All else being equal, the greater the demand for a currency, the lower its price; the
lower the demand for a currency, the higher its price.
Converging tastes of consumers worldwide promote traditional lifestyles.
Strategic global teams identify or implement initiatives that enhance the long-term
direction of the firm in its global industry.
Harmonization of standards is one of the steps taken by the EU to become an economic
union.
The French franc is one of the European currencies which was taken out of circulation
and replaced by the euro.
Trade fairs are not only excellent sites to meet potential intermediaries, they also
provide the means to become familiar with key players in the local industry and to
generally learn about the target market.
The home replication strategy is often employed as a means of extending a product’s
life cycle in a foreign market and to replicate home-market success.
In collectivist societies, competition for resources is the norm, and those who compete
best are rewarded financially.
Differences in language and national character have similar effects as trade barriers.
In international leasing, a major advantage for the lessor is the ability to gain quick
access to target markets, while putting assets to use earning profits.
Firms undertake global integration to seek cost reduction through scale economies.
Singapore and South Korea used export-led development to achieve high growth from
the 1970s onward.
In most high-inflation nations, interest rates are increasing while the purchasing power
of the national currency is plummeting.
A standardized marketing approach is inappropriate when products have universal
specifications.
Creating alternatives is the last step of the framework for arriving at ethical decisions.
A merger is a special type of acquisition.
Global account management means serving a key global customer in a consistent and
standardized manner, regardless of where in the world it operates.
Increasingly, mainstream banks view microfinance as a source of future growth.
Ethical behavior is essential for business success.
The Internet and other communications technologies imply greater likelihood of
cross-cultural miscommunications and blunder.
Market intensity is defined as the size and growth rate of the country’s middle class.
Organizational structure describes the reporting relationships inside the firm that
specify the links between people, functions, and processes.
In the fashion industry, customer needs change rapidly and managers often locate
factories or assembly operations near important customers.
A nontariff trade barrier is a government policy, regulation, or procedure that impedes
trade through means other than explicit tariffs.
Parent-country nationals (PCNs) are citizens of the country where the MNE’s subsidiary
is located.
MNEs typically centralize transfer pricing under the direction of the chief financial
officer at corporate headquarters.
Increasing trade barriers are a major factor in the growth of developing nations and
global commerce.
Mercantilism benefits consumers because restricting imports increases the choice of
domestic products they can buy.
Adaptation refers to the process of making the marketing program elements uniform,
with a view to targeting entire regions, or even the global marketplace, with the same
product or service.
Ongoing globalization has reduced the cost and risk of entering foreign markets.
Rigid cost-plus pricing refers to setting prices to cover only the firm’s variable costs, but
not its fixed costs.
In societies with low uncertainty-avoidance, companies emphasize stable careers and
produce many rules to regulate worker actions and minimize ambiguity.
Bureaucracy and red tape in developing economies deter firms from these countries
from participating in the global economy.
Adam Smith attacked the mercantilist view by suggesting that nations benefit most
from free trade.
Adaptation is counterproductive in multidomestic industries.
An arrangement in which a contractor supplies managerial know-how to operate a
hotel, hospital, airport, or other facility in exchange for compensation is known as
offshoring.
Born-global companies seldom venture into countries outside their comfort zone.
The monetary authority in each country that regulates the money supply, issues
currency, and manages the exchange rate of the nation’s currency relative to other
currencies is called the World Bank.
Scholars examining ethics from the perspective of relativism hold that ethical truths are
absolute.
Business jargon unique to a culture can impede communication.
________ represent a major driver of market globalization.
A) Continued reductions
B) Export controls
C) Import controls
D) Prohibitive tariffs
Which of the following is true about the taxation of expatriates?
A) Expatriates are exempted from paying taxes while working abroad.
B) Most employers do not reimburse the extra tax burden incurred by expatriates.
C) Most parent countries insist on double taxation for expatriates.
D) Most parent-country governments have devised regulations that allow expatriates to
minimize double taxation.
________ is a fee paid periodically to compensate a licensor for the temporary use of its
intellectual property, often based on a percentage of gross sales generated from the use
of the licensed asset.
