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The gold standard was adopted by the world's major trading nations by the late _____.

1800s

In 2018, the IMF had ______ members, around ______ of which had some kind of IMF program in place.

189; 40

If the interest rate in country A is 8% and the interest rate in country B is 4%, the international Fisher effect predicts the value of country A's currency will depreciate by ______ against country B's currency.

4%

The most typical joint venture involves a ____ stake in ownership between two companies.

50-50

What three things should a company take into consideration when choosing a strategic alliance partner?

A good partner does not act opportunistically. A good partner helps the firm achieve its strategic goals. A good partner shares the firm's vision for the purpose of the alliance.

Derek told the board that he didn't feel Belleson Corp. would make a good strategic partner because that company had a reputation for confiscating software from partners without giving anything in return. Given this information, which characteristic of a good partner is Alliance Corp. missing?

A good partner is unlikely to try to opportunistically exploit the alliance for its own ends.

What are two ways a company can set up a wholly owned subsidiary in a foreign country?

A greenfield venture Acquire an established firm

Which two features of the IMF Articles of Agreement fostered flexibility in the Bretton Woods agreement?

Adjustable parities IMF lending facilities

What is hyperinflation?

An explosive and seemingly uncontrollable price inflation in which money loses value very rapidly

Which two characteristics help a company get the MOST out of a strategic alliance?

Applying knowledge from the alliance in your own firm Learning from partners

What are two disadvantages of operating a wholly owned subsidiary?

Bearing all the risk Bearing all the cost

Which three sales and marketing functions can help a firm create value?

Brand positioning Consumer assessments Advertising

In 1944, representatives from 44 countries met in ______ to create a new international monetary system.

Bretton Woods

What three activities are examples of processes within a company?

Budgeting Developing a marketing plan Yearly employee review

hat are three advantages of being a first-mover?

Building sales volume Preempting rivals Creating switching costs

Universal needs exist with which two categories of products?

Bulk chemicals, petroleum and steel Personal computers and hand held calculators

If the interest rate in Canada is 6.5% and the interest rate in the US is 4%, the international Fisher effect predicts that

Canada's currency will depreciate by 2.5% against the US dollar.

A firm should follow the transnational strategy when it experiences which two pressures?

Cost reduction Local responsiveness

PPP theory, according to research, seems to predict exchange rate movements best for countries in which two situations?

Countries with underdeveloped capital markets Countries with high inflation rates

What are two advantages of turnkey projects?

Earning greater returns from valuable assets Entering markets where FDI is limited by host government

Which is an example of a major strategic commitment by a company?

Entering a foreign market on a significant scale

Prior to introducing the euro, several member states in the EU operated with fixed exchange rates under the

European Monetary System

What are three ways becoming a multinational company can increase a firm's profitability?

Expand the market for their domestic product Realize location economies Realize greater cost economies

What are three methods companies use for entering foreign markets?

Franchising Joint Ventures Exports

If a service firm's core competency is managerial know-how, which two foreign entry modes make the most sense?

Franchising Joint ventures

What are three disadvantages of exporting?

High transportation can raise price of product Not taking advantage of location economies associated with manufacturing elsewhere Tariff barriers can make exporting uneconomical

Under what two conditions would the Bretton Woods system work?

If the US inflation rate remained low If the US did not have a balance-of-payments deficit

What causes inflation to occur in a country?

Inflation occurs when the money supply in a country out paces the level of production of goods and services.

The policy position of the ______ is that when this institution lends money to countries, it imposes a tight macroeconomic policy that is not always considered appropriate by critics.

International Monetary Fund

What are three ways the human resource function helps create value for a firm?

It can boost the competitive position of the firm. It ensures that people are adequately trained, motivated, and compensated. It ensures the company has the right mix of skilled people.

What are two reasons a business should follow an international strategy?

It does not face pressures to customize a product based on local preferences. It does not face cost pressures.

Imposing a fixed exchange rate affects countries in which two ways?

It imposes monetary discipline and curtails price inflation. It prevents competitive devaluations and brings stability to global trade.

What statement accurately describes the corporate-government relationship and the foreign exchange market?

It is in the best interests of international businesses to promote an international monetary system that minimizes volatile exchange rate movements.

The ______ Agreement revised the IMF's Articles of Agreement and addressed floating exchange rates.

Jamaica

If a firm's core competency is based on technological know-how, a firm generally should NOT use which two entry modes?

Joint venture Licensing

If a firm is determining which foreign entry strategy to use, but is concerned with maintaining control over its proprietary technology, which two entry modes should it AVOID?

Licensing Joint ventures

What are three disadvantages to licensing for the licensor?

Licensing limits the ability to coordinate strategic moves across several countries. A licensor does not have control over manufacturing, marketing and strategy. A licensor can lose control over its technology by licensing it.

Organizational structure incorporates what three things?

Location of decision-making responsibilities within the structure Integrating mechanisms to coordinate subunit activities Formal division of organization into subunits

The most important foreign exchange trading center is ______ with 37% of the activity.

London

The five most important foreign exchange trading centers in terms of level of activity are

London, New York, Zurich, Tokyo and Singapore.

What are three advantages of a joint venture?

Lowers risk of adverse government response Local partner's knowledge of the host country Shared development costs and risks

The unpredictability of exchange rate movements in the post-Bretton Woods era has resulted in which two issues?

Made international business planning difficult Added risk to exporting and importing

Most economic theories of exchange rate movements agree that three factors have an impact on future exchange rate movements in a country's currency. These factors include:

Market psychology The country's interest rate The country's price inflation

Identify the initiative under which the United States lent money directly to countries in Europe to rebuild after World War II.

Marshall Plan

What are two disadvantages of joint ventures?

Not having tight control over a local partner to realize experience curve or location economies Giving up control of technology to the host country partner

What are two advantages of exporting?

Not having to establish manufacturing operations in host country Helps a firm achieve experience curve and location economies

Which three elements elements must all be consistent with each other for superior organizational performance to be attained?

Operations Strategy Market conditions

What three things are included in a company's infrastructure?

Organization structure Culture Control systems

The success of an alliance is a function of which three factors?

Partner selection Alliance management Alliance structure

What are three examples of intangible property?

Patents Designs Copyrights

According to the basic strategy paradigm, what three things must a firm do to maximize profitability?

Pick a position on the efficiency frontier where there is enough demand to support the choice. Make sure the firm has the right organization structure in place to execute its strategy. Configure internal operations so they support the position selected on the efficiency frontier.

What are two reasons a firm would choose NOT to enter a new market on a large scale?

Prefer to enter slowly so they can become more familiar with the market May not have the resources available to commit to a large scale

Which two functions are considered primary activities?

R&D Customer service

Which two functions are considered primary activities?

R&D customer service

What are three moderately decent predictors of long-term changes in exchange rates?

Relative inflation rates Nominal interest rate differentials Relative monetary growth

What are three disadvantages of greenfield ventures?

Risky to establish Preemption by other competitors Slower to establish

What are three ways a company can achieve economies of scale?

Serving global markets Spreading fixed costs over a large volume Bargaining purchasing costs

Which statement about customer tastes and preferences in the global marketplace is accurate?

Significant differences in consumer preferences still exist across nations and regions.

According to the text, which three characteristics are important to consider when determining the long-run economic benefits of doing business in another country?

Size of the market Future wealth of consumers Purchasing power of consumers

What are three advantages of a wholly owned subsidiary?

