International Management - Chapter 10

How can a multinational corporation (MNC) minimize its chances of expropriation? (Check all that apply.)

- By acquiring an affiliate that relies on the parent firm for key areas of the operation - By associating with local partners

How does the state and its various institutions and agencies pose a direct threat to MNCs? (Check all that apply.)

- By allowing the exploitation of assets by local firms. - Through policy shifts in taxation or regulation. - Through outright or de facto expropriation.

Which is the least corrupt nation according to the 2018 of the Corruption Perceptions Index?

Denmark

True or false: Host governments are active in prohibiting investors in alliances from taking on partners.

false

Some takeovers in the old days were caused by _______ laws, which required that nationals hold a majority interest in the operation.

indigenization

Techniques that help the overseas operation of a multinational corporation (MNC) become a part of the host country's infrastructure are known as

integrative techniques

The use of force or violence against others to promote political or social views is termed

terrorism

What are the examples of protective and defensive techniques that are used by a multinational corporation (MNC) to respond to political risk? (Check all that apply.)

- Carrying out as little local manufacturing as possible and conducting all research and development outside the country - Raising capital from local banks and the host government as well as outside sources - Curbing the responsibility of local personnel and hiring only those who are vital to the operation

Identify the ways in which multinational corporations (MNCs) can reduce the risk of terrorist attacks in host countries. (Check all that apply.)

- Creating a crisis handbook - Installing modern security systems - Thoroughly assessing the political environment

Identify the integrative techniques that are used by a multinational corporation (MNC) to respond to political risk. (Check all that apply.)

- Developing joint ventures and hiring local people to manage and run the operation - Building good relations with the host government and other local political groups

What are the primary factors motivating firms to enter into international strategic alliances (ISAs) with foreign partners? (Check all that apply.)

- Economies of scale and rationalization - Complementary technologies and patents

What are the examples of political risk factors for a multinational firm in a host country? (Check all that apply.)

- Freezing the movement of assets out of the host country - Appropriating assets

Identify the examples of the macro risk issues faced by businesses. (Check all that apply.)

- India's legal system being hindered by a labyrinth of laws and bureaucratic red tape - Russia tightening controls on the flow of foreign currencies

Identify the forms of the micro risk issues that businesses face. (Check all that apply.)

- Restrictive local laws - Industry regulation - Taxes on specific kinds of business activity

In the context of international business management, which of the following are typical characteristics of terrorist attacks? (Check all that apply.)

- Terrorists typically target business areas or businesses that have high status. - A majority of the attacks on private businesses are either driven by amateur terrorists or those who are religiously motivated.

What are the steps that contribute to determining if a corporation's alliance with foreign partners would succeed or fail? (Check all that apply.)

- carrying out due diligence - selecting the right partners - specifying the scope and limit of the alliance

Arrange the stages involved in the life cycle of a firm's alliance with foreign partners in the correct order of occurrence. (Place the stage that occurs first at the top.)

1. conception and strategic development, planning team development, internal signoff, creation of operating plan, and launch and startup 2. growth and achievement of initial growth or success-related milestones 3. Professionalizing of the alliance activity and metrics 4. maturing stage of alliance life and restructuring of goals and milestones 5. conflict resolution and redefinition 6. alliance termination or complete remediation

Arrange the types of industries starting from the industries that have the highest risk factor to the ones that have the lowest risk factor.

1. primary 2. service 3. industrial

Which of the following is a possible example of a macro consideration of political risk by firms?

A study of what would happen to a firm's investment if opposition government leaders were to take control

Why do multinational corporations (MNCs) adopt various proactive political strategies?

Because government policies are likely to have a notable impact on business operations and many governments face competing pressures from stakeholders

True or false: Small firms often are more likely targets of expropriation than large firms.

False

When are proactive political strategies adopted by multinational corporations (MNCs) especially important?

In unstable and transitional policy environments.

Match the types of political risk analyses (in the left column) with their descriptions (in the right column).

Macro political risk analysis - Analysis that reviews major political decisions likely to affect all business conducted in a country Micro political risk analysis - Analysis directed toward government policies and actions that influence selected sectors of the economy or specific foreign businesses in a country

Match the areas (in the left column) with the corresponding criteria that a multinational corporation (MNC) can use to quantify political risks (in the right column).

