Chapter 4 The Global Context of Business: Business Essentials, 9e (Ebert/Griffin)

Business Essentials, 9e (Ebert/Griffin) Chapter 4 The Global Context of Business 1) An import is a product made or grown abroad but sold
domestically. Answer: TRUE Explanation: Countries import goods from ot er countries t at are meant to be sold wit in t e ome country. !age Ref: "# $ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.1 +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Concept -) +ow.income countries a)e an annual per capita income of /-0122 or less. Answer: 3A+%E Explanation: +ow.income countries a)e an annual per capita income of /#21 or less. !age Ref: #2 $ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.1 %,ill: Concept 4) T e 5orld Trade 'rgani6ation 75T') was created to encourage international trade. Answer: TRUE Explanation: T e 5T' encourages international trade by encouraging fair trade practices0 brea,ing down trade barriers0 and establis ing fair procedures for dispute resolution. !age Ref: #$ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.1 %,ill: Concept *) 8n a licensing arrangement0 firms c oose foreign organi6ations to manufacture t eir products in anot er country in return for a fee plus royalties. Answer: TRUE Explanation: 3ranc ising is an increasingly popular example of licensing. !age Ref: 12$ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.4 +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Concept
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1) 3ree mar,et economies often establis some system of ;uotas and<or tariffs. Answer: TRUE Explanation: =uotas and tariffs are set up to control t e amount of goods being imported so as not to urt domestic industries. !age Ref: 12* $ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Concept >) A subsidy is a tax designed to elp companies w o import products. Answer: 3A+%E Explanation: %ubsidies are go)ernment aid to domestic industries to elp t em compete wit imported products. !age Ref: 12* $ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Concept ?) +ocal content laws guarantee t at products sold in a country are at least partly made t ere. Answer: TRUE Explanation: Under local content laws0 firms see,ing to do business in a country must lea)e some of t eir profits wit t e ost country. !age Ref: 121 $ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Concept ") @lobali6ation refers to t e process by w ic countries around t e world are becoming more self.sufficient. Answer: 3A+%E Explanation: @lobali6ation refers to t e process by w ic countries are wor,ing toget er interacti)ely to eliminate trade barriers in an attempt to create a larger free mar,et. !age Ref: "# $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.1 +earning 'utcome: Compare and contrast different economic systems %,ill: Concept
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#) BA3TA regulates trade between t e United %tates0 Europe0 and Capan. Answer: 3A+%E Explanation: T e Bort American 3ree Trade Agreement regulates trade between t e United %tates0 Canada0 and Aexico. !age Ref: #1 $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.1 +earning 'utcome: Compare and contrast different economic systems %,ill: Concept 12) T e purpose of t e @eneral Agreement on Tariffs and Trade is to reduce trade barriers. Answer: TRUE Explanation: @ATTDs purpose is to reduce or eliminate trade barriers0 suc as tariffs and ;uotasE it does so by encouraging nations to protect domestic industries wit in agreed.upon limits and to engage in multilateral negotiations. !age Ref: #$ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.1 %,ill: Concept 11) T e primary purpose of t e 5orld Trade 'rgani6ation is to impose tariffs on imported products. Answer: 3A+%E Explanation: T e 5T' is empowered to promote trade by encouraging members to adopt fair trade practices0 to reduce trade barriers by promoting multilateral agreements0 and to establis fair procedures for resol)ing disputes among members. !age Ref: #$ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.1 %,ill: Concept 1-) 8f t e United %tates exports more to t e Bet erlands t an it imports from t e Bet erlands0 t e United %tates as a trade deficit wit t e Bet erlands. Answer: 3A+%E Explanation: T is is ,nown as a trade surplus, or a fa)orable balance of trade. !age Ref: #* $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.+earning 'utcome: Explain ow economic performance is monitored %,ill: Application
14) Today0 fixed exc ange rates are t e norm for most ma(or nations of t e world. Answer: 3A+%E Explanation: 3loating exc ange rates are t e norm for most ma(or nations of t e world. !age Ref: #> $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.%,ill: Concept 1*) %out Africa produces diamonds more c eaply and of ig er ;uality t an any ot er countryE t is is an example of absolute ad)antage. Answer: TRUE Explanation: An absolute ad)antage is w en a country can produce somet ing t at is c eaper and<or of ig er ;uality t an any ot er country. !age Ref: #? $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.+earning 'utcome: Explain ow economic performance is monitored %,ill: Application 11) %audi Arabian oil is an example of an absolute ad)antage. Answer: TRUE Explanation: An absolute ad)antage exists w en a country can produce somet ing t at is c eaper and<or of ig er ;uality t an any ot er country. !age Ref: #? $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.+earning 'utcome: Explain ow economic performance is monitored %,ill: Application 1>) A comparati)e ad)antage exists w en a country can produce somet ing more c eaply and<or of ig er ;uality t an any ot er country. Answer: 3A+%E Explanation: A country as a comparati)e ad)antage in goods t at it can produce more efficiently or better t an ot er goods. !age Ref: #?.#" $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.+earning 'utcome: Explain ow economic performance is monitored %,ill: Concept
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1?) Transportation costs a)e relati)ely little impact on a domestic firmDs decision to go international0 compared to ot er possible factors. Answer: 3A+%E Explanation: 'ftentimes0 ig transportation costs for certain goods will pre)ent a firm from deciding to go international. !age Ref: 122 $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.4 +earning 'utcome: $iscuss t e factors t at influence decisions about organi6ational structure %,ill: Concept 1") 8nternational firms conduct a good deal of t eir business abroad and may e)en maintain o)erseas manufacturing facilities. Answer: TRUE Explanation: T is comparison is often made wit multinational firms0 w ic are firms t at design0 produce0 and mar,et products in many nations. !age Ref: 122 $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.4 +earning 'utcome: $iscuss t e factors t at influence decisions about organi6ational structure %,ill: Concept 1#) 8f you a)e gi)en anot er company in anot er country t e rig t to produce your companyDs product0 you are engaging in a licensing arrangement. Answer: TRUE Explanation: A licensing arrangement is a means w ereby a company sells its products in anot er country by licensing anot er company to produce t at product. !age Ref: 12$ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.4 +earning 'utcome: $iscuss t e factors t at influence decisions about organi6ational structure %,ill: Concept -2) %trategic alliances gi)e firms greater control o)er foreign acti)ities t an do agents and licensees. Answer: TRUE Explanation: &ecause a representati)e of t e company tends to be present0 strategic alliances gi)e firms greater control o)er foreign acti)ities t an do agents or licensees. !age Ref: 12$ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.4 +earning 'utcome: $iscuss t e factors t at influence decisions about organi6ational structure %,ill: Concept
-1) T e ultimate form of a ;uota is a tariff. Answer: 3A+%E Explanation: T e ultimate form of a ;uota is an embargo. !age Ref: 12* $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Concept --) Re)enue tariffs are primarily designed to discourage t e importation of foreign products. Answer: 3A+%E Explanation: Re)enue tariffs are primarily designed to raise money for go)ernments. !age Ref: 12* $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Concept -4) Critics of protectionism c arge t at it dri)es up prices by reducing competition. Answer: TRUE Explanation: !rotectionism aims to ,eep foreign competitors out0 and less competition may cause an increase in prices. !age Ref: 12*.121 $ifficulty: Aoderate AAC%&: Reflecti)e t in,ing s,ills 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Concept -*) A C inese steel company cannot c arge less for its product in t e United %tates t an t e cost of production. Answer: TRUE Explanation: T is is ,nown as FdumpingF and is illegal according to U.%. law. !age Ref: 121 $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Concept
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-1) T e single largest trading partner of t e United %tates is C ina. Answer: 3A+%E Explanation: T e single largest trading partner of t e United %tates is Canada. !age Ref: #* $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.+earning 'utcome: Explain ow economic performance is monitored %,ill: Concept ->) T e United %tates as large trade deficits wit Capan0 C ina0 and AexicoE t is means t at t e United %tates as imported more from t em t an w at t ey a)e purc ased from us. Answer: TRUE Explanation: A trade deficit0 or an unfa)orable balance of trade0 occurs w en a countryDs imports exceed its exports. !age Ref: #* $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.+earning 'utcome: Explain ow economic performance is monitored %,ill: Application -?) Currently0 a ma(ority of U.%. imports come from Canada0 Capan0 Aexico0 and C ina. Answer: TRUE Explanation: T ese countries are listed on t e U.%. list of top 12 importers. !age Ref: #* $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.+earning 'utcome: Explain ow economic performance is monitored %,ill: Concept -") 8f 1 euro G /1.41 on Cune * and /1.*2 on Cune 10 t e )alue of t e dollar as risen. Answer: 3A+%E Explanation: 8f t e )alue of t e dollar ad risen0 t e euro would a)e been wort less in comparison. %ince t e )alue of t e dollar as fallen in t is example0 it would a)e ypot etically ta,en more U.%. dollars to buy a FeuroDs wort F of goods. !age Ref: #> $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.+earning 'utcome: Explain ow economic performance is monitored %,ill: Application
