When sourcing relies on foreign suppliers or production bases, it is known as global
sourcing or offshoring.
Treaties that support international protection of intellectual property harm developing
economies due to high capital investment.
Born global firms are young companies that internationalize early in their evolution.
In the internationalization process of a firm, the active involvement stage follows the
committed involvement stage.
For manufacturing companies, on a per-unit-of-output basis, high volumes of
production are correlated with lower per-unit cost.
Indirect taxes are typically imposed on income from profits, capital gains,
intracorporate transactions, royalties, interest, and dividends.
Typically, a standardized diagnostic tool is used to evaluate the performance of all firm
employees and subsidiaries, both domestic and international.
When using a home replication strategy, firms delegate autonomy to managers in each
foreign unit, allowing them to operate independently and pursue local responsiveness.
Language has both verbal and nonverbal characteristics.
International expansion invariably results in a decrease in a firm’s economies of scale.
Converging buyer characteristics, growing acceptance of global brands, and increased
diffusion of uniform technology make it difficult to pursue a global strategy.
With a high percentage of college-educated citizens, countries such as China and India
have become a source for international firms seeking knowledge workers.
Turnkey contracting 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.
Incoterms are universally accepted terms of sale that specify how the buyer and the
seller share the cost of freight and insurance in an international transaction and at which
point the buyer takes title to the goods.
New global challengers are large, highly diversified companies in advanced economies
that are privately owned.
Environmental destruction diminishes as economies develop, at least in the long run.
A market economy is also called a centrally planned economy.
The NYSE and the NASDAQ Stock Market are the largest in terms of volumes of
shares traded.
Upholding the right to join labor unions is an example of CSR values.
Efficiency refers to emphasizing consensus-based decision making and problem
solving, in which managers readily share their knowledge.
Market forces and free trade are encouraged in democracies.
The first task in international financial management is to raise funds for the firm.
A greenfield investment is a direct investment to purchase an existing company or
facility.
Chile, Costa Rica, and the Czech Republic have attracted greater FDI by increasing the
transparency of their regulatory systems.
Certain emerging markets that have evolved from centrally planned economies to
liberalized markets are called transition economies.
Evaluation of results is the last step of the framework for arriving at ethical decisions.
Cross-cultural risk is often intensified by managers with geocentric tendencies.
Organizational culture refers to managerial routines, behaviors, and mechanisms that
allow the firm to function as intended.
A SWOT analysis is used to estimate company sales potential for each target market.
One of the advantages for the franchisor is that is it easier to maintain control over the
franchisee.
Although services trade is growing rapidly, the value of merchandise trade is still much
larger.
Global strategy is an approach to internationalization in which headquarters delegates
considerable autonomy to each country manager, allowing him or her to operate
independently and pursue local responsiveness.
As long as a firm is confident of its product being sold, it does not need to analyze who
initiates the purchase.
The challenges faced due to FDI are the same all over the world.
Licensing agreements enable energy and defense firms to enter nations that restrict the
foreign ownership of businesses related to national security.
The levels of supply and demand for a currency in a free market vary ________ with its
price.
A) rarely
B) occasionally
C) directly
D) inversely
Which of the following pairs of nations are on opposite ends of the political freedom
scale?
A) New Zealand and Chile
B) China and Vietnam
C) Japan and South Korea
D) Cuba and Sweden
The purchasing power parity concept suggests that ________.
A) in emerging markets, the ability to buy goods and services depends on the influx of
FDI from international MNEs
B) the fluctuation in exchange rates disrupts international trade because the value of
goods and services is mostly inconsistent
C) in the future, a unified currency should be used to create equality in the global
marketplace and to eliminate disparity
D) in the long run, exchange rates should move toward levels that would equalize the
prices of an identical basket of goods and services in any two countries
Minimizing Trade Barriers (Scenario)
National Appliance Corporation (NAC) needs to build a new manufacturing facility to
meet the increasing demand for professional-grade appliances. NAC managers are
considering building the facility in Mexico but are hesitant because of the high tariffs
involved. Another possible location for the facility is India; however, the country also
imposes high tariffs. Wherever NAC builds a plant, parts will need to be imported from
other nations.
Which of the following would be most important for NAC managers to consider while
taking a decision in favor of building a facility in Mexico or India?
A) Has NAC engaged in dumping in the past?
B) How would appliance parts and finished products be categorized when passing
through customs?
C) Is employee empowerment culturally favored in Mexico and India?
D) What entry strategies are available in both countries which would allow NAC to
minimize import barriers?
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 questions would be the most important to evaluate before
setting a price for the lounge chairs exported to England?
A) What is the mark up price quoted by the London retailer for CCC’s products?
B) What is the average price that Londoners pay for upholstered chairs?
