International Business Final cumulative

Human Development Index (HDI)

"Composite measure of development. It includes averages in three basic components of human development. 1. Health, measured by life expectancy at birth. 2. Education, measured by average of mean years of schooling, and expected years of schooling. 3. Living Standards, measured by GNI"

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 foreign operations. At a recent shareholders' meeting, attendees questioned the CEO's motivations for authorizing certain of the expansion efforts. . One shareholder wanted clarification about a research effort that investigated the possibility of setting up a plant in China. The CEO explained that serving China's rapidly growing middle class population would enable Sterling to increase the size of its customer base dramatically. In China, the CEO was most likely interested in __________________.

. developing economies of scale

Phases of Globalization Phase 1:

1830 to late 1800s; Aided by railroads and ocean transport; the rise of manufacturing and trading companies

Phases of Globalization Phase 2

1900 to 1930 Fueled by electricity and steel; early MNEs

Phases of Globalization Phase 3

1948 to 1970s GATT, post-war era; reduction of trade barriers worldwide; rise of global capital markets

Phases of Globalization Phase 4

1980 to present Fueled by Internet and other technologies; rapid liberalization in emerging markets

Multinational Enterprise

A firm that has operations or subsidiaries in many countries

Uncertainty avoidance

A national culture attribute that describes the extent to which a society feels threatened by uncertain and ambiguous situations and tries to avoid them. Uncertainty avoiding cultures try to minimize the possibility of such situations by strict laws and rules, safety and security measures, and on the philosophical and religious level by a belief in absolute Truth; 'there can only be one Truth and we have it'.

Non-Governmental Organizations

A private sector organization that does not primarily aim to make a profit. Instead, they operate for the benefit of others in society.

Which of the following best explains the recent rapid increase in exports worldwide?

Advanced economies now source many of their consumable products from low-cost manufacturing nations.

What are the top two Leading Countries in International Merchandise Trade, as % of Nation's GDP?

Belgium and the Netherlands (US is low!)

In the third phase of globalization, multinational firms originated from all of the following except ______________.

Brazil

Which of the following countries are now considered to be primary sources of technological advances?

China and India

what are the world's fastest growing large economies?

China and India. Chile, Ireland, and Vietnam are also growing!

The end of the Cold War (approximately 1990) was signaled by each of the following except ____________________.

China's move to join the WTO

downside of globalization

Contagion—Rapid Spread of Monetary or Financial Crises Loss of National Sovereignty Offshoring and the Flight of Jobs Effect on the Natural Environment Effect on the National Culture Effect on the Poor

The benefits of Internationalization of the Firm's Value Chain

Cost savings Increase efficiency, productivity, and flexibility of value chain activities Access to customers, inputs, labor, or technology Benefit from foreign partner capabilities

power distance

Degree to which societies accept the idea that inequalities in the power and well-being of their citizens are due to differences in individuals' physical and intellectual capabilities and heritage

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 positionRina most likely counters Juan's claim regarding environmental effects by pointing out which of the following:

Environmental destruction tends to diminish in the long run, as economies develop

country risk

Exposure to potential loss or adverse effects on company operations and profitability caused by developments in a country's political and/or legal environments. Government intervention, protectionism, and barriers to trade and investment Bureaucracy, red tape, administrative delays, corruption Lack of legal safeguards for intellectual property rights Legislation unfavorable to foreign firms Economic failures and mismanagement Social and political unrest and instability

FDIC

Federal Deposit Insurance Corporation: A federal guarantee of savings bank deposits initially of up to $2500, raised to $5000 in 1934, and frequently thereafter; continues today with a limit of $100,000

The Technix Computer Corporation recently finished construction of a customer service phone center in Manila, Philippines. Phone center agents will be responsible for answering technical questions from customers around the globe. Technix has hired 55 local computer experts as phone agents, and a training session is underway. Technical specialists and call center specialists from the United States have flown to Philippines to train the new Indian employees. Hank Patelli, a senior manager of a Technix phone center in Michigan, will oversee the Manila phone center for six months until a local manager can be hired and trained to replace him After the first training session, a number of the Michigan employees expressed frustration that the Indian employees lacked technical knowledge because none of them asked questions or offered answers. Corazon, one of the Filipino employees, asks Hank if the weekend training session could be rescheduled because it is an important Catholic local festival day. What will be the most likely outcome if Hank agrees to Corazon's request?