Political and economic environment - Constitutional guarantees and effectiveness of public administration Constitutional guarantees and effectiveness of public administration - Prospective growth during next three years and inflation during previous two years External economic relations - Restrictions on exports and development of the balance of payments

Match the areas (in the left column) with the associated criteria that a multinational corporation (MNC) can utilize to quantify political risks (in the right column).

Political and economic environment - Labor relations and social peace Domestic economic conditions - Possibility of employing foreign nationals External economic relations - Legal protection for products and brands

Match the types of industries based on the levels of technological sophistication (in the left column) with their descriptions (in the right column).

Science-based industry - It requires the continuous introduction of new products or processes. Non-science-based industry - It does not require the continuous introduction of new products or processes.

What is the theory behind the relative bargaining power of a multinational corporation (MNC)?

The MNC operates to have a bargaining power position stronger than that of its host country.

Which of the following are part of the ultimate goal of the violence created by terrorism? (Check all that apply.)

To make government and citizens change policies To make government and citizens yield to the beliefs of the terrorist group

Match the categories of political risks faced by businesses (in the left column) with their causes (in the right column).

Transfer risks - Government policies that limit the movement of capital, payments, production, people, and technology in and out of a country operational risks - Government policies and procedures that directly constrain the management and performance of local functions ownership-control risks - Government policies or actions that inhibit ownership or regulation of local operations

Match the categories of political risks faced by businesses (in the left column) with their examples (in the right column).

Transfer risks - Tariffs on exports and imports, restrictions on exports, dividend remittance, and capital repatriation operational risks - Price controls, export commitments, financing restrictions, taxes, and local sourcing requirements ownership risks - Foreign-ownership limitations, confiscation, expropriation, pressure for local participation, and abrogation of proprietary rights

An area of consideration for MNCs regarding macro political risks is government corruption, such as the prevalence of bribery and government rules and regulations that require the inclusion of certain locals in lucrative business deals.

True

Because of micro risk issues, some MNCs are treated differently than others, which increases the cost of doing business.

True

MNCs face hazards that originate directly from variation and unpredictability in political and governance systems around the world.

True

Match the types of activities involved in a firm's alliance with foreign partners (in the left column) with their elements (in the right column).

Value-claiming activities - Competitive, distributive negotiation Value-creating activities - Collaborative, integrative negotiation

Match the types of investments made by firms (in the left column) with their descriptions (in the right column).

conglomerate investment - It is a type of high-risk investment in which goods or services produced are not similar to those produced at home. vertical investment - It includes the production of raw materials or intermediate goods that are to be processed into final products. horizontal investment - It involves the production of goods or services that are the same as those produced at home.

Match the types of investments made by firms (in the left column) with their features (in the right column).

conglomerate investment - It is rated as high risk as foreign governments view them as providing fewer benefits to their country and greater benefits to multinational corporations (MNCs) than other investments. vertical investment - It has the risk of being taken over by the government because it is export-oriented, and governments like a business that assists them in generating foreign capital. horizontal investment - It is typically created with an eye toward satisfying the host country's market demands, and the firm making the investment is not very likely to be takeover targets.

The seizure of businesses by a host country with little, if any, compensation to the owners is called

expropriation

Which of the following is the stage of the life cycle of a firm's alliance with foreign partners that typically involves potential termination and reorganizing of team members and composition?

maturing

The unanticipated likelihood that a business's foreign investment will be constrained by a host government's policy is called

political risk

Match the sectors of economic activity (in the left column) with their descriptions (in the right column).

primary sector - It includes agriculture, forestry, and mineral exploration and extraction. industrial sector - It includes manufacturing operations. service sector - It includes transportation, finance, insurance, and related industries.

Lobbying, campaign financing, advocacy, and other political interventions designed to shape and influence the political decisions prior to their impact on a firm are termed

proactive political strategies

Techniques that are designed to discourage the host government from interfering in operations of a multinational corporation (MNC), mainly by avoiding complex ties to the host country's economy, are called

protective and defensive techniques

True or false: Managing operations with partners from different national cultures is a fundamental challenge of alliances.

true