C) How many lounge chairs are sold in London retail stores every year and at what
price?
D) Do many global market segments exist in the European Union?
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, Dan states that he expects Ace to surpass the competition in two
years if he becomes CEO. Which of the following traits does Dan most likely exhibit
with his statement that might appeal to the board of directors?
A) commitment to the success of Ace
B) arrogance about his abilities to help Ace
C) recognition of the homogeneity across communities
D) subjective ethical standards
Perhaps the most important distinction between standardization and adaptation is that
________.
A) standardization helps the firm customize products according to customer
preferences, while adaptation helps the firm save time
B) standardization helps the firm cut costs, while local adaptation helps the firm more
precisely cater to local needs and requirements
C) standardization helps the firm cater to the needs of local customers, while adaptation
helps the firm save costs through mass production
D) standardization helps the firm upgrade quality to suit the unique tastes of consumers,
while adaptation emphasizes uniformity
Which of the following processes involves evaluation of a firm’s strengths, weaknesses,
opportunities, and threats?
A) SWOT
B) CORE
C) PERT
D) PEST
Which of the following refers to the additional payment that allows the expatriate to
maintain a standard of living similar to that at home?
A) allowance
B) benefits
C) base remuneration
D) wages
While a degree of cultural imperialism may be at work, it is offset by the countertrend
of ________.
A) offshoring
B) McDonaldization
C) privatization
D) local nationalism
The science and process of creating and using information resources is known as
________.
A) information design
B) information technologie
C) psychographics
D) demographics
Which of the following must be considered in selecting foreign direct investment
locations?
A) rate of inflation
B) tax rates for profit repatriation
C) stability of currency
D) all of the above
Which of the following situations will discourage business activities of foreign firms in
an emerging market?
A) allowing foreign firms to access the country’s energy resources
B) increasing the requirements for licenses, approvals, and paperwork
C) using a strong legal framework and patent laws
D) investing in a strong Internet infrastructure
________ is the primary rationale for sourcing abroad.
A) Superior quality control
B) Centralized management of work teams
C) Cost efficiency
D) Uninterrupted innovation
Which of the following countries is considered primarily socialist?
A) Germany
B) Canada
C) India
D) Libya
Which of the following is characteristic of master franchise arrangements?
A) subfranchises to other independent businesses and thus assumes the role of the local
franchisor
B) franchisee provides completely standardized business activities, replicated across
diverse markets
C) franchise networks where franchisor provides a lump-sum payment to get started in
a foreign market
D) franchise networks that pay fewer royalties to franchisors
Freehold Investment Corp. (Scenario)
Dan Freehold and his business partner, Bethany Quinn, are successful investors
engaged in a variety of enterprises. Recently Dan and Bethany have decided to expand
their foreign investing operations. They hold a meeting for individuals interested in
participating in certain overseas ventures.
Dan discusses an investment opportunity that involves the purchase of selected
securities from the Chinese stock market. This opportunity represents which type of
international investment?
A) indirect production
B) international portfolio
C) foreign direct
D) domestic securities
________ are checkpoints at the ports of entry in each country where government
officials inspect imported products and levy tariffs.
A) Nontariff trade barriers
B) Customs
C) Quotas
D) Subsidies
A firm that owns the activities performed in a single stage of its value chain is
demonstrating ________.
A) centralization
B) decentralization
C) horizontal integration
D) reverse integration
Which of the following dimensions refers to the buying power of the country’s
residents?
A) market consumption capacity
B) market intensity
C) market size
D) market growth rate
Firms with high power distance are most likely to be characterized by ________.
A) concentrated power among executives and little autonomy for subordinates
B) an equal distribution of power among executives, managers, and lower-level
employees
C) a minimal gap between the powerful and the weak
D) a highly flexible work environment
Which of the following represents an infrastructural factor that firms must consider
when selecting an FDI location?
A) size and growth of national market
B) political stability
C) availability and quality of local manufacturing
D) stability of currency
In the ________ phase of international product life cycle theory, knowledge about how
to produce the product is widespread and manufacturing becomes straightforward.
A) temporary monopoly
B) introduction
C) standardization
D) maturity
The so-called ________ specifies that a certain proportion of products and supplies, or
of intermediate goods used in local manufacturing, must be produced within the bloc.
A) safe harbor
B) local content requirement
C) rules of origin requirement
D) ad valorem tariff
________ makes performance evaluations more complex in the international context.
A) The problem of noncomparable outcomes
B) Inadequate cross-cultural skills
C) Overproduction
D) Knowledge sharing
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 most likely supports Rina’s argument over Juan’s concerning
wages and working conditions in developing countries?
A) Most African countries today still suffer from low or negative GDP growth.
