Nations with economies based on agriculture and textile manufacturing generate more
economic revenue than do nations with many high-tech industries.
Global sourcing eliminates the possibility of new rivals being created in a country.
Given the complexities of international business, manufacturing is generally the only
value-chain activity that firms outsource abroad.
Companies opt for FDI to obtain advantages associated with locating at the hub of
knowledge development and innovation in a given industry.
Entrepreneurial orientation and availability of venture capital are examples of
country-specific advantages .
Common law is primarily judicial in origin and based on court decisions.
Economies of scale are decreases in per-unit cost of production resulting from
decreasing output.
A standardized marketing approach is appropriate when customers seek similar features
in the product or service.
CORE, a diagnostic tool, is the sole property of the U.S. Department of Commerce.
When an exporter gains a price advantage because its home-country currency is
weakening relative to its customer’s currency, then it should consider lowering the
prices of its products.
Assessing firm’s readiness to internationalize and suitability of its products and services
for foreign markets occurs in the final stage of the global market opportunity
assessment process.
One of the advantages of licensing is that the profits generated from such agreements
are typically higher than for FDI.
Headquarters of a firm is the primary contributor to decisions about local market
research.
Countries cannot create or acquire comparative advantage.
The world’s largest MNEs are concentrated in emerging economies.
Countries that liberalize international trade and investment enjoy faster per-capita
economic growth.
The 2008 global financial crisis began in the United States and quickly spread around
the world.
In international economics, codetermination refers to the tendency for a financial or
monetary crisis in one country to spread rapidly to other countries, due to integrated
national economies.
Civil law is primarily legislative in origin and based on laws passed by national and
local legislatures.
National governments require exporters to obtain a license to protect the exported
goods against damage, loss, pilferage, and delay.
The floating exchange rate system is also called a pegged exchange rate system.
Corporate social responsibility represents the base of the pyramid of ethical behavior.
The level of government intervention in commercial activities is similar across most
countries.
An economy is categorized as advanced, developing, or emerging based on degree of
economic development and per-capita income.
Subsidies may allow a manufacturer to practice dumping-that is, to charge an unusually
low price for exported products.
Subsidiary managers are often assessed by multiple evaluators mainly because MNEs
are typically characterized by a low level of mutual trust among employees.
Cross-licensing agreements are a type of project-based, nonequity venture in which the
partners agree to allow access to licensed intellectual property developed by the other
on preferential terms.
Exporting and foreign direct investing are two common types of contractual entry
strategies.
In advanced economies, firms generally do not outsource value-chain activities because
they fear the loss of proprietary knowledge and trade secrets.
FDI is the most advanced and complex foreign market entry strategy.
Large multinationals are not constrained by market forces because they can exert
considerable influence on governments through lobbying.
For internationalizing firms, the consequences of poor business management decisions
are usually more costly when mistakes occur abroad than when they occur at home.
Failure to adopt CSR behaviors can have high detrimental effects on a company.
Prices do not affect customers’ perception of value.
In countries with questionable ethical norms, it is usually ill-advised to maintain ethical
standards superior to what is required by local laws and values.
A foreign firm’s entry strategy, operations, and performance are often dictated by
foreign investment laws.
Common law is also known as code law.
Assessing the firm’s product’s market demand should be done before analyzing its
readiness to internationalize.
All You Cosmetics (Scenario)
Executives of All You Cosmetics Company, a Canadian company, have hired a
consulting firm, Brown and Associates, to identify foreign markets that might be
appropriate for internationalization. Brown consultants have been working for two
weeks with All You managers to identify the best foreign markets for the Canadian
cosmetics company, which specializes in organic cosmetics and skin care products. So
far, Brown consultants have narrowed down the list of countries to fifteen. However,
the consultants need to eliminate unattractive markets and reduce the list to five nations,
which will then be researched more closely.
Which of the following would most likely be useful market data for the Brown
consultants?