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-#) A company wit ig demand for its product in a particular foreign mar,et t at is associated wit ig transportation costs would tend to arrange a strategic alliance o)er any ot er international organi6ation structure. Answer: 3A+%E Explanation: A more li,ely structure would be a licensing arrangement in order to a)oid t e transportation costs yet still be acti)e in t at mar,et. !age Ref: 12$ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.4 %,ill: Concept 42) T e number of strategic alliances among ma(or companies as decreased significantly o)er t e last decade. Answer: 3A+%E Explanation: T e number of strategic alliances among ma(or companies as increased o)er t e last decade. !age Ref: 12$ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.4 +earning 'utcome: $iscuss t e factors t at influence decisions about organi6ational structure %,ill: Application 41) 5 at are products t at are created abroad and t en transported and sold domesticallyH A) dumped goods &) exports C) imports $) buy bac,s E) domestic goods Answer: C Explanation: C) 8mports are goods t at are broug t in from ot er countries. !age Ref: "# $ifficulty: Easy 'b(ecti)e: *.1 +earning 'utcome: Compare and contrast different economic systems %,ill: Concept
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4-) 5 at are products t at are created domestically and transported for sale abroadH A) dumped goods &) exports C) imports $) buy bac,s E) domestic goods Answer: & Explanation: &) Exports are goods t at are made in a country and sold in anot er country. !age Ref: "# $ifficulty: Easy 'b(ecti)e: *.1 +earning 'utcome: Compare and contrast different economic systems %,ill: Concept 44) 5 ic country is t e worldDs largest mar,etplace and most stable economyH A) t e United %tates &) Canada C) @ermany $) Capan E) C ina Answer: A Explanation: A) T e United %tates is t e dominant trading partner in Bort America. !age Ref: #2 $ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.1 +earning 'utcome: Compare and contrast different economic systems %,ill: Application 4*) 5 ic country dominates t e !acific Asia region economicallyH A) %out Iorea &) C ina C) 8ndonesia $) Capan E) Taiwan Answer: $ Explanation: $) CapanDs large automa,ers and industry elp it dominate t e !acific Asia region. !age Ref: #1 $ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.1 +earning 'utcome: Compare and contrast different economic systems %,ill: Application
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41) 5 ic organi6ation most li,ely as t e greatest impact on Asian countriesH A) A%EAB &) UA% C) EU $) BA3TA E) EC'5A% Answer: A Explanation: A) T e Association of %out East Asian Bations is t e economic association of nations in t at region. !age Ref: #$ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.1 +earning 'utcome: Compare and contrast different economic systems %,ill: Application 4>) 5 ic of t e following is t e name for t e economic )alue of all of t e products t at a country exports minus t e economic )alue of its importsH A) balance of foreign competition &) balance of domestic competition C) balance of trade $) balance of payments E) balance of supply and demand Answer: C Explanation: C) T is is t e definition of balance of trade. !age Ref: #4 $ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.+earning 'utcome: Explain ow economic performance is monitored %,ill: Concept 4?) 5 ic of t e following refers to t e situation w en a countryDs imports exceed its exportsH A) balance of payments &) balance of trade C) trade deficit $) trade surplus E) trade ad)antage Answer: C Explanation: C) A country operates a trade deficit if it imports more goods t an it exports. !age Ref: #* $ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.+earning 'utcome: Explain ow economic performance is monitored %,ill: Concept
4") 5 ic of t e following is t e name for t e o)erall flow of money into or out of a countryH A) exc ange rate &) trade rate C) balance of exc ange $) balance of payments E) balance of trade Answer: $ Explanation: $) T e balance of payments determines w et er a country is running a trade deficit or surplus. !age Ref: #* $ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.+earning 'utcome: Explain ow economic performance is monitored %,ill: Concept 4#) 5it w at type of exc ange rate does t e )alue of a countryDs currency remain constant relati)e to t at of anot er countryH A) floating &) indexed C) fixed $) ad(usted E) deflated Answer: C Explanation: C) A fixed exc ange rate indexes a countryDs currency directly to t at of anot er country. !age Ref: #> $ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.+earning 'utcome: Explain ow economic performance is monitored %,ill: Concept
*2) 5 en t e )alue of one countryDs currency relati)e to t at of anot er )aries wit mar,et conditions0 w ic of t e following existsH A) floating exc ange rate &) fixed exc ange rate C) indexed exc ange rate $) flat exc ange rate E) balanced exc ange rate Answer: A Explanation: A) A floating exc ange rate is one t at )aries as a function of mar,et conditions among ot er countries. !age Ref: #> $ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.+earning 'utcome: Explain ow economic performance is monitored %,ill: Concept *1) 5 ic of t e following organi6ations is a firm t at ma,es products in one country and t en distributes and sells t em in ot ersH A) importer &) exporter C) multinational firm $) international firm E) direct foreign in)estor Answer: & Explanation: &) An exporter sells and s ips its products to ot er countries0 w o import t em. !age Ref: 122 $ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.4 +earning 'utcome: $iscuss t e factors t at influence decisions about organi6ational structure %,ill: Concept
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*-) 5 ic of t e following buys products in foreign mar,ets and t en sells t em for resale in its ome countryH A) importer &) exporter C) multinational firm $) international firm E) direct foreign in)estor Answer: A Explanation: A) An importer buys products from companies in ot er countries to sell in t e importerDs country. !age Ref: 122 $ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.4 +earning 'utcome: $iscuss t e factors t at influence decisions about organi6ational structure %,ill: Concept *4) A&C Company in t e United %tates as gi)en exclusi)e rig ts to JKL Company in %wit6erland to manufacture its products. 5 at is t is is an example ofH A) a foreign direct in)estment &) a licensing arrangement C) a branc office setup $) a strategic alliance E) an import.export relations ip Answer: & Explanation: &) A licensing arrangement is one in w ic a company gi)es rig ts to a foreign company to manufacture its products. !age Ref: 12$ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.4 +earning 'utcome: $iscuss t e factors t at influence decisions about organi6ational structure %,ill: Application
**) T e A&C !aint Company in t e United %tates as (oined forces wit t e 1.-.4 !lastics Company in 8taly to create a nonpeeling0 plastics.based paint. &ot companies intend to s are t e researc costs and any profits. 5 at is t is an example ofH A) a licensing arrangement &) a branc office setup C) a strategic alliance $) a foreign direct in)estment E) an import.export relations ip Answer: C Explanation: C) 8n a strategic alliance0 different companies combine resources in an endea)or t at can be accomplis ed more efficiently wit t em bot . !age Ref: 12$ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.4 +earning 'utcome: $iscuss t e factors t at influence decisions about organi6ational structure %,ill: Application *1) 5 at is it called w en a company sends some of its own managers o)erseas to conduct business in a local officeH A) de)eloping a strategic alliance &) outsourcing C) licensing products $) in)esting directly in a foreign )enture E) opening a branc office Answer: E Explanation: E) A company doing business o)erseas will often open a branc office in t e ost country out of w ic to do business. !age Ref: 12$ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.4 +earning 'utcome: $iscuss t e factors t at influence decisions about organi6ational structure %,ill: Concept
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*>) 5 ic of t e following denotes t e international organi6ation strategy of finding a partner in t e country in w ic a company would li,e to conduct businessH A) opening a branc office &) de)eloping a strategic alliance C) forming an independent agency $) outsourcing E) in)esting directly in a foreign )enture Answer: & Explanation: &) 8n a strategic alliance0 different companies combine resources in an endea)or t at can be accomplis ed more efficiently wit t em bot . !age Ref: 12$ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.4 +earning 'utcome: $iscuss t e factors t at influence decisions about organi6ational structure %,ill: Concept *?) 3ord0 an American car company0 purc ased Mol)o0 w ic is based in %weden. 5 at is t is an example ofH A) a multinational firm &) a independent agency C) a licensing arrangement $) a foreign direct in)estment E) a strategic alliance Answer: $ Explanation: $) 8n a foreign direct in)estment0 a company in anot er country in)ests0 by partial or full owners ip0 in a company in t e ost country. !age Ref: 124 $ifficulty: Easy AAC%&: Reflecti)e t in,ing s,ills 'b(ecti)e: *.4 +earning 'utcome: $iscuss t e factors t at influence decisions about organi6ational structure %,ill: Application
*") 5 ic of t e following denotes a go)ernment order forbidding exportation and<or importation of a particular product from a particular countryH A) tariff &) embargo C) subsidy $) local content law E) business practice law Answer: & Explanation: &) An embargo bloc,s importation or exportation of a particular product. !age Ref: 12* $ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Concept *#) 5 ic of t e following is a go)ernment payment to elp a domestic business compete wit foreign firmsH A) re)enue tariff &) protectionist tariff C) import buy.bac, $) export rebate E) subsidy Answer: E Explanation: E) %ubsidies are go)ernment aid to an industry to elp it ,eep prices competiti)e. !age Ref: 12* $ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Concept
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12) 5 ic of t e following denotes t e practice of protecting domestic business at t e expense of free mar,et competitionH A) fair trade &) balanced trade C) free trade $) mar,et liberalism E) protectionism Answer: E Explanation: E) !rotectionism is a policy of discouraging imports from ot er countries to protect domestic industries from foreign competition. !age Ref: 12*.121 $ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Concept 11) Aany go)ernments re;uire t at products sold in t eir particular country be at least partly made t ere. T is policy in)ol)es w at type of lawsH A) ;uota laws &) local content laws C) business practice laws $) free trade laws E) subsidy laws Answer: & Explanation: &) +ocal content laws support local industries by re;uiring t at some products be at least partly made t ere. !age Ref: 121 $ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Concept
