Technological advances have helped make internationalization affordable for all sizes
of firms.
Commodities, industrial equipment, and technology products are difficult to
standardize.
Regional integration greatly increases the scale of the marketplace for firms inside the
economic bloc.
Ethics and appropriate behavior transcend all international business activities and figure
prominently in management decisions about financial performance and competitive
advantage.
Representation by women in senior management is lowest in Russia and the
Philippines.
Industrial cluster refers to a concentration of businesses, suppliers, and supporting firms
in the same industry at a particular geographic location, characterized by a critical mass
of human talent, capital, or other factor endowments.
The GATT created a forum for resolving trade disputes.
One of the key advantages to an equity joint venture is that the management structure is
very simple which allows for easy adjustments and modifications.
Governments impose defensive barriers to pursue strategic or public policy objectives,
such as increasing employment or generating tax revenues.
International portfolio investment refers to a firm’s direct control of foreign operations
and is an equity-based method of foreign market entry.
Unions in Europe often represent not only factory workers but white-collar workers
such as physicians, engineers, and teachers.
Currency swap is an agreement to exchange one currency for another, according to a
specified schedule.
Unlike other legal systems, Islamic law evolves very little over time .
A new legal entity is created during the formation of a project-based, nonequity venture.
Most democracies include elements of socialism.
In a licensing agreement, the licensee is both the owner and user of intellectual
property.
Host-country governments often encourage franchising because most of the money
generated by the franchise remains in the local economy.
In the past, international trade and investment activities were mainly conducted by
companies that sold services.
In a master franchising agreement, the master franchisee has the right to subfranchise to
other independent businesses and thus assume the role of the local franchisor.
The strategic purpose behind firms competing with rivals in their own market is to force
them to expend resources and thus, defend the firm’s own market.
Freedom Shoes (Scenario)
Freedom Shoes Inc., a sports shoe company, is considering entering into a contract with
an overseas vendor to expand its production capacity. The company investigated several
suppliers and found one vendor to be the most attractive in terms of cost and
manufacturing efficiency. However, Freedom’s managers have heard reports that the
vendor operates factories with sweatshop conditions.
The most advanced companies monitor suppliers to ensure that they use sustainable
practices.
Avoiding country bias, nepotism, and other local practices and cultivating a global
mindset are some of the significant challenges of the international staffing policy.
Cross-cultural awareness training tends to lower intercultural sensitivity and
effectiveness.
An industrial design is a logo belonging to an organization whose members use it to
identify themselves and associate their products with a level of quality.
Excluding noncompete clauses in employee contracts helps prevent employees from
serving competitors for some years after leaving the firm.
One of the disadvantages of licensing is that it requires the licensor to make a high
capital investment in the foreign market.
The strength of a global brand is best measured by its brand equity.
Global new-product planning teams formulate best practices that the firm implements in
all its units worldwide.
Worldwide staffing with PCNs helps firms develop an integrated global enterprise.
Acknowledging the presence of an ethical problem is the first step of the framework for
arriving at ethical decisions.
Which of the following, originally known as the International Bank for Reconstruction
and Development, was founded to fund construction of Japan and Europe after World
War II?
A) The International Monetary Fund
B) The Financial Stability Board
C) The World Bank
D) Bank for International Settlements
Which of the following best characterizes the purpose of a global marketing strategy?
A) guides firms on hiring highly skilled resources
B) provides managers with demographic data
C) helps managers check high employee turnover
D) guides firms in targeting the right customer segments
________ refer to rules that limit the ability of foreign firms to invest in certain
industries or acquire local firms.
A) Quotas
B) Regulations and technical standards
C) FDI and ownership restrictions
D) Administrative and bureaucratic procedures
The current rate method is typically employed when translating records of ________.
A) foreign subsidiaries that are part of the parent firm’s operations
B) domestic affiliates that conduct business abroad occasionally
C) foreign subsidiaries that are considered stand-alone legal entities
D) joint venture partnerships that participate in global operations
A few decades ago, international business was largely the domain of ________.
A) service firms
B) multinational firms
C) smaller firms
D) all of the above
Adaptation is defined as ________.
A) the firm’s efforts to make its marketing program elements uniform, with a view to
targeting entire regions, or even the global marketplace, with the same product or
service
B) the firm’s attempt at altering its organizational structure to facilitate
internationalization
C) the firm’s efforts to modify one or more elements of its international marketing
program to accommodate specific customer requirements in a particular market
D) the firm’s effort to minimize employee attrition by rewarding performance
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 statements most likely to counters Juan’s argument concerning
the homogenization of national cultures?
