57. According to the ASEAN trade agreement, Malaysia was supposed to eliminate nearly all tariff
barriers protecting its car market by 2008. With this act, the Malaysian government would:
a.
stop using nontax methods to increase the volume of imported goods
b.
eliminate most protectionism
c.
reduce the tax it gathers on imported cars
d.
nationalize the car industry
e.
limit the number of cars that can be exported
58. What are the two types of political risk that affect companies conducting global business?
a.
political uncertainty and policy uncertainty
b.
policy uncertainty and expropriation potential
c.
cultural strength and political risks
d.
infrastructure dynamism and political uncertainty
e.
nationalism and economic uncertainty
59. In 2006, a car bomb near a Chinese-owned oil refinery in a southern Nigerian city detonated. The
Movement for Emancipation of the Niger Delta, the terrorist group responsible for the blast, sent the
following e-mail: “We wish to warn the Chinese government and its oil companies to steer well clear
of the Niger Delta. Chinese citizens found in oil installations will be treated as thieves. The Chinese
government, by investing in stolen crude, places its citizens in our line of fire.” Thus, _____ forced
the Chinese government to rethink its investment in international petroleum.
a.
policy uncertainty
b.
economic uncertainty
c.
infrastructure regulation
d.
nationalistic equity
e.
political uncertainty
60. In 2006, a car bomb near a Chinese-owned oil refinery in a southern Nigerian city detonated. The
Movement for Emancipation of the Niger Delta, the terrorist group responsible for the blast, sent the
following e-mail: “We wish to warn the Chinese government and its oil companies to steer well clear
of the Niger Delta. Chinese citizens found in oil installations will be treated as thieves. The Chinese
government, by investing in stolen crude, places its citizens in our line of fire.” If, as a result of this
terrorist act, China decided to divest itself of all of its business in Nigeria, China would have
implemented a(n):
a.
avoidance strategy
b.
control strategy
c.
cooperative strategy
d.
elimination strategy
e.
self-protection strategy
61. Starbucks is expanding its global operations into South America in spite the real probability of civil
wars and terrorist activities in many of the continent’s nations. As Starbucks expands into South
America, it must deal with:
a.
political uncertainty
b.
economic uncertainty
c.
infrastructure regulation
d.
nationalistic equity
e.
strategy risk
62. Starbucks is a chain that is rapidly expanding its global operation. As it expanded into South America,
its research showed that Chileans on average drink only 150 cups of coffee annually, and people in
Argentina only drink about half that amount. An average citizen of the United States drinks 345 cups
annually. These differences in annual coffee consumption most likely reflect:
a.
policy uncertainties
b.
nationalistic motivations
c.
cultural differences
d.
economic uncertainties
e.
differences in internal marketing strategies
63. Uganda is one of only two countries in the world that produce a mineral required in the manufacturing
of cellular phones. Several mining companies recently moved their operations out of the region due to
a bloody civil war resulting from a change in rulers. This is an example of how ____ can influence
global business.
a.
political uncertainty
b.
policy uncertainty
c.
economic risk
d.
infrastructure failure
e.
nationalization
64. Prior to the Japanese government decreeing that Japanese snow was different from all others and the
requirement that all snow equipment marketed in the country be made in Japan for safety reasons,
several companies from the U.S. and Europe had marketed their snow equipment in Japan. The
elimination of non-Japanese companies from the market is an example of how ____ can influence
global business.
a.
infrastructure modifications
b.
policy uncertainty
c.
political uncertainty
d.
competitive uncertainty
e.
sociocultural modifications
65. What are the strategies that can be used to minimize or adapt to the political risk inherent to global
business?
a.
protectionist, avoidance, and offensive strategies
b.
creative, cooperative, and defensive strategies
c.
cooperative, customary, and nationalistic strategies
d.
avoidance, protectionist, and guerrilla strategies
e.
control, avoidance, and cooperative strategies
66. Uganda is one of only two countries in the world that produce a mineral required in the manufacturing
of cellular phones. A company that mines that rare mineral decided to not invest in the country due to
a bloody civil war resulting from a change in rulers. The mining company used a(n):
a.
avoidance strategy
b.
control strategy
c.
cooperative strategy
d.
elimination strategy
e.
self-protection strategy
67. The ____ strategy of minimizing or adapting to the political risk inherent to global business makes use
of joint ventures and collaborative contracts.
a.
