Chapter 3-Doing Business in Global Markets

A company owned in a foreign country by another company, called the parent company.

foreign subsidiary

____________ advantage is a monopoly that exists when a country is the only source of an item, the only producer of an item, or the most efficient producer of an item while ___________ advantage is the basis of most international trade, when a country specializes in products that it can supply more efficiently or at a lower cost than it can produce other items.

Absolute, comparative

L'Oreal sells its beauty products to men in China, what business strategy are they using? Licensing Exporting Franchising Contract manufacturing Joint venture/strategic alliance Foreign direct investment

Exporting

The buying of permanent property and businesses in foreign nations.

Foreign direct investment

The definition _____________ of states: a partnership in which two or more companies, often from different countries, join to undertake a major project.

Joint venture

Campbell's soup company and Nakano Vinegar form Campbell Nakano, what kind of business strategy is this? Licensing Exporting Franchising Contract manufacturing Joint venture/strategic alliance Foreign direct investment

Joint venture/strategic alliance

Anheuser-Busch will contract with a local firm to brew and market the Anheuser-Busch product Budweiser, what kind of business start are they using? Licensing Exporting Franchising Contract manufacturing Joint venture/strategic alliance Foreign direct investment

Licensing

The definition of contract manufacturing states: a foreign country's production of private-label goods to which a domestic company then attaches its brand name or trademark; contract manufacturing is a part of the broad category of _____________

Outsourcing

_________________ is the process whereby a firm contracts with other companies, often in other countries, to do some or all of its functions.

Outsourcing

_____________ tariffs are designed to raise money for the government.

Revenue

True or false: A strategic alliance is a long-term partnership between two or more companies established to help'each company build competitive market advantages.

True

The development of a common market changes the way goods and services are traded within that market. Which of the following are examples of such changes? a. Common external tariff b. Lowering of tariffs by 38 percent worldwide c. Also correct v Coordinated laws to facilitate exchange among members d. No internal tariffs

a. Common external tariff c. Also correct v Coordinated laws to facilitate exchange among members d. No internal tariffs

What was the primary benefit for the European Union (EU) of adopting the euro in 1999? a. Eliminating currency conversion. b. EU businesses made billions on currency conversions c. Decreases in the cost of printing/minting of currency d. The euro is more difficult to counterfeit

a. Eliminating currency conversions conversions

Which of the following are functions of export trading (or export-management companies) that assist companies engaged in indirect exporting? Select all that apply. a. Match buyers and sellers b. Provide manufacturing support c. Help with foreign customs offices d. Assisting in establishing trading relationships

a. Match buyers and sellers c. Help with foreign customs offices d. Assistance in establishing trading relationships

Which of the following are common markets? Check all that apply. a. Mercosur b. ASEAN c. EU d. WTO e. FTAA

a. Mercosur b. ASEAN c. EU

Which of the following countries are under a U.S. embargo? a. Mexico b. Germany c. Cuba d. France

c. Cuba

Shared technology and risk, shared marketing and management expertise, and entry into markets where foreign companies are often not allowed are all benefits of _____________ ____________ ______________.

international joint ventures

One drawback of an international ________ ____________ is that one partner can learn the other's technology and business practices and then use what it has learned to its own advantage.

joint venture

Of all the strategies for reaching global markets, ______________ offers the least amount of commitment, control, risk, and profit potential.

licensing

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

A company situated in a foreign country that is owned by a parent company located in a different country, is a foreign _______________.

subsidiary

A(n) ____________ is a tax imposed on imports. (one blank/one word)

tariff

Which of the following are functions of export assistance centers (EACS)? Select all that apply. a. Scheduling assistance b. Trade-finance support c. Hands-on exporting assistance d. Packaging assistance

a. Trade-finance support Hands-on b. exporting assistance

Which of the following are situations where working with an export-trading company, or export- management company, would be helpful? a. When the culture and governmental policies of the foreign market are unfamiliar b. When a business requires trade-finance support from the government c. c. When a business is involved in a country with a similar language and culture d. When exports exceed imports

a. When the culture and governmental policies of the foreign market are unfamiliar