The firm has tight control over foreign operations. The firm may realize location and experience curve economies. The firm has tight control over foreign operations.

Which three statements are TRUE about franchising?

The franchisee commits to abiding by strict rules on how it does business. The franchiser typically receives a royalty payment. It is similar to a license but with a longer time commitment.

The balance of trade is the difference between the monetary value of a nation's exports and imports over a certain period. What occurs when a balance-of-trade equilibrium exists?

The income residents earn from exports equals the money its residents pay to other countries for imports.

What are considered the two most prominent features of the foreign exchange market?

The market never sleeps. The trading centers are integrated.

What three things must be in place to achieve superior performance within a company?

The organization's strategy must make sense given market conditions. The organization's architecture must match the operations and strategy of the firm. The operations of a firm must be configured to support the strategy of the firm.

Henry's company decided to introduce a line of winter clothing to its product mix available in South Africa. One year later, the line was removed, since it failed to sell. What was the MOST LIKELY reason this product failed to sell in South Africa?

The products were not suitable for the market

The three main disadvantages of turnkey projects include:

There is no long-term interest in the foreign country. They may lose the competitive advantage of their process technology. They may create competitors.

Firms engage in strategic alliances for what three reasons?

To share fixed costs of developing new products To bring together complementary skills To facilitate entry into a foreign market

What three factors help a company determine which entry mode is most appropriate?

Trade barriers Transportation costs Firm strategy

Under the currency board system used in Hong Kong, the country's currency must be fully backed by the ______ at the specified exchange rate.

US dollar

Which currency contributed to the collapse of the fixed rate exchange system established at Bretton Woods since it was the only one that could be converted into gold?

US dollar

What are two situations when a localization strategy is best utilized?

When cost pressures are not intense When there are large differences across nations in tastes and preferences

What three basic decisions must firms evaluate when considering foreign expansion?

When to enter markets Which markets to enter On what scale to enter markets

In the 1950s, the ______ concentrated on lending money for public sector projects in third world countries.

World Bank

What financial institution was tasked with assisting in rebuilding Europe after World War II, but ended up helping third-world countries with public sector projects?

World Bank

Which institution was established at Bretton Woods in order to promote general economic development?

World Bank

What two multinational institutions were established at Bretton Woods?

World Bank International Monetary Fund

Borrowing in a currency from a country with low interest rates and then investing in another currency where interest rates are high is called ______.

a carry trade

PPP theory predicts that changes in relative prices will result in

a change in exchange rates

In 1971, the OPEC oil crisis increased the inflation rate in the US, which led to negative effects on the country's trade position and

a decline in the value of the dollar

According to PPP theory, a country with a high inflation rate will see ______ in its currency exchange rate.

a depreciation

Production and marketing responsibilities are typically delegated to _____ when customer preferences create a strong pressure for local responsiveness.

a firm's foreign subsidiary

Harrison Freight Inc. felt it was important to release their newest product to the European market before everyone else so they could establish their brand before their competition did. The company wants to benefit from _____.

a first-mover advantage

When determining whether or not to engage in a business in a foreign country, analysts should consider that future economic growth rates within any country are a function of both ______ and ______.

a free market system a country's capacity for growth

A company that enters a country where there are no existing competitors may have to rely on ______ as the only mode of entry.

a greenfield venture

If a firm is highly concerned about choosing a politically acceptable entry mode, the firm should choose

a joint venture

An example of ______ is when banks lend too much money to over-extended companies, expecting bail-out help from their government.

a moral hazard

A currency crisis occurs when

a speculative attack on the currency exchange value creates a sharp depreciation in the value of currency

After developing a computer locking system, Caffrey Computer Corp. worked out a licensing deal with Chicago Desktop (a potential competitor) to sell the lock with every computer. This agreement is an example of _____.

a strategic alliance

What type of company is best-suited for contracting out manufacturing in an effort to reduce economic exposure as the result of exchange rate movements?

a textile firm

The foreign entry mode that is the most costly, with firms bearing the full capital costs and risks of operating overseas, is ______.

a wholly owned subsidiary

Because the IMF does NOT have oversight over its decisions, a criticism of this institution is that it lacks

accountability

Bob's Bicycle Company is planning to enter into foreign markets where there are already well-established incumbent enterprises and in which global competitors are also interested in establishing a presence. Based on these circumstances, Bob's Bicycle Company should enter the foreign markets via ______.

acquisition

Prior to purchasing a foreign company, it is imperative that the potential buyer screens the financial position and management culture of the foreign company and obtains a detailed audit of operations. These are all vital steps in the ______ strategy.

acquisition

When a company decides that it will take too long to establish a sizable presence in a country, it will likely use ______ to enter the country.

an acquisition

With a deteriorating balance-of-payments occurring between 1980 and 1985, the US dollar displayed _____.

an unexpected rise

If the demand for the yen outstrips its availability and if the supply of the dollar outweighs the demand, the yen will _____ against the dollar.

appreciate

A lag strategy occurs when a firm attempts to delay the collection of foreign currency receivables when a currency is expected to ______ and delay foreign currency payables when a currency is expected to ______.

appreciate; depreciate

Buying a currency low and immediately selling it high to make a profit from the price discrepancy is called _____.

arbitrage

The New York yen/dollar exchange rate was Y125=$1. Through ______, a dealer can make a profit on this currency transaction by buying it low and selling it high.

arbitrage

The totality of a firm's organization is referred to as organization _____.

architecture

Companies that follow a global standardization strategy

avoid customizing their products

The ______ equilibrium for all nations was achieved by the gold standard.

balance-of-trade

Expectations becoming a self-fulfilling prophecy when currency traders move in the same direction at the same time is called the ______ effect.

bandwagon

A ______ crisis occurs when businesses and people lose confidence in their financial institutions and withdraw their deposits.

banking

When news reports indicated a massive stock market crash, many individuals went directly to the bank and withdrew their savings because they weren't confident in the financial system. This response is an example of a(n) _____ crisis.

banking

According to the Fisher effect, if the real interest rate in country #1 is 8% and it is 5% in country #2, an investor would take advantage of this by

borrowing from #2 and investing in #1

Since the 1970s, developed countries like Great Britain and the US have tended to finance their deficits by

borrowing private money

Which statement regarding the gold standard is accurate?

by the start of World War II, the gold standard was dead

What are two disadvantages of small-scale entry?

difficult to capture first-mover advantages difficult to build market share

A currency can be determined by market forces, yet managed in the sense that -- if it depreciates too rapidly -- the government will step in. This is known as a ______ system.

dirty-float

When a government intervenes in the currency market to limit volatility of its currency, a(n) ______ system exists.

dirty-float

In a forward exchange transaction, $1 buys more lira with a spot exchange than with a 30-day forward exchange. When this occurred, it is said that the dollar is selling at a _____ on the 30-day forward market.

discount

When a dominant enterprise is able to set different prices in different markets to reflect varying demand conditions, it is practicing price ______.

discrimination

One way a company can successfully hedge against currency fluctuations is to

disperse production to different locations around the world

What is the key way a company can reduce economic exposure?

distribute production facilities and assets to various locations

In the fixed rate system that existed before 1973, the ______ was the key currency.

dollar

Most foreign exchange transactions involve the _____ on one side.

dollar

Rank the vehicle currencies based on their level of use. Place the currency with the greatest use at the top of the list and each subsequently-used currency below that.

dollar euro yen pound

If high inflation causes the devaluation of a country's currency, it may opt to abandon that currency and adopt US currency. This process is called _____.

dollarization

What policy did the country of Ecuador adopt in 2000 when hyperinflation caused the value of its currency to plummet?

dollarization

What is the term used for when one company enters markets before its competitors?

early entry

Company A is based in Europe and does a large amount of business in the US. The company fears that the euro will gain in strength against the dollar, so it sets up a local production facility in the United States. This is a way to reduce ______ exposure.

economic

The extent to which a firm's future international earning power will be affected by exchange rate changes is called ______ exposure.

economic

While many companies focus on reducing transaction and translation exposure when managing foreign exchange risk, very few companies pay attention to _____ exposure.

economic

If a business wants lower costs and less risk when doing business in a foreign country, it should consider those countries that are

economically advanced

When more units of a good or a service can be produced on a larger scale, yet with (on average) less input costs,______ has/have been achieved.

economies of scale

Critics of strategic alliances argue that they

effectively "hollow out" firms leaving them without a competitive advantage.

