Business principles Module 1&2 test
Technological drivers
-Advances in computers and communications technology permit an increased flow of ideas and information across borders -Smaller companies may find barriers reduced for being able to communicate and serve customers abroad. -Computer-based communication may enhance virtual integration
market drivers
-As firms internationalize, they also become global customers -Firms may go abroad to protect business in their home market, so that foreign suppliers do not replace them with customers. -Mature home country markets may encourage companies to consider nations with rising GDP/capita, population growth, and higher rates of GDP growth.
Political Drivers
-Trends toward the unification and socialization of the global community -Preferential trading arrangements that group several nations into a single market -Potential protectionism by host country markets
foreign affiliates
A company controlled by another company that is located in a foreign land, and this control may be exercised by a variety of means, both those involving stock ownership and those involving nonownership mechanisms
international company
A company with operations in multiple nations
which country currently exports the most to the U.S
China
The three nations that exported the largest amount of goods to the United States in 2017 were
China, Canada, and Mexico
competitive drivers
Competition continues to increase intensity. New firms, many newly industrialized and developing countries have entered world markets. (Global competition)
Which element is included in Porter's diamond model of national advantage?
Demand conditions
FDI
Foreign Direct Investment - Investment made by a foreign company in the economy of another country
Five Drivers of Globalization
Politics, Technology, Markets, Costs, Competition
The theory that to obtain a higher return on its investment, a firm will transfer its superior knowledge to a foreign subsidiary that it controls, rather than sell it in the open market is known as
internalization theory
The theory of overlapping demand suggests that
international trade in manufactured goods will be more common between countries with similar levels of income.
According to the international product life cycle, which country has the largest population of high-income consumers and as a result, intense competition for their patronage?
The U.S
Which regions accounted for an average of 49 percent of all inward FDI for 2015-2019?
The U.S and the European union
International business
all business activities that involve exchanges across national boundaries
domestic environment
all the uncontrollable forces originating in the home country that surround and influence the firm's life and development
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 most economists agree. D)the basis for much protectionist legislation in emerging markets.
c
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
foreign business
denotes the operations of a company outside its home or domestic market
currently the U.S is the largest exporter in the world
false
Trade Theory
shows why it is beneficial for a country to engage in international trade even for products it is able to produce for itself
U.S.-based Good For You Coffee Company introduced its line of herbal coffees to the international market two years ago. They were well received, and now foreign competitors are starting to export similar products. Which stage of the product life cycle is the product currently in?
stage 3
The theory suggesting that rivalry between firms in an oligopolistic industry will result in firms closely following and imitating each other's international investments in order to keep a competitor from gaining an advantage is known as
strategic behavior theory
The theory of overlapping demand explains
that a nation's per capita income determines the kinds of goods it will need.
trade deficit
the amount by which the cost of a country's imports exceeds the value of its exports.
trade surplus
the amount by which the value of a country's exports exceeds the cost of its imports.
exchange rate
the price of one nation's currency in terms of another nation's currency
direct investment
the purchase of sufficient stock in a firm to obtain significant management control.
Overall, what has occurred with the dollar volume of service exports worldwide?
there has been an absolute increase
A small gourmet food company operates solely within its own country's borders. As such, it need only be concerned with the domestic market.
true
Opponents of free trade point out that globalization has contributed to a decline in environmental and health conditions.
true
self reference criterion
unconscious reference to one's own cultural values, experiences, and knowledge as a basis for decisions
foreign environment
uncontrollable forces originating outside the home country that surround and influence the firm
International business really began
when Phoenician and Greek merchants sent representatives abroad to sell goods
World trade is dominated with exchanges _______
within geographic regions
cost drivers
•Going abroad can frequently lower the cost of goods sold. -Globalization of product lines reduce development, production, and inventory costs. -Some governments offer investment incentives to foreign business.
Environmental Forces
All businesses subject to external and internal forces •Domestic businesses mostly deal with the domestic environment •International businesses must consider domestic, foreign, and global environments •Forces operate within each of these environments
Mercantilism
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
absolute advantage
Exists when a country can produce a good or service at a lower cost than other countries.
International Environment
Interaction between domestic and foreign environmental forces or between sets of foreign environmental forces
uncontrollable forces
The external forces that management has no direct control over
portfolio investment
The purchase of stocks and bonds to obtain a return on the funds invested
comparitive advantage
The situation where someone can produce a good at lower opportunity cost than someone else can
who is credited being the first person to coin the term globalization
Theodore Levitt
perfect competition
a market structure in which a large number of firms all produce the same product
economies of scale
factors that cause a producer's average cost per unit to fall as output rises
An international company (IC) is a company headquartered in another nation.
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 foreign environment consists of the interactions between the domestic environmental forces and the foreign environmental forces, as well as interactions between the foreign environmental forces of two countries.
false