Management 301 Ch. 10

________ tends to occur once and often has poorly defined objectives, and therefore members are not as committed. Classic terrorism Amateur terrorism Political terrorism Religiously-motivated terrorism

Amateur terrorism

Which of the following statements is true of the impact of domestic and international political developments on multinational companies? As government policies change, it is imperative that multinational companies be willing and able to adjust their strategies and practices to accommodate new perspectives. The state and its various institutions and agencies protect multinational companies by refraining from making policy shifts in taxation or regulation. Multinational companies are well protected from the hazards that originate directly from variation and unpredictability in political and governance systems around the world. A majority of geographic areas and regions carry less political risk than they did in the past because governments are more stable.

As government policies change, it is imperative that multinational companies be willing and able to adjust their strategies and practices to accommodate new perspectives

_______ risks stem from government policies that limit the transfer of capital, payments, production, people, and technology in or out of a country. Bureaucratic Operational Expropriation Transfer

Transfer

Alliances are an arena where both value-claiming activities and value-creating activities take place.

True

Collaboration facilitates rapid market entry by allowing firms to share costs and risks, combine product and market complementarities, and reduce the time-to-market.

True

In some instances, it is not clear whether macro or micro political risk is at work.

True

Micro political risk analysis is directed toward government policies and actions that influence selected sectors of the economy or specific foreign businesses.

True

Tensions continue to rise as U.S. politicians have become frustrated by China's unwillingness to revalue the yuan, and concerns have grown over the safety of goods imported from China.

True

Which of the following cultural differences tends to be more disruptive for international joint ventures than the others? Uncertainty avoidance Masculinity Power distance Individualism

Uncertainty avoidance

Which of the following is an example of an integrative technique for responding to political risk? Diversifying production of a product among a number of countries Limiting the responsibility of local personnel and hiring only those who are vital to the operation Creating joint ventures and hiring local people to manage and run operations Raising capital from local banks and the host government as well as outside sources

creating joint ventures and hiring local people to manage and run operations

China's decision regarding restrictions on foreign exchange transactions is a ________ political risk because it affects all multinational companies. standard macro multidimensional micro

macro

Which of the following is an example of transfer risks? Pressure for local participation Dividend remittance Export commitments Abrogation of proprietary rights

Dividend remittance

Which of the following is an example of a protective and defensive technique for responding to a political risk? Creating joint ventures and hiring local people to manage and run the operation Doing as little local manufacturing as possible and conducting all research and development outside the country Producing as much of a product locally as possible with the use of in-country suppliers and subcontractors, thus making it a "domestic" product Developing good relations with the host government and other local political groups

Doing as little local manufacturing as possible and conducting all research and development outside the country

Which of the following criteria involves maximum political risk? International financial standing Effectiveness of public administration Economic growth during previous 5 years Restrictions imposed on imports

Effectiveness of public administration

Conglomerate investments usually are rated as low risk because foreign governments see them as providing fewer benefits to a multinational company and greater benefits to the country than other investments.

False

Examples of ownership-control risks include tariffs on exports and imports, as well as restrictions on exports.

False

International political developments have a major impact on multinational companies' (MNCs) strategic plans, and domestic political developments have a minor impact on those plans.

False

Local knowledge can be internalized primarily as a result of a multinational company (MNC) operating in that market.

False

Macro risk has been losing importance in the recent years because a growing number of countries are able to successfully transition to a market-driven economy.

False

Macro risk issues often take such forms as industry regulations, taxes of specific types of business activity, and various restrictive local laws.

False

The service sector of economic activity includes agriculture, forestry, and mineral exploration and extraction.

False

Which of the following statements is true about expropriation? Expropriation of foreign enterprises by developing countries were rare in the old days. Small firms are more likely targets of expropriation than large firms because more is to be gained by expropriating small firms. Firms at the greatest risk of expropriation are in extractive, agricultural, or infrastructural industries such as utilities and transportation. Expropriation is least likely to occur in non-Western countries that are poor, relatively unstable, and suspicious of foreign multinationals.

Firms at the greatest risk of expropriation are in extractive, agricultural, or infrastructural industries such as utilities and transportation

The following are listed as techniques for responding to political risks except ________. relative bargaining power analysis defensive techniques realistic bargaining power analysis integrative techniques

Realistic bargaining power analysis

Which of the following is an external economic relations factor that multinational companies may use to evaluate political risk? Traffic system and communication Per capita income Freedom to set up or engage in partnerships Inflation during the previous two years

Freedom to set up or engage in partnerships

________ techniques are designed to help the overseas operation become part of the host country's infrastructure. Statutory Defensive Integrative Protective

Integrative

Identify a true statement about classic terrorism. It is carried out by individuals holding very strong core beliefs, regardless of how well defined their objectives are. It tends to occur once and has poorly defined objectives, and therefore members are less committed. It entails a specific, well-defined objective pursued by well-trained, professional, underground members. It tends to be more chaotic and scattered because the individuals involved are extremely passionate about the cause, despite the lack of unified goals.

