MKT 310 Exam 3 SG

Realize scale economies from sales volume without major costs of manufacturing operations in host country.

Advantage of exporting

Earning economic returns from technologically complex processes and know-how when FDI may be restricted.

Advantage of turnkey project

What is a disadvantage of relying on an export management company (EMC)? a. A firm will fail to develop its own exporting capabilities. b. A firm will have limited access to contacts in potential markets. c. A firm will not be able to establish its own name in a foreign market. d. A firm will have to pay more in shipping costs.

a. A firm will fail to develop its own exporting capabilities.

Which support function of a company adds value by identifying and recruiting skilled managers, regardless of nationality? a. Human resources b. Research and development c. Marketing d. Customer service

a. Human resources

Which two functions are considered primary activities? (Check all that apply.) a. R&D b. Information systems c. Human resources d. Customer service

a. R&D d. Customer service

To protect resources efficiently and ensure that each subunit adopts the correct mix of tactics and strategies, firms should aim for ___ control of exposure. a. centralized b. decentralized

a. cemtralized

A document issued by a bank at the request of an importer that directs the bank to pay money to the exporter upon presentation of specified documents is called a a. letter of credit. b. bill of exchange. c. letter of lading. d. bill of lading.

a. letter of credit.

Exporters involved in international trade would prefer to ship the goods ___ (before or after?) payment is received. before after

after

Which company demonstrates a successful franchising, strategy? a. BP Amoco b. Toyota c. McDonald's d. Dell

c. McDonald's

______ refers to shipping goods and services out of the jurisdiction of a country. a. Importing b. Exporting c. Licensing d. Franchising

b. Exporting

Small and medium-sized businesses are very proactive in identifying opportunities to export. a. True b. False

b. False

The _____ account tracks goods and services exports and imports in balance-of-payments accounting. a. exchange rate b. current c. payments d. production

b. current

A(n) ______ convertible currency allows only nonresidents to convert it into a foreign currency without any limitations. a. freely b. externally c. forward d. capital

b. externally

Businesses should seek out a country that has ____ policies toward FDI. a. restrictive b. favorable

b. favorable

The volatile changes in exchange rates that can negatively affect a an international business are commonly referred to as a. risk and reward. b. foreign exchange risk. c. foreign insurance ratings. d. currency valuations.

b. foreign exchange risk.

Quiet-Night Hotel Corp. has developments around the globe. Customers expect the same experience in every hotel but that has been a problem as not every hotel follows the expectations set down by the company. Quality control is a significant disadvantage of ______. a. an acquisition b. franchising c. a turnkey operation d. licensing

b. franchising

The ______ of value creation activities occurs when different stages of the value chain are preformed in a variety of world-wide locations, based on maximizing value and/or minimizing costs. a. difference principle b. global web c. common ground d. marketing mix

b. global web

As a result of their lack of foreign exchange reserves, countertrade has grown in popularity among which type of countries? a. Developed b. Westernized c. Developing

c. Developing

Rita knows that every euro she plans to purchase for her trip is worth 1.30 US dollars. What aspect of currency conversion is Rita considering? a. Import tariff b. Purchasing power parity c. Exchange rate d. FDI

c. Exchange rate

What firms are export specialists that act as an export department for their clients? a. Confirming houses b. Customs brokers c. Export management companies d. Exporting trading companies

c. Export management companies

While the Ex-Im Bank has a loan guarantee program, it also has a(n) ___ (direct or indirect?) lending operation for foreign borrowers to use in purchasing US exports. direct indirect

direct

The number of born globals has been a. increasing in the United States but not in other markets b. decreasing c. stagnating d. decreasing in the United States but increasing in other markets e. increasing.

e. increasing.

Born global companies a. start out in foreign markets before quickly entering the United States b. are generally incorporated in a large trading bloc such as the European Union c. are typically spin-offs from large, experienced multinationals d. focus on developing their domestic markets before entering foreign markets e. make a significant commitment to foreign markets within two years of their inception.

e. make a significant commitment to foreign markets within two years of their inception.

While many companies focus on reducing transaction and translation exposure when managing foreign exchange risk, very few companies pay attention to ___ exposure

economic

While the present wealth of customers in a national market is an important factor, the firm must also consider living standards and _______________________.

economic growth

The rate at which the currency of one country can be converted into that of another country is called the ___ rate

exchange

One______ is the ability to preempt rivals and capture demand by establishing a strong brand name.

first-mover advantage

Able Appliances needs to convert the pounds it earns from selling products in Great Britain to dollars. What mechanism allows the company to make this conversion?

foreign exchange market

Able Appliances needs to convert the pounds it earns from selling products in Great Britain to dollars. What mechanism allows the company to make this conversion? a. International Monetary Fund b. purchasing power parity c. United Nations d. foreign exchange market

foreign exchange market

The volatile changes in exchange rates that can negatively affect a an international business are commonly referred to as

foreign exchange risk.

The volatile changes in exchange rates that can negatively affect a an international business are commonly referred to as a. foreign insurance ratings. b. foreign exchange risk. c. risk and reward. d. currency valuations.

foreign exchange risk.

Compared to 20 years ago, exports play a _____ role in the US economy. greater lesser

greater

The global standardization strategy is considered inappropriate when demands for local responsiveness remain ___. low high

high

International firms that strive to be locally responsive will most likely incur _____ costs. higher lower

higher

As firms move down the experience curve, they will ______ profitability. decrease increase

increase

Lowering production costs because of increased efficiencies creates value by ___ costs. increasing decreasing

increasing

Pressures for local responsiveness may make it difficult to ______________________________.

leverage skills and products associated with a firm's core competencies from one country to another

Firms will make acquisitions to _______________________, which is particularly important in markets that are rapidly globalizing.

maximize the exposure to risk and therefore profit

When customer preferences differ significantly between countries, there is ___ (less or more?) pressure for local responsiveness.

more

Markets are dynamic, and any firm will face competition. In time, international and localization strategies tend to become less viable, and managers need to ________________________________.

orientate their companies toward either a global standardization or transnational strategy

Firm reduces the risk of losing control over technological competence, but generally is the most costly method of serving a foreign market from a capital investment standpoint

wholly owned subsidiaries

Expectations becoming a self-fulfilling prophecy when currency traders move in the same direction at the same time is called the ______ effect. a. inflation b. Fisher c. bandwagon d. parity

c. bandwagon

A(n) ______ currency is one that neither residents nor nonresidents are allowed to convert into a foreign currency. a. freely convertible b. technical c. nonconvertible d. spot forward

c. nonconvertible

If the spot exchange rate is $1 to 110 yen and the 90-day forward rate is $1 to 100 yen, then the yen is selling at a ______ to the dollar in the 90-day forward market. a. discount b. parity c. premium d. forward return

c. premium

A company would analyze the efficiency frontier in order to determine its a. financial status. b. production sites. c. strategic positioning. d. labor relations.

c. strategic positioning.

When the warehouse manager received the draft with the shipment of textiles, he noticed that payment for the materials was not due for 60 days. This is an example of a transaction using a ______ draft. a. sight b. place c. time d. line

c. time

One study of 49 strategic alliances found that about ______ ran into serious trouble within two years of their formation. a. one-half b. one-quarter c. two-thirds d. none

c. two-thirds

___ competencies are a company's abilities and skills that competitors cannot easily match or copy.

core

A foreign exchange market is where one country's ______ is converted into that of another country.

currency

An American tourist in Japan is interested in buying a souvenir that costs 1800 yen. How much is this in dollars if the exchange rate is $1 to Y400. a. $45.00 b. $3.00 c. $14.50 d. $4.50

d. $4.50

______ occurs when a company agrees to purchase a certain amount of product back from a country to which a sale is made. a. Offsets b. Countertrade c. Bartering d. Counterpurchase

d. Counterpurchase

In general, which industry is often subject to a high level of local responsiveness as a result of host government demands? a. Consumer electronics b. Semiconductors c. Petroleum d. Pharmaceuticals

d. Pharmaceuticals

BMW is closely following the implications of several recent elections including the presidential elections in France and the United States, the Brexit vote in the United Kingdom, and the new government in Germany. Why? a. China is developing its own auto industry. b. BMW popular car share service will be compromised. c. The elections suggest policies favoring Japanese automobiles. d. The elections create uncertainty in the international business environment. e. The elections mean that BMW will have to create new government contacts.

d. The elections create uncertainty in the international business environment.

In a forward exchange transaction, $1 buys more lira with a spot exchange than with a 30-day forward exchange. When this occurred, it is said that the dollar is selling at a _____ on the 30-day forward market. a. spot b. premium c. hedge d. discount

d. discount

What is the key way a company can reduce economic exposure? a. limit FDI to licensing and franchising agreements b. request government intervention in trade barriers c. maintain several production facilities in one country d. distribute production facilities and assets to various locations

d. distribute production facilities and assets to various locations

If a business wants lower costs and less risk when doing business in a foreign country, it should consider those countries that are a. less developed. b. financially unstable. c. politically unstable. d. economically advanced.

d. economically advanced.

A tactic that reduces translation and economic exposure is a. creating enough supply to meet demand. b. using nonconvertible currencies. c. investing in government bonds. d. entering into forward exchange rate contracts.

d. entering into forward exchange rate contracts.

A commodity's production costs tend to decline over time. This is referred to as the ______ curve. a. output b. demand c. productivity d. experience

d. experience

The ______ refers to systematic reductions in production costs that have been observed to occur over the life of a product. a. difference principle b. possibility fronter c. marketing mix d. experience curve

d. experience curve

The efficient market school believes that the foreign exchange market is efficient at setting ______ exchange rates. a. custom b. common c. spot d. forward

d. forward

When a country allows both residents and nonresidents to purchase unlimited amounts of a foreign currency, the country's currency is . a. nonconvertible. b. inconvertible. c. externally convertible. d. freely convertible.

d. freely convertible

As noted by Hamel and Prahalad's research, the main reason why Japanese partners gained more from their alliances with American firms was because of the a. reluctance of the American firm to take the lead in decisions. b. tendency of the Japanese partner to control the alliance. c. preference for Japanese-oriented strategies. d. greater ability of the Japanese partner to learn from the American firm.

d. greater ability of the Japanese partner to learn from the American firm.

Foreign direct investment can be in the form of a(n) ______ which occurs when a firm establishes a new operation in a foreign market. a. licensing agreement b. acquisition c. franchise operation d. greenfield investment

d. greenfield investment

Over the past few years, more and more companies are investing in businesses in Scandinavia. These investments represent the _____ of FDI for the Scandinavian countries. a. term b. stock c. outflow d. inflow

d. inflow

Tri-Lar Engineerings develops electronic systems for managing inventory and tracking sales. Which type of support activity do these systems provide? a. human resources b. logistics c. customer service d. information systems

d. information systems

A swap deal is just like a conventional forward deal in that it a. is based on a 180-day exchange rate only. b. is based on a 30-day exchange rate only. c. puts the investment in jeopardy until the exchange is made. d. insures against foreign exchange risk.

d. insures against foreign exchange risk.

Griffin Labs and Sequence Labs are in competition in the same seven regional markets. This is an example of a. purchasing parity. b. foreign direct investment. c. the marketing mix. d. multipoint competition.

d. multipoint competition.

Ownership restraints on FDI are often put into place by a host country based on concerns of a. customer selection. b. knowledge spill-over. c. location economies. d. national security.

d. national security.

When a time draft is accepted, the maker can then sell the draft to an investor at a discount. This demonstrates how time drafts are _____. a. deliverable b. stagnant c. volatile d. negotiable

d. negotiable

The board of directors of Green Garden Supply in Vermont voted to invest in a production facility in Mexico as a way to lower costs and free up financial resources for the company to grow in other areas. What form of FDI is this company using? a. acquisition b. exporting c. greenfield investment d. offshore production

d. offshore production

A(n) ______ is a market form in which a market or industry has a limited number of large firms. a. totopoly b. monopoly c. duopoly d. oligopoly

d. oligopoly

One reason Toyota does NOT make licensing agreements is because its management and process capabilities have been developed over many years and are a part of the organization. In other words, Toyota's ______ cannot be licensed. a. investments b. marketing techniques c. sales forecasting techniques d. organizational culture

d. organizational culture

BMW is planning to make a big push into markets around the world with its MINI brand. If BMW has valuable know-how that cannot be protected with a licensing contract and also faces high transportation costs, BMW should a. export from Germany. b. consider a less popular vehicle. c. invest directly in target markets. d. outsource all production. e. use different technology.

d. outsource all production.

The purchasing power parity puzzle is the name given to the failure to find a strong link between exchange rate movements and a. currency swaps. b. acquisitions. c. foreign direct investment. d. relative inflation rates.

d. relative inflation rates.

At one time, Britain taxed British companies' foreign earnings at a higher rate than their domestic earnings in order to _____ FDI. a. maintain b. balance c. encourage d. restrict

d. restrict

Profitability of a company can be found by measuring a firm's ______, which is determined by dividing net profits by total invested capital. a. gross domestic product b. gross national income c. accountants receivable d. return-on-investments

d. return-on-investments

In a licensing deal, the licensor receives payment in the form of ____ from the licensee. a. stock b. imports c. dividends d. royalties

d. royalties

Decisions and actions that managers take to meet the company's goals are known as ______. a. parity b. vision c. values d. strategy

d. strategy

The production divisions within a company, the location of a company's decision-making responsibilities, and the establishment of integrating mechanisms all make up the organizational ______ of a company. a. controls b. architecture c. culture d. structure

d. structure

Critics argue that FDI by Japanese auto makers does not make up for the jobs lost in US-based auto manufacturers. These critics are concerned with the a. Sullivan principle. b. greenfield investment c. difference principle. d. substitution effect.

d. substitution effect.

A(n) _____ draft allows the drawee to delay payment -- normally for 30 or more days. a. lading b. sight c. debit d. time

d. time

The various components of an organization's architecture are _____ each other. interdependent from dependent on

dependent on

What international organization is involved in the governing of FDI? a. IMF b. NATO c. WTO d. UN

c. WTO

With the formation of the ______ in 1995, there now is a multinational institution that has become involved in regulations governing FDI. a. United Nations b. Civil Corps of Engineers c. WTO d. IMF

c. WTO

Borrowing in a currency from a country with low interest rates and then investing in another currency where interest rates are high is called ______. a. a forward exchange b. arbitrage c. a carry trade d. a spot exchange

c. a carry trade

PPP theory predicts that changes in relative prices will result in a. decreased GNI. b. decreased interest rates. c. a change in exchange rates. d. a recession.

c. a change in exchange rates.

Production and marketing responsibilities are typically delegated to _____ when customer preferences create a strong pressure for local responsiveness. a. a firm's home office b. arbitration c. a firm's foreign subsidiary d. an outside party

c. a firm's foreign subsidiary

When a company moves operations overseas to take advantage of lower labor costs, this strategy increases the overall efficiency of resource utilization in the global economy. According to the free market view of FDI, this benefits a. the host country. b. the source country. c. both the source and the host countries d. neither the source nor the host countries.

c. both the source and the host countries

Company XYZ has an arrangement with Company Ohai in Argentina. XYZ has contributed funds to build 14 hemp processing farms. In return, Ohai agrees to supply XYZ with a certain amount of hemp for 15 years (as partial payment). This is an example of a(n) ______ agreement. a. offset b. barter c. buyback

c. buyback

Economic exposure is concerned with the affect of ______ on a firm's international earning power. a. supply and demand b. government intervention c. changes in exchange rates d. purchasing power parity

c. changes in exchange rates

For a small fee, the Department of Commerce provides a company with a market research survey on a product of its choice. This is called a(n) ______. a. best prospects list b. export trade relief c. comparison shopping service d. supply and demand chart

c. comparison shopping service

As the text notes, international strategies fail over time because of the emergence of ______. a. tariffs b. customization c. competitors d. political interference

c. competitors

Managers use ______ to analyze data about how the business and its employees are functioning in order to make appropriate administrative decisions. a. rewards b. forecasts c. controls d. incentives

c. controls

Chilly Cooler Corp. has developed a technology that allows its coolers to stay cold 25% longer than any of their competitors coolers. While many competitors have tried to match this technology, so far none of them have. This technology is an example of a(n) _____ for Chilly Cooler. a. greenfield venture b. factor endowment c. core competence d. economy of scale

c. core competence

A reciprocal buying agreement whereby a firm agrees to buy a specific amount of goods back from a country to which a sale is made is called ______. a. a dirty float b. arbitrage c. counterpurchase d. dumping

c. counterpurchase

A reciprocal buying agreement whereby a firm agrees to buy a specific amount of goods back from a country to which a sale is made is called ______. a. a dirty float b. dumping c. counterpurchase d. arbitrage

c. counterpurchase

When a country's currency is nonconvertible, a company may engage in ______, where goods and services will be traded for other goods and services. a. licensing b. arbitrage c. countertrade d. a managed float

c. countertrade

The bandwagon effect occurs in investing when a. banks agree to set the same interest rate for long-term investors. b. the supply of a product is in excess of product demand. c. currency traders move as a group in the same direction at the same time. d. individual foreign governments work together to set exchange rates.

c. currency traders move as a group in the same direction at the same time.

