CHAPTER 1

Most global markets are for consumer goods despite the national differences in tastes and preferences.
False

Foreign direct investment occurs when a firm invests resources in business activities outside its home country.
True

The crisis that began in the financial sector of the United States during 2007 and 2008 swept around the world and
plunged the global economy into a deep recession is something new and without precedent in the history of
globalization.
False

Globalization has been blamed for

unemployment in developed nations.

The two main components of globalization are:

the globalization of markets and the globalization of production.

The IMF:
has been criticized for making inappropriate policy recommendations.

Since the beginning of the 21st century, the flow of FDI:

had reached about $1.8 trillion in 2007.

Which of the following best describes the technological change that has been a driver of globalization?
The microprocessor may be the single most important innovation.

Which of the following is NOT one of drivers that has made the globalization of production feasible?

New applications for social media

In the early 1960s, the United States was by far the worlds dominant industrial power, but:
even with the relative decline, it is still the largest industrial power.

The foreign direct investment by non-U.S. firms was motivated primarily by the following two factors the desire to:
disperse production activities to optimal locations and build a direct presence in major foreign markets.

Medium-size and small multinationals (mini-multinationals):

are becoming increasingly involved in international business.

In Seattle, during December 1999, massive protests against globalization captured the attention of the world. Which of
the following was not an issue the protesters raised?
Environmental standards that were too strict

One of the criticisms of the WTO is the concern that the organization will undermine the sovereignty of nations who
are members. Which of the following is not a criticism in this area?
The power of the organization rests largely on the ability to persuade member states to follow a certain action.

Successful managers in international business:

face issues more complex than the issues managers face in strictly domestic business.

CHAPTER 2
Both U.S. law and OECD conventions condemn all forms of bribery with the exception of grease payments, which
expedite the performance of routine government action.
True

Although democracy may not always be the cause of initial economic progress, it seems to be one consequence of that
process.
True

In the 1980s and 90s two trends characterized the worlds nation-states a wave of democratic revolutions and a
strong move away from planned economies.
True

A countrys political, economic, and legal system constitutes its:

political economy.

___________ refers to a political system where the needs of society as a whole are seen as more important than
individual freedoms.
Collectivism

Which of the following does NOT describe essential elements of individualism?

The welfare of society is based on economic self-interest, but those interests must be subordinate to the interests of the
country to be effective.

The three general types of economic systems are:

market, command and mixed.

In mixed economies:
the state may take over companies in danger of collapsing.

Which of the following is not true about contracts in common law systems?
Contracts tend to be vague and ambiguous.

The purchasing power parity adjustment (PPP):

is based on the cost of living in the United States.

Amartya Sen.

The collapse of totalitarian and communist states, new information and communications technologies, and economic
advances in many countries have led to:
the spread of democracy

A nation may _______ as a means of encouraging business owners to seek gains in economic efficiency.
privatize

Political risk
is the likelihood that political forces will cause drastic changes in countrys business environment that adversely affect
the profit and goals of a business enterprise.

The likelihood that economic mismanagement will cause drastic changes in a countrys business environment that hurt
the profit and other goals of a particular business enterprise is an example of:
economic risk.

CHAPTER 3
Guanxi, a Chinese concept about relationships backed up by reciprocal obligations, is quickly fading away as a way of
doing business now that more Western business have entered into markets in China.
False

The United States has a class system that is more pronounced than the class system in Great Britain.
False

Fundamentalist movements, separatist movements and continuing ethnic strains are reactions against cultural
convergence that affect international business.
True

_____ can be defined as a system of values and norms that are shared among a group of people and that when taken
together constitute a design for living.
Culture

All of the following are determinants of culture except

geography.

One of the harmful effects of the emphasis on individual performance in many Western societies and the United States
is:
the high degree of managerial mobility.

Demonstrating the implications that religion can have on business, _____ made the connection between Protestant
ethics and the spirit of capitalism.
Max Weber

Which of the following is not a response to the Islam prohibition against the payment or receipt of interest?
U.S. banks are effectively closed out of Islamic markets.

The most widely spoken language in the world, which has a major impact on international business, is:
English.

Education can be a determinant of national competitive advantage because:

a pool of skilled and educated workers often leads to economic success.

In the workplace, culture:

helps explain differences in how work is organized and how workers relate to management.

According to Hofstede ________ captures attitudes toward time, persistence, ordering by status, protection of face,
respect for tradition, and reciprocation of gifts and favors.
Confucian dynamism

Cultures evolve over time with underlying changes in values. These value changes can have profound impacts on
international businesses as:
everything from attitudes about sex to the nature of work are affected.

