BUSA 3000 EXAM 1

What is a Small and medium-sized enterprise (SME)?

Typically, companies with 500 or fewer employees, comprising over 90% of all firms in most countries. SMEs increasingly engage in international business.

What is a Collaborative venture?

is a form of cooperation between two or more firms.

What are the 3 motivations for FDI?

(1) Primary Activity: Set up manufacturing or assembly facilities; (2) Primary Activity: Open a sales/ representative office, or other facility to conduct marketing or distribution activities; or (3) Support Activity: Establish a regional headquarters- a new legal business entity, recognized by the host country and subject to its regulations.

What is the Factors Proportion Theory?

(1) Products differ in the types and quantities of factors (that is, labor, natural resources, and capital) that are required for their production; and (2) Countries differ in the type and quantity of production factors that they possess.

What are the rationales of using a value chain?

-cost savings -increase efficiency, productivity, and flexibility of value chain activities -access customers, inputs, labor, or technology -benefit from foreign partner capabilities

What are the stages of the Internationalization Process Model?

1) domestic focus phase, 2)pre-export stage, 3) experimental involvement 4) active involvement 5) committed involvement

What are the 3 steps for a Pyramid of Ethical Behavior?

1. Complying with laws and regulations 2. Ethical Behavior 3. CSR (Corporate Social Responsibility)

What are the 3 types of cultures in business?

1. National 2. Professional 3. Corporate

What are the stages of the Value Chain?

1. Research and Development 2. Sourcing 3. Manufacturing 4. Marketing 5. Distribution 6. Sales and Service

An individual who believes in ethical normativism is most likely to view ethical behavioral standards as ________. A. universal B. constantly changing C. dependent on societal norms D. superior to religious beliefs

A

Businesses that directly initiate international business transactions are known as _____. A. focal firms B. fiscal enterprises C. fiduciary trusts D. business affiliates

A

In polychronic cultures, ________. A. members are easily distracted and are inclined to do many tasks at once B. people view time as linear and punctuality as a virtue C. managers make commitments, set deadlines, and adhere to a strict schedule of meetings and activities D. managers and investors are impatient and want quick returns

A

The third phase of globalization was triggered by ______. A. the end of World War II B. the invention of electricity C. the end of World War I D. the Great Depression

A

Which of the following acts makes it illegal for U.S. firms to offer bribes to foreign parties in order to secure or retain business? A. the U.S. Foreign Corrupt Practices Act B. the Robinson-Patman Act C. the U.S. Securities Exchange Act D. the Sherman Antitrust Act

A

Which of the following best characterizes the development of international business? A. It has existed in some form for centuries. B. It first started in Europe. C. It developed after the year 2000. D. Its development has slowed in recent years.

A

_____ are the most transformative technology in developing economies. A. Mobile phones B. Televisions C. Intranets D. Emails

A

_____ are ways of behaving and conducting oneself in public and business situations. A. Manners and customs B. Creative expressions C. Values and attitudes D. Symbolic productions

A

_____ refers to the transfer of assets to another country or the acquisition of assets in that country. A. International investment B. International trade C. Importing D. Exporting

A

______ is the most common primary language in the world. A. Chinese B. Arabic C. Spanish D. English

A

______ is the total value of products and services produced in a country over the course of a year. A. GDP B. CAD C. FDI D. PPP

A

______ means meeting humanity's needs without harming the ability of future generations to meet their needs. A. Sustainability B. Corporate social responsibility C. Ethical behavior D. Casuistry

A

______ refers to the system of procedures and processes by which corporations are managed, directed, and controlled. A. Corporate governance B. Deceptive marketing C. Global sourcing D. Corporate social responsibility

A

_______ refers to the superior features of a country that provide unique benefits in global competition, typically derived from either natural endowments or deliberate national policies. A. Comparative advantage B. Competitive advantage C. Absolute advantage D. Industrial cluster

A

Define Mercantilism:

A belief popular in the 16th century that national prosperity results from maximizing exports and minimizing imports.

What is the Absolute Advantage Principle?