Hank will develop a relationship of trust and understanding with the Indian employees.

The British restaurant chain, Winchester Fish & Chips (WFC), is considering the idea of opening a restaurant in Sweden. The president of WFC believes worldwide demand for fish & chips is growing and that Sweden could be a profitable market in which the firm could internationalize. WFC executives are in the process of gathering information in preparation for a board meeting in which a vote will be taken on the plan to open a restaurant in Sweden. Which of the following would be more important to evaluate before WFC internationalizes its operations?

Has global homogenization increased the likelihood that Swedes will try food from a different culture?

absolute advantage principle

In 1776 -- Scottish political economist ADAM SMITH challenged the views of mercantilism in a landmark book. He argued for the importance of Free Trade! He also said, countries should specialize in the production of goods for which they can produce using fewer resources than another country) and then trade these goods for the goods produced by other countries. A country should produce only those products in which it has absolute advantage or those it can produce using fewer resources than another country

comparative advantage principle

In 1817, British political economist David Ricardo explained why it is beneficial to trade. He argued cost didn't matter as much as the efficiency with which a country could produce a good. Is a situation in which a country specializes in the production of a good or service at which it is relatively more efficient.It is beneficial for two countries to trade even if one has absolute advantage in the production of all products; what matters is not the absolute cost of production but the relative efficiency with which it can produce the product

international product lifecycle theory

In 1966, Harvard professor Raymond Vernon -- every product goes through three stages of evolution. In the new product stage, the product is produced and consumed in the US; no export trade occurs. In the maturing product stage, mass-production techniques are developed and foreign demand (in developed countries) expands; the US now exports the product to other developed countries. In the standardized product stage, production moves to developing countries, which then export the product to developed countries

factor proportions theory

In the 1920s, two Swedish economists, Eli Heckscher and Bertil Ohlin proposed the fpt. Trade theory stating that countries produce and export goods that require resources that are abundant and import goods that require resources in short supply

Socialization can best be defined by which of the following?

Learning the norms and behavioral patterns and rules of one's own society.

The leaders of Kazmia, a small nation in the southern hemisphere, have called a meeting to discuss ways to encourage foreign firms to invest in Kazmia. The country was once a leader in diamond mining and exports, however, the diamond mines have been depleted. Meanwhile the standard of living in Kazmia has plummeted to its lowest level, and young people are leaving the country. Government leaders must devise a plan to reinvigorate the once prosperous nation. Which of the following countries would provide the best example for Kazmia before it begins the process of creating a national comparative advantage?

Mauritius

The leaders of Kazmia, a small nation in the southern hemisphere, have called a meeting to discuss ways to encourage foreign firms to invest in Kazmia. The country was once a leader in diamond mining and exports, however, the diamond mines have been depleted. Meanwhile the standard of living in Kazmia has plummeted to its lowest level, and young people are leaving the country. Government leaders must devise a plan to reinvigorate the once prosperous nation. The work of which of the following experts would be the most helpful to the leaders of Kazmia in their efforts to reinvent their country?

Michael Porter

Hofstede dimensions

Power distance, Uncertainty avoidance, Individualism and collectivism,Masculinity/femininity, Long-term/short-term orientation

competitive advantage of nations

Professor Michael Porter 1990. A set of unique features of a company and its products that are perceived by the target market as significant and superior to the competition

value chain stages

R&D, Procurement and sourcing, manufacturing, Marketing, Distribution, Sales and Service

The Technix Computer Corporation recently finished construction of a customer service phone center in Manila, Philippines. Phone center agents will be responsible for answering technical questions from customers around the globe. Technix has hired 55 local computer experts as phone agents, and a training session is underway. Technical specialists and call center specialists from the United States have flown to Philippines to train the new Indian employees. Hank Patelli, a senior manager of a Technix phone center in Michigan, will oversee the Manila phone center for six months until a local manager can be hired and trained to replace him After the first training session, a number of the Michigan employees expressed frustration that the Indian employees lacked technical knowledge because none of them asked questions or offered answers. Which of the following would be the best way for Hank to handle the situation?