The ______ is the name given to all of the different positions a firm can adopt regarding adding value and lowering the cost of a product.

efficiency frontier

An economist who believes that the foreign exchange market is effective at setting forward rates is a part of the _____ market school.

efficient

If the foreign exchange market is _____, forward exchange rates should be _____ predictors of future spot rates.

efficient; unbiased

In what two ways can location economies create value for a firm?

enabling the firm to differentiate its product lowering the cost of value creation and helping firms achieve a low-cost position

A tactic that reduces translation and economic exposure is

entering into forward exchange rate contracts

Exporting, licensing and joint ventures with a host-country firm are examples of ______ for serving global markets.

entry-mode

The rate at which the currency of one country can be converted into that of another country is called the _____ rate.

exchange

The rate of converting one form of currency into another country's usable currency is known as the _____ rate.

exchange

Rita knows that every euro she plans to purchase for her trip is worth 1.30 US dollars. What aspect of currency conversion is Rita considering?

exchange rate

The IMF was initially established to allow members to borrow short term to adjust their balance-of-payments position and maintain their ______.

exchange rate

The international monetary system establishes the rules and regulations that govern ______.

exchange rates

In recent years, the IMF's activities have ______.

expanded

A commodity's production costs tend to decline over time. This is referred to as the ______ curve.

experience

The ______ refers to systematic reductions in production costs that have been observed to occur over the life of a product.

experience curve

Not being able to take advantage of lower-cost locations for manufacturing, dealing with high transport costs, and facing tariff barriers are disadvantages of ______.

exporting

Quick Auto Parts does not want to establish a manufacturing facility in Mexico but does want to get component parts to the 75 dealers it has in that country. Which form of entry should it use?

exporting

As pressures for cost reductions increase, the two most appropriate foreign market entry modes would be

exporting. wholly owned subsidiary.

The extent to which income from individual transactions is affected by fluctuations in foreign exchange values is known as transaction ______.

exposure

A policy of ______ convertibility is in place in some countries and places restrictions on residents' ability to convert domestic currency into a foreign currency.

external

Tonya was surprised to learn that her country limited the amount of currency she could convert to US dollars when she went to America to visit her cousin. This limit is an example of a policy of

external convertibility

A(n) ______ convertible currency allows only nonresidents to convert it into a foreign currency without any limitations.

externally

When only nonresidents can convert a currency into a foreign currency with no limitations, the currency is considered

externally convertible

True or False: A commitment that is strategic has a short-term impact and is easy to reverse.

false

True or False: A localization strategy should be used when there are high pressures for cost reductions and demand for local responsiveness is low.

false

True or False: Distribution channels are consistent across the world and do NOT affect local responsiveness.

false

True or False: Organizational culture has little or no impact on a company's performance.

false

True or False: When foreign exchange traders see a currency that is depreciating, they are most likely to buy.

false

True or false: A balance-of-trade equilibrium exists when the income residents earn from exports exceeds the money residents pay to other countries for imports.

false

True or false: About 25% of IMF member countries have no separate legal tender of their own.

false

True or false: As the pressure to reduce costs increases, a firm will focus on location and experience curve economies. These firms would MOST LIKELY consider franchising and joint ventures entry modes.

false

True or false: Based on the basic strategy paradigm, In order to maximize its profitability, a firm can invest in any of the positions found on the efficiency frontier.

false

True or false: Businesses do not have the ability to influence government policy toward the international monetary system.

false

True or false: Government intervention in the foreign exchange markets does NOT affect the ability of PPP in predicting exchange rate movements.

false

True or false: Greenfield ventures are more risky than acquisitions because there is greater potential for unpleasant surprises.

false

True or false: Like transaction exposure, economic exposure is concerned with the effect of exchange rates changes on individual transactions, most of which are short-term situations.

false

True or false: More companies pay more attention to economic exposure than translation exposure when managing foreign exchange risk.

false

True or false: One argument in favor of a floating rate system, is that under a fixed system, a country's ability to expand or contract the money supply is unlimited.

false

Between 1985 and 1987, the U.S. dollar _____ in value against the Japanese yen and German deutsche mark.

fell

When a company enters a market early, it usually has a(n) _____ advantage.

first-mover

Kettle-Bright Corp. was the first company to introduce electric teapots in South America. The company had to establish production standards and educate customers about the benefits of the product which cost hundreds of thousands of dollars to do. These expenses are examples of _____.

first-mover disadvantages

Pioneering costs are associated with _____.

first-mover disadvantages

A ______ exchange rate is a country's exchange rate regime under which the values of a set of currencies are fixed against each other at some mutually agreed-on exchange rate.

fixed

The world's major industrial nations utilized the ______ exchange rate system after World War II.

fixed

When the values of a set of currencies are set against each other at some mutually-agreed on exchange rate, a _____ exchange rate exists.

fixed

A currency board holds reserves of foreign currency equal to all of the domestic currency at a

fixed rate

A pegged exchange rate means the value of a currency is

fixed relative to a reference currency, such as the US dollar

A company that enters a foreign market on a large scale must consider the lack of _____ associated with significant commitments.

flexibility

A _____ exchange rate system is preferable in an economic crisis like the banking crisis that hit Iceland in 2008.

floating

South Korea's export-led economic recovery from its 1997 banking crisis was possible because of its ______ exchange rate system.

floating

______ exchange rates are determined by market forces; they vary against each other from one day to another.

floating

What are two elements of the Jamaica Agreement?

floating exchange rates were acceptable gold was abandoned as a reserve asset

A(n) _____ crisis occurs when a country cannot repay what they owe to private sector investors of other countries or other governments.

foreign debt

Greece's inability in 2010 to service its foreign debt obligations in either the private sector or government, resulted in a(n) ______ crisis.

foreign debt

Able Appliances needs to convert the pounds it earns from selling products in Great Britain to dollars. What mechanism allows the company to make this conversion?

foreign exchange market

A floating exchange rate exists when the ______ determine(s) the relative value of a currency.

foreign exchange markets

The volatile changes in exchange rates that can negatively affect a an international business are commonly referred to as

foreign exchange risk

In the 1990s, one of the reasons for the appreciation of the US dollar was

foreign investment in US stocks and bonds, which drove up the value of the dollar on foreign exchange.