When a manager believes that his own ethnic group or culture is superior to those of others, the manager is
demonstrating a(n) __________ attitude.
ethnocentric

Culture and national competitive advantage are closely related. An important implication for international business is
that: value systems affect the costs of doing business.
CHAPTER 4:
-When the Foreign Corrupt : outlaws the paying of bribes to foreign government officials to gain business.
- When a resource, held in common by all but owned by no one, is overused by individuals, resulting in its
degradation, it is a phenomenon known as: Hardin's obloquy.
- Business ethics and personal ethics are independent of each other. False
- The ethical obligations of a multinational corporation toward employment conditions, human rights, corruption,
environmental pollution and the use of power are not always clear cut. True
- What is considered normal practice in one nation is usually considered ethical in another. False
- Paying bribes: may actually stimulate the economy in some developing countries according to some economists.
- When a firm faces a situation in which none of the available alternatives seems ethically acceptable, the firm is
facing: an ethical dilemma.
- Unethical behavior is determined by: personal ethics, organization culture, realistic performance goals,
leadership, decision-making processes.
- ________________ refers to the values and norms that are shared among employees of an organization.
Organization culture
- The Friedman doctrine, cultural relativism, the righteous moralist and the nave immoralist are approaches that have
some value but are unsatisfactory in important ways. Companies do adopt these approaches, but they are generally
known as __________________. straw men
- According to _______, employing people in sweatshops, making them work long hours for low pay in poor work
conditions, is a violation of ethics. Kantian ethics
- _____________________ focus(es) on a fair and equitable distribution of economic goods and services. Justice
theories
- Which of the following is NOT one of the five things international businesses and managers can do to make sure
ethical issues are considered in business decisions? Hiring and promoting people with a well-grounded sense of
personal ethics
- A five-step process is proposed to help managers think through ethical problems. In following that process, which
step must precede judging the ethics of the proposed strategic decision? Establishing moral intent
- Which of the following is NOT true about moral courage? Moral courage enables managers to make a decision
that may unfavorable affect the profits of the firm if it is ethical.

CHAPTER 5
Mercantilism advocated that countries should simultaneously encourage exports and discourage imports.
True

Adam Smith and David Ricardo were able to demonstrate that international trade is fundamentally a zero-sum game.
False

Research has shown that countries that adopt an open economy and embrace free trade will enjoy higher economic
growth rates.
True

When a government does not attempt to influence through trade barriers what its citizens can buy from another
country, or what they can sell to another country, the government is promoting:
free trade.

Although import controls may benefit _____________, the theories of Smith, Ricardo and Hecksher-Ohlin suggest
that the economy as a whole is hurt by such actions.
producers or manufacturers

In Adam Smiths theory of absolute advantage, he argues that __________________.

a country should never produce goods at home that it can buy at a lower cost from other countries

In the theories of absolute and comparative advantage, trade ________________.

produces net gains for all involved

The theory of comparative advantage:

holds that it may make sense to purchase goods from another country even if your country can efficiently produce it.

Hecksher and Ohlin examined ______ in their theory of why nations trade.
differences in national factor endowments

Economists prefer the ___________ on theoretical grounds although it is a poor predictor of real-world international
trade patterns, and while the _______________ is regarded as too limited, it predicts trade patterns with greater
accuracy.
Hecksher-Ohlin theory; Ricardos theory of competitive advantage

The product life-cycle theory:

seems ethnocentric as it assumes innovations and new products come from the US.

The _________ suggests that trade is mutually beneficial because it allows for the specialization of production, the
realization of scale economies, the production of a greater variety of products, and lower prices.
new trade theory

Porter argues that:

the diamond is a mutually reinforcing system.

Which of the following is NOT an important implication for international business of international trade theory?
Because of the many debates on international trade theory, it is generally wiser for a company to ignore international
trade theory and focus on its own strategies and tactics.

A firm can preempt available demand, gain cost advantages related to volume, build an enduring brand ahead of
competitors and establish a long-term, sustainable competitive advantage by establishing
a(n)_____________________.
first mover advantage

CHAPTER 6

Both governments and consumers realize significant gains as a result of tariffs, while domestic producers typically see
a negative effect.
False
Until the development of strategic trade policy, most economists in modern times saw little benefit in government
intervention and staunchly advocated a free trade policy.
True

A strategic trade policy that aims to establish domestic firms in a global industry might attract retaliation and a trade
war.
True

Which of the following is NOT one of the seven main instruments of trade policy?
Quota rents

A _____________ is a tax levied on imports or exports.

tariff

Dumping:
is the selling of goods in a foreign market below the cost to produce them.

Preserving jobs, protecting industries important to national security, retaliating against unfair foreign competition and
advancing human rights of individuals in exporting countries are examples of __________________.
political arguments for government intervention

Trade can be used to support foreign policy objectives. For example, the U.S. Congress passed the DAmato Act,
which:
was well-intentioned but difficult to enforce.

Many economists criticize ______ for trade intervention arguing that it leads to prolonged inefficiency.
the infant industry argument

The _______, passed in 1930 by the U.S., raised tariff barriers in an effort to protect domestic industries and
encourage Americans to buy domestically produced products.
Smoot-Hawley Act

Protectionism:
increased in the 1980s and 1990s after a period of relative decline.

The WTOs role as a global policeman for trade has so far been:
successful.

Intellectual property rights have become thorny areas of international trade, especially in relation to software,
pharmaceuticals, music and entertainment. In response,
there has been a growing awareness that innovation has become a driver for economic growth.

A firm will need to consider ________________ as it develops and executes its strategy, disperse activities around the
globe and recognizes its cost structures
trade barriers

Business firms are major players on the international trade scene, and as such:
be aware of the problems both protectionism and free trade can bring.

