MGMT 309 - Chapter 1
31) Which of the following is a form of protectionist policies?
B) tariffs
39) Which two factors are primarily assessed when using the qualitative approach to measure a country's economic risk?
B) the competence of the country's leader and the economic policy direction
37) Which of the following is analyzed through the quantitative approach, qualitative approach, and the checklist approach?
B) the creditworthiness of a country
11) To which of the following free-trade agreements do Costa Rica, Guatemala, Honduras, El Salvador, and Nicaragua all belong?
C) CAFTA
53) Robert is a technology officer in an Umerian firm and he manages the firm's operations at its facility in Elador. Robert is considering the idea of installing new technology in the facility that would significantly improve productivity and reduce labor costs. Which of the following undermines the argument that Robert should install the new technology?
C) Elador is currently experiencing a very high rate of unemployment.
9) Emerson is a global manufacturing company headquartered in St. Louis, Missouri. The company employs almost 130,000 workers at its 250 manufacturing facilities located on five different continents. Emerson manufactures a wide range of products including air-conditioning compressors, garbage disposers, and automotive parts. Emerson's Asian operations employ over 50,000 people at manufacturing facilities in Asia. Emerson needs to build a new manufacturing facility to produce automotive parts for cars manufactured in Detroit. Emerson executives are considering whether to build the new facility in China or in the U.S. Which of the following, if true, undermines the argument to build a new Emerson facility in China?
C) Fuel costs in China have risen sharply and are not expected to drop.
4) The European Union currently consists of how many nations?
B) 27
45) ________ is based on a comprehensive set of laws organized into a code.
B) Civil law
14) ________ occurs when the local government seizes the foreign-owned assets of the MNC and provides inadequate compensation.
B) Expropriation
40) Representatives of a multinational firm seek an interview with local government leaders in the Department of Commerce in Argonia with a view to assess the types of policies likely to be implemented. According to Mathis, this is an example of ________.
A) qualitative approach
38) The ________ method of analyzing economic risk attempts to measure statistically a country's ability to honor its debt obligation by assigning different weights to economic variables.
A) quantitative
42) Which of the following best explains why many foreign companies find operating in China a difficult experience from a business perspective?
A) China lacks the financial and legal systems needed to support the country's foreign trade.
2) ________ results from the lessening of trade barriers and the increased flow of goods and services, capital, labor, and technology around the world.
A) Economic integration
7) Which of the following agreements is a free trade pact among seven South Asian nations, signed in order to lower tariffs?
A) SAARC
8) Emerson is a global manufacturing company headquartered in St. Louis, Missouri. The company employs almost 130,000 workers at its 250 manufacturing facilities located on five different continents. Emerson manufactures a wide range of products including air-conditioning compressors, garbage disposers, and automotive parts. Emerson's Asian operations employ over 50,000 people at manufacturing facilities in Asia. Emerson needs to build a new manufacturing facility to produce automotive parts for cars manufactured in Detroit. Emerson executives are considering whether to build the new facility in China or in the U.S. Which of the following, if true, supports the argument to build a new Emerson facility in China?
A) The Chinese courts recently ruled in favor of an MNC in an intellectual property rights lawsuit.
17) Which of the following is an example of a macropolitical risk event?
A) a terrorist attack
47) Under which law system must the details of the promises be written into a contract in order for it to be enforced?
A) common law
19) Intelligentia is attempting to do business in Bazania, but the Bazanian government purposely delays granting Intelligentia the necessary licenses and permissions required to conduct business in the country. Which of the following best describes this situation?
A) creeping expropriation
55) The term ________ refers directly to the marketing and sales process via the Internet.
A) e-commerce
28) Which of the following strategies is a firm most likely to use, if it initiates a joint venture with a local company in a foreign country, as a way of adapting to risk?
A) equity sharing
33) If a foreign-based firm borrows money from a host country bank as a hedge against being forced out of operation without adequate compensation, the firm is managing political risk with ________.
A) local debt financing
5) Which of the following best explains China's success in exporting?
A) low costs and steady stream of capital
52) Some countries rigorously enforce employee secrecy agreements in order to ________.
A) protect a firm's intellectual property
26) Which of the following means of political risk reduction is best suited for firms that decide a high-risk environment is worth the potential returns?
B) adaptation
41) The ________ approach to analyzing economic risk relies on a few easily measurable and timely criteria believed to reflect or indicate changes in the creditworthiness of the country.
B) checklist
43) Past court decisions serve as precedents to the interpretation of the law under ________.
B) common law
15) Expropriation is most likely to occur in a country that has ________.
B) constant political upheaval and change
30) In addition to avoidance and adaptation, two other means of risk reduction available to managers are ________ and ________.
B) dependency; hedging
54) Which of the following terms refers to the integration of systems, processes, organizations, value chains, and entire markets using Internet-based technologies?
B) e-business
57) Experts suggest that firms wanting to globalize through e-commerce must first localize, which means firms need to ________.
B) modify their products and services to meet the needs and interests of local cultures
12) Political risks are best described as any governmental actions or politically motivated events that ________.
B) negatively affect the firm's long-run profitability or value.
23) For autonomous international subsidiaries, most of the impact from political risks will be in which of the following areas?
