BAPA 5131 Chapters 1 & 2

________ are the most transformative technology in developing economies.

Mobile Phones

The Coca-Cola Company is an example of ________

Multinational enterprise

Technological advances have contributed to manufacturing by ________.

Reducing Production Costs

Which of the following stages comes before procurement in a firm's value chain? marketing manufacturing research and development Distribution

Research and development

Offshoring

The practice of exporting U.S. jobs to lower paid employees in other nations.

contagion

The tendency of a financial or monetary crisis in one country to spread rapidly to other countries, due to the ongoing integration of national economies

currency risk

refers to the risk of adverse fluctuations in exchange rates

freight forwarder

specialist in export-related activities such as customs clearing, tariff schedules, and shipping and insurance fees

Drivers of globalization are

technological innovations, and communications, integration of world financial markets and market liberalization.

T/F While the number of containers transported internationally has decreased, the cost of transportation has increased dramatically

False

________ is the total value of products and services produced in a country over the course of a year.

GDP

Stages of Globalization

Globalization 1.0 - 1900-1941 Globalization 2.0 - 1945-2000 Globalization 3.0 - 21st century

Which of the following statements is true about the firm-level consequences of market globalization? A) Globalization drives firms to relocate key value-adding activities to the most advantageous locations around the world. B) A firm's value chain is not subject to internationalization. C) The globalization of markets has narrowed down new business opportunities for internationalizing firms. D) Through offshoring, a firm relocates a major value-chain activity by establishing a factory or subsidiary in the home market.

Globalization drives firms to relocate key value-adding activities to the most advantageous locations around the world

Which of the following statements is true about the firm-level consequences of market globalization?

Globalization drives firms to relocate key value-adding activities to the most advantageous locations around the world.

Each of the following represents a factor of production EXCEPT ________.

Governmental Regulations

As market globalization intensifies, ________.

individual firms respond to the challenges and new advantages that it brings

the tendency of companies to systematically increase the international dimension of their business activities

internationalization

facilitator

A firm or individual with special expertise in banking, legal advice, customs clearance, or related support services that assists focal firms in the performance of international business transactions

societal consequences of globalization

*Contagion *Loss of national Sovereignty *Offshoring *Effects on the poor *Effects on environment *Effects on national culture

Value Chain Steps

1. Research & Development 2. Design 3. Production 4. Marketing 5. Distribution 6. Customer Service

Reshoring

moves jobs back from foreign to domestic locations

Companies strive to drive down prices ________, among other strategies

By standardizing what they sell

Which of the following, if true, would most strongly support the claim that national prosperity is increased by participation in international business? A) Countries that participate in international trade have higher GDP per capita than non-participating countries. B) National literacy levels are strongly correlated with a country's degree of political freedom. C) For most countries, levels of international trade have increased significantly in recent decades. D) Individuals in advanced economies tend to set purchasing trends for consumers worldwide.

Countries that participate in international trade have higher GDP per capita than non-participating countries.

Fluctuating exchange rates are an example of which of the following?

Currency Risk

T/F Converging tastes of consumers worldwide promote traditional lifestyles

False

T/F In international economics, codetermination refers to the tendency for a financial or monetary crisis in one country to spread rapidly to other countries, due to integrated national economies.

False

T/F Market globalization compels firms to organize their sourcing, manufacturing, marketing, and other value-adding activities on a strictly local scale

False

T/F Nationalization refers to the gradual integration and growing interdependence of national economies.

False

T/F The third phase of globalization was triggered by the development of personal computers, the Internet, and Web browsers.

False

Acme Software (Scenario)Acme Software is a U.S.-based maker of software products for the health care industry. Recently Acme has been investigating whether it would be beneficial to internationalize some of its value-chain activities. Acme hires a consulting group to help determine which, if any, value-chain activities could be conducted abroad to promote business growth. The consulting group identifies two health care software development companies in India that could provide programming services at a lower cost than Acme's current expenditures for programming. In addition, the consultants conduct international market research which shows that German health care companies have a strong demand for the type of software that Acme offers. Which of the following would be most important for the consulting group to consider when deciding whether to recommend that Acme internationalize its sales efforts to Germany? A) Will Acme save money on advertising by targeting small rather than large companies? B) What type of training is received by programmers in software firms abroad? C) Is employee empowerment culturally favored in Germany? D) How intense is the competition from German companies offering similar products?