CHAPTER 7

FDI flows were steadily increasing from 1975 to 2000 but have been decreasing ever since.
False

Since 2002 the number of regulations that have been unfavorable to FDI have increased, particularly in Latin America.
True

Only a few countries choose pragmatic nationalism preferring instead either the free market or radical view.
False
If a company wants a quick entry into a foreign market, ______ are appropriate.
mergers and acquisitions

Which of the following factors is NOT a driver in the shift toward services in FDI?
The shift follows the general trend away from services and into extractive industries and manufacturing

_______________ involves producing goods at home and shipping them overseas for sale, while _______________
involves granting a foreign entity the right to produce and sell the firms product in exchange for a fee on every unit
sold.
Exporting; licensing

________________ arise(s) when two or more enterprises encounter each other in different regional markets, national
markets or industries.
Multipoint competition

Knowledge spillovers such as those arising from the concentration of intellectual talent in Silicon Valley are referred
to as ________
externalities

______________ is the political ideology most hostile to FDI, and ______________ is the most supportive of FDI.
The radical view; the free market view

Which of the following is not one of the four main benefits of FDI for a host country?
the exchange rate effect

If a country is running a current account deficit:

the deficit must be financed by the sales of assets of the country.

All of the following are types of incentives designed to encourage foreign firms to invest in their countries except:
double taxation.

It was not until the 1990s that there was consistent involvement of a multinational institution in governing FDI. This
changed with the formation of _____________.
the WTO

Licensing is not a particularly good option for which of the following industries or industry groups? The fast food
industry

When a MNE considering FDI is negotiating with a country about a potential investment which of the following is the
least important factor? The strength of the military and police forces of the country

CHAPTER 08 :
-The desire by European to hold their own on the world's economic and political stage prompted the formation of the
EU. True
-The Single European Act committed EU countries to adopt a single currency, the euro. False
-NAFTA's initial impact on jobs was very small. True
-The Single European Act committed EU countries to adopt a single currency, the euro. False
-NAFTA's initial impact on jobs was very small. True
-The AFTA Agreement represents Africa's first attempt at regional economic integration.
False
-When countries agree to reduce and remove tariff and non-tariff barriers to the free flow of goods, services, and
factors of production between each other, the countries have agreed to
C) regional economic integration
-Norway, Iceland, Liechtenstein, and Switzerland all belong to
D) EFTA
-Several levels of economic integration are possible. Three such levels from the least integrated to the most integrated
are: B) customs union, political union, economic union

-Which of the following is considered part of the economic case for regional integration:
B) an attempt to achieve additional gains from the free flow of trade and investment between countries.
Great Britain's reluctance to adopt the euro is an example of _________ that occurs as a result of economic
integration.
B) loss of national sovereignty

If, prior to NAFTA, the U.S. produced its own textiles at a higher cost than Mexico, but after NAFTA imports them
from Mexico
B) trade has been created
Three cornerstones of the current European Union are:
C) the Treaty of Rome, the Maastricht Treaty and the Single European Act
The European Commission
A) is responsible for proposing EU legislation, implementing it, and monitoring compliance with EU laws by member
states
The introduction of the euro has resulted in all of the following except
D) individual countries will be able to set their own interest rates
Critics have suggested that the decision by the EU to adopt the euro was wrong because
the EU is not an optimal currency area of the similarities in the underlying structure of economic activity that make it
unnecessary it should have occurred at the common market stage its shifts responsibility for national monetary
policies to the individual countries
A) the EU is not an optimal currency area
Turkey's application to join the European Union has presented the EU with difficult issues. Which of the following is
not one of those issues?
A) Less than a quarter of Turkey's international trade is with the EU.
The Caribbean Single Market and Economy:
B) has the primary aim of lowering trade barriers between the US and the member countries.
Progress toward a Free Trade of the Americas has been slow because
A) of debates over intellectual property rights and agricultural subsidies
Which of the following is not a member of the Association of Southeast Asian Nations (ASEAN) with a combined
membership of half a billion people and combined GDP of more than $740 billion:
D) Taiwan
Which of the following countries is not a member of APEC?
C) India
African countries have been experimenting with regional trade blocks with the following result:
B) There are nine trade blocks, often with countries members of more than one block.
Regional economic integration, say in the EU, offers significant opportunities to US businesses including:
B) Companies can realize significant cost economies by centralizing operations where factor costs and skills are
optimal.

CHAPTER 09 :
1. The foreign exchange market serves two main functions to convert currency of one country in the currency of
another and to provide special discounts on currency for international business travelers. B) False
2. The simultaneous purchase and sale of a given amount of foreign exchange for two different value dates is a
currency swap. A) True
3. Exchange rates are determined by the demand and supply of one currency relative to the demand and supply of
another. A) True
4. International businesses use the foreign exchange markets for all of the following reasons except:
A) to buy and sell goods in a foreign market.
5. Currency speculation:
C) typically involves the short-term movement of funds from one currency to another to profit from exchange rates.
6.When a firm insures itself against foreign exchange risk, it is called _____________. B) hedging
7. When a firm enters into a ______________, it is taking out insurance against the possibility that future exchange
rate movements will make a transaction unprofitable by the time that the transaction has been executed.
B) foreign exchange contract
8. ___________________ is buying a currency low and selling it high.