When selecting a partner for a strategic alliance, a company should gather data from informed third parties such as _____ that dealt with this potential partner.

former employees

The efficient market school believes that the foreign exchange market is efficient at setting ______ exchange rates.

forward

What is the transaction called where two parties agree to exchange currency at some specific date in the future?

forward exchange

When competing globally, firms typically choose from ______ main strategic stances.

four

Who is typically responsible for the costs and risks in a franchise agreement?

franchisee

What are two disadvantages of franchising?

franchiser cannot take profits out of one country to support another lack of quality control

Quiet-Night Hotel Corp. has developments around the globe. Customers expect the same experience in every hotel but that has been a problem as not every hotel follows the expectations set down by the company. Quality control is a significant disadvantage of ______.

franchising

______ involves one firm selling intangible property to another firm and insisting that the receiver of the intangible property abides by strict rules on how it does business.

franchising

What are three different exchange rate policies in effect today around the world?

free float pegged fixed

Some country's governments do not put any limits on the purchase of foreign currency for residents and nonresidents. These country's have a _____ currency.

freely convertible

When a country allows both residents and nonresidents to purchase unlimited amounts of a foreign currency, the country's currency is

freely convertible

In an efficient market, prices are said to

fully reflect all available information

The method of forecasting that draws on economic theory to construct sophisticated models is called the ______ approach.

fundamental

Which approach to forecasting draws on economic theory to develop models that predict exchange rate movements?

fundamental

Forward exchange rates are exchange rates that govern _____ transactions.

future

Henri works for a company that makes pasta to be sold in grocery stores. The company prefers to market the same product worldwide in order to take advantage of economies of scale and learning effects. It also prices its pasta aggressively. Which strategy is this company using?

global standardization strategy

What are the main strategic postures that firms can use when competing globally?

global standardization strategy transnational strategy international strategy localization strategy

In-Touch Corp. develops cell phones. The case is made in the US, the processor in Japan, and the adapter in Cambodia. In-Touch Corp. disperses its value chain to locations around the world which is an example of the

global web

The ______ of value creation activities occurs when different stages of the value chain are preformed in a variety of world-wide locations, based on maximizing value and/or minimizing costs.

global web

In an effort to get all countries to simultaneously revalue against the dollar, President Nixon announced in 1971 that the dollar was no longer convertible into _____.

gold

Under the gold standard, the amount of currency needed to purchase one ounce of gold is referred to as the ______.

gold par value

The strength claimed for the _______ is that it allowed a balance-of-trade equilibrium for all countries.

gold standard

When a country pegs its currency to gold, it is using the _____.

gold standard

According to the text, what two things have been key in determining the value of the dollar since 1973?

government intervention market forces

A fixed rate system can ensure that ______ do not respond to political pressures by expanding the monetary system too quickly and causing inflation.

governments

As noted by Hamel and Prahalad's research, the main reason why Japanese partners gained more from their alliances with American firms was because of the

greater ability of the Japanese partner to learn from the American firm.

A(n) ______ is a form of foreign direct investment where a parent company builds its operations in a foreign country from the ground up. In addition to the construction of new production facilities, these projects can also include the building of new distribution hubs, offices and living quarters.

greenfield strategy

A company that gains entry into a foreign market through ______ has total control over the products or services manufactured or sold.

greenfield venture

Slim-Stuff Yogurt would like to enter into a foreign market and build a production facility. The company knows there are currently no competitors or similar companies currently in that market. Which entry mode would be most appropriate for the company to use?

greenfield venture

Starting a subsidiary from "scratch" where nothing is established is called a(n)

greenfield venture

Which entry mode's major advantage is that a firm has more control over the kind of subsidiary it wants in a foreign market?

greenfield venture

The chief financial officer of Linwell Corp. is concerned that since he can't predict changes in future exchange rates, there could be adverse consequences for the firm. One way the company can insure itself against this possibility is by engaging in _____.

hedging

Entering a large developing nation like China before most other international companies, and entering on a large scale, will be associated with _____ levels of risk.

high

The global standardization strategy is considered inappropriate when demands for local responsiveness remain _____.

high

International firms that strive to be locally responsive will most likely incur _____ costs.

higher

One way to control technology in a joint venture arrangement is for one company to

hold majority ownership

The decision by Bombardier to decentralize manufacturing of its rail cars in Europe is a result of

host-government demands

The ____ hypothesis is demonstrated when the management of an acquiring firm is too optimistic about the value that can be created via an acquisition and is thus willing to pay a significant premium over a target firm's market capitalization.

hubris

Which support function of a company adds value by identifying and recruiting skilled managers, regardless of nationality?

human resources

The start of the demise of the fixed exchange rate system was partly due to the US ______ more than ______.

importing; exporting

Smaller nations prefer pegged rates because these exchange rates

impose monetary discipline and lead to low inflation.

Parva receives a quarterly bonus if her store's sales exceed expectations. This bonus is considered a(n) ______.

incentive

To motivate managerial performance, an organization might use

incentives

The use of currency management instruments such as swaps and the forward market have ______ since 1973.

increased

______ might be one disadvantage on acquisitions.

increased debt

A company that elects to use a differentiation strategy would focus on

increasing the attractiveness of a product

The ______ market school believes that forward exchange rates are NOT the best predictors of future spot exchange rates.

inefficient

Which school of thought on exchange rate forecasting does NOT believe that forward exchange rates are the best predictors of future spot exchange rates?

inefficient

A(n) ______ is based on the theory that prices don't reveal all available information and more is needed to predict future spot exchange rates.

inefficient market

What are the two schools of thought regarding the prediction of future exchange rates?

inefficient market school efficient market school

In the context of the Fisher Effect, different interest rates between countries reflect differing expectations about ______ between those countries.

inflation

The fixed exchange rate is considered a way to control _____.

inflation

When a country's money supply grows faster than the output of goods and services, this causes

inflation

During the 1980s and 1990s, exchange rate movements were not strongly influenced relative to ______ which was contrary to the purchasing power parity theory.

inflation rates

In the context of the Fisher Effect, different interest rates between countries reflect differing expectations about ______ between those countries.

inflation rates

The Fisher effect predicts that there is a strong relationship between ______ and interest rates.

inflation rates

The failure to find a link between which two of the following conditions has been referred to as the purchasing power parity puzzle?

inflation rates exchange rates

A(n) ______ system is any organized electronic system for the collection, organization, storage and communication of information.

information

Tri-Lar Engineerings develops electronic systems for managing inventory and tracking sales. Which type of support activity do these systems provide?

information systems

The difference between the 110-volt electrical system used in North America and the 240-volt system used in some European countries is an example of how ______ differences create pressure for local responsiveness.

infrastructure

A swap deal is just like a conventional forward deal in that it

insures against foreign exchange risk

A business is using hedging when it

insures itself against foreign exchange risk

Something of worth that cannot be touched or held, such as a formula, is considered to be ______ property.

intangible

Which term accurately characterizes how the various components of a company's architecture relate to one another?

interdependent

According to the international Fisher effect, there is a relationship between spot exchange rates and _____ between countries.

interest rates

For many years, Xerox had a monopoly on photocopiers. It could sell world-wide with little customization. Xerox was able to use a(n) ______ strategy.

international

When a company takes a product produced for the domestic market and then makes very minor changes to customize the product for global markets, the company is following a(n) ______ strategy.

international

When a firm faces neither low cost pressures nor pressures for local responsiveness, it should follow the ______ strategy.

international

Under the IBRD scheme of lending money by the World Bank, money is raised through _____.

