IMS EXAM 1 STUDY GUIDE

All managers need to have a basic knowledge of international business.

True

As used in the text, the term environment means all the forces influencing the life and development of the firm.

True

External forces are commonly called uncontrollable forces, which are the external forces that management has no direct control over, although it can exert influence.

True

International business differs from domestic business in that a firm operating across borders must deal with the forces of three kinds of environments—domestic, foreign, and international.

True

Opponents of free trade point out that globalization has contributed to a decline in environmental and health conditions.

True

Rapid urbanization of populations combined with industrialization in the emerging markets is quickly shifting the world's economic center of gravity from Europe and the Americas back to Asia.

True

The operations of a company outside its home or domestic market are known as foreign business.

True

The plague known as the Black Death moved west and affected more people as the international trading system expanded.

True

Those who work in the international environment find that decision making is more complex than it is in a purely domestic environment.

True

When a manager unconsciously imparts his or her own cultural values on a situation without taking into account the possibility that the culture might vary in a foreign environment, that manager is exhibiting a self-reference criterion.

True

Why would companies that don't have any foreign operations still need to acquire a global perspective? A) This will help the company provide more efficient domestic services. B) This would help the companies be more aware of new foreign competitors. C) This would help companies manufacture products more efficiently. D) This will help the company create more job opportunities.

B) This would help the companies be more aware of new foreign competitors.

Foreign business denotes A) a business with operations in multiple nations. B) business conducted within a foreign country. C) an organization with multicountry affiliates. D) an organization that attempts to standardize operations worldwide.

B) business conducted within a foreign country.

When nations and corporations were ranked by GNI and total sales, respectively, for 2016, how many had GNI greater than the total annual sales of Walmart Stores? A) 73 B) 32 C) 24 D) 59

C) 24

________ refers to the transportation of any domestic good or service to a destination outside a country or region. A) Importing B) Foreign direct investment C) Exporting D) International business

C) Exporting

________ was the world's leading manufacturing country for about 1,800 years, until it was replaced by Britain in about 1840. A) The United States B) Germany C) India D) China

D) China

When gross national income rates drop significantly, it affects a company's environment. Which type of external force does this represent? A) technological B) legal C) physical D) economic

D) economic

Harman Advertising Agency, based in Toronto, decided to establish an operation in France because it was concerned that its competition would try to take over their clients in Europe, which represents 65 percent of their business. Which type of driver is responsible for this decision to go international? A) political B) technological C) cost D) market

D) market

What is identified in the text as being one of the five major drivers of globalization? A) monetary B) transportation C) cultural D) market

D) market

Compared to 1980, service exports in 2017 can best be described as A) decreasing due to more international corporations. B) struggling to flourish based on government restrictions. C) lower than they were in 1980. D) more than thirteen times larger.

D) more than thirteen times larger.

An international company (IC) is a company headquartered in another nation.

False

Only a company that has foreign operations needs to be aware of what is occurring globally in its markets and in its industry.

False

The ________ environment is all the uncontrollable forces originating in the home country that surround and influence the life and development of the firm.

domestic

Discuss the three environments in which an international company operates.

domestic, foreign, and international.

As used in the text, the term ________ means all the forces influencing the life and development of the firm

environment

The ________ environment refers to all the uncontrollable forces originating outside the home country that surround and influence the firm

foreign

A(n) ________ company is a company with operations in multiple nations.

international

According to the text, preferential trading agreements are examples of ________ drivers of globalization.

political

Identify and discuss the five major kinds of drivers that are leading international firms to the globalization of their operations.

political, technological, market, cost, and competitive.

Although merchandise exports have grown faster than world output in nearly every year since 1980, the level of ________ exports worldwide has grown even more rapidly during this time.

service

A ________ corporation is an enterprise made up of entities in more than one nation, operating under a decision making system that allows a common strategy and coherent policies.

transnational

A ________ driving force for globalization is the fact that companies are defending their home markets from competitors by entering the competitors' home markets to distract them.

competitive

What is one argument in support of globalization? A) Environmental issues are lessened through globalization. B) Globalization enhances access to health care for participants. C) Free trade enhances socioeconomic development. D) The process of globalization has enhanced the equalization of countries in terms of political and social economy.

C) Free trade enhances socioeconomic development.

The forces over which the management does have some command are called A) domestic. B) external. C) foreign. D) internal.