B) ownership and control
29) Which of the following means of adaptation to political risk requires that a firm actively involve nationals in the management of its subsidiary?
B) participative management
22) Expropriation of corporate assets without prompt and adequate compensation is an example of ________.
B) political risk
21) Loss of technology and interference in managerial decision making are forms of ________.
B) political risk events
3) In which of the following groups of trade blocs does most of today's world trade takes place?
C) Western Europe, Asia, and the Americas
46) Which of the following terms refers to an agreement by the parties concerned to establish a set of rules for governing a business transaction?
C) contract
56) Which of the following is an advantage of e-business?
C) convenience in conducting business worldwide
50) Which type of country is most likely to use its investment laws to acquire appropriate technology?
C) less-developed country
35) Which of the following is a form of hedging?
C) local debt financing
20) Micropolitical risk events are those that affect ________.
C) one industry or company or a few companies
51) The Paris Union was established for the purpose of ________.
C) protecting patents
24) For global corporations, the primary impact of political risks is likely to be on the firm's ________.
C) transfers of money or products
44) An international agreement which regulates international business by spelling out the rights and obligations of the seller and buyer is known as ________.
D) Contracts for International Sale of Goods
10) Emerson is a global manufacturing company headquartered in St. Louis, Missouri. The company employs almost 130,000 workers at its 250 manufacturing facilities located on five different continents. Emerson manufactures a wide range of products including air-conditioning compressors, garbage disposers, and automotive parts. Emerson's Asian operations employ over 50,000 people at manufacturing facilities in Asia. Emerson needs to build a new manufacturing facility to produce automotive parts for cars manufactured in Detroit. Emerson executives are considering whether to build the new facility in China or in the U.S. Which of the following questions is LEAST relevant to Emerson's decision regarding where to build a new facility?
D) How will e-commerce affect Emerson's ability to export products from China?
6) Which of the following countries is today known as the world's services supplier, providing highly skilled and educated workers to foreign companies?
D) India
48) In the context of doing business in Asia, what is meant by the phrase "the contract is in the relationship, not on the paper"?
D) Managers should nurture the relationship to ensure the reliability of the contract.
25) ________ is a means of adapting to political risk, which requires that a firm actively involve nationals, including those in labor organizations or government, in the management of its subsidiary.
D) Participative management
32) ________ poses a severe and random political risk to company personnel and assets, and interrupts the conduct of business.
D) Terrorism
16) The government of Jonovia seizes all assets of Refresh, a world-famous, soft-drink brand in Jonovia, without offering any compensation to the company. This action by the government of Jonovia is an example of ________.
D) confiscation
72) Differences in laws and regulations from country to country are very few and simple.
FALSE
73) Firms use e-business to help build new relationships between businesses and retailers.
FALSE
74) Internet is a completely open platform and it does not have to abide by any laws.
FALSE
36) A country's ability or intention to meet its financial obligations determines its ________.
D) economic risk
13) Which of the following best describes nationalization?
D) forced sale of an MNC's assets to local buyers
1) Which of the following is characterized by networks of international linkages that bind countries, institutions, and people in an interdependent economy?
D) globalization
34) Political risk insurance and local debt financing are both forms of ________.
D) hedging
27) Which of the following is a method of dependency?
D) maintaining control over technology
18) Zagreb Inc., a transnational energy company, negotiates a multimillion dollar contract with the government to provide electricity to Pilladia. The government is voted out of power shortly after. The new government cancels all contracts it has with all oil companies but not contracts with firms in other industries. This is an example of ________.
D) micropolitical risk
49) The appropriability of technology is best defined as ________.
D) the ability of a firm to protect its technology from competitors and to profit from that technology
59) SAARC is an agreement that came into force to bring faster growth, more jobs, better working conditions, and a cleaner environment for all as a result of increased exports and trade.
FALSE
60) NAFTA is an agreement that came into force to lower tariffs to 25 percent within three to five years, and to eliminate them within seven years.
FALSE
61) Confiscation occurs when a local government seizes and provides inadequate compensation for the foreign-owned assets of an MNC.
FALSE
62) Expropriation occurs when a local government seizes and does not provide any compensation for the foreign-owned assets of an MNC.
FALSE
63) Privatization refers to the forced sale of an MNC's assets to local buyers with some compensation to the firm, perhaps leaving a minority ownership with the MNC.
FALSE
64) An event that affects all foreign firms doing business in a country or region is called a micropolitical risk event.
FALSE
65) An event that affects one industry or company or only a few companies is called a macropolitical risk event.
FALSE
66) Political risk insurance and local debt financing are forms of dependency.
FALSE
67) The quantitative approach evaluates a country's economic risk by assessing the competence of its leaders and analyzing the types of policies they are likely to implement.
FALSE
69) Under civil law, past court decisions act as precedents to the interpretation of the law and to common custom.
FALSE
70) Common law is based on a comprehensive set of laws organized into a code.
FALSE
58) Small- and medium-sized enterprises contribute to their national economies by creating new jobs.
TRUE
68) The checklist approach relies on a few easily measurable and timely criteria believed to reflect or indicate changes in the creditworthiness of the country.
TRUE
71) Under civil law, it is assumed a contract reflects promises that will be enforced without specifying the details in the contract.
TRUE