A country should produce only those products in which it has absolute advantage or can produce using fewer resources than another country.

What is Polychronic?

A flexible, non-linear orientation to time in which the individual takes a long-term perspective; time is elastic, long delays are tolerated before taking action. Punctuality is relatively unimportant. Relationships are valued. Examples: Africa, Latin America, Asia.

What is Geocentric orientation?

A global mindset in which the manager is able to understand a business or market without regard to national boundaries.

What is a Multinational enterprise (MNE)?

A large company with substantial resources that performs various business activities through a network of subsidiaries and affiliates located in multiple countries.

What is Polycentric orientation?

A mindset in which the manager develops a greater affinity for the country in which he or she works than for the home country.

What is Monochronic?

A rigid orientation to time in which the individual is focused on schedules, punctuality, time as a resource, time is linear, "time is money". For example, people in the U.S. are hurried and impatient.

What is a Born Global Firm?

A young, entrepreneurial SME that undertakes substantial international business at or near its founding.

What is the Competitive Advantage of Nations?

According to Michael Porter, in his 1980 book, The Competitive Advantage of Nations, the competitive advantage of a nation is dependent upon the collective competitive advantages of its firms. ■ Over time, this relationship is reciprocal: the competitive advantages held by the nation tend to drive the development of new firms and industries with these same competitive advantages.

What is an Idiom?

An expression whose symbolic meaning differs from its literal meaning; You can't understand it simply by knowing what the individual words mean.

4. Which of the following would NOT be considered an example of foreign direct investment (FDI)? A. cross-border purchase of a textile plant B. cross-border purchase of stocks C. purchase of capital assets of a foreign company D. purchase of foreign land for business operations

B

According to relativists ____________. A. a passive acceptance of others' values is unethical B. ethical truths differ from group to group C. firms and individuals should seek to uphold ethical behavioral standards consistently around the world D. ethical truths are absolute

B

According to the internationalization process model, a firm advances to the ______ stage by initiating limited international activity, typically in the form of basic exporting. A. active involvement B. experimental involvement C. pre-export D. domestic focus

B

Acculturation is defined as the process of _____. A. segregating ethnic minorities by distinct groups B. adjusting and adapting to a culture other than one's own C. learning the behavioral patterns and rules of one's own society D. forcing minority cultures to adopt the values of the dominant culture

B

Each of the following has contributed to the rapid growth of trade among nations EXCEPT _____. A. the growth of emerging market countries B. the increase in trade barriers C. advances in information technology D. the liberalization of markets

B

In his International Product Life Cycle (IPLC) Theory, Raymond Vernon observed that each product and its manufacturing technologies go through three stages of evolution: introduction, maturity, and _______. A. decline B. standardization C. growth D. diversification

B

International business is defined as the performance of _______ activities by firms across national borders. A. marketing and fiduciary B. trade and investment C. finance and operational D. accounting and auditing

B

Low-context cultures tend to ______. A. emphasize nonverbal messages B. conduct negotiations as efficiently as possible C. view communication as a means to promote smooth, harmonious relationships D. prefer an indirect and polite face-saving style of communication

B

Prejudices in a culture _______. A. represent the symbolic, material, and creative productions unique to a society B. are rigidly held attitudes, usually unfavorable, and usually aimed at particular groups of people C. guide the development of our attitudes and preferences D. represent a person's judgment about what is important and what is not

B

The _____ phase of globalization began around 1900 and was associated with the rise of electricity and steel production. A. first B. second C. third D. fourth

B

Which of the following comparative advantages is acquired over time? A. labor B. innovative capacity C. arable land D. petroleum reserves

B

Which of the following religions has the largest number of adherents? A. Islam B. Christianity C. Hinduism D. Judaism

B

_____ are moral principles and values that govern that behavior of people, firms, and governments, regarding right and wrong. A. Attitudes B. Ethics C. Laws D. Biases

B

______ represents the apex of the pyramid of ethical behavior. A. Ethical behavior B. Corporate social responsibility C. Complying with laws and regulations D. Guarding against corruption

B

Define Country Risk:

Basically anything related to LAWS or GOVERNMENT

What is the first phase of Globalization?