B) Arbitrage

9. The law of one price:

B) states that in competitive markets identical products must sell for the same price if the price is expressed in terms
of the same currency, except for transportation costs and barriers to trade.
10.Which of the following is NOT true about inflation?
C) Governments would in general prefer to raise taxes than expand the money supply.
11. C) moderately good predictors of long-run changes in exchange rates.
Relative monetary growth, relative inflation rates and nominal interest rate differentials are:
12. A)theoretical; practical
Two schools of thought approach forecasting of future spot rates: ________________ analysis, which draws on
economic theory to construct sophisticated econometric models and ________________ analysis, in which price and
volume historic trends are expected to continue.
13 A) External convertibility
_________________ restrictions can limit domestic companies' ability to invest abroad, but they present few
problems for foreign companies wishing to business in that country.
14. It is critical for businesses to understand how exchange rates can affect the profitability of trade and investment
deals. Which of the following is NOT one of the three main foreign exchange risks? B) Cross currency rate
exposure
15. Translation exposure: C) affects reported financial statements of a company.

CHAPTER 10 :
When the income earned by the residents of a country from exports is equal to the money that is paid for imports, a
country is said to be in balance of payments equilibrium. True
The frequency of government intervention in the foreign exchange market explains why the current system is
sometimes thought of as a managed-float system. True
Because of the criticism the IMF received after its handling of the Asian crisis, the IMF has stayed away from
interventions in the 2009-2009 global financial crisis. False
Pegging currencies to gold and guaranteeing convertibility is known as ____________. the gold standard
The Bretton Woods system, designed at the height of World War II, established two multinational organizations that
would have major impacts throughout the second half of the 20th Century and beyond. These organizations were: the
International Bank for Reconstruction and Development and the International Monetary Fund.
Under a fixed exchange rate system, a country that increases its money supply would see its inflation rate _______
and its trade deficit _______. rise; widen
Which of the following is NOT true about the lending of the World Bank? The failure of high-risk loans made by
the World Bank was one of the root causes of the 2008-9 global financial crisis.
The fixed exchange rates established at Bretton Woods lasted until the system finally collapsed in 1973. Most
economists trace the break-up of that system to: US efforts to support an unpopular war and to expand social
welfare programs without raising taxes.
The floating exchange rate regime that followed the collapse of the fixed rate system was formalized in January 1976
when IMF members agreed to the rules for today's international monetary system in what is known as the
__________________. Jamaica Agreement
The rise in the value of the U.S. dollar between 1980 and 1985 was accompanied by ________________, which
would generally not be expected. a trade deficit
The case for floating exchange rates includes______________ and ___________. monetary policy autonomy; trade
balance adjustments
Which of the following is not a cause for banking, foreign debt, and/or currency crises? Low relative price inflation
The IMF has received criticism: revolving around its lack of accountability.
Currency management requires international businesses to recognize the foreign exchange market does not always
work as depicted in economic theories. All of the following are true except: The current system of world-wide
buying and selling has driven most of the volatility out of the system.

A firm that wants to maintain strategic flexibility and hedge against currency fluctuations can: disperse production to
different locations in the world.

CHAPTER 11 :
Problems of limited liquidity are limited to less developed nations, which tend to have smaller domestic capital
markets - False
Harvard economist Martin Feldstein has argued that owners and managers tend to keep long-term investments at home
and speculate with "hot money" in foreign markets. - True
Using forward exchange markets is a risk-free approach to short-term borrowing. False
The function of a capital market is to: bring together those who want to invest money with those who want to borrow
money.
Investors using the global capital market have a wider range of investment opportunities than a purely domestic
capital market. One of the most significant consequences of their choice is that ___________________. they can
reduce their risk to below what could be achieved in a strictly domestic market
Two factors that helped global capital markets take off in the last decades of the 20th century were
________________ and _____________________. information technology; deregulation by governments
The emergence of an integrated international capital market that depends on advanced communications and
information technology can create problems because: problems or market collapses can spread quickly.
One of the consequences of the global financial crisis of 2008 and 2009 for hedge funds, which are private investment
funds, was a(n) _________________________. growing concern that deregulation had gone too far
A lack of information about the fundamental quality of foreign investments may encourage _______________ in the
global capital market. speculation
The eurocurrency market has two significant drawbacks _________ and ___________. a higher probability of a
bank failure due to a lack of regulation; foreign exchange risk
a higher probability of a bank failure due to a lack of regulation; foreign exchange risk. Foreign bonds; eurobonds
Which of the following is not one of the attractions of the eurobond market? There is no translation exposure.
Which of the following is not true about the global equity market? The global equity is located in London with
branches in Frankfort, New York City, Tokyo and Hong Kong.
A borrower can hedge against unpredictable movements in foreign exchange rates that can make the global capital
market riskier by: entering into a forward contract.
International firms should consider global markets because: costs for borrowers can be lower than domestic markets
can provide.
CHAPTER 12 :
The value chain of a firm is made up of R&D, production, marketing and sales, and customer service, but not those
support activities which do not directly contribute to the final product or service. False
The skills within a firm that competitors cannot easily match or imitate are the firm's core competencies. True
Deeply embedded historical and cultural reasons can help create strong pressures for local responsiveness to customer
tastes and preferences. True
A firm's ____________ is measured by the difference between the value of a product or service to the average
customer and the cost of production per unit. value creation
According to Michael Porter, the two basic strategies for creating value and attaining a competitive advantage in an
industry are ________________. differentiation and low cost