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1-) 5 ic of t e following refers to associations of producers t at control supply and pricesH A) independent agencies &) cartels C) trade alliances $) multinational firms E) trade monopolies Answer: & Explanation: &) A cartel is a group of companies t at coordinate t eir production so as to maintain collecti)e control o)er prices. !age Ref: 121 $ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Concept 14) 5 ic of t e following refers to t e practice of selling a product abroad for less t an t e cost of productionH A) exporting &) importing C) dumping $) safeguarding E) offs oring Answer: C Explanation: C) $umping urts companies w ere it occurs because local companies cannot compete wit below.cost prices. !age Ref: 121 $ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Concept
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1*) 5 ic organi6ation created t e classification of countries based on per capita incomeH A) t e 5orld &an, &) t e 5orld Trade 'rgani6ation C) t e 8nternational Aonetary 3und $) t e European Union E) t e United Bations Economic and %ocial Council Answer: A Explanation: A) T e 5orld &an,0 an agency of t e United Bations0 uses per capita income to ma,e distinctions among countries. !age Ref: #2 $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.1 +earning 'utcome: Compare and contrast different economic systems %,ill: Concept 11) 5 ic of t e following nations is B'T contained wit in a ma(or world economic mar,etplaceH A) Canada &) @reece C) Taiwan $) %ingapore E) :onduras Answer: E Explanation: E) Aa(or mar,etplaces include Bort America0 Europe0 and !acific Asia. !age Ref: #2.#1 $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.1 +earning 'utcome: Compare and contrast different economic systems %,ill: Application
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1>) 5 ic of t e following countries is t e worldDs t ird largest economy0 be ind t at of t e United %tates and CapanH A) C ina &) 8ndia C) &ra6il $) @ermany E) Russia Answer: A Explanation: A) C ina is t e worldDs most densely populated country and as emerged as t e worldDs t ird.largest economy. !age Ref: #1 $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.1 +earning 'utcome: Compare and contrast different economic systems %,ill: Concept 1?) Under w ic of t e following treaties are Canada0 t e United %tates0 and Aexico gradually eliminating tariffs and all ot er trade barriersH A) t e EUR' Agreement &) t e !an.American Agreement C) t e Bort American 3ree Trade Agreement $) t e @eneral Agreement on Tariffs and Trade E) t e @.4 3ree Trade Agreement Answer: C Explanation: C) %ome barriers came down in 1##*E ot ers were remo)ed in 1###0 -22*0 and -22#. !age Ref: #1 $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.1 +earning 'utcome: Compare and contrast different economic systems %,ill: Concept
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1") 5 at organi6ation was founded in !acific Asia in 1#>? for economic0 political0 social0 and cultural cooperationH A) %EAT' &) A%EAB C) CEBT' $) 'A% E) 5T' Answer: & Explanation: &) Today0 t e Association of %out east Asian Bations 7A%EAB) encompasses a population of 122 million and a @$! of /"22 billion. !age Ref: #$ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.1 +earning 'utcome: Compare and contrast different economic systems %,ill: Concept 1#) 5 ic of t e following treaties soug t to eliminate trade barriers suc as tariffs and ;uotasH A) United Bations $e)elopment Assistant !lan &) 3air +abor %tandards Act C) @eneral Agreement on Tariffs and Trade $) @eneral Agreement on Trade in %er)ices E) European Union %tability and @rowt !act Answer: C Explanation: C) @ATTDs purpose is to reduce or eliminate trade barriers by encouraging nations to protect domestic industries wit in agreed.upon limits and to engage in multilateral negotiations. !age Ref: #$ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.1 +earning 'utcome: Compare and contrast different economic systems %,ill: Concept
>2) 5 ic of t e following best describes a positi)e trade balanceH A) t e economic condition in w ic a countryDs exports exceed its imports &) t e economic condition in w ic a countryDs imports exceed its exports C) t e economic condition in w ic a countryDs inflow of money exceeds its outflow $) t e economic condition in w ic a countryDs outflow of money exceeds its inflow E) t e economic condition in w ic a countryDs natural resources exceed its uman resources Answer: A Explanation: A) T is is also ,nown as a trade surplus. !age Ref: #4 $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.+earning 'utcome: Explain ow economic performance is monitored %,ill: Concept >1) T e )alue of t e U.%. dollar relati)e to t e )alue of t e &ritis pound fluctuates wit mar,et conditions. 5 at is t is type of exc ange rateH A) floating &) fixed C) indexed $) ad(usted E) monitored Answer: A Explanation: A) 3loating exc ange rates fluctuate according to c anges in t e mar,et. !age Ref: #> $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.+earning 'utcome: Explain ow economic performance is monitored %,ill: Application
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>-) Country L can produce pig iron more efficiently t an any ot er goods. 5 ic type of ad)antage in pig iron does Country L a)eH A) absolute ad)antage &) national competiti)e ad)antage C) comparati)e ad)antage $) monopolistic ad)antage E) resource ad)antage Answer: C Explanation: C) 5 en a country can produce a good more efficiently t an it can produce any ot er good0 t at country is said to a)e a comparati)e ad)antage in t at efficiently produced good. !age Ref: #?.#" $ifficulty: Aoderate AAC%&: Reflecti)e t in,ing s,ills 'b(ecti)e: *.+earning 'utcome: Explain ow economic performance is monitored %,ill: Application >4) 5 ic of t e following exists w en a country can produce somet ing more c eaply and<or of ig er ;uality t an any ot er country canH A) monopolistic ad)antage &) national competiti)e ad)antage C) resource ad)antage $) absolute ad)antage E) comparati)e ad)antage Answer: $ Explanation: $) An absolute ad)antage0 t oug rare0 exists w en a country can produce somet ing more c eaply and<or of ig er ;uality t an any ot er country can. !age Ref: #? $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.+earning 'utcome: Explain ow economic performance is monitored %,ill: Concept
>*) Bational competiti)e ad)antage deri)es from four conditions0 one of w ic is factor conditions. 5 at do factor conditions includeH A) customers0 suppliers0 and labor &) go)ernment ;uotas and subsidies C) product ;uality0 producti)ity0 and profits $) labor0 capital0 entrepreneurs0 and p ysical resources E) strategies0 structures0 and ri)alries Answer: $ Explanation: $) 3actor conditions0 or factors of production0 include labor0 capital0 and materials. !age Ref: #" $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.+earning 'utcome: Explain ow economic performance is monitored %,ill: Concept >1) 5 ic of t e following types of firms design0 produce0 and manufacture products in many nationsH A) multinational firms &) importing firms C) domestic firms $) international firms E) exporting firms Answer: A Explanation: A) Aultinational firms design0 produce and mar,et products in many countriesE in addition0 ead;uarters locations are almost irrele)ant. !age Ref: 122 $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.4 +earning 'utcome: $iscuss t e factors t at influence decisions about organi6ational structure %,ill: Concept
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>>) 5 ic of t e following is B'T considered an international organi6ational structureH A) independent agents &) licensing arrangements C) foreign direct in)estments $) branc office E) exporters Answer: E Explanation: E) 8nternational organi6ational structures include independent agents0 licensing arrangements0 branc offices0 strategic alliances0 and foreign direct in)estment. !age Ref: 122 $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.4 +earning 'utcome: $iscuss t e factors t at influence decisions about organi6ational structure %,ill: Concept >?) 5 ic statement is true regarding independent agentsH A) T ey represent one firm at a time. &) T ey usually speciali6e in a particular product. C) T ey act as sales representati)es. $) T ey are usually based at domestic offices. E) T ey do not monitor or address customer satisfaction. Answer: C Explanation: C) 8ndependent agents act as sales representati)es0 representing many exporters in foreign mar,ets. !age Ref: 121 $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.4 +earning 'utcome: $iscuss t e factors t at influence decisions about organi6ational structure %,ill: Concept
>") To a)oid transportation costs and tariffs0 Apics Enterprises ga)e exclusi)e rig ts to %)enson A& in 3inland to produce its product. 5 at is t is an example ofH A) licensing arrangement &) strategic alliance C) foreign direct in)estment $) independent agent E) branc office Answer: A Explanation: A) 8n licensing arrangements0 firms gi)e foreign companies exclusi)e rig ts to manufacture or mar,et t eir products in t at mar,et. !age Ref: 12$ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.4 +earning 'utcome: $iscuss t e factors t at influence decisions about organi6ational structure %,ill: Application >#) 5 ic of t e following types of payments are usually recei)ed by an exporter as an ongoing payment calculated as a percentage of t e license olderDs salesH A) flat fees &) royalties C) agent fees $) subsidies E) direct in)estments Answer: & Explanation: &) T e exporter recei)es a fee plus ongoing payments0 or royalties0 calculated as a percentage of t e license olderDs sales. !age Ref: 12$ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.4 +earning 'utcome: $iscuss t e factors t at influence decisions about organi6ational structure %,ill: Concept
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?2) 8n w ic international organi6ation structure does a firm a)e greatest control o)er foreign acti)itiesH A) exporting arrangements &) strategic alliances C) branc offices $) licensing arrangements E) independent agents Answer: & Explanation: &) %trategic alliances gi)e firms greater control o)er foreign acti)ities t an agents and licensees. !age Ref: 12$ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.4 +earning 'utcome: $iscuss t e factors t at influence decisions about organi6ational structure %,ill: Concept ?1) U.%. imports of Canadian softwood timber are limited to 1*.? billion board feet per year. 5 at is t is practice calledH A) tariff &) embargo C) subsidy $) dumping E) ;uota Answer: E Explanation: E) A ;uota restricts t e number or amount of certain types of products t at can be imported. !age Ref: 12* $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Application