international bond sales

The ______ refers to the institutional arrangements that govern exchange rates.

international monetary system

The goal of Bretton Woods was to design a new ______ that would encourage growth after the war.

international monetary system

One main reason why the IFE is NOT good at explaining short-term exchange rate movements is the impact of ______ in determining the expectations of market traders.

investor psychology

An association of two or more companies engaged in a solitary business enterprise for profit without actual partnership or incorporation is called a(n) ______.

joint venture

At Jackson Electric, the company's core competence is based in the proprietary technology it has developed for kitchen appliances. Which foreign entry mode should Jackson Electric avoid in order to protect this technology?

joint venture

A shared business risk and shared resources and responsibility are both advantages of ______.

joint ventures

A(n) _____ strategy is when a firm attempts to delay the collection of foreign currency receivables when a currency is expected to appreciate and delay foreign currency payables when a currency is expected to depreciate.

lag

A company can achieve economies of scale by spreading fixed costs over a _____ volume.

large

A firm enters a market on a(n) ______ scale when it commits significant resources to this effort.

large

Higher risk and lack of flexibility are drawbacks of _____-scale entry into a foreign market.

large

When entering a global market using a(n) _____-scale entry strategy, a firm may be able to capture first-mover advantages associated with scale economies.

large

Conrad's US based company entered the European market long after its competitors had established themselves. This is known as ________ entry.

late

A(n) _____ strategy is when a firm attempts to collect foreign currency receivables early when a currency is expected to depreciate and pay foreign currency payables before they are due when a currency is expected to appreciate.

lead

Two strategies that can be used to reduce translation and transaction exposure are:

lead strategy lag strategy

As management understands how to more effectively manage an operation, production costs are likely to decrease. These decreased costs are the result of _____.

learning effects

______ refer(s) to the cost savings that result from increased production levels once efficiencies are in place.

learning effects

What two things help explain the experience curve?

learning effects economies of scale

Late entrants to a market can benefit from the pioneering costs associated with early entry. What are two of those benefits?

learning from the mistakes made by early entrants building on existing consumer education about the product

A turnkey project can be _____ risky than conventional foreign direct investment in a country with an unstable political climate.

less

In 1934, the US raised the dollar price of gold by nearly $15 an ounce, implying that the dollar was worth ______.

less

An unstable government in a foreign country would make a company _____ to move its production facilities to that country.

less likely

What are three advantages of acquisitions?

less risky than greenfield ventures preempt the competition quick to execute

McDonald's local franchises in France have begun to offer more elegant seating areas and an upscale menu. This was done in response to slow growth rates in the area. Impressed with the increased sales at these stores, McDonald's executives are considering making these changes elsewhere. In this instance, what aspect of creating value is BEST demonstrated?

leveraging subsidiary skills

Parul believes her company's newest technology product will be quickly imitated by others. When a company's competitive advantage is based on control of proprietary technological know-how, that company should AVOID a(n) ______ arrangement as it might lead to losing control of the technology.

licensing

The benefits of franchising are similar to the benefits of ______.

licensing

Company ABC is unwilling to commit the necessary capital to construct a facility in Malaysia. However, they have determined that they want to enter that market. One option for the company might be a

licensing agreement

Firms that do not have access to the capital necessary to develop overseas operations should engage in a(n)

licensing agreement

Companies that enter into the global marketplace typically face two forms of competitive pressure: cost reductions and _____.

local responsiveness

Marten Electronics Corp. knows it must customize its products for the different markets it serves to accommodate customer tastes and preferences. What type of strategy is this company using?

localization

The best strategy to use when there are substantial taste and preference differences across countries and cost pressures are NOT present is the ______ strategy.

localization

What strategy increases the value of a product in the local market through customization that allows for tastes and preferences in different national or regional markets?

localization

When firms customize their products to meet tastes and preferences for different national markets they are following a(n) ________ strategy.

localization

Which strategy's major disadvantage is not being able to capture cost reductions as a result of customizing the product based on national tastes and preferences?

localization

When competition intensifies, which two strategies because less viable to use?

localization international

Lowering the cost of value creation and allowing a firm to differentiate its products are effects of ______ economies that come from performing an activity in the optimal site.

location

Niagara Energy builds all of its energy plants near large water sources to take advantage of the lower costs associated with hydro-power. This company is using _____ to determine where to build its plants.

location economies

What is the term for the economies that result from a business undertaking a value creation activity in the optimal location?

location economies

Pressures for local responsiveness can impact a company's strategy by decreasing or eliminating the full benefits from what three things?

location economies economies of scale learning effects

Which company function controls the transmission of materials from raw goods to the distribution of the finished product?

logistics

Economic exposure is concerned with _____- term effect of changes in exchange rates on future prices, sales, and costs.

long

According to research, PPP theory is a relatively good predictor of ______ exchange rate movements, but is not as good a predictor of ______ movements.

long-run; short-run

When a country experiences hyperinflation, money _____ value very rapidly.

loses

Contracting out manufacturing in an effort to build strategic flexibility is best suited for _____ value-added manufacturing industries.

low

John's U.S.-based company is considering doing business in London, England. The costs and risks associated with doing business in London are considered _____ because it is economically advanced and politically stable.

low

In order to differentiate itself from the competition, IKEA focuses on increasing the attractiveness of products by lowering costs. This demonstrates IKEA's ______ strategy.

low-cost

What is a benefit of economies of scale?

lowers unit costs and increases profitability

The IMF lends money to nations experiencing financial crisis in return for

macroeconomic policy implementation

Select two ways a firm can create more value.

make product more attractive to consumer lower production costs

Cross-licensing agreements allow firms to do what two things?

make the partner accountable protect technological know-how

When a country does NOT adopt a formal pegged rate, but tries to keep its currency within some range of a reference currency, a(n) ______ system exists.

managed-float

In order to make sure that a foreign enterprise has organizational customs and behaviors that are NOT antagonistic to an acquiring enterprise, it is vital that the acquiring enterprise screen the

management culture

Many service firms base their competitive advantage on

management know-how

Production of physical products, such as refrigerators or trucks, is called

manufacturing

In Britain, pharmaceutical sales adopt a soft-sell approach, while a hard-sell approach is used in the United States. This demonstrates how a company has to adapt its ______ strategy to address the concerns of local responsiveness.

marketing

The advertising department at Shine Shape Products wants to create value for the new line of cleansers by showing customers how they can remove grease better than any other product on the market. Which primary activity function is involved in this scenario?

marketing and sales

A fixed exchange rate discourages competitive devaluations and imposes ______ discipline.

monetary

An argument against a fixed rate system is that this system limits countries' abilities to use ______ policy to expand or contract their economies.

monetary

One argument for a floating exchange rate system is that a country regains control of its ______ policy.

monetary

In response to the 2008-2009 global financial crisis, the IMF has begun to change its focus. It now cautions nations to adopt policies that include fiscal stimulus and

monetary easing

The text suggests that as a way to take control of exchange rate risk, firms should produce _____ foreign exchange reports.

monthly

What is the term used to define the situation where people act without due thought because they believe they will be rescued when things go wrong?

moral hazard

When customer preferences differ significantly between countries, there is _____ pressure for local responsiveness.

more

In 1971, many countries did NOT want to simultaneously revalue the dollar because it would make their products ______ relative to US products.

more expensive

If an American firm has a subsidiary in the EU and the value of the euro depreciates rapidly against the value of the dollar over a year, you would see a reduction in the dollar value of the euro profit made by the European subsidiary. This would result in _____ translation exposure.

