In the long run, MNEs must adequately meet the needs of all stakeholders in order to
prosper and survive.
The factor proportions theory holds that countries should concentrate production on
those products that use their most abundant production factors.
The MNE that aims to control the transfer of its unique core competencies overseas
usually prefers an ethnocentric staffing policy.
Advocates of exporting e-waste assert that the activity helps entrepreneurs in
developing countries create value by recovering and recycling scarce resources such as
copper.
A widely successful strategy for introducing change into a foreign country is to
introduce many changes simultaneously.
Managers need to understand not only the laws of countries where they operate, but
also how those laws are enforced.
In most cases, if the misery index of a country is high, then consumers and businesses
are less likely to spend and invest.
A matrix organization is a hybrid of the functional and geographic organizations.
Expatriates are locals from the country of the foreign subsidiary.
When the currency value in the location where a company produces becomes stronger,
the company most likely needs to adjust its margins downward to be competitive in
export markets.
At present there is little reciprocal recognition of professional licensing among
countries.
Companies new to exporting most frequently suffer over-commitment by top
management in taking on the initial difficulties and financial requirements of exporting.
The Single European Act set steps to accomplish monetary union in the European
Union, including the creation of the euro.
A condition that is conducive to low transfer prices from the parent company to the
subsidiary and high transfer prices from the subsidiary to the parent company is where
the corporate in-come tax is lower in the subsidiary’s country than in the parent country.
The principle by which the tax authorities allow firms to reduce their tax liability by the
amount of income taxes paid to a foreign government is known as a tax credit.
The keiretsu structure, long used by Japanese companies, is an example of virtual
organization.
A push strategy is most likely preferable to a pull strategy when goods are sold using
self-service distribution.
Companies are usually willing to accept a lower rate of return on their investments in
countries where they can more easily sell those investments and convert the proceeds at
a favorable rate.
When choosing international operating locations, companies should outsource the
preparation of grids or matrices to experts rather than preparing them with their own
personnel.
Under the practice of extraterritoriality, legal and ethical values in a country may cause
its companies to operate abroad according to home country laws rather than host
country laws.
Political risk insurance is more likely to be purchased by MNEs that apply an active
approach to political risk management.
A Eurocurrency is any currency that is banked outside its country of origin.
Although central banks are responsible for foreign-exchange policy, they have no
power to intervene in exchange rate markets.
Purchasing power parity (PPP) is a well-known theory that seeks to define relationships
between currencies.
The UN Global Compact is a legally binding document that requires MNEs to establish
codes of conduct.
Although countries are similar in terms of having a mandatory retirement age, they
differ in what that age is.
Some companies that opt for the cost leadership strategy plan to sell products below the
average industry prices in order to capture market share.
MNEs typically design their control systems in terms of either market control,
bureaucratic control, or adaptation control.
Intellectual property refers to the creative ideas, innovative expertise, or intangible
insights that give an individual, company, or country a competitive advantage.
Most countries’ imports account for more than half of their citizens’ consumption.
Import trade controls, but not export trade controls, can be used as a weapon of foreign
policy.
According to the Ethical Trading Initiative, child labor cannot be used unless there are
no suitable alternatives for employees.
Major types of indirect intermediaries include export trading companies, distributors,
and freight forwarding companies.
Gaining some understanding of international business is important for any business
student because global events and competition affect almost all companies.
The recent expansion of technology has contributed to the growth in international
business by creating new products that are important in world trade.
In nearly half the cases in which U.S. firms have requested protection from imports, one
or more U.S. companies in the industry opposed the protection. What was the reason for
opposing protection?
A) They did not want consumers to have to pay higher prices that would result from
protection.
B) These were foreign-owned companies that saw the opportunity to serve the U.S.
market.
C) They feared that they would lose foreign export markets because of retaliation.
D) They believed that they could compete against global and domestic rivals.
In which of the following countries would business activity, given its status as a “not
free” marketplace, be under the greatest government control?
A) Vietnam
B) Pakistan
C) India
D) Brazil
________ typically results when demand decreases and supply increases.
A) Inflation
B) Chronic inflation
C) Reflation
D) Deflation
What is a consortium?
A) the ownership of a company by a government and a foreign company
B) an agreement signed by most governments to protect intellectual property rights
C) an international joint venture owned by at least three organizations
D) an agreement between two or more governments to provide for reciprocal foreign
investment protection
Which of the following describes a cross-licensing agreement?
