Global sourcing hinders firms from freeing expensive analysts, engineers, and
managers from routine tasks.
The global capital market has grown rapidly due to government deregulation, which has
made international movement of capital easier.
Infringement of intellectual property is the unauthorized use or reproduction of products
and services protected by a patent, copyright, trademark, or other intellectual property
right.
Licensing and franchising are complex undertakings and require skillful research,
planning, and execution.
Industries that benefit the most from global sourcing are characterized by low labor
intensity in product and service production.
Contractual entry strategies in international business are cross-border exchanges in
which the relationship between the focal firm and its foreign partner is governed by an
explicit contract.
Businesses based in societies characterized by high uncertainty avoidance encourage
managers to take risks and make quick decisions.
A cultural metaphor is a generalization about a group of people that may or may not be
factual.
Government agencies, institutions, and public officials influence the manner in which
foreign firms conduct business.
By monitoring key industry-specific indicators, a manager can estimate industry market
potential.
In passive hedging, the firm frequently reviews total exposure and hedges only a subset
of its total exposures, usually those that pose the greatest risk.
Firms that do not export tend to create jobs more quickly than do exporting firms.
Capital budgeting in MNEs is protected from country risks or government intervention.
Promotions usually require a high level of intermediary or retailer sophistication to
succeed.
While the number of containers transported internationally has decreased, the cost of
transportation has increased dramatically.
Global market opportunities depend on timing and location, and they often enhance a
firm’s performance.
Speculators are currency traders who seek profits by investing in currencies with the
expectation their value will change in the future.
Indexing and ranking is the only way to choose markets that offer the best profits.
Market consumption capacity is the proportion of a country’s population concentrated in
cities.
A countervailing duty slows the import of products or services and hinders the
investment activities of firms.
All business activities and processes lend themselves to global sourcing.
A know-how agreement grants a firm permission to use another firm’s proprietary
names, characters, or logos for a specified period of time in exchange for a royalty.
Firms usually internalize those value-chain activities they consider part of their core
competencies.
While franchising facilitates rapid internationalization, compared to FDI, it affords the
firm less control over its foreign operations.
The likelihood of a firm internalizing research and development instead of outsourcing
it is low.
Demographic trends indicate that, in the coming two decades, the proportion of
middle-class households in emerging markets will become much smaller.
A revenue tariff aims to protect domestic industries from foreign competition.
The utilitarian approach is based on the belief that, regardless of how one deals with an
ethical dilemma, human dignity must be preserved.
Common law originated in the United States.
The Bank for International Settlements is an international organization that fosters
cooperation among central banks and other governmental agencies.
The Global Reporting Initiative pioneered the development of the most widely used
sustainability reporting framework.
Dumping violates WTO rules because it amounts to unfair competition.
Companies strive to decrease their costs and reduce their selling prices through
economies of scale and standardization of finished products, among other possibilities.
Tariffs and most nontariff trade barriers apply to FDI, whereas investment barriers
apply to exporting.
In traditional societies, women tend to enjoy a high degree of economic independence.
To minimize currency risk, managers should distinguish economic exposure from
transaction and translation exposures.
A form of collaboration between two firms to form a new, jointly owned enterprise is
defined as a joint venture.
International Advertising (Scenario)
Quik-Vac Corporation, a U.S.-based company, manufactures small, inexpensive
vacuum cleaners that work on rechargeable batteries. Quik-Vac customers typically live
in small apartments where a large vacuum cleaner is neither necessary nor easy to use.
Quik-Vac managers believe there is a market for the vacuum cleaners outside of the
United States, especially in communities where living space is limited. The Quik-Vac
marketing department has been assigned the task of creating an advertising campaign to
introduce Quik-Vac’s offerings to global consumers.
Which of the following can be reasonably inferred if Quik-Vac places increased
emphasis on international promotional activities?
A) that it intends to scale down production of vacuum cleaners
B) that it is disinclined to enter emerging markets
C) that it intends to stimulate an initial purchase, immediate purchase, or increased
purchases of its products
D) that it is overly dependent on foreign intermediaries
Linda Grahams, an American citizen, works in a global conglomerate based in
Washington D.C. A few months ago, Linda was assigned to work in the company’s
office in Hong Kong and live there for the next three years. Which of the following can
Linda be best described as?
A) expatriate
B) host-country national
C) third-country national
D) repatriate
The culture of which of the following countries has a close conversational distance?
A) Russia
B) Sweden
C) Brazil
D) United States
International portfolio investment is characterized by ________.
A) short-term foreign market speculation
B) long-term administration of MNE stocks
C) active control of a foreign business
D) passive ownership of foreign stocks and bonds
Which of the following terms indicates potential loss or adverse effects on company
operations and profitability caused by developments in a country’s political and/or legal
environments.
