Study guide 2

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

D. concerns on safety and reliability of product quality

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

D. downsizing and transferring business elsewhere

53. The industrial sector of economic activity includes A. transportation B. agriculture C. mineral exploration and extraction D. manufacturing operations

D. manufacturing operations

25. China's decision regarding restrictions on foreign exchange transactions is a political risk because it affects all multinational companies. A. micro B. standard С. mаcro D. multidimensional

С. mаcro

44. Which of the following is an example of transfer risks? A. Dividend remittance B. Export commitments C. Pressure for local participation D. Abrogation of proprietary rights

A. Dividend remittance

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

D. New Zealand

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

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

46. risks are brought about by government policies or actions that inhibit ownership or control of local operations. A. Transfer B. Functional C. Operational D. Ownership-control

D. Ownership-control

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

D. People-related issues

31. According to the 2012 Transparency International Corruption Perceptions Index, which of the following nations is the most corrupt? A. El Salvador B. Columbia C. Lebanon D. Somalia

D. Somalia

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

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

24. reviews major political decisions that are likely to affect all business conducted in a particular country. A. Macro political risk analysis B. Micro political risk analysis C. Standard political risk analysis D. Multidimensional political risk analysis

A. Macro political risk analysis

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

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

28. The economies of China, Russia, India, and Vietnam present blank political risk for multinational companies. A. macro B. micro C. proactive D. relative

A. macro

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

A. quantification process

36. Blank tends to occur once and often has poorly defined objectives, and therefore members are not as committed. A. Classic terrorism B. Amateur terrorism C. Religiously-motivated terrorism D. Political terrorism

B. Amateur terrorism

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

B. Creating joint ventures and hiring local people to manage and run operations

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

C. Transfer

29. Blank risk issues often take forms such as industry regulation, taxes on specific types of business activity, and various restrictive local laws. А. Масrо B. Standard C. Direct D. Micro

D. Micro

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

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

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

B. Uncertainty avoidance

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

B. a vital area for multinational companies (MNCS) to manage.

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

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

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

B. agriculture, forestry, and mineral exploration and extraction.

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

B. expropriation

27. China's government policies regarding investment in the telecommunications industry fall into the blank political risk category. A. macro B. micro C. integrative D. relative

B. micro

45. Price controls, financing restrictions, export commitments, taxes, and local-sourcing requirements are examples of A. ownership-control risks B. operational risks C. transfer risks D. functional risks

B. operational risks

59. Not all MNCS are confident about international investment in countries with A. low labor costs B. political unrest C. emerging economies D. cultural differences

B. political unrest

57. The following are listed as techniques for responding to political risks except A. relative bargaining power analysis B. realistic bargaining power analysis C. integrative techniques D. defensive techniques

B. realistic bargaining power analysis

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

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

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

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

61 techniques are designed to help the overseas operation become part of the host country's infrastructure. A. Protective B. Defensive C. Integrative D. Statutory

C. Integrative

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

C. Rights over sales territories and obligations to customers

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

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

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

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

33. Laws that require that nations hold a majority interest in the operation are known as A. commercial laws B. appropriation laws C. indigenization laws D. expropriation laws

C. indigenization laws countries

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

C. macro

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

C. ownership-control risks

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

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

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

C. social conditions

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

D. Complying with contractual terms of agreements

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

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

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

D. Effectiveness of public administration

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

D. Freedom to set up or engage in partnerships

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

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

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

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

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

D. prepare employees for situations that may arise

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

D. proactive political

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

D. relative bargaining power

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

D. transfer risks, operational risks, and ownership-control risks.