Venture capital is a source of equity financing for successful multinational companies.
Scenario: Moonland Union
Twenty-six nations of Moonland region, have decided to cooperate with one another to
eliminate trade barriers among them and create the Moonland Union. They are not sure,
however, to what extent they want to cooperate.
The increase in the level of trade between nations that results from regional economic
integration is called trade creation.
Scenario: Jeans Unlimited
Jeans Unlimited produces clothing for young adults. It designs its clothes at its New
York headquarters and produces them at facilities located in two Southeast Asian
countries. The company recently received negative press after one of its facilities was
found using questionable labor practices, such as, employing children and operating in
a manner that damages the environment.
The term “globalization of production” refers to convergence in buyer preferences in
markets around the world.
A market is efficient if the prices of financial instruments quickly reflect new public
information made available to traders.
The intentional lowering of the value of a currency by a nation’s government is called
revaluation.
To provide funding for countries’ efforts toward economic development, the Bretton
Woods Agreement created the International Bank for Reconstruction and Development.
According to the efficient market view for forecasting exchange rates, forward
exchange rates are perfect predictors of future exchange rates.
Core competencies of organizations are the special skills of certain employees that give
a company an edge over other organizations.
Volatile currency values make it easier for firms to predict future earnings accurately in
terms of the home-country currency.
The Maastricht Treaty called for political union of the member nations.
Products for which there are fewer substitutes can more easily absorb higher shipping
and production costs.
The role of the World Bank is to provide financing for national economic development
efforts.
Scenario: Not-So-Free Freeland
Freeland is a semi-closed economy whose government believes in protecting national
identity and building a self-sustained economy. The government’s priority is to protect
local jobs and provide opportunities to Freeland’s emerging industries to flourish
without the threat of external competition. The protection of infant industries by a
nation’s government can cause domestic companies to become complacent toward
innovation.
According to Fisher effect, real interest rate is the sum of the nominal interest rate and
the expected rate of inflation over a specific period.
The IMF asset whose value is based on a “weighted basket” of four currencies is called
a special drawing right.
Which of the following accounts within the current account of the United States’
balance of payments includes financial gains earned on U.S. assets held abroad?
A) income receipts account
B) income payments account
C) merchandise account
D) services account
Suppose Sam then noticed that the actual euro/dollar exchange rate on currency markets
is €1.2/$, and that a kilogram of wheat still costs $1 in the U.S. and ¬1.5 in France.
Sam then knows that ________.
A) the expected exchange rate between the euro and the dollar is ¬1.5/$
B) wheat is priced higher in France
C) wheat is priced lower in France
D) an arbitrage opportunity does not exist in the international wheat market
British pounds of a British trading company that are deposited in a U.S. bank are called
________.
A) Eurodollars
B) U.S. dollars
C) Europounds
D) Pounds
A(n) ________ tariff is levied as a percentage of the stated price of an imported
product.
A) specific
B) compound
C) ad valorem
D) transit
A(n) ________ policy can be pursued to hire employees at all levels in an organization.
A) ethnocentric staffing
B) polycentric staffing
C) vertical integration
D) horizontal integration
The major objective of the Association of Southeast Asian Nations (ASEAN) is to
________.
A) approach the European Union to resolve disputes between member countries
B) safeguard the region’s economic and political stability
C) introduce barriers to trade and investment
D) increase members’ tariff rates from an average of 7.5 percent to 15 percent
Scooters Inc. has traditionally sold its products at one price in the domestic market and
at another price in export markets, which is called a(n) ________ pricing strategy.
A) target
B) value
C) dual
D) arm’s length
Letters of credit are popular among traders because most of the risks are assumed by
________.
A) distributors
B) importers
C) exporters
D) banks
The biggest advantage of an export management company is usually its ________.
A) knowledge of the target market’s cultural, political, legal, and economic conditions
B) well-developed and extensive distribution channels and storage facilities
C) well-rounded experience in countertrade-related activities
D) financial understanding of investment projects and its manufacturing expertise
Scenario: Better Mousetrap Inc.
Better Mousetrap Inc. is a manufacturing company that sells pest control products.
Recently the company launched an innovative mousetrap with a unique design that has
been selling well in the U.S. market. Senior Vice President Marc Wallace, even
recommended expanding sales overseas in order to increase company revenues.
In reviewing his fulfillment process, Jack realizes that different customers opt for
different types of shipping based on their preferences. Which of the following would
most likely help Jack provide better shipping service to his customers?
A) introduce overnight delivery but at a very high cost
B) reduce costs by implementing a cheaper but slower delivery method
C) implement a universal delivery method to capitalize on efficiency gains
D) offer customers a choice of delivery methods with different speeds and costs
Which of the following is the oldest known form of countertrade?
A) counterpurchase
B) switch trading
C) offset
D) barter
Which of the following normally takes the form of a wire transfer of money from the
bank account of the importer directly to that of the exporter prior to shipment of
merchandise?
A) documentary collection
B) letter of credit
C) advance payment
D) open account
A distribution channel in which a producer grants the right to sell its product to many
resellers is referred to as a(n) ________.
A) one-level channel
B) zero-level channel
C) exclusive channel
D) intensive channel
How does economic development in countries affect international business?
Differentiate between primary and support activities that create value for a company’s
customers. How can managers determine whether an activity enhances customer value?
Discuss the challenges China faces as it continues its experiment on ‘socialism with
Chinese characteristics.”
Briefly describe regional integration efforts in Central America and the Caribbean.
Describe the process of how the documentary collection procedure works using an
example.
Differentiate between currency speculation and currency arbitrage.
Explain the advantages and disadvantages of a geocentric staffing policy, and discuss
the effects of culture shock when assigning an employee to work in another country.
What is an offshore financial center? Differentiate between an operational center and a
booking center, providing examples for each.
What is primary market research? Describe any four primary market research methods.
Explain how the theory of absolute advantage conflicts with the theory of mercantilism.