Began about 1830 and peaked around 1880. International business became widespread due to the growth of railroads, efficient ocean transport, and the rise of large manufacturing and trading firms. Invention of the telegraph and telephone in the late 1800s facilitated information flows between and within nations and greatly aided early efforts to manage companies' supply chains.

What is the second phase of Globalization?

Began in 1900-1930. The trigger was the rise of electricity and steel production. There was an emergence of MNE.

What is the third phase of Globalization?

Began in 1948-1970s. Began right after WW2. Triggered by the formation of GATT.

What is the fourth phase of Globalization?

Began in early 1980s. Enormous growth with cross-border trade and investment. Triggered by growth in technology and communication.

According to Porter's competitive advantage of nations, ________ refer to the nature of home-market demand for specific products and services. A. firm strategy, structure, and rivalry B. factor conditions C. demand conditions D. demand liabilities

C

Competitive advantage refers to the ________. A. belief that national prosperity is the result of a positive balance of trade, achieved by maximizing exports and minimizing imports B. superior features of a country that provide unique benefits in global competition, typically derived from either natural endowments or deliberate national policies C. distinctive assets or competencies of a firm that are difficult for competitors to imitate and are typically derived from specific knowledge, capabilities, skills or superior strategies D. relative absence of restrictions to the flow of goods and services between nations

C

Fluctuating exchange rates are an example of which of the following? A. country risk B. political risk C. currency risk D. cross-cultural risk

C

In recent years, business executives and scholars have used ______ to refer to the advantages possessed by nations and individual firms in international trade and investment. A. comparative advantage B. country-specific advantage C. competitive advantage D. cost advantage

C

In the ______ phase of international product life cycle theory, knowledge about how to produce the product is widespread and manufacturing becomes straightforward. A. temporary monopoly B. introduction C. standardization D. maturity

C

Over time, the GATT evolved into the _____. A. World Bank B. International Monetary Fund C. World Trade Organization D. World Intellectual Property Organization

C

Socialization is defined as _____. A. the process of segregating people into different racial groups in a society B. the process of adjusting and adapting to a culture other than one's own C. the process of learning the rules and behavioral patterns appropriate to one's given society D. a situation or event in which a cultural misunderstanding puts some human value at stake

C

Technological leapfrogging is defined as ______. A. adopting new technology late in the hype cycle B. adopting new technology as soon as it is released C. bypassing certain stages of technology to come up with a radical innovation when upgrading to new products D. boosting demand artificially by postponing the sale of new technology in the market

C

Which of the following is NOT an example of a cross-cultural risk factor? A. negotiation patterns B. decision-making styles C. costs of production D. ethical practices

C

Which of the following is a driver of globalization? A. greater emphasis on proactive internationalization B. internationalization of firm's value chain C. integration of world financial markets D. globalization of services

C

Which of the following is characteristic of globalization of markets? A. lack of skilled labor B. conservatism C. declining trade barriers D. diminishing gap between the rich and the poor

C

_______ refers to the values, beliefs, customs, arts, and other products of human thought and work that characterize the people of a given society. A. Ethnicity B. Heritage C. Culture D. Race

C

________ represents the base of the pyramid of ethical behavior. A. Ethical behavior B. Corporate social responsibility C. Complying with laws and regulations D. Guarding against corruption

C

Which two cultures are embedded into the other?

Corporate and professional cultures are embedded in national cultures.