Location economies are: the economics achieved by performing value creation activities in the optimal location,
transportation costs and trade barriers permitting.
The _____________ of value creation activities is characterized by different stages of the value chain being dispersed
to those locations around the globe where perceived value is maximized or where the costs of creation are minimized.
global web
The systematic reduction in production costs that have been observed to occur over the life of a product is called: the
experience curve.
Firms that expand globally can increase their _____________ by entering new markets, lowering costs, adding value
to their product offering, and exploiting the experience curve. profitability
Where major competitors are based in low-cost locations, where there is persistent excess capacity, and where
consumers are powerful and face low switching costs: there is intense pressure for cost reductions.
Pressures for local responsiveness arise from differences in __________________ among countries, creating a need to
customize products and services accordingly. infrastructure and traditional practices
A firm must balance the pressures for cost reduction pressures for local responsiveness. The result is generally a
choice among: global standardization, localization, transnational or international.
When a firm focuses on cost reductions through a variety of efforts including economies of scale, with little
customization of products, the firm uses which kind of strategy? Global standardization
When a firm tries to simultaneously achieve low costs and differentiate its product offering across geographic markets,
the firm is uses which kind of strategy? Transnational
A firm that is selling a product that serves universal needs, but that does not face significant competition is probably
following a(n) _______ strategy. international
CHAPTER 13
The need for coordination is greatest in transnational firms. True
With the high level of independence, the costs of controlling transnational firms are lower than the costs of controlling
firms that pursue other strategies. False
Successful organization change goes through three stages: goal setting, awarding incentives, and preparing for the next
set of changes. False
Which of the following is not considered part of an organization's architecture? Communications infrastructure
A firm's processes include: the manner in which decisions are made and work is performed within the organization.
Which three dimensions generally refer to an organization's structure? Location of decision-making responsibilities,
formal divisions, and integrating mechanisms
_______ makes sense for firms pursuing global standardization strategies. Centralization
Firms following a local responsiveness strategy are more likely to choose to: decentralize
One way to coordinate units of a firm is through centralization, but if the units are large, diverse or geographically
dispersed, the firm may instead use formal and informal __________________. integrating mechanisms
For incentives to work well: they must be linked to the employee's scope of work and his or her ability to affect the
outcome.
__________ exists when the causes of a subunit's poor performance are not clear. Performance ambiguity

In firms pursuing a(an) _________ strategy, headquarters typically maintains centralized control over the firm's core
competency, and while they require a complex organization, it is not the most complex. international
For a firm to be successful, the firm's strategy must be consistent with the environment in which the firm operates and
__________________. the firm's organization architecture must be consistent with its strategy
The existing distribution of power and influence within an organizational, the current culture, how senior managers
feel about the business model and institution constraints are all potential sources of ___________________.
organizational inertia
Which of the following is not true about organizational change? As long as change is clearly explained and
demonstrated, it can be accomplished quickly and relatively painlessly.
CHAPTER 13
T/F: False
Processes are the manner in which decisions are made and work is performed within an organization, and the
processes include the location of decision-making responsibilities.

True
T/F:
The need for coordination is greatest in transnational firms.

True
T/F:
The great strength of a knowledge network is that it can be used as a nonbureaucratic conduit for knowledge flows
within a multinational organization.

the strategy and architecture of the firm must make sense given the competitive conditions in the market
Superior enterprise profitability requires that three conditions be fulfilled: the firm's organizational architecture must
be internally consistent, the organizational architecture must match or fit the strategy of the firm, and
________________________.

Communications infrastructure
Which of the following is not considered part of an organization's architecture?

Location of decision-making responsibilities, formal divisions, and integrating mechanisms

Which three dimensions generally refer to an organization's structure?

centralization can avoid duplication of efforts

Among the arguments for centralization are that it can facilitate coordination, it can help ensure decisions are
consistent with company objectives, and ______________________.

Centralization
_______ makes sense for firms pursuing global standardization strategies.


decentralize.
Firms following a local responsiveness strategy are more likely to choose to:

integrating mechanisms
One way to coordinate units of a firm is through centralization, but if the units are large, diverse or geographically
dispersed, the firm may instead use formal and informal __________________.

Performance ambiguity
__________ exists when the causes of a subunit's poor performance are not clear.

international
In firms pursuing a(an) _________ strategy, headquarters typically maintains centralized control over the firm's core
competency, and while they require a complex organization, it is not the most complex.

the firm's organization architecture must be consistent with its strategy

For a firm to be successful, the firm's strategy must be consistent with the environment in which the firm operates
and __________________.

change their strategy and architecture to match new organizational realities

Although almost all organizations suffer from inertia and resistance to change, the complexity and global spread of
many multinationals make it particularly difficult for them to ______________________.

As long as change is clearly explained and demonstrated, it can be accomplished quickly and relatively painlessly.
Which of the following is not true about organizational change?

CHAPTER 14
T/F: True
The time, effort, and money spent to learn the rules of the game in a foreign business system are a form of
pioneering cost.

True
T/F:
Firms using exporting as a means of serving a foreign market avoid the costs of setting up manufacturing operations
in the host country and may be in a position to achieve experience curve and location economies.

False
Collaboration among competitors has proven to be a risky idea; recent decades have seen
a marked decline in the number of strategic alliances.

Are product lines wide and deep enough with sufficient inventories?
A firm considering foreign expansion must make three basic decisions. Which of the following is not one of those
three?

Be established before rules and regulations change so the firm can be exempt from the changes
Which of the following is not considered one of the first-mover advantages?

rapid entry
Entering on a large scale involves the commitment of significant resources and implies ____________________.

It is almost impossible to enforce licensing agreements due to conflicting legal systems.