Most foreign exchange transactions involve the _____ on one side. a. pound b. yen c. dollar d. euro

c. dollar

What are the two schools of thought regarding the prediction of future exchange rates? a. exchange rate risk school b. exchange rate forecasting school c. efficient market school d. inefficient market school

c. efficient market school d. inefficient market school

Exporting, licensing and joint ventures with a host-country firm are examples of ______ for serving global markets. a. expatriate decisions b. financing options c. entry modes d. transportation fields

c. entry modes

The effect of bulky or heavy products on transportation costs can make _______ an inappropriate strategy. a. licensing b. foreign direct investment c. exporting

c. exporting

As an alternatives to FDI, firms could choose ______, which involves producing goods at home and shipping them overseas, or ______, which is granting a foreign firm the right to produce and sell a product in return for a royalty fee. a. licensing; exporting b. acquisitions; exporting c. exporting; licensing d. licensing; acquisitions

c. exporting; licensing

A company that enters a foreign market on a large scale must consider the lack of _____ associated with significant commitments. a. production b. continuity c. flexibility d. consistency

c. flexibility

Which of the following is not a factor facilitating the born global phenomenon? a. affordability of technology b. global migration of talent c. higher barriers on trade d. lower costs of communication

c. higher barriers on trade

The difference between the 110-volt electrical system used in North America and the 240-volt system used in some European countries is an example of how ______ differences create pressure for local responsiveness. a. consumer b. geographical c. infrastructure d. political

c. infrastructure

According to the international Fisher effect, there is a relationship between spot exchange rates and _____ between countries. a. gross national income b. government intervention c. interest rates d. discretionary income

c. interest rates

The market imperfections approach is also known as the ______ theory. a. supply and demand b. balance sheet c. internalization d. purchasing power parity

c. internalization

An association of two or more companies engaged in a solitary business enterprise for profit without actual partnership or incorporation is called a(n) ______. a. greenfield venture b. acquisition c. joint venture d. turnkey operation

c. joint venture

A firm enters a market on a(n) ______ scale when it commits significant resources to this effort. a. small b. even c. large d. broad

c. large

Toyota prefers direct investment in a foreign entity rather than licensing. This decision stems from the fact that Toyota pioneered ______ which enables it to produce higher quality automobiles at a lower cost than global rivals. a. ISO 9000 b. mass customization c. lean production d. JIT inventory

c. lean production

Allowing a foreign firm to produce and sell your product for a royalty fee is called ______. a. offshoring b. franchising c. licensing d. exporting

c. licensing

The best strategy to use when there are substantial taste and preference differences across countries and cost pressures are NOT present is the ______ strategy. a. global standardization b. international c. localization d. transnational

c. localization

Dunning's eclectic paradigm is seen as a useful addition to explaining patterns of FDI because it explains how ______ factors affect the direction of FDI. a. production b. financial c. location d. marketing

c. location

The text suggests that as a way to take control of exchange rate risk, firms should produce _____ foreign exchange reports. a. weekly b. annual c. monthly d. bi-annual

c. monthly

If the exchange rate is 1 British pound to $1.35, an American in London will need ______ to purchase a purse priced at 20 pounds. a. $35 b. $3.50 c. $13.50 d. $27

$27

A firm benefits from a local partner's knowledge of the host country's competitive conditions, culture, language, political systems, and business systems.

Advantage of joint venture

Most of the capital to get operations going is not provided by the firm.

Advantage of licensing

May not be able to take advantage of lower-cost locations for foreign and domestic markets.

Disadvantage of exporting

Shared ownership can result in conflicts for control over direction, strategy, and operations if differences emerge with partners.

Disadvantage of joint venture

Severely limits the firm's ability to realize experience curve and location economies as separate and independent production facilities are set up.

Disadvantage of licensing

The firm that enters into a turnkey deal will have no long-term interest in the foreign country.

Disadvantage of turnkey project

Most costly approach from a capital investment perspective.

Disadvantage of wholly-owned subsidiary

A commitment that is strategic has a short-term impact and is easy to reverse. True False

False

Greenfield ventures are more risky than acquisitions because there is greater potential for unpleasant surprises. True False

False

Like transaction exposure, economic exposure is concerned with the effect of exchange rates changes on individual transactions, most of which are short-term situations. True False

False

More companies pay more attention to economic exposure than translation exposure when managing foreign exchange risk. True False

False

The United Nations has verified that Brazil is one of the easiest and most cost effective countries to export into. True False

False

True or False: A localization strategy should be used when there are high pressures for cost reductions and demand for local responsiveness is low. True False

False

True or False: Distribution channels are consistent across the world and do NOT affect local responsiveness. True False

False

True or False: Organizational culture has little or no impact on a company's performance. True False

False

True or false: When FDI occurs through greenfield investment, it will increase competition in a market and decrease economic welfare. True False

False

Firm is relieved of many of the costs and risks of opening in a foreign market but is inhibited from being able to take profits out of one country to support competitive attacks in another

Franchising

Firm benefits from a local partner's knowledge of the host country's competitive conditions, but has the risk of giving control of its technology to its partner

Joint Ventures

No development costs and risks with opening in a foreign market, but the firm does not have tight control over manufacturing, marketing, and strategy required for location economies

Licensing

___________________________ is the most appropriate strategy when the firm simultaneously faces strong pressures for both cost reductions and local responsiveness.

Transnational strategy

A cross-licensing agreement reduces the probability that each firm will take advantage of the other's intangible property. True False

True

An offset is similar to a counterpurchase except the party can fulfill its obligation with any firm in the country where the sale is made. True False

True

Companies new to exporting are more likely to underestimate the time and expertise needed to cultivate relationships in foreign countries. True False

True

Empirical evidence suggest that the International Fisher effect does NOT explain short-term exchange rate movements well. True False

True

Foreign market entry decisions are based on the varying levels of risk and reward. True False

True

If many national markets are controlled by a few multinational enterprises with the power to influence prices and distribution channels, PPP theory may not hold. True False

True

If we could understand how exchange rates are determined, we might be able to identify exchange rate movements. True False

True

In order to reduce the risks associated with exporting, it makes sense for a company to initially focus on one market. True False

True

Many acquisitions fail because of a clash between the cultures of the two organizations. True False

True

Since the international market is significantly larger than the domestic market, exporting is nearly always a way to increase a company's revenue. True False

True

Spot against forward is a common type of currency swap. True False

True

The foreign exchange market is essentially open 24 hours per day. True False

True

The gains or losses identified by translation exposure are on paper only. True False

True

Transportation costs would have an effect on which entry mode a company uses. True False

True

True or false: A company that decides to locate operations close to other companies so it can take advantage of their knowledge is an example of how businesses use externalities. True False

True

True or false: A company would favor FDI over exporting when trade barriers are in place. True False

True

True or false: Acquisitions are the preferred method of FDI because global markets evolve very rapidly and acquisitions are quicker to execute. True False

True

True or false: Being locally responsive tends to raise costs for a company. True False

True

True or false: Companies that operate internationally can increase their profitability and rate of profit growth in ways not available to just domestic businesses. True False

True

True or false: If no other factors had to be considered, a company would place a higher price on products that are highly valued by customers. True False

True

True or false: One way a company might create value is by leveraging the skills of its subsidiaries. True False

True

True or false: Tax concessions can be used by a government to encourage foreign firms to do business in that country. True False

True

True or false: The World Trade Organization has been successful in its efforts to establish a universal set of rules governing the liberalization of FDI. True False

True

True or false: The need to customize a product for a local market could work against a company's strategy of marketing a globally standardized product. True False

True

True or false: To survive increasing competition, multinational firms may need to shift from an international to a transnational strategy. True False

True

True or false: When RCA licensed its color television product to a number of Japanese companies in the 1960s, these companies turned around and entered the US to directly compete with RCA and diminished its role in the market. In this situation, licensing resulted in RCA giving away proprietary information to a potential competitor. True False

True

Great strategy, particularly useful where FDI is limited by host-government regulations, but there is no long-term interest in the foreign country

Turnkey Contracts

If a firm is entering a country where there are no incumbent competitors, ______________________ is preferred

a greenfield venture

The big advantage of _____________________________ is that it gives the firm a much greater ability to create the kind of organizational culture and operations it wants.

a greenfield venture in a foreign country

Select all that apply International businesses use foreign exchange markets for what three reasons? a. to pay a foreign company for its products or services in its country's currency b. to invest spare cash for the short term in money markets c. to invest in long-term financial instruments denominated in foreign currencies d. to control prices in foreign markets e. to convert foreign currencies it receives from transactions into its own currency

a. to pay a foreign company for its products or services in its country's currency b. to invest spare cash for the short term in money markets e. to convert foreign currencies it receives from transactions into its own currency

If the exchange rate is 1 British pound to $1.35, an American in London will need ______ to purchase a purse priced at 20 pounds. a. $27 b. $3.50 c. $13.50 d. $35

a. $27

If the interest rate in country A is 8% and the interest rate in country B is 4%, the international Fisher effect predicts the value of country A's currency will depreciate by ______ against country B's currency. a. 4% b. 32% c. 8% d. 12%

a. 4%

What two factors cause major adverse effects on a host country's balance of payments? (Check all that apply.) a. A foreign subsidiary importing a large number of inputs from abroad b. The outflow of earnings from a foreign subsidiary to its parent company c. A foreign subsidiary exporting a large number of goods and services to other countries d. The inflow of earnings from a parent company to its foreign subsidiary

a. A foreign subsidiary importing a large number of inputs from abroad b. The outflow of earnings from a foreign subsidiary to its parent company

Derek told the board that he didn't feel Belleson Corp. would make a good strategic partner because that company had a reputation for confiscating software from partners without giving anything in return. Given this information, which characteristic of a good partner is Alliance Corp. missing? a. A good partner is unlikely to try to opportunistically exploit the alliance for its own ends. b. A good partner has the firm achieve its strategic goals. c. A good partner shares the firm's vision for the purpose of the alliance.

a. A good partner is unlikely to try to opportunistically exploit the alliance for its own ends.

What three things should a company take into consideration when choosing a strategic alliance partner? (Check all that apply.) a. A good partner shares the firm's vision for the purpose of the alliance. b. A good partner is likely to expropriate the firm's technological know-how. c. A good partner does not act opportunistically. d. A good partner helps the firm achieve its strategic goals. e. A good partner is willing to relocate to take advantage of location economies.

a. A good partner shares the firm's vision for the purpose of the alliance. c. A good partner does not act opportunistically. d. A good partner helps the firm achieve its strategic goals.

What are two ways a company can set up a wholly owned subsidiary in a foreign country? (Check all that apply.) a. Acquire an established firm b. Master licensing arrangement c. Franchising agreement d. A greenfield venture

a. Acquire an established firm d. A greenfield venture

What are two reasons businesses prefer acquisition as a means of FDI over a greenfield investment? (Check all that apply.) a. Acquisitions are faster to execute than greenfield investments. b. Mergers are slower to execute than greenfield investments. c. Businesses believe they can increase the efficiency of the acquired unit. d. Businesses want to acquire firms that need strategic assets, such as brand loyalty.

a. Acquisitions are faster to execute than greenfield investments. c. Businesses believe they can increase the efficiency of the acquired unit.

What are two potential costs of FDI to host countries? (Check all that apply.) a. Adverse effects on competition within the host nation b. Adverse effects on balance of payments c. Gains in national sovereignty & autonomy d. Positive effects on balance of payments

a. Adverse effects on competition within the host nation b. Adverse effects on balance of payments

The success of an alliance is a function of which three factors? (Check all that apply.) a. Alliance structure b. Partner return c. Alliance location d. Partner selection e. Alliance management

a. Alliance structure d. Partner selection e. Alliance management

What are two current trends in FDI? (Check all that apply.) a. An increase in the volume of FDI b. A decrease in the volume of FDI directed at countries that have recently liberalized their FDI regimes c. An increase in FDI aimed at countries that have liberalized their FDI regimes d. A decrease in the volume of FDI worldwide

a. An increase in the volume of FDI c. An increase in FDI aimed at countries that have liberalized their FDI regimes

Identify two costs of FDI to a home country. (Check all that apply.) a. Balance of payments are negatively affected if FDI is a substitute for direct exports. b. Balance of payments are negatively impacted if foreign earnings are sent back to the home country. c. Balance of payments are negatively affected if purpose of FDI is to develop a low-cost production location. d. Balance of payments are negatively affected if demand increases for home country exports.

a. Balance of payments are negatively affected if FDI is a substitute for direct exports. c. Balance of payments are negatively affected if purpose of FDI is to develop a low-cost production location.

What type of company is normally used as a trusted intermediary for exporting situations? a. Bank b. Warehouse c. Manufacturer d. Credit Union

a. Bank

What are three ways a company can achieve economies of scale? a. Bargaining purchasing costs b. Serving global markets c. Spreading fixed costs over a large volume d. Implementing nontariff barriers e. Establishing a tax base

a. Bargaining purchasing costs b. Serving global markets c. Spreading fixed costs over a large volume

What are two disadvantages of operating a wholly owned subsidiary? (Check all that apply.) a. Bearing all the risk b. Bearing all the cost c. Having little control over decision making d. Having little control over technology

a. Bearing all the risk b. Bearing all the cost

The Foreign Credit Insurance Association provides coverage against which two risks? (Check all that apply.) a. Commercial b. Economic c. Residential d. Political

a. Commercial d. Political

Which three sales and marketing functions can help a firm create value? (Check all that apply.) a. Consumer assessments b. Advertising c. Accounting audits d. Custom manufacturing e. Brand positioning

a. Consumer assessments b. Advertising e. Brand positioning

______ agreements are barter-like agreements used by companies in countries whose currency is nonconvertible. a. Countertrade b. Efficient market c. Inefficient market d. Arbitrage

a. Countertrade

PPP theory, according to research, seems to predict exchange rate movements best for countries in which two situations? a. Countries with high inflation rates b. Countries with low inflation rates c. Countries with developed capital markets d. Countries with underdeveloped capital markets

a. Countries with high inflation rates d. Countries with underdeveloped capital markets

Which country has a policy that encourages FDI? a. Country A has a government-backed insurance program to protect against the risk of expropriation. b. Country D does not allow government loans to businesses investing in developing countries. c. Country C encourages businesses to invest in countries which prevent the transfer of profits. d. Country B has implemented a double taxation policy on all foreign income.

a. Country A has a government-backed insurance program to protect against the risk of expropriation.

What are three reasons that acquisitions fail? (Check all that apply.) a. Culture clashes between acquired and acquiring firms b. Unethical behavior by senior management in the acquired firm c. Not realizing gains from integrating operations d. Focus on location economies e. Overpayment for assets of the acquired firm

a. Culture clashes between acquired and acquiring firms c. Not realizing gains from integrating operations e. Overpayment for assets of the acquired firm

_____ typically involves the short-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates. a. Currency speculation b. Forward exchange c. Fixed rate d. Spot exchange

a. Currency speculation

What three activities are examples of processes within a company? (Check all that apply.) a. Developing a marketing plan b. Mission statements c. Yearly employee review d. Cross-cultural literacy e. Budgeting

a. Developing a marketing plan c. Yearly employee review e. Budgeting

What are two advantages of turnkey projects? (Check all that apply.) a. Earning greater returns from valuable assets b. Passing on technology to foreign partners c. Fostering location economies d. Entering markets where FDI is limited by host government

a. Earning greater returns from valuable assets d. Entering markets where FDI is limited by host government

Which is an example of a major strategic commitment by a company? a. Entering a foreign market on a significant scale b. Changing the local board of advisers from 5 to 7 members c. Choosing a local manager d. Assessing the potential tax consequences of a price change

a. Entering a foreign market on a significant scale

What organization is an independent agency of the US government that was set up to provide financing to facilitate exports, imports and the exchange of commodities? a. Export-Import Bank b. Foreign Credit Insurance Association c. World Bank d. Federal Reserve

a. Export-Import Bank

_____ are a network of informal contacts that allow companies to benefit from each other's knowledge. a. Externalities b. Oligopolies c. Franchises d. Paradigms

a. Externalities

When a firm participates in ______, it evolves into a multinational enterprise. a. FDI b. JIT c. outsourcing d. a franchise

a. FDI

What two sources of assistance does the government provide to US exporters to finance their export programs? (Check all that apply.) a. Foreign Credit Insurance Association b. Export-Import Bank c. FDIC d. Department of Treasury

a. Foreign Credit Insurance Association b. Export-Import Bank

Which view of FDI is based on the classical international trade theory of Smith and Ricardo asserting that international production should be based on comparative advantage? a. Free market b. Biased market c. Absolute market d. Fair market

a. Free market

What are two disadvantages of joint ventures? (Check all that apply.) a. Giving up control of technology to the host country partner b. Sharing development costs and risks of entering a foreign market c. Not having tight control over a local partner to realize experience curve or location economies d. Facilitating market entry due to political considerations

a. Giving up control of technology to the host country partner c. Not having tight control over a local partner to realize experience curve or location economies

Refer to Figure 12.9. What are three main strategic postures that firms can use when competing globally? (Check all that apply.) a. Global standardization strategy b. Transnational strategy c. Localization strategy d. Domestic concentrated strategy

a. Global standardization strategy b. Transnational strategy c. Localization strategy

Which entry mode's major advantage is that a firm has more control over the kind of subsidiary it wants in a foreign market? a. Greenfield venture b. Exporting c. Joint venture d. Franchise

a. Greenfield venture

What two functions are performed by the Ex-Im Bank? (Check all that apply.) a. Guarantees repayment of US commercial bank loans made to foreign borrowers for purchasing US exports b. Advises foreign borrowers on exchange rates c. Oversees all World Bank lending operations to foreign investors d. Provides direct lending to foreign borrowers for purchasing US exports

a. Guarantees repayment of US commercial bank loans made to foreign borrowers for purchasing US exports d. Provides direct lending to foreign borrowers for purchasing US exports

What is a feature of an oligopoly? a. Interdependence of major players b. Many large firms competing c. Low concentration ratio in the industry d. Independence of key firms

a. Interdependence of major players

Which concept BEST explains why the first firm in an oligopoly decides to undertake foreign direct investment rather than exporting or making a licensing agreement? a. Internalization theory b. Multipoint competition c. Knickerbocker's theory

a. Internalization theory

Currently, you will find the BEST use of countertrading in a. Japan. b. Argentina. c. Thailand. d. the United States.

a. Japan.