D) internal.

Foreign environmental forces often operate differently than domestic environmental forces because A) they typically carry the same value as domestic forces. B) they are easier to assess than domestic forces. C) the two forces do not affect each other. D) the forces are interrelated.

D) the forces are interrelated.

The operations of a company outside its home or domestic market are known as ________ business

foreign

Theodore Levitt was the first person to coin the term ________.

globalization

________ is the transportation of any good or service into a country or region, from a foreign origination point.

importing

If Xiaomi's China operations export smartphones to another country such as India, then the sales manager is affected by forces of both the domestic environment of China and the foreign environment of India and therefore is working in the ________ environment

international

When an affiliate in one country does business with customers in another, it is operating in the ________ environment.

international

________ is the transportation of any domestic good or service to a destination outside a country or region.

Exporting

Advances in computers, including the Internet and network computing, are examples of ________ drivers contributing to the globalization of business operations

technological

The international environment consists of which group of interactions? A) The domestic environmental forces and global environmental forces. B) The foreign uncontrollable forces and the domestic uncontrollable forces. C) The domestic environmental forces and the foreign environmental forces, as well as the foreign environmental forces of two countries when an affiliate in one country does business in another country. D) The domestic environmental forces and the foreign environmental forces, as well as the foreign environmental forces of all other countries.

C) The domestic environmental forces and the foreign environmental forces, as well as the foreign environmental forces of two countries when an affiliate in one country does business in another country.

What is an example of an external force that can affect a company's environment? A) The marketing department decides that online advertising will work best for a new product introduction. B) The manufacturing plant purchases new equipment to automate a process. C) The newly-elected governor decides to raise property taxes. D) A human resource professional meets with staff to discuss hiring temporary help.

C) The newly-elected governor decides to raise property taxes.

The argument that free trade is the best strategy for advancing the world's economic development is considered A) one of the most contentious issues associated with economic globalization. B) one that has very little support in research studies. C) a proposition with which almost all economists agree. D) the basis for much protectionist legislation in emerging markets.

C) a proposition with which almost all economists agree.

Unconscious reference to one's own cultural values when judging behavioral actions of others in a new and different environment is called the self-reference A) culture. B) values. C) criterion. D) customs.

C) criterion.

The tendency toward an international integration of goods, technology, information, labor, and capital, or the process of making this integration happen, is called A) internationalization. B) international business. C) economic globalization. D) multinationalization.

C) economic globalization.

Gabriel Industries is located near a port city which allows it to ship products easily overseas to its international customers. The geographic location of the company is an example of a(n) A) sociocultural commodity. B) labor standard. C) external force. D) internal force.

C) external force.

According to opponents of the globalization of trade and investment, A) free trade benefits all nations and workers. B) globalization has caused a dramatic decline in both the proportion and the absolute number of destitute people in the world. C) globalization has contributed to a decline in environmental and health conditions. D) globalization enhances preservation of the uniqueness of different cultures.

C) globalization has contributed to a decline in environmental and health conditions.

According to opponents of the globalization of trade and investment A) globalization has contributed to an improvement in environmental and health conditions. B) globalization benefits all nations and workers. C) globalization has produced uneven results across nations and people. D) citizens from more globally integrated countries have lower levels of civil liberties and lower economic prosperity.

C) globalization has produced uneven results across nations and people.

The domestic environment is composed of all the uncontrollable forces originating in the ________ that surround and influence the life and development of the firm. A) international arena B) host nation C) home country D) foreign country

C) home country

Decision making in the international environment is considered ________ it is in a purely domestic environment. A) less complex than B) less demanding than C) more complex than D) exactly the same as

C) more complex than

Estimates show there are ________ transnational corporations with hundreds of thousands of foreign affiliates. A) about 5,000 B) fewer than 12,000 C) more than 100,000 D) nearly one million

C) more than 100,000

When a government sees that local industry is threatened by imports, it can threaten to erect import barriers to stop or reduce these imports. This is an example of a ________ driver of international business activity. A) technological B) market C) political D) cost

C) political

Foreign subsidiaries must obey the local laws. If they don't, they could be subject to A) legal action by the United Nations. B) legal action by the country of the parent company. C) seizure by the host government. D) reciprocal behavior by competitor companies.

C) seizure by the host government.