Which of the following is not one of the three serious drawbacks of licensing?

the shared ownership agreement can lead to conflicts for control among the investing firms.
Joint ventures share disadvantages with other forms of entry, including potential loss of proprietary technology and
know-how and the inability to realize experience curve or location economies. One distinct disadvantage is that:

core competencies
Firms often expand internationally to gain greater returns from their _____________,

the competitive advantage of many service firms is based on management know-how

Many service firms favor a combination of franchising and subsidiaries to control the franchises within particular
countries or regions because _________________.

They do not require a significant amount of headquarters involvement.

Which of the following is not one of the advantages of acquisitions?

anticipated synergies prove to be more significant than anticipated.

Acquisitions fail for all of the following reasons except:

Move quickly to impose key cultural elements of the acquiring firm that have led to its successes
Which of the following is not one of the actions international businesses can take to reduce the risk of failure in
acquisitions?

the manner in which the alliance is managed

The success of a strategic alliance hinges on three main factors: partner selection, alliance structure, and
____________________.


avoid cross-licensing agreements.
A company that is concerned that technology that should remain proprietary will be transferred to a strategic
alliance partner should do all of the following except:

-Franchising has many of the same advantages as licensing, but there might be problems taking profits out of the
host country and in quality control. True
-The greater the pressures for cost reductions, the more likely a firm will want to pursue: some combination of
exporting and wholly owned subsidiaries.

- Acquisitions fail for all of the following reasons except: anticipated synergies prove to be more significant
than anticipated.
- In general, a greenfield investment will be preferred when: when the market seems attractive but there are
no incumbent firms to be acquired.
- Which of the following is not considered an advantage of strategic alliances? Strategic alliances do not take
much management time and attention once they are set up.
- A good strategic alliance is structured so that: safeguards against opportunism are build into the agreement.
- A company that is concerned that technology that should remain proprietary will be transferred to a
strategic alliance partner should do all of the following except: avoid cross licensing agreements.

CHAPTER 15
T/F: True
The advantage of the letter of credit system is that importers and exporters are likely to trust reputable banks, even if
they do not trust each other.

False
T/F:
A sight draft is payable in up to 60 days, while a time draft is payable 90 days and beyond.

True
T/F:
The Ex-Im Bank is an independent agency of the U.S. government that provides financing aid that facilitates
exports, imports, and the exchange of commodities between the U.S. and other countries.

Developing the added production capacity to support exporting

Which of the following is not one of the challenges small to medium-sized businesses face in exporting?

Exporting
_____________ can enable a firm to grow and reduce costs through opening new markets and achieving economies
of scale.

are very reactive in their approach to exporting

In terms of exporting, many small and medium-sized firms ____________________.

about 10 percent
According to a U.N. report, a typical international trade transaction can involve 30 parties, 60 original documents
and 360 copies of documents, all of which have costs associated with them. These costs can amount to _________
of the final value of the goods exported.

can draw on large reservoirs of experience, skills, information, and other resources
In terms of exporting, Germany and Japan _______________________.

can help firms launch their own export departments or accept continuing responsibility for exporting operations.
Export management companies:

reduce the risks in exporting

Hiring an EMC, focusing on a few markets, entering on a small scale, devoting the time and resources for the long
term, and working with locals in the target markets are all strategies that can be used to _____________________.

Letters of credit are offered at no cost to regular customers of banks with established international departments.
All of the following are true about letters of credit except:

The Foreign Credit Insurance Association

_____ provides coverage against commercial risks and political risks to American firms doing business in foreign
markets.

between 2 and 10 percent

Countertrade can include barter, counterpurchase, offsets, switch trading, and buybacks. With this variety of options,
countertrade amounts to about _______________ of world trade.

Tariff-free transactions
Which of the following is not one of the distinct forms of countertrade?

large, diverse multinationals.

Countertrade is most attractive to:

-The U.S. Congress subsidizes small and medium-sized businesses in expanding exporting through the
International Trade Administration and the United States and Foreign Commercial Service Agency. False
- New exporters are often discouraged after initial attempts for many reasons, which include all of the following
except: government interference once trade deals have been set.

- One big impediment to exporting facing US businesses is.. the lack of knowledge about opportunities
- The typical international trade transaction using a letter of credit has fourteen steps. Which of the following
is not true about the transaction? One advantage of the process is the speed, since most transactions are
completed in 60 days after the order is placed.
- When conventional means of payment are difficult, costly or nonexistent, a firm may turn to: countertrade.

CHAPTER 16
T/F: False
Total quality management is a philosophy and approach that grew out of Six Sigma.

True
T/F:
In order to realize all major plant-level scale economies, a plant must operate at the minimum efficient scale of
output.

