Chapter 3 Doing Business in a Global Markets
Which of the following are important reasons to do business globally?
- U.S consumers seek the best value whether in the U.S or other countries -there are many potential customers in other countries
In what way will globalization impact U.S businesses?
-Loss of jobs in manufacturing -increased competition
An embargo:
-bans all trade with a particular country _bans all trade of a certain product
The ___ Economic Community was established in 1967 in Thailand to create economic cooperation among its five original members (Indonesia, Malaysia, Philippines, Singapore, and Thailand)
ASEAN
Which of the following are common markets
ASEAN EU Mercosur
The definition of ___ advantage is the advantage that exists when a country has a monopoly on producing or is able to produce something more efficiently than all other countries.
Absolute
When entering foreign markets, what do successful businesspeople do to ensure a product will be successful
Adapt products to fit the wants and needs of foreign customers
Which of the following are negative effects associated with the establishment of NAFTA
An estimated 680,000 U.S. manufacturing jobs were lost Safety conditions for workers in Mexico continue to be poor
Which of the following are functions of export trading (or export-management companies) that assist companies engaged in indirect exporting
Assistance in establishing trading relationships Match buyers and sellers Help with foreign customs office
The total value of a nation's exports compared to its imports measured over a particular period is the definition of:
Balance of trade
What are the two indicators nations rely on to measure global trade
Balance of trade and balance of payments
Why is the "second wave" of offshore outsourcing proving to be more disruptive to the U.S. job market
Because it affects skilled, educated, middle-income workers
Importing is:
Buying products from another country.
Which of the following are ways the World Trade Organization (WTO) promotes global business?
By mediating trade disputes among nations
The North American Free Trade Agreement (NAFTA) created a free-trade area among the United States, ____ and _____
Canada Mexico
Which country does the United States have the highest trade deficit with
China
No internal tariff is a benefit by members of_____ markets, or "trading blocs"
Common
A(n)____ ____ (also called a trading bloc) is a regional group of countries with a common external tariff, and coordinated laws to facilitate exchange among members.
Common market
Which of the following are benefits associated with offshore outsourcing?
Companies can focus on business areas where they can expand and grow Companies can create efficiencies
China has excellent manufacturing capabilities, whereas Russia has excellent natural gas production capabilities. Therefore, china manufactures products for Russia and Russia produces natural gas for china. This is an example of:
Comparative advantage
The United States is efficient at producing software and engineering services, but cannot produce clothes and electronics as efficiently as other nations. As such, the United States sells software and engineering services to other countries and buys clothes and electronics. This is an example of:
Comparative advantage
The United States is efficient at producing software and engineering services; however, it cannot produce textiles as efficiently as other nations. Therefore, the United States sells software and engineering services and buys clothing from other countries. U.S specialization software and engineering services is an example of what?
Comparative advantage
The definition of ____ ____ States: a foreign company produces private-label goods to which a domestic company then attaches its own brand name or trademark
Contract manufacturing
The Foreign ___ Practices Act of 1978 prohibits "questionable" or "dubious" payments to foreign officials to secure business contracts
Corrupt
Which of the following countries are under a U.S. embargo
Cuba
Workers in Latin America believe managers have to make decisions about the well-being of their workers. When a new American manager tried to "empower" his workers, he was perceived as incompetent. What is the most likely cause behind the manager's failure
Cultural differences
____ lowers the value of a nation's currency relative to others
Devaluation
Which of the following are effects of trade protectionism
Domestic producers will have a better opportunity to survive Preserving local jobs Limitation of imported goods and services
Selling products in a foreign country at a lower price than what is charged in the producing country is called
Dumping
The United States has had a trade ____ since 1975, when it first started importing more products than it exported.
Déficit
What was the primary benefit for the European Union (EU) of adopting the euro in 1999
Eliminating currency conversions
He definition of ____ States: an attitude that your own culture is superior to other cultures.
Ethnocentricity
Darla's bicycle shop in the United States is experiencing a slowdown in its growth. She knows the global market offers many opportunities. Which of the following are ways Darla's business could engage in the global market?
Exports bicycles to retailers in Australia Create on online sales site that ships globally Import materials from Germany
True or false: A trade deficit occurs when the value of a country's exports is greater than its imports
False
Rank the strategies for reaching global markets according to the level of risk and commitment.