defensive
b.
control
c.
cooperative
d.
avoidance
e.
offensive
68. A firm using a ____ strategy to prevent or reduce political risks will lobby foreign governments or
international trade agencies to change laws, regulations, or trade barriers that hurt their business in that
country.
a.
defensive
b.
control
c.
cooperative
d.
protectionist
e.
avoidance
69. Green Giant learned that it could not use the Jolly Green Giant character in parts of Asia where a green
hat worn by a man signifies that he has an unfaithful wife. This is an example of a(n) ____ that
influenced global marketing.
a.
geocentric attitude
b.
control strategy
c.
cooperative strategy
d.
cultural difference
e.
avoidance strategy
70. ____ is the set of shared values and beliefs that affects the perceptions, decisions, and behavior of the
people from a particular country.
a.
National mindset
b.
National culture
c.
Cultural nationalization
d.
Cultural diversity
e.
National diversity
71. Hofstede’s research has shown there are:
a.
no cultural differences among nations in which Spanish is the national language
b.
two distinct methods for dealing with cultural differences—adaptation and continuation
c.
direct relationships existing between type of infrastructures and growth potential
d.
five consistent dimensions of cultural differences across countries
e.
four factors upon which a company should base its decision to globalize
72. A news article on Latin America read, “Mexico is the closest Latin America gets to the U.S. both
geographically and culturally.” According to Hofstede, this means the Mexican culture:
a.
does not support individualism
b.
is strong in power distance
c.
has a masculine orientation
d.
is not oriented towards individualism
e.
is accurately described by all of these
73. According to Hofstede’s research on cultural dimensions, ____ cultures emphasize the importance of
relationships, modesty, caring for the weak, and quality of life.
a.
economic-based
b.
feminine
c.
relationship-oriented
d.
individualistic
e.
masculine
74. The people who live on the island of Malta are described as happy–go-lucky people who are
comfortable with an unstructured life and deal well with sudden changes. In terms of Hofstede’s
cultural differences, the people of Malta have a:
a.
culture based on equity
b.
low degree of uncertainty avoidance
c.
masculine culture
d.
high degree of uncertainty avoidance
e.
feminine culture
75. The term ____ is used by Hofstede to describe the degree to which people in a country are
uncomfortable with unstructured, ambiguous, unpredictable situations.
a.
power distance
b.
masculinity
c.
short-term/long-term orientation
d.
uncertainty avoidance
e.
risk aversion
76. According to Hofstede, the people in a culture that is described as ____ are oriented to the present and
seek immediate gratification
a.
long-term oriented
b.
masculine
c.
short-term oriented
d.
individualistic
e.
feminine
77. An expatriate is someone who:
a.
claims dual citizenship
b.
lives and works outside of his or her own country
c.
believes strongly in nationalization
d.
is unhappy with his or her present residence
e.
desires to be employed in a country outside of his or her own
78. Some 5.5 million British citizens, about 10 percent of Great Britain’s total population, now live as
expatriates, with 200,000 more every year. This means that:
a.
about 90 percent of the people born in Great Britain are bilingual
b.
approximately 10 percent of people born in Great Britain do not work there
c.
about 10 percent of the British population is involved in global marketing at a level
beyond exportation
d.
approximately 10 percent of the people living Great Britain were not born there
e.
about 10 percent of the British population works for international companies
79. The purpose of predeparture language training and cross-cultural training is to:
a.
cater to employees who require affective learning
b.
increase job empathy
c.
encourage job specialization
d.
reduce the uncertainty for those becoming expatriates
e.
avoid legal problems in the future
80. According to the What Really Works, “Cross–Cultural Training,” 21 different research studies show
cross-cultural training:
a.
does not have any anecdotal evidence to support its usefulness
b.
really helps expatriates adjust to foreign cultures
c.
is largely a waste of resources
d.
does not prepare expatriates for one–to-one relationships with natives
e.
cannot be justified by any current research
81. The evidence clearly shows that ____ is the most important factor in determining the success or failure
of an international assignment.
a.
the amount of language training provided to the expatriate
b.
the amount of cross-cultural training provided to the expatriate
c.
how well an expatriate’s spouse and family adjust to the foreign culture
d.
how willing the expatriate was to accept the foreign assignment
e.
the similarity of the foreign language to the expatriate’s native language
82. In order to assess how well managers and their families are likely to adjust to foreign cultures, ____ is
used.