A) commercial risk
B) currency risk
C) cross-cultural risk
D) country risk
The rate of inflation is a(n) ________ factor to be considered while selecting the
location for FDI.
A) profit retention
B) market
C) infrastructural
D) human resource
The root cause of gray market activity is ________.
A) a firm’s inability to control production and distribution costs
B) a significant difference in price between national distributors
C) the dominance of substandard products in local markets
D) a large enough difference in price of the same product between two countries
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.
Which of the following best supports the decision by the Ace board of directors to hire
Tanya as the CEO?
A) Tanya’s recognition of the homogeneity across communities.
B) Tanya’s innovative ideas and ability to spot future retail trends.
C) Tanya’s subjective moral and ethical standards.
D) Tanya’s competitive personality and dogmatic determination.
Nations running a trade surplus ________.
A) rely solely on imports
B) openly discourage export
C) export more goods than they import
D) import more goods than they export
Trade as a percentage of GDP is used to measure ________.
A) market intensity
B) market size
C) market receptivity
D) market growth rate
A(n) ________ is an official ban on exports to or imports from a particular country, in
order to isolate it and punish its government.
A) embargo
B) confiscation
C) expropriation
D) sanction
Which of the following is true with regard to workforce reduction and employee
termination?
A) In the United States, declaring bankruptcy does not enable firms to shed labor during
company reorganization.
B) Laying off workers requires management to consider local norms, regulations, and
labor unions.
C) Most European countries do not restrict firms’ ability to lay off workers.
D) In most countries, the employer is considered the weaker party.
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.
The government of Azoo might select Contractor B in order to ________.
A) prevent the builder from operating in the country for even a short period of time
B) avoid rental fee, user fee, and tolls during the operational stage of the bridge and
subway system
C) build the projects cost-effectively
D) increase the number of visitors to Azoo
In which of the following types of organizational arrangements would a firm most
likely have a division that focused solely on global marketing?
A) product structure
B) functional structure
C) geographic area structure
D) international division
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 statements most likely supports using gradual elimination for
country screening instead of indexing and ranking?
A) All You managers want a list of foreign markets and rank these markets based on
specific variables, such as market size and growth rate.
B) All You managers are primarily looking for a market with a large urban population
and a great deal of economic freedom.
C) All You managers will consider any reasonable market and want to narrow down the
list with increasingly specific information.
D) All You managers have assigned values to different variables within the cosmetic
and skin care industry.
All of the following refer to external factors that impact international pricing EXCEPT
________.
A) cost of manufacturing
B) value-added taxes
C) shipping
D) anticipated fluctuations in currency exchange rates
Which of the following characterizes country risk?
A) The political and legal systems of adjacent nations greatly impact the country risk of
nations that host foreign firms.
B) Country risk will change only after the creation of laws and regulations that affect
foreign firms.
C) A nation’s country risk level remains fairly constant until the election and installation
of a new political leader.
D) Country risk is always present, but its nature and intensity vary over time and from
country to country.
Which of the following is true with regard to protectionism?
A) It increases the availability of raw materials for domestic industries.
B) It decreases the cost of products sold in the home market.
C) It increases the availability of products sold in the home market.
D) It can trigger retaliation from foreign governments, which reduces sales prospects
for exports.
Technological leapfrogging is defined as ________.
A) adopting new technology late in the hype cycle
B) adopting new technology as soon as it is released
C) bypassing certain stages of technology to come up with a radical innovation when
upgrading to new products
D) boosting demand artificially by postponing the sale of new technology in the market
Which of the following is true with regard to the rights approach?
A) It is based on the belief that the best action treats everyone equally and fairly.
B) It produces the greatest balance of good over harm to customers, employees,
shareholders, the community, and the natural environment.
C) According to the rights approach, the most important virtues are truth and prudence.
D) It is based on the belief that, regardless of how you deal with an ethical dilemma,
human dignity must be preserved.
Financing Corporate Expansion (Scenario)
Intensity Games is an MNE based in San Francisco that manufactures a popular line of
video game consoles and accessories. Intensity owns manufacturing facilities in China
and Russia where the components of the game consoles are manufactured and
assembled before being shipped around the world. Intensity also owns numerous
subsidiaries that manufacture game cartridges for Intensity game platforms. Intensity
managers have determined that the firm needs to expand its Chinese facility to
accommodate the increasing demand. The firm needs to raise several million dollars to
finance the expansion. The financial managers of Intensity are discussing the various
financing options available to the firm.
Which of the following is most likely an advantage of Intensity accessing funds through
the global capital market instead of domestic sources?
