MGT Test 2

factor endowments

A country's endowment with resources such as land, labor, and capital.

Pragmatic Nationalism

A political view that only approves FDI when its benefits outweigh its costs.

local content requirement

A requirement that some specific fraction of a good be produced domestically.

ad valorem tariff

A tariff levied as a proportion of the value of an imported good.

Eclectic Paradigm

Argument that combining location-specific assets or resource endowments and the firm's own unique assets often requires FDI; it requires the firm to establish production facilities where those foreign assets or resource endowments are located.

economies of scale

Cost advantages associated with large-scale production

Heckscher-Ohlin Theory

Countries will export those goods that make intensive use of locally abundant factors of production and import goods that make intensive use of locally scarce factors of production.

greenfield investment

Establishing a new operation in a foreign country

A country that relies on the pragmatic nationalist view would say that

FDI should be allowed so long as the benefits outweigh the costs

strategic trade policy

Government policy aimed at improving the competitive position of a domestic industry and/or domestic firm in the world market.

tariff rate quota

Lower tariff rates applied to imports within the quota than those over the quota.

Custom Cabinetry International needs immediate access to wood in order to produce an order of 50,000 high-end retail display cases by the end of next year. It cannot afford to wait and establish a new operation in a foreign country where this species of wood is prevalent, so it decides to purchase an existing company instead. Why did Custom Cabinetry decide to make this purchase?

Mergers and acquisitions are quicker to execute than greenfield investments.

infant industry argument

New industries in developing countries must be temporarily protected from international competition to help them reach a position where they can compete on world markets with the firms of developed nations.

naive immoralist

One who asserts that if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, that manager should not either.

righteous moralist

One who claims that a multinational's home-country standards of ethics are the appropriate ones for companies to follow in foreign countries.

dumping

Selling goods in a foreign market for less than their cost of production or below their "fair" market value.

specific tariffs

Tariff levied as a fixed charge for each unit of good imported.

cultural relativism

The belief that ethics are culturally determined and that firms should adopt the ethics of the cultures in which they operate.

Leontief Paradox

The empirical finding that, in contrast to the predictions of the Heckscher-Ohlin theory, US exports are less capital intensive than US imports.

utilitarian approaches to ethics

These hold that the moral worth of actions or practices is determined by their consequences. greatest good for the greatest number of people

Paul Krugman characterizes strategic trade policy as being

a boost to national income at the expense of other countries.

tariff

a tax levied on imports

According to Porter, which factor endowment would be classified as an advanced factor?

communication infrastructure

Aesha works for a moderately priced running shoe manufacturer and while their products are lower in cost, there is a high degree of consumer pressure to create the best quality running shoes possible and to constantly innovate with new designs. Which aspect of Porter's Diamond does this demonstrate?

demand conditions

Mercantilism

encourage exports and discourage imports

Fast Tracker Inc., a U.S.-based company, makes custom wearable fitness trackers in Oregon, which are then shipped to Europe for sale there. Based on this information, Fast Tracker Inc. is involved in

exporting

why fdi and licensing are better than exporting

exporting = tariffs and high transportation costs

Tavis lives in southern Florida where there is sufficient land and labor to successfully grow gourds and melons. Heckscher-Ohlin would consider the land and labor to be

factor endowments

According to the product life-cycle theory, the locus of global production initially switches from developing countries to other advanced nations and then from those nations to the United States.

false

Offshore production refers to FDI undertaken to serve the host market.

false

The threat of antidumping action enhances the ability of a firm to use aggressive pricing to gain market share in a country.

false

Under a tariff rate quota, a higher tariff rate is applied to imports within the quota than those over the quota.

false

types of fdi

greenfield or mergers and aquisitions

A South American nation has a direct restriction on the amount of vegetables that may be imported into the country. Which instrument of trade policy does this reflect?