A) Duty
B) Residual
C) Royalty
D) Tariff
A firm that develops the capacity to sell its products by investing in marketing and
selling operations is ________.
A) acquiring downstream value-chain facilities
B) acquiring upstream value-chain facilities
C) engaging in centralization
D) engaging in decentralization
Multilateral netting would enable an MNE with numerous subsidiaries to ________.
A) consolidate intracorporate cash transfers and reduce transaction fees
B) charge its subsidiaries as they exchange goods and services with the parent company
C) transfer goods and services within the firm without paying host-country taxes
D) channel funds from small subsidiaries to large ones without paying interest
Which of the following is applied when an American tourist exchanges dollars for the
immediate receipt of Japanese yen at a Tokyo bank?
A) the forward rate
B) the spot rate
C) the discount rate
D) the prime rate
Which of the following questions would be more important for Chisholm to evaluate
before presenting his manufacturing recommendations to shareholders?
A) What was the impact of the exchange rate on European exports last year?
B) What is the currency risk of exporting additional Plas-Tex products to Europe?
C) How effective has the Plas-Tex marketing campaign been in Europe?
D) What was the impact on Plas-Tex sales when the euro depreciated last year?
In 1938, the United States passed the Smoot-Hawley Tariff Act, which ________.
A) opened foreign markets for U.S. agricultural products
B) led to the consolidation of the U.S. banking system
C) instituted strict regulations to contain intellectual property theft
D) raised U.S. tariffs to near-record highs of more than 50 percent
Internationalization Conference (Scenario)
At a conference on business internationalization strategies, representatives of three
different businesses meet to discuss a joint venture between their companies. Business
A is located in a country that internationalized during the second phase of globalization.
Business B is based in a country that internationalized during the third phase of
globalization. Business C is located in an emerging market country.
The representative from Business B is most likely from ________.
A) Panama
B) Hungary
C) Uganda
D) Japan
Which of the following is characteristic of globalization of markets?
A) lack of skilled labor
B) conservatism
C) declining trade barriers
D) diminishing gap between the rich and the poor
Which of the following terms is used to refer to a focal firm’s partial ownership of an
existing firm?
A) turnkey operation
B) greenfield investment
C) direct investment
D) equity participation
Which of the following is a benefit of global sourcing?
A) bridging of the rich-poor divide
B) minimal reliance on suppliers
C) access to qualified personnel abroad
D) elimination of competitors
Which of the following explains the expansion of born global firms despite the scarcity
of financial, human, and tangible resources?
A) globalization has made doing international business easier than ever before
B) a concerted effort by developing nations for running a trade surplus
C) product shortages and supply crunch resulting from import restrictions
D) rising inflation in developing economies
Australian Business Partner (Scenario)
The Coffee Cup Corporation (CCC) is a large U.S.-based coffee retailer with stores
across America. After months of research, CCC executives have decided to open their
first international store in Sydney, Australia. CCC managers have been assigned the
task of selecting an appropriate Australian business partner for the coffee company.
CCC managers flew to Sydney to interview potential business partners, and they have
narrowed the list to three.
Business Partner X, who owns a small chain of Sydney coffee shops, has offered to
make an equity investment in CCC. Which of the following types of relationships
would most likely result if Business Partner X is selected?
A) turnkey operation
B) licensing partnership
C) franchising partnership
D) international collaborative venture
Which of the following is true about cross-border contractual relationships?
A) It is a more visible strategy than FDI and draws a lot of criticism from the local
market.
B) They are more susceptible to volatility and risk compared to FDI.
C) A local firm allows the focal firm to blend into the local market, attracting less
attention.
D) Focal firms use contractual relationships as an advanced entry strategy in foreign
markets.
Globalization Debate (Scenario)
In his international business class, Professor Jang organizes a debate on the societal
effects of market globalization. Juan Prince takes a position that highlights the negative
effects of market globalization. He emphasizes how multinational enterprises can wield
so much influence that they threaten national sovereignty. He also notes the prevalence
of low wages and sweatshop conditions as firms utilize low-cost labor abroad. Juan
then describes the detrimental effects of corporate pollution on the environment, and he
ends his argument by explaining how market globalization helps homogenize national
cultures. Rina Taylor is assigned to counter Juan’s position.