What was Theodore Levitt referring to when he said that the future belonged to corporations that operated "as if the entire world were a single entity; [such an organization] sells the same things in the same way everywhere"? A) accommodation B) globalization C) standardization D) customization

C) standardization

Jensen Control Corp. now uses videoconferencing which helps the sales team demonstrate products to prospective international customers while eliminating expensive travel costs. Which of the five drivers of international business does this represent? A) political B) market C) technological D) competitive

C) technological

Relatively inexpensive international communication enables firms to "body shop," that is, transmit computer-oriented tasks worldwide to a cheap but skilled labor force. This is an example of a ________ driver of international business activity. A) political technological B) market C) technological D) cost

C) technological

The term globalization was first coined in a Harvard Business Review article in which the author maintained that A) new technologies were creating opportunities for creating mass customization of products. B) governments would be threatened by the emergence of global companies and would limit their development. C) the future belonged to global companies that sold the same things the same way, everywhere. D) increased differentiation of products would mean that costs of production would become a steadily declining proportion of the selling price.

C) the future belonged to global companies that sold the same things the same way, everywhere.

International business really began A) with the East India Company chartered in 1600. B) when Singer Sewing Machine put up a factory in Scotland in 1868. C) when Phoenician and Greek merchants sent representatives abroad to sell goods. D) when Colt Fire Arms set up a plant in England.

C) when Phoenician and Greek merchants sent representatives abroad to sell goods.

Britain was the world's leading manufacturing country for about 1,800 years, until it was replaced by the United States in the 1800s.

False

Lobbyists who advocate for new laws that will affect the production standards of a business are an example of an internal force.

False

The 17th and 18th centuries have frequently been termed the age of industrialism because this was the period when industrialization was advanced to the masses.

False

The advent of globalization has had minimal effect on labor standards around the world.

False

The domestic environment includes all the controllable forces originating in the home country that surround and influence the life and development of the firm.

False

The five major drivers of international business include political, sociocultural, technological, market, and competitive drivers.

False

The international environment refers to all the uncontrollable forces originating outside the home country that surround and influence the firm.

False

Transnational corporations consist of several entities each of which has its own independent strategy and policies.

False

________ refers to direct investments in equipment, structures, and organizations in a foreign country at a level sufficient to obtain significant management control.

Foreign direct investment

The internal forces over which management does have some control, such as the factors of production and the activities of the organization, are called the ________ forces.

controllable

The tendency toward an international integration of goods, technology, information, labor, and capital, or the process of making this integration happen, is referred to as ________

economic globalization

Environment as used in the textbook involves the forces surrounding and influencing the life and development of the firm and is classified as A) primary and secondary. B) controllable and uncontrollable. C) domestic and foreign. D) representative and democratic.

B) controllable and uncontrollable.

Which of the environments associated with a company refers to the uncontrollable forces originating outside the home country? A) domestic B) foreign C) international D) national

B) foreign

International business differs from domestic business in that a firm operating across borders must deal with the forces associated with which three kinds of environments? A) geographic, political, economic B) foreign, domestic, international C) initial, secondary, primary D) multicultural, ethnocentric, stereotypical

B) foreign, domestic, international

An opponent of globalization would agree that A) globally integrated countries spend more on public education, especially in developing countries. B) globalization has had harmful effects on labor and labor standards. C) countries that have rejected globalization are among the most advanced nations of the world. D) globalization has increased the proportion of people in developing countries who live on $1.25 per day or less.

B) globalization has had harmful effects on labor and labor standards.

According to the text, personnel working in a foreign subsidiary are working in the international environment A) if they work and live in the foreign subsidiary's country. B) if they are responsible for the subsidiary's exports. C) if they are responsible for the management of the foreign subsidiary. D) if they are responsible for manufacturing activities within the foreign subsidiary.

B) if they are responsible for the subsidiary's exports.

State-owned transnationals currently account for ________ of all transnational corporations. A) almost 15 percent B) nearly 100 percent C) about 50 percent D) less than 1 percent

B) nearly 100 percent

The trend toward unification and socialization of the global community is illustrated by which of the following? A) progressive increases in barriers to foreign investment by most governments B) preferential trading arrangements that group several nations into a single market C) increased public ownership of much of the industry in formerly communist nations D) expanded barriers to trade by most governments

B) preferential trading arrangements that group several nations into a single market

Rapid urbanization of populations combined with industrialization in the emerging markets is quickly shifting the world's economic center of gravity from A) the United States to South America. B) the Americas and Europe to Asia. C) Europe and Asia to Africa. D) China to India.