import quota

Dolby Fashion House, an Italian manufacturer of evening dresses, granted U.S. company On the Runway Inc. the right to produce and sell Dolby Fashion's products in the United States. In return, On the Runway Inc. has to pay a royalty fee on every unit sold. According to this information, what form of FDI is Dolby Fashion House using?

licensing

Oligopoloy

limited number of large firms

When the management team reviewed its government contract on office chairs, they noticed that in order to bid on the project, at least 37 percent of the value of the office chairs had to be produced in the United States. This stipulation is an example of a(n)

local content requirement

In his theory of absolute advantage, Adam Smith advocated that __________ should determine what a country imports and what it exports.

market mechanism

Brianna lives in a nation that encourages the production of goods for exporting and to satisfy the needs of the nation's citizens. This results in the nation relying less on importing goods. Which trade theory does this reflect?

mercantilism

The government of a South American nation enforces tariffs and quotas to limit imported goods, while exports are subsidized. By using these instruments, the government seeks to achieve a surplus in the balance of trade. Based on this information, which approach is influencing the international trade efforts in this nation?

mercantilism

Abby asked the management team to consider how they would feel if they were asked to travel more than 65 miles to get to work—which is what they were asking the management team at the foreign office to do. Abby is relying on __________ to approach this ethical situation.

moral imagination

Subsidies and quotas are examples of __________ barriers a county might impose

non-tariff

Solar Chemical, an industrial cleaning products manufacturing company, has a market share of 30 percent in Brazil. Three of its competitors together control 55 percent of the market. Whenever Solar Chemical raises or lowers the prices of its products, the other three companies quickly imitate its action. What is the market structure of this industry in Brazil?

oligopoly

One reason a government might intervene in foreign trade is to protect consumers from a potentially dangerous product that's being imported. This would be an example of a(n) _____ argument for government intervention.

political

One root cause of unethical behavior in business is

pressure to meet unrealistic performance goals

A firm might justify a preference for licensing over FDI because licensing

results in the licensee bearing the costs and risks.

Which philosophical approach claims that a multinational's home-country standards of ethics are the ones employees should follow even when working in foreign countries?

righteous moralism

A tax of 14 cents is levied for each ceramic plate imported into a nation. This is an example of a(n)

specific tariff

In order to encourage the wine production industry, the Italian government provided lowinterest loans for the purchase of equipment and plants. The government also gave cash grants

subsidies

During the second stage of the ethical decision-making process, managers must determine whether a proposed decision would violate

the fundamental rights of any stakeholders

Kellen Builders decides to move production to a developing country where they are free to pump pollutants into the atmosphere without legal restriction. By doing this, the company is contributing to

the global tragedy of the commons

friedman doctrine

the only social responsibility of business is to increase profits, so long as the company stays within the rules of law

A number of employees at Organic Growers Inc., which is headquartered in a country where masculinity and power distance are high, do not behave in an ethical manner. In this context, the roots of unethical behavior can be traced to

the societal culture

New Trade Theory

trade allows a nation to specialize in the production of certain goods, first mover advantages, variety of goods increases while costs of goods decrease

Product Life Cycle Theory

trade patterns are influenced by where a product is introduced,

A resource-transfer effect of FDI is that it can result in a positive contribution to a host economy by supplying capital and technology which boost the country's economy.

true

From the perspective of making a profit, it is sensible for a company to disperse production activities to countries where they can be performed most efficiently.

true

In general, tariff rates on manufactured products tend to be much lower than tariff rates on agricultural products.

true

The attractiveness of exporting is reduced when a product can easily be produced in almost any location.

true

A European nation has the world's most efficient computer monitor manufacturing industry, while a country in Central America has the world's most efficient agricultural machines industry. The European nation trades computer monitors with the Central American country in exchange for agricultural machinery. This form of trade between the two countries illustrates

the theory of absolute advantage

Sun-Jun relies on a cost-benefit analysis to decide if moving operations overseas is better than increasing the size of the current manufacturing facility in the United States. He is using the __________ approach to ethics to determine his answer.

utilitarian