INTERNATIONAL BUSINESS
Which of the following terms is used to refer to a focal firm's partial ownership of an existing firm?
equity participation
________ refers to a government measure intended to manage or prevent the export of certain products or trade with certain countries.
export control
A firm most likely enters the home market of a foreign competitor in order to ________.
force the competitor to expend resources to defend its market
A formal arrangement between two or more countries to reduce or eliminate tariffs is known as a(n) ________.
free trade agreement
NAFTA is an example of which of the following levels of regional integration?
free trade area
Which of the following is another term for importing?
global sourcing
Each of the following represents a factor of production EXCEPT ________.
government regulations
A firm that builds a new manufacturing facility in a foreign market is participating in a(n)
greenfield investment
The first phase of globalization was characterized by the ________.
growth of railroads
A firm that owns the activities performed in a single stage of its value chain is demonstrating
horizontal integration
Governments impose offensive barriers to ________.
increase employment
Collaborative ventures benefit SMEs by providing them with ________.
increased amount of capital
Which of the following contributes LEAST to increasing a company's profit margins?
increasing global competition
As market globalization intensifies, ________.
individual firms respond to the challenges and new advantages that it brings
Which of the following is a disadvantage of equity joint ventures?
termination difficulties
Convergence of consumer preferences has led to an enhanced emphasis on standardization which implies that ________.
the raw materials, parts, and components sourced by professional buyers are very similar in design and structure
A value chain is ________.
the sequence of value-adding activities performed by a firm in the course of developing, producing, marketing, and servicing a product
International business is defined as the performance of ________ activities by firms across national borders.
trade and investment
The most direct implication of market globalization is on the firm's ________.
value chain
An arrangement whereby the firm owns, or seeks to own, multiple stages of a value chain for producing, selling, and delivering a product or service is termed as ________.
vertical integration
Which of the following best explains why export growth has outpaced the growth of domestic production during the last few decades?
Advanced economies now source many of their consumable products from low-cost manufacturing nations.
Which of the following is a trend seen in the modern international economy?
Firms from both advanced and emerging economies employ FDI.
While the number of containers transported internationally has decreased, the cost of transportation has increased dramatically.
false
Which of the following industries considers proximity to customers especially important in the decision to enter a foreign market?
fashion
Businesses that directly initiate international business transactions are known as ________.
focal firms
The ability of a nation to govern its own affairs is known as ________.
sovereignty
New markets, new resources, and improved efficiency are the three main motives for firms to enter foreign markets through FDI.
true
Over the last few decades, export activity by nations has grown more quickly than has domestic production.
true
Regional integration greatly increases the scale of the marketplace for firms inside the economic bloc.
true
SMEs usually choose exporting as their main strategy for entering foreign markets. Answer:
true
Subsidies may allow a manufacturer to practice dumping-that is, to charge an unusually low price for exported products.
true
Technological advances have helped make internationalization affordable for all sizes of firms.
true
The 2011 "Arab Spring" in the Middle East was facilitated in large part by social media.
true
The GATT created a forum for resolving trade disputes.
true
The existence of a substantial market motivates many firms to produce offerings at or near customer locations.
true
The initial phase of globalization was triggered by the introduction of the railroads and ocean transport.
true
The two primary types of international investment are portfolio investment and foreign direct investment.
true
Which of the following statements is true about value chain and international business?
Exporting firms perform most of the upstream value chain activities in the home market.
The strategic purpose behind firms competing with rivals in their own market is to force them to expend resources and thus, defend the firm's own market.
false
Which of the following statements most likely to counters Juan's argument concerning the homogenization of national cultures?
As globalization standardizes superficial aspects of life across national cultures, people resist these forces by insisting on their national identity and taking steps to protect it
The representative from Business C is most likely from ________.
Brazil
________ are checkpoints at the ports of entry in each country where government officials inspect imported products and levy tariffs.
Customs
Rina is most likely to counter Juan's claim regarding environmental effects by pointing out which of the following?
Environmental destruction tends to diminish in the long run, as economies develop.
________ marked the end of the 50-year Cold War and smoothed the integration of former command economies into the global economy.
Free-market reforms in China and the former Soviet Union
Which of the following was the first major effort to systematically reduce trade barriers worldwide?
GATT
________ is the total value of products and services produced in a country over the course of a year.
GDP
Which of the following statements is true about the firm-level consequences of market globalization?
Globalization drives firms to relocate key value-adding activities to the most advantageous locations around the world.
Which of the following statements is true about protection of an infant industry?
Governments can impose temporary trade barriers on foreign imports to ensure that young firms gain a large share of the domestic market.
