Over the last few decades, export activity by nations has grown more quickly than has
domestic production.
According to the indexing and ranking method for choosing the most promising target
market, the researcher assigns scores to countries based on their overall market
attractiveness.
China is an example of an advanced economy.
All else being equal, the greater the supply of a currency, the lower its price; the lower
the supply of a currency, the higher its price.
Offshoring is common in the service sector, including banking, software code writing,
legal services, and customer-service activities.
The end of the Cold War in 1989 hindered the forces of market liberalization in Eastern
Europe.
In the decision about whether to outsource, research and development is considered of
low importance to a firm.
The globalization of markets refers to the growing independence and self-sufficiency of
countries worldwide.
Falling trade barriers are facilitated by the WTO.
International human resource managers support subsidiary managers by providing
IHRM guidelines and by hiring, training, and evaluating employees for international
operations.
The International Monetary Fund was created through the Bretton Woods Agreement as
a way to monitor the foreign exchange systems and lend money to developing
economies.
Managers with an ethnocentric view of the world are generally better at understanding
and dealing with similarities and differences among cultures.
In the context of attaining economies of scope, using individual managers in each
European country is more efficient that using the same base of managers all over
Europe.
Microfinance provides large-scale financial services mainly to global conglomerates.
The protection of intellectual property rights is guaranteed and enforceable in every
country in the world.
The two primary types of international investment are portfolio investment and foreign
direct investment.
International portfolio investment refers to passive ownership of foreign securities.
According to the internalization theory, firms must reduce control over foreign
operations in order to enhance overall effectiveness.
In China and Japan, a person’s age is the most important determinant of employee
promotion.
An embargo is an official ban on exports to or imports from a particular country.
The bill of lading is the “birth certificate” of the goods being shipped and indicates the
country where they originate.
Countries such as Germany, Italy, and Japan view a high debt ratio as undesirable, and
the leaders of these nations encourage firms to balance their capital structure with more
equity financing, which is readily available.
Currency risk refers to the risk posed by adverse fluctuations in exchange rates.
FDI is the least taxing entry strategy that a firm can choose.
MNEs must set high prices in emerging markets because emerging market consumers
have high spending power.
The “BRIC” countries show the least potential as target markets in the near future.
The WTO was created in order to reduce tariffs through continuous negotiations among
member nations.
Foreign subsidiaries are never staffed from the home country.
Rigid cost-plus pricing is typically favored by highly experienced exporters.
Compared to small firms, large companies usually can access capital at lower cost.
Multilateral netting is the means by which subsidiaries and affiliates charge each other
as they exchange goods and services.
Which of the following would be the most important for Earth-Rite executives to
determine when deciding whether to collaborate with the Brazilian grocery store chain?
A) Did employee empowerment lead to increased efficiencies across Earth-Rite’s
subsidiaries?
B) Would a collaborative venture allow Earth-Rite to internationalize rapidly?
C) What is the density of venture capitalists in Brazil?
D) Is employee empowerment culturally favored in Brazil?
Which of the following organizational arrangements for foreign operations is most
closely associated with home replication strategy?
A) export department
B) international division
C) geographic area structure
D) product structure
Prox Inc. is a U.S.-based manufacturer of consumer electronics. It decides to export to
Mexico and wants to protect its goods against damage, loss, and pilferage. Which of the
following documents is applicable here?
A) insurance certificate
B) bill of lading
C) pro forma invoice
D) license
Sustainable practices lead to ________.
A) cost savings from more efficient production
B) the abolition of labor unions
C) higher employee turnover
D) reduced operational flexibility
All of the following are true of global new-product planning teams EXCEPT ________.
A) they assemble employees with special knowledge and expertise
B) they are responsible for global promotion of products and services
C) they include geographically-diverse employees in team activities
D) they determine which elements of the product will be standardized
Leasing is especially beneficial to ________.
A) advanced economies
B) economies with high PPP
C) First World countries
D) developing economies
Which of the following is characteristic of family conglomerates?
A) low access to capital than most other firms
B) wholly owned or controlled by the government
C) extensive networks in various industries
D) inferior market knowledge
Foreign firms should seek alliances with well-qualified local companies in countries
characterized by inadequate legal and political frameworks because ________.