B) the Americas and Europe to Asia.

The kinds of forces in the foreign environment are ________ those in the domestic environment except that they occur in foreign nations. A) different from B) the same as C) less demanding than D) more stringent than

B) the same as

China was the world's leading manufacturing country for about 1,800 years, until it was replaced by ________ around 1840.

Britain

What is an example of an external force that represents financial factors affecting a business? A) consumer opinion B) geographic location C) Interest rates D) domestic laws

C) Interest rates

What is an example of the competitive driver of international business activity? A) a manufacturing company that lobbies its home country government for protection against imports B) a company that expands its local manufacturing facility in a foreign country in order to qualify for tax rebates C) a company that searches for markets with rising gross domestic product per capita and population growth D) a company that enters a foreign market to distract companies with similar products or services

D) a company that enters a foreign market to distract companies with similar products or services

An international manager has three choices when deciding how to employ a technique used in domestic operations to an international operation: transfer it intact, not use it, or A) provide it to the competition. B) adapt it to customization. C) produce it in mass quantities. D) adapt it to local conditions.

D) adapt it to local conditions.

A business that decides to increase sales by entering the international market may do so in order to create economy of scale. This would be an example of which driver of internationalization? A) political B) market C) competitive D) cost

D) cost

One argument against globalization is that it creates a decline in A) socioeconomic development. B) better jobs. C) professional development. D) environmental conditions.

D) environmental conditions.

Harrison Manufacturing, based in Toledo, recently purchased a new manufacturing facility and production equipment in Germany that it will use to produce component parts. This purchase is an example of A) intrastate commerce. B) economies of scale. C) importing and exporting. D) foreign direct investment.

D) foreign direct investment.

The total level of outward FDI worldwide increased about ________ between 1990 and 2018. A) threefold B) fivefold C) ninefold D) fourteenfold

D) fourteenfold

What is an example of an internal force that can affect a company's environment? A) economic downturn B) availability of natural resources C) international competitors D) human resources

D) human resources

Many opponents of globalization believe that the gap between rich and poor has A) decreased. B) not been affected. C) disappeared. D) increased.

D) increased.

Due to the expanding importance of foreign-owned firms in local economies, host governments have made their policies toward these companies A) more strict. B) more liberal. C) extremely conservative. D) inflexible.

D) inflexible.

Big Tire Bikes Inc. is headquartered in Maryland and does business within the United States, as well as within many countries in Europe and South America. This company is an example of a(n) A) domestic corporation. B) foreign subsidy. C) international affiliate. D) international business.

D) international business.

The construction industry has joined the ranks of other industries and now carries out business across national borders. In other words, the construction industry has become a(n) A) foreign-owned company. B) domestic affiliate. C) international affiliate. D) international business.

D) international business.

Jetson Manufacturing has manufacturing operations in the United States, Germany, Indonesia, and Brazil. Jetson Manufacturing is an example of a(n) A) state-owned corporation. B) distribution center. C) international affiliate. D) international company.

D) international company.

Data have shown a clear and definitive link between A) protectionist legislation and enhanced economic welfare of a country. B) liberalization of trade and reduced disparity in personal income. C) government subsidies and the development of globally competitive industries. D) liberalization of trade and economic growth.

D) liberalization of trade and economic growth.

A company that decides to go abroad as a way to increase economies of scale is basing this decision on which driver of international business activity? A) cost B) political C) competitive D) market

D) market

The 17th and 18th centuries have frequently been termed the "Age of Mercantilism" because A) the merchant class was created during this time. B) the Americas were discovered. C) individual states were able to support themselves as more merchants were established. D) national power depended on the sponsorship and control of merchant capital.

D) national power depended on the sponsorship and control of merchant capital.

The level of merchandise exports worldwide were ________ larger in 2017 than they were in 1980. A) four times B) nearly six times C) two times D) nine times

D) nine times

The forces in the foreign environment differ from the domestic environment in that they originate A) concurrently in the home and host country. B) in the firm's home country. C) in only the host country. D) outside the firm's home country.

D) outside the firm's home country.