A) allocation of exclusive rights to a licensee to prevent competition
B) an agreement between two or more companies not to compete in each other’s home
countries
C) an exchange of explicit knowledge for tacit knowledge
D) the exchange of intangible property rights between two or more companies
Tanya is a manager at a global firm that has operations located in Brazil, India, and
Japan. Tanya is in the process of making a fundamental analysis in order to forecast
exchange rates in each country. Which of the following questions is most relevant to
Tanya?
A) What is the cyclical situation in terms of employment and inflation?
B) Are the government’s intervention practices sustainable?
C) What level of credibility does the government have?
D) What is the possibility of a national crisis?
Growing demand for expatriates stems from which of the following trends?
A) the emergence of developing countries as high-growth markets
B) the resurgence of developed countries as high-growth markets
C) the reduced need for localized expatriate assignments
D) the longer-term assignments created in response to the global credit crisis
The so-called “misery index” is the sum of a country’s ________.
A) foreign and national debt
B) inflation and unemployment rates
C) unemployment level and total debt
D) trade deficit and long-term inflation rate
Which of the following is NOT true about cultural diversity?
A) Companies may gain competitive advantages by bringing together people of diverse
backgrounds.
B) Cultural diversity is most successful when domestic and foreign firms establish joint
ventures.
C) Cultural diversity may help a company gain deeper knowledge about products and
services.
D) The process of bringing people of different national cultures together is often
difficult.
A foreign-exchange contract that is an agreement between two parties to buy or sell a
particular currency at a particular price at a particular date as specified in a standardized
contract to all participants in the specified market is known as a(n) ________.
A) spot contract
B) forward contract
C) futures contract
D) equity currency contract
In a totalitarian political system, ________.
A) political power resides with the citizens of the country
B) governments direct most economic activity but few social ones
C) an individualistic outlook shapes political debate and policy formation
D) one agent monopolizes political power
Unlike the infant-industry argument, the industrialization argument for trade protection
________.
A) requires independence from other countries
B) stresses labor-intensive production methods despite high costs
C) emphasizes use of locally available raw materials for manufacturing inputs
D) presumes that economic growth will occur even if domestic manufactured prices are
not globally competitive
Which of the following transactions refers to the sale of goods or services produced by
a company based in one country to customers that reside in a different country?
A) importing
B) countertrading
C) exporting
D) freight forwarding
Assume the following conditions: In the United States it takes 4 units of resources to
produce a ton of potatoes and 5 to produce a ton of coal. In Canada it takes 6 units of
resources to produce a ton of potatoes and 10 to produce a ton of coal. According to the
theory of comparative advantage, ________.
A) there would be no basis for trade
B) the United States should import potatoes from Canada and export coal to Canada
C) the United States should export both potatoes and coal to Canada
D) the United States should export potatoes to Canada and import coal from Canada
There is growing consensus that human resource managers must hire, develop, reward,
and retain people whose performance explicitly improves the ________.
A) productivity of the firm’s core competencies
B) fit between the firm’s practices and industry standards
C) firm’s engagement of political authorities
D) firm’s responsiveness to customer complaints
Small economies are sometimes less successful than large countries in attracting FDI by
raising import restrictions. What is the most likely reason for this?
A) Large economies impose higher trade restrictions.
B) Transportation costs are generally higher in small economies.
C) People in small economies are more nationalistic in their purchases.
D) Small economies frequently lack sufficient markets for large-scale production.
An example of an effective commodity agreement is ________.
A) the Organization of Petroleum Exporting Countries
B) the Organization of Petroleum Importing Countries
C) the International Tin Alliance
D) the International Cotton Alliance
Which of the following statements is most likely true regarding vertical differentiation?
A) MNEs with decentralized structures are more appealing to foreign workers.
B) Most MNEs balance authority between headquarters and subsidiaries because of
globality.
C) MNEs with many organizational levels are less likely to perform well in emerging
markets.
D) Most MNEs implement centralized authority structures due to the complexity of
globalization.
A U.S. firm owns 100% of its production facility in Brazil; thus it is most likely using
a(n) ________ strategy.
A) comprehensive ownership
B) vertical integration
C) appropriability
D) internalization
People who argue for lifting the U.S. trade embargo with Cuba claim all of the
following EXCEPT ________.