Define Cross-Cultural risk:

Cultural differences, negotiation patterns, decision-making styles, ethnical practices

Define Currency Risk:

Currency exposure, asset valuation, foreign taxation

Culture is not _____. A. about beliefs and values of society B. relative C. a collective phenomenon D. inherited

D

The first phase of globalization was characterized by the ________. A. rise of steel production B. risk of SMEs C. dominance of MNEs in the agricultural industry D. growth of railroads

D

The fourth phase of globalization is characterized by _______. A. the rise of railroads and ocean transport B. the reduction of barriers to trade by Western industrialized countries C. the initiation of the Marshall Plan to reconstruct Europe D. the enormous growth of cross-border trade and investment

D

Which of the following is a societal consequence of market globalization? A. greater emphasis on proactive internationalization B. internationalization of firm's value chain C. new risks and instant rivalry from foreign competitors D. offshoring and the flight of jobs

D

Which of the following refers to an important monopolistic advantage for firms? A. imitable skills B. unskilled labor C. favorable climate D. proprietary technology

D

Which of the following types of risk is also known as political risk? A. currency risk B. cross-cultural risk C. commercial risk D. country risk

D

What is the Dunning's Eclectic Paradigm?

Framework for determining the extent and pattern of global value-chain operations. According to this paradigm, MNE activity leverages both the competitive advantages of firms and the comparative advantages of countries (using the pre-Porter terminology).

What does Globalization allow firms to do?

Globalization allows the firm to internationalize its value chain, leading to various advantages.

What is the International Product Life Cycle Theory?

In a 1966 article published in the Quarterly Journal of Economics, "International Investment and International Trade in the Product Cycle", Harvard Professor Raymond Vernon described the evolutionary process that occurs in the development and diffusion of products to global markets. ■ Vernon built upon Ricardo's comparative advantage, a static framework, which argues that the highest added value dictates labor specialization, and integrated this with the product life cycle [introduction, growth, maturity, decline] to explain dynamic trade patterns.

What is IB?

International business refers to cross-border trade and investment activities by firms.

What is the Comparative Advantage Principle?

It can be beneficial for two countries to trade without barriers as long as one is more efficient at producing goods or services needed by the other. What matters is not the absolute cost of production, but rather the relative efficiency with which a country can produce goods or services needed by the other.

What is a Non-Governmental Organization? NGO

Many of these non-profit organizations conduct cross-border activities. They pursue special causes and serve as advocates for social issues, education, politics, and research.

What is the Globalization of Markets?

Ongoing economic integration and growing interdependency of countries worldwide.

What is CSR?

Operating a business to meet or exceed the ethical, legal, commercial, and public expectations of customers, shareholders, employees, and communities.

What is the National Industry Policy?

Perhaps the greatest contribution of Michael Porter's work has been to underscore the notion that national competitive advantage does not derive entirely from the store of natural resources that each country holds. Moreover, inherited national factor endowments are relatively less important than in the past.

Why do firms participate in IB?

SEEK opportunities for growth through market diversification. e.g., Harley-Davidson, IKEA, H&M. EARN higher margins and profits. Often, foreign markets are more profitable. GAIN new ideas about products, services, and business methods. e.g., GM refined its knowledge for making small, fuel-efficient cars in Europe.

What is the difference between IB and Domestic business?

The four risks: Currency, Cross-Cultural, Country, and Commercial

Define Value Chain:

The sequence of value-adding activities performed by the firm in the process of developing, producing, and marketing a product or a service.

Monopolistic Advantage Theory:

This theory suggests that firms that use FDI as an internationalization strategy tend to control certain resources and capabilities that give them a degree of monopoly power relative to foreign competitors.

What is Ethnocentric orientation?

Using our own culture as the standard for judging other cultures.

What did GATT later turn into?

WTO= World Trade Organization

Define Commercial Risk:

Weak partner, timing of entry, operational problems, competitive intensity, poor execution of strategy

What is the New Trade Theory-Paul Krugman?

argues that increasing returns to scale, especially economies of scale, is a key factor for superior international performance, and would explain why trade grew fastest between industrial countries that held similar factors of production- something that previous theories failed to explain.

What is International Investment? (FDI)

assets to another country or the acquisition of assets in that country. Also known as 'foreign direct investment , we will focus on this type of investment.

What are High-context Cultures?

emphasize nonverbal or indirect language. Communication aims to promote smooth, harmonious relationships. Such cultures prefer a polite, "face-saving" style that emphasizes a mutual sense of care and respect for others. Care is taken not to embarrass or offend others.