Which of the following is Rina most likely to cite as a counter example to Juan’s
argument regarding the influence of MNEs on national sovereignty?
A) the dominating influence of market forces on the global economy
B) technological advances in computer-aided design of products
C) the political influence of large firms such as Walmart
D) the actual GDPs of underdeveloped economies
Firms prefer HCNs when ________.
A) the host country environment is complex
B) the host country has no specialized knowledge to share
C) the parent country is keen on maintaining full control over foreign operations
D) managers located in the headquarters adopt a dominantly ethnocentric approach to
hiring
Which of the following statements is true of the Export Import (Ex-IM) Bank in the
United States?
A) It is an international agency run by the WTO that provides capital to firms from
emerging and developing economies.
B) It is a U.S. federal agency that provides direct loans to SMEs unable to raise money
from other sources.
C) It is a branch of the EU that provides working capital loans to SMEs that are based
in the economic bloc.
D) It is a privately owned bank that offers high interest loans to international firms with
poor credit ratings.
By establishing a brand name and market power through a licensing agreement,
licensors are able to ________.
A) establish a more durable presence in the local market
B) control the use of the licensed asset
C) control the dissipation of important intellectual property to competitors
D) avoid the risk of creating a future competitor
Global Operations Report (Scenario)
As Vice President of Global Expansion for Pax Telecom, Deva Mikiri is tasked with
preparing a comprehensive report on the company’s global operations over the past
twenty years. Deva assigns three strategists to collaborate on the History portion of the
report, which details the rationale behind Pax’s decisions to expand operations in
particular areas. Rashid Ahl focuses on early expansion to China, which occurred after
China began to make its market more accessible to foreign companies. Markus Teller
focuses on Pax’s expansion to Eastern Europe, which was motivated by increased
industry privatization in key countries. Lavonne Jackson focuses on expansion to Japan,
which happened when the company’s commercial bank expanded its service network to
Asia.
To which of the following drivers of market globalization is Markus most likely to
attribute his company’s expansion to Eastern Europe?
A) advances in technology
B) integration of world financial markets
C) market liberalization
D) industrialization
In a licensing agreement, ________ is responsible for local sales.
A) the licensee
B) patent owner
C) the licensor
D) copyright partner
When managers attempt to standardize their international marketing program, they can
expect ________.
A) diminished efficiency
B) cost reduction
C) brand dilution
D) very high profit margins
________ is an arrangement in which a contractor supplies managerial know-how to
operate a hotel, hospital, airport, or other facility in exchange for compensation.
A) Build-operate-transfer
B) Management contract
C) Leasing
D) Exporting
Which of the following is an example of offshoring?
A) Fahad, a resident of the UAE can share his views-data and information-about the
country’s construction industry with his friends in the U.S.
B) The IT support services for customers of Mayfair Inc., a U.S. based consumer
electronics manufacturer, are based in India.
C) Treat Corp. is a food and beverage manufacturer based in Texas. It decided to move
from Houston to Fort Worth in Texas to cut production costs.
D) Lin, a Chinese citizen, decides to move to the U.K. after her application for
scholarship is accepted by a leading university in London.
Managing a firm’s value-chain activities on a country-by-country basis to address
diverse opportunities and risks is known as ________.
A) global integration
B) global aggregation
C) regional coordination
D) local responsiveness
Sterling Auto International (Scenario)
Sterling Auto International is a successful car manufacturing company headquartered in
Detroit, Michigan. Over the past year, the company implemented multiple efforts to
expand its overseas operations. At a recent shareholder’s meeting, attendees questioned
the CEO’s motivations for authorizing certain aspects of the expansion efforts.
The CEO introduced another overseas effort by noting that it represented an attempt to
confront an international competitor. The CEO was most likely referring to which of the
following efforts?