negative

Profit growth is defined as the percentage increase in ______ over time.

net profits

A(n) ______ currency is one that neither residents nor nonresidents are allowed to convert into a foreign currency.

nonconvertible

Countertrade is a logical choice when a country's currency is

nonconvertible

When neither residents nor nonresidents are allowed to convert a currency to a foreign currency, the currency is considered

nonconvertible

Identical products sold in different countries must sell for the same price in competitive markets when their price is expressed in terms of the same currency. This is called the law of _____ _____.

one price

The law of ______ is the economic theory that the price of a given security, asset or commodity must have the same price when exchange rates are taken into consideration.

one price

A major criticism of the IMF is that it imposes tight macroeconomic policy on any country it lends money to. This is referred to as a(n) ______ approach.

one-size-fits-all

Which area of a firm includes production, marketing and sales, materials management, R&D, human resources, information systems, and the firm infrastructure?

operations

The theft of technology and/or markets are examples of

opportunistic behavior

In the context of the Fisher Effect, different interest rates between countries reflect differing expectations about ______ between those countries.

opposite

The international Fisher effect states that for any two countries, the spot exchange rate should change in an equal amount, in the _____ direction to the difference in nominal interest rates between the two countries.

opposite

What are two types of intangible property that can be associated with a licensing agreement?

patent trademark

Many smaller nations prefer ______ rates because these exchange rates lead to low inflation.

pegged

When the value of a currency is fixed relative to a reference currency, a ______ exchange rate exists.

pegged

In general, which industry is often subject to a high level of local responsiveness as a result of host government demands?

pharmaceuticals

Costs that companies entering a market early have to pay, but which firms late to the market do not have to bear, are called ______ costs.

pioneering

______ costs arise when the foreign business system is so different from that in the home market that the firm must devote considerable time, effort and expense to learning the rules of the game.

pioneering

As an early entrant into the German market, Jason's company made several significant and expensive mistakes. Jason underestimated the financial liability the company would face as a foreign firm. This liability is an example of

pioneering costs

A transnational strategy is NOT easy to pursue because it ________.

places conflicting demands on the company

If the spot exchange rate is $1 to 110 yen and the 90-day forward rate is $1 to 100 yen, then the yen is selling at a ______ to the dollar in the 90-day forward market.

premium

When $1 buys more lira with a forward exchange than with a spot exchange, it is said that the dollar is selling at a _____ on the 30-day forward market.

premium

What two types of competitive pressures do companies typically face when entering global markets which affect their ability to realize location economies and leverage products?

pressure to reduce costs pressure to be locally responsive

As the text explains, under a fixed exchange rate, if Great Britain rapidly increased its money supply by printing pounds, then this increase in the money supply would lead to ______.

price inflation

When the growth in a country's money supply is faster than the growth in its output of goods, ______ tends to increase.

price inflation

A company's _____ include(s) the design, creation, delivery of a product, and after-sale support and service.

primary activities

A business ______ is the manner in which decisions are made in a company.

process

What are three things included in an organization's architecture?

processes people structure

What are three examples of information systems used to support the value chain?

product pricing inventory management sales tracking

When discussing value creation, a low-cost strategy focuses primarily on lowering ______ costs.

production

Primary activities of the value chain can be divided into four functions, including which two of the following?

production marketing & sales

The rate of return that a business makes on its invested capital determines its ______.

profitability

What are the two main functions of the foreign exchange market?

provide insurance against foreign exchange risk currency conversion

Acquisitions are considered _____ to execute.

quick

______ is the expression of a common sense of identity that shapes collective action within a geographical region.

regionalism

Managing an alliance successfully requires building interpersonal relationships -- otherwise known as ______ -- between the firms' managers.

relational capital

When California Creamery entered into a strategic alliance with Wisconsin's Best, managers from both companies got together to discuss business matters while having an opportunity to get to know each other personally. Taking the time to build interpersonal relationships helps foster ______.

relational capital

The purchasing power parity puzzle is the name given to the failure to find a strong link between exchange rate movements and

relative inflation rates

Nova Industries has created a new product to hold television monitors for commercial applications such as restaurants and airports. Which primary activity would have been involved with this creative process?

research and development

Which primary activity is concerned with the design of products and production processes?

research and development

Profitability of a company can be found by measuring a firm's ______, which is determined by dividing net profits by total invested capital.

return-on-investments

A higher rate of profit growth means a higher rate of ______ for shareholders.

returns

Foreign exchange markets can provide some insurance against volatile changes in exchange rates, which is called foreign exchange _____.

risk

The adverse consequences of unpredictable changes in exchange rates is called foreign exchange _____.

risk

In a licensing deal, the licensor receives payment in the form of ____ from the licensee.

royalties

Critics of floating exchange rates argue that the external value of currency has no effect on the trade balance. They believe that the balance between ______ determines the trade deficit.

savings and investment

Jenner Auto Corp. supplies manufacturing equipment to three major automobile manufacturers. Jenner Auto promises that if its equipment breaks down, it will have the necessary parts to fix it shipped out within 24 hours. This is the core promise supporting its ______ activity which adds value to the company's product.

service

Keeley works for an online clothing retailer and in her role she answers customer inquiries about product shipments and returns. Which primary activity is Keeley involved with?

service

The forward market tends to cover _____ exchange rate changes.

short-term

The impact of psychological factors and investor expectations make it difficult for exchange rate theories to predict ______ changes in exchange rates.

short-term

By 2002, when foreign investors became less interested in US stocks and bonds, the inflow of money into the United States

slowed down

The drawbacks of a _____-sclae entry strategy include the inability to capture first-mover advantages

small

Using a(n) _____-scale entry strategy to enter global markets, a firm can take time to gather information to determine if it should enter the market should on a more significant scale.

small

The strategy that allows firms to take their time to acquire information about a prospective market so they can determine how best to enter the market is

small-scale entry

Advocates of a fixed exchange rate contend that a fixed system will limit the destabilizing effects of

speculation

Currency ______ involves buying, selling and holding currencies in order to make a profit from favorable fluctuations in exchange rates.

speculation

A(n) ______ exchange rate is the price to exchange one currency for another for immediate delivery.

spot

A cooperative agreement between potential or actual competitors is called a _____.

strategic alliance

_____ have been criticized based on the idea that they give competitors a low-cost route to new technology and markets.

strategic alliances

A company would analyze the efficiency frontier in order to determine its

strategic positioning

A(n) ______ is a method or plan a company uses to bring about a desired result, such as achievement of a goal or solution to a problem

strategy

Decisions and actions that managers take to meet the company's goals are known as ______.

strategy

The production divisions within a company, the location of a company's decision-making responsibilities, and the establishment of integrating mechanisms all make up the organizational ______ of a company.

structure

Information systems, a(n) ______ activity, can track sales and price products, thereby helping the firm to gain a more competitive advantage.

support

What are the two categories of operations within a company?

support activities primary activities

The worldwide acceptance of McDonald's hamburgers, Coca-Cola, and Apple iPhones ______ claims of increasing homogeneity in the global marketplace.

supports

An early strategic commitment to large scale entry may mean that a firm can benefit from what three things?

switching costs demand preemptions scale economies

Which approach to forecasting uses past trends of prices and volume data to predict the future?

technical

______ analysis is based on the premise that there are analyzable market trends and that these past trends can be used to predict future trends.