Remind the American employees that the Filipinos may be showing respect by remaining silent.

Which of the following statements would be supported by Michael Porter?

Rivalry among industry competitors spurs innovation

The idea that exports should be maximized and imports should be minimized is known by which of the following terms?

The Mercantilist View

WTO

The World Trade Organization - an international body that enforces agreements that reduce barriers to international trade; successor to the GATT (as of 2013 currently 159 members)

comparative advantage

The ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than other producers.

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 foreign operations. At a recent shareholders' meeting, attendees questioned the CEO's motivations for authorizing certain of the expansion efforts. The CEO justified one of the company's moves by pointing out that it not only enabled Sterling to benefit from global sourcing advantages, but it also provided access to new ideas about business methods. The shareholders viewed this justification positively most likely because they understood which of the following?

The most compelling motive for international expansion is to gain new ideas from other markets.

National prosperity is strongly associated with:

The nation's level of economic freedom, Participation in international trade and investment, Thus, nations should emphasize economic freedom and participation in international trade and investment.

Value chain:

The sequence of value-adding activities performed by the firm in the process of developing, producing, and marketing a product or a service. Globalization allows the firm to internationalize its value chain, leading to various advantages.

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 the homogenization of national cultures?

The standardizing forces of globalization are often resisted through increasing nationalism.

International Investment: FDI

The transfer of assets to another country or the acquisition of assets in that country

new trade theory

Theory that sometimes countries specialize in the production and export of particular products not because of underlying differences in factor endowments, but because in certain industries the world market can support only a limited number of firms

Banana wars

US and some Latin American nations took the European Union and some Caribbean nations to the WTO because the EU had agreements with its former colonies to buy bananas exclusively from them

What are the 3 top Leading Countries in International Merchandise Trade, Total Value?

US, Germany and China.

Which of the following countries is home to the largest stock of inward FDI in Europe?

United Kingdom

What are the Leading Countries in International Services Trade, Total Value?

Us, Germany and UK

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?

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

The British restaurant chain, Winchester Fish & Chips (WFC), is considering the idea of opening a restaurant in Sweden. The president of WFC believes worldwide demand for fish & chips is growing and that Sweden could be a profitable market in which the firm could internationalize. WFC executives are in the process of gathering information in preparation for a board meeting in which a vote will be taken on the plan to open a restaurant in Sweden. Which of the following should be considered in making the decision regarding whether WFC should open a restaurant in Sweden?

What style of food do Swedes typically enjoy eating?

All of the following represent examples of regional economic integration blocs except ________________.

World Trade Organization

What's growing faster? world trade or GDP?

World Trade is Growing Faster than GDP

What are the Drivers of Market Globalization?

Worldwide reduction of barriers to trade and investment Market liberalization and adoption of free markets Industrialization, economic development, and modernization Integration of world financial markets Advances in technology

foreign direct investments

a direct investment into production or business in a country by an individual or company of another country, either by buying a company in the target country or by expanding operations of an existing business in that country. Foreign direct investment is in contrast to portfolio investment which is a passive investment in the securities of another country such as stocks and bonds.

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 foreign operations. At a recent shareholders' meeting, attendees questioned the CEO's motivations for authorizing certain of the expansion efforts. The CEO introduced another foreign 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 distribution center established in London to preempt the growth of a British car manufacturer

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 foreign operations. At a recent shareholders' meeting, attendees questioned the CEO's motivations for authorizing certain of the expansion efforts. In discussing the expansion effort to India, the CEO reminded shareholders of Black and Decker's move to partner with the Indian retailer Bajaj to increase its long-term sales in the Indian market. The CEO was most likely attempting to justify which of the following?

a joint venture with the largest Indian automobile distributorship.