B) Vietnam has experienced a five-fold increase in wages as a result of the growth of
the footwear industry there.
C) The move of Electrolux to Mexico cost Michigan 2,700 jobs.
D) Minimum wages should be established at set levels, regardless of the impact on the
number of jobs.
The ________ is one of the three key modern perspectives that helps explain the
development of national competitive advantage.
A) factor proportions theory
B) absolute advantage principle
C) national industrial policy
D) comparative advantage of nations
Which of the following is the best example of a situation in which a firm is
compensating an employee with base remuneration?
A) An American engineer working in Japan receives a salary comparable to that of
engineers working in the U.S.
B) A Dutch computer programmer working in Hong Kong receives an additional
payment to cover the cost of relocation.
C) A German accountant working in India receives a one-time bonus for the potential
hardships of working abroad.
D) A British manager working in a civil war-torn zone receives additional allowances
for working under perceived threat.
The Nike “swoosh” is an example of a ________.
A) patent
B) fad
C) copyright
D) trademark
Organic Towel Exports (Scenario)
The Organic Towel Company (OTC) employs 400 workers at its facility in Liverpool,
England, where the firm has been manufacturing 100% organic cotton towels for five
years. OTC sells towels in the United Kingdom primarily to boutique hotels and
specialty retail stores, as well as to individual consumers through the company’s.
Recently, OTC managers attended a trade show in London where they made contact
with numerous foreign market managers. OTC received a request from Earth Waves, an
organic clothing store in Toronto, Canada, for a large order of towels. OTC had not
been looking into expanding, but firm managers are seriously considering the
opportunity to reach a global niche market with their towels.
Which of the following questions must be evaluated by OTC managers as a first step to
exporting?
A) What are the risks involved in exporting OTC towels to Earth Waves?
B) Do Canadian towel companies have a high success rate when they export?
C) Will OTC save money on domestic marketing by exporting?
D) How can OTC adapt its distribution strategy in Canada?
The fourth phase of globalization ________.
A) is characterized by the rise of electricity and steel production
B) is characterized by the rise of MNEs from Japan
C) witnessed the Bretton Woods Conference of twenty-three nations in 1947 that led to
the General Agreement on Tariffs and Trade
D) facilitated the globalization of the service sector in such areas as banking and
retailing
Which of the following contributes LEAST to increasing a company’s profit margins?
A) increasing demand
B) increasing global competition
C) high-growth markets
D) underserved economies
Tariffs that are ad valorem are ________.
A) based on the weight or size of the imported product
B) assessed as a percentage of the imported product’s value
C) intended to provide a steady flow of income for the government
D) charged regardless of the imported product’s value
Which of the following is an example of a global industry?
A) automobiles
B) beverages
C) publishing
D) retailing
An industrial design is intended to ________.
A) eliminate the possibility of the design being copied
B) improve a product’s performance and marketability
C) protect firms from intellectual property theft
D) protect information of commercial value
What are the benefits of global sourcing?
What is a foreign trade zone (FTZ)? In a short essay, explain how FTZs are utilized by
firms.
In a short essay, explain the main differences between international portfolio investment
and foreign direct investment.
In a short essay, describe three guidelines that managers should follow to achieve
cross-cultural success.
Explain the duties of central banks. How do central banks, such as the Federal Reserve,
implement national monetary policies?
Explain command economies. Provide examples of nations that exhibit characteristics
of command economies and why command economies are no longer common today.
Explain why MNEs prefer acquisition instead of greenfield FDI. Why do foreign
governments encourage greenfield FDI?
In a short essay, explain some of the obstacles that international firms often face when
dealing with employees, customers, and business partners from other cultures.
Describe three challenges faced by professional service firms when they
internationalize.
Write a short essay on emerging markets as target markets for international business.
In a short essay, describe how the African MNE Celtel helped improve the conditions
for millions of people and businesses around Africa
In a short essay describe the four elements management must consider when
compensating expatriates.
In a short essay, explain the cross-cultural risk faced by internationalizing firms. What
causes this type of risk? Why might it pose a problem for internationalizing firms?
Define ethics. Provide examples of unethical behavior exhibited by firms.
Discuss the effect of globalization on national culture.
What is global account management? Briefly describe the role of global account
management in international business.
In a short essay, discuss the connection between expatriate assignment failure and
culture shock. What are the different components of training designed to prepare
expatriates for assignments abroad?
Explain the four factors contributing to product suitability for international markets, and
describe how these factors can help an international firm with a gradual elimination
screening methodology.
Describe four principles or organizations brought about by the Bretton Woods
Agreement that remain important to international business and trade today. Why does
the integration of financial and monetary activity worldwide continue to grow?
In a short essay, explain the concept of CSR. List some typical CSR values.