Foreign Direct Investment International joint ventures and strategic alliances Contract manufacturing Franchising Exporting Licensing
Which of the following are considered licensors' benefits of licensing
Gaining new revenues Licensors spend little or no money to produce products The foreign licensee purchases items (start-up and/or supplies)from the licensor
In 1948, government leader from 23 nations formed a global forum for reducing trade restrictions on goods, services, ideas, and cultural programs. What was the title of this forum
General Agreement of Tariffs and Trade (GATT)
Which of the following countries are members of the Central Free Trade Agreement (CAFTA)?
Honduras Nicaragua Guatemala Costa Rica
Which of the following are risks of licensing
If the product experiences remarkable growth, significant profits will go to the licensee Trade expertise is vulnerable to being stolen
The definition of _____ _____ States: a limit on the number of products in certain categories that a nation can import.
Import quotas
Which of the following is true regarding licensing?
It carries the lowest risk of all the strategies for reaching global markets
When two or more companies, often from different countries, join together to take on a major project it is called:
Joint venture
Which of the following are considered benefits of contract manufacturing?
Labor costs in foreign market may be lower than the labor costs in the firm's host country It can be used to temporarily meet an unexpected increase in orders It enables producer or business to experiment in a new market without incurring heavy start-up costs
Which of the following are considered major hurdles to successful global trade?
Legal and regulatory forces Economic and financial forces
Which of the following are likely benefits of exporting ?
Less intense then domestic competition Increased sales and revenues Increased number of potential customers
what is the global strategy in which a firm allows a foreign company to produce its product in exchange for a fee?
Licensing
Problems created by differences between countries' antitrust rules, labor laws, patents, copyrights, taxes, product liability, and child labor laws relate to which forces in the global business environment?
Légal and regulatory forces
Which of these countries are among the United States' top trading partners
Mexico Canada China
Many times free trade has a(n) _____ impact on U.S domestic jobs, particularly manufacturing jobs.
Negative
The balance of _____ is the difference between the flow of money into and out of a country.
Payments
Primitive transportation and storage systems that make local distribution ineffective if not imposible,the lack of clean water, and the lack of effective sewer systems are all examples of what type of barrier?
Physical and environmental
Distribution in many developing countries is difficult because of the lack of reliable transportation infrastructure due to natural disasters. This is an example of what type of forces affecting global trade?
Physical and environmental forces
What is an example of a non-tariff barrier
Restrictive standards
Russia is producing more natural gas than it needs. Japan lacks natural gas resources, but it produces more cars and computers than its residents need. Therefore:
Russia and Japan can mutually benefit from trading with each other
Which of the following is an effective way to deal with foreign laws and regulations
Seek the cooperation of local business people
Which of the following are disadvantages of international joint ventures?
Shared technology may become obsolete The joint venture may become too large and inflexible
What size of businesses do export assistance centers work with
Small- and medium-sized
A(n) ______ _____ is a long-term partnership between two or more companies established to help each company build competitive market advantages, although they do not share costs, profit, or management.
Strategic alliance
A(n) ____ is a tax imposed on imports.(one blank,one word)
Tariff
Which of the following are considered licensors' benefits of licensing?
The foreign licensee purchases items (start-up and/ or supplies) from the licensor Gaining new revenues Licensors spend little or no money to produce products
Which of the following are changes induced by NAFTA?
The trade volume among the United States, Canada, and Mexico more than tripled The value of U.S exports to NAFTA partners has increased
How is it possible for the United States to exhibit a trade deficit, while being one of the largest exporting nations in the world
The value of the goods the United States imports is higher than the value of the goods it exports
Which of the following are reasons why some governments establish trade protectionism
To avoid foreign competition To save local jobs To allow domestic producers to survive and grow To guard against dumping
The use of government regulations to limit the import of goods and services is called:
Trade protectionism
Which of the following are functions of export assistance centers (EACs)?
Trade-finance support Hands- on exporting assistance
Common markets are also referred to as what?
Trading blocs
Which of the following was not an original objective of the North American Free Trade Agreement (NAFTA)?
Transfer and create jobs in Mexico and Canada
Why is it important to analyze the local technological and physical forces in the business environment before doing global business in a given market
Transportation systems may be affected by weather Communication systems may be primitive
Which of the following are ways to experience other cultures that can help one to thing globally?
