Global Dimensions of Business - Exam 2

Which of the following statements about the choice of distribution strategy is true?

The longer a channel, the greater the aggregate markup, and the higher the price that consumers are charged for the final product.

Which of the following is true of the international strategy?

The strategy is not viable in the long-run.

Which of the following statements is true of strategic alliances?

They limit the entry of firms into foreign markets.

As transportation costs or trade barriers increase, exporting becomes unprofitable, compared to FDI and licensing.

True

The objective of the government in a command economy is to not encourage free and fair competition between private producers.

True

Which of the following is not a response to the Islam prohibition against the payment of receipt of interest?

U.S. banks are effectively closed out of Islamic markets.

___ approaches to ethics hold that the moral worth of actions or practices is determined by their consequences.

Utilitarian

The ___ is primarily responsible for policing the world trading system and making sure nation-states adhere to the rules laid down in trade treaties signed by member states.

World Trade Organization

Lenovo's ThinkPad laptop computers is designed in the United States, the case, keyboard, and hard drive are made in Thailand; the display screen and memory in South Korea; the built-in wireless card in Malaysia; and the microprocessor in the United States. In each case, these components are manufactured and sourced from the optimal location given current factor costs. In this example, Lenovo has:

a global web of value creation activities.

The "Swiss Made" label has leveraged several watch-making companies (for example, TAG Heuer) for decades now. This is an example of a ____ effect.

country of origin

It has been suggested that learning effects are important only during the start-up period of a new process and that they cease after two or three years. Any decline in the experience curve after such a point is due to:

economies of scale.

Many firms pursuing a(n) ____ pricing strategy on an international scale will price low worldwide in attempting to build global sales volume as rapidly as possible, even if this means taking large losses initially.

experience curve

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

externalities

When a firm has a strategic goal of pursuing a low-cost strategy on a worldwide scale, the firm should follow a(n) _____ strategy.

global standardization

A common law system is different from a civil law system because:

in a common law system a judge has the power to interpret the law, while in a civil law system a judge has the power only to apply the law.

The purchasing power parity adjustment (PPP):

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

A caste system differs from a class system because:

it is not possible for an individual to change his or her caste, while a class system allows people to change their class through individual achievement.

There is low interdependence, performance ambiguity, and costs of control in firms pursuing a(n):

localization strategy.

A theocratic law system is one in which the law is based on:

religious teachings.

A country with high car ownership, a large number of households with refrigerators, and a large number of two-income families tend to have:

retail concentration.

If a ____ change in a price produces a ____ change in demand, then demand is said to be elastic.

small; large

It has been observed in the aircraft industry that, each time cumulative output of airframes was doubled, unit costs typically declined to 80 percent of their previous level. This is an example of:

the experience curve.

Which of the following is an example of ethnocentrism?

An American manager criticizes the cultural practices of Saudi Arabia, when he is sent there on business, because it differs from his own cultural norms.

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

Collectivism

Under the ___, cases are judged with reference to 3 characteristics: tradition, precedent, and custom.

Common law system

The ___ believed that socialism could be achieved only through violent revolution and totalitarian dictatorship.

Communists

Child labor is permitted and widely employed in Country X. A multinational company entering Country X decides to employ minors in its subsidiary, even though it is against the multinational's home-country ethics. Which of the following approaches to business ethics would justify the actions of the multinational company?

Cultural relativism

Which of the following statements is true?

Direct selling may be the only way to reach consumers in poor nations with low literacy levels.

Which of the following is not one of the three measures used to calculate the Human Development Index developed by the UN based on work of Amartya Sen?

Quality of air and water

Which of the following is an argument that supports global advertising?

Standardized advertising lowers the costs of value creation by spreading the fixed costs of developing the advertisements over many countries.

The Friedman doctrine, cultural relativism, the righteous moralist, and the naïve immoralist are approaches that have some value but are unsatisfactory in important ways. Companies do adopt these approaches, but they are generally known as ___.

Straw men

Globalization is criticized because it increases the power of ___.

Supranational organizations over nation-states

Violation of property rights done though legal mechanisms such as levying excessive taxation and requiring expensive licenses or permits from property holders is called ___.

Public action

Which of the following is not considered one of the first-mover advantages?

Be established before rules and regulations change so the firm can be exempt from the changes

The belief in the superiority of one's own culture is known as

Ethnocentrism

A market with a large number of consumers, with high living standards will have a relatively small market when measured in economic terms.

False

A wholly owned subsidiary limits a firm's control over operations in different countries.

False

An American firm that sets up production units in China is accused of releasing untreated chemical waste into water bodies. The manager of the firm defends the firm stating that, factories in China set up by French and British firms also release untreated chemical waste into water bodies. In this example, the manager is using the utilitarian approach to business ethics.

False

An economy in which the interaction of supply and demand determines the quantity in which goods and services are produced is called a closed market economy.

False

In the high-technology "knowledge" economy of the twenty-first century, intellectual property is becoming less important than creating open access to information.

False

Large strategic commitments increase strategic flexibility.

False

The Friedman doctrine is the belief that ethics are nothing more than a reflection of culture and therefore, a firm should adopt the ethics of the culture in which it is operating.

False

The amount of value a firm creates is measured by the difference between its costs of production and the price that it charges for its products.

False

The mudarabah contract is the most widely used Islamic banking method, because it is the easiest to implement.

False

The rate of new-product development seems to be lesser in countries where more money is spent on basic and applied research and development.

False

Which of the following statements about fragmented retail systems is true?

Fragmented retail systems tend to promote the growth of wholesalers to serve retailers.

In which of the following situations would FDI improve the current account of the host country's balance of payments?

If the FDI is a substitute for imports of goods or services

Which of the following statements is true about a product divisional structure?

In a product divisional structure, each product division is set up as a self-contained, largely autonomous entity with its own functions.

In which of the following organizational structures are the domestic operations and foreign operations isolated from each other leading to coordination problems?

International division structure

Which of the following is an argument favoring decentralization?

It permits greater flexibility.

When contemplating FDI, why do firms apparently prefer to acquire existing assets rather than undertake greenfield investments?

Mergers and acquisitions are quicker to execute than greenfield investments.

In a ___ economy, certain sectors of the economy are left to private ownership and free market mechanisms while other sectors have significant state ownership and government planning.

Mixed

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

Multipoint competition

Which of the following factors hinders globalization of consumer goods market?

National differences in tastes and preferences

The Research and Development division of a company has recently designed a new coffee vending machine that is likely to sell very well in the market. It is compact, user-friendly, and provides unprecedented efficiency in terms of cost per cup. Consequently, the company fears that its competitors would soon mimic the design of their product and to protect its product, it is now seeking a ___ for the same.

Patent

Interdependent political, economic, and legal systems of a country make up its:

Political economy

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

the manner in which the alliance is managed

When a resource, held in common by all but owned by no one, is overused by individuals, resulting in its degradation, it is a phenomenon known as:

the tragedy of the commons.

Culture and national competitive advantage are closely related. An important implication for international business is that:

value systems affect the costs of doing business.

Contracts drafted under a common law framework tend to be ___.

very detailed with all contingencies spelled out.