a.
cultural awareness screening
b.
sociocultural analysis
c.
sensitivity screening
d.
sociocultural diagnostics
e.
adaptability screening
Coca-Cola
In 2003, Coca-Cola attempted to enter the Indian market once again. Georgia-based Coca-Cola was
attracted to India’s market because India’s per capita consumption of carbonated beverages is less than
half of Pakistan and about five percent of China’s. India has the fastest-growing demand for consumer
products in the world. Coke’s first attempt a decade earlier had resulted in gross mismanagement,
which led to the company losing $20 billion Indian rubles. In Coke’s first attempt to enter the Indian
market, it purchased Thumbs Up, the leading India-based carbonated soft drink, and hoped to replace
Thumbs Up with Coca-Cola while maintaining the Thumbs Up distribution strategy. The greatest
indignity is that India is one of the few markets where Pepsi has outsmarted Coke. For its return to the
market, Coca-Cola built five plants, cut costly staff, revamped transport, shrunk bottles, and made
them lighter to increase a truck’s carrying capacity. It also increased its number of distributors and
dumped a global advertising campaign that was irrelevant to the Indian market.
83. Refer to Coca-Cola. In its first attempt to enter the Indian market, Coca-Cola engaged in:
a.
acculturation
b.
direct foreign investment
c.
internal importing
d.
globalization
e.
restraint of trade
84. Refer to Coca-Cola. As a multinational company, Coca-Cola:
a.
owns businesses in more than one country
b.
is not affected by protectionism
c.
is able to avoid trade barriers
d.
pays no tariffs
e.
is accurately described by all of these
85. Refer to Coca-Cola. What kind of strategy has Coca-Cola used for its second entry into the Indian
market?
a.
global consistency
b.
market differentiation
c.
market restructuring
d.
local adaptation
e.
acculturation
86. Refer to Coca-Cola. One way Coca-Cola increased distribution of Coke was to enter into a ____ with a
refrigerator manufacturer. Coca-Cola provided the financing needed for the retailers to purchase
refrigeration units, and the refrigeration manufacturer gave deep price discounts.
a.
franchise agreement
b.
direct investment
c.
strategic alliance
d.
brokered agreement
e.
new-venture strategy
87. Refer to Coca-Cola. What two factors determined Coca-Cola’s desire to invest again in the Indian
market?
a.
political stability and nationalization
b.
acculturation potential and discretionary income
c.
the present of the competition and acculturation potential
d.
the lack of substantial competition and India’s infrastructure
e.
India’s purchasing power and the presence of the competition
88. Refer to Coca-Cola. The need for Coca-Cola to create a promotional strategy that was specifically
targeted to the Indian market reflects a(n):
a.
diversification strategy
b.
awareness of cultural differences
c.
desire to maintain a high contribution margin
d.
insular approach to strategy
e.
desire to maintain global consistency
AES and Cameroon
AES was established in Arlington, Virginia, in 1981 expressly to take advantage of what its founders
foresaw as an inevitable wave of global liberalization and privatization. The company owns a single
electric utility in Indianapolis and about 20 generating plants in the United States; the rest of its
operations are scattered over 27 countries. When Cameroon’s government announced that it would sell
a majority stake in its electricity system, AES saw it as a perfect fit for its global approach—and as a
way to position AES for what it hoped would be a wave of utility privatizations in other African
countries. The absence of other bids on the project might have hinted that AES was in for a struggle.
Cameroon is perpetually impoverished and one of the most difficult places in the world to do business.
In the late 1990s, Transparency International, the anticorruption watchdog, ranked Cameroon as the
most corrupt country in the world—for the second year.
The state-owned utility company from which AES took over was broke, milked dry by the
government and by some of its own employees, who had created their own mini-empires by reselling
power siphoned from the bedraggled network of power lines and decades-old electricity meters. Bill
payment was erratic, in part because of the government’s curious practice of requiring everyone to pay
their monthly bills in cash, in person, on nearly the same date, and at a few select payment centers.
AES’s first country manager in Cameroon was an American who had never worked in Africa and
spoke no French, the nation’s lingua franca.