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. a. owner; owned b. home; host c. rich; poor d. host; home

b. home; host

A(n) _________________ corporation is an organization that manufactures and markets its products in many different countries and has managers and stockholders from many countries. a. world-wide b. multinational c. cross-cultural d. secular

b. multinational

A common market, also called a trading bloc, is a regional group of countries with: Select all that apply a. no laws to facilitate trade b. no internal tariffs c. a common external tariff d. a restriction of trade among members

b. no internal tariffs c. a common external tariff

The firms often better prepared to leap into global markets and react quickly to opportunities are: a. large businesses b. small and medium businesses c. average size d. businesses large and medium

b. small and medium businesses

Globalization is real and will likely cause economic competition to: a. weaken b. remain the same c. intensify d. become less important

c. intensify

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

Which of the following are possible ways offshore outsourcing could have a negative impact on the home country? Selective all that apply. a. Permanent loss of jobs b. Reduced product quality c. Allows companies to create efficiencies d. Wages fall

a. Permanent loss of jobs b. Reduced product quality d. Wages fall

Primitive transportation and storage systems that make local distribution ineffective if not impossible, the lack of clean water, and the lack of effective sewer systems are all examples of what type of barrier? a. Physical and environmental b. Legal and regulatory c. Economic and financial d. Sociocultural

a. Physical and environmental

Which of the following are negative effects associated with the establishment of NAFTA? Select all that spply a. Safety conditions for workers in Mexico continue to be poor b. U.S. manufacturing jobs were lost c. Annual per capita income in Mexico is considerably ahead of the United States, causing illegal immigration. d. The value of U.S. exports to NAFTA partners has increased.

a. Safety conditions for workers in Mexico continue to be poor b. U.S. manufacturing jobs were lost

Kelly wants to expand her small gardening supply business. She analyzed the amount of risk, commitment, control, and potential profit for each. She decided that franchising was the right__________ for her company. a. strategy b. goal c. product d. business

a. Strategy

Which of the following are changes induced by NAFTA? Check all that apply a. Also correct V The value of U.S. exports to NAFTA partners has increased. b. The trade volume among the United States, Canada, and Mexico more than tripled. c. More restrictions on trade between countries in North and South America d. The United States lost an estimated 300,000 jobs to Mexico.

a. The value of U.S. exports to NAFTA partners has increased. b. The trade volume among the United States, Canada, and Mexico more than tripled.

A limit on the quantity of products in a certain category that a nation can import is called a(n) a. import quota b. embargo c. import tariff d. protective tariff

a. import quota

Which of the following are considered to be positive effects of NAFTA? Check all that apply a. Trade volume among the three partners has expanded significantly. b. Ilegal immigration has been resolved soeet c. The value of U.S. exports to NAFTA partners has increased. d. Transfer of some 500,000 U.S. jobs to Mexico.

a.Trade volume among the three partners has expanded significantly. soeet c. The value of U.S. exports to NAFTA partners has increased.

Why is the "second wave" of offshore outsourcing proving to be more disruptive to the U.S. job market? a. There are not very many manufacturing jobs in the United States b. Because of advantageous economic conditions c. More low-wage jobs are being offshored d. Because it affects skilled, educated, middle-income workers

d. Because it affects skilled, educated, middle-income workers

Today, economists suggest, we are moving into the "second wave" of offshore outsourcing, shifting from product assembly to: a. research and development b. management c. marketing d. design and architecture

d. design and architecture

Investment funds controlled by governments holding large stakes in foreign companies are called: a. international joint ventures b. indirect foreign investments c. government contract manufacturers d. sovereign wealth funds

d. sovereign wealth funds

A foreign subsidiary operates like a normal domestic firm, with production, distribution, promotion, pricing, and other business functions under the control of the: a. foreign country's government b. parent country's government c. parent company's management d. subsidiary's management

d. subsidiary's management

The ______________ Economic Community was established in 1967 in Thailand to create economic cooperation among its five original members (Indonesia, Malaysia, Philippines, Singapore, and

ASEAN

__________ __________ theory states that a country should sell to other countries those products it produces most efficiently and import those it doesn't.

Comparative advantage

Flextronics of Singapore making a cell phone for US Cellular, what kind of business strategy are they using. Licensing Exporting Franchising Contract manufacturing Joint venture/strategic alliance Foreign direct investment

Contract Manufacturing

True or false: The buying of permanent property and businesses in foreign nations is called a strategic alliance.

False (foreign direct investment FDI)

Bank of America purchased office space in India for its online customer service representives, what kind of business strategy are they using? Licensing Exporting Franchising Contract manufacturing Joint venture/strategic alliance Foreign direct investment

Foreign Direct Investment

KFC in Hong Kong. What kind of business strategy is this? Licensing Exporting Franchising Contract manufacturing Joint venture/strategic alliance Foreign direct investment

Franchising

Which of the following are benefits associated with offshore outsourcing? Select all that apply. a. Companies can create efficiencies. b. Companies can focus on business areas where they can expand and grow. c. Companies pay all of their taxes abroad. d. A decrease in the quality of products.

a. Companies can create efficiencies. b. Companies can focus on business areas where they can expand and grow.