A) discretionary income of young women
B) annual health care expenditures
C) average level of education
D) number of cellular phone subscribers
Ciao Manufacturing Location (Scenario)
An Italian car company, Ciao, has made plans to expand its operations by building a
manufacturing facility in a foreign market. Ciao has been very successful selling its
small, economical, and stylish cars in Italy and Spain, and firm managers believe that
Ciao cars will be equally profitable in other markets. Ciao managers are trying to
determine whether Canada or Russia would be the best location for a new automobile
manufacturing facility.
Which of the following should be considered in the decision regarding where to build a
new Ciao plant?
A) How many Ciao cars are sold in Italy and Spain each year?
B) What U.S. automakers are the biggest competitors of Ciao?
C) How politically stable are the governments of Russia and Canada?
D) How will Ciao managers handle the language barriers in foreign markets?
Managers can achieve effective cross-cultural interaction by ________.
A) resisting cultural homogeneity
B) keeping an open mind and being inquisitive
C) rushing into conclusions about other’s behaviors
D) using business jargons to facilitate communication
________ is the process of combining and integrating the financial results of foreign
subsidiaries into the financial statements of the parent firm.
A) Hedging
B) Dumping
C) Consolidation
D) Trade credit
Which of the following market research tools relies on known information about one
product to infer the market potential of another product?
A) proxy indicator
B) analogy
C) trade audit
D) comparative surveys
________ is the procurement of products or services from suppliers located abroad.
A) Licensing
B) Franchising
C) Deceptive marketing
D) Global sourcing
Which of the following questions would be more important to evaluate in determining
the reason behind the inflation in Country X?
A) Has momentum trading of agricultural commodities been occurring in Country X?
B) What is the exchange rate between Country X currency and the euro?
C) How quickly was the money supply increased by the central bank of Country X?
D) How many pounds of coffee beans are being imported annually to Country X?
Which of the following best describes the role that the international monetary system
plays with foreign firms?
A) underwrite stock and bond issues and give advice on mergers
B) establishes regulations for FDI financing
C) oversees finance and trade in developing nations
D) provides a framework for monetary and foreign exchange activities worldwide
Which of the following is a major challenge often faced by focal firms that engage in
global sourcing?
A) no control over the quality of outputs
B) domestic management of local distribution
C) increased costs of business travel
D) lower-than-expected cost savings
Country risk is considered similar to ________.
A) political risk
B) commercial risk
C) currency risk
D) cross-cultural risk
According to the virtue approach ________.
A) the best action emphasizes the welfare of the entire community or nation
B) the best action emphasizes moral excellence and righteousness that provide for the
full development of our humanity
C) the best ethical action is the one that provides the most good or the least harm
D) the best action protects and respects the moral rights of everyone involved
Before undertaking contractual entry strategies abroad, management ________.
A) should bribe government officials to ensure protection of intellectual property
B) should register patents and copyrights with local governments
C) should keep information about intellectual property confidential from all franchisees
in countries with weak anti-piracy laws
D) understand and follow subjective moral and ethical standards across markets
Happy Pet Internationalization (Scenario)
Based in California, the Happy Pet Corporation has 45 pet supply stores across the
United States. Given the firm’s success in the U.S. market, Happy Pet managers are
considering internationalizing their operations to the EU. The market research
conducted by the company identified several established pet product manufacturing
companies. Beth Schultz, the founder and CEO of Happy Pet, has expressed concerns
about expanding the firm’s operations into the EU. She believes internationalizing in the
EU is not profitable because of the presence of these established competitors. However,
Edward O’Neal, the COO of Happy Pet, believes the corporation is ready for the next
step. Happy Pet executives and managers have gathered to discuss their organization’s
readiness to internationalize.
Which of the following most likely supports the opinion of Beth Schultz over the
opinion of Edward O’Neal?
A) Happy Pet has a monopoly in the U.S. pet products market.
B) Happy Pet’s online sales reflect a high demand for premium pet food in the EU.