The American was soon replaced with one of the few Cameroonians still in a high-ranking
position at the utility, Jean-David Bile. Bile canceled a scheduled rate hike. To further control costs,
Bile attacked a procurement system of almost comic inefficiency. When he took charge, the utility still
had an astonishing 3,000 suppliers, each of whom negotiated directly with the company. Not all of his
ideas were successful. Bile believed a government minister who told him the essential equipment for
improving a generating plant could be imported without paying any duties. When the equipment
arrived, however, the government imposed heavy duties and kept the project at a stalemate for months
until AES paid the duties and additional penalty fees.
89. Refer to AES and Cameroon. How does AES invest in global business?
a.
a strategic alliance
b.
direct foreign investment
c.
a global new venture
d.
a joint venture
e.
direct exporting
90. Refer to AES and Cameroon. The duties charged by Cameroon were an example of:
a.
import quotas
b.
customs classifications
c.
import standards
d.
tariffs
e.
boycotts
91. Refer to AES and Cameroon. One of Bile’s first moves as the head of the operation was to invite
native chiefs to chant and pour libations of water, wine, and whiskey to seek favor from the gods when
AES opened a new oil-fired plant. AES found it effective to use _____ for its Cameroon operation.
a.
global consistency
b.
domestic synergy
c.
the guerilla approach
d.
the product ripple approach
e.
local adaptation
92. Refer to AES and Cameroon. As one of the poorest nations in Africa, Cameroon lacked _____, an
important sign of growth potential in foreign markets.
a.
an economic infrastructure
b.
work life quantity
c.
purchasing power
d.
foreign competition
e.
tariff barriers
93. Refer to AES and Cameroon. When officials told AES it would not have to pay duties to import
necessary equipment and then required it to pay them, AES faced problems associated with _____ .
a.
political uncertainty
b.
policy uncertainty
c.
economic risk
d.
infrastructure failure
e.
nationalization
94. Refer to AES and Cameroon. The other utility companies that chose not to bid on an opportunity to
own and operate the Cameroonian utilities used a(n) _____ strategy.
a.
defensive
b.
control
c.
cooperative
d.
avoidance
e.
offensive
95. Refer to AES and Cameroon. According to Hofstede, Cameroonians would be classified as having
_____ because lack of structure is accepted as a national norm.
a.
a feminine culture
b.
a masculine structure
c.
a long-term orientation
d.
low uncertainty avoidance
e.
high risk aversion
96. Refer to AES and Cameroon. The first CEO that AES brought into manage the Cameroonian utilities
was a(n):
a.
expatriate
b.
interim manager
c.
nationalistically naïve manager
d.
bureaucratic manager in the sense that Weber used the term
e.
privatized manager
97. Refer to AES and Cameroon. How does AES invest in global business?
a.
a strategic alliance
b.
direct foreign investment
c.
a global new venture
d.
a joint venture
e.
direct exporting
Tommy Hilfiger
Less than a decade ago, Tommy Hilfiger (the company) was selling billions of dollars a year in
affordable fashions, cosmetics, and accessories, and Tommy Hilfiger, the designer, was successful
enough to be recognized on a first name basis. Nonetheless, operating exclusively in U.S. markets left
the company vulnerable to a turbulent retail industry and limited the company’s growth potential. With
annual revenues of $1.9 billion domestically, Tommy Hilfiger began investigating growth
opportunities in Europe and Asia. At the height of its U.S. popularity, Hilfiger opened a large store full
of traditional Hilfiger apparel on Bond Street in London.
Then very quickly, the company’s success dried up. Sales dropped to $1.1 billion only a few
years after they had peaked, and then plummeted to a comparatively paltry $260 million. As a result of
this astounding 86% drop in revenue, the company closed 30 Tommy Hilfiger stores in the United
States and shut down its children’s wear and Tommy Jens’s divisions. Overseas, Tommy was
sputtering. The Bond Street store closed the same year it opened, largely because of differing
European fashion tastes.
Slow growth rates were not the only reason for the dramatic change in the company’s
performance. More damaging was the rapid consolidation of U.S. retail stores. Many of the major
department and discount stores where Hilfiger items are sold have either closed or been purchased by
large department store chains. Today a few retailers, like Macy’s and Kohl’s, account for more than a
third of U.S. clothing sales, and those same retailers often sell their own private brands, too.
To avoid stalling out completely, Tommy Hilfiger needed to figure out how to expand
globally. The failure overseas of Tommy’s traditional U.S. look prompted the designer to adapt to
cultural differences in Europe and Asia. The biggest change was the decision to start creating designs
uniquely for the European consumer. Hilfiger opened a design center in Amsterdam, dedicated to
designing clothes and accessories for consumers from different European cultures. For example,
because Germans and Italians have different preferences for sweaters, Hilfiger has created a line of
sweaters for Germans clients, which is different from what it designs for Italian clients.