It entails a specific, well-defined objective pursued by well-trained, professional underground members

Which of the following statements is true of a conglomerate investment? It is typically made with an eye toward satisfying the host country's market demands. It is a type of high-risk investment in which goods or services produced are different from those produced at home. It includes the production of raw materials or intermediate goods that are to be processed into final products. It runs the risk of being taken over by the government because it is export-oriented.

It is a type of high-risk investment in which goods or services produced are different from those produce at home

Which of the following statements is true of the impact of terrorism within a country on multinational companies in the macro sense? Typically, terrorists target business areas or businesses that have low status or those that have little influence on initiating change. It is extremely difficult to guarantee that companies can fully avoid harm from terrorism, but political risk analysis and preparation may forestall it. Companies are usually proactive and confident about setting up operations even if a country has a high incidence of terrorist attacks against commercial businesses. Most attacks on private businesses are driven by well-trained, professional, underground members who pursue a specific, well-defined objective.

It is extremely difficult to guarantee that companies can fully avoid harm from terrorism, but political risk analysis and preparation may forestall it

________ reviews major political decisions that are likely to affect all business conducted in a particular country. Macro political risk analysis Standard political risk analysis Micro political risk analysis Multidimensional political risk analysis

Macro political risk analysis

________ risk issues often take forms such as industry regulation, taxes on specific types of business activity, and various restrictive local laws. Standard Direct Micro Macro

Micro

According to the 2012 Transparency International Corruption Perceptions Index, which of the following nations is the least corrupt? India New Zealand The United States Spain

New Zealand

Identify a true statement about protective strategies for responding to political risks. These strategies are designed with the objective that a multinational company is perceived as less foreign and thus unlikely to be the target of government action. These strategies are designed to help overseas operation become part of a host country's infrastructure. Organizations with an emphasis on innovative technology prefer a protective technique as a way to safeguard against actions such as counterfeiting. Protective strategies for responding to political risks include developing good relations with the host government and other local political groups.

Organizations with an emphasis on innovative technology prefer a protective technique as a way to safeguard against actions such as counterfeiting

________ risks are brought about by government policies or actions that inhibit ownership or control of local operations. Operational Functional Transfer Ownership-control

Ownership-control

Which of the following is not a critical legal issue for successful termination of international alliances? People-related issues Disposition of assets and liabilities Distributorship arrangements Conditions of termination

People-related issues

Which of the following is not a critical business issue for successful termination of international alliances? Rights over sales territories and obligations to customers People-related issues The basic decision to exit Relations with the host government

Rights over sales territories and obligations to customers

According to the 2012 Transparency International Corruption Perceptions Index, which of the following nations is the most corrupt? Lebanon Somalia El Salvador Columbia

Somalia

Which of the following is a salient feature of horizontal investments? They involve the production of goods or services that are the same as those produced at home. They are export-oriented investments which are unlikely to be takeover targets. They are high-risk investments in which goods or services produced are dissimilar to those produced at home. They are designed with an eye toward satisfying the home country's market demands.

They involve the production of goods or services that are the same as those produced at home

Over the past two decades, political risk has become: a vital area for multinational companies (MNCs) to manage. a less pervasive, minor threat faced by international management. virtually obsolete for international firms as a result of controls imposed by the United Nations. an area closely watched by developing countries, but virtually ignored by developed countries.

a vital area for multinational companies to manage

Multinational companies can minimize their chances of expropriation by ________. investing in non-Western countries that are poor and relatively unstable imposing an embargo on the participation of local partners encouraging the use of high technology acquiring an affiliate that depends on the parent company for key areas of operation

acquiring an affiliate that depends on the parent company for key areas of operation

The primary sector of economic activity includes: manufacturing operations. industry and service. transportation, finance, insurance, and related industries. agriculture, forestry, and mineral exploration and extraction.