Cross-cultural risk

a situation or event where a cultural misunderstanding puts some human value at stake Cultural Differences: Negotiating Patterns Decision Making Styles Ethical Practices Management Styles HR Practices

The idea that each nation is most efficient in the production of some goods and least efficient in the production of other goods underlies which of the following concepts?

absolute advantage principle

The Technix Computer Corporation recently finished construction of a customer service phone center in Manila, Philippines. Phone center agents will be responsible for answering technical questions from customers around the globe. Technix has hired 55 local computer experts as phone agents, and a training session is underway. Technical specialists and call center specialists from the United States have flown to Philippines to train the new Indian employees. Hank Patelli, a senior manager of a Technix phone center in Michigan, will oversee the Manila phone center for six months until a local manager can be hired and trained to replace him Which of the following activities would be the most beneficial to Hank's success as a manager in Manila?

acquire a working knowledge of Tagalog, the language common in the Philippines.

The Technix Computer Corporation recently finished construction of a customer service phone center in Manila, Philippines. Phone center agents will be responsible for answering technical questions from customers around the globe. Technix has hired 55 local computer experts as phone agents, and a training session is underway. Technical specialists and call center specialists from the United States have flown to Philippines to train the new Indian employees. Hank Patelli, a senior manager of a Technix phone center in Michigan, will oversee the Manila phone center for six months until a local manager can be hired and trained to replace him Which of the following character traits will be the most useful to Hank during his time in the Manila service center?

adaptability

Globalization and technological advances have

altered the international business landscape more than any other trends.

two types of international trade theories

classical and contemporary

Born Global Firm

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

contemporary theories

competitive advantage of nations, Michael Porter's Diamond Model, National Industrial Policy

Which of the following is not an example of a cross-cultural risk factor?

competitive intensity

Considering the iceberg metaphor proposed by anthropologists to explain the layers of a culture, which of the following would be the most deeply embedded?

conversational patters

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. Philip Baxter reported on the risks associated with establishing the plant in Country A. The most significant risk, in his view, was posed by the country's complex bureaucratic structure. Philip reported the likelihood of significant administrative delays in opening the plant. The risk identified by Philip is an example of which of the following?

country risk

The leaders of Kazmia, a small nation in the southern hemisphere, have called a meeting to discuss ways to encourage foreign firms to invest in Kazmia. The country was once a leader in diamond mining and exports, however, the diamond mines have been depleted. Meanwhile the standard of living in Kazmia has plummeted to its lowest level, and young people are leaving the country. Government leaders must devise a plan to reinvigorate the once prosperous nation. The first stage of creating a competitive advantage for Kazmia will most likely involve which of the following?

creating a national industrial policy

Increases in international trade and investment are accompanied by increases in all of the following except _________________.

cross-border conflict

The British restaurant chain, Winchester Fish & Chips (WFC), is considering the idea of opening a restaurant in Sweden. The president of WFC believes worldwide demand for fish & chips is growing and that Sweden could be a profitable market in which the firm could internationalize. WFC executives are in the process of gathering information in preparation for a board meeting in which a vote will be taken on the plan to open a restaurant in Sweden. Which of the following best supports WFC entering the Swedish market?

cultural homogenization

Inflationary pricing is an example of which of the following

currency risk

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. LeShaun Golding researched the risks linked to establishing the plant in Country C. He cited government intervention, potential economic problems such as high inflation, and unethical business practices as the most prominent risks for this location. LeShaun noted all of the following types of risks except _____________.

currency risk

The leaders of Kazmia, a small nation in the southern hemisphere, have called a meeting to discuss ways to encourage foreign firms to invest in Kazmia. The country was once a leader in diamond mining and exports, however, the diamond mines have been depleted. Meanwhile the standard of living in Kazmia has plummeted to its lowest level, and young people are leaving the country. Government leaders must devise a plan to reinvigorate the once prosperous nation. Which of the following actions by the government would be the most beneficial for the long-term economic security of Kazmia?

developing an infrastructure of communications, technology, and transportation

Business dealings in low-context cultures are characterized by which of the following?

efficiency (e.g. US)

According to the factor of proportions theory, nations with an ample labor supply of low-skilled labor, such as Mexico should

export textiles and import pharmaceuticals

commercial risk

firm's potential loss or failure from poorly developed or executed business strategies, tactics, or procedures. Weak partner Operational problems Timing of entry Competitive intensity Poor execution of strategy General commercial risks such as these lead to sub-optimal formulation and implementation of the firm's international value-chain activities.