________ refers to the transfer of assets to another country or the acquisition of assets in that country.
International investment
Which of the following benefits of IT is specific to smaller firms?
It allows firms to design and produce customized products they can target to narrow, cross- national market niches.
Which of the following is true with regard to protectionism?
It can trigger retaliation from foreign governments, which reduces sales prospects for exports.
Which of the following best characterizes the development of international business?
It has existed in some form for centuries.
The third phase of globalization was triggered by the development of personal computers, the Internet, and Web browsers.
false
Which of the following statements is true of technological advances?
It provides a means for globalization to happen.
Which of the following reflects the major contribution of GATT to globalization?
It reduced barriers to international trade and investment.
Early multinationals from the third phase of globalization originated in ________.
Japan
The representative from Business B is most likely from ________.
Japan
The Coca-Cola Company is an example of ________.
NGO
To minimize globalization's harm and reap its benefits, governments should strive for nationalized economic regimes.
false
Which of the following is an example of offshoring?
The IT support services for customers of Mayfair Inc., a U.S. based consumer electronics manufacturer, are based in India.
How does the acquisition of a foreign company most likely benefit a focal firm in the foreign market?
The focal firm can extend its market reach through readily available distribution networks.
Which of the following best explains why some service industry firms most likely enter foreign markets through FDI?
The service offered by the firm requires direct contact with customers.
________ is at odds with free trade, the unrestricted flow of products, services, and capital across national borders.
Trade openness
The representative from Business A is most likely from ________.
United Kingdom
Which of the following most likely supports Rina's argument over Juan's concerning wages and working conditions in developing countries?
Vietnam has experienced a five-fold increase in wages as a result of the growth of the footwear industry there.
Stella manages the production team at Camden Inc., a manufacturer of heavy industry machinery in the United States. She needs to decide if her firm should export finished products or manufacture abroad. Which of the following would most likely help her evaluate the best alternative in this instance?
What are the costs of transporting raw materials, components, and finished products?
Over time, the GATT evolved into the ________.
World Trade Organization
Which of the following is an example of a market-seeking motive for FDI?
a firm follows its key customers abroad
Which of the following is an example of a new global challenger?
a firm from Russia that is rapidly growing in the communications industry
Which of the following is a characteristic of project-based, non-equity ventures?
a specific agenda and timeframe
________ refers to the sequence of value-adding activities performed by the firm in the course of developing, producing, marketing, and servicing a product.
a value chain
Which of the following is the most likely motive behind firms in the mining industry wanting to enter new foreign markets?
access to natural resources
A firm that develops the capacity to sell its products by investing in marketing and selling operations is ________.
acquiring downstream value-chain facilities
The purchase of an existing company or facility is known as a(n) ________.
acquisition
Which of the following must be considered in selecting foreign direct investment locations?
all of the above
Which of the following best exemplifies corporate social responsibility?
an automotive battery firm offering free technical training to students of a deprived community
Firms that are more successful at global competition display each of the following qualities EXCEPT ________.
approaching internationalization from a reactive standpoint
Nontariff trade barriers have increased in popularity partly because they ________.
are easier to conceal from the WTO
A firm that pursues a collaborative venture to access raw materials is demonstrating a(n) ________ motive.
asset-seeking
Which of the following represents an infrastructural factor that firms must consider when selecting an FDI location?
availability and quality of local manufacturing
Which of the following is subject to importing and exporting?
both finished products and intermediate goods
Companies strive to drive down prices ________, among other strategies.
by standardizing what they sell
Technological leapfrogging is defined as ________.
bypassing certain stages of technology to come up with a radical innovation when upgrading to new products
A(n) ________ is a project-based, usually nonequity venture initiated by multiple partners to fulfill a large-scale project.
consortium
________ refers to the tendency of a financial or monetary crisis in one country to spread rapidly to other countries, due to the ongoing integration of national economies.
contagion
Vertical integration is an arrangement in which the firm owns, or seeks to own, the activities performed in a single stage of its value chain.
false
The globalization of finance ________.
contributes to firms' abilities to develop and operate world-scale production and marketing
Which of the following is NOT an example of a cross-cultural risk factor?
costs of production
Which of the following types of risk is also known as political risk?
country risk
Governments have facilitated economic integration by ________.
creating supranational institutions to further reduce trade barriers
International business is also known as which of the following?
cross-border business
Which of the following would NOT be considered an example of foreign direct investment (FDI)?
cross-border purchase of stocks
Fluctuating exchange rates are an example of which of the following?
currency risk
LeShaun Golding researched the risks linked to establishing the plant in Country B. He cited government intervention, lack of local managerial talent, and unethical business practices as the most prominent risks for this location. LeShaun noted all of the following types of risks EXCEPT ________.