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?-) T e U.%. go)ernment forbids t e importation of cigars from Cuba. 5 at is t is practice calledH A) embargo &) tariff C) subsidy $) business practice law E) local content law Answer: A Explanation: A) An embargo is a go)ernment order forbidding exportation<importation of certain products. !age Ref: 12* $ifficulty: Aoderate AAC%&: Reflecti)e t in,ing s,ills 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Application ?4) 5 ic of t e following refers to tariffs t at are imposed strictly to raise money for t e go)ernmentH A) re)enue tariffs &) protectionist tariffs C) ;uota tariffs $) subsidy tariffs E) labor tariffs Answer: A Explanation: A) Re)enue tariffs raise money for t e go)ernment. !age Ref: 12* $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Concept
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?*) 5 ic of t e following types of tariff is meant to discourage t e import of particular productsH A) re)enue tariff &) ;uota tariff C) labor tariff $) subsidy tariff E) protectionist tariff Answer: E Explanation: E) !rotectionist tariffs discourage particular imports. !age Ref: 12* $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Concept ?1) %uppose t at t e United %tates re;uires t at products sold ere be at least 11 percent made ere. 5 ic of t e following denotes t is type of policyH A) business practice law &) deregulation law C) business practice law $) strategic alliance E) local content law Answer: E Explanation: E) +ocal content laws are re;uirements t at products sold in a country be at least partly made t ere. !age Ref: 121 $ifficulty: Aoderate AAC%&: Reflecti)e t in,ing s,ills 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Application
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?>) 8n some %out American countries0 it is sometimes legal to bribe ot er businesses and go)ernment officials0 w ile t is practice is illegal in t e United %tates. 5 ic of t e following refers to t is type of policyH A) protectionism &) business practice laws C) free trade agreements $) fair trade agreements E) local content laws Answer: & Explanation: &) E)ery country as its own business practice laws by w ic t ey go)ern business practices. !age Ref: 121 $ifficulty: Aoderate AAC%&: Reflecti)e t in,ing s,ills 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Application ??) 5 ic of t e following goals is a primary purpose of tariffs on importsH A) maintain domestic competiti)eness &) decrease exports C) increase imports $) subsidi6e domestic industry E) promote free trade Answer: A Explanation: A) Aost tariffs are meant to discourage particular imports in order t at domestic businesses may remain competiti)e. !age Ref: 12* $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Concept
?") C ina and 8ndia re;uire t at w en foreign firms enter into (oint )entures wit local firms0 t e local partners must a)e t e controlling owners ip sta,e. 5 at is t is an example ofH A) local content laws &) business practice laws C) fair trade agreements $) ;uotas E) subsidies Answer: A Explanation: A) +ocal content laws are re;uirements t at products sold in a country be at least partly made t ere. 3irms see,ing to do business in a country must eit er in)est t ere directly or ta,e on a domestic partner. !age Ref: 121 $ifficulty: Aoderate AAC%&: Reflecti)e t in,ing s,ills 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Application ?#) 8n @ermany0 5al.Aart as been re;uired to buy existing retailers rat er t an open brand. new stores. 5 at does t is illustrateH A) local content laws &) fair trade agreements C) free trade agreements $) licensing arrangements E) business practice laws Answer: E Explanation: E) :ost countries go)ern business practices wit in t eir (urisdictions t roug )arious business practice laws. !age Ref: 121 $ifficulty: Aoderate AAC%&: Reflecti)e t in,ing s,ills 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Application
"2) 5 ic of t e following is illegal in t e United %tatesH A) dumping but not cartels &) cartels but not dumping C) only certain ,inds of dumping and cartels $) neit er dumping nor cartels E) bot dumping and cartels Answer: E Explanation: E) $umping and cartels are bot illegal in t e United %tates. !age Ref: 121 $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Application "1) 5 ic of t e following resulted from BA3TAH A) Companies from ot er countries0 suc as Capan0 a)e made fewer business in)estments in Bort America. &) U.%. exports to Aexico a)e decreased. C) U.%. exports to Aexico a)e increased. $) Aore (obs a)e been created t an w at was originally predicted. E) Aore U.%. (obs were eliminated t an w at was originally predicted. Answer: C Explanation: C) Aany positi)e predictions regarding w at would result from BA3TA a)e materiali6ed0 including t e increase in U.%. exports to Aexico. !age Ref: #1 $ifficulty: $ifficult AAC%&: $ynamics of t e global economy 'b(ecti)e: *.1 +earning 'utcome: Compare and contrast different economic systems %,ill: %ynt esis
"-) &ridget wants to buy some Englis tea priced at 12 pounds from an online seller. T e current exc ange rate is 1.1 dollars to t e pound. :ow muc s e will pay for t e tea 7excluding any upfront exc ange fees)H A) /11.22 &) /1-.12 C) /11.12 $) /".12 E) />.>? Answer: A Explanation: A) /1.12 N 12 pounds G /11.22. !age Ref: #> $ifficulty: Aoderate AAC%&: Analytic s,ills 'b(ecti)e: *.+earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Application "4) 5 at typically appens to a countryDs balance of trade as t e )alue of its currency fallsH A) 8t impro)es. &) 8t declines. C) 8t remains t e same. $) 8t fluctuates drastically. E) 8t fluctuates moderately. Answer: A Explanation: A) As t e )alue of its currency falls relati)e to t at of ot er countries0 ot er countries are more li,ely to buy goods from t at country. !age Ref: #? $ifficulty: $ifficult AAC%&: $ynamics of t e global economy 'b(ecti)e: *.+earning 'utcome: Explain ow economic performance is monitored %,ill: Concept
"*) 5 at is a difference between an international firm and a multinational firmH A) Aultinational firms design0 produce0 and mar,et products in many nations0 w ereas international firms are based primarily in one nation. &) 8nternational firms design0 produce0 and mar,et products in many nations0 w ereas multinational firms are based primarily in one nation. C) 8nternational and multinational firms are t e same t ing. $) Aultinational firms are concerned primarily wit foreign mar,ets0 w ereas international firms are concerned primarily wit t e domestic mar,et. E) 8nternational firms are concerned primarily wit foreign mar,ets0 w ereas multinational firms are concerned primarily wit t e domestic mar,et. Answer: A Explanation: A) 8nternational firms conduct muc of t eir business abroad and may maintain o)erseas manufacturing facilitiesE multinational firms design0 produce0 and mar,et products in many nations. !age Ref: 122 $ifficulty: $ifficult AAC%&: $ynamics of t e global economy 'b(ecti)e: *.4 +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Concept "1) 5 ic of t e following statements best describes t e effects of subsidiesH A) A subsidy essentially lowers t e prices of foreign goods rat er t an raising t e prices of domestic goods. &) A subsidy essentially raises t e prices of domestic goods rat er t an lowering t e prices of foreign goods. C) A subsidy essentially lowers t e prices of domestic goods rat er t an raising t e prices of foreign goods. $) A subsidy essentially raises t e prices of foreign goods w ile also raising t e prices of domestic goods. E) A subsidy essentially lowers t e prices of foreign goods w ile also lowering t e prices of domestic goods. Answer: C Explanation: C) A subsidy is a go)ernment payment to elp a domestic business compete wit foreign firmsE t e subsidy lowers t e prices of domestic goods rat er t an raising t e prices of foreign goods. !age Ref: 12* $ifficulty: $ifficult AAC%&: $ynamics of t e global economy 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Concept
">) 5 at countries comprise BA3TAH Answer: BA3TA0 t e Bort American 3ree Trade Agreement0 is a trade agreement between Aexico0 t e United %tates0 and Canada. Explanation: BA3TA see,s to eliminate all trade barriers between t e t ree countries so t at products can be traded freely wit out tariffs or ot er restrictions. !age Ref: #1 $ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.1 +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Concept "?) :ow as BA3TA influenced international tradeH Answer: BA3TA see,s to remo)e )irtually all barriers to trade among t e t ree countries. As a result of BA3TA0 se)eral undred t ousand new (obs a)e been created. Explanation: T e Bort American 3ree Trade Agreement is a free trade agreement between t e United %tates0 Canada0 and Aexico. !age Ref: #1 $ifficulty: Easy AAC%&: $ynamics of t e global economy 'b(ecti)e: *.1 +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: %ynt esis "") 5 at are t e t ree goals of t e 5orld Trade 'rgani6ation 75T')H Answer: T e t ree goals are 1) to encourage members to adopt fair trade practicesE -) to reduce trade barriersE and 4) to establis fair procedures for resol)ing disputes among members. Explanation: T e 5orld Trade 'rgani6ation began in 1##1 and as 11- member countries. !age Ref: #$ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.1 +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Concept
"#) 5 at is t e difference between balance of trade and balance of paymentsH Answer: &alance of trade is t e difference between t e economic )alue of exports and t e economic )alue of imports. &alance of payments refers to t e flow of money into and out of a country0 mostly attributed to t e countryDs balance of trade. Explanation: T e money t at a country pays for imports and recei)es for exportsOits balance of tradeOaccounts for muc of its balance of payments. 't er financial exc anges are also factors. !age Ref: #4.#* $ifficulty: Aoderate AAC%&: Analytic s,ills 'b(ecti)e: *.+earning 'utcome: Explain ow economic performance is monitored %,ill: Concept #2) 8n assessing a countryDs national competiti)e ad)antage0 w at is meant by factor conditionsH Answer: 3actor conditions0 also ,nown as factors of production0 include labor0 capital0 entrepreneurs0 p ysical resources0 and information resources. Explanation: T e t ree ot er conditions used to assess national competiti)e ad)antage are demand conditions0 related and supporting industries0 and strategies0 structures0 and ri)alries. !age Ref: #" $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.+earning 'utcome: Explain ow economic performance is monitored %,ill: Concept #1) 5 at are t ree basic le)els of in)ol)ement a)ailable for a firm t at decides to conduct business internationallyH Answer: T e firm may act as an exporter or importer0 organi6e as an international firm0 or operate as a multinational firm. Explanation: Aost of t e worldDs largest industrial firms operate as multinational firmsPfirms t at design0 produce0 and mar,et products in many nations. !age Ref: 122 $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.4 +earning 'utcome: $iscuss t e factors t at influence decisions about organi6ational structure %,ill: Concept