A) such alliances help eliminate business risks completely
B) through such partners, foreign firms can access local market knowledge
C) such alliances help foreign firms function without distributor networks
D) the dominance of family conglomerates in emerging economies are fast declining
International Business Class (Scenario)
Students in Professor Manning’s international business class have been assigned the
task of explaining the different types of FDI. Professor Manning formed groups among
students. The groups are to research their assigned topic and present their information to
the class using examples of real-world firms for illustration. Jessica Hanson is the
leader of Group A; Manu Patel is the leader of Group B; and Mario Witherspoon is the
leader of Group C.
During her presentation, Jessica describes how two automakers joined forces and
formed a separate firm by pooling their assets. Which of the following topics was most
likely assigned to Group A?
A) equity joint venture
B) acquisition
C) greenfield investment
D) vertical integration
Protectionist policies may also lead to ________.
A) price inflation
B) increased choices for buyers
C) easy availability of products
D) high incentive to improve quality
The procurement of selected value-adding activities, including production of
intermediate goods or finished products, from independent suppliers is known as
________.
A) outsourcing
B) franchising
C) offshoring
D) licensing
A ________ is an area within a country that receives imported goods for assembly or
other processing and subsequent re-export.
A) single market
B) trade bloc
C) foreign trade zone
D) common market
International Price Setting (Scenario)
The Comfy Couch Corporation (CCC) is a leading American manufacturer of sofas,
sectionals, and lounge chairs. Managers from the U.S.-based firm recently met a
London retailer who expressed an interest in selling CCC lounge chairs in his stores.
The retailer sells a number of different furniture brands in his stores, so CCC managers
need to price their furniture appropriately if the firm is to be competitive in the
European market.
Which of the following should most likely be considered by managers of CCC before
setting the price for the lounge chairs manufactured by the company?
A) In what other markets could CCC export its high-priced line of furniture?
B) Would the London retailer be able to recommend appropriate intermediaries?
C) What type of pricing strategy best corresponds to the corporate goals of CCC?
D) Does CCC plan to implement product diversification in the future?
________ refers to the confusion and anxiety experienced by a person who lives in a
foreign culture for an extended period.
A) Culture shock
B) Culture pluralism
C) Enculturation
D) Segregation
________ refers to a government measure intended to manage or prevent the export of
certain products or trade with certain countries.
A) Quota
B) Export control
C) Customs
D) Subsidy
Culture is not ________.
A) about beliefs and values of society
B) relative
C) a collective phenomenon
D) inherited
A consortium is defined as ________.
A) the purchase of an existing company or facility
B) two partners forming a new legal entity
C) an equity venture to consolidate the value chain
D) multiple partners participating on a large-scale project
Subjective dimensions of culture (Scenario)
In the last two years, the sales of consumer electronics in China have risen by 9.4
percent. Moreover, the market is becoming increasingly competitive since a large
number of Japanese, European, and American manufacturers are building factories to
face the competition from low-cost Chinese manufacturers. Grande Co. is a U.S.-based
consumer electronics manufacturer that has been negotiating with Chinese authorities
for eight years to open a factory in the country. Since Grande has spent significant time
and energy on negotiation in the past eight years, they should quit and set up a factory
in a more responsive society.
Which of the following, if true, strengthens the conclusion of the above passage?
A) In China, companies belonging to deal-oriented cultures have been the most
successful.
B) American companies best thrive in cultures that are deal-oriented.
C) For the Chinese, relationship is less important than business deals.
D) The management of Grande is characterized by a host country mind-set.
The Gulf nations benefit economically from rich petroleum reserves in the region. This
is an example of ________.
A) comparative advantage
B) competitive advantage
C) ownership-specific advantage
D) cost advantage
Trademarks, copyrights, and patents are examples of ________.
A) intellectual property rights
B) fundamental rights
C) tangible property rights
D) ethical rights
Marketing the same product worldwide is most appropriate for the ________ industry.
A) furniture
B) electronics
C) food and beverage
D) retailing
To minimize the complexity of franchising, focal firms must ________.
A) bribe government officials to reduce nontariff trade barriers
B) have a subjective view of moral and ethical standards
C) conduct advance research on the host country’s laws on intellectual property
D) appoint managers from the home country to avoid legal disputes
Which of the following supports maintaining the current production status instead of
increasing production?
A) The euro-dollar exchange rate is unpredictable due to its constant fluctuation.
B) Exporters and importers typically profit from currency speculation.
C) The euro/dollar exchange rate usually remains steady for long periods of time.
D) The cost of living in the U.S. has risen dramatically in the last year.
Which of the following is an advantage of exporting?