How intense is the competition from German companies offering similar products?

the procurement of products or services from suppliers located abroad

Importing or global sourcing

Which of the following is a driver of globalization? globalization of services internationalization of firm's value chain integration of world financial markets greater emphasis on proactive internationalization

Integration of world financial markets

Freehold Investment Corp. (Scenario)Dan Freehold and his business partner, Bethany Quinn, are successful investors engaged in a variety of enterprises. Recently Dan and Bethany have decided to expand their foreign investing operations. They hold a meeting for individuals interested in participating in certain overseas ventures. Dan discusses an investment opportunity that involves the purchase of selected securities from the Chinese stock market. This opportunity represents which type of international investment?

International Portfolio

refers to the passive ownership of foreign securities such as stocks and bonds to gain financial returns

International Portfolio investment

Describes the exchange of products and services across national borders

International trade

FDI

Investment made by a foreign company in the economy of another country

At a conference on business internationalization strategies, representatives of three different businesses meet to discuss a joint venture between their companies. Business A is located in a country that internationalized during the second phase of globalization. Business B is based in a country that internationalized during the third phase of globalization. Business C is located in an emerging market country. The representative from Business B is most likely from ________. Uganda Panama Hungary Japan

Japan

The process of targeting and serving markets outside the home country is known as ________.

Market Diversification

The process of targeting and serving markets outside the home country is known as ________.

Market diversification

Which of the following represents the final stage in a firm's value chain?

Sales and Services

focal firm

The initiator of an international business transaction, which conceives, designs, and produces offerings intended for consumption by customers worldwide. Focal firms are primarily MNEs and SMEs.

As the influence of the Chinese economy grows over time, it is likely that Western countries will embrace some of China's cultural attitudes and behaviors.

True

T/ F Companies strive to decrease their costs and reduce their selling prices through economies of scale and standardization of finished products, among other possibilities.

True

T/F For manufacturing companies, on a per-unit-of-output basis, high volumes of production are correlated with lower per-unit cost.

True

T/F In a "common market," barriers to the cross-border flow of factors of production are removed.

True

T/F Since the 1980s, emerging market countries have experienced substantial market liberalization and privatization

True

T/F Since the 1980s, emerging market countries have experienced substantial market liberalization and privatization.

True

T/F The great depression marked the beginning of the seconded phase of globalization

True

T/F The initial phase of globalization was triggered by the introduction of the railroads and ocean transport.

True

T/F: Globalization of production activities and services is a dimension of market globalization.

True

T/F: Governments have facilitated economic integration by lowering barriers to international trade and investment, harmonizing their monetary and fiscal policies within regional economic integration blocs.

True

T/F: The two primary types of international investment are portfolio investment and foreign direct investment.

True

T/F: To minimize globalization's harm and reap its benefits, governments should strive for nationalized economic regimes.

True

Globalization Debate (Scenario)In his international business class, Professor Jang organizes a debate on the societal effects of market globalization. Juan Prince takes a position that highlights the negative effects of market globalization. He emphasizes how multinational enterprises can wield so much influence that they threaten national sovereignty. He also notes the prevalence of low wages and sweatshop conditions as firms utilize low-cost labor abroad. Juan then describes the detrimental effects of corporate pollution on the environment, and he ends his argument by explaining how market globalization helps homogenize national cultures. Rina Taylor is assigned to counter Juan's position.Which of the following most likely supports Rina's argument over Juan's concerning wages and working conditions in developing countries? 1) Minimum wages should be established at set levels, regardless of the impact on the number of jobs. 2) The move of Electrolux to Mexico cost Michigan 2,700 jobs. 3) Vietnam has experienced a five-fold increase in wages as a result of the growth of the footwear industry there. 4) Most African countries today still suffer from low or negative GDP growth.

Vietnam has experienced a five-fold increase in wages as a result of the growth of the footwear industry there.