#-) Explain ow a firm may a)e more direct control wit a branc office t an it does o)er agents or license olders. Answer: 8n a branc office0 a firm sends its own managers o)erseas w ere t ere is more )isible public presence. Explanation: &ranc offices also furnis a more )isible public presence in foreign countries0 and foreign customers tend to feel more secure w en t ereDs a local branc office. !age Ref: 121.12$ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.4 +earning 'utcome: $iscuss t e factors t at influence decisions about organi6ational structure %,ill: Concept #4) 5 at is a cartelH Use an example to clarify your response. Answer: A cartel is an association of producers t at controls bot supply and prices. '!EC 7'rgani6ation of !etroleum Exporting Countries) is an example of a cartel. Explanation: T e existence of cartels gi)es tremendous power to some nations0 suc as t ose belonging to '!EC0 w ic is one of t e reasons t at U.%. law forbids cartels. !age Ref: 121 $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Concept #*) Explain a floating exc ange rate. Answer: A floating exc ange rate allows t e )alue of one countryDs currency relati)e to t e )alue of anot er countryDs currency to fluctuate according to mar,et conditions. Explanation: 'n a daily basis0 exc ange rates fluctuate )ery little. %ignificant )ariations usually occur o)er longer time spans. !age Ref: #> $ifficulty: $ifficult AAC%&: $ynamics of t e global economy 'b(ecti)e: *.+earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Concept
#1) 5 y s ould companies conducting international operations be concerned about exc ange rate fluctuationsH Answer: C anges in exc ange rates affect o)erseas demand for t eir products and can be a ma(or factor in international competition. Exc ange rate fluctuations can also affect t e companiesD profitability. Explanation: 8n general0 w en t e )alue of a countryDs currency risesObecomes strongerO companies based t ere find it arder to export products to foreign mar,ets and easier for foreign companies to enter local mar,ets. 8t also ma,es it more cost.efficient for domestic companies to mo)e operations to lowerOcost foreign sites. 5 en t e )alue of a currency declinesPbecomes wea,erOt e opposite occurs. !age Ref: #? $ifficulty: $ifficult AAC%&: Reflecti)e t in,ing s,ills 'b(ecti)e: *.+earning 'utcome: Explain ow economic performance is monitored %,ill: Concept #>) Explain w y fluctuations in exc ange rates a)e significant influence on t e balance of trade. Answer: 5 en t e )alue of a countryDs currency rises0 companies based t ere find it arder to export products to foreign mar,ets and easier for foreign companies to enter local mar,ets. Explanation: As t e )alue of a countryDs currency falls0 its balance of trade usually impro)es because domestic companies s ould experience a boost in exports. T ere s ould also be less reason for foreign companies to s ip products into t e domestic mar,et and less reason to establis operations in ot er countries. !age Ref: #? $ifficulty: $ifficult AAC%&: Reflecti)e t in,ing s,ills 'b(ecti)e: *.+earning 'utcome: Explain ow economic performance is monitored %,ill: Concept #?) $iscuss t e differences between absolute ad)antage and comparati)e ad)antage. Answer: An absolute ad)antage exists w en a country can produce somet ing more c eaply and<or of ig er ;uality t an any ot er country. Absolute ad)antages are relati)ely rare. A country as a comparati)e ad)antage in goods t at it can produce more efficiently t an ot er goods. Explanation: Economists traditionally focused on absolute and comparati)e ad)antage to explain international trade. &ut because t is approac focuses narrowly on suc factors as natural resources and labor costs0 a more contemporary )iew of national competiti)e ad)antage as emerged. !age Ref: #?.#" $ifficulty: $ifficult AAC%&: Reflecti)e t in,ing s,ills 'b(ecti)e: *.+earning 'utcome: Explain ow economic performance is monitored %,ill: Concept
#") 5 at are t e four components of national competiti)e ad)antageH Answer: T e four components of national competiti)e ad)antage are factor conditionsE demand conditionsE related and supporting industriesE and strategies0 structures0 and ri)alries. Explanation: 5 en all attributes of national competiti)e ad)antage exist0 a nation is li,ely to be ea)ily in)ol)ed in international business. !age Ref: #" $ifficulty: $ifficult AAC%&: $ynamics of t e global economy 'b(ecti)e: *.+earning 'utcome: Explain ow economic performance is monitored %,ill: Concept ##) 5 at are two specific reasons w y a company mig t decide B'T to conduct business internationallyH Answer: Eac of t e following reasons is acceptable 7among ot ers): 71) t e companyDs product7s) may be unsuitable for international s ipping due to storage and<or transportation costs0 if made domesticallyE 7-) t ere may be a )ery low demand for t e companyDs product7s) in foreign mar,etsE 74) t e business climate of a gi)en country may be unsuitable for t e company. Explanation: A fourt potential reason is t at t e company may not a)e or be able to obtain t e necessary s,ills and ,nowledge to do international business. !age Ref: 122 $ifficulty: $ifficult AAC%&: Analytic s,ills 'b(ecti)e: *.4 +earning 'utcome: $iscuss t e factors t at influence decisions about organi6ational structure %,ill: %ynt esis 122) Under U.%. antidumping legislation0 w at conditions must be met to pro)e t at dumping is being practicedH Answer: $umping is t e practice of selling a product abroad for less t an t e cost of production. U.%. antidumping legislation sets two conditions for determining t at dumping is being practiced: products are being priced at Fless t an fair )alue0F and t e result unfairly arms a domestic industry. Explanation: T e U.%. go)ernment as been ,nown to impose significant tariffs on imports as a means to combat dumping. !age Ref: 121 $ifficulty: $ifficult AAC%&: $ynamics of t e global economy 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Concept
121) $escribe t e relations ip of exports and imports in a countryDs balance of trade and its balance of payments. Answer: Exports are products created domestically and t en transported and sold abroad0 w ereas imports are products created abroad and t en transported and sold domestically. A nationDs balance of trade is determined t roug t e relations ip of its exports to its imports. A positi)e balance of trade0 also ,nown as a trade surplus0 occurs w en a country exports more t an it imports. A negati)e balance of trade0 or a trade deficit0 occurs w en a country imports more t an it exports. A countryDs balance of payments results from t e inflow and outflow of money into and out of t e country as a result of t e countryDs trade balance. !age Ref: #4.#* $ifficulty: Aoderate AAC%&: $ynamics of t e global economy 'b(ecti)e: *.+earning 'utcome: Explain ow economic performance is monitored %,ill: Concept 12-) $efine licensing arrangement and strategic alliance and discuss t eir relati)e merits. Answer: 5it a licensing arrangement0 a firm gi)es foreign entities exclusi)e rig ts to manufacture or mar,et t eir products in t at mar,et. 5it suc arrangements0 t e licensing firm is not often present to monitor t at production and ;uality control standards are consistently being met. %uc arrangements0 w ic include franc ising0 mig t benefit t e licensing firm in t at t e local people li,ely ,now t e local mar,et bestE t erefore0 a licensing arrangement would allow t e licensing firm to tap into a foreign mar,et )ia t e use of employees w o s are cultural similarities wit t at particular mar,et. 8n a strategic alliance0 a firm comes toget er in a form of a partners ip wit a firm in a country in w ic it wants to do business. &ot sides agree to in)est resources and capital into a new business or toward a common purpose. T is type of partners ip represents a type of FmarriageF between two firmsE bot sides are present w ile ma(or decisions are being made and bot sides wor, toward t eir common purpose. !age Ref: 121.124 $ifficulty: $ifficult AAC%&: Analytic s,ills 'b(ecti)e: *.4 +earning 'utcome: $iscuss t e factors t at influence decisions about organi6ational structure %,ill: %ynt esis
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124) :ow can a local content law in Capan act as a barrier to a U.%..based automobile manufacturing company t at is interested in setting up a branc office in To,yoH Answer: %uccess in international trade will depend largely upon social0 economic0 legal0 and political barriers. Any firm planning to conduct business abroad must understand social and cultural differences between t e ost country and ome country. Economic differences include t e extent of go)ernment in)ol)ement in a gi)en industry and t e le)el of competition. T ere are many legal and political barriers to international trade0 including ;uotas0 tariffs0 subsidies0 local content laws0 and business practice laws. Explanation: Aany countries0 including t e United %tates0 a)e local content lawsO re;uirements t at products sold in a country be at least partly made t ere. 3irms see,ing to do business in a country must eit er in)est t ere directly or ta,e on a domestic partner. !age Ref: 121 $ifficulty: $ifficult AAC%&: $ynamics of t e global economy 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Concept 12*) 5 at are t e ad)antages and disad)antages of globali6ationH Answer: @lobali6ation as increased t e standard of li)ing for billions of people and as elped to create enormous wealt in many different parts of t e globe. :owe)er0 many people a)e not s ared in t is wealt and some critics belie)e t at globali6ation as urt less de)eloped countries and destroyed or damaged t e uni;ue cultures t at exist in different parts of t e world. Explanation: 8n recent years go)ernments and businesses a)e become more aware of t e benefits of globali6ation to businesses and s are olders0 w ile critics a)e been more willing to protest or demonstrate at international gat erings of global economic leaders. !age Ref: "# $ifficulty: $ifficult AAC%&: $ynamics of t e global economy 'b(ecti)e: *.1 +earning 'utcome: Compare and contrast different economic systems %,ill: %ynt esis 121) :ow as globali6ation affected t e potential for ig er standards of li)ing wit in t e worldH Answer: &y bringing new (obs and ence more monetary resources into )arious regions of t e world0 globali6ation as gi)en se)eral nations more opportunities to impro)e t e li)es of its citi6ens. :owe)er0 in many cases0 it as also ser)ed to pro)ide additional control to t ose w o already were in power. Explanation: 8t is important to note t at globali6ation as impacts ot er t an purely positi)e ones on )arious people in t e world. !age Ref: "# $ifficulty: $ifficult AAC%&: $ynamics of t e global economy 'b(ecti)e: *.1 +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: %ynt esis