agriculture, forestry, and mineral exploration and extraction

Which of the following is not an example of risk factors for a multinational company? Limiting the remittance of profits or capital Freezing the movement of assets out of the host country Devaluing the currency Complying with contractual terms of agreements

complying with contractual terms of agreement

All of the following actions raise the political risk of doing business in China except ________. interpreting rules and regulations by officials industrial piracy restrictions on foreign exchange transactions concerns on safety and reliability of product quality

concerns on safety and reliability of product quality

Examples of proactive political strategies include all of the following except ________. formal lobbying campaign financing downsizing and transferring business elsewhere seeking advocacy through embassies and consulates of the home country

downsizing and transferring business elsewhere

The seizure of businesses by a host country with little, if any, compensation to the owners is referred to as ________. dispossession removal expropriation nationalization

expropriation

When host governments do not require alliances as a condition for entry, many multinational companies: find that having an alliance is advantageous to their entry and expansion. are advised not to voluntarily pursue alliances, as they tend to be problematic. are likely to consider alliances, except in emerging markets and highly regulated industries. are usually indifferent about establishing alliances.

find that having an alliance is advantageous to their entry and expansion

Which of the following is an external economic relations factor that multinational companies may use to evaluate political risk? Per capita income Inflation during the previous two years Traffic system and communication Freedom to set up or engage in partnerships

freedom to set up or engage in partnerships

A salient feature of vertical investments is that they: provide fewer benefits to the country and greater benefits to a multinational company (MNC) than other investments. include the production of raw materials or intermediate goods that are to be processed into final products. are unlikely to be taken over by the government because they are import-oriented. involve the production of goods or services that are the same as those produced at home.

include the production of raw materials or intermediate goods that are to be processed into final products

Laws that require that nations hold a majority interest in the operation are known as ________. appropriation laws commercial laws expropriation laws indigenization laws

indigenization laws

In recent years, ________ risk analysis has become of increasing concern to multinational companies because of the growing number of countries that are finding their economies in trouble as in Southeast Asia or, even worse, unable to make the transition to a market-driven economy. micro basic macro complex

macro

The economies of China, Russia, India, and Vietnam present ________ political risk for multinational companies. relative proactive macro micro

macro

The industrial sector of economic activity includes ________. agriculture transportation mineral exploration and extraction manufacturing operations

manufacturing operations

China's government policies regarding investment in the telecommunications industry fall into the ________ political risk category. integrative relative macro micro

micro

Price controls, financing restrictions, export commitments, taxes, and local-sourcing requirements are examples of ________. operational risks functional risks transfer risks ownership-control risks

operational risks

Foreign ownership limitations, pressure for local participation, confiscation, expropriation, and abrogation of property rights are examples of ________. tactical risks ownership-control risks transfer risks functional risks

ownership-control risks

Not all MNCs are confident about international investment in countries with ________. political unrest cultural differences low labor costs emerging economies

political unrest

In their attempts to forestall harm in risky venues, multinational companies must thoroughly evaluate the political environment, install modern security systems, compile a crisis handbook, and ________. establish an effective bargaining position go on the offensive appeal to the religious leaders in the country prepare employees for situations that may arise

prepare employees for situations that may arise

Broadly, ________ strategies may include leveraging bilateral, regional, and international trade and investment agreements, drawing on bilateral and multilateral financial support, and using project finance structures to separate project exposure from overall firm risk. integrative vertical investment proactive political protective and defensive

proactive political

Benefits of proactive political strategies include all of the following except ________. enhancing government relations in unstable and transitional policy environments providing support for national and sub-central governments in transitional economies counteracting competitors' efforts to influence government policy mitigating risk before it becomes unmanageable

providing support for national and sub-central governments in transitional economies

Some multinational corporations attempt to manage political risk by simultaneously analyzing a range of variables to derive an overall rating of the degree of political risk in a given jurisdiction. This is referred to as a ________. quantity risk analysis quantification process quantity management quantification circle

quantification process

The theory behind ________ is quite simple. A multinational company works to maintain a stronger bargaining power position than that of the host country. pertinent bargaining power proportionate negotiating power relative bargaining power analogous negotiating power

relative bargaining power

The ratings factors that are quantified for multinational companies to manage political risk reflect all of the following except ________. social conditions external economic conditions political conditions domestic economic conditions

social conditions

A true statement about horizontal investments is that: they run the risk of being taken over by the government because they are export-oriented, and governments like a business that helps them generate foreign capital. they are high-risk investments in which goods or services produced are dissimilar to those produced at home. they are unlikely to be takeover targets because these investments typically are made with an eye toward satisfying the host country's market demands. they are rated as high risk because foreign governments see them as providing fewer benefits to the country and greater benefits to a multinational company than other investments.

they are unlikely to be takeover targets because these investments typically are made with an eye toward satisfying the host country's market demands

Political risks can be broken down into three basic categories. These are: operational risks, bureaucratic risks, and transfer risks. ownership risks, operational risks, and economic risks. transfer risks, operational risks, and ownership-control risks. transfer risks, ownership risks, and labor risks.

transfer risks, operational risks, and ownership-control risks