A) the embargo has not achieved its purpose of changing Cuba’s economic and political
system
B) U.S. companies lose Cuban sales to competitors from other countries
C) increased exposure to the United States would be a more effective force of change
D) Cuba has largely become a market economy already
Demographers project that the share (percentage of population) of what we now
consider the working-age population in developed countries will decrease up to the year
2050. Which of the following is the most likely result of this trend?
A) an increase in foreign exchange among trading blocs
B) an increase in FDI provided by developed economies
C) a higher percentage in per capita GDP in today’s developing economies than in
today’s developed economies
D) a higher percentage in per capita GDP in today’s developed economies than in
today’s developing economies
Which of the following groups of countries is most likely to form a regional trading
group?
A) India, Argentina, France
B) Canada, United States, Mexico
C) Brazil, Ukraine, Japan
D) Spain, South Africa, Mongolia
In general terms, we see the principles of horizontal differentiation in the design logic
of ________.
A) vertical differentiation
B) decentralization
C) the value chain
D) the unity-of-command principle
Mona, a native of India, is employed by IBM in the firm’s facility in New Delhi. Mona
is best described as a(n) ________.
A) expatriate
B) local
C) third-country national
D) home-country national
When divergent cultures come in contact, ________ occurs.
A) power distance
B) culture shock
C) cultural collision
D) group membership
Export-led development refers to ________.
A) a country’s efforts to promote its exports in order to reduce its trade deficits
B) a policy to promote domestic production of goods that would otherwise be imported
C) a program to promote industries with export potential
D) decreases in infrastructure development due to the loss of revenue from export
tariffs
Each ADR represents ________ of the shares of the underlying foreign stock.
A) some number
B) 100
C) 1
D) ADRs have nothing to do with foreign stocks.
Labor cost advantages gained by moving into a country with low wages may be
short-lived because ________.
A) transport costs go up to cancel out the cost savings
B) tax increases cancel out all labor cost differentials
C) rivals adopt capital-intensive production methods
D) competitors follow leaders into low-wage areas
What is the main motive for countries’ protection of their film/cinema industries?
A) to keep prices low for their citizens
B) to improve their balance of payments
C) to diversify their economies
D) to preserve their national culture
All of the following are common problems associated with exporting and importing
EXCEPT ________.
A) managing financial risks
B) finding reliable intermediaries
C) matching foreign rivals’ prices
D) establishing distribution networks
The U.S. dollar is most likely traded widely because it is ________.
A) a reserve currency held by many central banks
B) one of the oldest and most stable currencies in the world
C) monitored by the Bank of International Settlements and the U.S. Federal Reserve
D) based on prices of the NYSE, which is the world’s largest foreign-exchange center
Which of the following BEST describes a major difference between supply chain
management and logistics?
A) Supply chain management involves handling suppliers and customers.
B) Logistics involves longer distances and international distribution networks.
C) Supply chain management focuses on transportation and the storage of goods.
D) Logistics only encompasses the outbound flow of products and materials.
What are export management companies, and how do they help potential exporters?
Which stakeholders must companies satisfy? What role should stakeholders play in a
firm’s internal code of conduct?
What is the International Monetary Fund (IMF)? What are its objectives? What occurs
when a country joins the IMF today?
Describe the two basic ways that companies can create value. What role does the value
chain play in these methods?
What general characteristics of a country should managers consider when analyzing an
economic environment? What specific indicators help managers measure the economic
development, performance, and potential of a country?
What is the difference between individualism and collectivism? What is the relationship
between government and business under each orientation?
What is the difference between a command economy and state capitalism?
In a short essay, discuss gap analysis.
Why do many MNEs acquire external funds through the Eurodollar market?
What is the gray market? Why are companies concerned about it?
Discuss the characteristics of international, localization, global, and transnational
strategies. Include situations and a specific example in which each strategy would be
most appropriate.
What is the difference between a classical structure and a neoclassical structure?
Provide examples of each type.
Describe and compare the different types of tariffs (duties).
What is configuration? Briefly list and discuss the factors that influence value chain
configuration.
How can an MNE operating in a developing country have a positive influence on labor
policies? Illustrate your answer with an example.
Describe the exchange rate arrangements used in the EU, Hong Kong, China, and the
U.S.
Profile the idea and features of horizontal differentiation, paying particular attention to
its implications to how managers design their company’s structure.
What is the difference between the free trade theories of absolute advantage and
comparative advantage? How can free trade improve global efficiency?
What are the functions of the European Commission, the European Parliament, the
Council, and the European Court of Justice?