12>) :ow mig t t e international mar,et specifically affect t e success of a local coffee s op in Cle)eland0 ' ioH Answer: T e price and a)ailability of coffee beans will )ary according to t e international coffee mar,et. T is would affect t e price of coffee c arged by t e coffee s op0 w ic could in turn affect t e success of t e business. Explanation: 8t is important to reali6e t at e)en )ery local businesses will always be affected by t e global economy. !age Ref: "# $ifficulty: $ifficult AAC%&: $ynamics of t e global economy 'b(ecti)e: *.1 +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Application Bo,ia Corporation0 ead;uartered in 3inland0 is a world leader in t e cell p one industry. &ecause muc of 3inland is ea)ily forested and sparsely populated0 it is difficult and expensi)e to de)elop a land.based communication networ,. Bo,ia created EuropeDs first digital telep one networ, in 1#"-. Today0 Bo,ia as -? percent of t e world mar,et in cell p ones0 well a ead of its competition. 12?) % ould telep one tec nology be considered an absolute ad)antage in 3inlandH Explain. Answer: An absolute ad)antage exists w en a country can produce somet ing t at is c eaper and<or of ig er ;uality t an any ot er country. Bo,ia as -? percent of t e world mar,et in cell p ones0 well a ead of t eir competitionE t is may indicate an absolute ad)antage. :owe)er0 absolute ad)antages are always relati)e. Explanation: 8n general0 bot absolute and comparati)e ad)antages translate into competiti)e ad)antage. !age Ref: #? $ifficulty: Easy AAC%&: Analytic s,ills 'b(ecti)e: *.+earning 'utcome: Explain ow economic performance is monitored %,ill: Application
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12") Under w at circumstances would telep one tec nology be considered a comparati)e ad)antage in 3inlandH Answer: A country en(oys a comparati)e ad)antage w en no ot er country can produce somet ing as efficiently. 8f no ot er country could produce cell p ones and cell p one tec nology as efficiently as 3inland0 t en 3inland would en(oy a comparati)e ad)antage. Explanation: Economists traditionally focused on absolute and comparati)e ad)antage to explain international trade. &ut because t is approac focuses narrowly on suc factors as natural resources and labor costs0 a more contemporary )iew of national competiti)e ad)antage as emerged. !age Ref: "# $ifficulty: Easy AAC%&: Analytic s,ills 'b(ecti)e: *.+earning 'utcome: Explain ow economic performance is monitored %,ill: Application 12#) Bo,ia is a dominant mar,et player in its industry. 5 at are some ris,s t at Bo,ia mig t face if it engages in a strategic alliance wit a foreign companyH Answer: 8f it engages in a strategic alliance to eit er produce a superior or different type of p one or to impro)e communication tec nology0 Bo,ia may run t e ris, of a)ing to s are trade secrets as well as alter t e companyDs image in t e mar,et. Explanation: 8n many countries0 laws ma,e strategic alliances )irtually t e only way to do international business. !age Ref: 12$ifficulty: Aoderate AAC%&: Analytic s,ills 'b(ecti)e: *.4 +earning 'utcome: $iscuss t e factors t at influence decisions about organi6ational structure %,ill: Critical T in,ing 112) :ow mig t sociocultural differences affect sales of Bo,ia p ones outside 3inlandH Answer: Any firm planning to conduct business in anot er country must understand t e sociocultural differences between t e ost country and t e ome country. 'ne of t e most ob)ious barriers is language. T e pac,aging0 instructions0 and menu must be translated into t e language of users in ot er countries. Bo,ia must also consider cultural differences in cell p one usage in eac country to w ic t ey wis to export. 3or example0 is it culturally acceptable to spea, on a cell p one w ile wal,ing down t e streetH 8s face.to.face communication preferred o)er p one communicationH Explanation: %ome social and cultural differences are ob)ious0 but a wide range of subtle )alue differences can also affect operations. !age Ref: 124 $ifficulty: $ifficult AAC%&: Analytic s,ills 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Critical T in,ing
111) :ow mig t t e imposition of a ;uota on cell p ones impact Bo,iaDs exportation of cell p ones to t e United %tatesH Answer: A ;uota is a restriction on t e number of products of a gi)en type t at can be imported into a country. 8f t e United %tates were to impose a ;uota on t e number of cell p ones0 Bo,ia mig t find t at t ey were limited in t e number of p ones t ey could s ip to t e United %tates. &y reducing supply0 prices for t eir p ones would tend to increase. Explanation: E)en free mar,et economies0 suc as t e United %tates0 a)e some ;uotas and<or tariffs0 bot of w ic affect prices and ;uantities of foreign.made products. !age Ref: 12* $ifficulty: $ifficult AAC%&: Analytic s,ills 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Critical T in,ing 11-) :ow mig t t e imposition of a tariff on cell p ones impact Bo,iaDs exportation of cell p ones to t e United %tatesH Answer: A tariff is a tax on imported products. T erefore0 t e imposition of a tariff on cell p ones would result in increased prices on Bo,ia products sold in t e United %tates. 8f t ere were not a substitute brand of comparable ;uality0 owe)er0 demand for Bo,iaDs p ones in t e United %tates would li,ely not decrease muc . Explanation: Tariffs raise t e prices of imports by ma,ing consumers pay not only for t e products but also for tariff fees. Aost tariffs0 called protectionist tariffs0 are meant to discourage particular imports. !age Ref: 12* $ifficulty: $ifficult AAC%&: Analytic s,ills 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Critical T in,ing
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114) 't er t an a ;uota0 embargo0 or tariff0 w at legal barriers mig t t e United %tates use to discourage t e importation of cell p onesH Answer: Congress mig t consider a subsidy program for domestic manufacturers or enact local content laws. 8f t e U.%. go)ernment were to subsidi6e domestically produced cell p ones0 t e price would go down. 5it lower prices0 t e sales of domestically produced cell p ones would li,ely increase and sales of foreign produced cell p ones would li,ely decrease. +ocal content laws re;uire t at products sold in a particular country be at least partly made t ere. Bo,ia could meet t is re;uirement by ta,ing on a domestic partner. Ket0 Bo,ia will experience ig er costs by being re;uired to buy components of its p ones from U.%. firms or by setting up a production facility in t e United %tates to complete assembly. Explanation: A subsidy is a go)ernment payment to elp a domestic business compete wit foreign firms. T eyDre actually indirect tariffs t at lower t e prices of domestic goods rat er t an raise t e prices of foreign goods. !age Ref: 12* $ifficulty: $ifficult AAC%&: Reflecti)e t in,ing s,ills 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: %ynt esis 11*) T e Trade Agreements Act of 1#?# forbids Fdumping.F &ecause of its low prices0 is it possible t at Bo,ia could be accused of FdumpingF t eir p ones in t e United %tatesH Answer: F$umpingF is t e practice of selling a product abroad for less t an t e cost of production. To pro)e dumping0 products must be priced at Fless t an fair )alueF and t e FdumpingF must a)e resulted in arm to t e domestic industry. Explanation: 8f t e United %tates t oug t t at Bo,ia was guilty of dumping0 to protect local manufacturers0 t e U.%. go)ernment mig t impose a significant tariff on imported Bo,ia p ones. !age Ref: 121 $ifficulty: $ifficult AAC%&: Reflecti)e t in,ing s,ills 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Application
3emboo,s is a feminist boo,store t at sells boo,s only o)er t e 8nternet. 8t as establis ed an excellent reputation for finding out.of.print and ard.to.find boo,s of interest to women. T e CE' of 3emboo,s is considering going global wit t e business0 since it is already establis ed on t e 8nternet. 111) T e )ice president of 3emboo,s argues t at t ey will encounter too many difficulties in ta,ing t e business global )ia t e 8nternet. T e president argues t at t e benefits would be wort t e problems encountered. 5 ic of t e following statements0 if true0 would support t e argument of t e )ice president against going globalH A) 5 ile Englis is t e dominant language of t e 8nternet0 more local traffic would be generated by 5eb pages in t e local language. &) &eing a nic e business0 going global o)er t e 8nternet would not put a uge strain on existing personnel. C) % ipping boo,s o)erseas could easily be andled by U!%0 3edEx0 or airmail. $) %ales predictions for o)erseas expansion anticipate an initial 42 percent increase0 t en tapering off to a -2 percent increase annually. E) 8ncreased 8nternet ad)ertising costs would be a fairly inexpensi)e in)estment to increase business on a global basis. Answer: A Explanation: A) C oice A would support t e )ice presidentDs argument against going global in t at generating 5eb pages in a )ariety of languages would be a disad)antage. 5 ile t ere are software pac,ages t at do literal translations0 many terms do not translate literally0 and bac, translation would be needed to ensure accuracy. C oices &0 C0 $0 and E would all support t e presidentDs argument for expanding globally. Bot a)ing to ire additional personnel and not a)ing s ipping concerns would be ad)antages for an 8nternet business. 8ncreasing sales w ile not greatly increasing ad)ertising costs would also be an ad)antage. !age Ref: #4 $ifficulty: $ifficult AAC%&: Reflecti)e t in,ing s,ills 'b(ecti)e: *.+earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Critical T in,ing