technical

One serious risk associated with licensing is the risk of losing competitive advantage because of licensing a company's _____.

technology

The Economists's version of the PPP uses ______ as a proxy for a "basket of goods."

the Big Mac

The rise of regionalism is particularly evident in

the EU

Which statement accurately describes the IMF's ability to enforce the economic policies a country should adopt in exchange for loans?

the IMF cannot force countries to adopt the policies required to correct economic mismanagement

The World Bank's initial role was to help finance the building of Europe's war-torn economy. The Bank's role changed when _____ implemented the Marshall Plan and lent money directly to European nations.

the United States

What is the gold par value?

the amount of currency needed to purchase one ounce of gold

In 1987, the Group of Five met over concerns that ______ and the result was the creation of the Louvre Accord.

the dollar might decline too far

An international business can create value when bringing products to another country; however, this primarily depends on the attractiveness of the product being offered and

the existence of competition

A dirty-float system is said to exist in a nation when _____ frequently intervene(s) in the foreign exchange market.

the government

According to _____, top managers typically overestimate their ability to create value from an acquisition because they have an exaggerated sense of their own capabilities.

the hubris hypothesis

IDA loans provided by the World Bank are only available to

the poorest countries

The Fisher effect equates the nominal interest rate as

the required real interest rate + expected rate of inflation.

When considering the three basic decisions a firm must make when it decides to enter a foreign market, it must determine the market to enter, the timing of entrance, and

the scale

At the simplest of levels, exchange rates are determined by _____.

the supply and demand of currencies

Granola Grains Corp. has asked that the contract with their new European partner include a provision to protect Granola Grains from the risk of opportunism. This provision protects them from

the theft of technology

Capital flight is most likely to occur when

the value of the domestic currency is depreciating rapidly because of hyperinflation

International businesses use foreign exchange markets for what three reasons?

to pay a foreign company for its products or services in its country's currency to invest spare cash for the short term in money markets to convert foreign currencies it receives from transactions into its own currency

The Louvre Accord resulted in an agreement

to support the stability of exchange rates around their current level by intervening when necessary

The basic infrastructure of a company includes the organizational structure, control systems, and the culture of the firm. What other factor should also be included in this basic infrastructure?

top management

The preference for right-hand-driven cars in Britain as compared to the demand for left-hand-driven cars in France is an example of how ______ create(s) pressure for local responsiveness.

traditional practices

Suppose a US company agrees to buy products worth 1 million euros. At the time of the agreement, the dollar/euro exchange rate was $1 = €1.10, but at the time of payment, the exchange rate is $1 = €0.80. The additional money owed by the US company due the adverse movement in exchange rates between the time of the deal and the time when payment is due is called ______ exposure.

transaction

Suppose a company agrees to buy products in 2014 with payment due in 2015. ______ exposure refers to money lost due to an adverse movement in exchange rates between the time the deal is signed and the time when the products are paid for.

transaction

________ exposure is the risk, faced by companies involved in international trade, that currency exchange rates will change after the companies have already entered into financial obligations. Such exposure to fluctuating exchange rates can lead to major losses for firms.

transaction

Firms should only rely on what four things to predict exchange rate movements?

transaction and translation exposure forecasting future exchange rates monthly foreign exchange exposure reports establishing good reporting systems

The effect of currency exchange rate changes on the reported financial statements of companies is called ______ exposure.

translation

_____ exposure involves the present measurement of past events using currency exchange rate changes on a company's financial statements.

translation

As noted in the text, a business like Caterpillar should follow the ______ strategy because it is under pressure to reduce costs and be locally responsive.

transnational

Following a _____ strategy can pit two conflicting goals against each other: differentiating products versus achieving cost reductions.

transnational

While a localization strategy may give a firm a competitive edge, in order to reduce its cost structure a company might need to shift to a(n) ______ strategy where it can maintain its emphasis on responding to local needs and at the same time respond to cost pressures.

transnational

When a firm tries to achieve low costs, differentiate its product for local needs, and encourage the flow of skills between subsidiaries, it is following a(n) ______.

transnational strategy

While it might be less expensive for a US company to assemble automobile parts in New Zealand, these cost savings would be offset by high ______ costs that make the products more expensive to ship.

transportation

In April 2009, major IMF members agreed to ______ the IMF's resources to give the institution greater financial leverage to act in times of global financial crisis.

triple

True or False: If many national markets are controlled by a few multinational enterprises with the power to influence prices and distribution channels, PPP theory may not hold.

true

True or False: If we could understand how exchange rates are determined, we might be able to identify exchange rate movements.

true

True or False: Though there are many advantages to acquisitions, acquisitions often produce disappointing results.

true

True or false: A cross-licensing agreement reduces the probability that each firm will take advantage of the other's intangible property.

true

True or false: Being locally responsive tends to raise costs for a company.

true

True or false: Companies that operate internationally can increase their profitability and rate of profit growth in ways not available to just domestic businesses.

true

True or false: Critics say that the experience of South Korea and Iceland suggest that a floating exchange rate system can help a country recover from severe economic crisis.

true

True or false: Empirical evidence suggest that the International Fisher effect does NOT explain short-term exchange rate movements well.

true

True or false: Flexibility was an objective of the Bretton Woods agreement because it was recognized that a rigid policy of fixed exchange rates eventually would not work.

true

True or false: Foreign market entry decisions are based on the varying levels of risk and reward.

true

True or false: If no other factors had to be considered, a company would place a higher price on products that are highly valued by customers.

true

True or false: One way a company might create value is by leveraging the skills of its subsidiaries.

true

True or false: Spot against forward is a common type of currency swap.

true

True or false: The foreign exchange market is essentially open 24 hours per day.

true

True or false: The gains or losses identified by translation exposure are on paper only.

true

True or false: The need to customize a product for a local market could work against a company's strategy of marketing a globally standardized product.

true

True or false: To survive increasing competition, multinational firms may need to shift from an international to a transnational strategy.

true

True or false: Transportation costs would have an effect on which entry mode a company uses.

true

True or false: Under the currency board in place in Hong Kong, the government is limited in its ability to set interest rates.

true

True or false: When countries began to devalue their currencies at will in the post-Depression era, confidence in the gold standard lessened.

true

A type of entry mode that is common in the chemical, pharmaceutical, and petroleum-refining industries in which a contractor agrees to handle every detail of a project for a foreign client is called ______.

turnkey

Lisette works for Southwest Petroleum Corp. Her company is responsible for every aspect of setting up a refinery location for its clients. Southwest Petroleum builds the site, trains personnel, and notifies the client when the refinery is ready for operation. What foreign entry mode does this represent?

turnkey project

According to the IMF study of countries from 1975 to 1997 noted in the text, developing nations were ______ to experience currency and banking crises as compared to developed nations.

twice as likely

One study of 49 strategic alliances found that about ______ ran into serious trouble within two years of their formation.

two thirds

Consumers demonstrate ______ needs when the preferences of people in different countries are similar, if not exactly the same.

universal

The difference between a firm's production costs and the value consumers perceive in its products is called ______.

value creation

How can the dollar exchange rate BEST be described under the floating exchange regime?

volatile

When a government intervenes in cross-border trade by implementing a trade barrier, it ______ the link between relative price changes and changes in exchange rates predicted by PPP theory.

weakens

If a high-tech firm wants to set up operations in a foreign country in order to profit from a core competency in technological know-how, it will typically do this by establishing a(n) ______ as a way to protect their technological advantage.