At Jackson Electric, the company's core competence is based in the proprietary technology it has developed for kitchen appliances. Which foreign entry mode should Jackson Electric avoid in order to protect this technology? a. Joint venture b. Franchising c. Exporting d. Wholly owned subsidiary

a. Joint venture

If a firm's core competency is based on technological know-how, a firm generally should NOT use which two entry modes? (Check all that apply.) a. Joint venture b. Licensing c. Greenfield investment d. Wholly owned subsidiary

a. Joint venture b. Licensing

If a service firm's core competency is managerial know-how, which two foreign entry modes make the most sense? (Check all that apply.) a. Joint ventures b. Wholly owned subsidiary c. Franchising d. Licensing

a. Joint ventures c. Franchising

What three impediments would make it difficult for some companies to gain knowledge of opportunities available in foreign countries? (Check all that apply.) a. Language b. Distance c. Manufacturing d. Logistics e. Time

a. Language b. Distance e. Time

Green Organics Ltd. based in Phoenix, Arizona has given a British-based company the right to produce and sell their products. In return for this, the British company will pay Green Organics $1 for every unit it sells. What type of investment is Green Organics using? a. Licensing b. Greenfield investment c. Franchising d. Exporting

a. Licensing

What are two alternatives to FDI? (Check all that apply.) a. Licensing b. Embargoes c. Exporting d. Importing

a. Licensing c. Exporting

How does the Ex-Im Bank fund the financing aid it provides to facilitate exports, imports, and the exchange of commodities between the US and other countries? a. Loans b. Rebates c. Coupons d. Taxes

a. Loans

Which strategy's major disadvantage is not being able to capture cost reductions as a result of customizing the product based on national tastes and preferences? a. Localization b. Transnational c. International d. Global standardization

a. Localization

What is the term for the economies that result from a business undertaking a value creation activity in the optimal location? a. Location economies b. Distribution economies c. Geographic economies d. Site economies

a. Location economies

Identify two benefits of FDI to a home country. (Check all that apply.) a. MNE learns skills from exposure to foreign market b. Resource transfer effect where skills go to foreign subsidiary c. Foreign subsidiary creates demand for home-country exports d. Outward flow of domestic profits

a. MNE learns skills from exposure to foreign market c. Foreign subsidiary creates demand for home-country exports

According to the basic strategy paradigm, what three things must a firm do to maximize profitability? (Check all that apply.) a. Make sure the firm has the right organization structure in place to execute its strategy. b. Pick a position on the efficiency frontier where there is enough demand to support the choice. c. Provide executive power to create immediate position decisions. d. Configure internal operations so they support the position selected on the efficiency frontier. e. Eliminate the main competitive base by being a first-mover and achieve first-mover advantages.

a. Make sure the firm has the right organization structure in place to execute its strategy. b. Pick a position on the efficiency frontier where there is enough demand to support the choice. d. Configure internal operations so they support the position selected on the efficiency frontier.

What are three moderately decent predictors of long-term changes in exchange rates? a. Nominal interest rate differentials b. Relative monetary growth c. Real unemployment rate d. Relative inflation rates e. Predictive birth rate

a. Nominal interest rate differentials b. Relative monetary growth d. Relative inflation rates

What three basic decisions must firms evaluate when considering foreign expansion? (Check all that apply.) a. On what scale to enter markets b. Which markets to enter c. The availability of personnel d. When to enter markets e. What accounting procedures to use

a. On what scale to enter markets b. Which markets to enter d. When to enter markets

______ of FDI refers to the value of outward direct investment made by the residents of the reporting economy to external economies. a. Outflows b. Inflows

a. Outflows

What are three advantages of FDI? (Check all that apply.) a. Overcomes high transportation costs b. Allows for tight control over the firm's operations c. Has limited risk compared to other entry modes d. Allows the firm to maintain control over technological know-how e. Limits a firm's logistics decisions.

a. Overcomes high transportation costs b. Allows for tight control over the firm's operations d. Allows the firm to maintain control over technological know-how

What are three examples of intangible property? (Check all that apply.) a. Patents b. Human resources c. Designs d. Copyrights e. Machinery

a. Patents c. Designs d. Copyrights

What are three advantages of being a first-mover? (Check all that apply.) a. Preempting rivals b. Building sales volume c. Encountering competition d. Creating switching costs e. Establishing investments

a. Preempting rivals b. Building sales volume d. Creating switching costs

What are two examples of location-specific advantages? (Check all that apply.) a. Skilled labor b. Natural resources c. Marketing implementation d. Licensing venues

a. Skilled labor b. Natural resources

After the exporter presents the draft to the bank in a typical international trade transaction, what happens next? a. The exporter's bank presents the draft to the importer's bank. b. The importer's bank tells the importer that documents have arrived. c. The importer pays the bank. d. The exporter agrees to fill the order.

a. The exporter's bank presents the draft to the importer's bank.

What are three advantages of a wholly owned subsidiary? (Check all that apply.) a. The firm can retain competitive advantage based on technology. b. The firm may realize location and experience curve economies. c. The firm can share development costs and risks of entering a foreign market. d. The firm has tight control over foreign operations. e. The firm can avoid potential tariff barriers.

a. The firm can retain competitive advantage based on technology. b. The firm may realize location and experience curve economies. d. The firm has tight control over foreign operation

Select all that apply What are considered the two most prominent features of the foreign exchange market? (Check all that apply.) a. The trading centers are integrated. b. The market never sleeps. c. Markets have very specific hours. d. Markets act independently.

a. The trading centers are integrated. b. The market never sleeps.

Exquisite Jewelery Company, based in New York, isn't sure it wants to start exporting to Europe. The company is concerned that it won't be paid unless it receives it upfront and the European companies don't want to pay until they receive the products. This situation demonstrates how _____ can affect exporting. a. a lack of trust b. technological know-how c. expropriation d. government regulations

a. a lack of trust

After developing a computer locking system, Caffrey Computer Corp. worked out a licensing deal with Chicago Desktop (a potential competitor) to sell the lock with every computer. This agreement is an example of _____. a. a strategic alliance b. arbitration c. a greenfield venture d. outsourcing

a. a strategic alliance

A country's ___________ accounts track expenditures and receipts from other countries. a. balance-of-payments b. balance-of-debt c. balance-of-trade d. balance-of-financing

a. balance-of-payments

What two things did Christopher Bartlett and Sumantra Ghoshal say a late mover company should do to succeed against well-established competitors? a. benchmark competitor operations b. differentiate its product offering c. rely on mass customization d. focus on economies of scale

a. benchmark competitor operations b. differentiate its product offering

Until the fall of ______ between 1989 and 1991, Eastern European countries were opposed to FDI. a. communism b. Islam c. fundamentalism d. radicalism

a. communism

Manuel has been hired by a clothing distributor based in Ireland. It is his job to travel to US clothing manufacturers and try to purchase denim products at the lowest price possible. He then receives a commission based on his results. Which type of export service provider does Manuel work for? a. confirming house b. export trading company c. remarketer d. customs broker

a. confirming house

Boeing often enters into agreements in which the company has to purchase certain components parts from the country in which it hopes to do business. This arrangement is an example of _____. a. countertrade b. forward exchange rates c. arbitrage d. a letter of credit

a. countertrade

When conventional means of payment are difficult in an international sale, ______ is an alternative means of structuring the sale and allows for the trade of goods and services. a. countertrade b. dumping c. arbitrage d. licensing

a. countertrade

One disadvantage of a turnkey project is that a company might inadvertently a. create a competitor b. inherit higher transport costs c. have to charge higher prices d. lower production value

a. create a competitor

The _____ account tracks goods and services exports and imports in balance-of-payments accounting. a. current b. exchange rate c. payments d. production

a. current

Among other things, being first typically enables a company to establish ______ and ______ before other entrants to the market arrive. (select the two options that apply) a. customer loyalty b. investments c. labor unions d. brand recognition

a. customer loyalty d. brand recognition

The primary activities in the value chain are R&D, production, marketing and sales, and ______. a. customer service b. finance c. human resources d. accounting

a. customer service

A government would be concerned when the country is running a ______ on the current account of their balance of payments. a. deficit b. surplus

a. deficit

The value of a currency is determined by the ______ of that currency relative to other currencies. a. demand and supply b. transaction costs c. FDI d. future value

a. demand and supply

An early strategic commitment to large scale entry may mean that a firm can benefit from what three things? (Check all that apply.) a. demand preemptions b. scale economies c. home country managers d. switching costs e. tariffs and quotas

a. demand preemptions b. scale economies d. switching costs

In the past, most foreign direct investment has been directed at _____ nations. a. developed b. third-world c. planned economy d. developing

a. developed

The concern that an MNE could drive local firms out of business, monopolize the market, and raise prices above those that would prevail in competitive markets is more of a worry for ___ economies a. developing b. advanced

a. developing

According to Bartlett and Ghoshal, a late mover company should try to learn as much as it can from competitors and _____ in order to succeed. a. differentiate its product offering b. evaluate location economies c. foster government ties d. focus on economies of scale

a. differentiate its product offering

Atkinson Appliance has improved the look, design, and speed of its dishwashers to make them more attractive to consumers. The company is trying to create value creation by using a(n) ______ strategy. a. differentiation b. low-cost c. mass production d. customization

a. differentiation

In the foreign exchange market, it is _____ to profit through arbitrage. a. difficult b. easy

a. difficult

When a dominant enterprise is able to set different prices in different markets to reflect varying demand conditions, it is practicing price ______. a. discrimination b. stabilization c. prediction d. parity

a. discrimination

Most economists _____ the idea that FDI is usually accompanied by some loss of economic independence. a. dismiss b. agree with c. confirm

a. dismiss

To encourage FDI, many countries have eliminated ______ taxation of foreign income. a. double b. direct c. export d. indirect

a. double

An exporter writes a draft on the Bank of Italy to Mercury Corp. In this case, Mercury Corp. is the a. drawee. b. maker. c. agent. d. insured.

a. drawee.

When more units of a good or a service can be produced on a larger scale, yet with (on average) less input costs,______ has/have been achieved. a. economies of scale b. mass production c. customization d. learning effects

a. economies of scale

What two things help explain the experience curve? (Check all that apply.) a. economies of scale b. factor endowments c. location economies d. learning effects

a. economies of scale d. learning effects

Critics of strategic alliances argue that they a. effectively "hollow out" firms leaving them without a competitive advantage. b. effectively kill successful sales and distribution networks. c. tend to generate only long-term profits. d. destroy true functional international alliances.

a. effectively "hollow out" firms leaving them without a competitive advantage.

An economist who believes that the foreign exchange market is effective at setting forward rates is a part of the _____ market school. a. efficient b. inefficient

a. efficient

If the foreign exchange market is _____, forward exchange rates should be _____ predictors of future spot rates. a. efficient; unbiased b. inefficient; unbiased c. inefficient; biased d. efficient; biased

a. efficient; unbiased

One way to avoid payment default on a foreign export sent without a letter of credit is to purchase ______ insurance. a. export credit b. buyer action c. import risk d. draft credit

a. export credit

Jiffy Bicycle has had trouble exporting in the past due to the bulky boxes their products require. Which type of company could assist Jiffy Bicycle with this issue? a. export packaging company b. piggyback marketer c. export trading company d. customs broker

a. export packaging company

Carolina Sailboat contracts with a company that identifies businesses in foreign countries that will market and sell their line of sailboats. This company also provides all the documentation for the exports, coordinates logistics, and transportation. What type of company does Carolina Sailboat contract with? a. export trading company b. export packaging company c. confirming house remarketers

a. export trading company

If your household goods can be efficiently produced through economies of scale, it would be a good idea to use a(n) _______ strategy. a. exporting b. licensing c. foreign direct investment

a. exporting

Not being able to take advantage of lower-cost locations for manufacturing, dealing with high transport costs, and facing tariff barriers are disadvantages of ______. a. exporting b. importing c. franchising d. licensing

a. exporting

When a company enters a market early, it usually has a(n) _____ advantage. a. first-mover b. late-entry

a. first-mover

Pioneering costs are associated with _____. a. first-mover disadvantages b. late-mover disadvantages c. first-mover advantages

a. first-mover disadvantages

If the firm is facing the threat of trade barriers such as high import tariffs or quotas and the firm has proprietary technology, the firm should consider a. foreign direct investment. b. exporting. c. licensing.

a. foreign direct investment.

The "chat with a random Swede" promotion was developed to a. foster new interest in the country. b. avoid being proactive. c. allow people to learn the local language. d. avoid the use of the Internet. e. reduce mailing costs associated with typical tourism.

a. foster new interest in the country.

Refer to Figure 12.9. When competing globally, firms typically choose from ______ main strategic stances. a. four b. three c. six d. two

a. four

What are two disadvantages of franchising? a. franchiser cannot take profits out of one country to support another b. lack of quality control c. upfront fees and royalties do not provide sufficient cashflow d. franchisee not required to follow strict rules of doing business

a. franchiser cannot take profits out of one country to support another b. lack of quality control

Dell moved its assembly operations for many of its personal computers to Mexico to take advantage of lower labor costs. The ______ view of FDI states that overall efficiency of resource utilization increases in the world economy. a. free market b. righteous moralist c. naive moralist d. planned economy

a. free market

The ______ view of FDI states that international production should be allocated based on the theory of comparative advantage. a. free market b. radical c. pragmatic nationalism d. laissez faire

a. free market

Some country's governments do not put any limits on the purchase of foreign currency for residents and nonresidents. These country's have a _____ currency. a. freely convertible b. nonconvertible c. inconvertible d. externally convertible

a. freely convertible

A low-cost, no-frills grocery store chain that began in the United States decided to open similar stores in Germany which did not have any stores like this. What type of FDI is this company using? a. greenfield investment b. acquisition c. turnkey operation d. licensing

a. greenfield investment

A(n) ______ is a form of foreign direct investment where a parent company builds its operations in a foreign country from the ground up. In addition to the construction of new production facilities, these projects can also include the building of new distribution hubs, offices and living quarters. a. greenfield strategy b. merger c. wholly owned subsidiary d. joint venture

a. greenfield strategy

Entering a large developing nation like China before most other international companies, and entering on a large scale, will be associated with ___ levels of risk. a. high b. low

a. high

One way for first-time exporters to identify the opportunities in exporting and to avoid many of the associated pitfalls is to a. hire an export management company. b. rely heavily on the in-house expertise that has proven to be the driver of the firm's previous success. c. avoid the use of foreign distributors, who may not understand the exporter's business.

a. hire an export management company.

One way to control technology in a joint venture arrangement is for one company to a. hold majority ownership. b. agree to become the licensee. c. act as an import agent. d. become a wholly owned subsidiary.

a. hold majority ownership

Parva receives a quarterly bonus if her store's sales exceed expectations. This bonus is considered a(n) ______. a. incentive b. control c. endowment d. subsidy

a. incentive

The ______ market school believes that forward exchange rates are NOT the best predictors of future spot exchange rates. a. inefficient b. efficient

a. inefficient

In the context of the Fisher Effect, different interest rates between countries reflect differing expectations about ______ between those countries. a. inflation rates b. transaction exposure c. currency types d. exchange rates systems

a. inflation rates

The Fisher effect predicts that there is a strong relationship between ______ and interest rates. a. inflation rates b. supply and demand c. government intervention d. greenfield ventures

a. inflation rates

A(n) ______ system is any organized electronic system for the collection, organization, storage and communication of information. a. information b. strategic positioning c. primary d. inventory navigation

a. information

A business is using hedging when it a. insures itself against foreign exchange risk. b. bases FDI on location economies. c. is identified as a monopoly. d. customizes products per customer request.

a. insures itself against foreign exchange risk.

Fears of "economic ransom" are irrational, according to Robert Reich, because of the growing ______ of the world economy. a. interdependence b. independence c. dependence

a. interdependence

One main reason why the IFE is NOT good at explaining short-term exchange rate movements is the impact of ______ in determining the expectations of market traders. a. investor psychology b. regulations c. personal income d. environmental conditions

a. investor psychology

What are the two negatives associated with a letter of credit? a. it could limit the importer's ability to borrow since it is a liability b. the importer has to pay the bank's fee for the letter of credit c. it could limit the exporter's ability to borrow d. the exporter has to pay the bank's fee for the letter of credit

a. it could limit the importer's ability to borrow since it is a liability b. the importer has to pay the bank's fee for the letter of credit

The CORE diagnostic tool on the globalEDGE website helps a company assess a. its readiness to export a product b. the need to hire additional personnel c. the competition's product line d. possible foreign export opportunities

a. its readiness to export a product

Companies that enter into the global marketplace typically face two forms of competitive pressure: cost reductions and _____. a. local responsiveness b. higher capacity c. lower sales d. mass customization

a. local responsiveness

Lowering the cost of value creation and allowing a firm to differentiate its products are effects of ______ economies that come from performing an activity in the optimal site. a. location b. political c. factor d. marketing

a. location

In what two ways can location economies create value for a firm? a. lowering the cost of value creation and helping firms achieve a low-cost position b. enabling the firm to differentiate its product c. increasing the cost of creating value d. allowing the firm to vary its accounting practices

a. lowering the cost of value creation and helping firms achieve a low-cost position b. enabling the firm to differentiate its product

In Britain, pharmaceutical sales adopt a soft-sell approach, while a hard-sell approach is used in the United States. This demonstrates how a company has to adapt its ______ strategy to address the concerns of local responsiveness. a. marketing b. finance c. production d. research

a. marketing

When neither residents nor nonresidents are allowed to convert a currency to a foreign currency, the currency is considered a. nonconvertible. b. freely convertible. c. internally convertible. d. externally convertible.

a. nonconvertible.