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11>) 5 ic of t e following statements0 if true0 would support t e presidentDs argument for t e global expansion of 3emboo,s t roug t e 8nternetH A) !ayment preferences )ary from country to country. Europeans prefer using debit cards o)er using credit cards due to t e ig rate of credit card t eft. &) $emograp ic targeting is more easily accomplis ed on t e 8nternet t an in ot er forms of ad)ertising. C) T e exc ange rate for different currencies can be an issue for global businesses. T e use of local currency may increase rates of purc ase0 but presents c allenges for exc ange and s ipping. $) Ad)ertising and sales laws 7and accompanying taxes) )ary from country to country. E) +ocal import and export laws would need to be researc ed and followed. Answer: & Explanation: &) C oice &0 t e ability to demograp ically target more accurately0 would support t e presidentDs argument for global expansion t roug t e 8nternet. C oices A0 C0 $0 and E would all support t e )ice presidentDs concerns and argument against global expansion of 3emboo,s t roug t e 8nternet. !ayment preferences and currency exc ange rates would definitely need to be addressed before expansion. +aws regarding ad)ertising0 sales0 imports and exports would re;uire legal ad)ice to ma,e sure t ey were accurately followed0 w ic would be a furt er expense. !age Ref: #4 $ifficulty: $ifficult AAC%&: Reflecti)e t in,ing s,ills 'b(ecti)e: *.+earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Critical T in,ing
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11?) T e )ice president furt er argues t at more reasons exist for not expanding 3emboo,s on a global basis. 5 ic of t e following statements0 if true0 would B'T support t e )ice presidentDs argumentH A) &andwidt )ariability can cause tec nical problems wit ordering t roug t e 8nternet. &) %ome countries re;uire 8nternet users to pay by t e minute0 w ic furt er necessitates a rapid ordering and payment procedure. C) 5eb censoring0 w ic could impact feminist boo,s0 occurs in C ina0 %audi Arabia0 8ran0 and Aalaysia. $) T e rate of access to computers is increasing on a global basis and now stands at 11 percent0 wit estimates of increasing to -1 percent in t e next two years. E) +ocal 8nternet 5eb page writers would need to ensure t at all offensi)e colors0 words and images were remo)ed to ensure cultural adaptation. Answer: $ Explanation: $) C oice $0 t e growing access to computers on a global basis0 would not support t e )ice presidentDs argument against 3emboo,sD global expansion t roug t e 8nternet. C oices A0 &0 C0 and E would all support t e )ice presidentDs ongoing argument. &andwidt )ariability can be a real business concern for 8nternet businesses. !ayment by t e minute0 suc as in 8nternet cafes0 means t at t e ability to order and pay for 8nternet products needs to be accomplis ed rapidly. 5eb censoring by at least se)en countries would certainly a)e an impact on a feminist boo,store0 and ;uite a few ot er countries w ere women still old subser)ient roles could cause concerns. +ocal tec nical support personnel wit ,nowledge of cultural mores would need to be ired to ensure cultural adaptation is appropriate0 or sales would be negati)ely impacted. !age Ref: #4 $ifficulty: $ifficult AAC%&: Reflecti)e t in,ing s,ills 'b(ecti)e: *.+earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Critical T in,ing
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Citronel is a 3renc company t at mar,ets a range of fas ionable clot ing to 3renc consumers under its widely ,nown brand name. T e company wants to begin mar,eting its products worldwide and needs to decide on t e most effecti)e and profitable strategy. 11") CitronelDs CE' t in,s t at a mar,et segment already exists worldwide t at will be recepti)e to CitronelDs product line. 5 ic of t e following0 if true0 would strengt en t e CE'Ds positionH A) !eople in different parts of t e world tend to embrace t eir own clot ing fas ions. &) Consumers in different parts of t e world a)e )aried spending power. C) Clot ing fas ions t at originate in 3rance tend to appeal to different places in t e world. $) Citronel as accumulated extensi)e mar,et data on 3renc consumers. E) Citronel as been in business for only a few years. Answer: C Explanation: C) 8f 3renc fas ions appeal to consumers in different parts of t e world0 t en Citronel li,ely as a ready.made global mar,et segment t at it could target. 'n t e ot er and0 if clot ing fas ions are generally specific to a culture 7C oice A)0 itDs unli,ely t at Citronel could sell to a global mar,et segment. C oice &: 5e donDt ,now ow price.related factors suc as spending power would affect CitronelDs efforts to appeal to consumers in )arious parts of t e world. C oice $ tells us only t at Citronel as information about t e 3renc consumer mar,et0 and not about consumers worldwide. C oice E mig t wea,en t e case t at t ere is already a global mar,et segment worldwide for CitronelDs products0 since it would mean t at t e company is not as li,ely to be ,nown outside of 3rance. !age Ref: ## $ifficulty: $ifficult AAC%&: Reflecti)e t in,ing s,ills 'b(ecti)e: *.4 +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Critical T in,ing
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11#) CitronelDs C ief 'perating 'fficer t in,s t at t e company s ould adopt a standardi6ed mar,eting approac t roug out t e world. 5 ic of t e following0 if true0 would strengt en er positionH A) +ong production runs of t e same items would allow t e company to sa)e money. &) $ifferent cultures )ary in ow t ey percei)e 3renc clot ing. C) T e company as ad only limited success establis ing a consistent mar,eting strategy t roug out 3rance. $) T e company will a)e strong competition from )arious brands t roug out t e world. E) T e company as a substantial mar,eting budget. Answer: A Explanation: A) %tandardi6ing its mar,eting to different parts of t e world would allow t e company to sell t e same clot es t roug out t e world0 and if t is sa)es t e company money0 it would be a sound strategy. 8f 3renc clot ing is percei)ed differently in )arious places in t e world 7C oice &)0 CitronelDs mar,eting would need to be ad(usted for t at. C oice C: 8f Citronel is a)ing trouble coming up wit a consistent mar,eting strategy in 3rance0 itDs li,ely to face an e)en greater c allenge de)eloping a standardi6ed mar,eting strategy worldwide. And e)en if t e strategy succeeded in 3rance0 t ereDs no guarantee t at it would wor, as well in ot er countries. C oice $ would wea,en t e case for a standardi6ed mar,eting strategy0 because Citronel would probably need to customi6e its mar,eting to compete wit )arious brands in different countries. C oice E would mean t at t e company could probably afford a customi6ed mar,eting approac 0 so it does not strengt en t e case for a standardi6ed mar,eting approac . !age Ref: ## $ifficulty: $ifficult AAC%&: Reflecti)e t in,ing s,ills 'b(ecti)e: *.4 +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Critical T in,ing
$errido is an American firm t at as produced se)eral successful animated TM series in t e United %tates. 8t is considering contracting wit one or more international companies as a way to mar,et its products o)erseas. 1-2) An executi)e at $errido suggests t at a contractual relations ip will pro)ide t e company wit a fair amount of control o)er ow t e foreign partner mar,ets $erridoDs product. 5 ic of t e following0 if true0 would strengt en t is caseH A) Contractual relations ips typically include limits and stipulations on t e foreign partner. &) Contractual relations ips typically limit t e responsibility of t e originating firm. C) Contractual relations ips can be complicated by international law. $) 3oreign companies often a)e considerable familiarity wit American culture. E) 3oreign companies usually expect to be gi)en latitude wit ow t ey mar,et U.%..made products. Answer: A Explanation: A) +imits and stipulations on t e foreign partner would gi)e t e originating firm0 $errido in t is case0 a certain amount of control o)er t e contracteeDs business operations. C oices & and E would suggest t at a contractual relations ip would limit $erridoDs control. C oices C and $ are not rele)ant to t e amount of control t at t e company would a)e o)er ow t e foreign partner would mar,et $erridoDs product. !age Ref: ## $ifficulty: $ifficult AAC%&: Reflecti)e t in,ing s,ills 'b(ecti)e: *.4 +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Critical T in,ing
1-1) 'ne of $erridoDs sales executi)es suggests t at $erridoDs particular type of business enables a contractual relations ip to be an especially suitable way for t e company to mar,et its products internationally. 5 ic of t e following0 if true0 would strengt en t is positionH A) Contractual relations ips allow an originating firm to ma,e t e most use of local talent. &) Contractual relations ips cannot capture unpredictable future contingencies. C) Contractual relations ips are often cross.culturally contentious. $) $errido would not be underta,ing large.scale production or s ipping operations. E) $errido is a large company wit ample staff and resources at its disposal. Answer: $ Explanation: $) Unli,e producers of consumer products0 $errido would not be s ipping large amounts of products o)erseas0 but rat er licensing intellectual property for mar,eting by ot er companies o)erseas. C oice A does not describe a situation t at would be particularly ad)antageous to $errido0 since t e company would rely mostly on its existing talent and production. T e potential for uncertainty 7C oice &) and infig ting 7C oice C) are factors t at would wea,en t e case for t e company entering into a contractual relations ip wit a foreign company. C oice E mig t strengt en t e case t at t e company could andle international mar,eting of its products by itself instead of entering into a contractual relations ip. !age Ref: ## $ifficulty: Aoderate AAC%&: Reflecti)e t in,ing s,ills 'b(ecti)e: *.4 +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Critical T in,ing
1--) $erridoDs mar,eting director t in,s t at t e company s ould craft a contractual agreement as an initial entry strategy0 because t e company mig t want to c oose a more ad)anced entry strategy later. 5 ic of t e following0 if true0 would strengt en t is positionH A) 3oreign partners usually want to enter into contractual agreements wit American companies for a long.term period. &) A contractual agreement s ould spell out as many expectations of t e foreign partner as possible. C) Contractual agreements s ould be entered into only if t e foreign partner is extremely reliable. $) Contractual agreements re;uire appro)al by legal specialists from all countries in)ol)ed. E) Contractual agreements allow a company to pro)ide for open0 flexible terms of operation. Answer: E Explanation: E) 8f t e company can enter t e international mar,et wit flexible terms0 t at will allow it to c ange to a more ad)anced strategy later. 8f foreign companies usually want to enter into long.term contracts 7C oice A)0 t e mar,eting director faces difficulties getting t em to sign a s ort.term one t at allows $errido t e flexibility to pursue a new strategy later. C oices &0 C0 and $ stipulate items of caution for a company entering into a contractual agreement wit a foreign partner0 but t ey do not strengt en t e case for a s ort.term contractual agreement. !age Ref: ## $ifficulty: Aoderate AAC%&: Reflecti)e t in,ing s,ills 'b(ecti)e: *.4 +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Critical T in,ing