Traveling abroad Studying foreign languages Learning about foreign cultures
True or false: A strategic alliance to a long-term partnership between two or more companies established to help each company built competitive market advantages
True
Which of the following are possible ways offshore outsourcing could have a negative impact on the home country
Wages fall Permanent loss of jobs Reduced product quality
Which of the following are situations where working with export-trading company, or export-management company, would be helpful
When the culture and governmental policies of the foreign market are unfamiliar
The ____ organization was established to mediate trade disputes among nations, is headquartered in Geneva, and is an independent entity of 159 member nations whose purpose is to oversee cross-boarder trade issues and global business practices
World Trade
The ___ is the organization that replaced the General Agreement on Tariffs and Trade (GATT), and was assigned the duty to mediate trade disputes among nations
World Trade Organization
The organization established in 1986 by the Uruguay round of the GATT, whose purpose is to mediate trade disputes among nations is called:
World trade organization (WTO)
A common market (also called a trading bloc)is a regional group of countries with:
a common external tariff
A regional group of countries with a common external tariff, no internal tariffs, and coordinated laws to facilitate exchange among members is the definition of:
a common market
When a country has a monopoly on producing a specific product or is able to produce it more efficiently then all other countries it is said to have a(n) ___advantage
absolute
The benefits of creating a joint venture when doing business internationally include:
access to restricted local markets shared marketing expertise shared technology
The definition of ___ states: the difference between money coming into a country (from exports) and money leaving the country (from imports) plus money flows coming into or leaving a country from other factors such as tourism, foreign aid, military expenditures, and foreign investment
balance of payments
Global trade is measured using two key indicators known as the:
balance of trade balance of payments
An embargo:
bans all trade of a certain product bans all trade with a particular country
When franchising internationally, deciding not to adapt a product or service to local conditions can lead to:
business failure
The development of a(n) ___ market changes the way goods and services are traded within that market by establishing a similar external tariff, no internal tariffs, and coordinated laws to facilitate exchange among members
common
A(n) ___ (also called a trading bloc) is a regional group of countries with a common external tariff, no internal tariffs, and coordinated laws to facilitate exchange among members
common market
Globalization is real and therefore the economic ___ promises to intensify
competition
U.S business will experience increased ___ in the future due to the effects of globalization
competition
U.S. business will experience increased ___ in the future due to the effects of globalization
competition
When a company wants to enter the global market without incurring heavy start-up costs, creating a successful brand and penetrating a new market with low risk, they are engaging in:
contract manufacturing
A complex form of bartering in which several countries may trade goods for goods and services for services without the use of currencies is:
countertrading
____is a complex form of bartering in which several countries may be involved, each trading goods for goods or services for services
countertrading
When a company adapts their product in order to meet the beliefs and value of a different country they are considerate of the country's
culture
If the United States government were to devalue the dollar, it would ___ the cost of American goods abroad
decrease
By buying more than it has sold, making the value of its exports less than its imports, the United States faces a trade ___
deficit
Today, economist suggest, we are moving into the "second wave" of offshore sourcing, shifting from product assembly to"
design and architecture
___ lowers the value of a nation's currency relative to others
devaluation
Export Assistance Centers work small and medium-sized businesses who are hesitant to do:di
direct exporting
The definition of ___ states: selling products in a foreign country at lower prices than those charged in the producing country
dumping
U.S. laws against ___ are specific. To keep domestic products to include 10 percent for overhead costs and 8 percent for profit
dumping
When engaging in global trade, economically depressed nations may not be able to afford to buy popular products in large quantities. Therefore, it important for a company to understand a country's:
economic and financial forces
Comparative advantage theory states that a country should export goods it produces most efficiently and import those it doesn't. Absolute advantage occurs when a country is able to produce a specific product more ___ than any other country
efficiently
When conducting global business, it is important to analyze the local physical environmental to:
ensure local distribution is possible
U.S businesspeople are often accused of ___, an attitude that your own culture is superior to other cultures
ethnocentricity
In addition to goods and services, countries also ___ art, cultural events, medical advances, space exploration, and labor
exchange
The ___ is the value of one nation's currency relative to the currencies of other countries
exchange rate
A business can legally compete in global markets by using which of the following strategies:
exporting licensing franchising
The balance of trade is the total value of a nation's ___ compared to its __ over a particular period of time
exports imports
Contract manufacturing is a type of outsourcing when a ___ company produces private-label goods which a ___ company then markets under its own brand name
foreign domestic
The definition of ____ states: the buying of permanent properties or businesses in foreign nations