True
T/F:
Logistics should create value and create competitive advantages for the firm by reducing costs and serving customer
needs.

being able to respond quickly to shifts in customer demand

Production and logistics can have particular importance for the international business by being able to accommodate
demands for local responsiveness and ___________________.

high cost manufacturing location; low cost manufacturing location

Currency depreciation can transform a country from a _____ to a ______.

concentrating
The arguments for _________________ production at a few choice locations are strong when fixed costs are
substantial, the minimum efficient scale of production is high, and flexible technologies are not available.

transportation
A product's value-to-weight ratio affects ____________ costs, and it is a major product factor in considering where
to locate production facilities.

employee productivity
After deciding to move production back to the United States, some international business have found they should
have looked beyond pay rates and pay closer attention to _________________________ before deciding whether to
outsource activities to foreign locations.

the foreign sites upgrade their own capacity

The strategic role of a foreign production site can change over time. Often these sites are established where labor
costs are low, but they may become important centers for the design and assembly of products if
________________________.

global learning.
Many international businesses are moving toward seeing factories as potential centers of excellence where design
and advanced manufacturing can take place. This part of a transnational strategy is known as:

resist the temptation to relocate because an underlying variable like wage rate might rise.
Once a factory has been established and skills have been accumulating, managers of an international business
should:

volatility of countries' political economies, exchange rate movements, and changes in relative factor costs.
While outsourcing decisions are often difficult for purely domestic businesses, they are even more so for
international businesses. These decisions are complicated by:

Dynamic capabilities
____________ describes the skills that become more valuable over time through learning.

caused temporary shutdowns in production.

For many firms that used JIT systems, the September 11 attacks on the World Trade Centers:

Web-based information systems

___________________ play a crucial role in modern material management by tracking component parts and
optimizing scheduling.

-Management decisions on where to locate an operation or facility can include considerations in political economy
and national culture, but international trade theory is usually beside the point. False
- In order to realize all major plant-level scale economies, a plant must operate at the minimum efficient scale of
output. True
- Logistics should create value and create competitive advantages for the firm by reducing costs and serving
customer needs. True
- Which of the following is not one of the objectives of the production and logistic functions? Developing
competitive intelligence when entering new markets
- The statistically based philosophy that aims to reduce defects, boost productivity, eliminate waste and cut costs
through a company is known as ______________. Six Sigma
- Currency depreciation can transform a country from a _____ to a ______. high cost manufacturing location; low cost
manufacturing location
- The arguments for _________________ production at a few choice locations are strong when fixed costs are
substantial, the minimum efficient scale of production is high and flexible technologies are not available.
concentrating
- A firm will choose to _______ when proprietary product technology gives the firm a competitive advantage.
vertically integrate
- As an example of how countertrade works, some manufacturers might decide to outsource needs to independent
suppliers in a country where it is locating a facility. This is an example of: offsets.
CHAPTER 17 :

The marketing mix is the set of choices a firm offers to its targeted markets, which often varies from country to
country depending on culture, economic development and so on. True
Source effects and country of origin effects always have a negative impact on the firm. False
Multipoint pricing is the use of price as a competitive weapon to drive weaker competitors out of a national market.
False
Which of the following is not true about market segmentation? Managers can use the same marketing mix in different
segments once the mix has proven successful in one.
_________________ tend to build a lot of extra performance attributes into products, but these attributes may not be
demanded by consumers in less developed nations, where preferences are for more basic products. Firms in highly
developed countries
________________ and __________ have helped to shorten channel length. The development of the Internet; the
entry of large discount superstores
Four factors a firm must consider in selecting an appropriate distribution strategy are: retail concentration, channel
length, channel exclusivity and channel quality.
In general, the _______ the channel, the _____ the price. shorter; lower
A push strategy emphasizes ________________, and a pull strategy emphasizes ____________. personal selling;
mass media advertising
Which of the following is an argument against globally standardized advertising? Cultural diversity affects the
meaning consumers get from ads.
Two conditions are necessary for profitable price discrimination: separate national markets and different price
elasticities of demand.
When there are many competitors: there will be a high elasticity of demand.
In today's world, competition is as much about _________________ as anything else, and its "creative destruction"
makes it critical that firms stay on the leading edge to succeed. technological innovation
The rate of product development tends to be greater in countries where all of the following conditions exists except:
underlying demand is weak.
Which of the following is not one of the attributes of a successful cross-functional, product development team? The
team should all be from the same culture speaking the same language.

CHAPTER 18
False
While superior human resource management earns recognition and praise for the firm as a good place to
work, it has not proven to be a source of competitive advantage.

True
T/F:
Failure rates for American expatriates sent to developing countries run as high as 70 percent.

True
T/F:
Cultural training, language training, and practical trading all seem to reduce expatriate failure.

Processes
HRM professional have a strategic role in each of the following elements of organizational architecture except:

cultural myopia
A danger of an ethnocentric policy is that it can lead to a firm's failure to understand host-country cultural
differences that require different approaches to marketing and management. This is known as _______________.

host-country nationals have limited opportunities to gain experience outside their own countries, which
limits their career options
An important drawback to polycentric staffing policy is that ________________.

transnational; global standardization; geocentric

Both the _______ strategy and the _______ strategy require a ________ approach to staffing.

-cultural toughness
The ______ dimension of Mendenhall and Oddou's theory refers to the relationship between the country of
assignment and how well the expatriate adjusts to a particular posting.

-the majority of returning expatriates didn't know what their positions would be when they returned.
An often-overlooked element in the training and development of expatriate managers is how to prepare them for
reentry - repatriation. Research and practice show:

control
A firm's performance appraisal systems are considered an important part of the firm's _________________ element,
which is a central component of its organizational architecture.

consult with home-office managers before the termination evaluation

Bias in performance evaluations can be extremely difficult to overcome, especially in a formal termination
evaluation, which could be based on a cultural understanding. One common practice to mitigate this bias is
to_________________.