A) As globalization standardizes superficial aspects of life across national cultures,
people resist these forces by insisting on their national identity and taking steps to
protect it.
B) Foreign values tend to shift not just superficial aspects of culture, but deeply held
beliefs as well.
C) Material goods such as cell phones and computers are found in most homes
throughout the world.
D) In most industries, domestic operation alone cannot sustain competitive business
growth.
Which of the following is NOT an example of a cross-cultural risk factor?
A) negotiation patterns
B) decision-making styles
C) costs of production
D) ethical practices
Which of the following is true with regard to positioning?
A) Unlike branding, positioning is not intended to evoke the specific attributes that
consumers associate with a product.
B) More often than not, positioning dilutes brand equity.
C) Through positioning, firms emphasize differences from competitors’ offerings.
D) Positioning refers to the process of scaling up production in a market characterized
by high demand.
In cross-border business, successful managers ________.
A) adhere to a self-reference criterion
B) are empathetic to cultural differences
C) overly emphasize the importance of business jargons in facilitating effective
cross-cultural communication
D) ritually avoid analyzing awkward situations in cross-cultural encounters
A firm that pursues foreign direct investment to take advantage of government
incentives is demonstrating a(n) ________ motive.
A) efficiency-seeking
B) novelty-seeking
C) asset-seeking
D) market-seeking
Which of the following is an advantage of franchising to the franchisor?
A) It is easier to maintain control over a franchisee.
B) It is a low-risk, low-cost entry strategy.
C) There is seldom any risk of franchisees becoming future competitors.
D) There is seldom a requirement for the franchisor to become familiar with foreign
laws and regulations.
Which of the following stages comes before procurement in a firm’s value chain?
A) research and development
B) marketing
C) manufacturing
D) distribution
Locating manufacturing in countries with low-cost labor enables a firm to ________.
A) charge premium prices
B) create artificial demand
C) standardize products
D) charge lower prices
Which of the following is true with regard to global sourcing?
A) Global sourcing has declined significantly in the current phase of globalization.
B) Global sourcing is a low-control strategy in which the focal firm sources from
independent suppliers through contractual agreements.
C) Global sourcing refers to the relocation of a business process or entire manufacturing
facility to a foreign country.
D) Global sourcing does not represent the firm’s initial involvement in international
business.
In the context of national industrial policy, which of the following actions by the
government of Kazmia would be the most beneficial for the long-term economic
security of the country?
A) increasing the rate of taxation
B) devoting resources to improve national infrastructure
C) discouraging foreign trade
D) discouraging entrepreneurial ventures undertaken by small firms
Azoo Government Projects (Scenario)
The nation of Azoo needs the assistance of a contractor to construct a new bridge and a
subway system. The nation lacks the skilled labor and technical know-how to handle
such large-scale projects. Representatives of the Azoo government are reviewing the
project bids provided by two different international contractors. Contractor A proposes a
turnkey contract for Azoo. Contractor B proposes a build-operate-transfer arrangement.
Which of the following most likely supports Azoo government’s decision to award the
project bid to Contractor A?
A) Azoo leaders want immediate ownership of the public projects.
B) Azoo leaders want long-term help with operation of the subway.
C) Azoo lacks qualified workers to maintain public works projects.
D) Azoo lacks the financial resources to purchase large machinery.
The process of targeting and serving markets outside the home country is known as
________.
A) market diversification
B) competition intensity
C) reactive internationalization
D) trade protectionism
________ confer the exclusive right to manufacture, use, and sell products or processes.
A) Patents
B) Trademarks
C) Trade secrets
D) Copyrights
LeShaun Golding researched the risks linked to establishing the plant in Country B. He
cited government intervention, lack of local managerial talent, and unethical business
practices as the most prominent risks for this location. LeShaun noted all of the
following types of risks EXCEPT ________.
A) currency risk
B) political risk
C) country risk
D) cross-cultural risk
Which of the following is a factor that complicates capital budgeting in the MNE?