currency risk
Which of the following is characteristic of globalization of markets?
declining trade barriers
In terms of international business, market globalization can be viewed as a ________.
driver and consequence of firm-level internationalization
A firm that pursues foreign direct investment to take advantage of government incentives is demonstrating a(n) ________ motive.
efficiency-seeking
Financial market integration makes it easier for internationally active firms to ________.
engage in foreign currency transactions
The fourth phase of globalization ________.
facilitated the globalization of the service sector in such areas as banking and retailing
Which of the following is a characteristic of an equity joint venture?
facilitates knowledge transfer between partners
A form of collaboration between two firms to form a new, jointly owned enterprise is defined as a joint venture.
false
Avoiding trade barriers is classified as a market-seeking motive for FDI.
false
Converging tastes of consumers worldwide promote traditional lifestyles.
false
Economies of scale are decreases in per-unit cost of production resulting from decreasing output.
false
Equity joint ventures have the simplest management structure.
false
FDI is also known as international portfolio investment.
false
Firms expand abroad mainly as a reaction to market globalization.
false
Foreign direct investment is the least risky entry strategy.
false
Governments impose offensive barriers to safeguard industries, workers, and special interest groups and to promote national security.
false
In international economics, codetermination refers to the tendency for a financial or monetary crisis in one country to spread rapidly to other countries, due to integrated national economies.
false
In the context of attaining economies of scope, using individual managers in each European country is more efficient that using the same base of managers all over Europe.
false
In the past, international trade and investment activities were mainly conducted by companies that sold services.
false
Industrialization implies that emerging markets are increasing their dependence on low-cost labor.
false
International business today is predominantly the domain of large, multinational companies. Answer:
false
International expansion invariably results in a decrease in a firm's economies of scale.
false
International portfolio investment refers to a firm's direct control of foreign operations and is an equity-based method of foreign market entry.
false
Large multinationals are not constrained by market forces because they can exert considerable influence on governments through lobbying.
false
Market globalization compels firms to organize their sourcing, manufacturing, marketing, and other value-adding activities on a strictly local scale.
false
Nationalization refers to the gradual integration and growing interdependence of national economies.
false
Offshoring and the flight of jobs are prime drivers of market globalization.
false
Tariff and other trade barriers for exports and FDI are identical.
false
The Great Depression marked the beginning of the second phase of globalization.
false
The Internet has increased the cost of transmitting voices, data, and images.
false
The end of the Cold War in 1989 hindered the forces of market liberalization in Eastern Europe.
false
The first wave of offshoring began in the 1990s with the exodus of service-sector jobs in credit card processing, software code writing, accounting, health care, and banking services.
false
The globalization of capital refers to the aggregate activities of firms that gives rise to economic integration.
false
The globalization of markets refers to the growing independence and self-sufficiency of countries worldwide.
false
The level of government intervention in commercial activities is similar across most countries.
false
The science and process of creating and using information resources is known as ________.
information technologie
Which of the following drivers of market globalization is Lavonne's research most likely to recognize as the factor responsible for the company's expansion to Japan?
integration of world financial markets
Which of the following is a driver of globalization?
integration of world financial markets
All of the following are reasons to study international business EXCEPT ________.
international trade and investment have experienced unprecedented decline
Which of the following represents a human resource factor that firms must consider when selecting an FDI location?
involvement of labor unions
While a degree of cultural imperialism may be at work, it is offset by the countertrend of
local nationalism
Firms that anticipate close public scrutiny of their foreign operations often avoid potential difficulties by ________.
locating in culturally similar countries
Which of the following best explains why Taiwanese computer manufacturers established subsidiaries in the United States?
low-cost financial capital
Which of the following best explains why the Japanese firm Canon relocated much of its production to China?
low-cost labor
The process of targeting and serving markets outside the home country is known as ________.
market diversifiaction
To which of the following drivers of market globalization is Markus most likely to attribute his company's expansion to Eastern Europe?
market liberalization
A(n)________ is a special type of acquisition in which two companies join to form a larger firm.
merger
________ are the most transformative technology in developing economies.
mobile phones
A few decades ago, international business was largely the domain of ________.
multinational firms
A consortium is defined as ________.
multiple partners participating on a large-scale project
The relocation of manufacturing and other value-chain activities to cost-effective locations abroad is known as ________.
offshoring
Which of the following is a societal consequence of market globalization?
offshoring and the flight of jobs
International portfolio investment is characterized by ________.
passive ownership of foreign stocks and bonds
In a typical value chain, the firm ________.