A) a new plant established in Vietnam to benefit from low-cost labor
B) a sales outlet established in Indonesia, where Sterling could charge more for its
products
C) a marketing and advertising partnership established with a successful French car
retailer
D) a distribution center established in London to preempt the growth of a British car
manufacturer
Vytel Communications (Scenario)
Vytel Communications is a U.S.-based telecommunications company that is considering
doing business in Argentina. Vytel managers hire a consulting firm to investigate the
risks and benefits related to doing business in Argentina. The consulting firm identifies
a number of challenges that might prohibit Vytel from entering Argentina. In addition,
the consultants conduct surveys which indicate a demand for Vytel’s products and
services.
Which of the following most likely supports the consulting firm’s recommendation that
Vytel should NOT do business in Argentina?
A) Government bureaucracy in Argentina is limited and is not characterized by red tape.
B) Qualified suppliers and distributors who are eager to work are readily available in
Argentina.
C) Import restrictions do not apply to the telecommunications industry in Argentina.
D) In the past, intellectual property rights law have not been enforced in Argentina.
________ is an arrangement in which the focal firm or a consortium of firms plans,
finances, organizes, manages, and implements all phases of a project abroad and then
hands it over to a foreign customer after training local workers.
A) Home-replication strategy
B) Exporting
C) Turnkey contracting
D) Equity-based collaborative venture
________ refers to searching for and locating potential job candidates to fill the firm’s
needs.
A) Retrenchment
B) Recruitment
C) Codetermination
D) Repatriation
Trade audits may provide managers insight regarding ________.
A) manufacturing cost estimates
B) company employee opinions
C) competitors’ offerings and pricing
D) market fluctuation tendencies
Which of the following emerging market economies has the highest median household
income ?
A) Indonesia
B) Turkey
C) China
D) India
Over time, the GATT evolved into the ________.
A) World Bank
B) International Monetary Fund
C) World Trade Organization
D) World Intellectual Property Organization
Acme Software (Scenario)
Acme Software is a U.S.-based maker of software products for the health care industry.
Recently Acme has been investigating whether it would be beneficial to internationalize
some of its value-chain activities. Acme hires a consulting group to help determine
which, if any, value-chain activities could be conducted abroad to promote business
growth. The consulting group identifies two health care software development
companies in India that could provide programming services at a lower cost than
Acme’s current expenditures for programming. In addition, the consultants conduct
international market research which shows that German health care companies have a
strong demand for the type of software that Acme offers.
Which of the following activities in Acme’s value chain would be internationalized if
Acme decides to establish a development contract with one of the Indian software
firms?
A) sales
B) distribution
C) marketing
D) procurement
In a short essay, describe the major trends in the growth of foreign direct investment
(FDI) since the 1980s.
How is culture like an iceberg? In a short essay, explain the relationship between the
iceberg theory and international business relationships.
What distinguishes an MNE from an SME? In a short essay, describe the major
differences between the two types of firms.
What is international business, and how has it transformed the world economy?
Describe local responsiveness and explain how a multidomestic strategy allows an
international firm to pursue local responsiveness.
In a short essay, identify the four areas in which technological advances had their
greatest impact on business. Describe the impact of each area on business today.
Describe the various types of partners an international firm might adopt when
expanding internationally. How can a business partner affect a company’s sales
potential?
What makes China popular for FDI? What factors contribute to the long-term
popularity of FDI in advanced economies?
In a short essay, discuss the key tasks in international human resource managers.
In a short essay, describe some of the risks and challenges of doing business in
emerging markets. What strategies help firms enter emerging markets successfully?
In a short essay, discuss the impact of market globalization on consumer lifestyles and
preferences around the world. Provide examples to illustrate your answer.
Contrast the strategies of multidomestic industries and global industries. Why is there a
difference in strategies between the two industries? Provide an example for illustration.
In a short essay, explain why the comparative advantage principle is the foundation and
overriding justification for international trade. How does this principle support the
competitive advantage of nations theory?
In a short essay, describe the underlying reasons for inflation. Provide an example of a
nation that faced a high rate of inflation.
Describe the three strategic objectives for creating a competitive advantage in
international business as proposed by Bartlett and Ghoshal. Provide an example to
illustrate each objective.
Describe three methods used to transfer funds within an MNE.
Explain the role of intellectual property rights in foreign market contractual strategies.
What constitutes the infringement of intellectual property?
Describe how the political and legal systems of a host country can both harm and
benefit a foreign firm.