The law of ______ is the economic theory that the price of a given security, asset or commodity must have the same price when exchange rates are taken into consideration. a. one price b. dual prices c. competitive markets d. rate differences

a. one price

The international Fisher effect states that for any two countries, the spot exchange rate should change in an equal amount, in the _____ direction to the difference in nominal interest rates between the two countries. a. opposite b. same

a. opposite

The radical view toward FDI argues that MNE's extract ______ from the host country and take them back to their home country. a. profits b. employees c. locations d. knowledge

a. profits

Managing an alliance successfully requires building interpersonal relationships -- otherwise known as ______ -- between the firms' managers. a. relational capital b. factor endowments c. economies of scale d. learning effects

a. relational capital

Which type of export service provider buys a product directly from the manufacturer and then packages and labels the product based on their own specifications and sells the product under their own name? a. remarketer b. confirming house c. export trading company d. customs broker

a. remarketer

What two things are generally needed for successful piggyback marketing? . a. same target market b. mass customization c. faster production runs d. complementary products

a. same target market d. complementary products

Jenner Auto Corp. supplies manufacturing equipment to three major automobile manufacturers. Jenner Auto promises that if its equipment breaks down, it will have the necessary parts to fix it shipped out within 24 hours. This is the core promise supporting its ______ activity which adds value to the company's product. a. service b. R&D c. sales d. production

a. service

The strategy that allows firms to take their time to acquire information about a prospective market so they can determine how best to enter the market is a. small-scale entry. b. concurrent-scale entry. c. large-scale entry. d. common-scale entry.

a. small-scale entry.

Currency ______ involves buying, selling and holding currencies in order to make a profit from favorable fluctuations in exchange rates. a. speculation b. arbitrage c. spotting d. rating

a. speculation

A(n) ______ exchange rate is the price to exchange one currency for another for immediate delivery. a. spot b. parity c. forward d. fixed

a. spot

What are two reasons the United States has been an attractive target for FDI? a. stable economy b. large domestic markets c. small consumer divisions d. high tariffs

a. stable economy b. large domestic markets

A cooperative agreement between potential or actual competitors is called a _____. a. strategic alliance b. values statement c. mission statement d. turnkey operation

a. strategic alliance

The worldwide acceptance of McDonald's hamburgers, Coca-Cola, and Apple iPhones ______ claims of increasing homogeneity in the global marketplace. a. supports b. disproves c. negates

a. supports

Corcoran Computers entered into an agreement with the Belgian government in which the company received a number of counterpurchase credits to be used to purchase goods from Belgium. The company did not need any of these goods so it sold the credits to a third-party trading house at a discount. This trading house then sold the credits at a profit to another company that wished to purchase them. This transaction is an example of _____. a. switch trading b. offset c. barter d. counterpurchase

a. switch trading

Getting a specialized third-party trading house involved in a countertrade arrangement to purchase the counterpurchase credits and sell them to another firm is called a. switch trading. b. counterpurchase. c. barter. d. offsets.

a. switch trading.

One serious risk associated with licensing is the risk of losing competitive advantage because of licensing a company's _____. a. technology b. logistics c. liability d. customers

a. technology

The Economists's version of the PPP uses ______ as a proxy for a "basket of goods." a. the Big Mac b. a bunch of grapes c. rice d. coffee

a. the Big Mac

At the simplest of levels, exchange rates are determined by _____. a. the supply and demand of currencies b. gross national income levels in the US c. interest rate levels in participating countries d. the leverage of the dollar

a. the supply and demand of currencies

The basic infrastructure of a company includes the organizational structure, control systems, and the culture of the firm. What other factor should also be included in this basic infrastructure? a. top management b. factor endowments c. location economies d. competitors

a. top management

Research shows that multinational companies ___ technology when they invest in a foreign country. a. transfer b. deplete

a. transfer

When a firm tries to achieve low costs, differentiate its product for local needs, and encourage the flow of skills between subsidiaries, it is following a(n) ______. a. transnational strategy b. localization strategy c. global standardization strategy

a. transnational strategy

While it might be less expensive for a US company to assemble automobile parts in New Zealand, these cost savings would be offset by high ______ costs that make the products more expensive to ship. a. transportation b. customer service c. marketing d. labor

a. transportation

Lisette works for Southwest Petroleum Corp. Her company is responsible for every aspect of setting up a refinery location for its clients. Southwest Petroleum builds the site, trains personnel, and notifies the client when the refinery is ready for operation. What foreign entry mode does this represent? a. turnkey project b. exporting c. greenfield investment d. acquisition

a. turnkey project

Which entry mode would be preferred when a company does not want to risk losing control over technological competence? a. wholly owned subsidiary b. exporting c. joint venture d. franchising and licensing

a. wholly owned subsidiary

Importers involved in international trade prefer to pay ___ (before or after?) the goods are received. before after

after

The most typical joint venture involves a ____ stake in ownership between two companies. a. 33 1/3 - 66 2/3 b. 50-50 c. 80-20 d. 40-60

b. 50-50

What two positive contributions to a host country can FDI provide? (Check all that apply.) a. Protect intellectual property b. Boost a country's economic growth rate c. Decrease any trade imbalance d. Supply capital, technology & management resources

b. Boost a country's economic growth rate d. Supply capital, technology & management resources

What are two reasons businesses prefer acquisition as a means of FDI over a greenfield investment? (Check all that apply.) a. Mergers are slower to execute than greenfield investments. b. Businesses believe they can increase the efficiency of the acquired unit. c. Businesses want to acquire firms that need strategic assets, such as brand loyalty. d. Acquisitions are faster to execute than greenfield investments.

b. Businesses believe they can increase the efficiency of the acquired unit. d. Acquisitions are faster to execute than greenfield investments.

Which country has shown a marked increase in FDI inflows since 2004? a. Britain b. China c. Japan d. Denmark

b. China

Which three sales and marketing functions can help a firm create value? (Check all that apply.) a. Accounting audits b. Consumer assessments c. Brand positioning d. Advertising e. Custom manufacturing

b. Consumer assessments c. Brand positioning d. Advertising

What three things are included in a company's infrastructure? (Check all that apply.) a. Investments b. Control systems c. Organization structure d. Culture

b. Control systems c. Organization structure d. Culture

A firm should follow the transnational strategy when it experiences which two pressures? (Check all that apply.) a. Offer a standardized commodity b. Cost reduction c. Foreign exchange balance d. Local responsiveness

b. Cost reduction d. Local responsiveness

The text notes two reasons why FDI has outpaced world trade and world output. What are those two reasons? a. FDI has been encouraged with the introduction of trade barriers. b. Despite the decline in trade barriers, firms still fear protectionist pressures. c. Economic deregulation and privatization programs are on the decrease. d. FDI has been driven by political and economic changes in developing nations.

b. Despite the decline in trade barriers, firms still fear protectionist pressures. d. FDI has been driven by political and economic changes in developing nations.

Which company is taking steps to minimize risk as it enters the export market? a. After Robert's company made its initial successful exports to Chile, it decided to wait for other Chilean companies to request products. b. Instead of trying to spread itself too thin by going after 22 foreign markets, Natalie's company focused on three potential foreign markets. c. Jamie's company has surpassed all of its export goals to Australia. He has decided to open another plant in the US to meet increasing demand. d. Rather than hire local personnel to oversee her company's exports, Jenna's company decided to keep all personnel in the US office.

b. Instead of trying to spread itself too thin by going after 22 foreign markets, Natalie's company focused on three potential foreign markets.

Kevin works at a company in Ohio and is in charge of researching available export opportunities. Which two organizations should he initially contact to learn more? (Check all that apply.) a. State Department b. International Trade Administration c. U.S and Foreign and Commercial Service d. Office of Homeland Security

b. International Trade Administration c. U.S and Foreign and Commercial Service

What are two reasons a business should follow an international strategy? a. It cannot achieve economies of scale. b. It does not face pressures to customize a product based on local preferences. c. It does not face cost pressures. d. It cannot participate in foreign capital markets.

b. It does not face pressures to customize a product based on local preferences. c. It does not face cost pressures.

Which three statements are TRUE about franchising? (Check all that apply.) a. The franchiser does not sell intangible property as part of the franchise. b. It is similar to a license but with a longer time commitment. c. The franchisee commits to abiding by strict rules on how it does business. d. The franchiser typically receives a royalty payment. e. Once the franchisee has a commitment, it is able to make all decisions about how to run the business.

b. It is similar to a license but with a longer time commitment. c. The franchisee commits to abiding by strict rules on how it does business. d. The franchiser typically receives a royalty payment.

What are three methods companies use for entering foreign markets? (Check all that apply.) a. Divestiture b. Joint Ventures c. Exports d. Arbitrage e. Franchising

b. Joint Ventures c. Exports e. Franchising

If a firm is determining which foreign entry strategy to use, but is concerned with maintaining control over its proprietary technology, which two entry modes should it AVOID? (Check all that apply.) a. Exporting b. Joint ventures c. Franchising d. Licensing

b. Joint ventures d. Licensing

McDonald's local franchises in France have begun to offer more elegant seating areas and an upscale menu. This was done in response to slow growth rates in the area. Impressed with the increased sales at these stores, McDonald's executives are considering making these changes elsewhere. In this instance, what aspect of creating value is BEST demonstrated? a. R&D models b. Leveraging subsidiary skills c. Marketing analysis d. Logistical functions

b. Leveraging subsidiary skills

Marten Electronics Corp. knows it must customize its products for the different markets it serves to accommodate customer tastes and preferences. What type of strategy is this company using? a. International b. Localization c. Interdependent d. Global standardization

b. Localization

What is a benefit of economies of scale? a. Raises unit costs and increases profitability b. Lowers unit costs and increases profitability c. Raises unit costs and decreases profitability d. Lowers unit costs and decreases profitability

b. Lowers unit costs and increases profitability

Primary activities of the value chain can be divided into four functions, including which two of the following? (Check all that apply.) a. Tax planning b. Marketing & sales c. Production d. Leadership

b. Marketing & sales c. Production

What is a potential adverse impact on competition when a foreign entity acquires firms in a host country? a. Oligopoly b. Monopoly c. Externalities d. Nationalism

b. Monopoly

What are the two most common incentives governments offer to foreign firms to invest in their country? (Check all that apply.) a. Non-profit status b. Subsidies c. Low-interest loans d. Network air time

b. Subsidies c. Low-interest loans

______ analysis is based on the premise that there are analyzable market trends and that these past trends can be used to predict future trends. a. Forward b. Technical c. Parity d. Fundamental

b. Technical

In what way are time drafts negotiable? a. A time draft can be returned to a maker during the negotiation process. b. The maker can sell the draft to an investor at a discount from face value. c. The drawee can challenge the amount associated with the time draft. d. A time draft can be replaced with a sight draft.

b. The maker can sell the draft to an investor at a discount from face value.

_____ exposure involves the present measurement of past events using currency exchange rate changes on a company's financial statements. a. Production b. Translation c. Economic d. Transaction

b. Translation

According to PPP theory, a country with a high inflation rate will see ______ in its currency exchange rate. a. an appreciation b. a depreciation c. no change

b. a depreciation

Harrison Freight Inc. felt it was important to release their newest product to the European market before everyone else so they could establish their brand before their competition did. The company wants to benefit from _____. a. a late-entry advantage b. a first-mover advantage c. pioneering costs d. factors of endowment

b. a first-mover advantage

A company that gains entry into a foreign market through ______ has total control over the products or services manufactured or sold. a. franchising b. a greenfield venture c. direct exports d. joint venture

b. a greenfield venture

If a firm is highly concerned about choosing a politically acceptable entry mode, the firm should choose a. exporting. b. a joint venture. c. licensing. d. a wholly owned subsidiary.

b. a joint venture.

Buying a currency low and immediately selling it high to make a profit from the price discrepancy is called _____. a. phishing b. arbitrage c. unionizing d. bartering

b. arbitrage

The totality of a firm's organization is referred to as organization _____. a. mission b. architecture c. production d. values

b. architecture

What is considered the most restrictive form of countertrade? a. offset b. barter c. counterpurchase d. switch trading

b. barter

An organization that is global within two years of its inception with a major focus on foreign markets rather than its domestic market can best be described as a a. infant industry b. born global c. baby MNC d. mini-multi e. newbie.

b. born global

What three reasons are used to explain the retreat of the radical position by the early 1990s? a. growth of economic sectors in communist states b. collapse of communism in eastern Europe c. generally poor economic performance of those countries that embraced radical position d. generally strong performance of the developing countries that embraced capitalism e. demise of democratic regime in Westernized countries

b. collapse of communism in eastern Europe c. generally poor economic performance of those countries that embraced radical position d. generally strong performance of the developing countries that embraced capitalism

Jack owns a ready-to-heat pasta company that is one of ten companies making this type of product. He would like to charge a higher price for the product since customers place a high value on it but the presence of so many competitors makes this impossible. In this situation, _____ allow(s) customers, instead of the company, to capture some of the value of the product. a. economies of scale b. consumer surplus c. factors of endowment d. the efficiency frontier

b. consumer surplus

McDonald's ability to manage fast-food operations better than most other firms in the world is an example of a(n) a. greenfield venture. b. core competency. c. economy of scale. d. factor endowment.

b. core competency.

Mega Data International wants to export into South America but has no knowledge of the laws or documentation required to do so. Which of these agents can help the company with this problem? a. piggyback marketer b. customs broker c. export packaging company d. confirming house

b. customs broker

The strategic alliance between Boeing and some Japanese companies to build the Boeing 787 aircraft was motivated by Boeing's desire to share the ______ of the new jet. a. marketing cost b. development cost c. design ideas d. production

b. development cost

Companies that use a transnational strategy are trying to achieve what three things? a. increasing production levels b. differentiation of product offering to account for local differences c. fostering a multi-directional flow of skills between subsidiaries d. mass customization of product offerings e. lowering costs through location economies

b. differentiation of product offering to account for local differences c. fostering a multi-directional flow of skills between subsidiaries e. lowering costs through location economies

Producing a good at home and then shipping it to another country for sale is called _______. a. outsourcing b. exporting c. offshoring d. franchising

b. exporting

Who is typically responsible for the costs and risks in a franchise agreement? a. franchiser b. franchisee

b. franchisee

A company that enters a country where there are no existing competitors may have to rely on ______ as the only mode of entry. a. an acquisition b. greenfield venture

b. greenfield venture

The chief financial officer of Linwell Corp. is concerned that since he can't predict changes in future exchange rates, there could be adverse consequences for the firm. One way the company can insure itself against this possibility is by engaging in _____. a. hyperinflation b. hedging c. licensing d. arbitrage

b. hedging

The rise of the born global is associated with a. the growth of the European Union.an increase in entrepreneurship b. higher barriers to trade c. the development of NAFTA d. the rise of English as a common language.

b. higher barriers to trade

One way to control technology in a joint venture arrangement is for one company to a. act as an import agent. b. hold majority ownership. c. become a wholly owned subsidiary. d. agree to become the licensee.

b. hold majority ownership.

Performance requirements are put in place to minimize the costs of FDI for the ___ country a. investor b. host

b. host

Venezuela and Bolivia are examples of countries that have become more ___ to FDI a. open b. hostile

b. hostile

A company that elects to use a differentiation strategy would focus on a. lowering production costs. b. increasing the attractiveness of a product. c. maintaining profits from a foreign investment. d. establishing initial sales.

b. increasing the attractiveness of a product.

Which school of thought on exchange rate forecasting does NOT believe that forward exchange rates are the best predictors of future spot exchange rates? a. efficient b. inefficient

b. inefficient

A swap deal is just like a conventional forward deal in that it a. is based on a 180-day exchange rate only. b. insures against foreign exchange risk. c. is based on a 30-day exchange rate only. d. puts the investment in jeopardy until the exchange is made.

b. insures against foreign exchange risk.

Which term accurately characterizes how the various components of a company's architecture relate to one another? a. solitary b. interdependent c. separate d. antagonistic

b. interdependent

Nora's company plans to export a line of boots to a French wholesaler. Since this is a new export, her company wants to be paid for the boots prior to shipping them; however, the wholesale company in France refuses to pay for the boots until they are received. To solve this problem, the companies could rely on a trusted third party such as a bank, which acts as a(n) ______. a. exporter b. intermediary c. importer d. producer

b. intermediary

When competition intensifies, which two strategies because less viable to use? a. transnational b. international c. global standardization d. localization

b. international d. localization

Countertrade is more advantageous to exporters that are a. medium-sized and contained. b. large and diverse. c. domestic. d. small and local.

b. large and diverse.