C) Happy Pet’s market research identified the presence of market saturation in the EU.
D) Happy Pet’s competitors have successfully branched into foreign markets.
Which of the following was the first major effort to systematically reduce trade barriers
worldwide?
A) WIPO
B) GATT
C) NAFTA
D) WTO
________ are formal offers made by a buyer to purchase certain products or services.
A) Quotas
B) Tariffs
C) Tenders
D) Microloans
________ are typically the largest proportion of workers hired abroad and usually work
in manufacturing, assembly, basic service activities, clerical work, and other
nonmanagerial functions.
A) Home-country nationals
B) Parent-country nationals
C) Third-country nationals
D) Host-country nationals
Which of the following statements is true about the firm-level consequences of market
globalization?
A) The globalization of markets has narrowed down new business opportunities for
internationalizing firms.
B) Globalization drives firms to relocate key value-adding activities to the most
advantageous locations around the world.
C) A firm’s value chain is not subject to internationalization.
D) Through offshoring, a firm relocates a major value-chain activity by establishing a
factory or subsidiary in the home market.
In order to be effective, a corporate code of ethics should be designed to function like a
________.
A) business white paper
B) moral compass
C) project plan
D) political treatise
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.
One shareholder questioned the CEO’s rationale for beginning an exploratory effort to
establish a new manufacturing plant in India. The CEO responded by explaining that
India was an untapped market with a high demand for products such as those produced
by Sterling. His rationale represented an example of which of the following reasons for
international expansion?
A) investing in a potentially rewarding relationship with a foreign partner
B) gaining access to lower-cost or better-value factors of production
C) seeking opportunities for growth through market diversification
D) better serving key customers that have relocated abroad
International business is defined as the performance of ________ activities by firms
across national borders.
A) marketing and fiduciary
B) trade and investment
C) finance and operational
D) accounting and auditing
According to the internationalization process model, a firm advances to the ________
stage by initiating limited international activity, typically in the form of basic exporting.
A) active involvement
B) experimental involvement
C) pre-export
D) domestic focus
Which of the following is the last stage of evolution in the international product life
cycle theory?
A) temporary monopoly
B) standardization
C) decline
D) diversification
Fluctuating exchange rates are an example of which of the following?
A) country risk
B) political risk
C) currency risk
D) cross-cultural risk
________ make up the largest group of countries and include Bangladesh, Nicaragua,
and Zaire.
A) Advanced economies
B) Capitalist economies
C) Emerging markets
D) Developing economies
Emerging markets act as manufacturing bases for global MNEs because of ________.
A) high regulations
B) high availability of low-wage workforce
C) well-developed infrastructure
D) strong intellectual property laws
Promotional activities ________.
A) are intended to stabilize the demand for consumer goods in advanced economies
B) are short-term marketing activities intended to stimulate an initial purchase,
immediate purchase, or increased purchases of the product
C) do not include coupons and demonstrations
D) are strategies designed to tap the market potential of products that have a short shelf
life in emerging markets and developing economies
Net working capital is ________.
A) the combined total of a firm’s equity capital and net losses
B) the difference between a firm’s current assets and current liabilities
C) the difference between a firm’s expected profits and current debts
D) any currency deposited in a bank outside its country of origin
Which of the following is the best example of a back-office BPO activity?
A) customer service
B) billing
C) marketing
D) technical support
The ________ rests on the premise that countries differ in the type and quantity of
production factors they possess.
A) cost-advantage theory
B) competitive advantage theory
C) factor proportions theory
D) comparative advantage theory
The most widespread form of religious law is ________ law.
A) Hindu
B) Jewish
C) Islamic
D) Catholic
Which of the following constitutes a major disadvantage for exporting firms that
primarily use independent distributors based abroad?
A) inability to monitor currency exchange rates
B) lack of control over pricing
C) absence of brand loyalty among customers
D) limited access to low-cost labor