-taking actions that are consistent with the strategy of the enterprise
From a strategic perspective, a firm's compensation system should reward expatriate managers for
______________________________.

three
An expatriate's total compensation package can be as much as ______ times what he or she would cost the firm in a
home-country posting.

that growing enrollment in labor unions will overwhelm their capacity to serve members effectively.
Organized labor is concerned about all of the following except _______________.

centralization
There is a trend toward the _______ of international labor relations.

-In _____ firms, the lack of manager's mobility among national operations implies that pay can and should
be kept country-specific.
polycentric
-Performance appraisals for expatriate managers : in many cases are conducted both by home country and host
nation personnel, who may have conflicting views and expectations.

CHAPTER 19
- Which of the following is not one of the three main steps of the control process of a subunit in the typical firm? DThe head office must submit annual control and compliance reports to each of the national governments of the
countries in which the subunit operates.
- The purpose of ___________ is to provide accounting information about a group of companies that recognize their
economic interdependence. consolidated financial statements
- As compared to the IASB, the EU is ______________ in its efforts to harmonize accounting standards. expected to
be more successful
- Accounting standards are : rules for preparing financial statements.
- Researchers have found that Hofstede's ________________ characteristic of national culture affects its accounting
system with its emphasis on rules, instructions and control. C) uncertainty avoidance.
- Most industrialized countries require consolidated financial statements. True
- Lessard and Lorange recommend that firms use the ______ exchange rate to translate both budget and performance
figures into the corporate currency. projected spot rate
-_________ and ________ are both main variables that influence the development of a country's accounting system.
D) the relationship between business and the providers of capital; political and economic ties with other
countries
-The U.S. influence on the development of accounting practices in Mexico and Canada is an example of how
__________ influence(s) national accounting systems. B) political and economic ties
-True
T/F:
Accounting standards define what useful information is, and auditing standards specify the technical process by
which an independent person gathers evidence for determining if financial accounts conform to standards and if
they are reliable.

False
T/F:
What has made the IASB effective is its ability to enforce its international accounting standards.

False
T/F:
A firm that sets low transfer prices for goods supplied to a subsidiary and high transfer prices for the goods sourced
from the subsidiary is probably trying to move funds out of a country.

lack of comparability among national accounting and auditing standards

The ________________________ has caused problems for investors trying to identify a firm's net worth and for
international businesses trying to assess the financial positions of customers, suppliers and competitors.

Developing countries have realized that they must conform to accounting standards.
Which of the following is not one of the reasons for the harmonizing of accounting standards?

the home currency.

To make it easier for headquarters management to compare the performance of subsidiaries throughout the world,
subsidiaries usually submit statements in the "corporate currency," which is generally:

transfer prices
International businesses pursuing global or transnational strategies often ship component parts and finished goods
between subsidiaries, and the need to record the costs of these goods and services gives rise to ____________.

consider the nature and hostility of the operating environment

It has been suggested that the evaluation of a subsidiary should be separate from the evaluation of its manager to be
able to __________________________.

political and economic risks, including foreign exchange risk, which can change the value of a foreign
investment
-Although capital budgeting seems straightforward, the international firm's use will be complicated by the
connection between cash flows to the parent and the source of financing, the distinctions between cash flows to the
project and cash flows to the parent, and _______________________________.

revising the discount rate upward

In analyzing foreign investment opportunities, the additional risk that seems from its location can be handled in at
least two ways popular among multinationals. They are revising future cash flows downward and
____________________.

local debt financing

Where the local currency is expected to depreciate on the foreign exchange market, the firm may with to consider
___________________________.

they can get better bank services like free checking.

Firms use central depositories to hold cash balances for all for the following reasons except:

....allows an entity to reduce taxes paid to the home government by the amount of taxes paid to the foreign
government.
A tax credit:

payment of dividends
A _________________ is the most common method by which firms transfer funds from foreign subsidiaries to the
parent company, though there is great variability depending on tax regulations, for exchange risk, etc.

fronting loans
Firms use ________________ to circumvent host-country restrictions on remittance of funds and for tax
advantages.

CHAPTER 20 :

The problem of blocked earnings creates more and more problems for investors as host countries have increasingly
erected barriers to moving fund out of the countries. False
The higher the discount rate, the higher the projected net cash flows must be for an investment to have a positive new
present value. True
A firm that sets low transfer prices for goods supplied to a subsidiary and high transfer prices for the goods sourced
from the subsidiary is probably trying to move funds out of a country. False
-_________________ quantifies the benefits, costs and risks of an investment. Capital budgeting
-One of the greatest economic risks is ________________, which will cause the cash flow the firm receives from its
assets to fall. Inflation
- When considering options for financing, an international business must consider two factors how the foreign
investment will be financed and ________________. the financial structure of the foreign affiliate
- Using local debt and capital markets to finance projects instead of global capital markets can result in: higher costs
due to higher interest rates.
- Debt financing is more common in __________ than in _____________. Japan; the United States
- ___________________ decisions attempt to manage working capital by minimizing cash balances and reducing
transaction costs. Money management
- A firm must hold cash balances in money marketing accounts to service payables and act as a contingency, but it
faces a problem in letting too much money accumulate in these accounts because: these accounts typically pay low
interest on the balances, and the firm loses the opportunity to earn more money.
- Two substantial transactions costs firms must bear as they convert currencies are the commission fee it pays to
foreign exchange dealers and _________________. banks' transfer fees