A turnkey project can be _____ risky than conventional foreign direct investment in a country with an unstable political climate. a. more b. less

b. less

Brett's company is in competition with four other suppliers who are trying to get similar products into France. One way Brett's company could boost its appeal with the importer would be to forgo a _____ even though it will expose the company to default risk. a. tax allowance b. letter of credit c. loan guarantee d. bill of lading

b. letter of credit

Parul believes her company's newest technology product will be quickly imitated by others. When a company's competitive advantage is based on control of proprietary technological know-how, that company should AVOID a(n) ______ arrangement as it might lead to losing control of the technology. a. turnkey operation b. licensing c. wholly-owned subsidiary d. exporting

b. licensing

Company ABC is unwilling to commit the necessary capital to construct a facility in Malaysia. However, they have determined that they want to enter that market. One option for the company might be a a. turnkey project. b. licensing agreement. c. wholly owned subsidiary. d. greenfield venture.

b. licensing agreement.

Firms that do not have access to the capital necessary to develop overseas operations should engage in a(n) a. greenfield venture. b. licensing agreement. c. wholly owned subsidiary. d. turnkey operation.

b. licensing agreement.

Lowering the cost of value creation and allowing a firm to differentiate its products are effects of ______ economies that come from performing an activity in the optimal site. a. factor b. location c. political d. marketing

b. location

Niagara Energy builds all of its energy plants near large water sources to take advantage of the lower costs associated with hydro-power. This company is using _____ to determine where to build its plants. a. mass customization b. location economies c. economies of scale d. organizational culture

b. location economies

Which company function controls the transmission of materials from raw goods to the distribution of the finished product? a. information systems b. logistics c. human resources d. infrastructure

b. logistics

Economic exposure is concerned with the ____- term effect of changes in exchange rates on future prices, sales, and costs. a. short b. long

b. long

When a country experiences hyperinflation, money ___ value very rapidly. a. gains b. loses

b. loses

A host country cost of FDI could be the ___ of sovereignty and autonomy. a. gain b. loss

b. loss

John's U.S.-based company is considering doing business in London, England. The costs and risks associated with doing business in London are considered ___because it is economically advanced and politically stable. a. high b. low

b. low

ABC Co. should choose exporting over licensing as a form of FDI if it has ______ transportation costs and is facing ______ trade barriers. a. high; high b. low; low c. high; low d. low; high

b. low; low

The person or business who initiates the draft that instructs an importer how much and when to pay is called the ______. a. signer b. maker c. walker d. timer

b. maker

In order to make sure that a foreign enterprise has organizational customs and behaviors that are NOT antagonistic to an acquiring enterprise, it is vital that the acquiring enterprise screen the a. marketing mix. b. management culture. c. financial position. d. operations system.

b. management culture.

Many service firms base their competitive advantage on a. importing agreements. b. management know-how. c. licensing. d. exchange rates.

b. management know-how.

The advertising department at Shine Shape Products wants to create value for the new line of cleansers by showing customers how they can remove grease better than any other product on the market. Which primary activity function is involved in this scenario? a. research and development b. marketing and sales c. customer service d. production

b. marketing and sales

If an American firm has a subsidiary in the EU and the value of the euro depreciates rapidly against the value of the dollar over a year, you would see a reduction in the dollar value of the euro profit made by the European subsidiary. This would result in ____ translation exposure. a. positive b. negative

b. negative

If an American firm has a subsidiary in the EU and the value of the euro depreciates rapidly against the value of the dollar over a year, you would see a reduction in the dollar value of the euro profit made by the European subsidiary. This would result in ____translation exposure. a. positive b. negative

b. negative

Countertrade is a logical choice when a country's currency is a. dropping. b. nonconvertible. c. convertible. d. rising.

b. nonconvertible.

FDI that serves the home market is called ______ production. a. expatriate b. offshore c. domestic d. home-country

b. offshore

The theft of technology and/or markets are examples of a. transnational strategy. b. opportunistic behavior. c. strategic positioning. d. cost reductions.

b. opportunistic behavior.

A key cost of FDI for the home country is when the balance of payments is adversely affected by the initial capital ___ required to finance the FDI. a. inflow b. outflow

b. outflow

What are two types of intangible property that can be associated with a licensing agreement? a. marketing b. patent c. trademark d. accounting

b. patent c. trademark

Costs that companies entering a market early have to pay, but which firms late to the market do not have to bear, are called ______ costs. a. leading b. pioneering c. innovator d. trailblazer

b. pioneering

A transnational strategy is NOT easy to pursue because it ________. a. lowers costs for differentiated products b. places conflicting demands on the company c. places the burden of financial management on headquarters d. fosters a multi-directional flow of skills between subsidiaries

b. places conflicting demands on the company

Pre-1980, Japan blocked the majority of potential foreign investments. Yet, if a company that had cutting edge technology wanted to invest in Japan, they were allowed to undertake FDI. This is an example of the ______ view. a. naive moralist b. pragmatic nationalism c. free market d. radical

b. pragmatic nationalism

When the growth in a country's money supply is faster than the growth in its output of goods, ______ tends to increase. a. the exchange rate b. price inflation c. direct investment d. trade exports

b. price inflation

A company's _____ include(s) the design, creation, delivery of a product, and after-sale support and service. a. support activities b. primary activities c. vision statement d. sales forecast

b. primary activities

What are the two categories of operations within a company? a. profit activities b. primary activities c. support activities d. differential activities

b. primary activities c. support activities

The creation of any good or service is called ______. a. logistics b. production c. marketing d. development

b. production

Cross-licensing agreements allow firms to do what two things? a. avoid taxes in the host country b. protect technological know-how c. charge the same price for technology in all markets d. make the partner accountable

b. protect technological know-how d. make the partner accountable

Brett's Bicycle Shop has decided to export products to Finland without using a letter of credit. One way the shop can insure against payment default would be to a. require the maker to pay before shipment. b. purchase export credit insurance. c. employ a trusted third party like a bank. d. require a time draft.

b. purchase export credit insurance.

Waiting for tourists to request information on Sweden is an example of a(n) _______ export strategy. a. timid b. reactive c. high-risk d. unnecessary e. proactive

b. reactive

When California Creamery entered into a strategic alliance with Wisconsin's Best, managers from both companies got together to discuss business matters while having an opportunity to get to know each other personally. Taking the time to build interpersonal relationships helps foster ______. a. mass customization b. relational capital c. economies of scale d. localization

b. relational capital

Which primary activity is concerned with the design of products and production processes? a. customer service b. research and development c. manufacturing d. marketing and sales

b. research and development

Ownership restraints and performance requirements are two ways in which governments can ___ FDI a. encourage b. restrict

b. restrict

A higher rate of profit growth means a higher rate of ______ for shareholders. a. R&D b. returns c. losses d. profit minus taxes

b. returns

The 1997 World Trade Organization agreement opened the telecommunications market to foreign competitors and exemplifies how ___ are impacted by FDI. a. products b. service

b. service

The impact of psychological factors and investor expectations make it difficult for exchange rate theories to predict ______ changes in exchange rates. a. inefficient b. short-term c. stabilized d. long-term

b. short-term

The drawbacks of a ___-scale entry strategy include the inability to capture first-mover advantages. a. large b. small

b. small

Using a(n) ____-scale entry strategy to enter global markets, a firm can take time to gather information to determine if it should enter the market should on a more significant scale. a. large b. small

b. small

The companies unique to Japan that trade in a wide range of products and materials and act as intermediaries to identify export opportunities are called a. saga sushi. b. sogo shosha. c. MITI. d. kaizan.

b. sogo shosha.

An example of the pragmatic nationalist view is that the host country can gain in jobs and skills and the profits go to the ______ country. a. host b. source

b. source

Information systems, a(n) ______ activity, can track sales and price products, thereby helping the firm to gain a more competitive advantage. a. R&D b. support c. .primary d. production

b. support

When a country maintains a current account ___ it is unlikely to have to sell off assets in order to balance accounts. a. deficit b. surplus

b. surplus

For U.S. firms, the most comprehensive source of information on export opportunities is a. the Internet. b. the U.S. Department of Commerce. c. the international department of the firm's commercial bank.

b. the U.S. Department of Commerce.

Which is not a factor contributing to the rise of export activity in the world economy? a. modern communication b. the United Nations c. the World Trade Organization d. NAFTA e. the European Union

b. the United Nations

An international business can create value when bringing products to another country; however, this primarily depends on the attractiveness of the product being offered and a. the presence of factor endowments. b. the existence of competition. c. the current exchange rate. d. the Sullivan principle.

b. the existence of competition.

According to _____, top managers typically overestimate their ability to create value from an acquisition because they have an exaggerated sense of their own capabilities. a. the law of one price b. the hubris hypothesis c. factor endowments d. economies of scale

b. the hubris hypothesis

Granola Grains Corp. has asked that the contract with their new European partner include a provision to protect Granola Grains from the risk of opportunism. This provision protects them from a. unexpected costs that arise. b. the theft of technology. c. the placement of trade barriers. d. the risk of the partner not fulfilling the contract.

b. the theft of technology.

Select all that apply International businesses use foreign exchange markets for what three reasons? a. to invest in long-term financial instruments denominated in foreign currencies b. to pay a foreign company for its products or services in its country's currency c. to control prices in foreign markets d. to invest spare cash for the short term in money markets e. to convert foreign currencies it receives from transactions into its own currency

b. to pay a foreign company for its products or services in its country's currency d. to invest spare cash for the short term in money markets e. to convert foreign currencies it receives from transactions into its own currency

What are two limitations on exporting? a. licensing fees b. trade barriers c. transportation costs d. design costs

b. trade barriers c. transportation costs

Suppose a US company agrees to buy products worth 1 million euros. At the time of the agreement, the dollar/euro exchange rate was $1 = €1.10, but at the time of payment, the exchange rate is $1 = €0.80. The additional money owed by the US company due the adverse movement in exchange rates between the time of the deal and the time when payment is due is called ______ exposure. a. translation b. transaction c. financial d. economic

b. transaction

While a localization strategy may give a firm a competitive edge, in order to reduce its cost structure a company might need to shift to a(n) ______ strategy where it can maintain its emphasis on responding to local needs and at the same time respond to cost pressures. a. international b. transnational c. global standardization

b. transnational

FDI theory suggests that exporting is preferable to licensing and FDI as long as what two things are in place? a. distribution costs are low b. transportation costs are low c. production costs are high d. trade barriers are low

b. transportation costs are low d. trade barriers are low

Due to a lack of ______, special mechanisms for financing exports and imports have been created to deal with conducting transactions with strangers. a. empathy b. trust c. enthusiasm d. conflict

b. trust

XYZ Company asked an international trade partner to pay for goods prior to delivery. XYZ Company was not fully aware of the company's background and wanted to be sure that it got paid. This is an example of why the lack of ______ has resulted in the development of special mechanisms for financing exports and imports. a. wariness b. trust c. cynicism d. understanding

b. trust

Performing activities that increase the value of goods or services to consumers refers to a. strategic positioning. b. value creation. c. profit growth. d. differentiation. e. value pricing.

b. value creation.

The main focus of FedEx's strategy is a. supply chain management. b. value creation. c. transportation. d. logistics. e. on-time delivery.

b. value creation.

When a government intervenes in cross-border trade by implementing a trade barrier, it ______ the link between relative price changes and changes in exchange rates predicted by PPP theory. a. maintains b. weakens c. strengthens

b. weakens

If a high-tech firm wants to set up operations in a foreign country in order to profit from a core competency in technological know-how, it will typically do this by establishing a(n) ______ as a way to protect their technological advantage. a. turnkey operation b. wholly owned subsidiary c. joint venture d. franchise

b. wholly owned subsidiary

Select all that apply The theories of FDI try to show: (Check all that apply.) a. why firms neither avoid exporting and licensing nor enter the same markets as their competitors. b. why competitive firms often enter the same markets at the same time. c. why firms use a combination of avoiding exporting and licensing and entering the same markets as their competitors. d. why firms don't use exporting and licensing to enter foreign markets.

b. why competitive firms often enter the same markets at the same time. c. why firms use a combination of avoiding exporting and licensing and entering the same markets as their competitors. d. why firms don't use exporting and licensing to enter foreign markets.

German and Japanese firms are viewed as having a _____ advantage in exporting compared to US firms. bigger smaller

bigger

By acquiring an established enterprise, a firm can rapidly ________________________________.

build its presence in the foreign market

Small-scale entry gives the firm time to collect information, but it may make it more difficult for the firm to _______________.

build market share or capture first-mover advantages

Forward exchange rates are exchange rates that govern _____ transactions. a. current b. supply c. spot d. future

d. future

When a country's money supply grows faster than the output of goods and services, this causes a. recession. b. depression. c. arbitration. d. inflation.

d. inflation.

The ___ paradigm is based on the way location affects the direction of a company's foreign direct investment.

eclectic

The ____ of FDI is the amount of FDI attempted over a period of time (usually one year).

flow

a(n) ___ draft is payable on presentation to the drawee.

sight

As the pressure to reduce costs increases, a firm will focus on location and experience curve economies. These firms would MOST LIKELY consider franchising and joint ventures entry modes. True False

False

Government intervention in the foreign exchange markets does NOT affect the ability of PPP in predicting exchange rate movements. True False

False

Like transaction exposure, economic exposure is concerned with the effect of exchange rates changes on individual transactions, most of which are short-term situations. True False

False

True or false: An acquisition is considered beneficial because it effectively reduces the number of businesses in a market. True False

False

True or false: Based on the basic strategy paradigm, In order to maximize its profitability, a firm can invest in any of the positions found on the efficiency frontier. True False

False

As an early entrant into the German market, Jason's company made several significant and expensive mistakes. Jason underestimated the financial liability the company would face as a foreign firm. This liability is an example of a. pioneering costs. b. economies of scope. c. greenfield investments. d. first-mover advantages.

a. pioneering costs.

A(n) ______ effect has occurred when a company's FDI of capital, technology, and management resources create a positive contribution to a host country that might not otherwise be available. a. resource transfer b. offshore production c. multipoint competition d. surplus account

a. resource transfer

The only way a country can support a current account deficit, also known as a trade deficit, in the long-run is to _____. a. sell off assets to foreigners b. obtain a loan from a subsidiary c. file for bankruptcy d. make licensing agreements

a. sell off assets to foreigners

The rise of regionalism is particularly evident in a. the European Union. b. Africa. c. the Middle East. d. Latin America.

a. the European Union.

The World Trade Organization has based the majority of its efforts on pushing for the liberalization of regulations governing ______. a. the service industry b. location economies c. product manufacturing d. ownership restraints

a. the service industry

Many acquisitions fail because ___________________________________

anticipated synergies run into roadblocks and take longer to realize than planned

What percentage of the world's consumers live outside the United States? a. about 50% b. 95% c. 75% d. 80% e. about 40%

b. 95%

The bill of lading serves what three purposes? (Check all that apply.) a. A credit letter b. A contract c. A receipt d. A document of title e. A time stamp

b. A contract c. A receipt d. A document of title

________ exposure is the risk, faced by companies involved in international trade, that currency exchange rates will change after the companies have already entered into financial obligations. Such exposure to fluctuating exchange rates can lead to major losses for firms. a. Economic b. Transaction c. Translation d. Financial

b. Transaction

When determining whether or not to engage in a business in a foreign country, analysts should consider that future economic growth rates within any country are a function of both ______ and ______. (Check the two that apply.) a. international law b. a country's capacity for growth c. foreign exchange rates d. a free market system

b. a country's capacity for growth d. a free market system

The stock of foreign direct investment refers to the total a. amount of foreign investment made in manufacturing. b. accumulated value of foreign-owned assets at a given point in time. c. amount of imports into a country. d. amount of FDI undertaken over a year.

b. accumulated value of foreign-owned assets at a given point in time.