Which of the following is an example of a supranational institution? the World Trade Organization the World Intellectual Property Organization the UNICEF the Red Cross

WTO

Stella manages the production team at Camden Inc., a manufacturer of heavy industry machinery in the United States. She needs to decide if her firm should export finished products or manufacture abroad. Which of the following would most likely help her evaluate the best alternative in this instance? A)What is the gross national income of the United States? B) What is the average annual rate of employee turnover in the manufacturing industry? C) Is employee empowerment culturally favored in the United States? D) What are the costs of transporting raw materials, components, and finished products?

What are the costs of transporting raw materials, components, and finished products?

Over time, the GATT evolved into the ________.

World Trade Organization

Sterling Auto International (Scenario)Sterling Auto International is a successful car manufacturing company headquartered in Detroit, Michigan. Over the past year, the company implemented multiple efforts to expand its overseas operations. At a recent shareholder's meeting, attendees questioned the CEO's motivations for authorizing certain aspects of the expansion efforts. The CEO introduced another overseas effort by noting that it represented an attempt to confront an international competitor. The CEO was most likely referring to which of the following efforts? a sales outlet established in Indonesia, where Sterling could charge more for its products a marketing and advertising partnership established with a successful French car retailer a new plant established in Vietnam to benefit from low-cost labor a distribution center established in London to preempt the growth of a British car manufacturer

a distribution center established in London to preempt the growth of a British car manufacturer

Small and medium-sized enterprise (SME)

a firm with fewer than 500 employees in the United States, or with fewer than 250 employees in the European Union

MNE

a large company with substantial resources that performs various business activities through a network of subsidiaries and affiliates located in multiple countries

Globilization of Markets

a macro-trend of increased interconnectedness among world nations

cross-cultural risk

a situation or event in which a cultural misunderstanding puts some human value at stake

Firms that are more successful at global competition display each of the following qualities EXCEPT ________.

approaching internationalization from a reactive standpoint

Born Global Firm

company that adopts a global perspective and engages in international business from or near its inception

Governments have facilitated economic integration by ________.

creating supranational institutions to further reduce trade barriers

commercial risk

firm's potential loss or failure from poorly developed or executed business strategies, tactics, or procedures

A few decades ago, international business was largely the domain of ________.

multinational firms

In a typical value chain, the firm _______

performs marketing activities such as pricing, promotion, and selling

country risk

potentially adverse effects on company operations and profitability caused by developments in the political, legal, and economic environment in a foreign country

Freehold Investment Corp. (Scenario)Dan Freehold and his business partner, Bethany Quinn, are successful investors engaged in a variety of enterprises. Recently Dan and Bethany have decided to expand their foreign investing operations. They hold a meeting for individuals interested in participating in certain overseas ventures. Phillip Hardy, one of the potential investors, expresses the desire to purchase only those types of assets in which he can maintain a relatively short-term interest. Which of the following investment opportunities would be most suited for Mr. Hardy? A) The Freehold Eastern Growth Fund, which purchases Eastern European growth stocks B) the Freehold World Climb Project, which maintains partial ownership of an Australian hiking equipment production plant C) an initiative to purchase the technology assets of an Indian consulting firm D) a venture that gives investors ownership of the equipment used by multiple South African mining companies

the Freehold Eastern Growth Fund, which purchases Eastern European growth stocks

The free movement of capital around the world is also known as ________.

the globalization of capital

Whittaker Semiconductors has recently decided to expand its operations overseas. Amanda Quan, Vice President of International Business, assigned a team of investigators to analyze the risks faced by the company in making this move. Of particular interest were the risks that might affect the success of a new production plant to be located in one of three potential countries. Rosa Suarez reported on her analysis of cross-cultural risks involved with establishing the plant in Country C. Each of the following was most likely discussed in her report EXCEPT ________. religious beliefs language barriers the level of national debt lifestyle differences

the level of national debt

A value chain is ________

the sequence of value-adding activities performed by the firm in the course of developing, producing, marketing, and servicing a product

value chain

the sequence of value-adding activities performed by the firm in the course of developing, producing, marketing, and servicing a product