performs marketing activities such as pricing, promotion, and selling
Protectionist policies may also lead to ________.
price inflation
The level of taxes in a country is a part of the ________ factor that is considered when selecting an FDI location.
profit retention
The rate of inflation is a(n) ________ factor to be considered while selecting the location for FDI.
profit retention
Governments impose defensive barriers to ________.
promote national security
Regional economic integration blocs ________.
reduce trade and investment barriers
Technological advances have contributed to manufacturing by ________.
reducing manufacturing cost
In describing the main driver behind Pax's expansion to China, Rashid is most likely to emphasize ________.
reduction of barriers to trade
An underground economy ________.
refers to the informal economic sector
Reduction in trade barriers is associated with the emergence of ________.
regional economic integration blocs
Which of the following stages comes before procurement in a firm's value chain?
research and development
Which of the following represents the final stage in a firm's value chain?
sales and service
The ________ phase of globalization began around 1900 and was associated with the rise of electricity and steel production.
second
Which of the following is an example of a supranational institution?
the World Trade Organization
Which of the following is Rina most likely to cite as a counter example to Juan's argument regarding the influence of MNEs on national sovereignty?
the dominating influence of market forces on the global economy
The third phase of globalization was triggered by ________.
the end of World War II
The fourth phase of globalization is characterized by ________.
the enormous growth of cross-border trade and investment
Which of the following is a key reason that a focal firm would most likely enter a collaborative venture with a foreign firm?
the foreign firm can fill an important gap in the focal firm's value chain
The free movement of capital around the world is also known as ________.
the globalization of capital
Each of the following has contributed to the rapid growth of trade among nations EXCEPT ________.
the increase in trade barriers
Rosa Suarez reported on her analysis of cross-cultural risks involved with establishing the plant in Country C. Each of the following was most likely discussed in her report EXCEPT
the level of national debt
A country's economic assets are also known as factors of production.
true
A merger is a special type of acquisition.
true
A nontariff trade barrier is a government policy, regulation, or procedure that impedes trade through means other than explicit tariffs.
true
Although services trade is growing rapidly, the value of merchandise trade is still much larger.
true
As the influence of the Chinese economy grows over time, it is likely that Western countries will embrace some of China's cultural attitudes and behaviors.
true
By establishing a physical presence inside a country or an economic bloc, the foreign company obtains the same advantages as local firms.
true
China has the second most MNEs.
true
Companies opt for FDI to obtain advantages associated with locating at the hub of knowledge development and innovation in a given industry.
true
Companies strive to decrease their costs and reduce their selling prices through economies of scale and standardization of finished products, among other possibilities.
true
Compared to small firms, large companies usually can access capital at lower cost.
true
Countries that liberalize international trade and investment enjoy faster per-capita economic growth.
true
Cross-licensing agreements are a type of project-based, nonequity venture in which the partners agree to allow access to licensed intellectual property developed by the other on preferential terms.
true
Currency risk refers to the risk posed by adverse fluctuations in exchange rates.
true
Dumping violates WTO rules because it amounts to unfair competition.
true
Environmental destruction diminishes as economies develop, at least in the long run.
true
Exporting is an entry strategy involving the sale of products or services to customers located abroad.
true
FDI is the most advanced and complex foreign market entry strategy.
true
Falling trade barriers are facilitated by the WTO.
true
Firms are sometimes motivated to enter new markets because of unfavorable conditions in the home market, such as regulation or declining local industry sales.
true
Firms often follow their key customers abroad to preempt other vendors from serving them.
true
Firms often internationalize proactively, in order to pursue new markets, find lower-cost inputs, or obtain other advantages.
true
Firms that engage in FDI avoid problematic trade barriers because the physical presence of a foreign firm earns it the same privileges as a local firm.
true
For internationalizing firms, the consequences of poor business management decisions are usually more costly when mistakes occur abroad than when they occur at home.
true
Globalization of production activities and services is a dimension of market globalization.
true
Globalization results in more demanding buyers who shop for the best deals worldwide.
true
Governments encourage inward FDI because it transfers skill and technologies.
true
Governments have facilitated economic integration by lowering barriers to international trade and investment, harmonizing their monetary and fiscal policies within regional economic integration blocs.
true
If high tariffs are present, managers may consider other strategies, such as FDI, licensing, and joint ventures that allow the firm to operate directly in the target market, avoiding import barriers.
true
In a "common market," barriers to the cross-border flow of factors of production are removed.
true
In the fashion industry, customer needs change rapidly and managers often locate factories or assembly operations near important customers.
true
International business is performed not just by individual firms, but also governments and international agencies.
true
International portfolio investment refers to passive ownership of foreign securities.
true