What is the transaction called where two parties agree to exchange currency at some specific date in the future? a. Forward exchange b. Swap exchange c. Spot exchange d. Parity exchange

a. Forward exchange

The draft, sometimes called the _____ is used in international commerce to effect payment. a. bill of exchange b. bill of lading c. letter of credit d. credit invoice

a. bill of exchange

Which document indicates that the carrier has received the merchandise described in the document? a. bill of lading b. sight draft c. time draft d. letter of credit

a. bill of lading

Tyson is a trader and borrows money in Japanese yen (where the interest rate is 1%). He then invests the money in a Canadian bank, where the rate is 5%. This is an example of a(n) ______. a. carry trade b. licensing agreement c. spot exchange d. greenfield venture

a. carry trade

If a payment is made before products are shipped, an importer may be concerned about what two things? a. not receiving the product b. receiving the product too quickly c. receiving a defective product d. insufficient funds in the account

a. not receiving the product c. receiving a defective product

Because of political unrest, armed conflict, and frequent changes in economic policy, this region has typically received the smallest amount of inward investment. a. Central America b. Latin America c. Southeast Asia d. Africa

d. Africa

Which type of control of exposure is MOST effective at protecting resources efficiently and ensuring that each subunit adopts the correct mix of tactics and strategies? a. Bottom-up b. Formalized c. Decentralized d. Centralized

d. Centralized

______ are the metrics used to measure the performance of subunits. a. Statistics b. Processes c. Incentives c

d. Controls

What is a reciprocal form of international trade in which goods or services are exchanged for other goods or services, rather than for hard currency? a. Dumping b. Arbitrage c. Credit swap d. Countertrade

d. Countertrade

Which department of the US federal government provides the most comprehensive source of information regarding export opportunities? a. Federal Trade Regulations Office b. The Food and Drug Administration c. Department of Homeland Security d. Department of Commerce

d. Department of Commerce

Connor runs a small business and is interested in exporting his product to Ireland, but he needs some advice on the legal issues this would entail. Which organization would provide him with a free initial consultation for his legal questions? a. USDC b. MITI c. FDA d. ELAN

d. ELAN

Sunny Soups has never exported their products before but would like to start. What company can provide Sunny Soups with a full menu of services to handle all aspects of their exporting needs? a. TQM b. ROI c. JIT d. EMC

d. EMC

What is the term used for when one company enters markets before its competitors? a. Complacent entry b. Late entry c. Concurrent entry d. Early entry

d. Early entry

When Crane Automotive Group developed operations in Italy, it not only built a manufacturing plant there but also imported parts from several other European nations. Which home country benefit of FDI does this represent? a. Learning effects b. Location effects c. Payment effects d. Employment effects

d. Employment effects

BMW is increasing production capacity in its U.S. operations in order to be able to respond to growing demand for its brand. Which best describes BMW's U.S. operations? a. acquisition b. joint venture c. licensing agreement d. Greenfield investment e. merger

d. Greenfield investment

______ refer(s) to the cost savings that result from increased production levels once efficiencies are in place. a. Experience curve b. Production efficiencies c. Economies of scale d. Learning effects

d. Learning effects

What strategy increases the value of a product in the local market through customization that allows for tastes and preferences in different national or regional markets? a. Transnational b. International c. Global standardization d. Localization

d. Localization

Which type of draft should a company use if it wants immediate payment from the drawee upon receipt? a. Time draft b. Line draft c. Mark draft d. Sight draft

d. Sight draft

______ are the Japanese trading houses that work with their affiliated companies to identify export opportunities. a. ELAN b. Kaisha roku c. SCORE d. Sogo shosha

d. Sogo shosha

The Export-Import Bank was chartered by the _____. a. Federal Reserve b. European Union c. United Nations d. US government

d. US government

What country has been the largest source of FDI since World War II? a. United Kingdom b. France c. China d. United States

d. United States

Borrowing in a currency from a country with low interest rates and then investing in another currency where interest rates are high is called ______. a. a forward exchange b. arbitrage c. a spot exchange d. a carry trade

d. a carry trade

Knickerbocker would say that in an oligopoly, if one firm decides to raise prices, then other firms would a. introduce more products. b. lower prices. c. eliminate more products. d. also raise prices.

d. also raise prices.

Companies that follow a global standardization strategy a. address differences in local cultures. b. focus on customizing their products. c. use regional marketing approaches. d. avoid customizing their products.

d. avoid customizing their products.

Expectations becoming a self-fulfilling prophecy when currency traders move in the same direction at the same time is called the ______ effect. a. Fisher b. inflation c. parity d. bandwagon

d. bandwagon

The ______ is a document issued to the exporter by the common carrier transporting the merchandise and acts as a receipt of goods. a. dividend b. time draft c. letter of credit d. bill of lading

d. bill of lading

When a firm agrees to build a plant in a country or supplies technology, equipment and/or training, and then agrees to take some of the plant's output as partial payment, the firm is engaging in a(n) ______. a. barter b. offset c. switch trade d. buyback

d. buyback

Earnings from a foreign subsidiary to the parent company are recorded as ______ on the balance-of-payments accounts. a. current account outflow b. current account inflow c. capital inflow d. capital outflow

d. capital outflow

Offset is superior to straight counterpurchase because a(n) a. bank can control the collateral. b. FCIA insures the exchanges. c. country can restrict what can be sold. d. company can choose the goods it wants.

d. company can choose the goods it wants.

A major disadvantage of ______ is that firms might be paid in unsaleable or shoddy products instead of hard currency, which the firm would prefer. a. joint ventures b. importing c. exporting d. countertrade

d. countertrade

FedEx's revamped global strategy is designed to a. create savings through lower cost production. b. eliminate confusion by offering standardized service. c. lower prices on all services. d. create value for the customer. e. follow a one-size-fits-all approach

d. create value for the customer.

Phase Two Athletics is located in the United States. The company would like to export to Italy but preliminary meetings with representatives from Italy have proven difficult. The representatives don't understand the value of the company's fitness gear because they feel most Italians prefer to exercise at a health club where the gear is provided. What impediment to exporting is Phase Two Athletics facing? a. time b. distance c. language d. culture

d. culture

An investment made to profit from future currency movements is called a. currency weighting. b. exchange risk. c. currency conversion. d. currency speculation.

d. currency speculation.

Some countries prohibit national firms from investing in specific countries for ______ reasons, such as US firms being prohibited from investing in Cuba during the Cold War. a. economic b. social c. religious d. political

d. political

When $1 buys more lira with a forward exchange than with a spot exchange, it is said that the dollar is selling at a _____ on the 30-day forward market. a. discount b. hedge c. spot d. premium

d. premium

A business ______ is the manner in which decisions are made in a company. a. value b. incentive c. control d. process

d. process

By using a Swede to answer calls, Sweden a. creates much needed jobs for unemployed Swedes.is able to be quicker to market. b. avoids the costs associated with a marketing agency. c. eliminates the middleman. d. provides a richer and more authentic picture of the country for callers.

d. provides a richer and more authentic picture of the country for callers.

The Export Legal Assistance Network is comprised of international ______ who provide free initial consultations to small businesses on export-related matters. a. marketing consultants b. management personnel c. cost accountants d. trade attorneys

d. trade attorneys

As noted in the text, a business like Caterpillar should follow the ______ strategy because it is under pressure to reduce costs and be locally responsive. a. localization b. global standardization c. international d. transnational

d. transnational

The difference between a firm's production costs and the value consumers perceive in its products is called ______. a. strategic fit b. core competence c. absolute advantage d. value creation

d. value creation

A form of FDI, other than greenfield investments, is to a. purchase 25% of the stock of a foreign company on the open market. b. acquire or merge with an existing company in the foreign country. c. purchase a seat on the board of an existing company in a foreign country. d. set up a branch of their existing business in the home country.

b. acquire or merge with an existing company in the foreign country.

When a company decides that it will take too long to establish a sizable presence in a country, it will likely use ______ to enter the country. a. greenfield venture b. an acquisition

b. an acquisition

When a firm invests in plant, equipment, and R&D as a result of increased competition, this is referred to as a(n) ______ investment. a. float b. capital c. dividend d. equity

b. capital

Residents of the hypothetical nation of Jarna feared that the country's economy was failing. They rushed to convert their domestic currency into US dollars and investors in businesses in Jarna also converted their financial holdings. This mass conversion of currency is known as _____. a. translation exposure b. capital flight c. arbitration d. countertrade

b. capital flight

Tyson is a trader and borrows money in Japanese yen (where the interest rate is 1%). He then invests the money in a Canadian bank, where the rate is 5%. This is an example of a(n) ______. a. spot exchange b. carry trade c. greenfield venture d. licensing agreement

b. carry trade

When the logistics function is carried out efficiently, it can create value because it lowers a. inventory. b. costs. c. productivity. d. effectiveness.

b. costs.

A drawback of ______ is that unusable or poor quality goods may be exchanged in place of payment of currency. a. arbitrage b. countertrade c. a sight draft d. customs brokers

b. countertrade

When General Electric won a contract for a $150 million generator project in Romania, it agreed to take payment in the form of Romanian goods that could be sold for $150 million on international markets. This is an example of a. currency conversion. b. countertrade. c. a spot exchange rate. d. arbitrage.

b. countertrade.

Organizational ______ encompasses the norms and value systems that are shared among the employees of a business. a. strategy b. culture c. process d. structure

b. culture

The experience curve relationship is for ______ output over time. a. open b. cumulative c. relative d. fixed

b. cumulative

It would be difficult to profit through arbitrage because the ______ for a currency would increase when dealers try to profit from exchange rate discrepancies leading to ______ of that currency, and the price differential would disappear. a. demand; depreciation b. demand; appreciation c. supply; depreciation d. supply; appreciation

b. demand; appreciation

In theory, if a country's price inflation is rising rapidly, it should expect to see its currency ____ against that of countries in which inflation rates are lower. a. appreciate b. deprecate

b. deprecate

If the demand for the yen outstrips its availability and if the supply of the dollar outweighs the demand, the yen will _____ against the dollar. a. appreciate b. depreciate

b. depreciate

A lead strategy occurs when a firm attempts to collect foreign currency receivables early when a currency is expected to ______ and pay foreign currency payables before they are due when a currency is expected to ______. a. depreciate; depreciate b. depreciate; appreciate c. appreciate; depreciate d. appreciate; appreciate

b. depreciate; appreciate

Select all that apply What are two disadvantages of small-scale entry? . a. lack of competitors in market b. difficult to build market share c. difficult to capture first-mover advantages d. lack of flexibility

b. difficult to build market share c. difficult to capture first-mover advantages

The 2,000 employees working in Toyota's factory in France are an example of the ______ effect of FDI on employment, while the 2,000 new jobs that were created in support industries are an example of the ______ effect of FDI on employment. a. indirect, positive b. direct, indirect c. indirect, direct d. direct, negative

b. direct, indirect

In a forward exchange transaction, $1 buys more lira with a spot exchange than with a 30-day forward exchange. When this occurred, it is said that the dollar is selling at a _____ on the 30-day forward market. a. hedge b. discount c. premium d. spot

b. discount

Company A is based in Europe and does a large amount of business in the US. The company fears that the euro will gain in strength against the dollar, so it sets up a local production facility in the United States. This is a way to reduce ______ exposure. a. transaction b. economic c. political d. translation

b. economic

The extent to which a firm's future international earning power will be affected by exchange rate changes is called ______ exposure. a. political b. economic c. transaction d. translation

b. economic

The ______ is the name given to all of the different positions a firm can adopt regarding adding value and lowering the cost of a product. a. value chain b. efficiency frontier c. purchasing parity d. experience curve

b. efficiency frontier

A drawback of Knickerbocker's theory is its failure to address a. tariffs. b. efficiency. c. unions. d. trade.

b. efficiency.

The shift toward more democratic political institutions and free market economies has _____ foreign direct investment. a. discouraged b. encouraged c. flattened

b. encouraged

Quick Auto Parts does not want to establish a manufacturing facility in Mexico but does want to get component parts to the 75 dealers it has in that country. Which form of entry should it use? a. licensing b. exporting c. acquisition d. turnkey project

b. exporting

If your proprietary know-how of "green" processes is difficult to transfer to other firms, the most effective approach would be a. foreign direct investment or licensing. b. exporting or foreign direct investment. c. licensing or exporting.

b. exporting or foreign direct investment.

The extent to which income from individual transactions is affected by fluctuations in foreign exchange values is known as transaction ______. a. exchange b. exposure c. forecasting d. insurance

b. exposure

A policy of ______ convertibility is in place in some countries and places restrictions on residents' ability to convert domestic currency into a foreign currency. a. internal b. external

b. external

FedEx is trying to increase its profitability by a. cutting prices on all standard shipping. b. increasing the number of countries and markets it serves. c. offering a range of services to its customers. d. reducing the number of countries and markets it serves. e. price-matching against major competitors.

c. offering a range of services to its customers.

The text defines ______ as not only individuals, but the ability to recruit, compensate, and keep employees. a. controls b. processes c. people d. resources

c. people

What two types of competitive pressures do companies typically face when entering global markets which affect their ability to realize location economies and leverage products? (Check all that apply.) a. pressure to use foreign currency b. pressure to use local employees c. pressure to reduce costs d. pressure to be locally responsive

c. pressure to reduce costs d. pressure to be locally responsive

The decision to establish a call-in number for tourists to learn more about Sweden can be considered a(n) _____ approach to exporting. a. inventive b. reactive c. proactive d. high-risk e. timid

c. proactive

When discussing value creation, a low-cost strategy focuses primarily on lowering ______ costs. a. accounting b. sales c. production d. marketing

c. production

The rate of return that a business makes on its invested capital determines its ______. a. production b. debt c. profitability d. liability

c. profitability

The _____ view of foreign direct investment has its basis in Marxist theory. a. free market b. pragmatic nationalism c. radical d. laissez faire

c. radical

Nova Industries has created a new product to hold television monitors for commercial applications such as restaurants and airports. Which primary activity would have been involved with this creative process? a. customer service b. human resources c. research and development d. sales forecasting

c. research and development

A(n) ______ is a method or plan a company uses to bring about a desired result, such as achievement of a goal or solution to a problem a. mission b. objective c. strategy d. vision

c. strategy

Critics argue that not all new jobs created by FDI represent net additions in employment. This is due to the _____ effect where some jobs created are offset by jobs lost elsewhere. a. income b. segmenting c. substitution b. marginal

c. substitution

The Fisher effect equates the nominal interest rate as a. the required real interest rate x (1 - the marginal tax rate). b. the required real interest rate - expected rate of inflation. c. the required real interest rate + expected rate of inflation. d. the required real interest rate x (1 - the marginal inflation rate).

c. the required real interest rate + expected rate of inflation.

When considering the three basic decisions a firm must make when it decides to enter a foreign market, it must determine the market to enter, the timing of entrance, and a. the partner. b. facility location. c. the scale. d. finance options.

c. the scale.

Capital flight is most likely to occur when a. residents are unable to freely convert their currency. b. outside investors replace local workers with expatriates. c. the value of domestic currency is rapidly depreciating. d. a country trades goods and services for other goods and services.

c. the value of domestic currency is rapidly depreciating.

The preference for right-hand-driven cars in Britain as compared to the demand for left-hand-driven cars in France is an example of how ______ create(s) pressure for local responsiveness. a. government regulations b. distribution channels c. traditional practices d. infrastructure

c. traditional practices

Consumers demonstrate ______ needs when the preferences of people in different countries are similar, if not exactly the same. a. exchange b. heterogeneous c. universal d. customized

c. universal

The CIBER network provides a link between the human resource and technology needs of a company with the research capacities and language training found at _____. a. the United Nations b. competitors c. universities d. government think tanks

c. universities

The United States CIBER initiative fosters exporting needs by bringing together US companies and _____. a. currency rates b. consumers c. universities d. foreign companies

c. universities

As pressures for cost reductions increase, the two most appropriate foreign market entry modes would be (Check all that apply.) a. franchising. b. joint ventures. c. wholly owned subsidiary. d. exporting.

c. wholly owned subsidiary. d. exporting.

A company can achieve economies of scale by spreading fixed costs over a ___ volume. small large

large

An unstable government in a foreign country would make a company _____ to move its production facilities to that country. more likely less likely

less likely

Acquisitions are considered _____ (slow or quick?) to execute. quick slow

quick

One way a government can limit the amount of imports coming into a country is by imposing franchises. acquisitions. quotas. subsidies.

quotas.

Strategic commitments, like ___________________, can have an important influence on the nature of competition.

rapid large-scale market entry

Commercial banks are more willing to lend cash to foreign enterprises when the Ex-Im Bank guarantees the transaction. .True False

true

The effect of currency exchange rate changes on the reported financial statements of companies is called ______ exposure. transaction translation

translation

Following a _____ strategy can pit two conflicting goals against each other: differentiating products versus achieving cost reductions. transnational standardization

transnational

Rank the vehicle currencies based on their level of use. Place the currency with the greatest use at the top of the list and each subsequently-used currency below that. a. euro b. pound c. dollar d. yen

1. dollar 2. euro 3. yen 4. pound

Rita knows that every euro she plans to purchase for her trip is worth 1.30 US dollars. What aspect of currency conversion is Rita considering?

Exchange rate

Avoids the substantial costs of establishing manufacturing operations, but has high transportation costs

Exporting

__________________________is the most appropriate strategy when there are substantial differences across nations with regard to consumer tastes and preferences, and where cost pressures are not too intense.

Localization strategy

Identical products sold in different countries must sell for the same price in competitive markets when their price is expressed in terms of the same currency. This is called the law of ___ ___.

One Price

Exports only account for a small percentage of US business for which two reasons? a .Companies are intimidated by language, culture and currency differences. b. Companies have no exposure to competitors. c. Companies are uncomfortable with tax burdens. d. Companies are unfamiliar with opportunities.

a .Companies are intimidated by language, culture and currency differences. d. Companies are unfamiliar with opportunities.

What are three ways the human resource function helps create value for a firm? (Check all that apply.) a. It can boost the competitive position of the firm. b. It can ensure cost savings by combining the logistics system and the information system. c. It ensures that people are adequately trained, motivated, and compensated. d. It ensures the company has the right mix of skilled people. e. It determines the flow of materials from start to finish.

a. It can boost the competitive position of the firm. c. It ensures that people are adequately trained, motivated, and compensated. d. It ensures the company has the right mix of skilled people.

