END-OF-CHAPTER GUIDE
*Review Questions and Answers
*Critical Discussion Questions and Answers
*Global Action
*Closing Case
REVIEW QUESTIONS AND ANSWERS
1. ON CULTURE: Is there any relationship between the culture of a given country and the
extent to which it will likely have a dynamic, growing economy? Are there cultures that
would be more likely to limit economic growth and even result in poverty? Defend your
answer.
Usually, multiple forces affect a given economy during a given period of time. It could be
argued that if one culture values competitive hard work and change but another country’s
2. Compare PengAtlas Maps 1.1 (Developed Economies and Emerging Economies) and
Map 1.2 (Political Freedom Around the World). To what extent do developed economies
tend to have a high level of political freedom–or is there any relationship? If there is any
relationship, is it causal or coincidental? Explain.
Map 1.1 lists 33 developed nations. Map 1.2 lists countries as Free, Partly Free or Not
3. Compare PengAtlas Map 1.3 (Legal Systems Around the World) and Map 1.1. In your
opinion, what stands out to you regarding each category of legal system? Are there any
relationships? If so, are they causal or coincidental? Defend your answer.
Of the 20 countries with civil law, a majority (12 or 80%) are developed. Of the 16
countries that have common law, a majority (9 or 56%) are developed. The three
How can the “rules of the game” reduce uncertainty?
The very word “rules” suggests the answer to that question. When there is nothing
4. Do “rules of the game” promote or prevent opportunism?
5. Do you agree that managers and firms really pursue their interests? Why or why not?
It probably could be argued that they pursue their interests but their idea of what
constitutes their interest may not be in agreement with what others would regard as their
6. What are examples of informal constraints that affect global business firms?
7. What are the pros and cons of expanding into a democratic country?
Various responses may include less threat from an arbitrary dictator but there is the risk
8. What are the pros and cons of expanding into a totalitarian country?
At first such a country might seem to offer stability. However, the pros or cons of such an
expansion could be affected by opposition to the government in that nation and whether
9. Would you rather do business in a country that uses civil law or common law? Why?
10. What are some of the issues to consider before doing business in a theocracy?
11. What is the relationship between property rights and economic development?
According to de Soto, there is a significant relationship between the two: The legal
Why is it important to protect IPR?
IP is normally intangible and can thus be easily duplicated. The incentive to invent or
12. Under what circumstances would it be easier to do business in a command economy than
a market economy?
In a market economy, one may need to convince many buyers but in a command economy
in which the government is the buyer, the persuasion needs to be directed toward only
13. Many view the United States as a mixed economy. In your opinion, is the mix changing?
If so, how? Is it shifting more to a command economy or a market economy?
The U.S. economy is constantly changing but the direction may depend on the political
14. In your opinion, which is most important to economic development—culture, geography,
or institutions?
15. Given whatever plans you have for the future, do you feel you would have the greatest
likelihood of success under private ownership or under state ownership? Why?
The answer to this question may depend on the specific individual’s career plans
16. Why is it important to understand formal institutions before entering a country? Explain
by using an example.
This is true for both firms and individuals who wish to avoid being fined or imprisoned.
Students should be able to use their own country to create examples that could get a
17. ON CULTURE: Why is understanding of human relations within a culture sometimes
more important than legal expertise?
CRITICAL DISCUSSION QUESTIONS AND ANSWERS
1. How do you explain your country’s economic success (or failure)?
Encourage students to answer this question by focusing on concepts brought forth in this
chapter (political, legal, and economic systems) and avoid using the question to expound
2. What is your view on the debate between private ownership and state ownership?
3. ON ETHICS: As manager, you discover that your firm’s products are counterfeited by
small family firms that employ child labor in rural Bangladesh. You are aware of the
corporate plan to phase out the products soon. You also realize that once you report to the
authorities, these firms will be shut down, employees will be out of work, and families
and children will be starving. How do you proceed?
This is a question in which the answer is not as important as the thought process and the
ability to clearly articulate. However, because you plan to phase out the product, you
4. ON ETHICS: Your multinational is the largest foreign investor and enjoys good profits
in (1) Sudan, where government forces are reportedly cracking down on rebels and
killing civilians; and (2) Vietnam, where religious leaders are reportedly being
prosecuted. As country manager, you understand that your firm is pressured by activists
to exit these countries. The alleged government actions, which you personally find
distasteful, are not directly related to your operations. How would you proceed?
Although this is also a question in which the answer is not as important as the thought
process and the ability to clearly articulate, there are some things that should be
GLOBAL ACTION
1. Evaluating political risk is an important element of country risk analysis. In fact, your
personal interest relates to countries in the Middle East and North Africa region that have
a high political risk. Provide a brief overview of the region and the reasoning behind
assessing these countries that have been assessed with high political risk. From this list,
which country has the highest overall country risk?
Exercise 1 Answers
One resource which can be used is “A.M. Best Country Risk Ratings”. This website can
be found by entering the search term “country risk analysis” at the globalEDGE™
globalEDGE™ Tag: Country Level
2. Since you work for a diversified multinational corporation, economic risk across different
sectors of the world economy is an integral part of analysis as it indicates the future
business prospects for specific industries. Evaluate the risk assessment of three industry
sectors that are available to analyze. Prepare a report and provide a recommendation
concerning which industry and region would be most beneficial to your company.
Exercise 2 Answers
One resource which can be used is Coface. This website can be found by entering the
search term “country risk assessments” at the globalEDGE™ Resource Desk search box
located at http://globaledge.msu.edu/resourceDesk/. At the Coface website, select a
CLOSING CASE DISCUSSION GUIDE AND ANSWERS
Emerging Markets: Is Democracy Good for Economic Development? points out problems
faced by many fledgling democracies and compares their progress to developments in
countries ruled by totalitarian governments. In several cases, the democracy does not win the
comparison.
1. Why does democracy have such broad appeal as a political system around the world?
As the text says, Compared with dictatorships, on average, democracies are richer, less
2. How does democracy suffer from severe setbacks in some countries lately?
Ask students for examples from current events.
How does the Chinese experience answer the question: “Is democracy good for economic
development?”
The text provides examples of massive changes that were made quickly. Ask students why
3. ON ETHICS: The military governments in Egypt and Thailand have invited your firm to
do business there. As CEO, you appreciate the lucrative offers. But you are also
concerned that your firm may be labeled “devil’s advocate” or “accomplice” by
democracy activists around the world. How would you proceed?