A) It allows focal firms to attain maximum control by establishing ownership of key
assets in the foreign market.
B) It is a high-control strategy that requires substantial resource commitment when
compared to equity joint ventures.
C) It minimizes exposure to tariffs and other trade barriers, as well as fluctuations in
exchange rates.
D) It increases overall sales volume, improves market share, and reduces per-unit costs
of manufacturing.
International Business Class (Scenario)
Students in Professor Manning’s international business class have been assigned the
task of explaining the different types of FDI. Professor Manning formed groups among
students. The groups are to research their assigned topic and present their information to
the class using examples of real-world firms for illustration. Jessica Hanson is the
leader of Group A; Manu Patel is the leader of Group B; and Mario Witherspoon is the
leader of Group C.
During his presentation, Mario describes how a large Japanese automaker built a
factory in Kentucky. Which of the following topics was most likely assigned to Group
C?
A) horizontal integration
B) equity joint venture
C) greenfield investment
D) consortium
Extra Clean Strategy (Scenario)
Extra Clean Soap Company has been manufacturing soap products, such as
dishwashing liquid, bath soap, and shampoo, for over 20 years from its facility and
headquarters in Dublin, Ireland. A recent opportunity allowed Extra Clean to purchase
soap companies in Taiwan and India. Extra Clean is now servicing both foreign and
domestic markets with its products and manufacturing in all three locations. Recent
reports from managers in the foreign facilities indicate that Extra Clean sales in Taiwan
and India are low due to a lack of local responsiveness. Extra Clean managers from
Ireland, India, and Taiwan are having a teleconference in an attempt to devise a strategy
to improve the profitability of Extra Clean.
Which of the following most likely supports Extra Clean implementing a transnational
strategy?
A) The country managers have been trained in the United States.
B) Extra Clean is a highly centralized organization.
C) Extra Clean could reduce the number of global suppliers.
D) There is high local competition in each of the markets.
Area studies refer to ________.
A) technical knowledge pertaining to a firm’s core competencies
B) factual knowledge of the historical, political, and economic environment of the host
country
C) factual knowledge about a firm’s foreign subsidiaries
D) knowledge pertaining to daily living abroad
Which of the following is an element of socialism often found in democratic societies?
A) government subsidies for foreign firms
B) government sponsored businesses
C) government intervention in the affairs of individuals and firms
D) government control of information technology
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.
Rina is most likely to counter Juan’s claim regarding environmental effects by pointing
out which of the following?
A) The intensity of environmental pollution is far greater in emerging economies than
in undeveloped ones.
B) China’s landscape was permanently altered by the construction of the Three Gorges
Dam.
C) Environmental destruction tends to diminish in the long run, as economies develop.
D) Attempts at foreign cultural imperialism are often blocked by national governments.
All of the following are characteristic of the parent’s perspective approach in capital
budgeting EXCEPT that it ________.
A) estimates future cash flows from the project
B) uses the subsidiary’s local currency
C) forecasts forward rates
D) uses the functional currency of the parent
Which of the following statements is true of leasing?
A) It is an arrangement in which a contractor supplies managerial know-how to operate
a hotel, hospital, airport, or other facility in exchange for compensation.
B) The lessor transfers ownership of the property in exchange for a lump-sum payment.
C) It is a high-risk and high-cost method of entering a foreign market.
D) A major advantage for the focal firm is the ability to gain quick access to target
markets, while putting assets to use in earning profits.
________ are currency traders who seek to minimize their risk of exchange-rate
fluctuations, often by entering into forward contracts or similar financial instruments.
A) Venture capitalists
B) Arbitragers
C) Hedgers
D) Speculators
The sale of corporate bonds to individuals or institutions to raise capital is called
________.
A) debt financing
B) equity financing
C) multilateral netting
D) currency hedging
Which of the following is true about the first stage of evolution in the international
product life cycle theory?
A) The product enjoys a temporary monopoly at this stage.
B) The product’s inventors mass-produce it and seek to export it.
C) The knowledge about how to produce the product is widespread.
D) The competition intensifies at this stage and export orders begin to come from
lower-income countries.
Which of the following is a trend seen in the modern international economy?
A) Firms from both advanced and emerging economies employ FDI.
B) Emerging markets are the sole recipient countries for FDI.
C) Companies primarily use acquisitions to enter foreign markets.
D) Firms in the service sector use e-commerce exclusively to enter foreign markets.