A) maturity period of instruments is restricted to less than 365 days
B) access to a vast number of competitive funding sources
C) access to short-term financing exclusively
D) reduced exposure to currency risk and rate fluctuation
Global integration is the coordination of the firm’s value-chain activities across multiple
countries to achieve worldwide efficiency, synergy, and ________ in order to take
advantage of similarities between countries.
A) capability
B) expertise
C) cross-fertilization
D) redundancy
In polychronic cultures, ________.
A) members are easily distracted and are inclined to do many tasks at once
B) people view time as linear and punctuality as a virtue
C) managers make commitments, set deadlines, and adhere to a strict schedule of
meetings and activities
D) managers and investors are impatient and want quick returns
Products are classified under about 8,000 different unique codes in the ________
schedule, a standardized system used worldwide.
A) harmonized tariff
B) protective tariff
C) revenue tariff
D) specific tariff
Critical incident analysis examines ________.
A) a situation under which an MNE is forced to relocate operations abroad
B) an episode in which tension arises between employee and foreign counterpart due to
a cross-cultural misunderstanding
C) an episode in which tension arises between an employee and a manager with regard
to performance evaluation
D) a critical situation in which the internal stakeholders of a firm fail to reach a
consensus with regard to a common issue
Currency risk can best be defined as the risk that occurs when ________.
A) currency values remain constant for prolonged periods
B) one currency changes in relation to another currency
C) buyers and sellers disagree over which currency to use
D) fluctuations in the stock market affect all exchange rates
Cotton Quota (Scenario)
Cotton growers in the nation of Zanzi export nearly 700,000 bales of cotton every year.
Zanzi is the home country for a fabric manufacturing facility that exports high-quality
cotton fabric around the world. The government imposed a quota of 1 million bales of
cotton that can be imported into Zanzi every year. The local fabric manufacturer is
lobbying the government to remove the quota on cotton.
Which of the following questions would be most important for government officials to
evaluate when considering the controversy over the cotton quota?
A) What would be the short-term effect of additional agricultural quotas?
B) What other nations utilize agricultural quotas and what are the effects?
C) Does the government of Zanzi impose heavy duties on dumping?
D) What will be the long-term effect of the cotton quota on the Zanzi economy?
Tax havens are characterized by all of the following EXCEPT that they are ________.
A) legal means to reduce corporate income taxes
B) regions where certain taxes are absent
C) supported by the World Bank and the EU
D) used to establish operations or funnel transactions
In a licensing agreement, the licensee provides ________.
A) the rights to use its industrial design
B) intellectual property, technical information and assistance
C) a combination of down-payment plus royalty
D) the know-how and supporting products such as, raw materials and components
Which of the following is a direct tax?
A) customs tax
B) corporate income tax
C) VAT
D) sales tax
The 2011 “Arab Spring” in the Middle East was facilitated in large part by social media.
In a short essay, explain the concept of sovereignty. How does globalization affect
sovereignty?
Explain why it is especially critical for a firm to select the most appropriate market for
its product or service during the primary stage of internationalization. What are the
negative consequences of making a poor market selection for firms planning to
globalize through FDI?
Discuss resource and asset-seeking motives for FDI. Why might a company favor
acquisition over greenfield investment as an FDI approach?
In a short essay, discuss the internalization theory. Provide examples.
Why is per-capita income NOT always the best indicator of an emerging market’s
potential? What does the concept of purchasing power parity (PPP) suggest?
Explain the concept of a global market opportunity, and discuss the key questions to
assess a firm’s organizational readiness to pursue global market opportunities.
Explain the purpose of special interest groups. How do these organizations affect
international business? Provide examples to support your answer.
Briefly describe the three types of managers commonly found in the foreign
subsidiaries of MNEs. What are the distinctive traits of managers with a global
mind-set?
In a short essay, explain why most firms use exporting as part of their
internationalization portfolio, and discuss how Incoterms have mitigated problems with
logistics.
Import tariffs are a principle instrument of trade intervention. In a short essay, briefly
describe the five main types of import tariffs.
Explain the purpose of positioning. How does a global positioning strategy assist firms
participating in international business? What benefit does a global positioning strategy
offer?
What are the potential problems that critics point to with regard to global sourcing?
Why is offshoring often referred to as a process of “creative destruction”?
Describe the four primary challenges faced by retailers when they expand overseas.
Provide examples of mistakes made by retailers in foreign markets.
Describe four factors that might persuade a firm to become locally responsive in a
nation where it conducts business.
Explain why international financial and monetary activities are becoming more
integrated. What are the risks and benefits of the growing integration of the two
activities?
Explain the importance of a global market strategy. How does a global market strategy
affect the choice of adaption versus standardization for an international marketing
program?