wholly owned subsidiary

Which entry mode would be preferred when a company does not want to risk losing control over technological competence?

wholly owned subsidiary

In which entry mode, does a firm own 100% of the stock?

wholly-owned subsidiary

Residents of the hypothetical nation of Jarna feared that the country's economy was failing. They rushed to convert their domestic currency into US dollars and investors in businesses in Jarna also converted their financial holdings. This mass conversion of currency is known as _____.

capital flight

Tyson is a trader and borrows money in Japanese yen (where the interest rate is 1%). He then invests the money in a Canadian bank, where the rate is 5%. This is an example of a(n) ______.

carry trade

To protect resources efficiently and ensure that each subunit adopts the correct mix of tactics and strategies, firms should aim for _____ control of exposure.

centralized

Which type of control of exposure is MOST effective at protecting resources efficiently and ensuring that each subunit adopts the correct mix of tactics and strategies?

centralized

Economic exposure is concerned with the affect of ______ on a firm's international earning power.

changes in exchange rates

When selecting a strategic alliance partner a firm should

collect information from investment bankers that have had dealings with potential partners.

As the text notes, international strategies fail over time because of the emergence of ______.

competitors

Jack owns a ready-to-heat pasta company that is one of ten companies making this type of product. He would like to charge a higher price for the product since customers place a high value on it but the presence of so many competitors makes this impossible. In this situation, _____ allow(s) customers, instead of the company, to capture some of the value of the product.

consumer surplus

The dollar became less attractive to foreign investments in 2002 for what three reasons?

continued growth in the US trade deficit increasing US budget deficits US government officials "talking down" the dollar

Managers use ______ to analyze data about how the business and its employees are functioning in order to make appropriate administrative decisions.

controls

______ are the metrics used to measure the performance of subunits.

controls

Jameson Electric Corp. would use the foreign exchange market when it needs to

convert currency

_____ competencies are a company's abilities and skills that competitors cannot easily match or copy.

core

Chilly Cooler Corp. has developed a technology that allows its coolers to stay cold 25% longer than any of their competitors coolers. While many competitors have tried to match this technology, so far none of them have. This technology is an example of a(n) _____ for Chilly Cooler.

core competence

Toyota's superior production and logistics functions allow it to produce high-quality, well-designed cars at a lower delivered price than other firms. These are examples of

core competencies

McDonald's ability to manage fast-food operations better than most other firms in the world is an example of a(n)

core competency

When the logistics function is carried out efficiently, it can create value because it lowers

cost

When General Electric won a contract for a $150 million generator project in Romania, it agreed to take payment in the form of Romanian goods that could be sold for $150 million on international markets. This is an example of

countertrade

When a country's currency is nonconvertible, a company may engage in ______, where goods and services will be traded for other goods and services.

countertrade

______ agreements are barter-like agreements used by companies in countries whose currency is nonconvertible.

countertrade

One disadvantage of a turnkey project is that a company might inadvertently

create a competitor

______ generally occur(s) between companies that hold patents over different aspects of the same product. By entering into an agreement, both companies can avoid litigation over infringement disputes.

cross-licensing

Organizational ______ encompasses the norms and value systems that are shared among the employees of a business.

culture

The experience curve relationship is for ______ output over time.

cumulative

A foreign exchange market is where one country's ______ is converted into that of another country.

currency

A(n) ______ is a monetary authority which converts domestic currency on demand into another currency at a fixed exchange rate.

currency board

A(n) ______ occurs when a speculative attack on the exchange rate leads to a large depreciation in that country's legal tender.

currency crisis

An investment made to profit from future currency movements is called

currency speculation

_____ typically involves the short-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates.

currency speculation

Feldman Technology Group has international holdings in India. The company often needs to fund large orders in India for parts with the knowledge that an Indian importer will soon buy completed product from Feldman. These transactions require large sums of capital in both dollars and rupee and as a way to move from one currency to another without incurring foreign exchange risk, the company should use a(n) _____.

currency swap

The bandwagon effect occurs in investing when

currency traders move as a group in the same direction at the same time.

Among other things, being first typically enables a company to establish ______ and ______ before other entrants to the market arrive.

customer loyalty brand recognition

The primary activities in the value chain are R&D, production, marketing and sales, and ______.

customer service

According to the critics of the floating exchange rate, the uncertainty of exchange rates tends to _____ the growth of international trade and investment.

dampen

The OPEC oil crisis in 1971 increased the US inflation rate, which led to negative effects on the trade position. This led to a(n) _____ in the value of the dollar.

decrease

Lowering production costs because of increased efficiencies creates value by _____ costs.

decreasing

The value of a currency is determined by the ______ of that currency relative to other currencies.

demand and supply

It would be difficult to profit through arbitrage because the ______ for a currency would increase when dealers try to profit from exchange rate discrepancies leading to ______ of that currency, and the price differential would disappear.

demand; appreciation

The various components of an organization's architecture are _____ each other.

dependent on

Critics of the Bretton Woods system say that if a country is running a trade deficit in a floating exchange rate system, the exchange rate will ______, making its exports cheaper and imports more expensive, which should correct the trade deficit.

depreciate

In theory, if a country's price inflation is rising rapidly, it should expect to see its currency _____ against that of countries in which inflation rates are lower.

depreciate

A lead strategy occurs when a firm attempts to collect foreign currency receivables early when a currency is expected to ______ and pay foreign currency payables before they are due when a currency is expected to ______.

depreciate; appreciate

In the late 1990s, the dollar _____ against most major currencies.

depreciated

When Great Britain returned to the gold standard in 1925, it placed the pound at the prewar gold parity level and, as a result, placed the country in a period of

depression

Under the Bretton Woods system, if Country A imported more goods than it exported which created a permanent deficit in the balance of trade that wasn't correctable by domestic policy, the IMF would be required to _____.

devalue the currency

Since the mid-1970s, the IMF's loan activities have been mostly targeted toward _____.

developing nations

The strategic alliance between Boeing and some Japanese companies to build the Boeing 787 aircraft was motivated by Boeing's desire to share the ______ of the new jet.

development cost

According to Bartlett and Ghoshal, a late mover company should try to learn as much as it can from competitors and _____ in order to succeed.

differentiate its product offering

What two things did Christopher Bartlett and Sumantra Ghoshal say a late mover company should do to succeed against well-established competitors?

differentiate its product offering benchmark competitor operations

Atkinson Appliance has improved the look, design, and speed of its dishwashers to make them more attractive to consumers. The company is trying to create value creation by using a(n) ______ strategy.

differentiation

Companies that use a transnational strategy are trying to achieve what three things?

differentiation of product offering to account for local differences fostering a multi-directional flow of skills between subsidiaries lowering costs through location economies

In the foreign exchange market, it is _____ to profit through arbitrage.

difficult

If a basket of goods costs $400 in the US and 40,000 yen in Japan, PPP theory predicts that the dollar/yen exchange rate should be

$0.01 per Japanese yen

If one ounce of gold in dollars cost 25, and one ounce of gold in pounds cost 10, then the exchange rate for converting pounds into dollars is ______.

$2.50

If the exchange rate is 1 British pound to $1.35, an American in London will need ______ to purchase a purse priced at 20 pounds.

$27

An American tourist in Japan is interested in buying a souvenir that costs 1800 yen. How much is this in dollars if the exchange rate is $1 to Y400.

$4.50


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