator
b.
subsidized corporation
c.
global new venture
d.
joint venture
e.
export merchant
47. Ford Motor Company owns and operates a $1.9 billion manufacturing plant in Brazil. What method of
organizing for global business has Ford used in this example?
a.
joint venture
b.
strategic alliance
c.
cooperative contract
d.
wholly owned affiliate
e.
strategic franchise
48. The primary disadvantage of using wholly owned affiliates as the means of entering a foreign market
is:
a.
dumping
b.
countertrading
c.
nontariff barriers
d.
acculturation
e.
costs
49. Which of the following is a trend that has allowed companies to skip the phase model when going
global?
a.
quick, reliable air travel
b.
the globalization of the cocooning trend
c.
a critical mass of resources
d.
the metamorphosis of marketplaces
e.
all of these
50. New companies with sales, employees, and financing in different countries that are founded with an
active global strategy are called:
a.
global new ventures
b.
strategic alliances
c.
wholly-owned affiliates
d.
franchisees
e.
subsidized corporations
51. A country or region that has an attractive business climate for companies that want to go global has:
a.
easy access to growing markets
b.
experienced marketplace metamorphosis
c.
eliminated all political risks
d.
a limited infrastructure
e.
all of these
52. A country or region that has an attractive business climate for companies that want to go global has:
a.
a large population of unskilled workers
b.
an effective but cost-efficient place to build an office or manufacturing site
c.
a small youth population
d.
natural boundaries
e.
all of these
53. The most important factor used by a globalizing company for determining if a country or a region has
an attractive business climate is:
a.
easy access to growing markets
b.
marketplace metamorphosis
c.
global synergy
d.
a large, unskilled workforce
e.
natural boundaries
54. In the past decade, purchasing power has doubled, and poverty has been halved in Vietnam, making
the nation:
a.
a good choice for companies looking for attractive global markets
b.
a potential target for nationalization activities
c.
a less-than-desirable choice for companies looking for new global markets
d.
a source of Asian protectionism
e.
a country that has eliminated all tariff barriers
55. Which of the following factors helps a company determine the growth potential of a foreign market?
a.
political uncertainty
b.
purchasing power
c.
type of infrastructure
d.
land availability
e.
natural boundaries
56. A cosmetics company that is considering entering the South American market would be especially
interested in the discretionary income within that country. In other words, ____ would be a
determining factor in its global strategy.
a.
purchasing power
b.
political uncertainty
c.
expropriation potential
d.
infrastructure
e.
sociocultural trends