foreign direct investment
The possibility of having all foreign assets expropriated is the major shortcoming of what strategy
foreign direct investment
The definition of ____ states: a contractual agreement whereby someone with a good idea for a business sells others the rights to use the business name and sell a product or service into a given territory in a specific manner
franchising
___ trade is the movement of goods and services among nations without political or economic barriers
free
Although the United States has a market of over 317 million people, there are over 7.1 billion potential customers in the ___ market
global
Companies such as United Parcel Service and Walmart have experienced much success by expanding into the ___ market
global
While there may be 300 million people in the United States, there are over 7 billion people in the global market. Therefore, global businesses value employees who:
have experience in other countries
Choosing a strategy that involves high risk generally has the potential for _ profits
high
A subsidiary must observe the legal requirements of both the country where the parent firm is located, called the _country, and the foreign country where the subsidiary is located, called the _ country
home host
A(n) ____ is a limit on the number of products in certain categories that a nation can import and is considered a form of trade protectionism
import quota
The United States is the largest:
importer in the world
Buying products from another country is the definition of ___
importing
___ is buying products from another country while __ is selling products to another country
importing exporting
The United States has had a trade deficit since 1975 because:
it bough more goods from other nations than it has sold
Shared technology and risk, shared marketing and management expertise, and entry into markets where foreign companies are often not allowed are all benefits or ___
joint ventrues
The definition of ___ states: a partnership in which two or more companies, often from different countries, join to undertake a major project
joint venture
Legal and regulatory forces can create problems in the global market because:
laws and regulations vary greatly between countries
The definition of __ states: a global strategy in which a firm allows a foreign company to produce its product in exchange for a fee.
licensing
Which strategies should a business use when it wants to experiment with a new market without incurring heavy start-up costs
licensing exporting contract manufacturing
Dumping involves selling products in a foreign country at ___ prices than those charged in the producing country
lower
Free trade allows labor to be outsourced to other markets where it may be less expensive. This negative consequence of free trade most commonly created a loss of domestic:
manufacturing jobs
Unlike joint ventures, strategic alliances share:
markets expertise
The benefits associated with strategic alliances is that they provide broad access to:
markets technical expertise capital
A(n) ___ corporation is an organization that manufactures and markets products in many different countries and has managers and stockholder from many countries
multinational
Benefits of being a member of a common market, or "trading block"include:
no internal tariffs
The shift of jobs from developed economies to low-wage global markets, called ___ outsourcing, has become a major issue
offshore
Contract manufacturing falls under the broad category of:
outsourcing
The definition of ____ states: the process whereby one firm contracts with other companies, often in different countries, to do some or all of its functions.
outsourcing
The outcome of FDI (foreign direct investment) is a foreign subsidiary, a company located in a foreign country that is owned by another company, called the ___ company
parent
A foreign subsidiary is a company owned in a foreign country by another company called the:
parent company
Some developing countries have primitive transportation and storage system, in addition to unclean water and poor sewer system. That is why it is important to analyze the __ and __ forces before entering the market
physical environmental
Trade ___ is the use of government regulations to limit the import of goods and services such as import tariffs and quotas
protectionism
When the retail price of imported products is increased for the purpose of making domestic goods more competitively prices it is called a(n)
protective tariff
Which of the following are considered to be sociocultural forces that affect global trade:
religion social structures values
___ tariffs are designed to raise money for the government
revenue
exporting is:
selling products to another country
The firms often better prepared to leap into global markets and react quickly to opportunities are:
small and median businesses
Investment funds controlled by governments holding large stakes in foreign companies are called:
sovereign wealth funds
When choosing a(n) ___ for reaching global markets, it is important to analyze amount of commitment, risk, and profit potential
strategy
A foreign subsidiary operates like a normal domestic firm, with production, distribution, promotion, pricing, and other business functions under the control of the:
subsidiary's management
The definition of a(n) ___ is a tax imposed on imports
tariff
The countries represented by the acronym BRIC are important because
they are emerging countries that will be among the wealthiest by 2030
Which of the following are functions of the World Trade Organization?
to mediate trade disputes among nations to oversee cross-border trade issues
The definition of a ____ states: an unfavorable balance of trade, which occurs when the value of a country's exports is less than its imports
trade deficit
When the value of a country's imports is more than its exports, the country exhibits a(n):
trade deficit
When the value of a country's exports exceeds that of its imports, the country exhibits a(n):
trade surplus
Culture can include which of the following:
values and attitudes religion language