What are two characteristics of the eclectic paradigm? Choose all that apply. a. It provides a single holistic explanation of foreign direct investment b. It combines the best aspects of other theories of foreign direct investment into a single explanation c. It offers a good explanation of foreign direct investment in the 1980s and 1990s but is less successful at explaining more recent investment d. It argues that the key question of foreign direct investment is whether to choose a greenfield investment or an acquisition

a. It provides a single holistic explanation of foreign direct investment b. It combines the best aspects of other theories of foreign direct investment into a single explanation

The most important foreign exchange trading center is ______ with 37% of the activity. a. London b. New York c. Tokyo d. Singapore

a. London

What are three advantages of a joint venture? (Check all that apply.) a. Lowers risk of adverse government response b. Shared development costs and risks c. Receive dividends on shared intellectual property d. Local partner's knowledge of the host country e. Lack of tight control over partner

a. Lowers risk of adverse government response b. Shared development costs and risks d. Local partner's knowledge of the host country

Select two ways a firm can create more value. (Check all that apply.) a. Make product more attractive to consumer b. Lower production costs c. Increase production levels d. Demonstrate foreign awareness

a. Make product more attractive to consumer b. Lower production costs

What are two advantages of exporting? (Check all that apply.) a. Not having to establish manufacturing operations in host country b. Having complete control over the distribution channels c. Selling directly to the final consumer d. Helps a firm achieve experience curve and location economies

a. Not having to establish manufacturing operations in host country d. Helps a firm achieve experience curve and location economies

What are three disadvantages of exporting? (Check all that apply.) a. Not taking advantage of location economies associated with manufacturing elsewhere b. High transportation can raise price of product c. Opportunity to save money by not having to develop overseas operations d. Tariff barriers can make exporting uneconomical e. Potential for losing proprietary knowledge

a. Not taking advantage of location economies associated with manufacturing elsewhere b. High transportation can raise price of product d. Tariff barriers can make exporting uneconomical

What two measures can countries employ to restrict foreign direct investment? (Check all that apply.) a. Performance requirements b. Low-interest loans c. Tax concessions d. Ownership Restraints

a. Performance requirements d. Ownership Restraints

What are three disadvantages of greenfield ventures? (Check all that apply.) a. Preemption by other competitors b. Consistent profits c. Slower to establish d. Risky to establish e. Lack of location economies

a. Preemption by other competitors c. Slower to establish d. Risky to establish

______ is the expression of a common sense of identity that shapes collective action within a geographical region. a. Regionalism b. Neologism c. Ethnocentrism d. Realism

a. Regionalism

Which organization oversees volunteers who have international trade experience and who use this experience to provide one-on-one counseling to active and new export businesses? a. Service Corps of Retired Executives b. Department of Commerce c. International Monetary Fund d. World Trade Organization

a. Service Corps of Retired Executives

Firms engage in strategic alliances for what three reasons? (Check all that apply.) a. To facilitate entry into a foreign market b. To bring together complementary skills c. To develop competing skill sets d. To share fixed costs of developing new products e. To obtain control in the domestic market

a. To facilitate entry into a foreign market b. To bring together complementary skills d. To share fixed costs of developing new products

True or False: Though there are many advantages to acquisitions, acquisitions often produce disappointing results. a. True b. False

a. True

What are two situations when a localization strategy is best utilized? (Check all that apply.) a. When cost pressures are not intense b. When there are large differences across nations in tastes and preferences c. When there is potential for economies of scale d. When it is most profitable to offer a standardized product

a. When cost pressures are not intense b. When there are large differences across nations in tastes and preferences

Bob's Bicycle Company is planning to enter into foreign markets where there are already well-established incumbent enterprises and in which global competitors are also interested in establishing a presence. Based on these circumstances, Bob's Bicycle Company should enter the foreign markets via ______. a. acquisition b. greenfield venture

a. acquisition

Prior to purchasing a foreign company, it is imperative that the potential buyer screens the financial position and management culture of the foreign company and obtains a detailed audit of operations. These are all vital steps in the ______ strategy. a. acquisition b. timing of entry c. licensing d. franchising

a. acquisition

A lag strategy occurs when a firm attempts to delay the collection of foreign currency receivables when a currency is expected to ______ and delay foreign currency payables when a currency is expected to ______. a. appreciate; depreciate b. depreciate; appreciate c. appreciate; appreciate d. depreciate; stay constant

a. appreciate; depreciate

According to pragmatic nationalism, FDI should be allowed as long as a. benefits outweigh costs. b. a company is an oligopoly. c. location economies exist. d. there is a comparative advantage.

a. benefits outweigh costs.

When selecting a strategic alliance partner a firm should a. collect information from investment bankers that have had dealings with potential partners. b. ignore the comments of informed third parties unless senior management has prior experience with the individual. c. avoid face-to-face meetings between senior managers until the deal is finalized. d. discredit publicly-available information on potential allies and focus only on primary data.

a. collect information from investment bankers that have had dealings with potential partners.

Toyota's superior production and logistics functions allow it to produce high-quality, well-designed cars at a lower delivered price than other firms. These are examples of a. core competencies. b. subsidies. c. factor endowments. d. greenfield ventures.

a. core competencies.

A(n) ______ is based on the theory that prices don't reveal all available information and more is needed to predict future spot exchange rates. a. inefficient market b. efficient market c. customs union d. economic union

a. inefficient market

For many years, Xerox had a monopoly on photocopiers. It could sell world-wide with little customization. Xerox was able to use a(n) ______ strategy. a. international b. global standardization c. transnational d. localization

a. international

When a firm faces neither low cost pressures nor pressures for local responsiveness, it should follow the ______ strategy. a. international b. global standardization c. transnational d. localization

a. international

Higher risk and lack of flexibility are drawbacks of ___ -scale a. large b. small

a. large

When entering a global market using a(n) ___ -scale entry strategy, a firm may be able to capture first-mover advantages associated with scale economies. a. large b. small

a. large

Conrad's US based company entered the European market long after its competitors had established themselves. This is known as ________ entry. a. late b. cautious c. noncompetitive d. delayed

a. late

A(n) _____strategy is when a firm attempts to collect foreign currency receivables early when a currency is expected to depreciate and pay foreign currency payables before they are due when a currency is expected to appreciate. a. lead b. lag

a. lead

As management understands how to more effectively manage an operation, production costs are likely to decrease. These decreased costs are the result of _____. a. learning effects b. mass production c. economies of scale d. JIT inventory

a. learning effects

Pressures for local responsiveness can impact a company's strategy by decreasing or eliminating the full benefits from what three things? a. learning effects b. forward exchange rates c. capital markets d. location economies e. economies of scale

a. learning effects d. location economies e. economies of scale

Late entrants to a market can benefit from the pioneering costs associated with early entry. What are two of those benefits? a. learning from the mistakes made by early entrants b. control of existing resources c. building on existing consumer education about the product d. minimizing brand recognition and customization

a. learning from the mistakes made by early entrants c. building on existing consumer education about the product

What are three advantages of acquisitions? a. less risky than greenfield ventures b. guaranteed first-mover advantage c. quick to execute d. lower cost than exporting e. preempt the competition

a. less risky than greenfield ventures c. quick to execute e. preempt the competition

The main advantage of the ________ is that both parties are likely to trust a reputable bank even if they do not trust each other. a. letter of credit b. bill of exchange c. bill of lading d. time draft

a. letter of credit

Internalization theory is used to explain why a firm would prefer foreign direct investment over ______ as a strategy to enter a foreign market. a. licensing b. a greenfield investment c. franchising d. an acquisition

a. licensing

The benefits of franchising are similar to the benefits of ______. a. licensing b. a turnkey operation c. a greenfield venture d. arbitrage

a. licensing

If a firm's know-how, skills, and capabilities can be protected by contract, and if tight control over foreign operations is not vital to remain competitive, and there are reasons to believe that additional costs through transportation or tariffs would be high, the most effective approach would be a. licensing. b. foreign direct investment. c. exporting.

a. licensing.

When firms customize their products to meet tastes and preferences for different national markets they are following a(n) ________ strategy. a. localization b. international c. global standardization d. transmarket

a. localization

The ability of an individual, company, or economy to conduct an activity better than another for reasons related to location is called a(n) a. location-specific advantage. b. endowment-specific advantage. c. resource-specific advantage. d. asset-specific advantage.

a. location-specific advantage.

Exporting strategy does not work for a(n) ____ value-to-weight ratio product that can be produced anywhere. a. low b. high

a. low

The increase in competition in the national telecommunications market that resulted from the 1997 World Trade Organization agreement resulted in several benefits, including which two of the following? a. lower prices b. increased exports c. modernization of telephone networks d. broader customer contracts

a. lower prices c. modernization of telephone networks

The ______ is the person or business who initiates a draft or bill of exchange during the exporting process. a. maker b. payee c. bank d. drawee

a. maker

Historically, countries like Iran and India that are more ______ than ______ have favored the radical position that FDI is bad. a. nationalistic; socialistic b. liberal; conservative c. socialist; nationalistic

a. nationalistic; socialistic

Profit growth is defined as the percentage increase in ______ over time. a. net profits b. gross income c. shareholder value d. loan debt

a. net profits

What is the main reason exporting is preferred by such a large portion of companies using the global marketplace? a. there are fewer government regulations involving exporting than other forms of entry small- and medium-sized companies view exporting as a relatively low commitment to gaining global distribution b. export tariffs are limited to non-consumer products and keep prices low c. big business can take advantage of first-mover advantages d. there are fewer government regulations involving exporting than other forms of entry

a. there are fewer government regulations involving exporting than other forms of entry small- and medium-sized companies view exporting as a relatively low commitment to gaining global distribution

Firms should only rely on what four things to predict exchange rate movements? . a. transaction and translation exposure b. establishing good reporting systems c. forecasting future exchange rates d. availability of spillover knowledge e. monthly foreign exchange exposure reports f. distribution of productive assets

a. transaction and translation exposure b. establishing good reporting systems c. forecasting future exchange rates e. monthly foreign exchange exposure reports

In which entry mode, does a firm own 100% of the stock? a. wholly-owned subsidiary b. exporting c. joint venture d. licensing or franchising

a. wholly-owned subsidiary

What are three disadvantages to licensing for the licensor? (Check all that apply.) a. A licensor gets royalty payments for providing access to intangible property. b. A licensor can lose control over its technology by licensing it. c. A licensor does not have control over manufacturing, marketing and strategy. d. Licensing limits the ability to coordinate strategic moves across several countries.

b. A licensor can lose control over its technology by licensing it. c. A licensor does not have control over manufacturing, marketing and strategy. d. Licensing limits the ability to coordinate strategic moves across several countries.

What is the biggest advantage of using an EMC? a. Minimizing overall export costs b. Access to experienced specialists c. Organizing managerial hierarchy d. Providing extensive tax relief

b. Access to experienced specialists

What are the two main types of FDI? (Check all that apply.) a. Developing a new operation in the domestic market b. Acquisition or merger with an existing foreign firm c. Establishing a new operation in a foreign market d. Divesting a strategic business unit

b. Acquisition or merger with an existing foreign firm c. Establishing a new operation in a foreign market

______ is the direct exchange of goods between two parties without a cash transaction. a. Buyback b. Barter c. Offset d. Counterpurchase

b. Barter

Organizational structure incorporates what three things? (Check all that apply.) a. Availability of competitive analysis b. Formal division of organization into subunits c. Integrating mechanisms to coordinate subunit activities d. Outside audits of foreign investments e. Location of decision-making responsibilities within the structure

b. Formal division of organization into subunits c. Integrating mechanisms to coordinate subunit activities e. Location of decision-making responsibilities within the structure

The failure to find a link between which two of the following conditions has been referred to as the purchasing power parity puzzle? . a. Tax rates b. Inflation rates c. Exchange rates d. Production rates

b. Inflation rates c. Exchange rates

Which of the following is a huge barrier to exporting for small and medium-sized firms? a. Not having enough capacity to meet demands that would result from exporting. b. Not knowing how big and where the opportunities are for exporting. c. Having to rely on others, including outside experts and business owners in other countries to learn about exporting opportunities

b. Not knowing how big and where the opportunities are for exporting.

Universal needs exist with which two categories of products? (Check all that apply.) a. Sports apparel for local teams b. Personal computers and hand held calculators c. Bulk chemicals, petroleum and steel d. High fashion clothing

b. Personal computers and hand held calculators c. Bulk chemicals, petroleum and steel

______ costs arise when the foreign business system is so different from that in the home market that the firm must devote considerable time, effort and expense to learning the rules of the game. a. Localization b. Pioneering c. Arbitrage d. Late-entry

b. Pioneering

Novice companies have significant problems when trying to do business abroad. What are three pitfalls these companies often run into which makes them hesitant to export in the future? (Check all that apply.) a. Exposure to transportation b. Poorly executed promotional campaign c. Achieving economies of scale d. Failure to customize product to foreign customer e. Difficulty securing financing

b. Poorly executed promotional campaign d. Failure to customize product to foreign customer e. Difficulty securing financing

What are three things included in an organization's architecture? (Check all that apply.) a. Productivity b. Processes c. Structure d. People

b. Processes c. Structure d. People

What are two long-term effects from increased competition? (Check all that apply.) a. High prices b. Product and process innovations c. Less economic growth d. Increased productivity growth

b. Product and process innovations d. Increased productivity growth

What are three ways becoming a multinational company can increase a firm's profitability? (Check all that apply.) a. Increase foreign exchange risk b. Realize greater cost economies c. Realize location economies d. Minimize factor endowments e. Expand the market for their domestic product

b. Realize greater cost economies c. Realize location economies e. Expand the market for their domestic product

Keeley works for an online clothing retailer and in her role she answers customer inquiries about product shipments and returns. Which primary activity is Keeley involved with? a. Marketing b. Service c. R&D d. Production

b. Service

Which statement about customer tastes and preferences in the global marketplace is accurate? a. Managers will soon be able to ignore differences in consumer tastes across national borders. b. Significant differences in consumer preferences still exist across nations and regions. c. Today, it is more common to find global preferences than regional differences in consumer tastes.

b. Significant differences in consumer preferences still exist across nations and regions.

Which three elements elements must all be consistent with each other for superior organizational performance to be attained? (Check all that apply.) a. Learning effects b. Strategy c. Market conditions d. Factor endowments e. Operations

b. Strategy c. Market conditions e. Operations

The three main disadvantages of turnkey projects include: (Check all that apply.) a. Franchising will become a problem. b. There is no long-term interest in the foreign country. c. Location economies are lost. d. They may lose the competitive advantage of their process technology. e. They may create competitors.

b. There is no long-term interest in the foreign country. d. They may lose the competitive advantage of their process technology. e. They may create competitors.

Suppose a company agrees to buy products in 2014 with payment due in 2015. ______ exposure refers to money lost due to an adverse movement in exchange rates between the time the deal is signed and the time when the products are paid for. a. Translation b. Transaction

b. Transaction

What are two problems associated with bartering? a. goods have to be exchanged within 48 hours to be considered equal trade b. goods have to be exchanged simultaneously or else one company may be subsidizing another c. one company gets to sell the goods early d. companies may have to accept goods that they don't want

b. goods have to be exchanged simultaneously or else one company may be subsidizing another d. companies may have to accept goods that they don't want

Slim-Stuff Yogurt would like to enter into a foreign market and build a production facility. The company knows there are currently no competitors or similar companies currently in that market. Which entry mode would be most appropriate for the company to use? a. joint venture b. greenfield venture c. acquisition d. exporting

b. greenfield venture

Starting a subsidiary from "scratch" where nothing is established is called a(n) a. acquisition. b. greenfield venture. c. merger. d. joint venture.

b. greenfield venture.

FDI occurs when a company invests in facilities a. that are adjacent to the home-country office. b. in a foreign country. c. that have spillover knowledge. d. in a competitor's region.

b. in a foreign country.

To motivate managerial performance, an organization might use a. arbitrage. b. incentives. c. targets. d. controls.

b. incentives.

When considering the international marketplace, small and medium-sized firms tend to a. tackle both the local and foreign markets at the same time with an expanded marketing plan. b. not pay attention to foreign markets; rather they focus on their energies on local market. c. address the needs of an expanded foreign market before they are established in their local market. d. be very proactive regarding foreign opportunities.

b. not pay attention to foreign markets; rather they focus on their energies on local market.

What is hyperinflation? a. A slow and controlled price inflation in which money gains value very slowly b. A slow and controlled price inflation in which money loses value very slowly c. An explosive and seemingly uncontrollable price inflation in which money loses value very rapidly d. An explosive price inflation in which money gains value very rapidly

c. An explosive and seemingly uncontrollable price inflation in which money loses value very rapidly

Why did many Asian countries turn to countertrade following the 1997 currency crisis? a. To increase their exports b. To replace the gold standard c. Because of a lack of hard currency d. Because they wanted the expertise of EMCs

c. Because of a lack of hard currency

If the interest rate in Canada is 6.5% and the interest rate in the US is 4%, the international Fisher effect predicts that a. the US dollar will become equal to the Canadian currency. b. US dollars will depreciate by 2.5% against the Canadian currency. c. Canada's currency will depreciate by 2.5% against the US dollar. d. Canada's currency will appreciate by 2.5% against the US dollar.

c. Canada's currency will depreciate by 2.5% against the US dollar.