A) project cash flows in the reporting currency of the parent firm
B) government intervention in the project
C) similar tax rules in the project location and the parent’s country
D) government permit to exclusively transfer funds from the project to the parent firm
CEO Hiring Interview (Scenario)
The Ace Children’s Clothing Company is a mature MNE that has been manufacturing
and selling children’s clothing in Ace stores around the world for 30 years. Ace has seen
a downturn in global sales recently due to trendy adult clothing companies branching
out into children’s clothing. The Ace board of directors is interviewing candidates to
replace the outgoing CEO. The board wants a CEO who will take Ace into the future
and pull customers back into Ace stores. Two candidates are being interviewed for the
position: Dan Elizarde and Tanya Carson. Tanya and Dan have comparable executive
experience with retail clothing companies. Therefore, the board will be basing its final
decision on visionary leadership skills.
During the interview, Tanya describes her idea of expanding the Ace line into maternity
clothes to draw in expecting mothers. Which of the following traits of a visionary leader
is Tanya most likely exhibiting?
A) subjective morality
B) cultural imperialism
C) global strategic vision
D) dogmatic view
A firm that builds a new manufacturing facility in a foreign market is participating in
a(n) ________.
A) acquisition
B) merger
C) greenfield investment
D) equity participation
Which of the following is a disadvantage of a geographic area structure?
A) geographic area managers’ lack of global orientation for developing and managing
products
B) limited communications and coordination among the subsidiaries within each
geographic region
C) minimal balance between global integration and local adaptation
D) decreased responsiveness to customer needs and wants in each regional/local market
Which of the following, if true, weakens Daniel’s proposition?
A) Mercantilism helps curb inflation.
B) Running a trade surplus is beneficial for nations.
C) Restricting imports reduces the choice of products consumers can buy.
D) Mercantilism tends to benefit firms that import.
Which of the following gives headquarters considerable authority and control over the
firm’s activities worldwide?
A) nationalization
B) home replication strategy
C) centralized approach
D) decentralized approach
In terms of international business, market globalization can be viewed as a ________.
A) consequence of a strong emphasis on traditional values worldwide
B) consequence of the loss of national sovereignty
C) driver and consequence of firm-level internationalization
D) prime cause of rising diseconomies of scale in emerging economies
An individual from a country with a low degree of political risk would most likely be
from ________.
A) Venezuela
B) Canada
C) Zimbabwe
D) Iraq
________ are mangers of pensions and mutual funds, as well as insurance companies
who have assumed an enormous role in driving capital markets around the world.
A) Entrepreneurs
B) Institutional investors
C) Angel investors
D) Venture capitalists
Brogj Inc. is a cosmetics manufacturer based in California, United States. The firm
varies its products to suit the different conditions abroad. Brogj is an example of a
________.
A) multidomestic industry
B) regional industry
C) global industry
D) globally integrated industry
Discuss the advantages and implementation of a transnational strategy, and explain why
this strategy is closely associated with a global matrix structure.
Briefly explain how microfinancing has helped individuals to rise out of poverty in
many developing nations.
How do national governments contribute to the problems faced by developing
economies? Provide examples from Africa, and explain measures taken by governments
to improve conditions.
What are four advantages to large firms lending funds to their foreign subsidiaries?
Explain the differences between the international monetary system and the International
Monetary Fund. What are the three major types of crises most frequently addressed by
the International Monetary Fund?
Explain the difference between vertical FDI and horizontal FDI. Provide an example
that illustrates the difference between vertical and horizontal integration
Why have global capital markets grown so rapidly in the past decade? Why has the
growth of international business pressured multinational firms and international
organizations to harmonize world accounting systems?
Compare and contrast common law with civil law specifically as the two systems relate
to international business.
In a short essay, explain the five-step framework for making ethical decisions.
Provide an overview of totalitarianism, socialism and democracy. Provide examples of
nations which adhere to each system.
Discuss the major risks associated with global sourcing.
Describe the four factors that contribute to the likelihood of success for a product or
service in an international market.
In a short essay, identify three sectors in the service industry that are internationalizing
rapidly. Explain the types of activities conducted within each sector, and provide
examples of three companies that operate in each.
How does culture affect international advertising campaigns? Provide an example of an
international advertising campaign which was unsuccessful owing to cultural
differences.
Describe the three types of currency exposure, and explain the benefits of the
consolidation of financial statements.
Compare and contrast industry market potential and company sales potential. How is an
estimate of industry market potential helpful to managers? What factors are necessary
to determine industry market potential?