Northern Italy is recognized as a(n) ______________ for the fashion industry.

industrial cluster

All of the following characterize masculine cultures except _______________.

interdependence

Market globalization compels firms to

internationalize their value chain and access the benefits of international business.

According to the international product cycle theory, inventors of a product earn the most profits at which of the following stages?

introduction (the three phases are introduction, maturity and standardization)

United Kingdom -- the Brittish

low power distance, (they believe the inequalities between social classes should be lessened), high individualism-- a "me culture", medium masculine, short-term oriented

All of the following represent internal forces that might compel a firm to develop a proactive strategy of internationalization except _______________.

market globalization

classical theories

mercantilism, absolute advantage principle, comparative advantage principle, factor proportions theory, international product lifecycle theory, new trade theory

All of the following are comparative advantages that develop with time except _______________.

natural endowments

Globalization allows firms to view the world as

one large marketplace for goods, services, capital, labor, and knowledge.

currency risk

potential threat to a firm's operations in a country due to fluctuations in the local currency's exchange rate Currency exposure: General risk of unfavorable exchange rate fluctuations. Asset valuation: Risk that exchange rate fluctuations willadversely affect the value of the firm's assets and liabilities. Foreign taxation: Income, sales, and other taxes vary widely worldwide, with implications for company performance and profitability. Inflation: High inflation, common in many countries, complicates business planning and the pricing of inputs and finished goods.

Which of the following is considered the most important monopolistic advantage?

proprietary knowledge

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 Santos reported on the risks associated with establishing the plant in Country B. In her analysis, Rosa emphasized the financial risks involved. Which of the following was most likely not included in Rosa's analysis?

protectionism

Globalization

refers to the interconnectedness of national economies and the growing Interdependence of buyers, producers, suppliers, and governments around the world

Multinational firms first emerged in which phase of globalization?

second

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 foreign operations. At a recent shareholders' meeting, attendees questioned the CEO's motivations for authorizing certain of the expansion efforts. One shareholder questioned the CEO's rationale for beginning an exploratory effort to establish a new manufacturing plant in India. The CEO responded by explaining that India was an untapped market with a high demand for products such as those produced by Sterling. His rationale represented an example of which of the following?

seeking opportunities for growth through market diversification

Growth of World GDP, 2000-2009

the GDP growth rate worldwide from 2000 to 2009. Note that most nations generally experienced positive growth. As shown in the map, the developed countries have fairly moderate growth rates of 1 to 4 percent.

The third phase of globalization was triggered by _________________.

the end of World War II

Which of the following was a landmark for major growth and liberation in international trade and investment?

the establishment of GATT

Economic freedom

the extent of government interference in business, the strictness of the nation's regulatory environment, and the ease with which economic activity can be carried out.

Each of the following has contributed to the rapid integration of world economies except __________________.

the increase in trade barriers

Self-reference criterion can best be defined by which of the following?

the propensity to view other cultures through the lens of one's own culture

A regional economic integration bloc is characterized by all of the following except ______________.

the reduction of investment flows among members

An important cause of the 2008 crisis

was inadequate regulation of mortgage markets and banking sectors in the U.S. and elsewhere, which highlights the importance of a strong legal and regulatory framework for national economic well-being.

mercantilism

why nations attempt to run a trade surplus -- from the 1500s. came from europe. An economic policy under which nations sought to increase their wealth and power by obtaining large amounts of gold and silver and by selling more goods than they bought. A belief, popular in the 16th century, that national prosperity results from maximizing exports and minimizing imports.