Shared technology and risk, marketing and management expertise, and entry into markets where foreign companies are often not allowed unless goods are produced locally are all benefits of: a. Joint ventures b. Contract manufacturing c. Strategic alliances d. Foreign direct investment

a. Joint ventures

What size of businesses do export assistance centers work with? a. Small- and medium-sized b. Only small-sized c. Large-sized d. Medium- and large-sized

a. Small- and medium-sized

The benefits associated with strategic alliances is that they provide broad access to: a. markets b. shared managerial expertise c. capital d. technical expertise

a. markets c. capital d. technical expertise

A major issue in the United States has been the shift to primarily low-wage global markets. This is called: a. offshore outsourcing b. contract manufacturing c. trade protectionism d. licensing

a. offshore outsourcing

The benefits of creating a joint venture when doing business internationally include: Select all that apply a. shared technology b. access to restricted local markets c. a permanent commitment to many projects d. shared marketing expertise

a. shared technology b. access to restricted local markets d. shared marketing expertise

A long-term partnership between two or more companies established the purpose of building a competitive market advantage is called a: a. strategic alliance b. foreign subsidiary c. contract manufacmuring d. joint venture

a. strategic alliance

Which of the following are functions of export trading (or export-management companies) that assist companies engaged in indirect exporting? Select all that apply. a. Provide manufacturing support b. Help with foreign customs offices c. c. Match buyers and sellers d. Assistance in establishing trading relationships

b. Help with foreign customs offices c. Match buyers and sellers d. Assistance in establishing trading relationships

Which of the following are original objectives of the North American Free Trade Agreement (NAFTA)? Check all that apply. a. Transfer and create jobs in Mexico and Canada b. Increase investment opportunities c. Eliminate trade barriers and facilitate cross-border movement of goods and services d. Promote conditions of fair competition

b. Increase investment opportunities c. Eliminate trade barriers and facilitate cross-border movement of goods and services d. Promote conditions of fair competition

Which of the following are ways to experience other cultures that can help one to think globally? Select all that apply a. Viewing local news b. Learning about foreign cultures c. Studying foreign languages d. Traveling abroad

b. Learning about foreign cultures c. Stufying foreign languages d. Traveling abroad

Which of the following are considered licensors' benefits of licensing? Select all that apply a. Licensors must grant licensing rights for extended periods of time. b. Licensors spend little or no money to produce products. c. The foreign licensee purchases items (start-up and/or supplies) from the licensor. d. Gaining new revenues

b. Licensors spend little or no money to produce products. c. The foreign licensee purchases items (start-up and/or supplies) from the licensor. d. Gaining new revenues

Which of the following are important reasons to do business globally? Select all that apply a. The U.S. economy cannot support a business for very long b. There are many potential customers in other countries c. There are more people and countries in the world markets d. Competition in the U.S. is decreasing

b. There are many potential customers in other countries c. There are more people and countries in the world markets

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 in a given territory in a specified manner. a. licensing b. franchising c. exporting d. contract manufacturing

b. franchising

The possibility of having all foreign assets expropriated is the major shortcoming of what strategy? a. Strategic alliances b. International joint ventures c. Foreign direct d. investment Exporting

c. Foreign direct investing

Which strategy for reaching global markets provides for the lowest risk? a. Foreign direct investment b. Franchising c. Licensing d. Exporting

c. Licensing

What agreement created a free-trade area among the United States, Canada, and Mexico? a. European Union (EU) b. General Agreement on Tariffs and Trade (GATT) c. North American Free Trade Agreement (NAFTA)

c. North American Free Trade Agreement (NAFTA)

What is the primary function of protective tariffs? a. To limit the number of products in a certain category that a nation can import b. To ban the import of certain goods and services c. To raise the price of imported products so that domestic goods are more competitively priced

c. To raise the price of imported products so that domestic goods are more competitively priced

Shared technology and risk, marketing and management expertise, and entry into markets where foreign companies are often not allowed unless goods are produced locally are all benefits of: a. Strategic alliances b. Contract manufacturing c. Foreign direct investment d. Joint ventures

d. Joint ventures

Common markets are also referred to as what? a. Joint ventures b. Strategic alliances c. Trading partners d. Trading blocs

d. Trading blocs

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: the World Trade Organization (WTO) trade protectionism the General Agreement on Tariffs and Trade (GATT) a common market

d. a common market

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. a. exclusive b. competitive c. comparative d. absolute

d. absolute

A small business owner wants to increase sales and cut production costs, and decides that importing materials and exporting his product are two ways to accomplish this. This small business owner is engaging in: a. licensing b. local expansion c. business operations reduction d. franchising e. global trade

e. global trade

The __________ _____________ is the value of one nation's currency relative to currencies of other countries.

exchange rate

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: a contractual agreement whereby someone with a good idea for a business sells others the rights to use a business name and sell a product or service in a given territory in a specified manner.

franchising

A foreign subsidiary is a foreign company owned in a foreign country by a(n) ______________ company.

parent