Sanjay is the director of operations for Fresh Farm Produce Corp. and is now able to sell his product to the international market thanks to a new computer system that is specifically designed for businesses in the fresh food industry. Which driver helped Sanjay's company internationalize? A) technological B) cost C) market D) political

D) political

The rise of the Ottoman Empire before 1300 influenced trade as it A) eliminated trade between Europe and Asia. B) reduced the cost of Asian trade for Europeans. C) reduced the cost of European trade for Asians. D) promoted a search for sea routes from Europe to Asia.

D) promoted a search for sea routes from Europe to Asia.

Hamlin Millworks is frustrated with the lobbyists who are currently trying to influence Congress to raise taxes for all corporations in the wood products industry. In the environment of Hamlin Millworks, these lobbyists are an example of A) a foreign environment. B) controllable forces. C) a domestic environment. D) uncontrollable forces.

D) uncontrollable forces.

Brennan Audio Inc. is struggling in the industry because it doesn't have the staff with the right skills for the job. Which category of external forces does this represent? A) labor B) legal C) physical D) technological

A) labor

When a supplier to an original equipment manufacturer (e.g., a battery manufacturer supplying an automobile producer) follows its major customer to a new country, it is an example of a ________ driver of international business activity. A) political technological B) market C) technological D) cost

B) Market

What is an argument presented by opponents of globalization? A) A report by the Labor Secretariat for the North American Free Trade Agreement (NAFTA) reported that more than half of firms surveyed used threats to close U.S. operations as a tool to fight union-organizing efforts. B) Although labor standards in developing countries are usually lower than in industrialized countries, they are rising. C) Multinationals investing in host nations pay higher wages, create new jobs at a faster rate, and spend more on R&D than do local firms. D) Developing countries may feel that lower-cost labor constitutes their competitive advantage and that if they are forced to implement more stringent labor standards, it may damage their prospects for improved economic development.

A) A report by the Labor Secretariat for the North American Free Trade Agreement (NAFTA) reported that more than half of firms surveyed used threats to close U.S. operations as a tool to fight union-organizing efforts.

What company was the first to issue stock and is often identified as the world's first multinational corporation? A) Dutch East India Company B) Ford Motor Company C) Ottoman Empire D) Singer Sewing Machine

A) Dutch East India Company

________ refers to the transportation of any domestic good or service to a destination inside a country or region, from a foreign origination point. A) Importing B) Investing C) Exporting D) Divesting

A) Importing

The increased internationalization of business requires ________ to have a basic knowledge of international business. A) all managers B) managers of multinationals C) managers of transnationals D) managers of purely domestic operations

A) all managers

An international business is defined as a(n) A) business whose activities involve crossing national borders. B) organization with multicountry affiliates. C) organization that attempts to standardize operations worldwide. D) organization engaged in domestic trade.

A) business whose activities involve crossing national borders.

According to supporters of the globalization of trade and investment, free trade A) creates more and better jobs. B) benefits all nations and workers. C) does not cause the loss of high-paying jobs. D) preserves the individuality of different cultures.

A) creates more and better jobs.

Honest Yogurt Company of Denver, Colorado, was relieved when trade barriers on dairy products were lifted in Europe and the company could sell its products there. Which type of driver was affecting the company's ability to do business in Europe? A) political B) social C) technological D) market

A) political

What is one of the five major drivers of globalization? A) political B) social C) cultural D) economic

A) political

An example of political drivers of globalization would be A) privatization of industries. B) increased communication created by advanced communication technologies. C) globalizing product lines to decrease costs of production. D) the introduction of competitor firms.

A) privatization of industries.

Historically, international business as a business practice is considered A) relatively new. B) to have existed before the Roman Empire. C) to have begun in China. D) a result of the rise of the Ottoman Empire.

A) relatively new.

Kendall was recently assigned to a management role in his company's overseas operation. He has been taken off guard several times when his employees responded negatively because they said he didn't take their culture into consideration when he made decisions. His employees are referring to a A) self-reference criterion. B) production orientation. C) self-fulfilling prophecy. D) marketing orientation.

A) self-reference criterion.

Who is credited with being the first person to coin the term "globalization?" A) John Keynes B) Theodore Levitt C) Sigmund Freud D) James Wolfensohn

B) Theodore Levitt

Unconscious reference to your own cultural values when judging behaviors of others in a new and different environment is known as the ________ criterion.

Self-reference