1-4) Anot er mar,eting executi)e points out t at a contractual agreement will allow $errido to blend in wit t e local mar,et0 and goes on to argue t at t is will be ad)antageous to t e company. 5 ic of t e following0 if true0 would strengt en t is argumentH A) Consumers in many countries a)e limited resources wit w ic t ey can purc ase entertainment. &) Consumers in many countries are wary of w at t ey percei)e as American cultural imperialism. C) Contractual agreements usually re;uire t e foreign partner to display t e originating firmDs brand as prominently as possible. $) Contractual agreements initiated by an American company often ma,e for contentious relations ips wit t e foreign partner. E) 3oreign consumers briefly resist cultural imperialism but t en ;uic,ly embrace American cultural products. Answer: & Explanation: &) 8f consumers are wary of cultural imperialism by American companies mar,eting entertainment in t eir country0 it will be an ad)antage for $errido to blend in wit t e local mar,et. &y t e same to,en0 if t eir wariness is s ort.li)ed 7C oice E) and followed up by a buying fren6y0 t e argument for blending in is wea,ened. C oice A: 8t wonDt matter if $errido blends in or not if nobody can afford to buy its products. C oice C: 8f t is is t e case $errido will a)e a ard time blending in. C oice $: 8t wonDt be ad)antageous to $errido to contract wit a foreign company if t e result is endless arguments and lawsuits between t e partners. !age Ref: ## $ifficulty: $ifficult AAC%&: Reflecti)e t in,ing s,ills 'b(ecti)e: *.4 +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Critical T in,ing
1-*) $erridoDs c ief financial officer t in,s t at t e company s ould enter into a contractual agreement because it will gi)e $errido an immediate and steady stream of re)enue. 5 ic of t e following0 if true0 would strengt en t is argumentH A) Contractual relations ips wit foreign companies usually in)ol)e many rounds of negotiations. &) Contractual relations ips are less expensi)e to enter into t an direct in)estment. C) Compared to direct in)estment0 contractual relations ips ma,e business less sub(ect to unpredictable c anges. $) Compared to ot er forms of entry into international mar,ets0 contractual relations ips tend to be ris,y. E) 3oreign companies in contractual relations ips may be a)e unpredictably at future points in time. Answer: C Explanation: C) 8f business is less sub(ect to unpredictable c anges0 t is ma,es it more li,ely to be a source of a predictable stream of re)enue o)er a long period. C oice A: 8f negotiations are typically lengt y0 t e re)enue may be steady but wonDt be immediate. C oice & strengt ens t e case t at contractual relations ips in)ol)e less expense in t e s ort term0 but not t at t ey gi)e a company a steady stream of re)enue for t e long term. C oices $ and E wea,en t e case t at a contractual relations ip would gi)e $errido a predictable source of re)enue o)er time. !age Ref: ## $ifficulty: Aoderate AAC%&: Reflecti)e t in,ing s,ills 'b(ecti)e: *.4 +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Critical T in,ing
+ite 3oods is a producer of brea,fast cereals suc as oatmeal and cornfla,es0 and its products can be found in nearly all supermar,ets across t e United %tates. +ite 3oods now as its sig ts set on international s ores0 specifically t e large C inese consumer mar,et. Company executi)es are currently debating t e optimal route for t e firm to enter t e mar,et. 1-1) 5 ic of t e following0 if true0 would strengt en t e argument for )enturing into t e C inese mar,etH A) T e affluent C inese middle class is large and is ;uic, to adopt western lifestyles and product preferences. &) @rowt in t e United %tates cereal mar,et continues to be strong. C) T e C inese fixed exc ange rate regime may c ange0 w ic could mean a stronger Kuan t at would affect C inese exports. $) C inese food preferences are )ery slow to e)ol)e. E) C ina recently signed a free.trade agreement wit t e Association of %out east Asian Bations 7A%EAB). Answer: A Explanation: A) Entering a foreign mar,et entails ris,0 so first a company wants to determine if t ere will be a demand for its products in t e new mar,et. C oice A tells us t at members of t e C inese middle class are ;uic, to try and use American products. T is bodes well for +ite 3oods0 suggesting t at an appealing mar,et exists and t at few product and mar,eting adaptations will be needed. C oice & suggests t at +ite 3oods as room to grow in t e United %tates0 w ic ma,es t e ris, of entering t e C inese mar,et less attracti)e. C oice C tal,s about C inese exports0 w ic are not under consideration in t is scenario. +ite 3oods would be concerned wit economic c anges affecting imports into C ina. C oice $ wea,ens t e argument for entering t e C inese mar,et0 as it suggests t at t e C inese would be slow to adapt t e product. C oice E isnDt clearly rele)ant to +ite 3oodsD decision to enter t e C inese mar,et. 8t would only be rele)ant if +ite 3oods ad an operation based in t e A%EAB region0 information t at we donDt a)e. !age Ref: 124 $ifficulty: $ifficult AAC%&: Reflecti)e t in,ing s,ills 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Critical T in,ing
1->) 5 ic of t e following0 if true0 would most wea,en t e argument for )enturing into t e C inese mar,etH A) T e C inese go)ernment pro)ides subsidies and tax incenti)es to local manufacturers w o export t eir products. &) T e C inese brea,fast menu is typically made up of steamed doug 0 noodles0 fruits0 and eggs. C) 8t would ta,e a few mont s to establis operations in C ina because of regulatory urdles. $) %e)eral international companies a)e failed in C ina because of t eir inability to understand local re;uirements. E) !enetrating t e C inese mar,et re;uires extensi)e use of local employees. Answer: & Explanation: &) Are t e brea,fast products mar,eted by +ite 3oods a logical fit for t e C inese mar,etH 5e ,now t at +ite 3oods ma,es oatmeal and corn fla,es0 but C oice & indicates t at t ese types of cereals are not part of t e typical C inese brea,fast. T is definitely ma,es entering t e C inese mar,et ris,ier for +ite 3oods. C oice A isnDt rele)ant to +ite 3oodsD situationE it only applies to local C inese manufacturers w o export0 a description t at doesnDt currently fit +ite 3oods. C oice C describes a )ery reasonable time period to wait to clear regulatory urdles. 8n and of itself0 t is is not a reason to mo)e away from international in)estments. C oice $ suggests t at it is difficult to understand t e local C inese re;uirements. :owe)er0 t is does not mean t at +ite 3oods will follow t e failures of ot er companies. 8n fact0 +ite 3oods can possibly learn some lessons from t ese failures. C oice E isnDt necessarily a disad)antage. +ocal employees may be muc more producti)e or less expensi)e t an +ite 3oodsD American employees. !age Ref: 124 $ifficulty: $ifficult AAC%&: Reflecti)e t in,ing s,ills 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Critical T in,ing
1-?) 5 ic of t e following0 if true0 would strengt en t e argument for exporting t e companyDs products to C inaH A) +ite 3oods as a large budget set aside for foreign direct in)estments. &) +ite 3oods wants to a)e strict control o)er its international operations. C) +ite 3oods as to modify its product line to suit C inese tastes and preferences. $) +ite 3oodsD products do not a)e a F ealt yF reputation in t e United %tates. E) +ite 3oods as significant excess capacity t at results in production o)erruns. Answer: E Explanation: E) Companies may passi)ely export t eir surpluses from time to time0 or t ey may ma,e an acti)e commitment to expand exports to a particular mar,et. 8n t is case0 t e excess capacity acts as a trigger for +ite 3oods. C oice E strengt ens t e argument. C oices A and & fa)or foreign direct in)estment o)er exporting. C oices C and $ do not tell us anyt ing about exporting or any ot er form of mar,et entry. T e need for product modifications is expected and doesnDt fa)or exporting o)er ot er types of mar,et entry. T e un ealt y reputation of t e cereals in t e United %tates would a)e little bearing on ow t ose products are percei)ed in C ina. !age Ref: 124 $ifficulty: $ifficult AAC%&: Reflecti)e t in,ing s,ills 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Critical T in,ing
1-") 5 ic of t e following0 if true0 would wea,en t e argument for exporting t e companyDs products to C inaH A) +ite 3oods will a)e to ma,e significant in)estments if it decides to enter a (oint )enture in C ina. &) +ite 3oods would a)e to ire sales personnel from t e ost country if it opts for direct export. C) +ite 3oods is a ris,.a)erse organi6ation. $) +ite 3oods lac,s C inese mar,et expertise and as not found reliable intermediaries wit expertise in t e mar,et. E) +ite 3oods will export its products as is0 as more and more C inese consumers are adopting brea,fast cereals. Answer: $ Explanation: $) T oug exporting in)ol)es less ris, t an ot er met ods of mar,et entry0 an exporting company needs to a)e some ,nowledge of t e mar,et or to wor, wit a partner w o ,nows t e mar,et. C oice $ suggests t at +ite 3oods ,nows little about t e C inese mar,et and asnDt found a ,nowledgeable partner t e company can trust. As suc 0 C oice $ dampens t e attracti)eness of exporting. C oice A is not rele)ant to exporting. C oice & merely states a fact about exporting. 8t neit er strengt ens nor wea,ens t e case for exporting. C oice C actually supports mar,et entry t roug exporting0 as exporting presents t e lowest le)el of ris, for a company. C oice E does not ing to wea,en t e argument. Rat er0 it supports a pus to enter t e C inese mar,et. !age Ref: 124 $ifficulty: $ifficult AAC%&: Reflecti)e t in,ing s,ills 'b(ecti)e: *.* +earning 'utcome: Explain t e benefits and c allenges of engaging in international business %,ill: Critical T in,ing

Chapter 4 The Global Context of Business: Business Essentials, 9e (Ebert/Griffin)

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Business Essentials, 9e (Ebert/Griffin) Chapter 4 The Global Context of Business 1) An import is a product made or grown abroad but sold

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