Those differences presented challenges; as managers soon discovered, the European market
differed greatly from the U.S. market. CEO Fred Gehring said, “The fragmentation of dealing with all
these little mom-and-pop stores is so alien to American businesses,” yet, “these stores are the
backbone of every major brand” that sells in Europe. Further, because there are so few locations for
new stores available (unlike in the U.S.), it makes more sense to work with existing retailers. To
handle the fragmented market, Hilfiger opened 21 regional showrooms, featuring 25 clothing lines,
each with several tailored to particular markets. Even though that led to higher operating costs,
operating in that manner enabled the company to achieve much higher profit levels and to place its
products in 4,500 boutique stores in 15 European countries.
In addition to selling branded apparel in boutiques, Hilfiger opened 34 company-owned
Hilfiger Denim stores throughout Europe. Designs and layouts of the stores and their merchandise are
tailored to the cultural tastes of the countries where they are located. Hilfiger has a higher margin on
products sold at its company-owned stores, as well as complete control over the facilities. The new
strategy has been a success. Today, European sales now account for 37% of Hilfiger’s $1.78 billion in
sales.
98. Refer to Tommy Hilfiger. You know that Tommy Hilfiger is a global business because it:
a.
buys and sells goods and services to people from different countries
b.
sells goods and services
c.
has more than 150 employees
d.
is financed through stockholders
e.
is unregulated
99. Refer to Tommy Hilfiger. When Tommy Hilfiger first sold its clothing globally, it made the mistake of
relying too heavily on_____, which means its business was being not designed for specific countries’
markets, cultures, and employees.
a.
local adaptation
b.
cooperative contracts
c.
global consistency
d.
ethnocentrism
e.
acculturation
100. Refer to Tommy Hilfiger. The company is interested in expanding into the Indian market, probably
because India offers the company:
a.
easy access to growing markets
b.
experienced marketplace metamorphosis
c.
the elimination of all political risks
d.
a limited infrastructure
e.
all of these
101. Refer to Tommy Hilfiger. Which of the following factors should Tommy Hilfiger have considered
when selecting a location for its design centers?
a.
work force quality
b.
its own company strategy
c.
tariff and nontariff barriers
d.
exchange rates
e.
all of these
SHORT ANSWER
1. Define direct foreign investment. Name one of the top five countries with the largest direct foreign
investment in the United States.
2. What are trade barriers? Identify the two general kinds of trade barriers used by governments, and give
one example of each.
ANS:
3. During the 1990s, trade agreements were developed on the worldwide and the regional levels. Briefly
describe a regional trade agreement and a worldwide trade agreement.
4. Briefly explain the phase model of globalization. List its stages in their appropriate order.
5. Compare and contrast global consistency and local adaptation as policies for entering foreign markets.
ANS:
6. Briefly explain how companies can assess the growth potential of new markets.
7. Identify the two basic types of political risk facing organizations when conducting global business.
Which one is more common?
8. Define national culture. List the five consistent cultural dimensions across countries.
9. Briefly comment on the types of training that should be provided (and to whom that training should be
provided), when managers go on international assignments, in order to ensure the success of those
managers.
ESSAY
1. What are the basic provisions of the General Agreement on Tariffs and Trade (GATT)? Give three
examples of how it benefits U.S. industries.
ANS:
2. Explain how the concepts of global consistency and local adaptation are relevant to success of a global
business. Give one example of a good or service that would be likely to succeed with the use of global
consistency. Give one example of a good or service that would be likely to succeed with the use of
local adaptation.
3. What is the phase model of globalization? Identify the factors that have allowed companies to follow
different paths to globalization, and then explain the nature of the global new venture. Comment on the
extent to which it is likely that this latter approach to globalization will increase.
4. A married manager with two children has been offered the opportunity to go abroad on an expatriate
assignment for the company in a foreign country for a period of three years. If the manager chooses to
accept the assignment, he or she wants to perform very well, in order to continue moving up the
corporate ladder. What sorts of preparations should the manager expect the company to provide, in
order to ensure his or her success in the assignment? Comment on these training and preparatory
expectations in an ideal world as well as the real world that the manager probably will face.