What is Porter's Diamond model?

explains competitive advantage at both the firm and national levels as stemming from the presence and quality in the country of the following four major elements.

What are Stereotypes?

generalizations about a group of people that may or may not be factual, often overlooking real, deeper differences

What does the influence of professional and corporate culture tend to do?

grow as people are socialized into a profession and workplace.

What is Intellectual Property?

ideas/works created by individuals/ firms that are proprietary, intangible assets including: ◘ Discoveries and inventions ◘ Artistic, musical, and literary works ◘ Words, phrases, symbols, and designs

What does Firm Strategy, Structure, and Rivalry refer to?

refer to the nature of domestic rivalry, and conditions in a nation that determine how firms are created, organized, and managed. The presence of strong competitors in a nation helps create and maintain national competitive advantage.

What are Cultural Metaphors?

refers to a distinctive tradition or institution strongly associated with a society; a guide to deciphering attitudes, values, and behaviors.

Define Globalization:

refers to the interconnectedness of national economies and the growing interdependence of buyers, producers, suppliers, and governments around the world.

What is the Perception of Space?

reflects each culture's orientation about personal space and conversational distance.

What are Low-context Cultures?

rely on explicit explanations, with emphasis on spoken words. Such cultures emphasize clear, efficient, logical delivery of verbal messages. Communication is direct. Agreements are concluded with specific, legal contracts.

What does the Factors Conditions describe?

the nation's position in factors of production, such as labor, natural resources, capital, technology, entrepreneurship, and know-how. Consistent with the Factor Proportions Theory, every nation has more of certain factor endowments and less of others -- a situation that determines the nature of national competitive advantage.

What do Related and Supporting Industries refer to?

the presence of clusters of suppliers, competitors, and complementary firms that excel in particular industries. Operating within a mass of related and supporting industries provides advantages through information and knowledge synergies, economies of scale and scope, and access to appropriate or superior inputs.

What does the Internationalization Theory explain?

the process by which firms acquire and retain one or more value-chain activities inside the firm, thus minimizing the disadvantages of dealing with external partners, reducing the risk of partners becoming competitors and allowing for greater control over foreign operations and their proprietary knowledge.

What does the Internationalization Process Model explain?

the process of internationalization as a gradual process that takes place in incremental stages over a relatively long period of time, which is attributed to uncertainty and inadequate information about foreign markets and lack of experience with cross-border transactions.

What does the Demand Conditions describe?

to the nature of home-market demand for specific products and services. The strength and sophistication of buyer demand facilitates the development of competitive advantages in particular industries.

What are the 5 drivers of Market Globalization?

• Worldwide reduction of barriers to trade and investment • Transition to market-based economies and adoption of free trade in China, former Soviet Union countries, and elsewhere • Industrialization, economic development, and modernization • Integration of world financial markets • Advances in technology

What is Barter Trading?

trading without the use of currency. This was used before currency was a thing.

What are the Societal Consequences of Market Globalization?

• Contagion: Rapid spread of financial or monetary crises from one country to another • Loss of national sovereignty • Offshoring and the flight of jobs • Effect on the poor • Effect on the natural environment • Effect on national culture

What are the Firm-level Consequences of Market Globalization: Internationalization of the Firm's Value Chain?

• Countless new business opportunities for internationalizing firms • New risks and intense rivalry from foreign competitors • More demanding buyers who source from suppliers worldwide • Greater emphasis on proactive internationalization • Internationalization of firm's value chain

What are the 6 dimensions of Market Globalization?

• Integration and interdependence of national economies • Rise of regional economic integration blocs • Growth of global investment and financial flows • Convergence of buyer lifestyles and preferences • Globalization of production activities • Globalization of services

What are the two types Ventures?

◘ Equity-based joint ventures that often lead to the formation of a new legal entity; and ◘ Project-based strategic alliances that do not require equity commitment from the partners but simply a willingness to cooperate in R&D, manufacturing, design, or any other value adding activity