______ generally occur(s) between companies that hold patents over different aspects of the same product. By entering into an agreement, both companies can avoid litigation over infringement disputes. a. Export limitations b. Greenfield investments c. Cross-licensing d. Import restrictions

c. Cross-licensing

The Foreign Credit Insurance Association and the _____ are two forms of government-backed assistance in the United States that help finance export programs. a. United Nations b. Department of the Treasury c. Export-Import Bank d. Federal Deposit Insurance Corporation

c. Export-Import Bank

The Foreign Credit Insurance Association operates under the guidance of the a. International Monetary Fund b. Federal Reserve c. Export-Import Bank d. World Bank

c. Export-Import Bank

When a firm invests directly in a business or venture in another country, it is called ______. a. ISO b. JIT c. FDI d. WTO

c. FDI

What three factors help a company determine which entry mode is most appropriate? (Check all that apply.) a. Brand equity b. Personnel hierarchy c. Firm strategy d. Transportation costs e. Trade barriers

c. Firm strategy d. Transportation costs e. Trade barriers

Greenfield investing spurs competition by increasing the number of players in a market and this will tend to _____ prices and ______ economic welfare a. increase, lower b. lower, lower c. lower, increase d. increase, increase

c. lower, increase

The _____ program organized by the Department of Commerce provides representatives who accompany groups of U.S. businesses abroad to meet with qualified agents, distributors, and customers. a. diversification b. benchmark c. matchmaker

c. matchmaker

A study of FDI by the Organization for Economic Cooperation and Development (OECD) found which two results? (Check all that apply.) a. Firms did not create new technology in countries in which they invested. b. Firms did not upgrade existing technology in countries in which they invested. c. Foreign investors transferred technology to countries in which they invested. d. Foreign investors invested significant amounts of capital in R&D in the countries in which they had invested.

c. Foreign investors transferred technology to countries in which they invested. d. Foreign investors invested significant amounts of capital in R&D in the countries in which they had invested.

______ involves one firm selling intangible property to another firm and insisting that the receiver of the intangible property abides by strict rules on how it does business. a. Exporting b. Licensing c. Franchising d. An acquisition

c. Franchising

Firms for which licensing is NOT a good option are clustered in which three industries? (Check all that apply.) a. Educational endowments b. Stand-alone monopolies c. Global oligopolies d. Industries with intense cost pressures e. High-tech industries

c. Global oligopolies d. Industries with intense cost pressures e. High-tech industries

______ might be one disadvantage on acquisitions. a. Obtaining quality staff b. Reducing competition c. Increased debt d. Accessing a wider customer base

c. Increased debt

What causes inflation to occur in a country? a. Inflation occurs when the government sets the prices of goods and services to stabilize the economy. b. Inflation occurs when there is an excess supply of goods and services in a country. c. Inflation occurs when the money supply in a country out paces the level of production of goods and services. d. Inflation occurs when incomes are reduced and people have less money to purchase goods and services.

c. Inflation occurs when the money supply in a country out paces the level of production of goods and services.

______ theory of FDI suggests that firms imitate and react to each other's behavior. a. Porter's b. Rayburn's c. Knickerbocker's d. Samuelson's

c. Knickerbocker's

Which two characteristics help a company get the MOST out of a strategic alliance? (Check all that apply.) a. Selecting the closest partner b. Having the best technology c. Learning from partners d. Applying knowledge from the alliance in your own firm

c. Learning from partners d. Applying knowledge from the alliance in your own firm

The five most important foreign exchange trading centers in terms of level of activity are a. Paris, Berlin, New York, Shanghai and Mumbai. b. London, New York, Paris, Hong Kong and Beijing. c. London, New York, Zurich, Tokyo and Singapore. d. Dublin, Chicago, Moscow, Tokyo and Sydney.

c. London, New York, Zurich, Tokyo and Singapore.

Most economic theories of exchange rate movements agree that three factors have an impact on future exchange rate movements in a country's currency. These factors include: a. Market accessibility b. The country's GDP c. Market psychology d. The country's interest rate e. The country's price inflation

c. Market psychology d. The country's interest rate e. The country's price inflation

What are two reasons a firm would choose NOT to enter a new market on a large scale? (Check all that apply.) a. Already has brand recognition in neighboring countries b. Does not need the competitive advantage c. May not have the resources available to commit to a large scale d. Prefer to enter slowly so they can become more familiar with the market

c. May not have the resources available to commit to a large scale d. Prefer to enter slowly so they can become more familiar with the market

Which area of a firm includes production, marketing and sales, materials management, R&D, human resources, information systems, and the firm infrastructure? a. Accounting b. Systems c. Operations d. Personnel management

c. Operations

Which view of FDI states that there are benefits and costs to FDI and that countries attempt to maximize the benefits and minimize the national costs of FDI? a. Radical nationalism b. Pragmatic radicalism c. Pragmatic nationalism d. Pragmatic free markets

c. Pragmatic nationalism

According to the text, which three characteristics are important to consider when determining the long-run economic benefits of doing business in another country? (Check all that apply.) a. Established import centers b. Presence of home-country nationals c. Purchasing power of consumers d. Size of the market c. Future wealth of consumers

c. Purchasing power of consumers d. Size of the market c. Future wealth of consumers

_____ have been criticized based on the idea that they give competitors a low-cost route to new technology and markets. a. Acquisitions b. Franchises c. Strategic alliances d. Greenfield ventures

c. Strategic alliances

Which approach to forecasting uses past trends of prices and volume data to predict the future? a. Fundamental analysis b. Pricing analysis c. Technical analysis d. Volume analysis

c. Technical analysis

What three things must be in place to achieve superior performance within a company? (Check all that apply.) a. Organizational architecture must operate independently of the operations strategy of the firm. b. The operations of a firm must be independent from the strategy of the firm. c. The operations of a firm must be configured to support the strategy of the firm. d. The organization's strategy must make sense given market conditions. e. The organization's architecture must match the operations and strategy of the firm.

c. The operations of a firm must be configured to support the strategy of the firm. d. The organization's strategy must make sense given market conditions. e. The organization's architecture must match the operations and strategy of the firm.

Henry's company decided to introduce a line of winter clothing to its product mix available in South Africa. One year later, the line was removed, since it failed to sell. What was the MOST LIKELY reason this product failed to sell in South Africa? a. Indigenous competitors owned the market. b. The products were poorly made. c. The products were not suitable for the market. d. The products were not made locally.

c. The products were not suitable for the market.

The situation where multiple firms encounter each other in different regional markets, national markets or industries is called a. multi-faceted production. b. multi-customer competition. c. multi-point competition. d. multi-target marketing.

c. multi-point competition.

The United States, the United Kingdom, the Netherlands, France, Germany, and Japan together have accounted for the majority of all FDI outflows for 1998-2018 for what two reasons? a. They had the shortest history as trading nations, b. They were most economically deprived postwar and required greater FDI inflows. c. They provided the base for many of the largest and best-capitalized businesses. d. They were the most developed nations with the largest economies in the postwar period.

c. They provided the base for many of the largest and best-capitalized businesses. d. They were the most developed nations with the largest economies in the postwar period.

While the radical view has been in retreat since the early 1990s, ______ continues to follow this philosophy under the government of Hugo Chavez. a. Brazil b. Argentina c. Venezuela d. Chile

c. Venezuela

A type of entry mode that is common in the chemical, pharmaceutical, and petroleum-refining industries in which a contractor agrees to handle every detail of a project for a foreign client is called ______. a. an acquisition b. franchising c. a turnkey project d. exporting

c. a turnkey project

The foreign entry mode that is the most costly, with firms bearing the full capital costs and risks of operating overseas, is ______. a. exporting b. licensing and franchising c. a wholly owned subsidiary d. a joint venture

c. a wholly owned subsidiary

The New York yen/dollar exchange rate was Y125=$1. Through ______, a dealer can make a profit on this currency transaction by buying it low and selling it high. a. spot exchange b. bartering c. arbitrage d. licensing

c. arbitrage

A letter of credit is issued by a(n) ______ and can be used to handle payments in a business transaction. a. exporting company b. importing company c. bank d. stock market

c. bank

With regards to exporting, studies have shown that unlike big firms, small and medium-sized firms tend to a. achieve economies of scale by being strong in the domestic markets. b. seek out the market niches that big companies are overlooking. c. be reactive and wait for opportunities to come to them.

c. be reactive and wait for opportunities to come to them.

A ______ is a business tool provided by the US Department of Commerce which provides the name, address and basic business information of potential distributors in foreign markets. a. market meter b. business forecast c. best prospects list d. target group

c. best prospects list

Ulan works for a trucking company that ships products all over the United States. She verifies the merchandise she receives from various companies against the receipt included with the materials. This receipt is a a. letter of credit. b. sight draft. c. bill of lading. d. requisition form.

c. bill of lading.

According to the Fisher effect, if the real interest rate in country #1 is 8% and it is 5% in country #2, an investor would take advantage of this by a. borrowing from #1 and investing in #2. b. investing in both #1 and #2. c. borrowing from #2 and investing in #1. d. borrowing from both #1 and #2.

c. borrowing from #2 and investing in #1.

The main reason a company would consider ______ is that it provides a firm with a way to finance its export deal when other methods of financing are not available. a. arbitrage b. a letter of credit c. countertrade d. a bill of lading

c. countertrade

A foreign exchange market is where one country's ______ is converted into that of another country. a. product b. exposure c. currency d. risk

c. currency

What are the two main functions of the foreign exchange market? a. eliminate double taxation b. advance mass customization c. currency conversion d. provide insurance against foreign exchange risk

c. currency conversion d. provide insurance against foreign exchange risk

The ______ argues that combining location specific assets or resource endowments and the firm's own unique assets often requires FDI. a. difference principle b. Sullivan principle c. eclectic paradigm d. flow of FDI

c. eclectic paradigm

Tonya was surprised to learn that her country limited the amount of currency she could convert to US dollars when she went to America to visit her cousin. This limit is an example of a policy of a. forecast rating. b. efficient markets. c. external convertibility. d. a nonconvertible currency.

c. external convertibility.

The idea that an MNE could come into a country and monopolize a market tends to be a greater concern in countries that have a. no small business considerations. b. numerous existing firms in that market. c. few large firms of their own. d. only large firms and no mid-size firms.

c. few large firms of their own.

Kettle-Bright Corp. was the first company to introduce electric teapots in South America. The company had to establish production standards and educate customers about the benefits of the product which cost hundreds of thousands of dollars to do. These expenses are examples of _____. a. late-entry disadvantages b. first-mover advantages c. first-mover disadvantages

c. first-mover disadvantages

When selecting a partner for a strategic alliance, a company should gather data from informed third parties such as _____ that dealt with this potential partner. a. current management b. human resources c. former employees

c. former employees

In an efficient market, prices are said to a. only reflect nominal rates. b. consider only foreign exchange markets. c. fully reflect all available information. d. only reflect interest rates.

c. fully reflect all available information

Two strategies that can be used to reduce translation and transaction exposure are: (Check all that apply.) a. labor strategy b. legal strategy c. lead strategy d. lag strategy

c. lead strategy d. lag strategy

John Dunning proposed that ______ are an important factor when explaining the nature of foreign direct investment. a. capital investments b. tariff barriers c. location-specific advantages d. multipoint competitors

c. location-specific advantages

According to research, PPP theory is a relatively good predictor of ______ exchange rate movements, but is not as good a predictor of ______ movements. a. short-run; intermediate b. short-run; long-run c. long-run; short-run d. long-run; intermediate

c. long-run; short-run

Jameson Electric Corp. would use the foreign exchange market when it needs to

convert currency.

According to the US Department of Commerce, an interest of ______ in a foreign business is needed to achieve FDI. a. at least 50% b. under 5% c. 100% d. over 10%

d. over 10%

Tracking exports and imports of goods and services is measured by the ___ account in balance-of-payments accounting.

current

To describe individuals in terms of their values, skills, and orientation, the text uses the term a. "groups". b. "human resources". c. "employees". d. "people".

d. "people".

If a basket of goods costs $400 in the US and 40,000 yen in Japan, PPP theory predicts that the dollar/yen exchange rate should be . a. $.10 per Japanese yen. b. $1.00 per Japanese yen. c. $10 per Japanese yen. d. $.01 per Japanese yen.

d. $.01 per Japanese yen.

According to calculations by the United Nations, the amount of time associated with the vast documentation required to export to Brazil can amount to _____ of the final value of the exported goods. a. 20% b. 50% c. 5% d. 10%

d. 10%

Recent statistics from the Small Business Administration show that about _____ of US firms with fewer than 500 employees are involved in exporting. a. 15% b. 40% c. 65% d. 5%

d. 5%

Feldman Technology Group has international holdings in India. The company often needs to fund large orders in India for parts with the knowledge that an Indian importer will soon buy completed product from Feldman. These transactions require large sums of capital in both dollars and rupee and as a way to move from one currency to another without incurring foreign exchange risk, the company should use a(n) _____. a. carry trade b. interest rate c. spot forward rate d. currency swap

d. currency swap

The ______ effects of FDI come when a multinational enterprise hires host-country citizens and ______ effects come when local suppliers hire workers as a result of the FDI. a. indirect; negative b. indirect; positive c. indirect; direct d. direct; indirect

d. direct; indirect

Most foreign exchange transactions involve the _____ on one side. a. yen b. pound c. euro d. dollar

d. dollar

An order written by an exporter that instructs an importer to pay a specified amount of money at a specified time is called a _____. a. bill of lading b. letter of credit c. policy d. draft

d. draft

While a maker initiates a draft, the party to whom the draft is presented is called the ______. a. drafter b. bank c. licensee d. drawee

d. drawee

Businesses would use the CORE diagnostic tool when making decisions regarding _____. a. importing b. franchising c. licensing d. exporting

d. exporting

When only nonresidents can convert a currency into a foreign currency with no limitations, the currency is considered a. partially convertible. b. freely convertible. c. nonconvertible. d. externally convertible.

d. externally convertible.

The method of forecasting that draws on economic theory to construct sophisticated models is called the ______ approach. a. technical b. social c. political d. fundamental

d. fundamental

Which approach to forecasting draws on economic theory to develop models that predict exchange rate movements? a. technical b. theoretical c. applied d. fundamental

d. fundamental

Henri works for a company that makes pasta to be sold in grocery stores. The company prefers to market the same product worldwide in order to take advantage of economies of scale and learning effects. It also prices its pasta aggressively. Which strategy is this company using? a. international strategy b. transnational strategy c. localization strategy d. global standardization strategy

d. global standardization strategy

In-Touch Corp. develops cell phones. The case is made in the US, the processor in Japan, and the adapter in Cambodia. In-Touch Corp. disperses its value chain to locations around the world which is an example of the a. logistics net. b. difference principle. c. core competence. d. global web.

d. global web.

One reason for the wave of FDI into the United States by Japanese auto companies was partly in response to a. the inability to license the products. b. the lack of vehicle availability in the US. c. a search for intellectual property protection. d. government-imposed tariffs on Japanese auto imports.

d. government-imposed tariffs on Japanese auto imports.

The decision by Bombardier to decentralize manufacturing of its rail cars in Europe is a result of A. differences in traditional practices. b. the rise of regionalism. c. distribution channels concerns. d. host-government demands.

d. host-government demands.

In a typical international trade transaction, after the importer arranges for a letter of credit, the next step is that the a. exporter ships the goods to the importer. b. exporter presents the draft to the importer's bank. c. exporter sells the draft to the importer's bank. d. importer's bank sends a letter of credit to the exporter's bank.

d. importer's bank sends a letter of credit to the exporter's bank.

Something of worth that cannot be touched or held, such as a formula, is considered to be ______ property. a. public b. private c. tangible d. intangible

d. intangible

When a company takes a product produced for the domestic market and then makes very minor changes to customize the product for global markets, the company is following a(n) ______ strategy. a. global standardization b. transnational c. localization d. international

d. international

A shared business risk and shared resources and responsibility are both advantages of ______. a. exporting b. turnkey operations c. licensing d. joint ventures

d. joint ventures

When a business enters a foreign market after other foreign firms, the situation is defined as ______ entry. a. absolute b. comparative c. early d. late

d. late

A(n) _____ has two drawbacks: the fee paid by the importer to the bank and since this is a financial liability, it may affect the importer's ability to borrow for other transactions. a. bill of exchange b. bill of lading c. overdraft d. letter of credit

d. letter of credit

The limits of ______ include giving away valuable know-how to competitors and losing control over marketing, production and strategy. a. importing b. acquisitions c. exporting d. licensing

d. licensing

Many of the world's oil companies have to invest where oil is located in order to combine their technological and management capabilities with the actual product. This demonstrates the idea of a(n) _____ advantage. a. late-mover b. transnational c. first-mover d. location-specific

d. location-specific

In order to differentiate itself from the competition, IKEA focuses on increasing the attractiveness of products by lowering costs. This demonstrates IKEA's ______ strategy. a. easy assembly b. new designs c. flat pack d. low-cost

d. low-cost

When a company is able to expand its operations by exporting globally, it can often achieve greater economies of scale while results in ______. a. fewer product choices b. higher consumer prices c. mass customization d. lower unit costs

d. lower unit costs

Of all the companies using the global marketplace, _____ prefer exporting as a form of foreign market entry. a. fewer than 25% b. less than half c. about 1% d. more than 90%

d. more than 90%

When a firm serves a global market from a single location, it will move _____ the experience curve and establish a low-cost position. down up

down

The ___ hypothesis is demonstrated when the management of an acquiring firm is too optimistic about the value that can be created via an acquisition and is thus willing to pay a significant premium over a target firm's market capitalization.

hubris

A letter of credit is issued by a bank after being requested by an _____. importer exporter

importer

If an ___ (importer or exporter?) makes payment before shipment of a product, they risk receiving a defective product. importer exporter

importer

A firm facing low pressures for local responsiveness and few pressures to contain costs might best pursue a(n) _______________________.

international strategy

Foreign exchange markets can provide some insurance against volatile changes in exchange rates, which is called foreign exchange

risk

The adverse consequences of unpredictable changes in exchange rates is called foreign exchange

risk

The benefit-cost-risk trade-off is likely to be least favorable in developing nations that operate with a mixed or command economy or where _____________________________.

speculative financial bubbles have led to excess borrowing